<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THE MACNEAL-SCHWENDLER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
---------------------------------------------------------------------------
1) Amount previously paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1997
---------------------
To the Stockholders of
THE MACNEAL-SCHWENDLER CORPORATION
The Annual Meeting of Stockholders of The MacNeal-Schwendler Corporation
(the "Company") will be held at the Hilton Hotel, 150 Los Robles Avenue,
Pasadena, California 91101, on Wednesday, June 11, 1997 at 11:00 a.m., Los
Angeles time, for the following purposes:
1. To elect two directors to Class III of the Company's Board of Directors
in accordance with Article III, Section 3 of the Company's By-laws.
2. To approve the Company's 1996 Employee Stock Purchase Plan.
3. To consider and vote upon Stockholder Proposal A which is set forth and
described in the accompanying proxy statement.
4. To consider and vote upon Stockholder Proposal B which is set forth and
described in the accompanying proxy statement.
5. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company.
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on April 18, 1997 as
the record date for the determination of stockholders entitled to receive notice
of and vote at the 1997 Annual Meeting or any adjournment thereof.
By Order of the Board of Directors
Louis A. Greco
SECRETARY AND CHIEF FINANCIAL OFFICER
April 30, 1997
YOUR VOTE IS IMPORTANT
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED
TO DATE, FILL IN, SIGN AND MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
815 COLORADO BOULEVARD
LOS ANGELES, CALIFORNIA 90041
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 1997
------------------------
Your proxy on the enclosed Proxy Card is solicited by the management of the
Company for use at the Annual Meeting of Stockholders (the "1997 Annual
Meeting") to be held on June 11, 1997 or at any adjournment thereof. This Proxy
Statement and the accompanying Proxy Card are being mailed to stockholders on or
about April 30, 1997.
Each properly executed proxy received prior to the 1997 Annual Meeting will
be voted as directed, but if not otherwise specified, such proxies will be voted
for the election of the nominees for Class III of the Company's Board of
Directors named in this Proxy Statement, for the approval of the 1996 Employee
Stock Purchase Plan, against Stockholder Proposal A, against Stockholder
Proposal B, and for ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants for the current fiscal year. As for any other
business which may properly come before the 1997 Annual Meeting and be submitted
to a vote of stockholders, proxies received by the Board of Directors will be
voted in accordance with the best judgment of the designated proxyholders.
Each stockholder giving a proxy may revoke it at any time before it is
exercised. A proxy may be revoked by filing with the Secretary of the Company at
815 Colorado Boulevard, Los Angeles, California 90041, a written revocation or a
properly executed proxy bearing a later date. A proxy may also be revoked if the
person who executed the proxy attends the meeting in person and so requests,
although attendance at the 1997 Annual Meeting will not in itself constitute a
revocation of the proxy.
The Company will bear the costs of preparing, assembling and mailing the
Notice, Proxy Statement and Proxy Card for the 1997 Annual Meeting. The
solicitation of proxies for the 1997 Annual Meeting will be made primarily by
mail. However, if necessary to ensure satisfactory representation at the
meeting, additional solicitation may take place by telephone, telegraph and
personal interview by officers and employees of the Company. No such officer or
employee will receive additional compensation for such services. The Company
will, upon request, reimburse persons holding shares in their names as
custodians, nominees or fiduciaries for reasonable expenses they may incur for
completing the mailing of such materials to beneficial owners of such shares.
The Company has retained Chemical Mellon Shareholder Services, L.L.C. to assist
in the solicitation of proxies on its behalf for a fee of approximately $7000,
plus out-of-pocket expenses.
The Company has fixed the close of business on April 18, 1997, as the record
date for the determination of stockholders entitled to notice of and to vote at
the 1997 Annual Meeting and any adjournment thereof. Shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), of which 13,465,806
shares were outstanding on April 18, 1997, are the only voting securities of the
Company. A majority of the Company's outstanding shares of Common Stock as of
April 18, 1997 must be represented in person or by proxy to constitute a quorum
for the 1997 Annual Meeting. Each share of Common Stock entitles the holder
thereof to one vote on each matter to be voted on at the 1997 Annual Meeting.
