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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ENGINEERING ANIMATION, INC.
(NAME OF SUBJECT COMPANY)
ENGINEERING ANIMATION, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
292872108
(CUSIP NUMBER OF CLASS OF SECURITIES)
MATTHEW M. RIZAI
Chief Executive Officer
2321 North Loop Drive
Ames, Iowa 50010
Telephone: (515) 296-9908
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
With copies to:
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JAMIE A. WADE, ESQ. GEORGE C. MCKANN, ESQ.
Engineering Animation, Inc. Gardner, Carton & Douglas
2321 North Loop Drive 321 North Clark Street, Suite 2900
Ames, Iowa 50010 Chicago, Illinois 60610
Telephone: (515) 296-6942 Telephone: (312) 245-8417
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[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company is Engineering Animation, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is ISU Research Park, 2321 North Loop Drive, Ames, Iowa 50010. The
telephone number of the principal executive offices of the Company is (515)
296-9908.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
Exhibits or Annexes hereto, this "Schedule 14D-9" or "Statement") relates is the
common stock, $0.01 par value, of the Company (the "Common Stock"), together
with the associated preferred stock purchase rights (the "Rights") issued
pursuant to the Rights Agreement dated as of January 1, 1996, as amended (the
"Rights Agreement"), between the Company and First Chicago Trust Company of New
York (the "Rights Agent"). As of August 31, 2000, there were 12,072,619 shares
of Common Stock outstanding. Unless the context otherwise requires, as used
herein the term "Shares" shall mean shares of Common Stock, including the
Rights.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the cash tender offer by Unigraphics Solutions
Inc., a Delaware corporation ("Unigraphics" or "Parent"), and UGS Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Parent
("Purchaser"), to purchase all of the issued and outstanding Shares at $13.75
per Share (such amount, or any greater amount per Share paid pursuant to the
Offer, hereinafter referred to as the "Offer Price"), net to the seller in cash,
upon the terms and subject to the conditions (including the condition that a
majority of the fully diluted Shares are validly tendered) set forth in
Purchaser's Offer to Purchase, dated September 13, 2000 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together with the
Offer to Purchase and any amendments or supplements thereto constitutes the
"Offer"). The Offer is described in a Tender Offer Statement on Schedule TO (as
amended or supplemented from time to time, the "Schedule TO"), filed by Parent
and Purchaser with the Securities and Exchange Commission ("SEC") on September
13, 2000.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of September 5, 2000, by and among Parent, Purchaser and the Company (the
"Merger Agreement"). The Merger Agreement provides that, subject to the
satisfaction or waiver of certain conditions, following completion of the Offer,
and in accordance with the Delaware General Corporation Law (the "DGCL"), the
Purchaser will be merged with and into the Company (the "Merger"). Following the
consummation of the Merger, the Company will continue as the surviving
corporation and will be a direct wholly owned subsidiary of Parent. At the
effective time of the Merger (the "Effective Time"), each issued and outstanding
Share (other than Shares owned by Parent, any of its subsidiaries, including
Purchaser, the Company (as treasury stock), and Shares held by stockholders who
properly demand appraisal and comply with the provision of Section 262 of the
DGCL relating to dissenters' rights of appraisal) will be converted into the
right to receive the same amount in cash per Share that is paid pursuant to the
Offer (the "Merger Consideration"). The Merger Agreement is summarized in
Section 11 of the Offer to Purchase.
The Schedule TO states that the principal executive offices of Parent and
Purchaser are located at 13736 Riverport Drive, Maryland Heights, MO 63043.
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ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement (the
"Information Statement") pursuant to Rule 14f-1 under the Securities Exchange
Act of 1934 that is attached as Annex A to this Statement and is incorporated
herein by reference. Except as described in this Statement (including in the
Exhibits hereto and in Annex A hereto) or incorporated herein by reference, to
the knowledge of the Company, as of the date of this Statement there exists no
material agreement, arrangement or understanding or any actual or potential
conflict of interest between the Company or its affiliates and (1) the Company's
executive officers, directors or affiliates or (2) the Purchaser, Parent or
their respective executive officers, directors or affiliates.
MERGER AGREEMENT.
The summary of the Merger Agreement and the description of the conditions
of the Offer contained in Sections 11 and 14, respectively, of the Offer to
Purchase and filed as an exhibit to the Schedule TO, which is being mailed to
stockholders together with this Statement, are incorporated herein by reference.
Such summary and description are qualified in their entirety by reference to the
Merger Agreement, which has been filed as Exhibit (e)(1) hereto and is
incorporated herein by reference.
STOCK OPTION AGREEMENT.
The summary of the Stock Option Agreement dated as of September 5, 2000
among Parent and the Company (the "Stock Option Agreement") contained in Section
11 of the Offer to Purchase and filed as an exhibit to the Schedule TO, which is
being mailed to stockholders together with this Statement, is incorporated
herein by reference. Such summary is qualified in its entirety by reference to
the Stock Option Agreement, which has been filed as Exhibit (e)(2) hereto and is
incorporated herein by reference.
STOCKHOLDERS AGREEMENT.
The summary of the Stockholders Agreement dated as of September 5, 2000
among Parent, Purchaser and the stockholders of the Company named therein (the
"Stockholders Agreement") contained in Section 11 of the Offer to Purchase and
filed as an exhibit to the Schedule TO, which is being mailed to stockholders
together with this Statement, is incorporated herein by reference. Such summary
is qualified in its entirety by reference to the Stockholders Agreement, which
has been filed as Exhibit (e)(3) hereto and is incorporated herein by reference.
EFFECTS OF THE OFFER AND THE MERGER UNDER COMPANY STOCK PLANS AND AGREEMENTS
BETWEEN THE COMPANY AND ITS EXECUTIVE OFFICERS.
OPTIONS.
The Merger Agreement provides that Parent and the Company will take all
actions necessary to provide that each outstanding option to purchase shares of
Common Stock (a "Company Stock Option") granted under any stock option plan of
the Company and any Company Stock Option agreement that is outstanding
immediately prior to the consummation of the Offer, whether or not such Company
Stock Option is vested and exercisable immediately prior to the consummation of
the Offer, will be canceled, as of the day immediately following the
consummation of the Offer, and the holder of each Company Stock Option will be
entitled to receive an amount in cash payable at
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the time of cancellation equal to the excess of (i) the product of (A) the
excess, if any, of (x) the Offer Price over (y) the per share exercise price of
such Company Stock Option multiplied by (B) the number of shares of Common Stock
subject to such Company Stock Option over (ii) any income tax or employment tax
withholding required under the Internal Revenue Code of 1986, as amended;
provided, however, that holders of Company Stock Options that are not vested as
of the day immediately following the consummation of the Offer and that do not
vest by their terms upon a change of control, will not be entitled to receive
such amount and such Company Stock Options will be canceled as of such date.
The following table sets forth, with respect to each of the executive
officers and each of the directors of the Company, (i) the number of Shares
subject to Company Stock Options with exercise prices below $13.75 per share
that will be vested prior to the consummation of the Offer, (ii) the number of
Shares subject to Company Stock Options with exercise prices below $13.75 per
share that will vest upon the consummation of the Offer, (iii) the total number
of Shares that will be converted into the right to receive cash as a result of
the consummation of the Offer, (iv) the weighted average exercise price of the
options and (v) the aggregate value of such options based upon the $13.75 Offer
Price (i.e., the total cash value less the exercise price).
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OPTION OPTION
SHARES SHARES TOTAL WEIGHTED AVERAGE AGGREGATE
VESTED VESTED DUE OPTION EXERCISE PRICE VALUE OF
EXECUTIVE OFFICERS PRE-OFFER TO OFFER(1) SHARES PER SHARE ($) OPTIONS ($)
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Matthew M. Rizai......................... 214,289 150,000 364,289 $5.52 $2,998,844.01
Robert M. Nierman........................ 0 75,000 75,000 $8.50 $ 394,025.00
Martin J. Vanderploeg.................... 303,903 50,000 353,903 $3.60 $3,592,881.05
Jamie A. Wade............................ 12,600 32,100 44,700 $7.09 $ 297,635.13
Michael K. O'Gara........................ 0 50,000 50,000 $8.50 $ 262,500.00
Robert L. Cyr............................ 0 80,000 80,000 $8.28 $ 437,440.00
Jeff D. Trom............................. 25,875 0 25,875 $1.93 $ 305,788.88
NON-EMPLOYEE DIRECTORS
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Michael M. Crow.......................... 10,200 0 10,200 $6.96 $ 69,218.40
Laurence J. Kirshbaum.................... 12,000 0 12,000 $8.73 $ 60,256.13
</TABLE>
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(1) Shares subject to unvested options that were accelerated and vested pursuant
to the existing terms of their option agreements with the Company as a
result of the transactions contemplated by the Merger Agreement.
INTERESTS OF CERTAIN PERSONS.
Certain members of the Company's management and the Board of Directors of
the Company (the "Company Board") may be deemed to have interests in the
transactions contemplated by the Merger Agreement that are in addition to their
interests as Company shareholders and option holders generally. The Company
Board was aware of these interests and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS.
The Company's employment agreements with executive officers generally state
an executive's initial compensation and bonus and provide the mechanism for
future adjustments. The initial terms of recent employment agreements have been
two years, with amendments to expiring agreements extending the terms until
December 31, 2003.
