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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 (S) 240.14a-11(c) or (S) 240.14a-12
UNIGRAPHICS SOLUTIONS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF UNIGRAPHICS]
13736 RIVERPORT DRIVE
MARYLAND HEIGHTS, MISSOURI 63043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 2000
The Annual Meeting of Stockholders of Unigraphics Solutions Inc. ("UGS")
will be held at the Sheraton Plaza Tower Hotel, 900 West Port Plaza, St.
Louis, Missouri 63146, on May 19, 2000 at 11:00 a.m., Central Time. The
purpose of the meeting is to consider and act upon the following matters:
1. To elect three Class II directors for a three-year term;
2. To approve the Unigraphics Solutions Inc. 2000 Incentive Plan;
3. To approve the Unigraphics Solutions Inc. Executive Deferral Plan;
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The record date for the annual meeting is March 24, 2000. Only stockholders
of record at the close of business on that date can vote at the meeting.
By Order of the Board of Directors
J. Randall Walti
Vice President, General Counsel
and Secretary
April 7, 2000
Whether or not you intend to be present at the meeting, please promptly mark,
sign, date and return the accompanying proxy. A return envelope is enclosed
for your convenience.
<PAGE>
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 2000
The Board of Directors of Unigraphics Solutions Inc. is soliciting proxies
to be used at the 2000 Annual Meeting of Stockholders (the "Meeting"). This
Proxy Statement and the form of proxy will be mailed to stockholders on or
about April 7, 2000. References in this Proxy Statement to "UGS", the
"Company" or "we" are to Unigraphics Solutions Inc. References to "EDS" are to
Electronic Data Systems Corporation, our principal stockholder. The address of
UGS' principal executive offices is 13736 Riverport Drive, Maryland Heights,
Missouri 63043.
Who Can Vote
Record holders of UGS common stock at the close of business on March 24,
2000 may vote at the Meeting. On that date, 5,045,941 shares of Class A Common
Stock and 31,265,000 shares of Class B Common Stock were outstanding. Each
share of Class A Common Stock is entitled to cast one vote while each share of
Class B Common Stock is entitled to 10 votes on all matters submitted to a
vote of stockholders. Holders of Class A Common Stock are generally entitled
to vote with the holders of Class B Common Stock as one class on all matters
as to which the holders of Class B Common Stock are entitled to vote.
How You Can Vote
If you return your signed proxy before the Meeting, we will vote your
shares as you direct. You can specify whether your shares should be voted for
all, some, or none of the nominees for director. You can also specify whether
you approve, disapprove, or abstain from each of the other proposals.
If you participate in the UGS Employee Stock Purchase Plan or the UGS Stock
Fund under the UGS 401(k) Plan, you will receive one proxy with respect to all
shares registered in the same name. If your accounts are not registered in the
same name, you will receive a separate proxy with respect to your individual
plan shares.
THE ENCLOSED PROXY/VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE
VOTED AND DEEMED AN INSTRUCTION TO THE PROXIES OR VANGUARD (AS DEFINED BELOW),
AS THE CASE MAY BE, TO VOTE IN THE MANNER DIRECTED HEREIN BY YOU. IF NO
DIRECTION IS MADE, THE PROXY/VOTING INSTRUCTION CARD WILL BE VOTED, OR WITH
RESPECT TO SHARES HELD IN THE UGS 401(K) PLAN, THE PROXY/VOTING INSTRUCTION
CARD WILL BE DEEMED AN INSTRUCTION TO VOTE, FOR THE ELECTION OF ALL NOMINEES
UNDER PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3 AND IN THE DISCRETION OF THE
PROXIES OR VANGUARD, AS THE CASE MAY BE, IN A MANNER AS THE PROXIES OR
VANGUARD, IN THEIR SOLE DISCRETION, DEEM APPROPRIATE WITH RESPECT TO ANY OTHER
MATTER OR PROPOSAL PROPERLY BROUGHT BEFORE THIS ANNUAL MEETING (AND ANY
ADJOURNMENT OR POSTPONEMENTS THEREOF) FOR A VOTE OF THE SHAREHOLDERS.
Shares of Class A Common Stock held in the UGS 401(k) Plan will be voted by
Vanguard Fiduciary Trust Company ("Vanguard") as trustee of the UGS 401(k)
Plan. Participants in the UGS 401(k) Plan should indicate their voting
instructions for each action to be taken under proxy. All voting instructions
from the UGS 401(k) Plan participants will be kept confidential. If the
participant fails to sign or to return the enclosed proxy/voting instruction
card, the shares allocated to such participant will be voted in accordance
with the pro rata vote of the participants who did provide instructions,
unless such participants otherwise elect not to have his or her directions so
apply.
As noted above, if you do not specify on your proxy card how you want to
vote your shares, we will vote them "For" the election of all nominees for
director as set forth under "Election of Directors" below; "For" the approval
of the Unigraphics Solutions Inc. 2000 Incentive Plan as set forth under
Proposal 2 below, and "For" the approval of the Unigraphics Solutions Inc.
Executive Deferral Plan as forth under Proposal 3 below. All instructions must
be received prior to May 15, 2000 in order to be counted.
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Revocation of Proxies
You can revoke your proxy at any time before it is exercised in any of the
following three ways:
1. by submitting written notice of revocation to the Secretary of UGS;
2. by submitting another proxy that is properly signed and later dated;
or
3. by voting in person at the Meeting.
Required Votes
The holders of a majority of the voting power of the outstanding shares of
UGS entitled to vote generally in the election of directors, who are either
present in person or represented by proxy at the Meeting, will constitute a
quorum for the transaction of business at the Meeting. The election of
directors requires a plurality of the votes cast. Abstentions and broker non-
votes are counted for purposes of determining whether a quorum is present at
the Meeting. For each other proposal, the affirmative vote of a majority of
the voting power of the shares present in person or represented by proxy at a
meeting of the stockholders of the Company and entitled to vote on the
proposal will be required for approval. Accordingly, abstentions will have the
effect of votes against the proposal.
EDS is the beneficial owner of approximately 98.4% of the outstanding
voting power of the UGS shares. As a result, EDS has the power to elect the
three nominees for director, to approve the Unigraphics Solutions Inc. 2000
Incentive Plan and to approve the Unigraphics Solutions Inc. Executive
Deferral Plan. EDS has indicated that it will vote its shares in accordance
with the recommendations of the Board of Directors.
Other Matters To Be Acted Upon At The Meeting
We do not know of any other matters to be presented or acted upon at the
Meeting. If any other matter is presented at the Meeting on which a vote may
properly be taken, the shares represented by proxies in the accompanying form
will be voted in accordance with the judgment of the person or persons voting
those shares.
Expenses of Solicitation
The cost of soliciting proxies will be paid by UGS. In addition to
solicitation by mail, proxies may be solicited in person or by telephone,
facsimile transmission or other means of electronic communication by
directors, officers or employees of UGS, without extra compensation. We have
retained Corporate Investor Communications, Inc. to assist in the distribution
of proxy materials to beneficial holders of shares held in street name. We may
also reimburse brokerage firms, nominees, custodians and fiduciaries for their
out-of-pocket expenses for forwarding proxy materials to beneficial owners and
obtaining their instructions.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Certificate of Incorporation provides for three classes of directors to
be as equal in number as possible. Each class serves a three year term, with
one class elected each year. Currently, the Board of Directors is comprised of
eight members. The three Class II directors whose terms expire at this Meeting
are J. Davis Hamlin, Richard L. deNey, and William P. Weber. The Board of
Directors has nominated these persons for election as Class II directors. If
elected, each director will serve until the annual meeting in 2003 or until he
is succeeded by another qualified director who has been elected. All other
directors will continue in office until the expiration of the terms of their
classes at the annual meeting in 2001 or 2002, as the case may be.
We will vote your shares as you specify on the enclosed proxy form. If you
sign, date and return the proxy form but do not specify how you want your
shares voted, we will vote them FOR the election of the three nominees listed
below. If due to unforeseen circumstances (such as death or disability) a
nominee should become unavailable for election, the Board may either reduce
the number of directors or substitute another person for the nominee, in which
event your shares will be voted for that other person.
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The Board of Directors held five meetings in 1999. All directors, except
Mr. Chiapparone, attended at least 75% of the meetings of the Board of
Directors and the committees thereof of which they are members. Mr.
Chiapparone was elected to the Board on October 21, 1999 to replace Gary B.
Moore who had resigned. Mr. Chiapparone was unable to attend the October 21,
1999 Board Meeting, which was the last 1999 Board Meeting.
The following information regarding the nominees for director and each
current director continuing in office is as of March 1, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR.
Nominees for Directors for Three Year Term Expiring in 2003
Richard L. deNey, 50
Mr. deNey has been Senior Vice President of EDS, responsible for strategic
planning and business development, since August 1999. From January 1995 to
August 1999, Mr. deNey was Executive Vice President of Corporate Strategy
and Development at Borden, Inc. Prior to that time, Mr. deNey had served in
various management positions at several investment banking firms. Mr. deNey
has been Vice Chairman and director of UGS since October 1999.
J. Davis Hamlin, 67
Mr. Hamlin retired from EDS as Senior Vice President and director in June
1994, which positions he held since 1987. He served as Chief Financial
Officer of EDS from April 1986 to November 1990 and continued to oversee
EDS' financial planning, administration and investor relations through
December 1991. Mr. Hamlin joined EDS in 1966 and served in numerous
management capacities. Mr. Hamlin has served as a director of UGS since
June 1998.
William P. Weber, 59
Mr. Weber served in various capacities with Texas Instruments Incorporated
from 1962 until his retirement in April 1998. From December 1986 until
December 1993, he served as the President of Texas Instrument's worldwide
semiconductor operations; and from December 1993 until his retirement in
April 1998, he served as Vice Chairman of Texas Instruments. He held a
number of executive positions in TI's semiconductor, international,
defense, digital systems, consumer, materials, and controls businesses. He
is a director of Micron Technology, Inc. He has served as a director of UGS
since June 1998.
Members of the Board Continuing in Office
Term Expiring in 2001
Jeffrey M. Heller, 60
Mr. Heller has been President and Chief Operating Officer of EDS since June
1996 and was a Senior Vice President from 1984 until June 1996. He joined
EDS in 1968 and has served in numerous technical and management capacities.
Mr. Heller is a director of EDS, Mutual of Omaha and Trammell Crow Company.
Mr. Heller has served as Chairman of UGS since January 1999.
Leo J. Thomas, 63
Dr. Thomas retired in May 1996 from Eastman Kodak Company, a manufacturer
of imaging products. From September 1994 to May 1996, he held the position
of Executive Vice President, and from September 1991 to September 1994 he
was Group Vice President of Eastman Kodak Company. Dr. Thomas has been a
director of UGS since June 1998.
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Term Expiring in 2002
John A. Adams, 45
Mr. Adams has been Vice President and Corporate Controller of EDS since
August 1998 and prior to that time had been Controller of its Financial
Planning and Reporting organization since 1994. As such he was responsible
for corporate level internal and external financial reporting and planning,
as well as the management of the Shared Financial Services Group and the
financial oversight of a number of EDS business units. Mr. Adams joined EDS
in 1985 and his previous positions in EDS include Controller, the Americas,
and Controller, International Operations. Mr. Adams has served as a
director of UGS since June 1998.
Paul J. Chiapparone, 60
Mr. Chiapparone has been an Executive Vice President of EDS since 1996 and
prior to that time had been a Senior Vice President since April 1986. He
has responsibility for EDS' global business units supporting the General
Motors Corporation account. Mr. Chiapparone joined EDS in 1966 and has
served in numerous management capabilities. He has been director of UGS
since October 1999.
John J. Mazzola, 56
Mr. Mazzola was appointed President and Chief Executive Officer of UGS on
January 1, 1998. From 1992 to December 1997, he served as the President of
the Unigraphics division of EDS. Prior to 1992, Mr. Mazzola served as
President of McDonnell Douglas Systems Integration ("MDSI"), the
predecessor to the Unigraphics division of EDS, where he held numerous
positions, including Vice President of Manufacturing and Engineering,
Director of Marketing, Vice President of Check Card Systems and Vice
President of Research and Development. Mr. Mazzola has served as a director
of UGS since June 1998.
Committees of the Board of Directors
Audit Committee: The Audit Committee is composed of Leo J. Thomas
(Chairman), J. Davis Hamlin and William P. Weber. It was formed in June 1998
in connection with the Company's initial public offering and met four times in
1999. Its function is to review and recommend the selection of independent
auditors, the fees to be paid to such auditors, the adequacy of the audit and
accounting procedures of UGS and such other matters as may be specifically
delegated to the Audit Committee by the Board of Directors.
Compensation Committee: The Compensation Committee is composed of William
P. Weber (Chairman) and Leo J. Thomas, none of whom are employees or officers
of UGS or EDS. It was formed in June 1998 in connection with the Company's
initial public offering and met five times in 1999. It administers management
incentive compensation plans, including the 1998 and 1999 Incentive Plans, and
establishes the management remuneration policies of UGS, including salary
rates and fringe benefits of elected officers, other remuneration plans such
as incentive compensation, deferred compensation and stock option plans,
directors' compensation and benefits and such other matters as may be
specifically delegated to it by the Board of Directors. The Compensation
Committee also serves as the nominating committee.
The Compensation Committee will consider director nominee recommendations
by stockholders who write to J. Randall Walti, Secretary, providing the name
and a detailed biography of each prospective nominee. In January or February
each year, the Compensation Committee expects to consider nominees for
directors to be elected at the Company's next Annual Meeting of Stockholders.
Therefore, in order to be considered for nomination by the Board of Directors
and inclusion in the Company's proxy statement, prospective nominee
recommendations should be received by the Secretary prior to the last week of
December of the preceding calendar year. See "Stockholder Proposals for 2001
Annual Meeting" for description of bylaw procedures governing stockholder
nominations.
Executive Committee: The Executive Committee is composed of Jeffrey M.
Heller (Chairman), John J. Mazzola and Richard L. deNey. It was formed in June
1998 in connection with the Company's initial public
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offering and did not formally meet in 1999. It has and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of UGS, with the exception of such powers and authority
as may be specifically reserved to the Board by law or by resolution adopted
by the Board of Directors.
Director Compensation
A director who is also an employee of UGS or EDS is not entitled to any
additional compensation for serving as a director. Each non-employee director
of UGS receives an annual retainer for Board of Directors and committee
service of $20,000, a fee of $3,500 for serving as a committee chairman, a fee
of $1,000 for attending each meeting of the Board of Directors or a Board
committee and reimbursement for reasonable out-of-pocket expenses incurred in
connection with attendance at any such meeting.
In addition, pursuant to the Unigraphics Solutions Inc. 1998 Incentive Plan
(the "Incentive Plan") each non-employee director receives, on an annual
basis, options to purchase 3,000 shares of Class A Common Stock with a ten
year term and an exercise price equal to the fair market value of the Class A
Common Stock on the date of grant. Such options become exercisable in
increments of one-third of the total number of shares subject thereto on the
first, second and third anniversaries of the date of grant. All unvested
options granted to a non-employee director will be forfeited if he or she
resigns from the Board of Directors without the consent of a majority of the
other directors.
A non-employee director may make an annual election to receive, in lieu of
all or any portion of the director's fees he or she would otherwise receive in
the next year (including both annual retainer and meeting fees), a number of
options equal to the product of (x) three times (y) a fraction the numerator
of which is equal to the dollar amount of fees the director elects to forego
in the next year in exchange for options and the denominator of which is equal
to the fair market value of Class A Common Stock on the date of the election.
The terms of the options received by a non-employee director pursuant to such
election will be the same as for options automatically granted. All non-
employee directors have elected to participate in this plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires UGS'
directors and executive officers, and persons who own beneficially more than
ten percent (10%) of the common stock of UGS, to file reports of ownership and
changes of ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Copies of all filed reports are required to be furnished
to UGS pursuant to Section 16(a). Based solely on the reports received by UGS
and on written representations from reporting persons, UGS believes that the
directors, executive officers, and greater than ten percent (10%) beneficial
owners complied with all applicable filing requirements during the fiscal year
ended December 31, 1999.
OWNERSHIP OF COMMON STOCK
The table below sets forth certain information with respect to the
beneficial ownership as of March 2, 2000, to the extent known to UGS, of (1)
the Class A Common Stock and Class B Common Stock of UGS by each beneficial
owner of more than 5% of the outstanding shares of either the Class A Common
Stock or the Class B Common Stock of UGS and (2) the outstanding shares of
Class A Common Stock and Class B Common Stock of UGS and the common stock of
EDS by (i) each director of UGS, (ii) each executive officer named in the
Summary Compensation Table and (iii) all executive officers and directors of
UGS as a group. Unless otherwise noted, the persons named below have sole
voting and investment power with respect to the shares shown as beneficially
owned by them.
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<TABLE>
<CAPTION>
Beneficial Ownership
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UGS Class A Common Stock UGS Class B Common Stock EDS Common Stock
------------------------- -------------------------- --------------------
Percent Percent Percent
Number of Percent of UGS Number Percent of UGS Number of of EDS
Shares of UGS Voting of of UGS Voting Shares Common
Name of Beneficial Owner (f)(g) Class A Power Shares Class B Power (h)(i)(j)(k) Stock
- ------------------------ --------- ------- ------- ---------- ------- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Electronic Data Systems
Corporation (a)........ -- -- -- 31,265,000 100% 98.4%
Westport Asset
Management, Inc. (b)... 1,352,600 26.8% .43% -- -- --
FMR Corp. (c)........... 520,000 10.3% .16% -- -- --
Wellington Management
Company, LLP (d)....... 376,100 7.5% .12% -- -- --
The Hartford Mutual
Funds, Inc. (e)........ 376,100 7.5% .12% -- -- --
John A. Adams........... 1,000 * * -- -- -- 44,879 *
Anthony J. Affuso....... 88,214 1.7% * -- -- -- 6,375 *
Douglas E. Barnett...... 45,926 * * -- -- -- 81 *
Paul J. Chiapparone..... 4,000 * * 202,119 *
Richard L. deNey........ 1,000 * * 1,084 *
James Duncan............ 36,667 * * -- -- -- 1,468 *
J. Davis Hamlin......... 3,000 * * -- -- -- 9,797 *
Jeffrey M. Heller....... -0- * * -- -- -- 474,608 *
Dennis P. Kruse......... 36,667 * * -- -- -- 1,815 *
John J. Mazzola......... 106,426 2.1% * -- -- -- 8,016 *
Dr. Leo J. Thomas....... 6,000 * * -- -- -- -0- *
William P. Weber........ 9,000 * * -- -- -- -0- *
All directors and
executive officers as a
group (17 persons)..... 448,133 8.9% .14% -- -- -- 764,960 *
</TABLE>
- --------
(a) EDS exercises sole voting and dispositive power over the shares of Class B
Common Stock held by it. The address of EDS is 5400 Legacy Drive, Plano,
Texas 75024. Mr. Heller is also a director and executive officer of EDS.
Messrs. Adams, Chiapparone and deNey are also executive officers of EDS.
Mr. Hamlin is a former director and executive officer of EDS. These
individuals disclaim beneficial ownership of the shares of Class B Common
Stock beneficially owned by EDS.