1
<PAGE>
1. ELECTION OF DIRECTORS
One of the purposes of the 1997 Annual Meeting is the election of two
persons to Class III of the Company's Board of Directors in accordance with
Article III, Section 3 of the Company's By-laws. Pursuant to Article III,
Section 3 of the Company's By-laws, the Board of Directors have set the number
of directors on the Board at nine and have divided the Board into three classes,
designated Class I, Class II and Class III. Class III presently consists of
three directors, Richard H. MacNeal, Dale D. Myers and Arthur H. Reidel. Mr.
Myers and Mr. Reidel have been nominated to stand for reelection as Directors at
the 1997 Annual Meeting to hold office until the 2000 Annual Meeting of
Stockholders and until their successors are elected and qualified. Richard
MacNeal will finish his current term as Director, but has declined to stand for
reelection to the Board and thus has not been renominated. The Board of
Directors has chosen not to nominate a third Director to stand for election when
Richard MacNeal's term expires. Accordingly, it is intended that the size of the
Board will be reduced and Class III will have only two members. Proxies cannot
be voted for a greater number of persons than the number of nominees named.
Accordingly, proxies will only be voted for two Directors.
The Company does not contemplate that any of the following nominees will
become unavailable prior to the Annual Meeting, but if any such persons should
become unavailable, it is expected that proxies will be voted for such other
nominee or nominees as may be recommended to the Board of Directors by the Human
Resources Committee.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE NOMINEES
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR DALE D. MYERS AND
ARTHUR H. REIDEL AS DIRECTORS TO HOLD OFFICE UNTIL THE 2000 ANNUAL MEETING OF
STOCKHOLDERS AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED. PROXIES
RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
IN THEIR PROXY A CONTRARY CHOICE.
NOMINEES FOR DIRECTORS
At the 1997 Annual Meeting, the term of incumbent directors in Class III
will expire and the directors listed below will stand for re-election in
accordance with Article III, Section 3 of the Company's By-laws. The directors
elected to Class III of the Company's Board of Directors at the 1997 Annual
Meeting will serve for a three-year term ending at the Annual Meeting of
Stockholders to be held in 2000 and until their respective successors are
elected and qualified. The following table sets forth certain information,
furnished to the Company by the respective persons named below, about the
directors standing for re-election at the 1997 Annual Meeting:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
- ----------------------- --- ------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Dale D. Myers 75 President, Dale Myers and Associates, an aerospace and energy consulting 1990
firm (1989 to present). Mr. Myers was also director of General Science
Corporation, a subsidiary of Science Applications International
Corporation, a privately held aerospace, defense and energy firm (April
1993 to September 1996).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
- ----------------------- --- ------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Arthur H. Reidel 46 President, Chief Executive Officer, and director of Pharsight 1993
Corporation, a privately held software corporation (February 1996 to
present); Private investor/consultant (March 1995 to April 1996); Vice
President, Business Development, Viewlogic Systems, Inc., a publicly held
software firm (October 1994 to March 1995). Mr. Reidel has also served as
President and Chief Executive Officer, Sunrise Test Systems, Inc., a
privately-held software firm (1992 to September 1994) (Viewlogic Systems,
Inc. acquired Sunrise Test Systems, Inc. in September 1994); and Vice
President, Weitek Corporation (1991 to 1992).
</TABLE>
CONTINUING DIRECTORS
The following table sets forth certain information, furnished to the Company
by the respective persons named below, about the directors who comprise Class I
and Class II of the Company's Board of Directors.
The following Class I directors* are currently serving until the 1998 Annual
Meeting and until their respective successors are elected and qualified:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
- ----------------------- --- ------------------------------------------------------------------------- ----------
<S> <C> <C> <C>
Paul B. MacCready 71 Chairman (1971 to present) and former Chief Executive Officer (1971 to 1992
1994), AeroVironment, Inc., a provider of services and products relating
to pollution control, alternative energy and energy-efficient vehicles.
Dr. MacCready also serves as a director of National Education
Corporation, a publicly held company, and is a lecturer on creativity for
industry and schools. Dr. MacCready previously served as director of the
Lindbergh Fund and the Museum of Flying. Dr. MacCready is the creator of
the Gossamer aircraft.