The Company also has severance arrangements with executive officers. Under
these arrangements, executive officers would receive a lump sum payment equal to
the sum of the base salary and bonus paid to them in the prior year. Drs. Rizai
and Vanderploeg's agreements provide
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for two-times this amount. Mr. Nierman would receive three-times his then
current annual salary and bonus, or two-times this amount if a change in control
occurred after the first 18 months of his employment. Mr. O'Gara would receive
two-times his then current annual salary and bonus, or one and one-half-times
this amount if employment terminated after the first 12 months of his
employment. Each of the arrangements also provides for additional employee
benefits and a pro rata bonus for the year of termination. The vesting of stock
options held by Drs. Rizai and Vanderploeg and Messrs. Nierman, Wade, O'Gara and
Cyr would accelerate, with registration rights for Drs. Rizai and Vanderploeg.
Severance is triggered if the Company terminates an executive's employment
without cause or if an executive terminates employment for good reason, which
includes a change in control for all of the executives except Mr. Cyr. A change
in control for purposes of these provisions will occur on the consummation of
the Offer. In some instances, severance is payable upon an executive's death or
permanent disability.
Drs. Rizai, Vanderploeg and Trom and Mr. Wade have entered into amendments
to their employment agreement pursuant to which they have agreed, among other
things, not to compete with the Company's business and not to solicit or to hire
current or former employees of the Company, Parent or Purchaser for 12 months
following termination of employment with the Company and/or Parent or Purchaser.
The amendments terminate in the event that the Merger is not consummated. Mr.
Nierman has entered into a noncompetition agreement in connection with his
employment agreement, pursuant to which he agreed not to compete with the
Company's business or solicit employees for a period of one year following
termination of employment.
The Company has been advised that Drs. Rizai, Vanderploeg and Mr. Cyr plan
not to continue with the Company after the Effective Time. These executives may
provide consulting services to Parent after the Effective Time. Parent expects
that Mr. Nierman and most of the Company's other executive officers will
continue with the Company after the Effective Time. Mr. O'Gara is expected to
remain with the Company for a transition period of at least three months. The
Company has been advised that Parent plans to offer current Company executive
officers who will remain with Parent for more than a transition period new
employment agreements with Parent, effective as of the Effective Time. These
agreements are expected to provide for payment of a retention bonus
approximately equal to the severance payment the executive officer would have
received had he elected not to continue his employment plus an additional
incentive amount, annual compensation at substantially the same level as
currently in place and, in some cases, options to purchase shares of Parent's
common stock. The Company has been advised that in addition to the amount he
will receive as severance, Mr. O'Gara will be offered a short term bonus to
remain employed for the transition period.
Assuming that the consummation of the Offer occurs on October 11, 2000, the
severance benefits (any lump sum payment payable and any pro-rata bonus, but
excluding the value attributable to the stock options discussed above, welfare
benefit continuation, outplacement assistance and other benefits and without
taking into account the amount, if any, of any tax reimbursement payment) that
would be payable to executive officers if their employment were terminated in
accordance with the terms of their respective severance arrangements would
approximately be as follows: Dr. Rizai, $1,323,333; Mr. Nierman, $1,478,845; Dr.
Vanderploeg, $1,156,667; Mr. Wade, $281,666; Mr. O'Gara, $578,000; Mr. Cyr,
$350,000; and Dr. Trom, $295,000.
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EMPLOYEE BENEFIT PLANS.
The Merger Agreement provides that for purposes of all employee benefit
plans, programs and arrangements maintained by or contributed to by Parent for
which the Company's employees are eligible to participate ("Parent Benefit
Plan"), Parent will treat the prior service with the Company and its affiliates
of each person who is an employee or former employee of the Company or its
subsidiaries immediately prior to the Merger (a "Company Employee") as service
rendered to Parent for purposes of eligibility to participate in and vesting
thereunder (but not benefit accrual) to the same extent that service is
recognized under corresponding plans, programs or arrangements of the Company or
its affiliates prior to the Merger, so long as the crediting of service does not
duplicate any benefit or the funding of such benefit. Company Employees will
also be given credit for any deductible or co-payment amounts paid in respect of
the plan year in which the Merger occurs to the extent applicable. Parent will
also cause each Parent Benefit Plan to waive any preexisting condition that was
waived under the terms of any Company Benefit Plan immediately prior to the
Merger or waiting period limitation that would otherwise be applicable to a
Company Employee on or after the Merger.
THE COMPANY BOARD.
The Merger Agreement provides that promptly upon the purchase of and
payment for any Shares by Parent or Purchaser pursuant to the Offer, Parent will
be entitled to designate such number of directors, rounded up to the nearest
whole number, on the Company Board as is equal to the product of the total
number of directors on the Company Board (giving effect to the directors so
designated by Parent) multiplied by the percentage that the number of Shares so
accepted for payment bears to the total number of Shares then outstanding. In
furtherance thereof, the Company will, upon request of Purchaser, promptly
either increase the size of the Company Board or secure the resignations of such
number of its incumbent directors, or both, as is necessary to enable Parent's
designees to be so elected to the Company Board, and will cause Parent's
designees to be so elected. At such time, the Company will also cause persons
designated by Parent to have proportionate (but not less than majority)
representation on (i) each committee of the Company Board, (ii) each board of
directors (or similar body) of each subsidiary of the Company and (iii) each
committee (or similar body) of each such board.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
Pursuant to the Merger Agreement, Parent agreed that the surviving
corporation will indemnify and hold harmless all those persons entitled to
indemnification from the Company and its subsidiaries as provided in their
respective certificates of organization or by-laws (each an "Indemnified Party")
against all liabilities arising out of actions or omissions occurring at or
prior to the Effective Time, and to the advancing of expenses to any Indemnified
Party promptly upon receipt of an undertaking from such party that such expenses
will be repaid should it ultimately be determined that such party was not
entitled to indemnification.
The Merger Agreement also provides that the surviving corporation will
maintain, for three years after the Effective Time, the Company's existing
directors' and officers' liability insurance ("D&O Insurance") covering acts or
omissions occurring at or prior to the Effective Time with respect to those
persons who are currently covered by the Company's D&O Insurance on terms with
respect to coverage and amount no less favorable than the current terms;
provided, that it may substitute therefor policies of substantially similar
coverage and amounts containing terms no less favorable to such former directors
or officers; provided, further, that in no event will it be required to
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pay aggregate premiums for this insurance in excess of 125% of the aggregate
premiums paid by the Company in 1999 for such purpose.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
RECOMMENDATION OF THE COMPANY BOARD.
The Company Board, at a meeting held on September 4, 2000, unanimously
approved and declared advisable the Offer, the Merger, the Merger Agreement, the
Stock Option Agreement and the transactions contemplated by Purchaser and Parent
pursuant to the Offer and the other transactions contemplated by the Merger
Agreement. In addition, the Company Board exempted the Merger Agreement, the
Stockholders Agreement, the Stock Option Agreement and the transactions
contemplated thereby from the restrictions of Section 203 ("Section 203") of the
DGCL. At this meeting, the Company Board unanimously recommended that the
Company's stockholders accept the Offer and tender their shares pursuant to the
Offer.
BACKGROUND OF THE OFFER.
In early October 1999, John Mazzola, Parent's President and Chief Executive
Officer at that time, contacted Matthew Rizai, the Company's Chairman and Chief
Executive Officer, regarding a possible business combination. On October 26,
1999, Mr. Mazzola and Douglas Barnett, Parent's Chief Financial Officer, met
with representatives of the Company, including Dr. Rizai, Martin Vanderploeg,
Executive Vice President, and Jamie Wade, General Counsel, to discuss the
potential combination. Parent's financial advisors, Morgan Stanley & Co.
Incorporated, and the Company's financial advisors, J.P. Morgan & Co. and
Colonnade Financial Advisors LLC ("Colonnade"), attended the meeting. At that
meeting, after executing a non-disclosure agreement, the parties reviewed the
Company's business, including certain confidential financial projections of the
Company. The parties also discussed preliminary pricing issues.
From October 1999 to May 2000, there were no significant discussions
between Parent and the Company regarding a business combination. During this
period, Parent and the Company each continued to discuss visualization
technology solutions with General Motors Corporation ("GM"), one of the largest
customers of both the Parent and the Company. Because the technologies and
services offered by Parent and the Company were complementary, GM encouraged the
parties to reconsider a business combination.
On May 24, 2000, Mr. Mazzola sent Dr. Rizai a letter expressing Parent's
interest in acquiring the Company. The proposal involved a purchase of all of
the Company's outstanding stock for consideration valued at $15.00 per share,
subject to the results of a due diligence review. The proposal called for
individual lock-up agreements with the principal shareholders of the Company and
an option to purchase newly issued shares of the Company's common stock up to
19.9% of the Company's outstanding common stock.
On June 7, 2000, Mr. Mazzola and Dr. Rizai met in New York to discuss
further the Company's business and financial prospects. Also attending the
meeting were Mr. Barnett of Parent and Dr. Vanderploeg, Mr. Wade, Michael
O'Gara, Chief Financial Officer of the Company, and Robert Nierman, Chief
Operating Officer of the Company, as well as each party's financial advisors.
On June 12, 2000, Messrs. Mazzola, Barnett and Anthony Affuso, then serving
as Executive Vice President of Parent, met in Minneapolis, Minnesota, with some
of the Company's financial, operations and technical management led by Mr.
Nierman to discuss certain financial and other information requested by Parent
at the June 7th meeting.