(b) Based on Schedule 13G dated February 16, 2000. Westport Asset Management,
Inc. reports sole voting and dispositive power over 347,100 shares of
Class A Common Stock and shared voting power over 776,100 shares and
shared dispositive power over 1,005,500 shares of Class A Common Stock.
Westport Advisers LLC, 50% of which is owned by Westport Asset Management,
Inc., is the beneficial owner of the 776,100 shares of Class A Common
Stock as to which Westport Asset Management has shared voting power as a
result of acting as an investment manager of The Westport Funds, mutual
funds which hold shares of Class A Common Stock in the ordinary course of
business. The address of Westport Asset Management, Inc. is 253 Riverside
Avenue, Westport, Connecticut 06880.
(c) Based on Amendment 2 to Schedule 13G dated February 14, 2000. FMR Corp.
reports sole dispositive power over 520,000 shares of Class A Common
Stock. Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp., is the beneficial owner of 520,000 shares of
Class A Common Stock as a result of acting as investment adviser to
various investment companies. The ownership of one investment company,
Fidelity Low-Priced Stock Fund, amounted to 520,000 shares, or 10.3%, of
the Class A Common Stock. Edward C. Johnson 3rd, FMR Corp., through its
control of Fidelity, and the funds have sole power to dispose of 520,000
shares of Class A Common Stock. Voting power resides in the Board of
Trustees of the various funds. Members of the Edward C. Johnson 3rd
family, including Edward C. Johnson 3rd and Abigail Johnson, are the
predominant owners of voting power of FMR Corp. The address of FMR Corp.
is 82 Devonshire Street, Boston, Massachusetts 02109.
(d) Based on Amendment 2 to Schedule 13G dated February 9, 2000. Wellington
Management Company, LLP reports shared voting and dispositive power over
376,100 shares of Class A Common Stock, in its capacity as investment
adviser to various clients. No such client was known to have the right or
power to direct the
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receipt of dividends or sale proceeds with respect to more than 5% of the
class except The Hartford Capital Appreciation Fund, Inc. See note (e). The
address of Wellington Management Company, LLP is 75 State Street, Boston,
Massachusetts 02109.
(e) See note (d). Based on Amendment 1 to Schedule 13G dated February 11,
2000. The Hartford Mutual Funds, Inc. reports on behalf of The Hartford
Capital Appreciation Fund shared voting and dispositive power over 376,100
shares of Class A Common Stock. The address of The Hartford Mutual Funds,
Inc. is 200 Hopmeadow Street, Simsbury, CT 06070.
(f) Amounts reported include shares of UGS Class A Common Stock which may be
acquired on or before May 1, 2000 through the exercise of stock options as
follows: Mr. Affuso--75,000 shares; Mr. Barnett--45,000 shares; Mr.
Duncan--36,667 shares; Mr. Hamlin--1,000 shares; Mr. Kruse--36,667 shares;
and Mr. Mazzola--105,001 shares; Mr. Thomas--1,000 shares; Mr. Weber--
1,000 shares; and all directors and executive officers as a group--400,673
shares.
(g) Amounts reported include UGS Class A Common Stock allocated to accounts
under UGS' 401(k) Plan as follows: Mr. Mazzola--124 shares; Mr. Affuso--
4,741 shares; and all directors and executive officers as a group--4,865
shares.
(h) Excludes unvested restricted stock units granted under the EDS Incentive
Plan (and its predecessor) as follows: Mr. Adams--32,500 units; Mr.
Affuso--6,700 units; Mr. Duncan--3,750 units; Mr. Heller--425,000 units;
Mr. Kruse--3,750 units; Mr. Mazzola--8,400 units and all directors and
executive officers as a group--722,510 units.
(i) Amounts reported include compensation deferrals invested in EDS Common
Stock under employee compensation deferral plans as follows: Mr. Affuso--
3,853 shares; Mr. Barnett--81 shares; Mr. Chiapparone--80 shares; Mr.
deNey--1,084 shares; Mr. Heller--62,253 shares; Mr. Kruse--63 shares; Mr.
Mazzola--71 shares; and all directors and executive officers as a group--
67,702 shares.
(j) Excludes unvested stock options granted under the EDS Performance Share
Plan as follows: Mr. Adams--659 options; Mr. Affuso--363 options; Mr.
Duncan--341 options; Mr. Kruse--550 options; Mr. Mazzola--783 options; and
all directors and executive officers as a group--4,181 options.
(k) Amounts reported include shares of EDS Common Stock which may be acquired
on or before May 1, 2000 through the exercise of stock option shares as
follows: Mr. Adams--30,659 shares; Mr. Affuso--363 shares; Mr.
Chiapparone--40,000 shares; Mr. Duncan--341 shares; Mr. Kruse--550 shares;
Mr. Heller--120,000 shares; Mr. Mazzola--783 shares; and all directors and
executive officers as a group--194,181 shares.
*None of the persons listed above beneficially own in excess of 1% of the
common stock of UGS or EDS.
EXECUTIVE COMPENSATION
Report of Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of the two non-employee directors of the Company. Among other
duties, the Committee is responsible for establishing and administering
compensation programs for UGS' executive officers, including the Chief
Executive Officer. In fulfilling these responsibilities, the Committee
administers all compensation and benefit components for executive officers,
including setting base salaries, establishing performance targets, determining
the payment of cash incentives and setting equity awards under executive short
term and long term incentive plans. The Committee was established in June 1998
at the time of the Company's initial public offering. Prior to that time, the
compensation of the executive officers was administered by EDS.
Compensation Philosophy. The Committee's compensation philosophy is that
executive officers should receive competitive compensation determined by
reference to (i) competitive market rates among companies with which the
Company competes for talented executives and (ii) the Company's and the
individual executive's performance in relation to identified targets and
goals. Compensation plans and programs are intended to motivate and reward
executive officers for achievement of long term goals and enhancement of
stockholder value, to motivate and reward executive officers for achievement
of annual performance objectives, and to attract and retain executives whose
abilities are critical to the long-term success and competitiveness of the
Company.
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The Committee decided that in determining compensation levels it should
first evaluate executive officer compensation against independent, published
survey data of comparator companies, with a key determinant being the
compensation levels and pay practices in the technology industry. Different
comparator groups and data sources are used to determine targeted compensation
amounts for each of the three components of executive compensation to better
determine then-current competitive compensation levels and practices. Overall,
the Committee's policy is to provide total compensation to executive officers
that is above the 50th percentile of comparator companies when the Company
achieves its performance goals. Performance goals are intended to represent
performance that is likewise above the 50th percentile of competitors.
Executive Officer Compensation. The Committee has established three
principal components of the Company's executive compensation structure: base
salary, annual incentive compensation, and long-term incentive compensation.
By allocating a significant portion of the total executive officer
compensation package to annual and long-term incentive compensation, which is
at-risk and varies based on Company and individual performance, the Committee
seeks to tie executive officer compensation to the Company's performance and
link the executive officers' goals with the interests of the Company's
stockholders. In order to achieve the goal of compensating the executive
officers above the 50th percentile of the comparator groups when the Company
achieves its goals, the Committee has adopted the following approaches to base
salary, annual incentive compensation and long-term incentive compensation.
Base Salaries. The Committee's policy for establishing and adjusting base
salaries for Company executive officers is to maintain base salaries at levels
that are above the median level for executives with similar roles and
responsibilities in the comparator group. The Committee considers base
salaries and adjustments through a process of first identifying competitive
ranges for base salaries for similar positions in the comparator group, then
evaluating the responsibility, performance, experience and future potential of
each executive. In 1999, the Committee increased the base salaries of the CEO
and most executive officers with a view toward closing the existing gap
between actual and competitive salaries. Based on comparator group
information, the 1999 base salaries for most of the Company executives,
including the Chief Executive Officer, remained below the median level for
comparable positions in the comparator group.
Annual Cash Incentive Bonuses. Annual incentive compensation, payable in
the form of cash bonuses, reflects the Committee's policy that a significant
portion of each executive officer's annual compensation be contingent upon the
current performance of the Company. The Committee approved a 1999 executive
bonus plan under which demanding performance goals for the Company and each
executive were established by the Committee at the beginning of the fiscal
year, and payments were based on the extent to which such targets were
achieved. The Committee also considered the Company's performance against its
major competitors. Specifically, for 1999 the Committee determined the bonus
target for each executive and the maximum amount that could be payable to each
executive officer. Also, the Committee established the performance objectives
that had to be achieved in order for all or part of bonuses to be paid. These
amounts were established consistent with the Committee's policy of
compensating executive officers above median levels of the comparator group
when the Company achieves performance goals established by the Committee.
Generally, the 1999 cash bonus awards paid to Company executives exceeded the
amounts paid by comparator companies for executives similarly situated based
on the performance levels attained.
Long Term Incentive Compensation. The Company's 1998 Incentive Plan
authorized the award to directors, executive officers and other key employees
of up to 1,300,000 shares of Class A Common Stock in the form of stock
options, stock appreciation rights, restricted or non-restricted stock or
units denominated in stock, cash awards, performance awards or any combination
of the foregoing. 1,200,000 shares were available for employee awards and
100,000 shares were available for director awards. Stock options and other
Company equity-based awards are designed to align the long term interests of
the Company's executive officers and employees with those of its stockholders
by linking compensation to increases in shareholder value. In 1998, the Board
of Directors authorized the award of 710,000 Class A stock options to
executive officers and key employees. During 1999, the Committee authorized
the award of 413,000 Class A stock options to the ten Company executive
officers under the 1998 Incentive Plan.
8
<PAGE>
The number of stock options or other equity-based awards granted to
executive officers is based upon the value of long-term awards for similar
roles and responsibilities of comparator group companies, level of
responsibility, performance during the previous year, and expected future
contributions as determined by the Committee. The Committee expects to grant
stock options at an exercise price equal to the fair market value of the
Company stock on the date of grant. Option shares vest over three or four-year
periods. Similar to the other forms of compensation paid to executive
officers, the value of stock options granted to executives in 1999 was
generally lower than the value of such options granted by comparator
companies.
The Committee also takes into consideration the value of shares of
restricted EDS Common Stock granted to certain executives prior to the
Company's initial public offering.
Chief Executive Officer Compensation. The process of setting and
administering the compensation of the Chief Executive Officer generally takes
into consideration the same factors used for other executive officers. The CEO
has a higher percentage of compensation at-risk compared to other executive
officers. The Committee increased the CEO's annual base salary by 43% to
$300,000 annually during 1999 in order to begin moving his base salary into
alignment with comparator group CEO base salaries. The 1999 base salary for
the CEO was below the median base salary for comparator group CEOs. With
respect to annual and long term incentive compensation, 1999 amounts were paid
or awarded by the Committee in accordance with the methodology described above
for other Company executive officers. The CEO was awarded a cash bonus of
$450,000 for 1999. In 1999, the CEO received a grant of 115,000 options to
purchase shares of the Company's Class A Common stock. In addition, he became
vested in 3,200 shares of restricted EDS Common Stock previously granted to
him under the EDS 1996 Incentive Plan (and predecessor plans).
Internal Revenue Code Section 162(m) Compliance. Section 162(m) of the
Internal Revenue Code generally limits the deductibility of compensation to
the Chief Executive Officer and the four other most highly compensated
officers in excess of $1 million per year, except that so-called "performance-
based" compensation may be excluded from the $1 million limitation. The
Committee intends to structure annual cash bonus awards and long term
incentive grants in a manner designed to make such awards "performance-based"
to the extent practicable while at the same time maintaining competitive
compensation levels.
Compensation Committee
William P. Weber, Chairman
Leo J. Thomas
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of William P. Weber and Leo J.
Thomas, neither of whom are employees or current or former officers of UGS or
EDS.
9
<PAGE>
Stock Performance Graph
The following graph compares the cumulative total stockholder return on
Class A Common Stock since the Company's initial public offering on June 23,
1998 with the cumulative total return of the S&P 500 Stock Index and the S&P
Midcap Computer Software Index.
This graph is presented in accordance with SEC requirements. You are
cautioned against drawing any conclusions from this information, as past
results are not necessarily indicative of future performance. This graph in no
way reflects a forecast of future financial performance.
Comparison of 18-Month Cumulative Total Return
[LINE CHART]
UGS COMMON S&P S&P MIDCAP
Label STOCK 500 INDEX COMPUTER
- ----- ---------- --------- ----------
1 6/23/98 $100 $100 $100
2 9/30/98 $ 66 $ 91 $ 95
3 12/31/98 $102 $110 $179
4 3/31/99 $125 $115 $158
5 6/30/99 $132 $123 $160
6 9/30/99 $190 $115 $174
7 12/31/99 $189 $131 $336
10
<PAGE>
Summary Compensation Table
Pursuant to a reorganization consummated effective as of January 1, 1998
(the "Reorganization"), UGS became the successor to the mechanical computer-
aided design, manufacturing and engineering ("MCAD") businesses of EDS. Prior
to the Reorganization, all employees of the Company, including the executive
officers, were compensated by EDS and participated in various EDS welfare and
benefit plans, including the EDS Retirement Plan. Since the Reorganization,
the executive officers and all other employees of the Company have been
compensated solely by the Company. From January 1, 1999 through March 31, 1999
most of the executive officers and all other employees of the Company
participated in the EDS welfare and benefit plans. On April 1, 1999, the
Company transitioned to new UGS welfare and benefit plans, including new
medical, dental, vision care insurance, employee stock purchase, and
retirement plans.
The following table sets forth information with respect to the compensation
for the last three years of the Chief Executive Officer and each of the four
other most highly compensated executive officers of UGS as of the end of 1999.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------- ------------------
Restricted Number
Other Annual Stock of All Other
Name and Principal Position Salary Bonus Compensation Awards Options Compensation
During 1999 Year (a) (b) (c) (d) (e) (f)
- --------------------------- ---- ------ ----- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J.
Mazzola
President
and Chief 1999 $296,599 $450,000 $-0- $ -0- 115,000 $34,923
Executive 1998 204,375 278,554 -0- -0- 100,000 1,200
Officer 1997 170,000 60,000 204 516,750 -0- 424
Anthony J.
Affuso
Vice
President,
Products 1999 277,592 259,000 -0- -0- 75,000 22,475
And 1998 180,208 227,951 -0- -0- 75,000 1,200
Operations 1997 152,500 35,000 295 215,313 -0- 295
Douglas E. 1999 223,944 168,000 -0- -0- 45,000 6,395
Barnett 1998 150,000 154,470 -0- -0- 45,000 1,438
(g)
Vice
President,
Chief
Financial
Officer
and
Treasurer
James
Duncan
(h)
Vice 1999 210,667 166,000 -0- -0- 30,000 -0-
President, 1998 167,153 172,538 -0- -0- 40,000 -0-
Europe 1997 122,320 128,722 -0- 107,656 -0- -0-
Dennis P.
Kruse
Vice 1999 217,864 160,000 -0- -0- 30,000 22,563
President, 1998 142,592 205,180 -0- -0- 40,000 1,200
Americas 1997 118,220 128,696 -0- 107,656 -0- -0-
</TABLE>
- --------
(a) Salary includes amounts deferred pursuant to the EDS 401(k) Plan for 1997-
1999 and the UGS 401(k) Plan for 1999.
(b) Represents bonuses earned by the named executives with respect to the year
indicated. Amounts for Messrs. Duncan and Kruse in 1997 include
commissions or new business bonuses of $59,812 and $106,198, respectively.
Amounts for Mr. Kruse in 1998 includes commissions of $144,735.
(c) For Messrs. Affuso and Mazzola, amounts represent payments in respect of
taxes due on imputed interest for non-interest bearing loans.
(d) Represents awards of the following number of shares of restricted EDS
Common Stock granted pursuant to the EDS 1996 Incentive Plan to the named
executive officers on January 3, 1997: Mr. Mazzola, 12,000 shares; Mr.
Affuso, 5,000 shares; Mr. Duncan, 2,500 shares; and Mr. Kruse, 2,500
shares. Such shares will vest ratably over each of the following 10 years
subject to the achievement by EDS of performance goals. Shares which do
not vest in any year due to failure to achieve such goals will vest in
2007. Dividend equivalents are paid with respect to restricted stock units
in the amount and at the time of the payment of dividends of the EDS
common stock. As of December 31, 1999, the number and fair market value of
the aggregate units representing unvested restricted EDS Common Stock held
by the named executive officers were: Mr. Mazzola, 9,600 shares, $642,600;
Mr. Affuso, 8,000 shares, $535,500; Mr. Duncan, 4,500 shares, $301,219;
and Mr. Kruse, 4,500 shares, $301,219.
11
<PAGE>
(e) Represents UGS Class A Common Stock options awarded in 1998 and 1999 under
the UGS 1998 Incentive Plan.
(f) The 1999 amounts include UGS' matching contributions made under the UGS
401(k) Plan as follows: Mr. Barnett, $638; Mr. Kruse, $400. The 1999
amounts include EDS' matching contributions made under the EDS 401(k) Plan
as follows: Mr. Mazzola, $2,062; Mr. Affuso, $1,319; Mr. Barnett, $1,775;
Mr. Kruse, $1,719. The 1999 amounts include the one-time UGS Special
401(k) Contribution: Mr. Mazzola, $16,301; Mr. Affuso, $13,833; Mr.
Barnett, $3,983; Mr. Kruse, $14,480. The 1999 amounts include UGS'
contribution to the Restoration Plan Accounts: Mr. Mazzola, $16,560; Mr.
Affuso, $7,323, Mr. Kruse, $5,964.
(g) Mr. Barnett joined the Company on March 2, 1998.
(h) Mr. Duncan's 1998 and 1999 Salary and Bonus represent U.S. dollar
equivalent calculated at the U.S. dollar--British pound sterling exchange
rates on December 31, 1998 and December 31, 1999.
Option Grants In Last Fiscal Year
The following table contains information regarding awards of stock options
to the named executive officers in 1999.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants (a) Term
----------------------------------------- ------------------------------
Percent
of
Total
Options/
SARs
Number of Granted Exercise
Securities to or
Underlying Employees Base
Option/SARs in Fiscal Price Expiration
Name Granted (b) Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- --------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John J. Mazzola......... 115,000 9.53% 14.75 4/22/2009 1,066,763 2,703,386
Anthony J. Affuso....... 75,000 6.21% 14.75 4/22/2009 695,715 1,763,078
Douglas E. Barnett...... 45,000 3.73% 14.75 4/22/2009 417,429 1,057,847
James Duncan............ 30,000 2.49% 14.75 4/22/2009 278,286 705,231
Dennis P. Kruse......... 30,000 2.49% 14.75 4/22/2009 278,286 705,231
</TABLE>
- --------
(a) The options become exercisable in one-third increments beginning on
January 1 of 2000, 2001 and 2002. The options granted have a 10 year term
from the date of grant. The Board is obligated to make proportionate
adjustments in the event of any other recapitalization or capital
reorganization of the Company, merger, plan of exchange affecting Company
common stock, or similar reorganization. Also, the Board is authorized to
issue or assume awards by means of a substitution of new awards, as
appropriate, for previously issued awards or an assumption of previously
issued awards in the case of a merger, consolidation, acquisition of stock
or property, reorganization or liquidation.
(b) Represents UGS Class A Common Stock options.