Frank Perna 59 Chief Executive Officer and director, EOS, a privately held provider of 1994
power supplies for electrical equipment and notebook computers (1994 to
present). Mr. Perna also serves as a director of Durand Inc., a privately
held Internet software company, Software.Com, a privately held software
company and EISI, a privately held electronics distributor. Mr. Perna
previously served as director of PDA Engineering (1990 to 1994) and was a
member of the Board of Directors of PDA Engineering at the time it was
acquired by the Company. Mr. Perna was formerly President and Chief
Executive Officer of MagneTek, Inc., a publicly held provider of
electrical equipment and services to utilities and industrial customers
(1990 to 1993).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
- ----------------------- --- ------------------------------------------------------------------------- ----------
<S> <C> <C> <C>
Thomas C. Curry 52 President (1994 to present) and Chief Executive Officer (March 1996 to 1996**
present) of the Company. Mr. Curry previously served as President of PDA
Engineering (January 1994 to August 1994) at the time it was acquired by
the Company, and as Vice President and General Manager of the Software
Products Division of PDA Engineering (1990 to January 1994). Mr. Curry
also serves as a director for LMS International and GSSL, Ltd.
</TABLE>
- ------------------------
* Russell Henke resigned from the Board, at the Board's request, in June 1996
because his consulting services for the Company exceeded fifty percent of
his time.
** In accordance with the By-laws of the Company, Thomas Curry was elected by
the Board of Directors on March 27, 1996. Pursuant to the Company's Bylaws,
Thomas Curry was reclassified from Class II to Class I in order to maintain
the number of directors in each Class as nearly equal as possible.
The following Class II directors are currently serving until the 1999 Annual
Meeting and until their respective successors are elected and qualified:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
- ----------------------- --- ------------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Bernard J. Bannan 76 President and director, Binley, Inc. (formerly BJB Enterprises), a 1986
privately held investment management company, since 1984. Dr. Bannan is
also a director of Cable Design Technologies, a publicly held company
(1995 to present). Dr. Bannan previously served as a director of
Fairchild Space & Defense Corporation (1989 to 1991) and Intercole, Inc.
(1986 to 1995).
Harold Harrigian 62 Partner and Director of the Corporate Finance Department, Crowell, Weedon 1986
& Co., an investment banking and securities firm, since 1984. Mr.
Harrigian also serves as a director and member of the Audit and
Compensation Committees of First Mortgage Corporation (1992 to present),
and as a director of Community Bank, a privately held company, McGinn
Actuaries, a privately held company, and Nations Holding Group, a
privately held company.
George N. Riordan 63 Chairman of the Board of the Company (February 1, 1997 to present). Mr. 1983
Riordan is also Managing Director, George Riordan & Co., investment
bankers (February 1991 to present) and is a director of Pancho's Mexican
Buffet, Inc. (1993 to present). Mr. Riordan was previously a director of
Lewis Galoob Toys, Inc. (1994 to 1996) and formerly a Managing Director
of Dean Witter Reynolds, Inc., an investment banking firm (1989 to
February 1991).
</TABLE>
4
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended January 31, 1997, the Board of Directors held 9
meetings. The Board of Directors has three committees: an Audit Committee, a
Human Resources Committee, and an Executive Committee. The Audit and Human
Resources Committees are composed entirely of outside Directors.
Messrs. Harrigian, Perna, and Reidel sit on the Audit Committee, which held
8 meetings in the fiscal year ended January 31, 1997. The Audit Committee is
responsible for assisting the Board in fulfilling its responsibilities as they
relate to the Company's accounting policies, internal controls, and financial
reporting practices, and for maintaining a line of communication between the
Board and the Company's independent accountants, Ernst & Young LLP. Reports of
such meetings are provided to the Board together with any Committee
recommendations.
Dr. Bannan and Messrs. MacCready and Myers comprise the Human Resources
Committee, which met 8 times in the fiscal year ended January 31, 1997. The
Human Resources Committee reviews all corporate officers' compensation and
recommends to the Board, as necessary, stock options to be awarded, changes in
salary or profit sharing, and the amount of yearly bonuses to be awarded to
employees. The Human Resources Committee also is responsible for nominating
directors to serve on the Board of Directors of the Company. The Human Resources
Committee will not consider nominees recommended by the stockholders.
