<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Engineering Animation, Inc.
---------------------------
(Name of Registrant as Specified in its Charter)
N/A
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
.....................................................................
2. Aggregate number of securities to which transaction applies:
.....................................................................
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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1. Amount Previously Paid:
..............................................................
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..............................................................
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..............................................................
4. Date Filed:
..............................................................
<PAGE>
E A I
[Logo]
Engineering Animation, Inc.
2321 North Loop Drive
Ames, Iowa 50010
May 26, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the Engineering Animation, Inc.
Annual Meeting of Stockholders at the Embassy Suites Hotel, 101 East Locust
Street, Des Moines, Iowa 50309 on Thursday, June 29, 2000 at 1:30 PM Central
time. The attached Notice of Annual Meeting and Proxy Statement describe the
business to be transacted at the meeting and provide other information
concerning EAI that you should be aware of when you vote your shares.
The principal business of the Annual Meeting will be to elect one
director and to ratify the appointment of our independent public auditors.
It is important that your shares are represented at the Annual Meeting,
whether or not you plan to attend. To ensure that you will be represented, we
ask that you sign, date and return the enclosed proxy card or proxy voting
instruction form as soon as possible. If your bank or broker offers telephone or
Internet voting and you choose to use one of those forms of voting, it is not
necessary for you to return your proxy card. In any event, please vote as soon
as possible.
If you are planning to vote in person at the Annual Meeting and you own
your stock in "street name," please remember that you must bring an account
statement or letter indicating that you were the beneficial owner of the shares
on May 10, 2000. Otherwise, you will not be able to vote in person at the
meeting.
On behalf of the Board of Directors and management, I would like to
express our appreciation for your continued interest in EAI.
Sincerely,
Matthew M. Rizai
Chairman, Chief Executive
Officer & Treasurer
<PAGE>
Engineering Animation, Inc.
2321 North Loop Drive
Ames, Iowa 50010
-------------------------------------------------
Notice of Annual Meeting of Stockholders
-------------------------------------------------
Thursday, June 29, 2000
1:30 PM Central Time
Embassy Suites Hotel
101 East Locust Street
Des Moines, Iowa 50309
The purpose of our Annual Meeting is to:
1. elect one director for a three-year term; and
2. ratify the appointment of KPMG LLP as our independent public
auditors for fiscal 2000.
You can vote at the Annual Meeting in person or by proxy if you were a
stockholder of record on May 10, 2000. Our Annual Report for the fiscal year
ended December 31, 1999 is enclosed.
You may revoke your proxy at any time prior to its exercise at the
Annual Meeting.
By Order of the Board of Directors,
Jamie A. Wade
Secretary
May 26, 2000
<PAGE>
Engineering Animation, Inc.
------------------------------------------------
Proxy Statement
------------------------------------------------
Table of Contents
Page
General Information............................................... 2
Election of Directors............................................. 4
Meetings and Committees of the Board of Directors................. 5
Director Compensation............................................. 5
Ownership of EAI Common Stock..................................... 5
Section 16(a) Beneficial Ownership Reporting Compliance........... 6
Executive Compensation............................................ 6
Report of the Compensation Committee of the Board of Directors.... 9
Company Performance............................................... 11
Employment and Severance Arrangements............................. 11
Proposal to Ratify the Appointment of Independent Public Auditors. 12
Annual Report on Form 10-K
You may obtain a free copy of our Annual Report on Form 10-K for the
year ended December 31, 1999, including schedules, that is on file with the
Securities and Exchange Commission (SEC). Please contact Maribeth Waldman,
Senior Manager of Communication Services, at Engineering Animation, Inc., 2321
North Loop Drive, Ames, Iowa 50010, or contact [email protected] by e-mail. You can
also access our SEC filed reports through our Web site at
www.eai.com/corporate/investor.
This proxy statement and form of proxy are first being sent to
stockholders on or about May 26, 2000.