12
<PAGE>
Option Values at Fiscal Year End
The following table presents (i) the unexercised UGS Class A Common Stock
options held by each named executive officer and (ii) the value of all in-the-
money options as of December 31, 1999, as if all such in-the-money options
were vested and exercisable as of December 31, 1999.
<TABLE>
<CAPTION>
Option Values at December 31, 1999
----------------------------------
Number of Shares
Underlying Unexercised Value of Unexercised
Options Held In-the-Money Options (a)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John J. Mazzola............. 33,334 181,666 $433,342 $2,275,408
Anthony J. Affuso........... 25,000 125,000 325,000 1,568,750
Douglas E. Barnett.......... 15,000 75,000 195,000 941,250
James Duncan................ 13,334 56,666 173,342 714,158
Dennis P. Kruse............. 13,334 56,666 173,342 714,158
</TABLE>
- --------
(a) Calculated as the aggregate closing market price per share of the
Company's Class A Common Stock on December 31, 1999, for the total number
of in-the-money shares under option, net of the aggregate value of all
option exercise proceeds.
The EDS Retirement Plan
During the first three months of 1999, the named executive officers
participated in the EDS Retirement Plan which, effective July 1, 1998, was
converted from a final average pay plan to a career average pay "cash balance"
plan. Benefits under the EDS Retirement Plan provide for accruals which are
expressed as annual credits added to individual participant's "personal
pension accounts" ("PPA"). The PPA is established with an opening balance
equal to the present value of the participant's accrued benefit as of June 30,
1998, under the final average earnings formula. Annual credits under the
career average pay formula are based on a participant's credited years of
service together with age which are divided by 12 where the resulting quotient
becomes the annual allocation percentage which is then multiplied by the
participant's Earnings to determine the annual accrual amount to be credited
to the participant's PPA. Participants' 1999 allocation percentage is
increased for credits (i) if annual compensation in 1999 exceeded $72,600,
(ii) if they were hired or rehired by EDS at or after they were age 35
("midcareer adjustment credits") or (iii) if they were age 43 or older on June
30, 1998 ("transition credits"). Effective April 1, 1999, all UGS employees,
including the named executive officers were no longer eligible to participate
in the EDS Retirement Plan and will not be credited with additional accruals.
However, each Participant will continue to receive interest credits on the
annual balance of their PPA, which will be earned until the earlier of the
commencement of distributions or age 65. Effective April 1, 1999, the named
executive officers will participate in the newly adopted Unigraphics Solutions
Inc. 401(k) Plan, which is a defined contribution plan rather than a final
average earnings based formula defined benefit plan.
Additionally, EDS has established an EDS Benefit Restoration Account Plan
("EDS Restoration Plan") for certain highly paid employees whose income
exceeds the maximum allowable compensation limit set forth in the Internal
Revenue Code. Under the EDS Restoration Plan, EDS maintains a bookkeeping
Restoration Account ("RA") reflecting EDS credits and interest credits made by
EDS on behalf of a participant. Effective April 1, 1999, all United States UGS
employees, including the four U.S.-based named executive officers, were no
longer eligible to participate in the EDS Benefit Restoration Account Plan and
will not be credited with additional accruals. However, each Participant will
continue to receive interest credits on the balance of their RA, which will be
earned until the earlier of the commencement of distributions or age 65.
"Earnings" under the EDS Retirement Plan generally refer to total annual
cash compensation (up to $170,000 for 1999 as limited by the Internal Revenue
Code) for services rendered to the Company and its participating subsidiaries,
together with any salary reduction contributions to the EDS 401(k) Plan, and
shall exclude extraordinary compensation (such as overseas living allowances,
relocation allowances and benefits under any employee benefit plan, such as
the UGS 1998 Incentive Plan).
13
<PAGE>
The following table indicates the estimated annual benefits payable upon
retirement to the named executive officers for the specified compensation and
years of service classifications under the EDS Retirement Plan. The table
shows the January 1, 1999 opening account balance for each named executive
which includes accruals under the previous final average earnings formula
through June 30, 1998. The table provides the account credits, including
applicable mid-career adjustment credits and transition credits added to each
named executive's PPA and RA from January 1, 1999 through March 31, 1999.
Because Mr. Barnett was not an EDS Retirement Plan participant on June 30,
1998, he had no previous accruals under the plan to convert into an opening
PPA balance. Mr. Duncan is not a United States employee and consequently is
not eligible to participate in the EDS Retirement Plan.
<TABLE>
<CAPTION>
Total Estimated EDS
Retirement Plan (PPA) Total Estimated PPA Total Estimated
and EDS Restoration and RA credits for Total Estimated PPA Annual Single
Account (RA) Balance the period ending and RA as of Life Annuity at
Name as of January 1, 1999 December 31, 1999 December 31, 1999 age 65
- ---- --------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
John J. Mazzola......... $183,319 $78,883 $262,202 $51,101
Anthony J. Affuso....... $203,105 $57,645 $260,750 $56,714
Douglas E. Barnett...... $ 8,411 $ 8,797 $ 17,208 $ 7,173
Dennis P. Kruse......... $109,313 $16,367 $125,680 $31,774
</TABLE>
Employment Agreements
Effective March 1998, the Company entered into employment agreements
("Original Employment Agreement(s)") with Messrs. Mazzola, Affuso, Barnett,
Duncan and Kruse which provided for a term of two years, subject to automatic
renewal unless the executive or the Company provided written notice of
termination at least 60 days prior to the expiration or renewal date, as
applicable, of the agreement. The Original Employment Agreement for Mr.
Mazzola has been automatically renewed for one year ending February 28, 2001.
The Original Employment Agreements for the other named executives have been
replaced with the New Employment Agreements described below. Mr. Mazzola's
Original Employment Agreement provides for a minimum annual base salary of
$210,000. The Original Employment Agreement also provided for specified
targeted bonuses for 1998. After 1998, specific bonus amounts or targets were
not specified in the agreement. The Original Employment Agreement sets forth a
specific grant of stock options to be awarded in conjunction with the
Company's initial public offering, as described in the table above under
"Summary Compensation Table." Subsequent stock option awards were not
specified in the Original Employment Agreement, but the Compensation Committee
awarded additional options in 1999 as listed in the table above under "Option
Grants in the Last Fiscal Year." Additionally, Mr. Mazzola was permitted to
continue vesting in any outstanding awards under certain EDS incentive plans
as long as he remains an employee of UGS. If Mr. Mazzola terminates his
employment with UGS for "Cause" as defined in the Original Employment
Agreements, then he will be entitled to receive the equivalent of one year of
his then annual salary and bonus and all unvested stock options will vest. The
Original Employment Agreement also includes non-competition and non-
solicitation obligations which cover the period Mr. Mazzola is employed by the
Company and for twelve months thereafter.
Updated employment agreements ("New Employment Agreements") were entered
into with nine executive officers effective January 20, 2000. The nine
executive officers included Messrs. Affuso, Barnett, Davidson, Desmond,
Duncan, Kruse, Loss, Schenk and Walti. The New Employment Agreements have a
two-year term, subject to automatic renewal unless the executive or the
Company provides 60 days written notice prior to the expiration or renewal
date. The New Employment Agreements for the named executive officers shown in
the Summary Compensation Table provide for minimum base salaries as follows:
Mr. Affuso, $240,000; Mr. Barnett, $200,000; Mr. Duncan $210,000; and Mr.
Kruse $205,000. Salaries are subject to reductions of up to 25% of the amounts
specified in the New Employment Agreements as determined by the Compensation
Committee of the Board of Directors. The New Employment Agreements also
provide for performance bonuses and long term incentives as determined by the
Compensation Committee. Similar to the Original Employment Agreements, the New
Employment Agreements state that outstanding awards under EDS stock incentive
plans will continue to vest as long as such individuals remain employees of
UGS. In the event the executive terminates his employment
14
<PAGE>
for "good reason" (as defined in the agreement) or UGS terminates the
executive without cause, then such executive will be entitled to receive the
equivalent of one year of his then-current annual salary plus his then-current
bonus target (or 1.25 times the previous year's bonus target if at the time of
termination, a bonus target had not yet been determined). In addition, the
executive would be entitled to cash payments to cover certain health and
welfare benefits, relocation expenses, and outplacement services. In a change
of control situation, if the executive were to terminate his employment for
"good reason" (as defined in the agreement) or if UGS terminates the executive
without cause, the executive would be entitled to receive a severance payment
equal to two times his then-current annual salary plus two times his bonus
target or previous year's bonus target if a bonus target had not been
established at the time of the executive's termination. The executive also
would be entitled to the same other benefit entitlements as set forth above
with respect to the executive's termination in a non-change of control
situation. Under the New Employment Agreements, the Company's obligation to
make termination payments is limited to an amount less than the excess
parachute payment limit as set forth in Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended. The New Employment Agreements also include
non-competition and non-solicitation obligations which cover the period of
employment and twelve months thereafter.
RELATIONSHIP WITH EDS AND CERTAIN TRANSACTIONS
The Company was formed on October 2, 1997 and, pursuant to the
Reorganization, became the successor to the Unigraphics MCAD business of EDS
effective as of January 1, 1998. In connection with the Reorganization and
subsequent initial public offering, the Company entered into the agreements
with EDS described below.
Capital Stock. In connection with its formation on October 2, 1997, the
Company issued 500 shares of common stock to EDS in consideration for a cash
payment of $1,000. Effective January 1, 1998, the Company issued an additional
500 shares of common stock to EDS in consideration for the assets transferred
to the Company in connection with the Reorganization. On May 21, 1998, the
1,000 shares of common stock were reclassified into 31,265,000 shares of Class
B Common Stock.
Intercompany Agreement. At the time of the Reorganization, the Company and
EDS entered into an Intercompany Agreement (the "Intercompany Agreement")
pursuant to which each party indemnified the other for certain obligations
relating to the Reorganization. Pursuant to that agreement, the Company
indemnified EDS for liabilities assumed in the Reorganization and against
third party claims asserted against EDS as a result of EDS' prior ownership of
assets or operation of businesses contributed to the Company and for losses
arising from or in connection with the Company's lease of property from EDS.
In exchange, EDS indemnified the Company for specified liabilities retained by
it in the Reorganization, against third party claims against the Company
relating to EDS' businesses and asserted against the Company as a result of
the ownership or possession by EDS prior to the Reorganization of any asset
contributed to the Company in the Reorganization.
Management Services Agreement. The Company and EDS have entered into a
Management Services Agreement dated January 1, 1998 (the "Management Services
Agreement") pursuant to which EDS performs various management services for the
Company, including treasury, risk management, tax and similar administrative
services. The Company paid EDS approximately $6.4 million for such services in
1999. This agreement provides for the payments of fees to EDS for such
services, either on a fixed price or usage basis, which fees are generally
designed to approximate EDS' cost of providing the services, as well as a
fixed fee equal to 0.5% of the Company's total revenues. The Management
Services Agreement will expire on December 31, 2002 unless terminated earlier
by either party if EDS and the Company are no longer under common control.
Except for certain tax and treasury management services relating to
consolidated operations or corporate policy of EDS, which the Company is
required to purchase during the term of the Management Services Agreement, the
Company or EDS may terminate any service on or after January 1, 2000 with
prior notice of not less than five months.
15
<PAGE>
Tax Sharing Agreement. The Company and EDS have entered into a Tax Sharing
Agreement dated January 1, 1998 (the "Tax Sharing Agreement") which provides
for the allocation of tax liabilities during the tax periods the Company is
part of consolidated federal, state and local income tax returns filed by EDS.
In addition, the Tax Sharing Agreement sets out certain benefits and
obligations of the Company and EDS for tax matters relating to periods before
the Reorganization and for certain benefits and obligations that would affect
the Company or EDS in the future if the Company ceased to be a member of EDS'
consolidated group for federal income tax purposes. The Tax Sharing Agreement
generally requires the Company to pay to EDS the amount of federal, state and
local income taxes that the Company would have been required to pay had it and
its subsidiaries filed their own tax return or returns and not been included
in the EDS consolidated group. The Company is jointly and severally liable for
the federal income tax of EDS and the other companies included in the
consolidated return for all periods in which the Company is included in the
EDS consolidated group. EDS has agreed, however, to indemnify the Company for
any liability for taxes reported or required to be reported on a consolidated
return. Except for certain items specified in the Tax Sharing Agreement, EDS
generally retains any potential tax benefit carry forwards, and remains
obligated to pay all taxes, attributable to periods before the Reorganization.
Intercompany Credit Agreements and Intercompany Note. The Company and EDS
are parties to domestic and foreign Intercompany Credit Agreements dated
January 1, 1998 (the "Intercompany Credit Agreements") pursuant to which the
Company is required to borrow from EDS, and EDS is required to lend to the
Company, amounts required by the Company to fund its daily cash requirements.
The maximum amount that the Company may borrow at any time from EDS under the
Intercompany Credit Agreements is $70 million. There were no amounts
outstanding under the Intercompany Credit Agreements as of December 31, 1999.
Also, under the Intercompany Credit Agreements, the Company is required to
lend to EDS all excess cash of the Company. The interest rate to be charged to
the Company is the sum of the one-month London Interbank Offered Rate plus
0.5%. The interest rate to be charged to EDS is the one-month London Interbank
Bid Rate minus 0.5%. On any business day that the Company has excess cash
available, it must use that cash to repay any outstanding loans it has under
the Intercompany Credit Agreements or make an advance to EDS if no loans are
outstanding. The Intercompany Credit Agreements will terminate on December 31,
2002, unless earlier terminated at the election of one of the parties upon the
occurrence of certain events, including the termination of the Management
Services Agreement or the cessation of EDS' beneficial ownership of 50% or
more of the capital stock of the Company. The net interest paid to EDS under
the Intercompany Credit Agreements was $2.9 million in 1999. Total 1999
borrowings under the Intercompany Credit Agreements were approximately $34
million.
In connection with the acquisition (the "Solid Edge Acquisition") of the
MCAD business of Intergraph Corporation on March 2, 1998, the Company borrowed
$107 million from EDS pursuant to the Intercompany Credit Agreements. In
addition, effective March 6, 1998, the Company issued to EDS, as a dividend, a
note in the principal amount of $73 million (the "Intercompany Note"). The
Intercompany Note bears interest, payable semiannually, at the one-month
London Interbank Bid Rate minus 0.5%, and matures on March 6, 2001. The
amounts advanced by EDS to the Company under the Intercompany Credit
Agreements in respect of the Solid Edge Acquisition, as well as a portion of
the amount outstanding under the Intercompany Note, were repaid to EDS with
the net proceeds of the Company's initial public offering and cash generated
from operations. The amount outstanding under the Intercompany Note as of
December 31, 1999 was $35.2 million.
GM Subcontract. In connection with the split-off of EDS from General Motors
Corporation ("GM") in June 1996, EDS entered into a Master Service Agreement
(the "EDS/GM MSA") and certain related agreements pursuant to which EDS serves
as GM's principal, supplier of information technology on a worldwide basis for
an initial term of 10 years. The EDS/GM MSA serves as the framework for the
negotiation and operation of service agreements between GM and EDS related to
certain "in scope" services (as defined in the EDS/GM MSA). EDS and GM entered
into a Unigraphics Software Corporate License Agreement, effective as of July
1, 1996 (the "EDS/GM Site License Agreement"), which provided for the sale of
GM of a perpetual license of up to 10,000 seats of Unigraphics, including
iMAN, and the provision of three years of maintenance services for such
products. These products and services are "in scope" services under the EDS/GM
MSA. The EDS/GM
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Site License Agreement was due to expire on June 30, 1999, however, the
agreement has been extended on a month-to-month basis pending renegotiation of
a follow-on agreement. In connection with the Reorganization, EDS and the
Company entered into a Memorandum of Understanding, effective January 1, 1998
(the "GM Subcontract"), pursuant to which the Company receives all revenues
and performs EDS' obligations under the EDS/GM Site License Agreement and
agrees to cooperate with EDS in providing additional products and services to
GM under the EDS/GM MSA. The GM Subcontract further provides that the Company
may provide directly to GM products and services that are outside of the scope
of the EDS/GM MSA. This GM Subcontract with EDS will expire when the new Site
License Agreement is signed. Approximately 8% of the Company's 1999 revenues
was attributable to products and services provided to GM.
Registration Rights Agreement. In connection with the Company's initial
public offering, it entered into a Registration Rights Agreement with EDS (the
"Registration Rights Agreement") pursuant to which EDS may demand registration
under the Securities Act of 1933 of shares of the Company's capital stock held
by EDS at any time. So long as EDS owns capital stock of the Company
representing more than 20% of the total voting power of all classes of stock
of the Company outstanding, EDS may exercise this "demand registration" at any
time and on an unlimited number of occasions. Transferees of EDS (and EDS upon
a reduction in its ownership to less than 20% of the voting power) may only
exercise this demand registration right three times. If EDS owns less than 50%
of the total voting power of all classes of stock of the Company outstanding,
the Company may postpone a demand registration under certain customary
circumstances. In addition, at any time prior to the tenth anniversary of the
date of the Registration Rights Agreement, EDS may request the Company to
include shares of the Company's capital stock held by it in any registration
proposed by the Company of such capital stock under the Securities Act of
1933. The Registration Rights Agreement contains provisions regarding the pro
rata payment of expenses by the Company and EDS and regarding mutual
indemnification agreements for certain securities laws violations.
Sublease Agreements. At the time of the Reorganization, the Company entered
into sublease agreements with EDS covering substantially all of the real
property occupied by the Company at the time of the Reorganization. The terms
of such sublease agreements incorporate the financial and other material terms
of EDS' lease agreements for the subject property (other than the sublease for
the Company's St. Louis headquarters for which the rental rate charged to the
Company was reduced to reflect then-current market rates). The Company paid to
EDS annual aggregate rental payments of approximately $4.7 million in 1999 in
respect of all real property leased or subleased from EDS.
PROPOSAL 2: APPROVAL OF THE UNIGRAPHICS SOLUTIONS INC.
2000 INCENTIVE PLAN
The Board of Directors has adopted the Unigraphics Solutions Inc. 2000
Incentive Plan (the "2000 Incentive Plan") and has directed that the 2000
Incentive Plan be submitted to the stockholders for approval. The 2000
Incentive Plan will become effective only if the stockholders approve the plan
at the Meeting. The purpose of the 2000 Incentive Plan is to attract and
retain employees of the Company and its subsidiaries, to attract and retain
qualified directors, and to encourage their sense of proprietorship. The 2000
Incentive Plan provides the Company the opportunity to reward eligible
employees and non-employee directors with Class A Common Stock, $.01 par value
per share, of the Company ("Common Stock") through various types of incentive
awards. If stockholder approval is not obtained at this Meeting, the 2000
Incentive Plan will be void and of no effect. EDS has indicated to the Company
that it intends to vote its shares for approval of the 2000 Incentive Plan.