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Based on the results of these meetings, Parent expressed its interest in
continuing the discussions regarding an acquisition of the Company, but not at
the price stated in the May 24th letter. On June 15, 2000, at the Company's
request, Parent sent a second letter to Dr. Rizai indicating a desire to
negotiate a definitive agreement to purchase all of the Company's outstanding
stock for consideration valued at $13.00 per share, subject to the same terms
and conditions stated in the May 24th letter. The Company responded that it was
not interested in pursuing a business combination with Parent on those terms.
In early July 2000, members of the Company's management and the Company's
financial advisors had discussions with a third party regarding a possible
business combination transaction. Those discussions were terminated by the third
party when it informed the Company that it had no interest in pursuing a
transaction at that time.
On July 12, 2000, Mr. Affuso was elected as the President and Chief
Executive Officer of Parent, replacing Mr. Mazzola who had previously announced
his intent to retire.
On July 24, 2000, Mr. Affuso met with GM representatives at Parent's
Cypress, California office. At that meeting, GM again encouraged Parent to
pursue an acquisition of the Company.
On August 15, 2000, Parent sent a third letter to the Company indicating
Parent's interest in acquiring all of the outstanding shares of the Company's
stock at a price of between $11 and $14 per share. The Company requested that
representatives of the parties meet to discuss the terms of the proposal.
On August 17, 2000, representatives of the parties and their financial
advisors (including Goldman, Sachs & Co. ("Goldman Sachs") and Colonnade on
behalf of the Company) met in Minneapolis, Minnesota, to discuss the proposed
transaction and the scope and timing of Parent's due diligence investigation.
Following this meeting, the Company began to provide requested financial and
other information to Parent.
The companies' executive teams and their financial advisors met in Denver
on August 24 and 25, 2000. The Company's line of business executives and other
Company executives made business, technical and financial presentations
regarding the Company and its product and service offerings.
In late August 2000, the Company's financial advisors contacted the third
party involved in the early July 2000 discussions to determine whether the third
party was interested in further discussions. The third party again stated that
it had no interest at that time in pursuing a transaction.
On August 27, 2000, representatives of both companies conducted numerous
conference calls discussing the price and major conditions of the proposed
acquisition. On August 28, 2000, Parent sent a letter to the Company proposing
to acquire all of the outstanding shares of the Company's stock for $13.50 per
share in cash. The parties' discussions regarding the price and other principal
terms of Parent's offer continued until August 30, 2000, at which time Mr.
Affuso and Dr. Rizai agreed to a price of $13.75 per share and the other
principal terms of the transaction described herein.
Between August 30 and September 4, 2000, attorneys and representatives of
both parties engaged in continuous negotiations regarding the terms of the
Merger Agreement, Stock Option Agreement and Stockholders Agreement, reaching
agreement on the final terms late on September 4th. Parent's Board of Directors
approved the transaction on September 1, 2000. The Company Board approved the
transaction on September 4, 2000.
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On the morning of September 5, 2000, before the opening of trading on the
New York Stock Exchange and the Nasdaq Stock Market, Parent and the Company
issued a joint press release announcing that they had executed the Merger
Agreement and associated agreements.
REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
In approving the Offer, the Merger, the Merger Agreement, the Stock Option
Agreement and the transactions contemplated thereby and recommending that all
holders of Shares accept the Offer and tender their Shares pursuant thereto, the
Company Board considered a number of factors, including:
Financial Condition and Prospects of the Company. The Company Board
considered the financial condition, results of operations, business and
prospects of the Company if it were to remain independent. The Company Board
discussed the Company's current strategic plans, including the risks associated
with achieving and executing the Company's business plans, as well as the
competitive environment in which the Company operates. The Board also considered
management's belief that the Company and Parent have similar corporate cultures,
the complementary nature of the two companies' products, and the experience,
size and financial strength of Parent, including Parent's ability to fund the
Offer and the Merger using a credit facility between it and Electronic Data
Systems Corporation, the majority owner of Parent.
Historical Stock Price Performance. The Company Board reviewed the
historical stock price performance of the Company and noted that the
consideration to be received by the Company's stockholders pursuant to the Offer
and the Merger would represent a premium of approximately 24% over the closing
price of the Shares on Nasdaq on September 1, 2000, 33% over the 10-day average
closing price, 60% over the one-month average closing price, and 33% over the
six-month average closing price, in each case prior to September 1, 2000.
Goldman Sachs Presentation. The Company Board took into account the
presentations of Goldman Sachs with respect to the financial terms of the Offer
and the Merger and the opinion of Goldman Sachs to the effect that, as of the
date of such opinion, and subject to the matters set out in such opinion, the
$13.75 per share in cash to be received by the holders of Shares pursuant to the
Offer and the Merger is fair from a financial point of view to such holders. A
copy of Goldman Sachs' opinion is included as Annex B to this Schedule 14D-9 and
is incorporated herein by reference. Holders of Shares should read Goldman
Sachs' opinion in its entirety for a description of procedures followed,
assumptions and qualifications made, matters considered and limitations on the
review undertaken by Goldman Sachs.
Terms and Conditions of the Offer and the Merger. The Company Board
considered the terms and conditions of the Merger Agreement as well as the terms
of the Stock Option Agreement and the Stockholders Agreement. The Company Board
noted that the transaction was being structured as a cash tender offer for all
Shares, and it would permit all holders of Shares to participate on the same
basis. The Company Board also noted that the Offer contains no financing
condition and that there are limited conditions to Parent's obligations to
consummate the Offer, including the consents and approvals required to
consummate the Offer and the Merger, such as regulatory clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and foreign
antitrust laws, and the favorable prospects for receiving such consents and
approvals.
Other Potential Transactions. The Company Board also considered the
information provided by Goldman Sachs concerning the process that had been
conducted on behalf of the Company by Goldman Sachs since December 1999,
including information regarding discussions and meetings held by Goldman Sachs
and the Company's management with other potential acquirors of the
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Company. The Company Board noted that none of those discussions had resulted in
proposals to acquire the Company that were more favorable to the Company and its
stockholders than the Offer and the Merger. The Company Board also noted that
the Merger Agreement would permit the Company to terminate the Merger to accept
an unsolicited superior proposal from a third party (subject to payment of the
$8,000,000 termination fee).
The Company Board did not quantify or otherwise assign relative weights to
the foregoing factors or determine that any factor was of particular importance.
Rather, the Company Board viewed its position and recommendation as being based
on the totality of the information presented to and considered by the Company
Board. In addition, individual members of the Company Board may have given
different weights to different factors.
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive but is
believed to include all material factors considered by the Company Board.
INTENT TO TENDER.
After reasonable inquiry and to the best of the Company's knowledge, to the
extent permitted by applicable securities laws, rules or regulations, each
executive officer, director, affiliate and subsidiary of the Company currently
intends to tender all Shares held of record or beneficially owned by such person
or entity to the Purchaser in the Offer. Certain senior executives of the
Company have entered into the Stockholders Agreement pursuant to which, among
other things, they have agreed to tender their Shares in accordance with the
Offer and to vote the Shares beneficially owned by them in favor of the Merger.
See Items 2 and 3 above.
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The Company engaged Goldman Sachs pursuant to the terms of a letter
agreement, dated as of December 17, 1999 (the "Goldman Sachs Engagement
Letter"), to assist the Company as its financial advisor in connection with the
possible sale of all or a portion of the Company (a "Transaction"). In addition,
the Company engaged Colonnade Advisors LLC ("Colonnade"), its long-standing
financial advisor, to assist the Company for this Transaction pursuant to the
terms of letter agreements dated April 18, 2000 and May 25, 2000 (the "Colonnade
Engagement Letters").
Pursuant to the terms of the Goldman Sachs Engagement Letter, the Company
agreed to pay Goldman Sachs a transaction fee of 2.0% of the sum of the
aggregate consideration paid in connection with the Offer and the Merger
(including amounts paid to holders of options, warrants and convertible
securities)and the principal amount of all indebtedness for borrowed money of
the Company outstanding, as set forth in the most recent consolidated balance
sheet of the Company prior to consummation of the Offer, but in no event shall
the transaction fee be less than $2.5 million.
Pursuant to the terms of the Colonnade Engagement Letters, the Company
agreed to pay Colonnade a transaction fee of 0.5% of the sum of the aggregate
consideration paid in connection with the Offer and the Merger (including
amounts paid to holders of options, warrants and convertible securities)and the
principal amount of all indebtedness for borrowed money of the Company
outstanding.
The Company has also agreed to reimburse Goldman Sachs and Colonnade for
reasonable out-of-pocket expenses, including the fees and disbursements of its
attorneys, and to indemnify
9
<PAGE> 11
Goldman Sachs and Colonnade and related parties against certain liabilities
arising out of or in connection with or as a result of Goldman Sachs' or
Colonnade's engagement, including liabilities under the federal securities laws.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Except as described herein, no transactions in Shares have been effected
during the past 60 days by the Company or, to the knowledge of the Company, by
any executive officer, director, affiliate or subsidiary of the Company. On July
17, 2000, Jamie A. Wade inherited 17 Shares from his mother's estate.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Schedule 14D-9, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (1) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (2) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (3) a purchase, sale or
transfer of a material amount of assets of the Company or any subsidiary of the
Company; or (4) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company.
Except as set forth in this Schedule 14D-9, there are no transactions,
resolutions of the Board, agreements in principle, or signed contracts in
response to the Offer that relate to one or more of the events referred to in
the preceding paragraph.