<PAGE>
General Information
Engineering Animation, Inc.'s Annual Meeting of Stockholders will take
place on Thursday, June 29, 2000 at 1:30 PM Central time at the Embassy Suites
Hotel, 101 East Locust Street, Des Moines, Iowa 50309. We are requesting that
you vote on the following items and any other business that is properly raised
at the meeting, if a quorum is present:
* the election of one director for a three-year term; and
* the ratification of KPMG LLP as our independent public auditors.
Voting Procedure
Each share of EAI common stock that you own entitles you to one vote.
Stockholders at the close of business on May 10, 2000 (the record date) are
entitled to vote at the 2000 Annual Meeting. You may vote by signing, dating and
mailing your proxy in the enclosed postage paid envelope. You also may vote by
telephone or over the Internet if you hold your shares through a bank or broker
that offers either of those options.
If you attend the Annual Meeting in person, you may pick up a ballot
when you arrive. If your shares are held in the name of your broker, your bank
or another nominee, you must bring an account statement or letter from them
indicating that you were the beneficial owner of the shares on May 10, 2000;
otherwise, you will not be able to vote in person at the meeting.
You can change your vote by revoking your proxy at any time before it
is exercised by:
* notifying our Secretary in writing before the Annual Meeting that you
are revoking your proxy;
* submitting another proxy with a later date;
* voting by telephone or Internet after you have given your proxy; or
* voting in person at the Annual Meeting, but make sure you follow the
instructions set out above for voting at the Annual Meeting.
What Your Vote Means
Quorum - A quorum is the presence, in person or by proxy, of the
holders of not less than one-third of the shares entitled to vote at the Annual
Meeting. You will be considered part of the quorum if you return a signed and
dated proxy card, if you vote by telephone or Internet, or if you attend the
meeting. As of the record date, there were 12,040,531 shares of EAI common stock
outstanding and entitled to vote at the Annual Meeting.
Abstentions are counted as "shares present" at the Annual Meeting for
purposes of determining whether a quorum exists. Proxies submitted by brokers
that do not indicate a vote for a proposal because the brokers do not have
voting authority and have not received voting instructions from you (so-called
"broker non-votes") are considered "shares present" for purposes of determining
whether a quorum exists. Broker non-votes are not considered as shares voted and
will not affect the outcome of the vote.
Election Of Director - The director nominee who receives the highest
number of votes will be elected. If you do not want to vote your shares for the
nominee, you may indicate that in the space provided on the proxy card or
withhold authority as prompted during telephone or Internet voting. Abstentions
do not affect the outcome of the vote.
2
<PAGE>
Ratification Of Independent Public Auditors - Although we are not
required to submit the appointment of our auditors to a vote of stockholders, we
believe that it is appropriate to ask you to ratify the appointment.
Ratification of KPMG LLP as our independent public auditors requires the
affirmative vote of a majority of the shares present or represented by proxy at
the Annual Meeting. Abstentions have the same effect as votes "against" the
proposal, since they result in fewer votes for approval.
Unmarked Proxy Card or Other Items Coming Up at the Meeting
If you sign, date and return your proxy card but do not indicate how
you want to vote, you give discretionary voting authority to Matthew M. Rizai
and Robert M. Nierman to vote on the items discussed in these proxy materials.
In such a case, your vote will be cast FOR the director nominee and FOR the
ratification of our independent public auditors.
When you return a signed and dated proxy card or provide your voting
instructions by telephone or Internet, you give Dr. Rizai and Mr. Nierman the
discretionary authority to vote on your behalf on any other item that is
properly brought at the Annual Meeting.
Cost of Proxy Solicitation
We will pay all of the costs of soliciting the proxies for the 2000
Annual Meeting. We will ask brokerage houses and other nominees and fiduciaries
to forward the proxy materials to the beneficial owners of EAI common stock and
to obtain the authority to execute proxies. We will reimburse them for their
reasonable expenses. In addition to mailing proxy materials, our directors,
officers and employees may solicit proxies in person, by telephone or otherwise.