Summary of the 2000 Incentive Plan
The full text of the 2000 Incentive Plan is set forth in Exhibit A to this
Proxy Statement. The following summary of the material features of the 2000
Incentive Plan is qualified in its entirety by reference to the text of the
2000 Incentive Plan.
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The 2000 Incentive Plan, as it applies to participants who are employees
but not with respect to non-employee directors, will be administered by the
Compensation Committee of the Board of Directors (the "Committee"). A total of
3,000,000 shares of Common Stock have been reserved for purchase under the
2000 Incentive Plan, of which a total of 200,000 shares may be issued to non-
employee directors. These shares of Common Stock may be shares acquired by the
Company in an open market or privately negotiated transactions, previously
acquired treasury shares, or authorized but unissued shares. Shares covered by
awards that are forfeited or terminated, expire unexercised, settled in cash
in lieu of Common Stock or in a manner such that all or some of the shares
covered by the award are not used or exchanged for non-stock awards, will
again be available for awards. As of March 20, 2000, 100,307 additional shares
remained available for future awards under the Company's existing stock option
plans, along with any of the 1,904,502 previously awarded options which might
terminate, expire or be surrendered without being exercised in full.
The Committee is responsible for the administration of the 2000 Incentive
Plan for employees and has the authority to administer the 2000 Incentive Plan
and take all actions contemplated thereby and to interpret the 2000 Incentive
Plan and adopt such rules and regulations as it deems necessary or proper. The
Committee may in its discretion: (i) provide for the extension of the
exercisability of an employee award, (ii) accelerate the vesting or
exercisability of the employee award, (iii) eliminate or make less restrictive
any restrictions contained in an employee award, (iv) waive any restriction or
other provision of this plan or an employee award or (v) otherwise amend or
modify an employee award in any manner that is either not adverse to the
participant to whom such employee award was granted or consented to by such
participant. The Committee may adopt subplans to the extent it deems necessary
or advisable to comply with any foreign laws. Except with respect to awards to
certain senior executives, the Committee is permitted to delegate its duties
to the Chairman of the Board of Directors or to other senior officers of the
Company.
The Board of Directors or the Committee may amend or terminate the 2000
Incentive Plan at any time, provided that no amendment may adversely change
any award previously granted under the 2000 Incentive Plan, unless such
amendment or termination is consented to by the affected participant. However,
stockholder approval will be required for any amendment, if required by any
applicable law or rule. Notwithstanding the foregoing, the Committee is
authorized to amend the 2000 Incentive Plan to the extent deemed necessary or
advisable to comply with the law of foreign jurisdictions.
All employees of the Company and its subsidiaries who hold positions of
responsibility and whose performance in the judgment of the Committee can have
a significant effect on the success of the Company and its subsidiaries, or
whose services to the Company can be better recruited or retained through
participation in the 2000 Incentive Plan are eligible for awards under the
2000 Incentive Plan. Directors who are not employees of the Company, its
subsidiaries or corporations of which the Company is a subsidiary (each a
"non-employee director") are also eligible to receive automatic or elective
awards under the 2000 Incentive Plan. The Company is unable to determine the
number of individuals who are likely to participate in the 2000 Incentive
Plan; however, over 300 employees and directors participate in the Company's
existing employee award plans.
Non-qualified options ("NQOs"), incentive stock options ("ISOs"),
restricted stock, stock appreciation rights ("SARs"), cash awards, stock
awards and performance awards may be granted under the 2000 Incentive Plan.
Employee awards may be granted singly, in combination or in tandem. Employee
awards may also be made in combination or in tandem with, in replacement of,
or as alternatives to, grants or rights under this plan or any other employee
plan of the Company or its subsidiaries, including the plan of any acquired
entity; provided that no option may be issued in exchange for the cancellation
of an option with a lower exercise price. An employee award may provide for
the grant or issuance of additional, replacement or alternative employee
awards upon the occurrence of specified events, including the exercise of the
original employee award granted to a participant.
Payment of employee awards may be made in the form of cash or Common Stock,
or a combination thereof, and may include such restrictions as the Committee
shall determine, including, in the case of Common Stock, restrictions on
transfer and forfeiture provisions. With the approval of the Committee,
payments in respect of Employee awards may be deferred, either in the form of
installments or a future lump-sum payment. Rights to
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dividends or dividend equivalents may be extended to and made part of any
employee award consisting of shares of Common Stock or units denominated in
shares of Common Stock, subject to such terms, conditions and restrictions as
the Committee may establish. The Committee may also establish rules and
procedures for the crediting of interest on deferred cash payments and
dividend equivalents for employee awards consisting of shares of Common Stock
or units denominated in shares of Common Stock. At the discretion of the
Committee, a participant who is an employee may be offered an election to
substitute an employee award for another employee award of the same or
different type.
The exercise price per share of a NQO or ISO may not be less than the fair
market value of the Common Stock at the time the award is granted. The fair
market value of the Common Stock is generally the mean between the highest and
lowest sales price of the Common Stock on The New York Stock Exchange on the
date of grant. On March 20, 2000, the average of the highest and lowest sales
price of the Common Stock on the New York Stock Exchange was $29.3750 per
share. In order to obtain the shares, a participant must pay the full exercise
of the award to the Company at the time of exercise, together with an amount
equal to any taxes required to be withheld in connection with such exercise.
The exercise price may be paid in any combination of cash and/or Common Stock
or another award, valued at the fair market value of such shares on the date
of exercise. The Committee will determine acceptable methods for participants
who are employees to tender Common Stock or other awards, provided any stock
must have been held for six months. The Committee may also establish
procedures to permit the exercise of awards by use of proceeds to be received
from the sale of Common Stock issuable pursuant to the award. The Committee
may provide for procedures to permit the exercise or purchase of such awards
by use of the proceeds to be received from the sale of Common Stock issuable
pursuant to an employee award. Unless otherwise provided in the applicable
award agreement, in the event shares of restricted stock are tendered as
consideration for the exercise of an award, a number of the shares issued upon
the exercise of the award, equal to the number of shares of restricted stock
used as consideration therefor, will be subject to the same restrictions as
the restricted stock so submitted as well as any additional restrictions that
may be imposed by the Committee.
Performance awards will be paid, vested or otherwise deliverable solely on
account of the attainment of one or more pre-established, objective
performance goals established by the Committee prior to the earlier to occur
of (x) 90 days after the commencement of the period of service to which the
performance goal relates and (y) the elapse of 25% of the period of service
(as scheduled in good faith at the time the goal is established), and in any
event while the outcome is substantially uncertain. A performance goal is
objective if a third party having knowledge of the relevant facts could
determine whether the goal is met. Such performance goals may be based on one
or more business criteria that apply to the individual, one or more business
units of the Company, or the Company as a whole, and may include one or more
of the following: increased revenue, net income, stock price, market share,
earnings per share, return on equity, return on assets or decrease in costs.
Unless otherwise stated, such a performance goal need not be based upon an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business criteria). Prior to
the payment of any compensation based on the achievement of performance goals,
the Committee must certify in writing that applicable performance goals and
any of the material terms thereof were, in fact, satisfied.
The Company has the right to deduct applicable taxes from any employee
award payment and withhold, at the time of delivery or vesting of cash or
shares of Common Stock, an appropriate amount of cash or number of shares of
Common Stock or a combination thereof for payment of taxes required by law or
to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for withholding of such taxes. The Committee may also
permit withholding to be satisfied by the transfer to the Company of shares of
Common Stock owned by the holder of the employee award with respect to which
withholding is required. If shares of Common Stock are used to satisfy tax
withholding, such shares will be valued based on the fair market value on the
day when tax withholding is required to be made. The Committee may provide for
loans, on either a short term or demand basis, from the Company to a
participant who is an employee to permit the payment of taxes required by law.
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No employee may be granted an award during any one year period which
consists of: (i) NQOs, ISOs or SARs which are exercisable for more than
200,000 shares of Common Stock; (ii) awards, other than NQOs, ISOs or SARs,
which are exercisable for, or payable in, more than 100,000 shares of Common
Stock; or (iii) other kinds of awards having a value on the grant date in
excess of $4,000,000.
Except as permitted by the Committee and provided in the award agreement,
no award constituting a derivative security may be assigned or transferred
except by will, the laws of descent and distribution or pursuant to a
qualified domestic relations order.
On the date of his or her initial election to the Board of Directors, each
non-employee director (as defined above) of the Company will be automatically
granted an NQO that provides for the purchase in aggregate under the 2000
Incentive Plan or any other stock plan of the Company then in effect of 3,000
shares of Common Stock. In addition, each year, each non-employee director
will automatically be granted an NQO that provides for the purchase, in
aggregate under this plan and any other stock plan of the Company then in
effect, of 3,000 shares, or a fraction thereof as applicable, of Common Stock.
In the event that a non-employee director is elected otherwise than by
election at an annual meeting of stockholders of the Company, on the date of
his or her election, such non-employee director will automatically be granted
an NQO that provides for the purchase of a number of shares of Common Stock,
in aggregate under the 2000 Incentive Plan or any other stock plan of the
Company then in effect, equal to the product of (i) 3,000 and (ii) a fraction
the numerator of which is the number of days between the election of such
director and the next scheduled annual director award date (or, if no such
date has been scheduled, the first anniversary of the immediately preceding
annual director award date) and the denominator of which is 365.
The term of the awards granted to non-employee directors will be for a
period of ten years from the date of grant, notwithstanding any earlier
termination of the status of the holder as a non-employee director. The
purchase price of each share subject to a director option will be the fair
market value on the date of grant. All awards granted to non-employee
directors will become vested in increments of one-third of the total number of
shares of Common Stock that are subject thereto on the first, second and third
anniversaries of the date of grant. All unvested awards granted to a non-
employee director will be forfeited if the non-employee director resigns from
the Board without the consent of a majority of the other directors.
In addition, a non-employee director may make an annual election to
receive, in lieu of all or any portion of the director's fees he would
otherwise be entitled to receive in cash during the next year (including
annual retainer and meeting fees), an award that provides for the purchase of
a number of shares of Common Stock, in aggregate under this plan and any other
stock plan of the Company then in effect, equal to the product of (x) three
times (y) a fraction the numerator of which is equal to the dollar amount of
fees the non-employee director elects to forego in the next year in exchange
for the award and the denominator of which is equal to the fair market value
of the Common Stock on the effective date of this election.
In the event of any subdivision or consolidation of the outstanding shares
of Common Stock, declaration of a dividend payable in shares of Common Stock
or other stock split, then (i) the number of shares of Common Stock reserved
under the 2000 Incentive Plan, (ii) the number of shares of Common Stock
covered by outstanding awards in the form of Common Stock or units denominated
in Common Stock, (iii) the exercise or other price in respect of such awards,
(iv) the appropriate fair market value and other price determinations for such
awards, (v) the number of shares of Common Stock covered by director options
automatically granted pursuant to the 2000 Incentive Plan, and (vi) the
limitations on the number of stock-based awards that may be made to any
employee under the 2000 Incentive Plan, shall each be proportionately adjusted
by the Board to reflect such transaction. In the event of any other
recapitalization or capital reorganization of the Company, any consolidation
or merger of the Company with another corporation or entity, the adoption by
the Company of any plan of exchange affecting the Common Stock or any
distribution to holders of Common Stock of securities or property, the Board
shall make appropriate adjustments to (i) the number of shares of Common Stock
covered by awards in the form of Common Stock or units denominated in Common
Stock, (ii) the exercise or other price in respect of such awards, (iii) the
appropriate fair market value and other price determinations for such awards,
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(iv) the number of shares of Common Stock covered by director options
automatically granted pursuant to the 2000 Incentive Plan, and (v) the
limitations on the number of stock-based awards that may be made to any
employee under the 2000 Incentive Plan, to give effect to such transaction
shall each be proportionately adjusted by the Board to reflect such
transaction; provided that such adjustments are only as are necessary to
maintain the proportionate interest of the holders of the awards and preserve,
without exceeding, the value of the awards. In the event of a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee is authorized to issue or assume
awards by means of a substitution of new awards, as appropriate, for
previously issued awards or an assumption of previously issued awards as part
of such adjustment.
The benefits or amounts that will be received by or allocated to
participants, other than non-employee directors, are not presently
determinable. The Committee will have discretion as to the timing, terms and
amount of awards.
Federal Income Tax Consequences
Participants will not realize any income at the time a NQO or SAR is
granted, nor will the Company be entitled to a deduction at that time. Upon
exercise of a NQO, a participant will recognize ordinary income (whether the
exercise price is paid in cash or by the surrender of previously owned Common
Stock), in an amount equal to the difference between the exercise price and
the fair market value of the shares to which the NQO pertains. Upon the
exercise of a SAR, a participant will recognize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the price specified in the award agreement. In the discretion of
the Committee, the participant may authorize the Company to withhold shares of
stock to satisfy the participant's tax withholding liability incurred on
exercise of the award. The Company will be entitled to a tax deduction in an
amount of ordinary income realized by the participant.
ISOs are intended to qualify for favorable Federal income tax treatment
under Section 422 of the Internal Revenue Code. A participant will not realize
any income, nor will the Company be entitled to a deduction, at the time an
ISO is granted. If a participant does not dispose of the shares acquired on
the exercise of an ISO within one year after the transfer of such shares to
him or within two years from the date the ISO was granted to him, for Federal
income tax purposes: (a) the participant will not recognize any income at the
time of exercise of his ISO; (b) the amount by which the fair market value of
the shares at the time of exercise exceeds the exercise price is an item of
tax preference subject to the alternative minimum tax on individuals; and (c)
the difference between the exercise price and the amount realized upon the
sale of the shares by the participant will be treated as long-term capital
gain or loss. The Company will not be entitled to a deduction upon the
exercise of an ISO. Except in the case of a disposition following the death of
a participant and certain other very limited exceptions, if the stock acquired
pursuant to an ISO is not held for the minimum periods described above, the
excess of the fair market value of the stock at the time of exercise over the
amount paid for the stock generally will be taxed as ordinary income to the
participant in the year of disposition. The Company is entitled to a deduction
for Federal income tax purposes at the time and in the amount of which income
is taxed to the participant as ordinary income by reason of the sale of stock
acquired upon the exercise of an ISO.
Participants receiving cash awards or performance awards payable in cash
will recognize income upon receipt of the cash or, if earlier, at the time
such cash is otherwise made available to the participants. Participants
receiving stock awards or performance awards payable in stock will recognize
ordinary income, equal to the fair market value of the Common Stock received,
upon receipt of the Common Stock or, if earlier, at the time such Common Stock
is otherwise made available to the participants. If, in payment of a stock
award or performance award payable in stock, participants receive restricted
stock so that it is not transferable and is subject to a substantial risk of
forfeiture when received, the participants will recognize ordinary income in
an amount equal to the fair market value of the Common Stock when it first
becomes transferable or is no longer subject to a substantial risk of
forfeiture, unless the participants make an election to be taxed on the fair
market value of the Common Stock when the restricted stock is received. The
Company is entitled to a deduction for Federal income tax purposes at the time
and in the amount of which income is taxed to the participant as ordinary
income.
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With certain exceptions, Section 162(m) of the Internal Revenue Code limits
the deduction to the Company for compensation paid to the Chief Executive
Officer of the Company or any one of the other four highest paid executive
officers who are employed by the Company on the last day of the Company's
taxable year. However, compensation paid to such individuals will not be
subject to such deduction limit if it is considered "qualified performance-
based compensation" (within the meaning of Section 162(m)). The Company has
structured the 2000 Incentive Plan with the intention that compensation
resulting from awards granted under the plan will be so qualified and
deductible without regard to the limitations otherwise imposed by Section
162(m), provided that the exercise price of NQOs or SARs is at least equal to
the fair market value of the Common Stock on the date of grant of such awards.
Under certain circumstances, accelerated vesting or exercise of awards
granted to the 2000 Incentive Plan participants in connection with a "Change
of Control" of the Company might be deemed an "excess parachute payment" for
purposes of the golden parachute provisions of Section 280G of the Internal
Revenue Code. To the extent it is so considered, the 2000 Incentive Plan
participant would be subject to an excise tax equal to 20% of the amount of
the excess parachute payment, and the Company would be denied a tax deduction
for the excess parachute payment.
Under current tax law, long-term capital gain will be taxable at a maximum
federal rate of 20%, and short-term capital gain and ordinary income will be
taxable at a maximum federal rate of 39.6%. However, the effective rate may be
higher due to the phase-out of the deduction for personal exemptions and
otherwise deductible expenses if adjusted gross income exceeds certain levels.
Phase-outs of personal exemptions and reductions of allowable itemized
deductions at higher levels of income may result in slightly higher marginal
tax rates. Ordinary compensation income will also be subject to a Medicare tax
and, under certain circumstances, a social security tax.
* * *
Approval of this proposal requires an affirmative vote of a majority of the
voting power of shares present in person or represented by proxy at the
meeting and entitled to vote on this proposal. Accordingly, abstentions will
have the effect of votes against these proposals and broker non-votes will be
disregarded.
The Board of Directors recommends a vote for the approval of the
Unigraphics Solutions Inc. 2000 Incentive Plan.
PROPOSAL 3: APPROVAL OF THE UNIGRAPHICS SOLUTIONS INC.
EXECUTIVE DEFERRAL PLAN
The Board of Directors has adopted the Unigraphics Solutions Inc. Executive
Deferral Plan (the "Deferral Plan") and has directed that the Deferral Plan be
submitted to the stockholders for approval. The Deferral Plan became effective
on March 15, 2000 for certain compensation earned after May 1, 2000. If
approved by shareholders, the Company may issue new shares to meet any
distribution requirement. If shareholder approval is not obtained, the Company
will meet any distribution requirement through cash or treasury shares. The
purpose of the Deferral Plan is to attract and retain competent officers, key
executives and highly compensated employees of the Company and its designated
subsidiaries by providing them with flexible compensation arrangements. EDS
has indicated to the Company that it intends to vote its shares for approval
of the Deferral Plan.
Summary of the Deferral Plan
The full text of the Deferral Plan is set forth in Exhibit B to this Proxy
Statement. The following summary of the material features of the Deferral Plan
is qualified in its entirety by reference to the text of the Deferral Plan.
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The Deferral Plan will be administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee has the power and
authority in its sole and absolute discretion to, among other things: (i) make
and from time to time amend rules by which the Deferral Plan will be
implemented and administered from time to time; (ii) construe and interpret
the Deferral Plan, determine the application of the plan to situations where
such application is unclear or disputable, resolve all questions arising under
the Deferral Plan and make equitable adjustments for any mistakes or errors
made in the administration of the Deferral Plan; and (iii) determine all
questions arising in the administration of the Deferral Plan, including the
power to determine the status of individuals as eligible employees, the rights
of participants and their beneficiaries and the amount of their respective
benefits. The Committee is also authorized to enforce and administer the
Deferral Plan and adopt, amend, rescind such rules, regulations and forms as
it may deem necessary for the proper and efficient administration of the
Deferral Plan and do all other things the Committee deems necessary and
desirable for the advantageous administration of the Deferral Plan. The
Committee has the authority to delegate such of its powers and authorities to
such person or person, with his, her, its or their consent, as the Committee
may appoint.
The Board of Directors or the Committee may amend or terminate the Deferral
Plan at any time in accordance with the terms of the Deferral Plan, provided
that no amendment or termination of the Deferral Plan and no amendment of any
rules governing the Deferral Plan may adversely affect the right to payment of
a benefit to which a participant is entitled, unless such amendment or
termination of the Deferral Plan or any rules is reasonably required to comply
with applicable law or to preserve the tax treatment of benefits under the
Deferral Plan or is consented to by the affected participant. Following the
occurrence of a Change in Control Event (as defined in the Deferral Plan), no
such amendment may be made without the written consent of the Board of
Directors, except if required by law.