ITEM 8. ADDITIONAL INFORMATION.
The Information Statement attached hereto as Annex A, and incorporated
herein by reference, is being furnished to the Company's stockholders in
connection with the possible designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company Board other than at
a meeting of the Company's stockholders as described in Item 3.
STATE TAKEOVER LAWS.
A summary of selected provisions of state takeover laws is contained in
Section 15 of the Offer to Purchase under the heading "State Takeover Laws" and
is incorporated herein by reference.
REGULATORY APPROVAL.
A summary of antitrust concerns related to the Offer is contained in
Section 15 of the Offer to Purchase under the heading "Antitrust" and is
incorporated herein by reference.
AMENDMENT TO RIGHTS AGREEMENT.
Each Right issued pursuant to the Rights Agreement entitles the registered
holder thereof to purchase one one-hundred-fiftieth of a share of Series A
Junior Participating Preferred Stock of the Company for a price of $50.00 per
one one-hundred-fiftieth of a share, subject to adjustment.
The Rights become exercisable at the specified exercise price upon the
earlier of (i) the tenth business day following the first public announcement
that any person or group (an "Acquiring Person") has acquired beneficial
ownership of 15% or more of the outstanding Shares (the "Shares Acquisition
Date") or (ii) the tenth business day (unless delayed by the Company Board)
after any person or group (other than an Exempt Person) has commenced, or
announced the intention to
10
<PAGE> 12
commence, a tender or exchange offer that would, upon its consummation, result
in such person or group being the beneficial owner of 15% or more of the
outstanding Shares (the earlier of such dates being the "Distribution Date").
After the Distribution Date, each holder of a Right (other than the Acquiring
Person) will thereafter have the right to acquire shares of Common Stock having
a market value of two times the exercise price of the Right; or, in certain
circumstances, the right to acquire shares of the Acquiring Person's capital
stock having a market value of two times the exercise price of the Right. The
Rights may be redeemed at a price of $0.01 per Right at any time prior to the
earlier of (i) the time that a person has become an Acquiring Person or (ii)
January 1, 2006.
The Company and the Rights Agent amended the Rights Agreement as of
September 5, 2000 to provide that neither Parent nor any of its subsidiaries
(including the Purchaser) will be an Acquiring Person by virtue of the approval,
execution or delivery of the Merger Agreement, the Stock Option Agreement or the
Stockholders Agreement, or the consummation of the transactions contemplated
thereby, including, without limitation, the exercise of the stock option. The
amendment also provides that neither the approval, execution or delivery of the
Merger Agreement, the Stock Option Agreement or the Stockholders Agreement nor
the consummation of the transactions contemplated thereby, including, without
limitation, the exercise of the stock option, will constitute a Stock
Acquisition Date, a Distribution Date or any other separation of the Rights from
the underlying Common Stock, nor entitle or permit the holders of the Rights to
exercise the Rights or otherwise affect the rights of the holders of Rights,
including giving the holders of Rights the right to acquire securities of any
party to the Merger Agreement.
11
<PAGE> 13
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(a)(1) Letter to the stockholders of the Company, dated September
13, 2000.*
(a)(2) Sections 11, 14 and 15 of the Offer to Purchase, dated
September 13, 2000 (incorporated by reference from Exhibit
(a)(1)(A) to the Schedule TO filed on September 13, 2000).
(a)(3) Form of Letter of Transmittal 2000 (incorporated by
reference from Exhibit (a)(1)(B) to the Schedule TO filed on
September 13, 2000).
(a)(4) Opinion of Goldman, Sachs & Co., dated September 5, 2000
(included as Annex B to this Statement).*
(a)(5) Joint Press Release and letter to employees issued by the
Company and Parent on September 5, 2000 (previously filed
under cover of Schedule 14D-9C filed by the Company on
September 5, 2000).
(a)(6) Joint Press Release, dated September 13, 2000 (incorporated
by reference from Exhibit (a)(1)(G) to the Schedule TO filed
on September 13, 2000).
(a)(7) Summary Advertisement, dated September 13, 2000
(incorporated by reference from Exhibit (a)(1)(H) to the
Schedule TO filed on September 13, 2000).
(e)(1) Agreement and Plan of Merger, dated as of September 5, 2000,
among Parent, the Purchaser and the Company (incorporated by
reference from Exhibit (d)(1) to the Schedule TO filed on
September 13, 2000).
(e)(2) Stock Option Agreement, dated as of September 5, 2000,
between Parent and the Company (incorporated by reference
from Exhibit (d)(2) to the Schedule TO filed on September
13, 2000).
(e)(3) Stockholders Agreement, dated as of September 5, 2000, among
Parent, Purchaser and the stockholders of the Company named
therein (incorporated by reference from Exhibit (d)(3) to
the Schedule TO filed on September 13, 2000).
(e)(4) First Amendment, effective as of September 5, 2000, to
Rights Agreement, dated as of January 1, 1996, between the
Company and First Chicago Trust Company of New York, as
Rights Agent (incorporated by reference from Exhibit 4.2 to
the Form 8A/A filed by the Company on September 6, 2000).
(e)(5) Matthew M. Rizai Employment and Severance Agreements, dated
as of January 1, 1996, and Option Agreements, dated June 9,
1994 and February 11, 1995 (incorporated by reference from
the Company's Registration Statement on Form S-1, SEC file
no. 333-80705).
(e)(6) Martin J. Vanderploeg Employment and Severance Agreements,
dated as of January 1, 1996, and Option Agreements, dated
June 9, 1994 and February 11, 1995 (incorporated by
reference from the Company's Registration Statement on Form
S-1, SEC file no. 333-80705).
(e)(7) Jamie A. Wade Employment and Severance Agreements, dated as
of January 1, 1996, and Option Agreement, dated February 11,
1995 (incorporated by reference from the Company's
Registration Statement on Form S-1, SEC file no. 333-80705).
(e)(8) Robert M. Nierman Employment Agreement, dated April 21,
1999, and Option Agreement, dated April 30, 1999
(incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999).
(e)(9) Jeff D. Trom Employment and Severance Agreements, dated as
of January 1, 1996 (incorporated by reference from the
Company's Registration Statement on Form S-1, SEC file no.
333-80705).
(e)(10) Robert L. Cyr Employment Agreement, dated as of January 1,
2000 (incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
2000).
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(e)(11) Michael K. O'Gara Employment Agreement, dated as of February
28, 2000 (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000).
(e)(12) Amendment No. 1 to Employment Agreement with Matthew M.
Rizai, dated as of January 1, 2000 (incorporated by
reference from the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000).
(e)(13) Amendment No. 1 to Employment Agreement with Martin J.
Vanderploeg, dated as of January 1, 2000 (incorporated by
reference from the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000).
(e)(14) Amendment No. 1 to Employment Agreement with Jamie A. Wade,
dated as of January 1, 2000 (incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000).
(e)(15) Amendment No. 1 to Employment Agreement with Jeff D. Trom,
dated as of January 1, 2000 (incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000).
(e)(16) Non-Competition/No-Solicitation Agreement by Matthew M.
Rizai, dated as of September 5, 2000.*
(e)(17) Non-Competition/No-Solicitation Agreement by Martin J.
Vanderploeg, dated as of September 5, 2000.*
(e)(18) Non-Competition/No-Solicitation Agreement by Jamie A. Wade,
dated as of September 5, 2000.*
(e)(19) Non-Competition/No-Solicitation Agreement by Jeff D. Trom,
dated as of September 5, 2000.*
(e)(20) Information Statement of the Company, dated September 13,
2000 (included as Annex A hereto).*
</TABLE>
---------------
* Included with this Statement.
13
<PAGE> 15
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C>
Date: September 13, 2000 ENGINEERING ANIMATION, INC.
By: /s/ JAMIE A. WADE
--------------------------------------------------
Name: Jamie A. Wade
Title: Vice President of Administration
and Secretary
</TABLE>
S-1
<PAGE> 16
ANNEX A
ENGINEERING ANIMATION, INC.
ISU RESEARCH PARK
2321 NORTH LOOP DRIVE
AMES, IOWA 50010
INFORMATION STATEMENT
PURSUANT TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
We are mailing this Information Statement on or about September 13, 2000 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Statement") of Engineering Animation, Inc. ("EAI"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Unigraphics Solutions Inc., a Delaware corporation ("Parent"), to
a majority of seats on the Board of Directors of EAI. On September 5, 2000, we
entered into an Agreement and Plan of Merger (the "Merger Agreement") by and
among Parent, UGS Acquisition Corp. (the "Purchaser"), a Delaware corporation
and a wholly owned subsidiary of Parent, and EAI, pursuant to which Purchaser is
required to commence a tender offer to purchase all outstanding shares of Common
Stock, par value $0.01 per share, of EAI (the "Common Stock"), and the
associated preferred stock purchase rights (shares of Common Stock together with
any associated rights are referred to in this Information Statement as the
"Shares") at a price per Share of $13.75 (the "Offer Price"), net to the seller
in cash, upon the terms and conditions set forth in the Purchaser's Offer to
Purchase, dated September 13, 2000 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any amendments and supplements
thereto, collectively constitute the "Offer"). Copies of the Offer to Purchase
and the Letter of Transmittal have been mailed to you with this Information
Statement and are filed as Exhibits (a)(1)(A) and (a)(1)(B) respectively, to the
Tender Offer Statement on Schedule TO (as amended from time to time, the
"Schedule TO") filed by the Parent with the Securities and Exchange Commission
on September 13, 2000. The Merger Agreement provides that, subject to the
satisfaction or waiver of certain conditions, following completion of the Offer,
and in accordance with the Delaware General Corporation Law (the "DGCL"), the
Purchaser will be merged with and into EAI (the "Merger"). Following
consummation of the Merger, EAI will continue as the surviving corporation and
will be a wholly owned subsidiary of Parent. At the effective time of the Merger
(the "Effective Time"), each issued and outstanding Share (other than Shares
owned by Parent, any of its subsidiaries (including Purchaser), EAI, and Shares
held by stockholders who properly demand appraisal and comply with the
provisions of Section 262 of the DGCL relating to dissenters' rights of
appraisal) will be converted into the right to receive the same amount in cash
per Share that is paid pursuant to the Offer (the "Merger Consideration").