The Board of Directors created an Executive Committee on June 12, 1996. The
current members of the Executive Committee are Dr. Bannan and Messrs. Curry,
Perna and Riordan. The Executive Committee met 15 times in the fiscal year ended
January 31, 1997. The Executive Committee was granted broad power in managing
the business and affairs of the Company.
Each director attended at least 87.5% of the total number of meetings of the
Board and committees of which he was a member.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 18, 1997 the names, addresses,
and holdings of those persons known to the Company to be beneficial owners of
more than 5% of its Common Stock, the names and holdings of each director and
each nominee for director, the names and holdings of each executive officer
named in the Summary Compensation Table ("named executive officers") and the
holdings of all executive officers and directors as a group:
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY OWNED
AND NATURE OF BENEFICIAL PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) (2)
- -------------------------------------------------- ------------------------- -----------------
<S> <C> <C>
Richard H. MacNeal ............................... 1,582,015 11.4%
501 Highland Drive
La Canada, CA 91011
Brinson Partners, Inc. ........................... 1,096,200(3) 8.1%
209 South LaSalle
Chicago, IL 60604
The Capital Research and Management Company ...... 670,000(4) 5.0%
333 South Hope Street
Los Angeles, CA 90071
The TCW Group, Inc. .............................. 828,800(5) 6.2%
865 South Figueroa Street
Los Angeles, CA 90017
Bernard J. Bannan................................. 32,300 *
Harold Harrigian.................................. 20,250 *
Paul B. MacCready................................. 20,000 *
Dale D. Myers..................................... 22,200 *
Frank Perna....................................... 15,452 *
Arthur H. Reidel.................................. 17,486 *
George N. Riordan................................. 22,500 *
Kenneth D. Blakely................................ 33,649 *
Thomas C. Curry................................... 236,703 1.7%
Louis A. Greco.................................... 92,158 *
Bruce E. MacNeal.................................. 104,200 *
Dennis A. Nagy.................................... 101,980 *
All directors and executive officers as a group 2,382,182(6) 16.4%
(17 persons)....................................
</TABLE>
- ------------------------
* Holdings represent less than 1% of all shares outstanding.
(1) Except as provided with respect to certain shares held in trust with the
person's spouse and as otherwise provided under state community property
laws, beneficial ownership is direct (and includes shares held pursuant to
The MacNeal-Schwendler Corporation Profit Sharing Plan), and the person
indicated has sole voting and investment power over the shares of Common
Stock indicated. The amounts shown in this column include shares issuable
upon (i) conversion of the Company's 7 7/8% Convertible Subordinated
Debentures due 2004 (the "Debentures") or
6
<PAGE>
(ii) exercise of options which are exercisable on or within 60 days of April
18, 1997, in the following amounts: Bernard J. Bannan, 19,000; Thomas C.
Curry, 231,721; Harold Harrigian, 19,000; Paul B. MacCready, 19,000; Richard
H. MacNeal, 376,500; Dale D. Myers, 19,000; Frank Perna, 15,452; Arthur H.
Reidel, 17,000; George N. Riordan, 19,000; Kenneth D. Blakely, 31,750; Louis
A. Greco, 74,000; Bruce E. MacNeal, 64,200; and Dennis A. Nagy, 90,980.
(2) All expressions of percent of class held assume that the Debentures and
options, if any, of the particular person or group in question, and no
others, have been exercised.
(3) Based upon information set forth in a Schedule 13G filed under the
Securities Exchange Act of 1934 by Brinson Partners, Inc. ("BPI") in
February 1997. BPI filed the statement on behalf of itself, Brinson Trust
Company ("BTC"), Brinson Holdings, Inc. ("BHI"), SBC Holding (USA), Inc.
("SBCUSA"), and Swiss Bank Corporation ("SBC"). BTC is a wholly-owned
subsidiary of BPI; BPI is a wholly-owned subsidiary of BHI; BHI is a
wholly-owned subsidiary of SBCUSA; SBCUSA is a wholly owned subsidiary of
SBC. SBC, SBCUSA, BHI and BPI exercised shared voting power with respect to
1,096,200 shares, or 8.1% of the Company's outstanding Common Stock. Of the
1,096,200 shares, BTC exercised shared voting power with respect to 321,452
shares, or 2.4% of the Company's outstanding Common Stock.