These individuals will not be specially compensated.
Shareholder Proposals and Director Nominees
You should send any proposal or director nomination for next year's
annual meeting to our Corporate Secretary at the address on the cover of this
Proxy Statement.
Proposals - If you wish to submit a shareholder proposal for the 2001
Annual Meeting, you must send it in writing so that we receive it on or after
December 27, 2000, but on or before January 26, 2001. Our by-laws require that
your proposal give: (1) a brief description of the business you want to bring
before the meeting; (2) your name and address as they appear on our stock
records; (3) the class and number of shares of EAI stock that you beneficially
own; and (4) any interest you may have in the business you want to bring before
the meeting. In addition, to be included in the proxy statement for the meeting,
your proposal must comply with the proxy rules of the SEC.
Director Nominee - If you wish to submit a nomination for a director of
EAI for the 2001 Annual Meeting, we must receive it in writing on or after
January 30, 2001, but on or before March 1, 2001. Our by-laws require that you
provide: (1) your name and address and the name and address of the nominee; (2)
a statement that you are a record holder of EAI stock entitled to vote at the
meeting and that you plan to appear in person or by proxy at the meeting to make
the nomination; (3) a description of all arrangements or understandings under
which you are making the nomination; (4) any other information that would be
required by the SEC for inclusion in a proxy statement; and (5) the nominee's
consent to serve as a director if elected.
3
<PAGE>
Election of Director
Five directors serve on EAI's Board of Directors. The directors are
divided into three classes. At this year's Annual Meeting, you are being asked
to elect one director to serve for a term of three years or until a qualified
successor director has been elected. The nominee, Jamie A. Wade, is currently an
EAI director. The remaining four directors (Matthew M. Rizai, Martin J.
Vanderploeg, Michael M. Crow and Laurence J. Kirshbaum) will continue to serve
on the Board as described below.
Your shares will be voted as you specify on your proxy card or voting
instruction form. If you do not specify how you want your shares voted, we will
vote them FOR the election of Mr. Wade. If unforeseen circumstances (such as
death or disability) make it necessary for the Board to substitute another
person for the nominee, your shares will be voted FOR that other person. The
Board does not anticipate that the nominee will be unable to serve. The nominee
and continuing directors have provided the following information about
themselves.
Nominee
Jamie A. Wade Age: 51 Director since: 1995
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.
-------------------------------------------------------------------------------
The Board of Directors unanimously recommends a vote
FOR the election of Jamie A. Wade as a director.
-------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Directors Continuing Until 2001 Annual Meeting
Martin J. Vanderploeg, Ph.D. Age: 43 Director since: 1988
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.
Laurence J. Kirshbaum Age: 55 Director since: 1995
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.
- --------------------------------------------------------------------------------
Directors Continuing Until 2002 Annual Meeting
Matthew M. Rizai, Ph.D. Age: 43 Director since: 1990
Dr. Rizai has been Chairman and Chief Executive Officer since 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
4
<PAGE>
a Ph.D. in Mechanical Engineering from Michigan State University and an M.B.A.
from the University of Chicago.
Michael M. Crow, Ph.D. Age: 44 Director since: 1991
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.
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.
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.
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.
Ownership of EAI Common Stock
The following table shows how much EAI common stock the directors, the
named executive officers and all executive officers and directors as a group
beneficially owned as of May 10, 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.
5
<PAGE>
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 5/10/00 of Class
- -------------------------------------------------- ---------------------- ----------------------- -------------
<S> <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 44,049 (3) 20,100 *
- -------------------------------------------------- ---------------------- ----------------------- -------------
Jerome M. Behar (4) 150 66,250 *
- -------------------------------------------------- ---------------------- ----------------------- -------------
Michael M. Crow 63,948 25,200 *
- -------------------------------------------------- ---------------------- ----------------------- -------------
Laurence J. Kirshbaum - 23,250 *
- -------------------------------------------------- ---------------------- ----------------------- -------------
All directors and executive officers as a group
(10 persons) 1,419,769 953,367 19.3%
- -------------------------------------------------- ---------------------- ----------------------- -------------
</TABLE>
[FN]
*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.