The Offer, the Merger, and the Merger Agreement are more fully described in
the Statement, to which this Information Statement forms Annex A. We filed the
Statement with the SEC on September 13, 2000 and are mailing it to EAI
stockholders along with this Information Statement.
We are mailing this Information Statement to you in accordance with Section
14(f) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 14f-1
promulgated thereunder. The information in this document supplements certain
information included in the Statement. Parent has provided the information in
this document that relates to Parent, Purchaser or the Parent
A-1
<PAGE> 17
designees. We urge you to read this Information Statement carefully. You are
not, however, required to take any action in connection with the matters
described in this Information Statement.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
September 13, 2000. Unless the Purchaser extends the Offer, it will expire at
12:00 midnight, Central Daylight Time, on Wednesday, October 11, 2000.
GENERAL
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of our stockholders. As of
the close of business on August 31, 2000, there were 12,072,619 outstanding
shares of Common Stock, none of which were owned by Parent or Purchaser.
RIGHTS TO DESIGNATE DIRECTORS AND PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment for Shares by Parent or Purchaser pursuant to the Offer, Parent will be
entitled to designate that number of directors on EAI's Board of Directors,
rounded up to the next whole number, as is equal to the product of the total
number of directors on EAI's Board (giving effect to the directors designated by
Parent pursuant to this right) multiplied by the percentage that the number of
Shares so accepted for payment bears to the total number of Shares then
outstanding.
The Merger Agreement provides that we will, upon request of Purchaser,
promptly either increase the size of EAI's Board of Directors or secure the
resignations of that number of its incumbent directors, or both, as is necessary
to enable the Parent designees to be elected to the Board and will cause the
Parent designees to be so elected.
Notwithstanding the foregoing, if Shares are purchased pursuant to the
Offer, until the Effective Time there will be at least two members of the EAI
Board who were directors on the date of the Merger Agreement.
Parent will select its designees from among the individuals listed below.
Each of them has consented to serve as a director of EAI if appointed or
elected. None of the Parent designees currently is a director of, or holds any
positions with, EAI. Parent has advised us that, to the best of its knowledge,
except as set forth below, none of the Parent designees or any of their
affiliates beneficially owns any equity securities or rights to acquire any
equity securities of EAI, nor has any of them been involved in any transaction
with EAI or any of our directors, executive officers or affiliates that is
required to be disclosed pursuant to the rules and regulations of the SEC other
than with respect to transactions between Parent and EAI that have been
described in the Schedule TO or the Statement. Parent has advised us that, to
the best of its knowledge, none of the Parent designees has any family
relationship with any current director or executive officer of EAI. The name,
age, citizenship, present principal occupation or employment and five-year
employment history of each of the individuals who may be selected as a Parent
designee are set forth below. Unless otherwise indicated, each of them has held
his or her present position for the past five years, and each occupation refers
to employment with Parent. Unless otherwise indicated, each of these individuals
is a citizen of the United States, and the business address of each of them is
13736 Riverport Drive, Maryland Heights, MO 63043.
A-2
<PAGE> 18
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE POSITIONS HELD DURING THE PAST FIVE YEARS
---- --- ------------------------------------------
<S> <C> <C>
Anthony J. Affuso 54 Mr. Affuso was appointed President and Chief Executive
Officer and Director of Parent on July 12, 2000. From
January 1998 to July 2000, Mr. Affuso served as Vice
President, Products and Operations of Parent. From March
1992 to December 1997, Mr. Affuso served as the Vice
President of Software Development and Marketing of the
Unigraphics division of EDS, with responsibility for
research and development for Parent's core products. From
September 1989 to March 1992, Mr. Affuso was in charge of
the business unit of EDS which automated GM's worldwide
engineering, computing, communications and information
management infrastructure.
Douglas E. Barnett 41 Mr. Barnett was appointed Vice President, Chief Financial
Officer of Parent on March 2, 1998 and was appointed
Treasurer of Parent on May 19, 1999. From January 1996 to
March 1998, Mr. Barnett served as Vice President and
Corporate Controller of Giddings & Lewis, Inc. ("Giddings &
Lewis"), a publicly traded company and the largest supplier
of industrial automation products in North America. From
1991 to 1996, Mr. Barnett served as Treasurer of Giddings &
Lewis.
Michael L. Desmond 56 Mr. Desmond was appointed Vice President, Human Resources of
Parent effective July 14, 1999. From March 1, 1998 until
July 14, 1999, he was the executive in charge of Parent's
human resource functions. From July 1994 to February 1998,
Mr. Desmond served as Vice President, Human Resources for
Global One (formerly Sprint International). Prior to July
1994, Mr. Desmond served in a variety of executive human
resource positions with several Fortune 500 companies.
James Duncan 63 Mr. Duncan was appointed Vice President, Europe of Parent on
January 1, 1998. Mr. Duncan oversees operations in countries
located throughout Europe, South Asia, the Middle East and
Africa. Mr. Duncan served as Managing Director of the
European operations for the Unigraphics division of EDS from
November 1991 to December 1997. Mr. Duncan is a British
citizen.
Charles C. Grindstaff 43 Mr. Grindstaff was appointed Vice President, Products and
Operations of Parent on July 12, 2000. Mr. Grindstaff has
responsibility of research and development, product
marketing and technical support functions for Parent
products. Mr. Grindstaff served as Director of the
Unigraphics Line of Business from June 1998 to June 2000.
Prior to June 1998, Mr. Grindstaff directed research and
development activities for computer-aided design,
computer-aided engineering and computer-aid manufacturing
functions at Parent.
Dennis P. Kruse 51 Mr. Kruse was appointed Vice President, Americas of Parent
on January 1, 1998. Mr. Kruse served as Vice
President-Sales, Americas for the Unigraphics division of
EDS from April 1994 to December 1997 with responsibility for
sales, pre- and post-sales support, training and technical
sales support. From 1987 to 1994, Mr. Kruse served as
Director of the Western Region for the Unigraphics division
of EDS and, prior to 1991, he was employed by McDonnell
Douglas Systems Integration Company. Mr. Kruse owns 4,000
shares of EAI common stock.
</TABLE>
A-3
<PAGE> 19
OWNERSHIP OF EAI COMMON STOCK
The following table shows how much EAI common stock the directors, the
executive officers named in the Summary Compensation Table, and all executive
officers and directors as a group beneficially owned as of August 31, 2000. The
named executive officers include the Chief Executive Officer and the four other
most highly compensated executive officers based on compensation earned during
1999. The table would also show all other persons we know to be beneficial
owners of more than 5% of EAI common stock; however, we do not know of any as of
August 31, 2000.
Beneficial ownership is a technical term broadly defined by the SEC to mean
more than ownership in the usual sense. In general, beneficial ownership
includes any shares a stockholder can vote or transfer and stock options that
are exercisable currently or that become exercisable within 60 days. These
shares are considered to be outstanding for the purpose of calculating the
percentage of outstanding EAI common stock owned by a particular stockholder,
but are not considered to be outstanding for the purpose of calculating the
percentage ownership of any other person. The stockholders named in this table
have sole voting and investment power for all shares shown as beneficially owned
by them.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
STOCK OPTIONS
SHARES OF EXERCISABLE AS OF OR
COMMON STOCK WITHIN SIXTY DAYS PERCENT
NAMED EXECUTIVE OFFICERS AND DIRECTORS OWNED AFTER 8/31/00 OF CLASS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Matthew M. Rizai(1) 467,639(2) 319,289 6.4%
------------------------------------------------------------------------------------------------------
Robert M. Nierman -- 56,250 *
------------------------------------------------------------------------------------------------------
Martin J. Vanderploeg(1) 378,026 408,903 6.3%
------------------------------------------------------------------------------------------------------
Jamie A. Wade 44,066(3) 20,100 *
------------------------------------------------------------------------------------------------------
Jerome M. Behar(4) 150 66,250 *
------------------------------------------------------------------------------------------------------
Michael M. Crow 63,948 25,200 *
------------------------------------------------------------------------------------------------------
Laurence J. Kirshbaum -- 30,750 *
------------------------------------------------------------------------------------------------------
All directors and executive officers as a
group (10 persons) 1,419,786 960,867 19.3%
------------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent
(1) Address: c/o Engineering Animation, Inc., 2321 North Loop Drive, Ames, Iowa
50010.
(2) Held by the Matthew Rizai Family Limited Partnership.
(3) Includes 6,249 shares held in Mr. Wade's Individual Retirement Account.