The Committee may determine which employees are eligible to participate in
the Deferral Plan. Eligibility will be limited to a select group of management
or highly compensated employees who may voluntarily elect to participate in
the Deferral Plan by filing an election form with the Committee each year.
Status as an eligible participant will be redetermined from time to time, at
least annually. If an individual ceases for any reason to be eligible, through
termination of employment or otherwise, his deferral election will terminate,
and he will not again become eligible to make a deferral election until he
again becomes eligible. The Committee may establish rules governing vesting
and forfeitability of all or any portion of a participant's account.
Each eligible employee will be provided an opportunity to make a deferral
election with respect to such portion of his compensation as the Committee
designates by rule. Deferral elections for a plan year must be filed no
earlier than the date permitted by the Committee, and no later than the
deferral election deadline. Deferral elections for a plan year will become
irrevocable at such time as the Committee may designate by rule. An employee's
deferral election automatically terminates on the date employment at the
Company terminates unless the Committee otherwise provides or the date on
which the employee begins receiving payments under the Company's long-term
disability plan, whichever date is earlier.
The Committee may by rule permit additional or matching credits to be made
to participants' accounts, at such time and based upon such criteria as the
Committee deems appropriate. The Committee will maintain an account in the
name of each participant. The value of each account will be adjusted as of
each valuation date to reflect the deferred compensation credited thereto, the
rate of return credited (or charged) to such account, and any amounts
distributed or withdrawn from such account since the most recent prior
valuation date. The Committee will by rule establish and may change from time
to time the rate of return to be credited or charged to participants'
accounts. Such rules may, but need not, specify one or more rates of return
equal to the actual rate of return on specified predetermined actual
investments (whether or not assets are actually invested therein), and may,
but need not, permit participants to choose among alternative rates of return
for all or part of their accounts.
Simultaneously with the employee's deferral election, each participant will
elect the timing and form of distribution of his or her account, subject to
such limitations and exceptions as the Committee may, by rule, require or
permit. A participant may change the previously elected form of distribution
only upon such terms
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and conditions as the Committee may establish by rule. The Committee may also,
upon application of a participant, in its sole discretion, direct premature
distribution of part or all of a participant's account either during
employment or after employment terminates, on such basis and for such reasons
as the Committee may permit. Benefits under the Deferral Plan will be paid in
cash or cash equivalent from the trust or other general funds of the Company,
or if the Committee so designates, in the form of a fully paid insurance or
annuity contract or in Common Stock or other Company securities, valued at
their fair market value at the time of payment. For this purpose, 500,000
shares of Common Stock have been reserved for delivery. Such shares may be
treasury shares, or shares acquired on the open market or, subject to
stockholder approval of the Deferral Plan, newly issued shares of Common
Stock. In the event of any stock dividend, stock split, share combination,
spin-off, reorganization, recapitalization, merger or other transaction
involving the Company or its outstanding securities, the number and kind of
shares of Common Stock or other securities reserved under the Deferral Plan
will be adjusted by the Board of Directors, in its discretion, as it deems
appropriate to reflect such transaction. In the event of the death of a
participant prior to distribution of all amounts otherwise payable to the
participant hereunder, the participant's beneficiary or beneficiaries will be
entitled to distribution of all vested amounts credited to the participant's
account, in such form as the Committee may designate by rule.
The Company has the right to deduct applicable taxes from the amounts
deferred and from any amounts payable to a participant or beneficiary and from
amounts otherwise subject to any tax, and to withhold an appropriate amount of
cash or a number of shares of Common Stock of a combination thereof for
payment of taxes or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for withholding of such
taxes. The Committee may also permit withholding to be satisfied by the
transfer to the Company of cash, shares of Common Stock or other property
theretofore owned by the participant or beneficiary.
Except as the Committee may otherwise permit by rule, no participant or
beneficiary of a participant has any right to assign, pledge, hypothecate,
anticipate or any way create a lien on any amounts payable under the Deferral
Plan. No amounts payable under the Deferral Plan are subject to assignment or
transfer or otherwise alienable, either by voluntary or involuntary act, or by
operation of law, or subject to attachment, execution, garnishment,
sequestration or other seizure under any legal, equitable or other process or
available in any way for the debts or defaults of participants and their
beneficiaries.
Upon the first event constituting a part of the Change of Control (as
defined in the Deferral Plan) the members of the Board serving immediately
prior to the Change of Control event may, in their sole and absolute
discretion, direct the Committee to distribute all amounts credited to the
accounts of participants in a single lump sum payment to each participant, net
of investment charges, surrender charges, etc. following which the Deferral
Plan will terminate; no changes may be made to any rules in effect immediately
prior to the Change of Control event and no new rules may be promulgated; and
Deferral Plan amendments may only be made with the written consent of the
Board of Directors, unless required by law.
Under rules adopted for the Deferral Plan (the "Rules"), eligible executive
employees of the Company may elect to defer up to 50% of their base salary
(including performance payments), 100% of their bonus compensation and 100% of
any restricted stock units that would otherwise vest in the next year under
the 1998 Incentive Plan, the 1999 Broad-Based Incentive Plan, and the 2000
Incentive Plan of the Company. Deferral elections with respect to cash amounts
must be made in whole percentages of at least 1% and with respect to amounts
designated in shares must be made in whole shares. For plan year 2000,
election forms filed by April 30, 2000 apply to salary and bonus compensation
payable from May 1, 2000 through December 31, 2000, and to restricted stock
units that would otherwise vest in such period. Any compensation deferred is
credited to the participant's account as soon as administratively convenient
after the participant would have otherwise been paid and this amount (except
for deferred restricted stock units) is net of any applicable withholding for
taxes. The Company may, in its discretion, withhold any amounts required to be
withheld for taxes on restricted stock units from the restricted stock units,
other cash compensation or such other means as the Committee may permit on a
case by case basis.
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Under the Rules, the Company may credit to a participant's plan account a
percentage of his or her annual salary and annual executive bonus plan payment
as follows:
1. A participant may receive a 401(k) "make-up" match of 25% of the
amount of deferred compensation equal to 6% of the participant's base
salary and executive bonus award that exceeds the federal compensation
limits on the Company's 401(k) plan, provided the participant defers an
amount at least equal to this "make-up" match and invests it in Common
Stock.
2. In addition, for a participant who invests his or her deferral in
Common Stock, such participant will receive a match of 25% on the basis of
the participant's base salary or executive bonus award. This match is
limited to deferrals up to and including 15% of base pay and 25% of
executive bonus awards. This match does not apply to any deferred
restricted stock units.
Participants must be employed by the Company and be an eligible employee on
the last day of the year to receive the 401(k) "make-up" match or additional
match. Company matching contributions are credited to their accounts as of
that day and are net of any applicable withholding for taxes.
Under the Rules, participants are fully vested in and have non-forfeitable
rights to amounts credited to their accounts at all times except in the
following situations: (i) deferred restricted stock units are subject to a
restricted period during which they will be subject to forfeiture if the
Committee, in its discretion, finds at any time that "cause" existed during
the restricted period; (ii) a participant makes a direct withdrawal prior to
termination of employment (in which case, the participant will forfeit 10% of
the participant's deferred base salary, executive bonus award or restricted
stock units); or (iii) a participant refuses or fails to execute a binding
waiver and release on the prescribed form. In addition, a participant will
forfeit both the 401(k) "make-up" match and any additional match if the
Committee, in its discretion, finds at any time that "cause" exists.
"Cause" means that a Participant has:
. violated any of the Company's policies; or
. directly or indirectly competed against the Company (where indirect
competition could include, but not be limited to, the participant's
having worked for or with others who compete against the Company or do
work that the Company may otherwise have had the opportunity to compete
for); or violated any material term of any non-compete or non-disclosure
agreements which the participant has entered into with the Company; or
. committed a crime or other offense; or
. acted in a way considered adverse to the Company; or
. has taken an action, or has omitted to act in such a way, that is
considered contrary to the Company's interests.
Under the Rules, deferrals of both restricted stock units and the company-
matching contributions will be invested in Common Stock. A participant may
choose to invest deferrals of any base salary or executive bonus award in
either the Company Common Stock Equivalent Fund or the Fixed Income Equivalent
Fund. Participants who fail to specify a fund upon filing a deferral election
will have their accounts credited to the Common Stock Equivalent Fund. Because
the Deferral Plan is unfunded, participant accounts will actually be credited
with stock equivalent units rather than shares of Common Stock. Stock units do
not have voting rights. The number of stock units credited to each
participant's account will be determined based on the mean between the highest
and lowest sales price per share of Common Stock on the days amounts are
credited.
For stock units maintained in a participant's account on a record date for
cash dividends on the Common Stock, the Company will credit such account with
stock units valued at the dollar amount of cash dividends that would have been
paid to the participant if each stock unit maintained constituted one share of
Common Stock. The number and kind of stock units deemed credited to the Common
Stock Equivalent Fund of a participant's account is subject to equitable
adjustment in the event of a stock dividend, stock split, share combination,
spin-
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off, reorganization, recapitalization, merger or other transaction involving
the Company or its outstanding securities as the Board of Directors determines
to be appropriate, subject to the overall limitation on shares available under
the Deferral Plan. If stockholder approval is not obtained and the Company
does not elect to utilize treasury shares, or if insufficient shares remain
available under the Deferral Plan, the Company may, in its discretion, pay
cash in lieu of issuing treasury shares based on the fair market value of the
common stock on the date of payment of benefits.
A participant's interest in the Fixed Income Equivalent Fund will be equal
to the return on the 30-year U.S. Treasury securities in effect as of the
first business day in September of the prior year plus 50 basis points.
Participants may elect to transfer any or all of the portion of their
deferrals in the Fixed Income Equivalent Fund to the Common Stock Equivalent
Fund for future periods no more than once in any 31-day period. Participants
may not transfer their deferrals allocated to the Common Stock Equivalent Fund
to the Fixed-Income Equivalent Fund.
Distributions to participants will be made in the time and manner elected
by the participant in his or her initial annual election form, which are
irrevocable once the election period is over. Subject to stockholder approval
or, in the Committee's discretion, the availability of treasury shares, and
the availability of shares under the Deferral Plan, payment of amounts
credited to the Company Common Stock Equivalent Fund will be made in the form
of Company's class A common stock. If stockholder approval is not obtained and
the Company does not elect to utilize treasury shares, or if insufficient
shares remain available under the Deferral Plan at the time benefits under the
Deferral Plan become payable, the Company may, in its discretion, pay cash in
lieu of issuing treasury shares based on the fair market value of the common
stock on the date of payment. For this purpose, 500,000 shares of common stock
have been reserved under the Deferral Plan for delivery. Such shares may be
treasury shares, or shares acquired on the open market or, subject to
stockholder approval of the Deferral Plan, newly issued shares of common
stock. In the event of any stock dividend, stock split, share combination,
spin-off, reorganization, recapitalization, merger or other transaction
involving the Company or its outstanding securities, the number and kind of
shares of common stock or other securities reserved under the Deferral Plan
will be adjusted by the Board of Directors, in its discretion, as it deems
appropriate to reflect such transaction. Payment of amounts credited to the
Fixed Income Equivalent Fund will be paid in cash.
Under the Rules, the amount of compensation distributed upon the date of a
participant's death, termination or retirement will be based on the amount in
the participant's account as of such date. While employed, participants can
withdraw their own personal contributions from their accounts in two ways: In-
Service Distributions or through direct withdrawal.
In-Service Distributions. Under the Rules, participants can designate base
pay and bonus deferrals to be distributed to them by irrevocable election at
the same time they make their deferral elections. Like their deferral
elections, these designated distribution elections are irrevocable once the
election period is over. For the 2000 plan year, May 1,-December 31, 2000 base
pay deferrals can be designated before April 30, 2000, as an In-Service
Distribution. This election and distribution does not apply to deferred
executive bonus plan awards and restricted stock units earned between May 1,-
December 31, 2000, though such compensation earned in subsequent plan years
may be distributed pursuant to such an election.
Unless a participant is a "covered employee" as defined by Code Section
162(m), the date that the participant will receive this designated
distribution is the January of the third plan year following the plan year in
which the deferral is made. If a participant is a "covered employee," the
participant will receive his distribution in the January of the first plan
year after the participant is no longer a "covered employee."
The separation distribution elections (see Distributions Upon Separation
below) for lump-sum or annualized payments over a period of up to five years
are available for this distribution election.
If a participant dies or terminates his service prior to the designated
date of his In-Service Distribution then his initial distribution election
will supercede this In-Service Distribution election.
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<PAGE>
Direct Withdrawal. Alternatively, under the Rules, a participant can make
an unplanned distribution election at any time. However, the participant will
forfeit 10% of his deferred base pay, executive bonus plan award or restricted
stock units (not subject to a restricted period) being distributed.
Under the Rules, the timing of all distributions under the Deferral Plan
and Rules are subject to the Company's deduction limitations under section
162(m) of the Internal Revenue Code. Distributions instituted during a
"blackout" period will not be effective until the first business day following
the end of the "blackout" period.
Distributions Upon Separation. Under the Rules, if a participant ends his
employment with the Company, he is entitled to receive the full value of his
deferral account, including matching contributions and earnings on his account
(subject to the forfeiture due to termination for cause provision). Payment of
amounts credited to the Fixed Income Equivalent Fund will be paid in cash.
If an account balance is $15,000 or less at the time of termination, a lump
sum distribution will automatically be made to the participant as soon as
administratively feasible following the participant's termination of
employment. If an account balance is more than $15,000 at the time of
termination, the normal form of payment will be a lump-sum payment made in
January of the calendar year following the year in which the participant's
employment ends (or, if earlier, payments under the Company's long-term
disability plan begin). Alternatively, the participant may elect to receive
payment in annual installments over a period of up to five years commencing in
January of the calendar year following the year in which his employment ends.
Any deferred restricted stock units subject to a restricted period which
otherwise would have been distributed during the restricted period will be
distributed as soon as administratively feasible after the end of the
restricted period.
Under the Rules, at any time during employment, a participant can change
his election or defer his receipt of any payments to any January following the
year of his termination, as long as he receives all payments by January of the
fifth year following termination, but any elections made within 12 months
before the date of termination will not be effective. If a distribution
election is not effective because it was made within 12 months before his
termination date, the prior distribution election on file, if any, will be
effective.
If a participant dies before receiving all the benefits under the Deferral
Plan, the beneficiary(ies) will receive the remaining benefits in the same
form of payment the participant chose, provided that if the distributee is an
estate, the Company, in its sole discretion, may elect to distribute the
remaining benefits in a lump sum payment. If no beneficiary form is on file,
or the beneficiary(ies) die before payments are completed, payment will be
made to his spouse, or to his estate if he has no spouse.
Any distribution may be postponed until a later time if the participant is
prohibited by Company policy or otherwise from acquiring or disposing of
equity securities of the Company.
Federal Income Tax Consequences
The full amount of the participant's distribution is taxable as ordinary
income when received because the participant accumulated his money on a pretax
basis. Because FICA taxes were paid at the time contributions were made, no
FICA tax applies to the distribution, but distributions may be subject to
withholding for federal, state and local income taxes.
Compensation subject to deferral is not includable in a participant's
taxable income for federal income tax purposes for the taxable year in which
the amount would have been received if no deferral election had been in
effect. Instead, participants will recognize as taxable income such deferred
compensation in the year in which such income is actually distributed under
the Deferral Plan. The Company is entitled to a deduction for Federal income
tax purposes at the time and in the amount of which income is taxed to the
participant as ordinary income. Additionally, participants will also be
subject to a Medicare tax and, under certain circumstances, a social security
tax on such compensation in the year in which the participant earned the
compensation.
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<PAGE>
New Plan Benefits
Benefits to be awarded in 2000 or in future years under the Deferral Plan
are not determinable because such benefits depend upon the amount of
compensation each participant elects to defer and the percentage of
compensation that the Company, at its discretion, may contribute to each
employee as a Company contribution. The following table sets forth the
benefits or amounts that would have been allocated in 1999 to each of the
Named Officers and the other persons listed below, had they elected to
participate in full in the Deferral Plan in accordance with the current Rules.
New Plan Benefits
Executive Deferral Plan and Rules for Plan Year 2000
<TABLE>
<CAPTION>
Dollar Number of
Name and Position Value(a) Shares (b)
----------------- -------------- --------------
<S> <C> <C>
John Mazzola, President and CEO.................. $170,000 5,478
Anthony Affuso, Vice President, Products and
Operations...................................... $140,000 4,512
Douglas Barnett, Vice President, Chief Financial
Officer and Treasurer........................... $110,000 3,545
James Duncan, Vice President, Europe............. Not Applicable Not Applicable
Dennis Kruse, Vice President, Americas........... $107,500 3,464
All Current Executive Officers as a group........ $892,500 28,761
</TABLE>
- --------
(a) Represents the Company's entire obligation (both vested and non-vested
component).
(b) Calculated using the fair market value of the Company's Class A Common
Stock on March 24, 2000.
* * *
Approval of this proposal requires an affirmative vote of a majority of the
voting power of shares present in person or represented by proxy at the
meeting and entitled to vote on this proposal. Accordingly, abstentions will
have the effect of votes against these proposals and broker non-votes will be
disregarded.
The Board of Directors recommends a vote for the approval of the
Unigraphics Solutions Inc. Executive Deferral Plan.
INDEPENDENT AUDITORS
KPMG LLP was the auditor for the fiscal year ended December 31, 1999, and
the Audit Committee intends to select KPMG LLP as auditor for the year ending
December 31, 2000. A representative of KPMG LLP will be present at the meeting
with the opportunity to make a statement and/or respond to appropriate
questions from stockholders.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Under SEC rules, stockholder proposals intended to be presented at the 2001
Annual Meeting and included in the proxy materials for that meeting must be
received no later than December 7, 2000. Proposals may be mailed to the
Secretary of UGS, 13736 Riverport Drive, Maryland Heights, Missouri 63043.
Upon timely receipt of any such proposal, the Company will determine whether
or not to include such proposal in the proxy statement and proxy in accordance
with applicable regulations governing the solicitation of proxies.
Our Bylaws provide for certain procedures which stockholders must follow to
nominate persons for election as directors or to introduce an item of business
at an annual meeting. Generally, the stockholder must notify the Secretary of
UGS of the nomination or proposal not less than 90 days nor more than 120 days
before the first
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<PAGE>
anniversary of the previous years' annual meeting (or, in the event that the
date of the annual meeting is advanced by more than 20 days or delayed by more
than 70 days from such anniversary date, not earlier than the 120th day prior
to such meeting and not later than the later of (x) the 90th day prior to such
meeting and (y) the 10th day after public announcement of the date of such
meeting is first made). Notwithstanding the foregoing, in the event that the
number of directors to be elected is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Company at least 100 days prior
to the first anniversary of the preceding year's annual meeting, a
stockholder's notice will be timely, but only with respect to nominees for any
new positions created by such increase, if it is received by the Company not
later than the 10th day after such public announcement is first made by the
Company. Under the Bylaws, for notice of a stockholder nomination to be made
at a special meeting at which directors are to be elected to be timely, such
notice must be received by the Company not earlier than the 120th day before
such meeting and not later than the later of (x) the 90th day prior to such
meeting and (y) the 10th day after public announcement of the date of such
meeting is first made. In the case of special meetings of stockholders, only
such business as is set forth in the notice of meeting may be conducted. The
foregoing time limits also apply in determining whether notice is timely for
purposes of rules adopted by the Securities and Exchange Commission relating
to the exercise of discretionary voting authority.