</FN>
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.
6
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
------------
Number of
Securities
Annual Compensation Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options Compensation ($)
- --------------------------- ---- ---------- ------------------- ------------- ----------------
<S> <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 Administration, 1998 155,000 40,000 6,000 2,746 (7)
General Counsel and Secretary 1997 140,000 30,000 - 2,069 (7)
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>
[FN]
(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 $2,253 paid in 1997 for taxable relocation
expenses. Mr. Behar was employed from June 1, 1997 until February 29, 2000.
</FN>
7
<PAGE>
Option Grants in 1999
This table provides information relating to the 1999 stock option
grants to the executive officers listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
% of Potential
Total Realizable Value at
Number of Options Assumed Annual
Securities Granted to Rates of Stock Price
Underlying Employees Exercise Appreciation
Options in Fiscal Price Expiration for Option Term
Name Granted (#) Year ($/Share) Date 5% ($) 10% ($)
- ---------------- ----------------- ------------ ------------- -------------- -------------------------------
<S> <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>
[FN]
(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.
</FN>
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 $8.75 (the last reported market
price of our common stock on December 31, 1999) multiplied by the number of
shares underlying the option. An option is in-the-money if the market value of
the common stock subject to the option is greater than the exercise price.
8
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1999
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End (#) at FY-End ($)
Acquired on Value ---------------------------------- -----------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- -------------- ------------- ---------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
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>
[FN]
(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.
</FN>
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 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.
9
<PAGE>
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
10
<PAGE>
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]
<TABLE>
<CAPTION>
Cumulative Total Return
2/29/96 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------- ------------- ------------ ------------- ------------ ------------
<S> <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>
Employment and Severance Arrangements
Our employment agreements with the named executive officers generally
state an executive's initial compensation and bonus and provide the mechanism
for future adjustments. The initial termination dates of recent employment
agreements have been two years, with amendments to expiring agreements extending
the terms until December 31, 2003.
We also have severance arrangements with the named 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 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. Each of the arrangements also provides for additional
employee benefits and earned bonuses. The vesting of stock options held by Drs.
Rizai and Vanderploeg and Mr. Nierman would accelerate, with registration
rights.
Severance is triggered if we terminate an executive's employment
without cause or if an executive terminates employment for good reason, which
includes a change in control. In some instances, severance is payable upon an
executive's death or permanent disability. Mr. Nierman's severance would trigger
if he were to terminate his employment for good reason or there were a change in
control.
11
<PAGE>
Proposal to Ratify the Appointment of Independent Public Auditors
Upon the recommendation of the Audit Committee, the Board of Directors
appointed KPMG LLP as the independent public auditors to examine our financial
statements for the fiscal years ending December 31, 1999 and 2000. Ernst & Young
LLP (E&Y) had served as our independent public auditors since 1991.
E&Y resigned as our independent public auditors on February 29, 2000.
After consultation with the SEC, E&Y determined that, as a result of certain
bookkeeping work they had performed at three of our European subsidiaries, they
could not meet the strict, SEC enforced technical requirements for auditor
independence. On March 1, 2000, we appointed KPMG LLP as our independent public
auditors.
The audit reports of E&Y on our consolidated financial statements for
the fiscal years ended December 31, 1997 and 1998 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. In connection with the audits
of these years and the subsequent interim periods, we had no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to their satisfaction, would have caused E&Y to make reference in
connection with their opinion to the subject matter of the disagreements. In
addition, during that time there were no reportable events as defined in the
applicable SEC regulations.