(4) Mr. Behar's employment at EAI ended February 29, 2000.
On September 5, 2000, in connection with the execution of the Merger
Agreement, EAI entered into a Stock Option Agreement with Parent pursuant to
which we granted to Parent an option to purchase a number of shares of EAI
common stock equal to 19.9% of all shares of EAI common stock currently issued
and outstanding at an exercise price of $13.75 per share.
BOARD OF DIRECTORS
The Board of Directors is divided into three classes with staggered terms.
At each annual meeting of stockholders, a class of directors will be elected for
a three-year term to succeed the directors of the same class whose terms are
then expiring. Biographical information on each director, including age,
follows:
A-4
<PAGE> 20
TERMS EXPIRING IN 2001
------------------------------------
<TABLE>
<S> <C> <C>
MARTIN J. VANDERPLOEG, PH.D. Age: 43 Director since: 1988
</TABLE>
Dr. Vanderploeg co-founded EAI in 1988. He has served as Executive Vice
President since October 1993, as Secretary from June 1990 until November 1995
and as a Co-General Manager of the Software Division from October 1997 until
August 1999. His prior experience includes serving as a faculty member in
mechanical engineering at Iowa State University and performing contract research
for a number of large corporations. Dr. Vanderploeg earned a Ph.D. in Mechanical
Engineering from Michigan State University.
<TABLE>
<S> <C> <C>
LAURENCE J. KIRSHBAUM Age: 56 Director since: 1995
</TABLE>
Mr. Kirshbaum has been Chairman of Time Warner Trade Publishing since 1997.
From 1984 to 1997, he was President and CEO of Warner Books Inc., a subsidiary
of Time Warner Inc. Mr. Kirshbaum is a director of Hoover's, Inc., an Internet
provider of company and industry information. Mr. Kirshbaum earned a B.A. from
the University of Michigan.
TERMS EXPIRING IN 2002
------------------------------------
<TABLE>
<S> <C> <C>
MATTHEW M. RIZAI, PH.D. Age: 44 Director since: 1990
</TABLE>
Dr. Rizai has been Chairman and Chief Executive Officer since June 1990 and
Treasurer since November 1995. He was President from June 1990 until November
1999. Dr. Rizai's prior experience includes serving as an associate with a
venture capital firm, a senior research engineer with General Motors Corporation
and a development engineer with Ford Motor Company. Dr. Rizai earned a Ph.D. in
Mechanical Engineering from Michigan State University and an M.B.A. from the
University of Chicago.
<TABLE>
<S> <C> <C>
MICHAEL M. CROW, PH.D. Age: 44 Director since: 1991
</TABLE>
Dr. Crow has been Executive Vice Provost at Columbia University since
August 1991. Dr. Crow served as the Director of the Institute for Physical
Research and Technology and the Office of Science Policy and Research at Iowa
State University from July 1985 to June 1991. Dr. Crow earned a Ph.D. in Public
Administration (Science and Technology Policy) from Syracuse University.
TERMS EXPIRING IN 2003
------------------------------------
<TABLE>
<S> <C> <C>
JAMIE A. WADE Age: 52 Director since: 1995
</TABLE>
Mr. Wade has served as Vice President of Administration and General Counsel
since June 1994 and Secretary since November 1995. From 1983 to 1994, Mr. Wade
was a partner with Davis, Hockenberg, Wine, Brown, Koehn & Shors, P.C., a Des
Moines law firm. Mr. Wade earned a J.D. from Drake University Law School and a
B.A. from Drake University College of Business.
DIRECTOR COMPENSATION
Directors who are EAI employees receive no fees for their services as
directors. Non-employee "outside" directors receive an annual retainer of
$20,000, and a fee of $1,000 and reimbursement of expenses for each Board and
committee meeting they attend.
A-5
<PAGE> 21
Outside directors participate in the Non-Employee Directors Stock Option
Plan. The Chairman of the Board, Matthew Rizai, administers this plan. Each
non-employee director receives an initial option to purchase 7,500 shares of EAI
common stock in the year he or she joins the Board and an option to purchase an
additional 7,500 shares for each subsequent year he or she serves. The options
have a fifteen-year term and an exercise price equal to the fair market value of
EAI common stock on the date the option is granted. The initial options granted
under the plan become exercisable in four equal annual installments, with the
first increment becoming exercisable immediately. Subsequent options are
exercisable when they are granted. Directors may only transfer the options by
will or by the laws of descent and distribution.
MEETINGS AND COMMITTEES OF THE
BOARD OF DIRECTORS
The Board of Directors met twelve times during 1999. In addition to
meetings of the full Board, some directors attended meetings of Board
committees. The Board has standing audit and compensation committees. Each
director attended or participated by telephone in greater than 75% of the
aggregate of the meetings of the Board and of the committees on which he served.
The Audit Committee recommends the independent public auditors to the Board
and oversees our accounting and audit functions. Drs. Rizai and Crow and Mr.
Kirshbaum are the members of the Audit Committee. The Committee met three times
during 1999.
The Compensation Committee determines executive officers' salaries, bonuses
and other compensation. Dr. Crow and Mr. Kirshbaum are the members of the
Compensation Committee. The Committee met three times during 1999.
EXECUTIVE OFFICERS OF EAI
The Board of Directors generally appoints the executive officers at the
first meeting of the Board held after the annual meeting of stockholders. The
executive officers hold office until a successor is elected and qualified or
until death, resignation or removal in accordance with our by-laws. Our current
executive officers are:
MATTHEW M. RIZAI
AGE: 44
TITLE: Chairman, Chief Executive Officer and Treasurer
EXPERIENCE: Dr. Rizai has been our Chairman, Chief Executive Officer and
a Director since joining EAI in June 1990. He has been
Treasurer since November 1995. He was President from June
1990 until November 1999. Dr. Rizai's prior experience
includes serving as an associate with a venture capital
firm, a senior research engineer with General Motors
Corporation and a development engineer with Ford Motor
Company. Dr. Rizai earned a Ph.D. in Mechanical Engineering
from Michigan State University and an M.B.A. from the
University of Chicago.
ROBERT M. NIERMAN
AGE: 55
TITLE: President and Chief Operating Officer
A-6
<PAGE> 22
EXPERIENCE: Mr. Nierman has served as President since November 1999 and
Chief Operating Officer since joining EAI in May 1999. He
was Executive Vice President from May until November 1999.
Mr. Nierman's prior experience includes serving as Executive
Vice President and Chief Operating Officer of Structural
Dynamics Research Corporation (SDRC) from January 1997 until
May 1999, and President and Chief Executive Officer of
Metaphase Technologies, Inc. from October 1992 until
December 1996. Mr. Nierman attended Cornell University.
MARTIN J. VANDERPLOEG
AGE: 43
TITLE: Executive Vice President
EXPERIENCE: Dr. Vanderploeg co-founded EAI in 1988. He has served as
Executive Vice President since October 1993. Dr. Vanderploeg
has been a Director since 1988. He was Secretary from June
1990 until November 1995 and a Co-General Manager of the
Software Division from October 1997 until August 1999. His
prior experience includes serving as a faculty member in
mechanical engineering at Iowa State University and
performing contract research for a number of large
corporations. Dr. Vanderploeg earned a Ph.D. in Mechanical
Engineering from Michigan State University.
JAMIE A. WADE
AGE: 52
TITLE: Vice President of Administration, General Counsel and
Secretary
EXPERIENCE: Mr. Wade has served as our Vice President of Administration
and General Counsel since June 1994 and Secretary since
November 1995. He has been a Director since 1995. From 1983
to 1994, Mr. Wade was a partner with Davis, Hockenberg,
Wine, Brown, Koehn & Shors, P.C., a Des Moines law firm. Mr.
Wade earned a J.D. from Drake University Law School and a
B.A. from Drake University College of Business.
ROBERT L. CYR
AGE: 40
TITLE: Vice President of Worldwide Sales and Marketing
EXPERIENCE: Mr. Cyr has served as our Vice President of Worldwide Sales
and Marketing since January 2000. Prior to that, Mr. Cyr was
Vice President of the Americas and Asia Pacific for SDRC in
1998. Mr. Cyr worked for Honeywell-Measurex Corporation (and
formerly Measurex Corporation) from 1995 through 1997,
serving in several national and international sales and
service vice presidential positions. He earned a B.S. in
Chemical Engineering from the University of Maine's Bowdoin
College.
A-7
<PAGE> 23
MICHAEL K. O'GARA
AGE: 53
TITLE: Vice President of Finance and Chief Financial Officer
EXPERIENCE: Mr. O'Gara joined EAI in October 1999, serving as our Vice
President of Business Operations until March 2000, when he
became Vice President of Finance and Chief Financial
Officer. Prior to joining EAI, he served as an executive of
business operations for SDRC from January 1997 until August
1999, and Chief Financial Officer for Metaphase
Technologies, Inc. from October 1992 until December 1996.
Mr. O'Gara earned a B.S. in Accounting from Minnesota State
University -- Mankato.
JEFF D. TROM
AGE: 40
TITLE: Vice President and Chief Technology Officer
EXPERIENCE: Dr. Trom, a co-founder of EAI, has held the position of Vice
President since June 1990, and Chief Technology Officer
since November 1999. He served as Treasurer from June 1990
until November 1995. Dr. Trom earned a Ph.D. in Mechanical
Engineering from Iowa State University.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
executive officers, directors and 10% stockholders file reports of ownership and
changes of ownership of EAI common stock with the SEC. Based on a review of
copies of these reports provided to us during 1999, we believe that all filing
requirements were met.