(4) Based upon information set forth in a Schedule 13G filed under the
Securities Exchange Act of 1934 by The Capital Group Companies, Inc. and
Capital Research Management Company in February 1997. Capital Research
Management Company, a registered investment adviser and an operating
subsidiary of The Capital Group Companies, Inc., exercised investment
discretion with respect to 670,000 shares, or 5.0% of outstanding shares of
the class, which were owned by various institutional investors. Said
subsidiary has no power to direct the vote of the above shares.
(5) Based upon information set forth in a Schedule 13G filed under the
Securities Exchange Act of 1934 by The TCW Group, Inc. ("TCW") and Robert
Day in February 1997. TCW exercised voting power and investment discretion
with respect to 828,800 shares, or a total of 6.2% of the Company's
outstanding Common Stock. Robert Day is also listed on such 13G as
exercising voting power and investment discretion with respect to 828,800
shares, as an "individual who may be deemed to control The TCW Group, Inc.
and other holders of the Common Stock of the issuer."
(6) Includes 1,043,700 shares issuable upon exercise of options granted the
directors and executive officers of the Company which are exercisable on or
within 60 days of April 18, 1997. See footnote 1 above.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION. The following table and accompanying notes show for
each Chief Executive Officer and the four next highest paid executive officers
of the Company as of January 31, 1997, the indicated compensation paid by the
Company to such persons during the last fiscal year and, to the extent required
by applicable rules, the preceding two fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS (1)
-------------
ANNUAL COMPENSATION SECURITIES
----------------------- OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($)(2) ($)(3) (#)(4) ($)(5)
- ---------------------------------- --------- --------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. MacNeal, 1997 325,000 0 0 511,426(7)
Chairman and Chief 1996 325,000 59,962 -- 105,000 61,511
Executive Officer (6) 1995 325,000 121,904 -- 103,500 61,546
Thomas C. Curry, Chief 1997 271,122 0 -- 120,000 50,025
Executive Officer (6) 1996 253,007 46,680 -- 105,000 45,725
and President 1995 72,930 46,886 -- 130,000 8,111
Dennis A. Nagy, 1997 210,000 0 -- 10,000 38,968
Senior Vice President, 1996 210,000 36,033 -- 30,000 38,512
Operations 1995 210,000 78,769 -- 65,000 36,546
Louis A. Greco, 1997 195,000 0 -- 25,000 35,426
Chief Financial Officer 1996 191,666 35,362 -- 55,000 34,595
1995 185,000 69,631 -- 45,000 33,546
Bruce E. MacNeal, 1997 153,923 0 -- 10,000 25,426
Vice President 1996 140,802 25,978 -- 30,000 24,366
1995 132,812 -- -- 25,000 16,374
Kenneth D. Blakely, 1997 143,619 0 -- 25,000 25,688
Vice President 1996 136,834 18,935 -- 30,000 23,566
1995 126,771 5,000 -- 11,000 15,530
</TABLE>
- ------------------------
(1) The Company did not make any payments or awards that would be classifiable
under the "Restricted Stock Award" and "LTIP Payout" columns otherwise
required to be included in the Table by the applicable Securities and
Exchange Commission ("SEC") disclosure rules.
(2) Annual bonus amounts are earned and accrued during the fiscal years
indicated, and paid subsequent to the end of each fiscal year.
(3) The amounts included in this column for each of the named executive officers
do not include the value of certain perquisites which in the aggregate did
not exceed the lower of $50,000 or 10% of each named executive's aggregate
fiscal 1995, 1996 or 1997 salary and bonus compensation.
(4) Unless otherwise noted, represents shares of stock underlying options
granted under The MacNeal-Schwendler Corporation 1991 Stock Option Plan, as
amended (the "1991 Plan"). There were no individual grants of stock options
in tandem with stock appreciation rights ("SAR's") or freestanding SAR's
made during the fiscal years ended January 31, 1995, 1996 or 1997 to the
above-named executive officers.