Such stockholders must be entitled to vote at the meeting and be holders of
record at the time they furnish such notice. The notice must be delivered to
the Secretary at our principal executive officers and include the name and
address of the stockholder and of any beneficial owner, if any, on whose
behalf the proposal or nomination is made, and the class and number of shares
which are owned beneficially and of record by such stockholder and such
beneficial owner. If the notice relates to a nomination for director, it must
also set forth all information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to the SEC's proxy
rules (including the written consent of each nominee to being named in the
proxy statement as a nominee and to serving as a director, if elected). Notice
of an item of business is also required to include a description of the
proposed business, the reason for conducting the proposed business at the
annual meeting and any material interest in such business of such stockholder
and any beneficial owner, if any, on whose behalf the proposal is made. Copies
of our Bylaws are available from the Secretary of UGS.
The foregoing requirements do not apply to EDS or its affiliates prior to
the date EDS ceases to be the beneficial owner of at least a majority of the
voting power of the voting stock of the Company then outstanding. These Bylaw
requirements are separate from and in addition to the requirements a
stockholder must meet to have a proposal included in the Company's proxy
statement.
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<PAGE>
Form 10-K
A copy of UGS' Annual Report on Form 10-K as filed with the SEC is included
with this Proxy Statement. UGS will provide an additional copy of the Form 10-
K to any stockholder upon written request to UGS Investor Relations, 13736
Riverport Drive, Maryland Heights, Missouri 63043.
By order of the Board of Directors,
J. Randall Walti
Vice President, General Counsel
and Secretary
April 7, 2000
30
<PAGE>
EXHIBIT A
UNIGRAPHICS SOLUTIONS INC.
2000 INCENTIVE PLAN
1. Plan.
This Unigraphics Solutions Inc. 2000 Incentive Plan (the "Plan") has been
adopted by Unigraphics Solutions Inc., a Delaware corporation (the "Company"),
to be effective as of the Effective Date stated below for the purpose stated
in paragraph 2 below.
2. Objectives.
This Plan is designed to attract and retain key Employees (as hereinafter
defined), to attract and retain qualified directors of the Company, to
encourage the sense of proprietorship of such employees and Directors, and to
stimulate the active interest of such persons in the development and financial
success of the Company and its Subsidiaries. These objectives are to be
accomplished by making Awards (as hereinafter defined) under this Plan and
thereby providing Participants (as hereinafter defined) with a proprietary
interest in the growth and performance of the Company and its Subsidiaries.
3. Definitions.
As used herein, the terms set forth below shall have the following
respective meanings:
"Annual Director Award Date" means, for each year beginning with the
year that includes the Effective Date, the first business day of the month
next succeeding the date upon which the annual meeting of stockholders of
the Company is held in such year.
"Authorized Officer" means the Chairman of the Board of the Company or
the President of the Company (or any other senior officer of the Company to
whom the Chairman of the Board or the President shall delegate the
authority to execute any Award Agreement).
"Award" means an Employee Award or a Director Award.
"Award Agreement" means any Employee Award Agreement or Director Award
Agreement.
"Board" means the Board of Directors of the Company.
"Cash Award" means an award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Compensation Committee of the Board or such other
committee of the Board as is designated by the Board to administer the
Plan. If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
"Common Stock" means the Class A Common Stock, par value $.01 per share,
of the Company.
"Director" means an individual serving as a member of the Board.
"Director Award" means the grant of a Director Option.
"Director Award Agreement" means a written agreement between the Company
and a Participant who is a Non-employee Director setting forth the terms,
conditions and limitations applicable to a Director Award.
"Director Options" means Nonqualified Options granted to Non-employee
Directors pursuant to the applicable terms, conditions and limitations
specified in paragraph 9 hereof.
"Disability" means, with respect to a Non-employee Director, the
inability to perform the duties of a Director for a continuous period of
more than three months by reason of any medically determinable physical or
mental impairment.
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"Dividend Equivalents" means, with respect to shares of Restricted Stock
that are to be issued at the end of the Restriction Period, an amount equal
to all dividends and other distributions (or the economic equivalent
thereof) that are payable to stockholders of record during the Restriction
Period on a like number of shares of Common Stock.
"Effective Date" means May 19, 2000.
"Employee" means an employee of the Company or any of its Subsidiaries
or any corporation which directly or indirectly owns shares representing
more than 50% of the combined voting power of the shares of all classes or
series of capital stock of the Company which have the right to vote
generally on matters submitted to a vote of the stockholders of the
Company.
"Employee Award" means the grant of any Option, SAR, Stock Award, Cash
Award or Performance Award, whether granted singly, in combination or in
tandem, to a Participant who is an Employee pursuant to such applicable
terms, conditions and limitations as the Committee may establish in order
to fulfill the objectives of the Plan.
"Employee Award Agreement" means a written agreement between the Company
and a Participant who is an Employee setting forth the terms, conditions
and limitations applicable to an Employee Award.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" of a share of Common Stock means, as of any relevant
date, (i) if shares of Common Stock are listed on a national securities
exchange, the mean between the highest and lowest sales price per share of
Common Stock on the consolidated transaction reporting system for the
principal national securities exchange on which shares of Common Stock are
listed on that date, or, if there shall have been no such sale so reported
on that date, on the last preceding date on which such a sale was so
reported, (ii) if shares of Common Stock are not so listed but are quoted
on the Nasdaq National Market, the mean between the highest and lowest
sales price per share of Common Stock reported by the Nasdaq National
Market on that date, or, if there shall have been no such sale so reported
on that date, on the last preceding date on which such a sale was so
reported or (iii) if shares of Common Stock are not so listed or quoted but
are traded in the over-the-counter market, the mean between the closing bid
and asked price on that date, or, if there are no quotations available for
such date, on the last preceding date on which such quotations shall be
available, as reported by the Nasdaq Stock Market, or, if not reported by
the Nasdaq Stock Market, by the National Quotation Bureau Incorporated.
"Incentive Option" means an Option that is intended to comply with the
requirements set forth in Section 422 of the Code.
"Non-employee Director" has the meaning set forth in paragraph 4(b)
hereof.
"Nonqualified Stock Option" means an Option that is not an Incentive
Option.
"Option" means a right to purchase a specified number of shares of
Common Stock at a specified price.
"Participant" means an Employee or Director to whom an Award has been
made under this Plan.
"Performance Award" means an award made pursuant to this Plan to a
Participant who is an Employee that is subject to the attainment of one or
more Performance Goals.
"Performance Goal" means a standard established by the Committee, to
determine in whole or in part whether a Performance Award shall be earned.
"Restricted Stock" means any Common Stock that is restricted or subject
to forfeiture provisions.
"Restriction Period" means a period of time beginning as of the date
upon which an Award of Restricted Stock is made pursuant to this Plan and
ending as of the date upon which the Common Stock subject to such Award is
no longer restricted or subject to forfeiture provisions.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any
successor rule.
A-2
<PAGE>
"SAR" means a right to receive a payment, in cash or Common Stock, equal
to the excess of the Fair Market Value or other specified valuation of a
specified number of shares of Common Stock on the date the right is
exercised over a specified strike price (in each case, as determined by the
Committee).
"Stock Award" means an award in the form of shares of Common Stock or
units denominated in shares of Common Stock.
"Subsidiary" means (i) in the case of a corporation, any corporation of
which the Company directly or indirectly owns shares representing more than
50% of the combined voting power of the shares of all classes or series of
capital stock of such corporation which have the right to vote generally on
matters submitted to a vote of the stockholders of such corporation and
(ii) in the case of a partnership or other business entity not organized as
a corporation, any such business entity of which the Company directly or
indirectly owns more than 50% of the voting, capital or profit interests
(whether in the form of partnership interests, membership interests or
otherwise).
4. Eligibility.
(a) Employees. Employees eligible for Employee Awards under this Plan are
those who hold positions of responsibility and whose performance, in the
judgment of the Committee, can have a significant effect on the success of the
Company and its Subsidiaries, or whose services to the Company can, in the
Committee's sole determination, be better recruited or retained through
participation in the Plan.
(b) Directors. Directors eligible for Director Awards under this Plan are
those who are not employees of the Company or any of its Subsidiaries or any
corporation which directly or indirectly owns shares representing more than
50% of the combined voting power of the shares of all classes or series of
capital stock of the Company which have the right to vote generally on matters
submitted to a vote of the stockholders of the Company ("Non-employee
Directors").
5. Common Stock Available for Awards.
Subject to the provisions of paragraph 15 hereof, there shall be available
for Awards under this Plan, granted wholly or partly in Common Stock
(including rights or options that may be exercised for or settled in Common
Stock), an aggregate of 3,000,000 shares of Common Stock, of which an
aggregate of not more than 200,000 shares shall be available for Director
Awards and the remainder shall be available for Employee Awards. The number of
shares of Common Stock that are the subject of Awards under this Plan, that
are forfeited or terminated, expire unexercised, are settled in cash in lieu
of Common Stock or in a manner such that all or some of the shares covered by
an Award are not issued to a Participant or are exchanged for Awards that do
not involve Common Stock, shall again immediately become available for Awards
hereunder. The Committee may from time to time adopt and observe such
procedures concerning the counting of shares against the Plan maximum as it
may deem appropriate. The Board and the appropriate officers of the Company
shall from time to time take whatever actions are necessary to file any
required documents with governmental authorities, stock exchanges and
transaction reporting systems to ensure that shares of Common Stock are
available for issuance pursuant to Awards.
6. Administration.
(a) This Plan, as it applies to Participants who are Employees but not with
respect to Participants who are Non-employee Directors, shall be administered
by the Committee.
(b) Subject to the provisions hereof, insofar as this Plan relates to the
Employee Awards, the Committee shall have full and exclusive power and
authority to administer this Plan and to take all actions that are
specifically contemplated hereby or are necessary or appropriate in connection
with the administration hereof. Insofar as this Plan relates to Employee
Awards, the Committee shall also have full and exclusive power to interpret
this Plan and to adopt such rules, regulations and guidelines for carrying out
this Plan as it may deem
A-3
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necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee shall have full power and authority to create subplans under this
Plan to the extent the Committee deems necessary or advisable to comply with
the laws of any foreign country in connection with Employee Awards made to
Employees who are residents of such country. The Committee may, in its
discretion, provide for the extension of the exercisability of an Employee
Award, accelerate the vesting or exercisability of an Employee Award,
eliminate or make less restrictive any restrictions contained in an Employee
Award, waive any restriction or other provision of this Plan or an Employee
Award or otherwise amend or modify an Employee Award in any manner that is
either (i) not adverse to the Participant to whom such Employee Award was
granted or (ii) consented to by such Participant. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in this Plan
or in any Employee Award in the manner and to the extent the Committee deems
necessary or desirable to further the purposes of the Plan. Any decision of
the Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned. The functions of the Committee specified in
the Plan shall be exercised by the Board, if and to the extent that no
Committee exists which has the authority to so administer the Plan.
(c) No member of the Committee or officer of the Company to whom the
Committee has delegated authority in accordance with the provisions of
paragraph 7 of this Plan shall be liable for anything done or omitted to be
done by him or her, by any member of the Committee or by any officer of the
Company in connection with the performance of any duties under this Plan,
except for his or her own willful misconduct or as expressly provided by
statute.
7. Delegation of Authority.
The Committee may delegate to the Chairman of the Board and to other senior
officers of the Company its duties under this Plan pursuant to such conditions
or limitations as the Committee may establish, except that the Committee may
not delegate to any person the authority to grant Awards to, or take other
action with respect to, Participants who are subject to Section 16 of the
Exchange Act or Section 162(m) of the Code.
8. Employee Awards.
(a) The Committee shall determine the type or types of Employee Awards to
be made under this Plan and shall designate from time to time the Employees
who are to be the recipients of such Awards. Each Employee Award may be
embodied in an Employee Award Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its sole
discretion and shall be signed by the Participant to whom the Employee Award
is made and by an Authorized Officer for and on behalf of the Company.
Employee Awards may consist of those listed in this paragraph 8(a) hereof and
may be granted singly, in combination or in tandem. Employee Awards may also
be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under this Plan or any other employee plan
of the Company or any of its Subsidiaries, including the plan of any acquired
entity; provided that no Option may be issued in exchange for the cancellation
of an Option with a lower exercise price. An Employee Award may provide for
the grant or issuance of additional, replacement or alternative Employee
Awards upon the occurrence of specified events, including the exercise of the
original Employee Award granted to a Participant. All or part of an Employee
Award may be subject to conditions established by the Committee, which may
include, but are not limited to, continuous service with the Company and its
Subsidiaries, achievement of specific business objectives, increases in
specified indices, attainment of specified growth rates and other comparable
measurements of performance. Upon the termination of employment by a
Participant who is an Employee, any unexercised, deferred, unvested or unpaid
Employee Awards shall be treated as set forth in the applicable Employee Award
Agreement.
(i) Stock Option. An Employee Award may be in the form of an Option. An
Option awarded pursuant to this Plan may consist of an Incentive Option or
a Nonqualified Option. The price at which shares of Common Stock may be
purchased upon the exercise of an Incentive Option shall be not less than
the Fair
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Market Value of the Common Stock on the date of grant. The price at which
shares of Common Stock may be purchased upon the exercise of a Nonqualified
Option shall be not less than, but may exceed, the Fair Market Value of the
Common Stock on the date of grant. Subject to the foregoing provisions, the
terms, conditions and limitations applicable to any Options awarded
pursuant to this Plan, including the term of any Options and the date or
dates upon which they become exercisable, shall be determined by the
Committee.
(ii) Stock Appreciation Right. An Employee Award may be in the form of
an SAR. The terms, conditions and limitations applicable to any SARs
awarded pursuant to this Plan, including the term of any SARs and the date
or dates upon which they become exercisable, shall be determined by the
Committee.
(iii) Stock Award. An Employee Award may be in the form of a Stock
Award. The terms, conditions and limitations applicable to any Stock Awards
granted pursuant to this Plan shall be determined by the Committee.
(iv) Cash Award. An Employee Award may be in the form of a Cash Award.
The terms, conditions and limitations applicable to any Cash Awards granted
pursuant to this Plan shall be determined by the Committee.
(v) Performance Award. Without limiting the type or number of Employee
Awards that may be made under the other provisions of this Plan, an
Employee Award may be in the form of a Performance Award. A Performance
Award shall be paid, vested or otherwise deliverable solely on account of
the attainment of one or more pre-established, objective Performance Goals
established by the Committee prior to the earlier to occur of (x) 90 days
after the commencement of the period of service to which the Performance
Goal relates and (y) the elapse of 25% of the period of service (as
scheduled in good faith at the time the goal is established), and in any
event while the outcome is substantially uncertain. A Performance Goal is
objective if a third party having knowledge of the relevant facts could
determine whether the goal is met. Such a Performance Goal may be based on
one or more business criteria that apply to the individual, one or more
business units of the Company, or the Company as a whole, and may include
one or more of the following: increased revenue, net income, stock price,
market share, earnings per share, return on equity, return on assets or
decrease in costs. Unless otherwise stated, such a Performance Goal need
not be based upon an increase or positive result under a particular
business criterion and could include, for example, maintaining the status
quo or limiting economic losses (measured, in each case, by reference to
specific business criteria). In interpreting Plan provisions applicable to
Performance Goals and Performance Awards, it is the intent of the Plan to
conform with the standards of Section 162(m) of the Code and Treasury
Regulations (S) 1.162-27(e)(2)(i), and the Committee in establishing such
goals and interpreting the Plan shall be guided by such provisions. Prior
to the payment of any compensation based on the achievement of Performance
Goals, the Committee must certify in writing that applicable Performance
Goals and any of the material terms thereof were, in fact, satisfied.
Subject to the foregoing provisions, the terms, conditions and limitations
applicable to any Performance Awards made pursuant to this Plan shall be
determined by the Committee.
(b) Notwithstanding anything to the contrary contained in this Plan, the
following limitations shall apply to any Employee Awards made hereunder:
(i) no Participant may be granted, during any one-year period, Employee
Awards consisting of Options or SARs that are exercisable for more than
200,000 shares of Common Stock;
(ii) no Participant may be granted, during any one-year period, Employee
Awards consisting of shares of Common Stock or units denominated in such
shares (other than any Employee Awards consisting of Options or SARs)
covering or relating to more than 100,000 shares of Common Stock (the
limitation set forth in this clause (ii), together with the limitation set
forth in clause (i) above, being hereinafter collectively referred to as
the "Stock Based Awards Limitations"); and
(iii) no Participant may be granted Employee Awards consisting of cash
or in any other form permitted under this Plan (other than Employee Awards
consisting of Options or SARs or otherwise consisting of shares of Common
Stock or units denominated in such shares) in respect of any one-year
period having a value determined on the date of grant in excess of
$4,000,000.
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9. Director Awards.
Each Non-employee Director of the Company shall be granted Director Awards
in accordance with this paragraph 9 and subject to the applicable terms,
conditions and limitations set forth in this Plan and the applicable Director
Award Agreement. Notwithstanding anything to the contrary contained herein,
Director Awards shall not be made in any year in which a sufficient number of
shares of Common Stock are not available to make such Awards under this Plan.
(a) Automatic Director Options. On the date of his or her initial election
to the Board, each Non-employee Director shall be automatically awarded a
Director Option that provides for the purchase in aggregate under this Plan or
any other stock plan of the Company then in effect of 3000 shares of Common
Stock. In addition, on each Annual Director Award Date, each Non-employee
Director shall automatically be granted a Director Option that provides for
the purchase, in aggregate under this Plan or any other stock plan of the
Company then in effect, of 3000 shares of Common Stock. In the event that a
Non-employee Director is elected after the Effective Date otherwise than by
election at an annual meeting of stockholders of the Company, on the date of
his or her election, such Non-employee Director shall automatically be granted
a Director Option that provides for the purchase of a number of shares of
Common Stock (rounded up to the nearest whole number), in aggregate under this
Plan or any other stock plan of the Company then in effect, equal to the
product of (i) 3000 and (ii) a fraction the numerator of which is the number
of days between the election of such Non-employee Director and the next
scheduled Annual Director Award Date (or, if no such date has been scheduled,
the first anniversary of the immediately preceding Annual Director Award Date)
and the denominator of which is 365. Each Director Option shall have a term of
ten years from the date of grant, notwithstanding any earlier termination of
the status of the holder as a Non-employee Director. The purchase price of
each share of Common Stock subject to a Director Option shall be equal to the
Fair Market Value of the Common Stock on the date of grant. All Director
Options shall vest and become exercisable in increments of one-third of the
total number of shares of Common Stock that are subject thereto (rounded up to
the nearest whole number) on the first and second anniversaries of the date of
grant and of all remaining shares of Common Stock that are subject thereto on
the third anniversary of the date of grant. All unvested Director Options
shall be forfeited if the Non-employee Director resigns as a Director without
the consent of a majority of the other Directors.