EXECUTIVE COMPENSATION
The table on the following page summarizes the before-tax 1999 compensation
for the Chief Executive Officer and the other four most highly compensated
executive officers of EAI.
A-8
<PAGE> 24
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
NUMBER OF
SECURITIES
NAME AND ANNUAL COMPENSATION UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS COMPENSATION($)
---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
Matthew M. Rizai 1999 395,000 -- 320,000(1) 10,153(2)
Chief Executive Officer 1998 295,000 200,000 60,000 8,569(2)
and Treasurer 1997 235,000 205,000 -- 8,062(2)
---------------------------------------------------------------------------------------------------------------
Robert M. Nierman 1999 184,524 109,615 265,000 2,086(4)
Chief Operating Officer and
President(3)
---------------------------------------------------------------------------------------------------------------
Martin J. Vanderploeg 1999 395,000 -- 320,000(1) 10,153(5)
Executive Vice President 1998 295,000 200,000 60,000 8,483(5)
1997 235,000 205,000 -- 8,062(5)
---------------------------------------------------------------------------------------------------------------
Jamie A. Wade 1999 200,000 -- 28,000(6) 3,958(7)
Vice President of 1998 155,000 40,000 6,000 2,746(7)
Administration, General 1997 140,000 30,000 -- 2,069(7)
Counsel and Secretary
---------------------------------------------------------------------------------------------------------------
Jerome M. Behar 1999 200,000 -- 8,000(6) 3,889(8)
Vice President of Finance 1998 150,000 50,000 13,500 3,658(8)
and Chief Financial Officer 1997 78,750 20,000 54,750 3,115(8)
---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 200,000 options cancelled in 1999.
(2) Consists of $6,953, $3,463 and $3,128 of premiums on a life insurance policy
paid in 1999, 1998 and 1997, and $3,200, $5,106 and $4,934 of matching
contributions by EAI to the Engineering Animation, Inc. Retirement Plan made
in 1999, 1998 and 1997.
(3) Mr. Nierman began working at EAI in May 1999.
(4) Consists of premiums on a life insurance policy paid in 1999.
(5) Consists of $6,953, $3,463 and $3,128 of premiums on a life insurance policy
paid in 1999, 1998 and 1997, and $3,200, $5,020 and $4,934 of matching
contributions by EAI to the Engineering Animation, Inc. Retirement Plan made
in 1999, 1998 and 1997.
(6) Includes 8,000 shares of performance based grants that fully lapsed on
February 9, 2000, due to Company performance criteria not being met.
(7) Consists of $1,648, $686 and $609 of premiums on a life insurance policy
paid in 1999, 1998 and 1997, and $2,310, $2,060 and $1,460 of matching
contributions by EAI to the Engineering Animation, Inc. Retirement Plan made
in 1999, 1998 and 1997.
(8) Consists of $689, $333 and $112 of premiums on a life insurance policy paid
in 1999, 1998 and 1997, and $3,200, $3,325 and $750 of matching
contributions by EAI to the Engineering Animation, Inc. Retirement Plan made
in 1999, 1998 and 1997, and $2,253 paid in 1997 for taxable relocation
expenses. Mr. Behar was employed from June 1, 1997 until February 29, 2000.
A-9
<PAGE> 25
OPTION GRANTS IN 1999
This table provides information relating to the 1999 stock option grants to
the executive officers listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
----------------------- ----------- ------------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Matthew M. Rizai 120,000 6.71 44.25 2/09/09 5,575,500 5,841,000
200,000(1) 11.18 19.69 6/28/09 4,134,480 4,331,360
---------- --------- ----------- ------------
Total 320,000 17.89 9,709,980 10,172,360
---------- --------- ----------- ------------
---------- --------- ----------- ------------
Robert M. Nierman 225,000 12.58 15.91 4/30/09 3,758,029 3,936,983
40,000 2.24 8.44 11/4/09 354,396 371,272
---------- --------- ----------- ------------
Total 265,000 14.82 4,112,425 4,308,255
---------- --------- ----------- ------------
---------- --------- ----------- ------------
Martin J. Vanderploeg 120,000 6.71 44.25 2/09/09 5,575,500 5,841,000
200,000(1) 11.18 19.69 6/28/09 4,134,480 4,331,360
---------- --------- ----------- ------------
Total 320,000 17.89 9,709,980 10,172,360
---------- --------- ----------- ------------
---------- --------- ----------- ------------
Jamie A. Wade 8,000(2) 0.45 44.25 2/09/09 371,700 389,400
20,000 1.12 8.44 11/04/09 177,198 185,636
---------- --------- ----------- ------------
Total 28,000 1.57 548,898 575,036
---------- --------- ----------- ------------
---------- --------- ----------- ------------
Jerome M. Behar 8,000(2) 0.45 29.75 2/09/09 249,900 261,800
---------- --------- ----------- ------------
---------- --------- ----------- ------------
</TABLE>
------------------------
(1) Grant that was cancelled in 1999.
(2) Performance based grant that fully lapsed on February 9, 2000, due to
Company performance criteria not being met.
AGGREGATED OPTION EXERCISES IN 1999
AND FISCAL YEAR-END OPTION VALUES
This table provides information regarding the exercise of stock options
during 1999 by the CEO and the other four most highly compensated executives.
The "value realized" is calculated using the difference between the option
exercise price and the price of our common stock on the date of exercise
multiplied by the number of shares subject to the option. The "value of
unexercised in-the-money options at fiscal year end" is calculated using the
difference between the option exercise price and $8.75 (the last reported market
price of our common stock on December 31, 1999) multiplied by the number of
shares underlying the option. An option is in-the-money if the market value of
the common stock subject to the option is greater than the exercise price.
A-10
<PAGE> 26
AGGREGATED OPTION EXERCISES IN 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE -------------------------------------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Matthew M. Rizai -- -- 274,289 180,000 1,149,349 --
------------------------------------------------------------------------------------------------------------------------
Robert M. Nierman -- -- -- 265,000 -- 12,480
------------------------------------------------------------------------------------------------------------------------
Martin J. Vanderploeg -- -- 363,903 180,000 1,814,016 --
------------------------------------------------------------------------------------------------------------------------
Jamie A. Wade 25,300 449,984 13,500 41,200(1) 31,825 40,440
------------------------------------------------------------------------------------------------------------------------
Jerome M. Behar -- -- 28,571 45,499(1) -- --
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 8,000 shares each of performance based grants that fully lapsed on
February 9, 2000, due to Company performance criteria not being met.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The employment and severance arrangements for executive officers are
discussed under the heading "Effects of the Offer and the Merger Under Company
Stock Plans and Agreements Between the Company and its Executive
Officers--Employment and Severance Arrangements" in the Statement, to which this
Information Statement forms Annex A.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors is composed of two
outside directors. The Committee recommends our executive officers' compensation
to the Board. It also approves the terms of executive employment and severance
arrangements, and administers and approves the stock option grants under the
Stock Option Plan and the 1997 Non-Qualified Stock Option Plan.
The Committee's goals are to:
- motivate executive officers to create value for EAI's stockholders
through compensation incentives that are tied to EAI's operating and
stock market performance;
- reward executives for both individual performance and EAI's performance;
- provide compensation and benefits at levels that enable EAI to attract
and retain high-quality professionals; and
- align the interests of EAI's officers and directors with stockholder
interests by using stock options as an element of compensation.
EXECUTIVE COMPENSATION PROGRAMS: Executive officer compensation is composed
of base salary, a cash bonus and stock options. The Committee believes that
EAI's stockholders are best served by emphasizing the cash bonus and stock
option elements of compensation since doing so aligns the executive officers'
interests with stockholder interests.
Base Salary. The Board considers the Committee's recommendations and the
terms of executive employment agreements in setting annual base salaries for
executives. In making its
A-11
<PAGE> 27
recommendations, the Committee reviews historical compensation levels of the
executives, and their past and potential future performance. In determining base
salaries, the Committee considers compensation information of comparable
companies in the industry, but does not use any particular indices.
Cash Bonus. Executives may receive cash bonuses during and after the end of
each fiscal year. These bonuses depend primarily on EAI's financial performance
and the achievement of corporate objectives established by the Committee at the
beginning of each fiscal year. Executives involved in sales and marketing
activities may also receive commissions on sales of EAI's products and services.
In determining bonuses for the 1999 fiscal year, the Committee considered
individual performance goals as well as EAI's net income, revenues and business
unit sales. The Committee considers compensation information of comparable
companies in the industry to establish appropriate bonuses but does not use any
particular indices.
Stock Options. Executives generally receive stock options through initial
option grants at the time of hire and periodic additional option grants. EAI's
practice has been to set the exercise price of stock options at the fair market
value of EAI common stock on the date the option is granted and to provide
vesting provisions based upon EAI's financial performance, performance of the
business unit and, if such performance provisions are met, vesting over a period
of years. The Committee believes that stock options effectively align the
long-term interests of executives and stockholders since the executives realize
gains on option exercises only if the performance and longevity provisions are
met and only if EAI's stock price increases over the fair market value at the
date of grant.
In determining the amount of option grants, the Committee evaluates the
executive's job level, responsibilities for the upcoming fiscal year,
responsibilities for prior years and the size of awards received in prior years
relative to EAI's overall performance. Options generally become exercisable over
a period of four years, beginning on the first anniversary of issuance. From
time to time, EAI issues options to executives that are immediately exercisable.