8
<PAGE>
(5) Unless otherwise noted, the amounts shown constitute Company contributions
on behalf of the named individuals to (i) The MacNeal-Schwendler Corporation
Profit Sharing Plan ("PSP") and (ii) The MacNeal-Schwendler Corporation
Supplemental Retirement and Deferred Compensation Plan ("SERP") in the
following amounts: Richard H. MacNeal -- 1997: $18,926 to PSP, $42,500 to
SERP; 1996: $19,012 to PSP, $42,500 to SERP; 1995: $19,046 to PSP, $42,500
to SERP; Thomas Curry -- 1997: $18,926 to PSP, $31,099 to SERP; 1996:
$19,012 to PSP, $26,714 to SERP; 1995; $5,275 to PSP, $2,836 to SERP; Dennis
A. Nagy -- 1997: $18,926 to PSP, $20,042 to SERP; 1996: $19,012 to PSP,
$19,500 to SERP; 1995: $19,046 to PSP, $19,500 to SERP; Louis A. Greco --
1997: $18,926 to PSP, $16,500 to SERP; 1996: $19,012 to PSP, $15,584 to
SERP; 1995: $19,046 to PSP, $14,500 to SERP; Bruce E. MacNeal -- 1997:
$18,176 to PSP, $7,250 to SERP; 1996: $17,403 to PSP, $6,964 to SERP; 1995:
$16,374 to PSP, $0 to SERP; Kenneth D. Blakely -- 1997: $12,176 to PSP,
$13,512 to SERP; 1996: $13,571 to PSP, $9,995 to SERP; 1995: $15,530 to PSP,
$0 to SERP.
(6) Richard MacNeal resigned as Chief Executive Officer of the Company on March
27, 1996 and was succeeded by Mr. Curry. In addition, Richard MacNeal
resigned as Chairman on January 31, 1997 and was succeeded by George
Riordan.
(7) Richard MacNeal received $450,000 pursuant to his separation agreement. See
"Separation Agreement with Richard MacNeal." The remaining $61,426
represents amounts the Company contributed on behalf of Richard MacNeal
under PSP and SERP. See above footnote (5).
OPTION GRANTS. The following table sets forth certain information
concerning stock options granted to the named executive officers for fiscal year
1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
PERCENT OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE GRANT DATE
GRANTED TO EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1)(2) FISCAL YEAR 1997 ($/SH)(3) DATE VALUE ($)
- ------------------------------------------- ------------ ----------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard H. MacNeal......................... 0 -- -- -- --
Thomas Curry............................... 20,000(4) 3.1% 8.25 12/11/06 110,000(5)
100,000(6) 15.5% 13.75 3/27/01 658,000(8)
Dennis A. Nagy............................. 10,000(7) 1.6% 6.50 7/31/01 31,100(8)
Louis A. Greco............................. 10,000(7) 1.6% 6.50 7/31/01 31,100(8)
15,000(4) 2.3% 8.25 12/11/06 82,500(5)
Bruce E. MacNeal........................... 10,000(9) 1.6% 6.50 4/30/97(9) 31,100(8)
Kenneth D. Blakely......................... 10,000(7) 1.6% 6.50 7/31/01 31,100(8)
15,000(4) 2.3% 8.25 12/11/06 82,500(5)
</TABLE>
- ------------------------
(1) Unless otherwise noted, represents options to purchase shares of Common
Stock granted under the 1991 Plan that become exercisable one year after the
date of grant. Options under the 1991 Plan are nontransferable other than by
will or the laws of descent and distribution or certain exceptions under
Rule 16b-3 of the Securities Exchange Act of 1934. Options are exercisable
only during an optionee's term of employment, and for three months after
termination of employment if as a result of permanent disability or
retirement or resignation approved by the Board. Vesting may be accelerated
in certain events related to changes in control of the Company, unless the
Human Resources Committee, prior to such change in control, determines
otherwise. Under the terms of the 1991 Plan, the Human Resources Committee
retains discretion, subject to limits in the 1991 Plan, to modify the terms
of outstanding options and to regrant and reprice options. The 1991 Plan is
administered by the Human Resources Committee of the Board.