(b) Elective Director Options. In addition to the Director Options
automatically awarded pursuant to the immediately preceding paragraph, a Non-
employee Director may make an annual election to receive, in lieu of all or
any portion of the Director's fees he would otherwise be entitled to receive
in cash during the next year (including both annual retainer and meeting
fees), Director Options that provide for the purchase of a number of shares of
Common Stock (rounded up to the nearest whole number), in aggregate under this
Plan or any other stock plan of the Company then in effect, equal to the
product of (x) three times (y) a fraction the numerator of which is equal to
the dollar amount of fees the Non-employee Director elects to forego in the
next year in exchange for Director Options and the denominator of which is
equal to the Fair Market Value of the Common Stock on the effective date of
the election. Each annual election made by a Non-employee Director pursuant to
this paragraph 9(b), (i) shall take the form of a written document signed by
such Non-employee Director and filed with the Secretary of the Company, (ii)
shall designate the dollar amount of the fees the Non-employee Director elects
to forego in the next year in exchange for Director Options and (iii) to the
extent provided by the Committee in order to ensure that the Award of the
Director Options is exempt from Section 16 by virtue of Rule 16b-3, shall be
irrevocable and shall be made prior to the date as of which such Award of
Director Options is to be effective. An Award of Director Options at the
election of a Non-employee Director shall be effective on the next Annual
Director Award Date.
Any Award of Director Options shall be embodied in a Director Award
Agreement, which shall contain the terms, conditions and limitations set forth
above and shall be signed by the Participant to whom the Director Options are
granted and by an Authorized Officer for and on behalf of the Company.
10. Payment of Awards.
(a) General. Payment of Employee Awards may be made in the form of cash or
Common Stock, or a combination thereof, and may include such restrictions as
the Committee shall determine, including, in the case
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of Common Stock, restrictions on transfer and forfeiture provisions. If
payment of an Employee Award is made in the form of Restricted Stock, the
Employee Award Agreement relating to such shares shall specify whether they
are to be issued at the beginning or end of the Restriction Period. In the
event that shares of Restricted Stock are to be issued at the beginning of the
Restriction Period, the certificates evidencing such shares (to the extent
that such shares are so evidenced) shall contain appropriate legends and
restrictions that describe the terms and conditions of the restrictions
applicable thereto. In the event that shares of Restricted Stock are to be
issued at the end of the Restricted Period, the right to receive such shares
shall be evidenced by book entry registration or in such other manner as the
Committee may determine.
(b) Deferral. With the approval of the Committee, payments in respect of
Employee Awards may be deferred, either in the form of installments or a
future lump-sum payment. The Committee may permit selected Participants to
elect to defer payment of some or all types of Employee Awards in accordance
with procedures established by the Committee. Any deferred payment of an
Employee Award, whether elected by the Participant or specified by the
Employee Award Agreement or by the Committee, may be forfeited if and to the
extent that the Employee Award Agreement so provides.
(c) Dividends and Interest. Rights to dividends or Dividend Equivalents may
be extended to and made part of any Employee Award consisting of shares of
Common Stock or units denominated in shares of Common Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The
Committee may also establish rules and procedures for the crediting of
interest on deferred cash payments and Dividend Equivalents for Employee
Awards consisting of shares of Common Stock or units denominated in shares of
Common Stock.
(d) Substitution of Awards. At the discretion of the Committee, a
Participant who is an Employee may be offered an election to substitute an
Employee Award for another Employee Award or Employee Awards of the same or
different type.
11. Stock Option Exercise.
The price at which shares of Common Stock may be purchased under a Director
Option shall be paid in full at the time of exercise in cash. The price at
which shares of Common Stock may be purchased under an Option which is an
Employee Award shall be paid in full at the time of exercise in cash or, if
elected by the optionee, the optionee may purchase such shares by means of
tendering Common Stock or surrendering another Award, including Restricted
Stock, valued at Fair Market Value on the date of exercise, or any combination
thereof. The Committee shall determine acceptable methods for Participants who
are Employees to tender Common Stock or other Employee Awards; provided that
any Common Stock that is or was the subject of an Employee Award may be so
tendered only if it has been held by the Participant for six months. The
Committee may provide for procedures to permit the exercise or purchase of
such Awards by use of the proceeds to be received from the sale of Common
Stock issuable pursuant to an Employee Award. Unless otherwise provided in the
applicable Award Agreement, in the event shares of Restricted Stock are
tendered as consideration for the exercise of an Option, a number of the
shares issued upon the exercise of the Option, equal to the number of shares
of Restricted Stock used as consideration therefore, shall be subject to the
same restrictions as the Restricted Stock so submitted as well as any
additional restrictions that may be imposed by the Committee.
12. Tax Withholding.
The Company shall have the right to deduct applicable taxes from any
Employee Award payment and withhold, at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash
or number of shares of Common Stock or a combination thereof for payment of
taxes required by law or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for withholding of such
taxes. The Committee may also permit withholding to be satisfied by the
transfer to the Company of shares of Common Stock theretofore owned by the
holder of the Employee Award with respect to which withholding is required. If
shares of Common Stock are used to satisfy tax withholding, such shares shall
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be valued based on the Fair Market Value when the tax withholding is required
to be made. The Committee may provide for loans, on either a short term or
demand basis, from the Company to a Participant who is an Employee to permit
the payment of taxes required by law.
13. Amendment, Modification, Suspension or Termination.
The Board or the Compensation Committee may amend, modify, suspend or
terminate this Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose permitted by law except that (i)
no amendment or alteration that would adversely affect the rights of any
Participant under any Award previously granted to such Participant shall be
made without the consent of such Participant, and (ii) no amendment or
alteration shall be effective prior to its approval by the stockholders of the
Company to the extent such approval is required by applicable legal
requirements. Notwithstanding the foregoing, the Committee is authorized to
amend this Plan to the extent it deems necessary or advisable in order for the
Plan to comply, qualify or be registered under the laws of any foreign
jurisdiction, subject to clauses (i) and (ii) of this paragraph 13.
14. Assignability.
Unless otherwise determined by the Committee and provided in the Award
Agreement, no Award or any other benefit under this Plan constituting a
derivative security within the meaning of Rule 16a-1(c) under the Exchange Act
shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder. The Committee may prescribe and include in
applicable Award Agreements other restrictions on transfer. Any attempted
assignment of an Award or any other benefit under this Plan in violation of
this paragraph 14 shall be null and void.
15. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to
the Common Stock) or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a character similar
to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock, declaration of a dividend payable in shares of Common Stock
or other stock split, then (i) the number of shares of Common Stock reserved
under this Plan, (ii) the number of shares of Common Stock covered by
outstanding Awards in the form of Common Stock or units denominated in Common
Stock, (iii) the exercise or other price in respect of such Awards, (iv) the
appropriate Fair Market Value and other price determinations for such Awards,
(v) the number of shares of Common Stock covered by Director Options
automatically granted pursuant to paragraph 9 hereof, and (vi) the Stock Based
Awards Limitations (as defined in paragraph 8(b) hereof) shall each be
proportionately adjusted by the Board to reflect such transaction. In the
event of any other recapitalization or capital reorganization of the Company,
any consolidation or merger of the Company with another corporation or entity,
the adoption by the Company of any plan of exchange affecting the Common Stock
or any distribution to holders of Common Stock of securities or property
(other than normal cash dividends or dividends payable in Common Stock), the
Board shall make appropriate adjustments to (i) the number of shares of Common
Stock covered by Awards in the form of Common Stock or units denominated in
Common Stock, (ii) the exercise or other price in respect of such Awards,
(iii) the appropriate Fair Market Value and other price determinations for
such Awards, (iv) the number of shares of Common Stock covered by Director
Options automatically granted pursuant to paragraph 9 hereof, and (v) the
Stock Based Awards Limitations to give effect to such transaction
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shall each be proportionately adjusted by the Board to reflect such
transaction, provided that such adjustments shall only be such as are
necessary to maintain the proportionate interest of the holders of the Awards
and preserve, without exceeding, the value of such Awards. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board shall be authorized to issue or
assume Awards by means of a substitution of new Awards, as appropriate, for
previously issued Awards or an assumption of previously issued Awards as part
of such adjustment.
16. Restrictions.
No Common Stock or other form of payment shall be issued with respect to
any Award unless the Company shall be satisfied based on the advice of its
counsel that such issuance will be in compliance with applicable federal and
state securities laws. Certificates evidencing shares of Common Stock
delivered under this Plan (to the extent that such shares are so evidenced)
may be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any securities
exchange or transaction reporting system upon which the Common Stock is then
listed or to which it is admitted for quotation and any applicable federal or
state securities law. The Committee may cause a legend or legends to be placed
upon such certificates (if any) to make appropriate reference to such
restrictions.
17. Unfunded Plan.
Insofar as it provides for Awards of cash, Common Stock or rights thereto,
this Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Participants who are entitled to cash, Common Stock or rights
thereto under this Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation,
nor shall the Company, the Board or the Committee be deemed to be a trustee of
any cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to an
Award of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and
any Award Agreement, and no such liability or obligation of the Company shall
be deemed to be secured by any pledge or other encumbrance on any property of
the Company. Neither the Company nor the Board nor the Committee shall be
required to give any security or bond for the performance of any obligation
that may be created by this Plan.
18. Governing Law.
This Plan and all determinations made and actions taken pursuant hereto, to
the extent not otherwise governed by mandatory provisions of the Code or the
securities laws of the United States, shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
choice or conflicts of laws principles.
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EXHIBIT B
UNIGRAPHICS SOLUTIONS INC.
EXECUTIVE DEFERRAL PLAN
ARTICLE I
INTRODUCTION
1.1 Creation. Upon the recommendation of the Compensation Committee
("Committee") of its Board of Directors ("Board"), the Company has adopted
this Unigraphics Solutions Inc. Executive Deferral Plan ("Plan"), effective
March 15, 2000.
1.2 Purpose. The objective and purpose of this Plan is to attract and
retain competent officers, key executives and highly compensated employees by
offering flexible compensation opportunities to officers, key executives and
highly compensated employees of the Company and to offer them an opportunity
to defer income to be paid at a later date. The Plan shall not constitute a
"qualified plan" subject to the limitations of Section 401(a) of the Code, nor
shall it constitute a "funded plan," for purposes of such requirements. This
Plan shall be exempt from the participation and vesting requirements of Part 2
of Title I of ERISA, the funding requirements of Part 3 of Title I of ERISA,
and the fiduciary requirements of Part 4 of Title I of ERISA by reason of the
exclusions afforded plans which are unfunded and maintained by an employer
primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. The following words and phrases shall have the meaning set
forth below, unless a different meaning is required by the context in which
the word or phrase is used.
(a) Account shall mean the bookkeeping account to which a Participant's
deferred Compensation is credited, together with any earnings thereon.
(b) Affiliate shall mean (i) a corporation that is a member of a
controlled group of corporations (as determined pursuant to Section 414(b)
of the Code) which includes the Company and (ii) a trade or business
(whether or not incorporated) which is under common control (as determined
pursuant to Section 414(c) of the Code) of the Company.
(c) Beneficiary shall mean the person or persons designated by the
Participant in a writing filed with the Committee to receive payment of the
Participant's Account upon the death of the Participant.
(d) Board shall mean the Board of Directors of the Company.
(e) Change of Control shall mean such term as defined in the Rules
immediately prior to a CIC Event; provided however, that, until changed by
the Committee by Rule, "Change of Control" shall mean a change in control
of the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the
Company is then subject to such reporting requirement; provided, however,
that, without limiting the generality of the foregoing, a Change in Control
shall be deemed to have occurred (irrespective of the applicability of the
initial clause of this proviso) if at any time (a) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding
(i) any employee benefit plan of the Company or any Affiliate, and (ii) any
entity organized, appointed or established by the Company pursuant to the
terms of any such plan) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power of the
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Company's then outstanding securities without the prior approval of at
least two-thirds of the members of the Board in office immediately prior to
such person's attaining such percentage interest; (b) the Company is a
party to a merger, consolidation, share exchange, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of
the Board in office immediately prior to such transaction or event
constitute less than a majority of the whole Board thereafter; or (c)
during any period of two consecutive years, individuals who at the
beginning of such period constituted members of the Board (including for
this purpose any new member whose election or nomination for election by
the Company's stockholders was approved by at least two-thirds of the
members of the whole Board then still in office who were either (1) members
of the Board at the beginning of such period, (2) employees of the
Company's principal shareholder, Electronic Data Systems Corporation
("EDS"), or (3) members of the Board approved by EDS) cease for any reason
to constitute a majority of the whole Board. The intent of this item (c) is
that for so long as EDS controls the Company through its ability to elect
directors or otherwise, changes in EDS-employed or EDS-sponsored directors
during any two consecutive years will not be a Change of Control under this
Section 2.1(e).
(f) CIC Event shall mean such term as defined in Section 6.2.
(g) Code shall mean the Internal Revenue Code of 1986, as amended.
(h) Company shall mean Unigraphics Solutions Inc., a Delaware
corporation.
(i) Committee shall mean the Compensation Committee of the Board, or any
successor thereto. If at any time no Committee shall be in office, the
functions of the Committee specified in the Plan shall be exercised by the
Board.
(j) Common Stock shall mean the Class A Common Stock, par value $.01 per
share, of the Company.
(k) Compensation shall, for any period, mean such amount as the
Committee may designate (which may be different amounts for different
purposes under the Plan); provided that such amount shall not exceed the
total earnings prior to withholding, as reportable on Internal Revenue
Service Form W-2, payable to any Employee by an Employer in such period,
disregarding any Deferral Election hereunder, and increased by amounts not
included in income through a salary reduction election made pursuant to a
cafeteria plan described in Code Section 125, or the Unigraphics 401(k)
Plan.
(l) Deferral Election shall mean the agreement between the Company or
Participating Employer and an Eligible Employee pursuant to which the
Eligible Employee consents to participation and the deferral of
Compensation hereunder, and designates the amount of Compensation to be
deferred.
(m) Deferral Election Deadline shall mean the date the Committee
designates by Rule as the last date an Eligible Employee may file a
Deferral Election with the Committee for such period as the Committee may
designate.
(n) Eligible Employee shall mean an Employee of the Company or a
Participating Employer whom the Committee designates as eligible to
participate in the Plan. Notwithstanding the foregoing, the Committee shall
permit only a select group of management or highly compensated employees to
be Eligible Employees.
(o) Employee shall mean any person employed as an employee by an
Employer and on the payroll of an Employer. If a person's status as an
employee is redetermined retroactively, such redetermination shall not
affect participation in the Plan prior to the redetermination.
(p) Employer shall mean the Company and Participating Employers.
(q) ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
(r) Fair Market Value of a share of Common Stock shall mean the fair
value thereof, determined under such Rules as the Committee may establish.
Unless the Committee so establishes a different meaning, Fair Market Value
of a share of Common Stock shall mean as of a particular date, (i) if
shares of Common Stock are listed on a national securities exchange, the
mean between the highest and lowest sales price per share of Common Stock
on the consolidated transaction reporting system for the principal national
securities
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exchange on which shares of Common Stock are listed on that date or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (ii) if shares of
Common Stock are not so listed but are quoted on the Nasdaq National
Market, the mean between the highest and lowest sales price per share of
Common Stock reported by the Nasdaq National Market on that date, or, if
there shall have been no such sales reported on that date, on the last
preceding date on which such a sale was so reported or (iii) if the Common
Stock is not so listed or quoted but is traded in the over-the-counter
market, the mean between the closing bid and asked price on that date, or,
if there are no quotations available for such date, on the last preceding
date on which such quotations shall be available, as reported by the Nasdaq
Stock Market, or, if not reported by the Nasdaq Stock Market, by the
National Quotations Bureau Incorporated.
(s) Participant shall mean each Eligible Employee who has properly
completed and filed a Deferral Election with the Committee.
(t) Participating Employer shall mean any Affiliate which, with the
consent of the Committee, elects to become and accepts the obligations of
an Employer hereunder.
(u) Plan shall mean this Unigraphics Solutions Inc. Executive Deferral
Plan, as amended from time to time.
(v) Plan Year shall mean the period beginning May 1, 2000 and ending
December 31, 2000, and thereafter the calendar year or such other period as
the Committee may designate by Rule.
(w) Rule shall mean a determination, regulation, standard, or rule of
general applicability made by the Committee or the Board.
(x) Unigraphics 401(k) Plan shall mean the employee retirement plan
intended to qualify under Code Sections 401(a) and 401(k) as established by
the Company effective April 1, 1999, as amended from time-to-time, any
successor to such plan, and any other plan of the Company or an Affiliate
intended to qualify under Code Sections 401(a) and 401(k) as may be
designated by the Committee.
(y) Valuation Date shall mean such date (or dates) as the Committee may,
in its discretion, designate; provided that there shall be at least one
Valuation Date each Plan Year.
2.2 Construction. If any provision of this Plan or any Rule is determined
to be for any reason invalid or unenforceable, the remaining provisions of
this Plan and the remaining Rules shall continue in full force and effect. All
of the provisions of this Plan and the Rules hereunder shall be construed and
enforced in accordance with the laws of the State of Delaware (other than its
laws regarding choice of laws) and shall be administered according to the laws
of such state, except as otherwise required by ERISA, the Code or other
applicable federal law. The masculine gender, where appearing in this Plan or
the Rules, shall include the feminine gender, and vice versa. The terms
"delivered to the Committee" and "filed with the Committee," as used in this
Plan or the Rules, shall include, respectively, delivery to and filing with a
person or persons designated by the Committee for the disbursement and the
receipt of administrative forms. Headings and subheadings in the Plan or the
Rules are for the purpose of reference only and are not to be considered in
the construction of this Plan or the Rules.
ARTICLE III
PARTICIPATION AND VESTING
3.1 Eligibility and Participation. An Eligible Employee who properly
completes and files with the Committee a Deferral Election pursuant to which a
portion of his Compensation is deferred under the Plan shall become a
Participant. A Participant shall remain a Participant until his entire Account
under the Plan is extinguished, through distribution or otherwise.
3.2 Ceasing to be an Eligible Employee. Status as an Eligible Employee will
be redetermined from time to time, at least annually. If an individual ceases
for any reason to be an Eligible Employee, through termination
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employment or otherwise, his Deferral Election shall forthwith terminate, and
he shall not again become eligible to make a Deferral Election until he again
becomes an Eligible Employee.
3.3 Vesting. The Committee may establish Rules governing vesting and
forfeitability of all or any portion of a Participant's Account.
ARTICLE IV
DEFERRAL ELECTIONS, MATCHING CREDITS AND ACCOUNTING
4.1 Deferral Elections. Each Eligible Employee shall be provided an
opportunity to make a Deferral Election with respect to such portion of his
Compensation as the Committee designates by Rule. The Committee may require or
permit separate Deferral Elections to be made with respect to different
elements of Compensation, and may provide that Deferral Elections shall be
subject to minimum and maximum limitations on the amount deferred.
Deferral Elections for a Plan Year shall be filed with the Committee no
earlier than the date permitted by the Committee, and no later than the
Deferral Election Deadline. Deferral Elections for a Plan Year shall become
irrevocable at such time as the Committee may designate by Rule. A
Participant's Deferral Election shall automatically terminate on his
termination of employment, unless the Committee otherwise provides. The
Committee shall determine the form and manner of filing the Deferral Election,
which shall be by such means as the Committee shall require or permit,
including, but not limited to traditional writing or electronic means.