The performance based stock option grants awarded to the executive officers
in 1999 were cancelled because the 1999 performance criteria were not met.
Additionally, stock options granted to Drs. Rizai and Vanderploeg in 1999 were
cancelled.
CHIEF EXECUTIVE OFFICER COMPENSATION: The Committee evaluates the CEO's
performance and determines his compensation in accordance with the factors that
apply to executive officers generally. The CEO's base salary for 1999, as shown
in the Summary Compensation Table, represented a 34% increase over 1998. This
increase was based on comparison to compensation of CEOs in comparable companies
in the industry and upon the financial performance of EAI during 1998.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION: Internal Revenue Code Section
162(m) limits the deductibility by EAI of compensation in excess of $1,000,000
paid to each of the CEO and the other four most highly compensated executive
officers. Certain "performance based compensation" is not included in
compensation counted for purposes of the limit. The Committee has attempted to
structure EAI's compensation programs to preserve full deductibility and will
continue to assess the impact of Section 162(m) on its compensation practices.
Compensation Committee
Michael Crow
Laurence Kirshbaum
A-12
<PAGE> 28
COMPANY PERFORMANCE
This graph shows a comparison of cumulative total returns for EAI, The
Nasdaq Stock Market, Inc.-U.S. and a group of public companies in the H&Q
Computer Software Index from February 29, 1996 (the date EAI common stock was
first offered to the public) through December 31, 1999. The graph assumes an
initial investment of $100 and the reinvestment of dividends.
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
2/29/96 12/31/96 12/31/97 12/31/98 12/31/99
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Engineering Animation, Inc. $100 $135 $256 $450 $ 73
------------------------------------------------------------------------------------------------------
The Nasdaq Stock Market, Inc. - U.S. 100 118 144 204 368
------------------------------------------------------------------------------------------------------
H&Q Computer Software Index 100 117 141 184 419
------------------------------------------------------------------------------------------------------
</TABLE>
A-13
<PAGE> 29
ANNEX B
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL & CONFIDENTIAL
September 5, 2000
Board of Directors
Engineering Animation, Inc.
2321 North Loop Drive
Ames, IA 50010
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Common Stock, par value $0.01 per
share (the "Shares"), of Engineering Animation, Inc. (the "Company") of the
$13.75 per Share in cash proposed to be paid by Unigraphics Solutions Inc.
("Parent") in the Offer and Merger (as defined below) pursuant to the Agreement
and Plan of Merger, dated as of September 5, 2000, among Parent, UGS Acquisition
Corporation, a wholly-owned subsidiary of Parent ("Purchaser"), and the Company
(the "Agreement"). The Agreement provides for a tender offer for all of the
Shares (the "Offer") pursuant to which Purchaser will pay $13.75 per Share in
cash for each Share accepted. The Agreement further provides that following
completion of the Offer, Purchaser will be merged with and into the Company (the
"Merger") and each outstanding Share (other than Shares already owned by
Purchaser and Shares in respect of which dissenters' rights have been properly
exercised) will be converted into the right to receive $13.75 per Share in cash.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as its financial advisor in connection
with the sale of its subsidiary EAI-DELTA GmbH to Dassault Systemes S.A. in
March 2000, and having acted as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Agreement. We
also have provided certain investment banking services to the Parent's
controlling shareholder, Electronic Data Systems Corporation ("EDS"), including
having acted as co-manager in the secondary public offering of 15,000,000 shares
of Common Stock of EDS in May 1999, having acted as co-manager in the public
offering of $1,500,000,000 aggregate principal amount of notes in October 1999,
and having acted as co-manager in the secondary public offering of 15,000,000
shares of Common Stock of EDS in February 2000. Goldman, Sachs & Co. may provide
investment banking services to EDS in the future. Goldman, Sachs & Co. provides
a full range of financial advisory and securities services and, in the course of
its normal trading activities, may from
B-1
<PAGE> 30
time to time effect transactions and hold securities, including derivative
securities, of the Company, Parent or EDS for its own account and for the
accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement, Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1999; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding their assessment of its past and current business operations,
financial condition and future prospects. In addition, we have reviewed the
reported price and trading activity for the Shares, compared certain financial
and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded, and
performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or any of its subsidiaries and we have not been
furnished with any such evaluation or appraisal. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transactions contemplated by the Agreement and such opinion does not constitute
a recommendation as to whether or not any holder of Shares should tender such
Shares in connection with such transaction, or, if applicable, how any holder of
Shares should vote in connection with the Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the $13.75 per
Share in cash to be received by the holders of Shares in the Offer and the
Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
---------------------------------
(GOLDMAN, SACHS & CO.)
B-2
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(a)(1) Letter to the stockholders of the Company, dated September
13, 2000.*
(a)(2) Sections 11, 14 and 15 of the Offer to Purchase, dated
September 13, 2000 (incorporated by reference from Exhibit
(a)(1)(A) to the Schedule TO filed on September 13, 2000).
(a)(3) Form of Letter of Transmittal 2000 (incorporated by
reference from Exhibit (a)(1)(B) to the Schedule TO filed on
September 13, 2000).
(a)(4) Opinion of Goldman, Sachs & Co., dated September 5, 2000
(included as Annex B to this Statement).*
(a)(5) Joint Press Release and letter to employees issued by the
Company and Parent on September 5, 2000 (previously filed
under cover of Schedule 14D-9C filed by the Company on
September 5, 2000).
(a)(6) Joint Press Release, dated September 13, 2000 (incorporated
by reference from Exhibit (a)(1)(G) to the Schedule TO filed
on September 13, 2000).
(a)(7) Summary Advertisement, dated September 13, 2000
(incorporated by reference from Exhibit (a)(1)(H) to the
Schedule TO filed on September 13, 2000).
(e)(1) Agreement and Plan of Merger, dated as of September 5, 2000,
among Parent, the Purchaser and the Company (incorporated by
reference from Exhibit (d)(1) to the Schedule TO filed on
September 13, 2000).
(e)(2) Stock Option Agreement, dated as of September 5, 2000,
between Parent and the Company (incorporated by reference
from Exhibit (d)(2) to the Schedule TO filed on September
13, 2000).
(e)(3) Stockholders Agreement, dated as of September 5, 2000, among
Parent, Purchaser and the stockholders of the Company named
therein (incorporated by reference from Exhibit (d)(3) to
the Schedule TO filed on September 13, 2000).
(e)(4) First Amendment, effective as of September 5, 2000, to
Rights Agreement, dated as of January 1, 1996, between the
Company and First Chicago Trust Company of New York, as
Rights Agent (incorporated by reference from Exhibit 4.2 to
the Form 8A/A filed by the Company on September 6, 2000).
(e)(5) Matthew M. Rizai Employment and Severance Agreements, dated
as of January 1, 1996, and Option Agreements, dated June 9,
1994 and February 11, 1995 (incorporated by reference from
the Company's Registration Statement on Form S-1, SEC file
no. 333-80705).
(e)(6) Martin J. Vanderploeg Employment and Severance Agreements,
dated as of January 1, 1996, and Option Agreements, dated
June 9, 1994 and February 11, 1995 (incorporated by
reference from the Company's Registration Statement on Form
S-1, SEC file no. 333-80705).
(e)(7) Jamie A. Wade Employment and Severance Agreements, dated as
of January 1, 1996, and Option Agreement, dated February 11,
1995 (incorporated by reference from the Company's
Registration Statement on Form S-1, SEC file no. 333-80705).
(e)(8) Robert M. Nierman Employment Agreement, dated April 21,
1999, and Option Agreement, dated April 30, 1999
(incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999).
(e)(9) Jeff D. Trom Employment and Severance Agreements, dated as
of January 1, 1996 (incorporated by reference from the
Company's Registration Statement on Form S-1, SEC file no.
333-80705).
(e)(10) Robert L. Cyr Employment Agreement, dated as of January 1,
2000 (incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
2000).
</TABLE>
E-1
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(e)(11) Michael K. O'Gara Employment Agreement, dated as of February
28, 2000 (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000).
(e)(12) Amendment No. 1 to Employment Agreement with Matthew M.
Rizai, dated as of January 1, 2000 (incorporated by
reference from the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000).
(e)(13) Amendment No. 1 to Employment Agreement with Martin J.
Vanderploeg, dated as of January 1, 2000 (incorporated by
reference from the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000).
(e)(14) Amendment No. 1 to Employment Agreement with Jamie A. Wade,
dated as of January 1, 2000 (incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000).
(e)(15) Amendment No. 1 to Employment Agreement with Jeff D. Trom,
dated as of January 1, 2000 (incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000).
(e)(16) Non-Competition/No-Solicitation Agreement by Matthew M.
Rizai, dated as of September 5, 2000.*
(e)(17) Non-Competition/No-Solicitation Agreement by Martin J.
Vanderploeg, dated as of September 5, 2000.*
(e)(18) Non-Competition/No-Solicitation Agreement by Jamie A. Wade,
dated as of September 5, 2000.*
(e)(19) Non-Competition/No-Solicitation Agreement by Jeff D. Trom,
dated as of September 5, 2000.*
(e)(20) Information Statement of the Company, dated September 13,
2000 (included as Annex A hereto).*
</TABLE>
---------------
* Included with this Statement.
E-2