During the fiscal years ended December 31, 1997, 1998 and 1999, and the
subsequent interim period, we did not consult with KPMG regarding the
application of generally accepted accounting principles to a specific
transaction, either proposed or completed, or the type of audit opinion that
might be rendered on our consolidated financial statements. Since there were no
disagreements or reportable events, we did not consult with KPMG in respect to
these matters during that time.
Prior to initially filing this information with the SEC, we provided
E&Y with a copy and requested they furnish us with a letter addressed to the
SEC. That letter was filed with the SEC.
Although we are not required to do so, given the recent change in our
auditors, we believe that it is appropriate to request that stockholders ratify
the appointment of our auditors. A representative of KPMG will be present at the
annual meeting. KPMG will be given the opportunity to make a statement and will
be available to respond to appropriate questions. If stockholders do not ratify
the appointment, the Audit Committee will investigate the reasons for the
stockholders' rejection and the Board will reconsider the appointment.
- --------------------------------------------------------------------------------
The Board of Directors unanimously recommends a vote
FOR ratification of the appointment of KPMG LLP.
- --------------------------------------------------------------------------------
By Order of the Board of Directors,
Jamie A. Wade
Secretary
12
<PAGE>
Appendix A
[X} Please mark your [ [7517
votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR each proposal.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] Nominee: Jamie A. Wade 2. Ratification of the appointment of KPMG LLP [ ] [ ] [ ]
Director. as independent accountants.
3. In the discretion of the proxies named herein, the proxies are
authorized to vote upon other matters as are properly brought before the
meeting.
YES NO
I PLAN TO ATTEND THE MEETING [ ] [ ]
Change of Address/ [ ]
Comments on Reverse Side.
SIGNATURE(S) DATE
---------------------------------------------------- ------------
NOTE: Please sign exactly as name appears hereon. Joint owners The signer hereby revokes all proxies heretofore given by the
should each sign. When signing as attorney, executor, signer to vote at said meeting or any adjournments thereof.
administrator, trustee or guardian, please give full title as
such.
- --------------------------------------------------------------------------------
</TABLE>
- FOLD AND DETACH HERE -
EAI
[LOGO]
Engineering Animation, Inc.
Annual Meeting of Stockholders
June 29, 2000
1:30 p.m.
Embassy Suites Hotel
101 E Locust St.
Des Moines, Iowa 50309
- --------------------------------------------------------------------------------
<PAGE>
ENGINEERING ANIMATION, INC.
PROXY CARD
Proxy for the Annual Meeting of Stockholders to be Held on June 29, 2000.
This Proxy is Solicited on Behalf of the Board of Directors.
P The undersigned hereby constitutes and appoints Matthew M. Rizai and
Robert M. Nierman, and each of them, true and lawful agents and
R proxies of the undersigned, with full power of substitution, to
represent the undersigned and to vote all shares of stock which the
O undersigned is entitled to vote at the Annual Meeting of Stockholders
of Engineering Animation, Inc. to be held on June 29, 2000, and at any
X and all adjournments and postponements thereof, on all matters
before such meeting.
Y
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. HOWEVER,
IF NO VOTE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE NOMINEE FOR
DIRECTOR AND "FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP
AS INDEPENDENT ACCOUNTANTS; ALL OF WHICH MATTERS ARE MORE FULLY
DESCRIBED IN THE PROXY STATEMENT OF WHICH THE UNDERSIGNED STOCKHOLDER
ACKNOWLEDGES RECEIPT.
THIS PROXY GRANTS DISCRETIONARY AUTHORITY TO VOTE IN ACCORDANCE WITH
THE BEST JUDGMENT OF THE NAMED PROXIES ON OTHER MATTERS THAT MAY COME
BEFORE THE MEETING.
--------------------------------------------------------------------
PLEASE VOTE, SIGN AND DATE THIS PROXY ON THE OTHER SIDE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
--------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ ________________________________
____________________________________ ________________________________
____________________________________ ________________________________
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