4.2 Additional Credits. The Committee may by Rule permit additional or
matching credits to be made to Participants' Accounts, at such time and based
upon such criteria as the Committee deems appropriate.
4.3 Accounting for Deferred Compensation. The Committee shall maintain an
Account in the name of each Participant. The value of each Account shall be
adjusted as of each Valuation Date to reflect the deferred Compensation
credited thereto, the rate of return credited (or charged) to such Account,
and any amounts distributed or withdrawn from such Account since the most
recent prior Valuation Date. In the sole discretion of the Committee, one or
more sub-Accounts may be established for each Participant to facilitate
recordkeeping convenience and accuracy.
Establishment and maintenance of Accounts hereunder shall not be construed
as giving any person any interest in assets of the Company or an Affiliate, or
a right to payment other than as provided hereunder. An Account shall be
maintained until all amounts credited to such Account have been withdrawn,
distributed, forfeited, or otherwise extinguished in accordance with the terms
and provisions of this Plan.
4.4 Rates of Return. The Committee shall by Rule establish and may change
from time to time the rate of return to be credited or charged to
Participants' Accounts. Such Rules may, but need not, specify one or more
rates of return equal to the actual rate of return on specified predetermined
actual investments (whether or not assets are actually invested therein), and
may, but need not, permit Participants to choose among alternative rates of
return for all or part of their Accounts.
ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 Time and Form of Distribution. Simultaneously with the initial Deferral
Election, a Participant shall elect on a form permitted by and delivered to
the Committee, the timing and form of distribution of his Account, subject to
such limitations and exceptions as the Committee may, by Rule, require or
permit. The Committee may, by Rule, change the timing and forms of payment
available hereunder. In establishing or changing such Rules, the Committee
shall take into account constructive receipt considerations.
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5.2 Changes in Distribution Options. A Participant may change the
previously elected form of distribution only upon such terms and conditions as
the Committee may establish by Rule.
5.3 Early Distributions. The Committee, upon application of a Participant,
in its sole discretion, may direct premature distribution of part or all of a
Participant's Account either during employment or after employment terminates,
on such basis or for such reasons as the Committee may permit.
5.4 Committee Discretion to Distribute. The Committee may establish Rules
requiring distribution of all or any part of a Participant's Account to be
made earlier or later than the time elected by the Participant pursuant to
Section 5.1, 5.2, or 5.3.
5.5 Form of Payment. All benefits under this Plan shall be paid by
negotiable check or other cash equivalent from the trust (if any) or other
general funds of the Employer, or if the Committee so designates, in the form
of a fully paid insurance or annuity contract or in Common Stock or other
Employer securities, valued at their Fair Market Value at the time of payment.
For this purpose, 500,000 shares of Common Stock are reserved for delivery
hereunder. Such shares may be newly issued shares, treasury shares, or shares
acquired on the open market. In the event of any stock dividend, stock split,
share combination, spin-off, reorganization, recapitalization, merger or other
transaction involving the Company or its outstanding securities, the number
and kind of shares of Common Stock or other securities reserved under this
Plan shall be adjusted by the Board, in its discretion, as the Board deems
appropriate to reflect such transaction.
5.6 Death of a Participant. In the event of the death of a Participant
prior to distribution of all amounts otherwise payable to the Participant
hereunder, the Participant's Beneficiary or Beneficiaries shall be entitled to
distribution of all vested amounts credited to the Participant's Account, in
such form as the Committee may designate by Rule. Each Participant may
designate a Beneficiary or Beneficiaries to receive payment of his benefits
under this Plan in the event of his death, and may revoke or change such
designation, in accordance with such procedures as the Committee shall
promulgate. Unless the Committee otherwise provides, a Participant may revoke
his designation of Beneficiary (without the consent of any Beneficiary) and
make a new designation of Beneficiary by filing a new form with the Committee.
A properly completed and executed change in a designation of Beneficiary,
unless the Committee provides to the contrary, shall take effect immediately
upon being filed with the Committee during the Participant's lifetime. If upon
a Participant's death no valid designation of Beneficiary is on file with the
Committee, or if a Beneficiary dies before payments are completed and there
are no living contingent or successive Beneficiaries, then, unless the
Committee establishes a different Rule, any remaining payments under this Plan
shall be made (1) to the Participant's surviving spouse, if any, or (2) if
there is no surviving spouse, then to the Participant's estate.
5.7 Withholding. A Participant's Employer or the Company shall have the
right to deduct applicable taxes (including, but not limited to FICA) from
amounts deferred pursuant to an Eligible Employee's Deferral Election and from
any amounts payable hereunder to a Participant or Beneficiary and from amounts
otherwise subject to any tax, and to withhold an appropriate amount of cash or
a number of shares of Common Stock or a combination thereof for payment of
taxes or to take such other action as may be necessary in the opinion of the
Employer or the Company to satisfy all obligations for withholding of such
taxes. The Committee may also permit withholding to be satisfied by the
transfer to the Company of cash, shares of Common Stock, or other property
theretofore owned by the Participant or Beneficiary.
5.8 Facility of Payment. In the event any distribution is payable under
this Plan to a minor or other individual who is legally, physically or
mentally incompetent to receive such payment, the Committee in its sole
discretion shall pay such benefits to one or more of the following persons:
(a) Directly to such minor or other person;
(b) To the legal guardian or conservator of such minor or other person;
(c) To the spouse, parent, brother, sister, child or other relative of
such minor or other person for the use of such minor or other person; or
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(d) To such other person as the Committee deems appropriate.
The Committee shall not be required to see to the application of any
distribution so made to any of such persons, but the receipt therefore shall
be a full discharge of the liability of the Plan, the Committee, the
Employers, and the trustee (if any) to such minor or other person.
5.9 Waiver and Release. The Committee may condition the payment of some or
all benefits hereunder on the Participant's entering into a binding release
and waiver in such form as the Committee shall permit.
ARTICLE VI
PAYMENT LIMITATIONS
6.1 Assignment. Except as the Committee may otherwise permit by Rule, no
Participant or Beneficiary of a Participant shall have any right to assign,
pledge, hypothecate, anticipate or in any way create a lien on any amounts
payable hereunder. No amounts payable hereunder shall be subject to assignment
or transfer or otherwise be alienable, either by voluntary or involuntary act,
or by operation of law, or subject to attachment, execution, garnishment,
sequestration or other seizure under any legal, equitable or other process, or
be liable in any way for the debts or defaults of Participants and their
Beneficiaries.
6.2 Change of Control. Upon the first event constituting a part of the
Change of Control ("CIC Event"):
(a) the members of the Board serving immediately prior to the CIC Event
may, in their sole and absolute discretion, direct the Committee to
distribute all amounts credited to the Accounts of Participants in a single
lump sum payment to each Participant, net of investment charges, surrender
charges, etc. following which the Plan shall terminate;
(b) no changes shall be made to any Rules in effect immediately prior to
the CIC Event and no new Rules shall be promulgated; and
(c) Plan amendments shall be subject to the last sentence of Section
10.1 (Amendment and Termination).
ARTICLE VII
FUNDING AND EXPENSES
7.1 Funding. Benefits under this Plan shall be funded solely by the Company
and its Affiliates. Benefits hereunder shall constitute an unfunded general
obligation of each Participant's respective Employer. In the event a
Participant has been employed by more than one Employer, benefits hereunder
shall constitute an unfunded general obligation of the Participant's most
recent Employer. All payments under this Plan shall be deemed made by the
Participant's Employer from general assets available to all unsecured
creditors of the Employer in the event of its insolvency. Each Participant has
merely the status of a general unsecured creditor of his Employer.
Notwithstanding the foregoing, the Company and the Employers may, but need
not create for purposes of this Plan a trust of the type commonly referred to
as a "rabbi" trust, which may, but need not, be in substantial conformity to
the terms of the model trust published by the Internal Revenue Service in Rev.
Proc. 92-64 or any successor thereto. The Employer may transfer assets to the
trustee of such trust to hold and to make distributions under this Plan on
behalf of the Employers. The assets so held in trust shall remain the general
assets of the Employers, which are the grantors under the trust. The rights of
Participants and their Beneficiaries under this Plan and the trust shall be
exclusively unsecured contractual rights. No Participant or Beneficiary shall
have any right, title or interest whatsoever in the trust.
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7.2 Creditor Status. A Participant and his Beneficiary or Beneficiaries
shall be general creditors of the Participant's Employer with respect to the
payment of any benefit under this Plan, unless such benefits are provided
under a contract of insurance or an annuity contract that has been delivered
to the Participant, in which case the Participant and his Beneficiary or
Beneficiaries shall look to the insurance carrier or annuity provider for
payment, and not to the Employer or any Affiliate. The Employer's or
Affiliate's obligation for such benefit shall be discharged by the purchase
and delivery of such annuity or insurance contract.
7.3 Expenses. The expenses of administering the Plan shall be borne by the
Employers, provided that, prior to a CIC Event, the Committee may direct that
assets of the trust, if any, shall be applied to pay such expenses.
ARTICLE VIII
ADMINISTRATION
8.1 Committee. Except for rights and powers expressly reserved to the Board
or the Company, the Plan will be administered by the Committee.
8.2 Committee Powers. The Committee shall have the power and authority in
its sole and absolute discretion:
(a) To make and from time to time amend Rules by which the Plan will be
implemented and administered from time to time, which Rules shall be
binding on the Employers and all Participants and their Beneficiaries, even
though they may apply retroactively to Participants whose employment has
terminated;
(b) To construe and interpret the Plan, determine the application of the
Plan to situations where such application is unclear or disputable, to
resolve all questions arising under the Plan (including questions of fact)
and make equitable adjustments for any mistakes or errors made in the
administration of the Plan; provided that individual exceptions to Rules
shall not be permitted;
(c) To determine all questions arising in the administration of the
Plan, including the power to determine the status of individuals as
Eligible Employees, the rights of Participants and their beneficiaries and
the amount of their respective benefits and such determination,
interpretation or other action shall be final and binding for all purposes
and upon all persons;
(d) To adopt, amend and rescind such rules (including Rules),
regulations and forms as it may deem necessary for the proper and efficient
administration of the Plan consistent with its purposes, which rules may
permit case-by-case determinations;
(e) To enforce and administer the Plan in accordance with its terms and
the rules, regulations and forms it adopts; to appoint a plan administrator
and to delegate to the plan administrator such administrative duties as the
Committee shall deem appropriate;
(f) To take such action and establish such procedures as it deems
necessary or appropriate to coordinate deferrals and benefits under this
Plan and any other plan;
(g) To select, monitor and prospectively change the rates of return to
be credited under the Plan;
(h) To take such action and establish such procedures as it deems
necessary or appropriate to implement Participant elections and
designations of rates of return, and to coordinate the Employers' actions,
if any, taken to reduce or eliminate the Employers' exposure to market
fluctuations;
(i) To direct the appropriate person to make payments from the Plan;
(j) To employ such counsel, auditors, actuaries, or other specialists
(who may be counsel, auditors, actuaries or other specialists for the
Company) and to engage such clerical or other services to the extent such
services are not provided by the Company;
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(k) To maintain records concerning the Plan sufficient to prepare
reports, returns and other information required by the Plan or by law, and
to communicate the terms of the Plan and any material amendments thereto to
the Eligible Employees and Participants;
(l) To delegate such of its powers and authorities (including the power
and authority to delegate) to such person or persons, with his, her, its or
their consent, as the Committee may appoint; and
(m) To do all other things the Committee deems necessary or desirable
for the advantageous administration of the Plan and to make the Plan fully
effective in accordance with its terms and intent.
8.2 Claims for Benefits. In the event that a Participant or Beneficiary
claims to be eligible for benefits, or claims any rights hereunder, he must
complete and submit such claims forms and supporting documentation as shall be
required by the Committee, in its sole discretion. The Committee shall, by
Rule, establish procedures (including appeals) for considering and deciding
claims.
8.3 Receipt and Release of Necessary Information. In implementing the terms
of this Plan, the Committee may, without the consent of or notice to any
person, release to or obtain from any other organization or person any
information, with respect to any person, which the Committee deems to be
necessary for such purposes. Any Participant or Beneficiary claiming benefits
under this Plan shall furnish to the Committee such information as may be
necessary to determine eligibility for and amount of benefit, as a condition
of claiming and receiving such benefit.
8.4 Overpayment and Underpayment of Benefits. The Committee may adopt, in
its sole discretion, whatever rules, procedures and accounting practices are
appropriate in providing for the collection of any overpayment of benefits. If
a Participant or Beneficiary receives an underpayment of benefits, the
Committee shall direct that immediate payment be made to make up for the
underpayment. If an overpayment is made to a Participant or Beneficiary, for
whatever reason, the Committee may, in its sole discretion, withhold payment
of any further benefits under the Plan until the overpayment has been
collected or may require repayment of benefits paid under this Plan without
regard to further benefits to which the Participant or Beneficiary may be
entitled.
ARTICLE IX
OTHER BENEFIT PLANS OF THE COMPANY
9.1 Other Plans. Nothing contained in this Plan shall prevent a Participant
prior to his death, or his Beneficiary after his death, from receiving, in
addition to any payments provided for under this Plan, any payments provided
for under any other plan or benefit program of an Employer, or which would
otherwise be payable or distributable to the Participant or Beneficiary under
any plan or policy of an Employer or otherwise. Nothing in this Plan shall be
construed as preventing the Company or any Affiliate from establishing any
other or different plans providing for current or deferred compensation for
employees. Benefits provided under this Plan shall not constitute earnings or
compensation for purposes of determining contributions or benefits under any
plan of the Company intended to "qualify" under Section 401 of the Code,
unless specifically provided otherwise in such plan.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
10.1 Amendment and Termination. The Committee may amend or terminate this
Plan at any time and in its sole discretion, by (and only by) written
resolution. Any such amendment or termination shall be binding on the
Employers and all Participants and their Beneficiaries, even though it may be
retroactive and applicable to Participants whose employment by the Company or
an Employer has terminated. The Committee may amend any Rule at any time.
However, no amendment or termination of the Plan and no amendment of a Rule
shall
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adversely affect the right of a Participant to payment of a benefit to which
the Participant would be entitled (then or thereafter) under the terms of the
Plan if the Participant's employment terminated immediately before the
adoption of such amendment or termination of the Plan or Rule, unless such
amendment or termination of the Plan or amendment of the Rule in the
reasonable judgment of the Committee is required to comply with applicable law
or to preserve the tax treatment of benefits under this Plan for the Employers
or for the Participant, or is consented to by the affected Participant.
Following the occurrence of a CIC Event, no amendment of the Plan or of any
Rule may be made without the written consent of the Board, except for
amendments necessary to comply with applicable law.
10.1 Continuation. The Company intends to continue this Plan indefinitely,
but nevertheless assumes no contractual obligation beyond the promise to pay
the benefits described in this Plan to its Employees.
ARTICLE XI
MISCELLANEOUS
11.1 No Reduction of Employer Rights. Nothing contained in this Plan shall
be construed as a contract of employment between the Company or any Affiliate
and an employee, or as a right of any person to be continued in the employment
of the Company or any Affiliate, or as a limitation of the right of the
Company or an Affiliate to discharge any of its employees, with or without
cause.
11.2 Indemnification. The Company hereby indemnifies each member of the
Committee and each employee who is delegated responsibilities under the Plan
against any and all liabilities and expenses, including attorney's fees,
actually and reasonably incurred by them in connection with any threatened,
pending or completed legal action or judicial or administrative proceeding to
which they may be a party, or may be threatened to be made a party, by reason
of membership on such Committee or due to a delegation of responsibilities,
except with regard to any matters as to which they shall be adjudged in such
action or proceeding to be liable for gross negligence or willful misconduct
in connection therewith.
11.3 Successors. All obligations of an Employer under this Plan shall be
binding on any successor to such Employer, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Employer.
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UNIGRAPHICS SOLUTIONS INC.
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNIGRAPHICS SOLUTIONS INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS
ON MAY 19, 2000
The undersigned hereby authorizes Jeffrey M. Heller and John J. Mazzola,
and each or any of them with the power to appoint his substitute, to vote as a
Proxy for the undersigned at the Annual Meeting of Stockholders to be held at
the Sheraton Plaza Tower Hotel, 900 West Port Plaza, St. Louis, MO 63146, on May
19, 2000 at 11:00 AM, Central Time, or any adjournment or postponement thereof,
the number of Class A and Class B Common shares which the undersigned would be
entitled to vote if personally present. The Proxies shall vote subject to the
directions indicated on the reverse side of this card, and Proxies are
authorized to vote in their discretion upon such other business as may properly
come before the meeting and any adjournments or postponements thereof. The
Proxies will vote as the Board of Directors recommends where the undersigned
does not specify a choice.
This card also constitutes your voting instructions to the Vanguard
Fiduciary Trust Company ("Vanguard") for shares held in the UGS 401(k) Plan
("Plan"), and the undersigned hereby authorizes the trustees of the Plan to vote
the shares held in the undersigned's accounts. All voting instructions from Plan
participants will be kept confidential. If the Plan participant fails to sign or
to return a card, the shares allocated to such participant will be voted in
accordance with the pro rata participants who did provide instructions, unless
such participants otherwise elect not to have his or her directions so apply.
All instructions must be received prior to May 15, 2000 in order to be
counted.
Address Change/Comments:
-----------------
- -----------------------------------------
- -----------------------------------------
(IF YOU HAVE WRITTEN IN THE ABOVE SPACE, PLEASE UNIGRAPHICS SOLUTIONS INC.
MARK THE BOXES FOR "COMMENTS/CHANGE OF ADDRESS" P.O. BOX 11200
ON THE REVERSE SIDE OF THIS CARD SO THAT YOUR NEW YORK, NY 10203-0200
COMMENTS CAN BE DIRECTED TO THE APPROPRIATE
GROUP FOR REVIEW.)
(CONTINUED, AND PLEASE SIGN ON REVERSE SIDE.)
<PAGE>
DETACH PROXY CARD HERE
[ ]
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ITEMS 1, 2 AND 3.)
1. Election of Directors FOR [ ] WITHHOLD [ ] *EXCEPTIONS [ ]
ALL AUTHORITY
NOMINEES TO VOTE FOR
LISTED ALL NOMINEES
BELOW LISTED BELOW
Nominees: 01-Richard L. deNey 02-J. Davis Hamlin 03-William P. Weber
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
the "Exceptions" box and write the nominee's name(s) in the space provided
below.)
*EXCEPTIONS
------------------------------------
2. Approval of the Unigraphics Solutions Inc. 2000 Incentive Plan.
FOR AGAINST: ABSTAIN:
---------- ---------- ----------
3. Approval of the Unigraphics Solutions Executive Deferral Plan.
FOR AGAINST: ABSTAIN:
---------- ---------- ----------
This proxy will be voted as specified. If no specification is made, this proxy
will be voted for Proposal 1, Proposal 2 and Proposal 3 and in the discretion
of the proxies upon such other business as may properly come before this meeting
and any adjournments or postponements thereof.
Please sign exactly as name or names appear on this proxy. When signing as
attorney, executor, administrator, trustee, custodian, guardian or corporate
officer, give full title. If more than one trustee, all should sign. If stock is
owned in joint names, all should sign.
Dated:
-----------------------------------
Signature:
-------------------------------
Signature:
-------------------------------
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