9
<PAGE>
(2) The 1991 Plan provides, under certain circumstances, for the grant of
"reload options" if an optionee uses already-owned shares of Common Stock to
pay for the exercise of any options. The reload provision permits the
grantee the right to purchase the same number of shares of the Company's
Common Stock as the grantee used to exercise any options at an exercise
price equal to the fair market value of a share of Common Stock on the date
of exercise of the initial option to which the reload relates.
(3) Options granted at an exercise price equal to the fair market value on the
date of grant.
(4) Represents nonqualified stock options to purchase shares of Common Stock
granted on December 11, 1996 under the 1991 Plan that are exercisable in
installments, with 25% of the options becoming exercisable one year after
the date of grant and with an additional 25% of the options becoming
exercisable on each successive anniversary date, with full vesting occurring
on the fourth anniversary date.
(5) Grant Date Present Value determined under Black-Scholes Valuation Method.
The estimated values under the Black-Scholes model are based on the
following assumptions: the risk-free rate of return is 7.5%, the expected
dividend yield is 0, the expected volatility is 0.42 and the expected term
is ten years. The actual value, if any, an executive may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised. Therefore, there is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
(6) Represents discretionary grant to employee of nonqualified stock options to
purchase shares of Common Stock granted on March 27, 1996 under the 1991
Plan that are exercisable on March 27, 1997.
(7) Incentive stock options granted on July 31, 1996.
(8) Grant Date Present Value determined under Black-Scholes Valuation Method.
The estimated values under the Black-Scholes model are based on the
following assumptions: the risk-free rate of return is 7.5%, the expected
dividend yield is 0, the expected volatility is 0.42 and the expected term
is five years. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised. Therefore, there is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
(9) Represents grant to employee of incentive stock options to purchase shares
of Common Stock granted on July 31, 1996 under the 1991 Plan that were
originally exercisable on July 31, 1997 and were to expire on July 31, 2001.
However, Bruce MacNeal received accelerated vesting to January 31, 1997
pursuant to his severance package with such options expiring 90 days after
such date, or April 30, 1997. See "Separation Agreement with Bruce MacNeal."
On March 4, 1997, Bruce MacNeal exercised 10,000 options at $6.50.
10
<PAGE>
OPTION EXERCISES. The following table sets forth information regarding
stock options exercised by the named executive officers during fiscal 1997 and
the value of in-the-money unexercised options held by the named officers as of
January 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
EXERCISABLE (E)/
UNEXERCISABLE (U) EXERCISABLE (E)/
--------------------- UNEXERCISABLE (U)
NUMBER OF SECURITIES -----------------------
UNDERLYING VALUE OF UNEXERCISED
SHARES ACQUIRED ON VALUE REALIZED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
NAME EXERCISE (#) ($) AT FY-END (#) FY-END ($)(1)
- ----------------------------------- --------------------- ----------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Richard H. MacNeal................. 0 0 376,500/0 0/0
Thomas Curry....................... 0 0 130,000/225,000 0/17,500
Dennis A. Nagy..................... 0 0 89,000/70,000 0/26,250
Louis A. Greco..................... 0 0 74,000/90,000 0/39,375
Bruce E. MacNeal................... 0 0 74,200/0(2) 26,250/0
Kenneth D. Blakely................. 0 0 31,750/43,750 0/39,375
</TABLE>
- ------------------------
(1) Based on the closing price of the Company's Common Stock on January 31, 1997
($9.125 per share) minus the exercise price of "in-the-money" options.
(2) As part of his severance package, Bruce MacNeal received accelerated vesting
of his stock options such that such options became exercisable on January
31, 1997, and expire 90 days after that date. See "Separation Agreement with
Bruce MacNeal."
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
SEPARATION AGREEMENT WITH RICHARD MACNEAL. Effective January 31, 1997,
Richard MacNeal resigned as Chairman of the Board of the Company and entered
into a Separation Agreement with the Company. The Company agreed to pay Richard
MacNeal a separation payment of $450,000, and entered into a one year Consulting
Agreement with him, pursuant to which he will provide consulting services in the
area of product development, and the Company will pay him an annual fee of
$150,000. Until January 31, 1998 or the termination of his consulting services,
Richard MacNeal will also receive continued participation in the Company's
executive automobile program, secretarial expense reimbursements not to exceed
$30,000, and continued coverage under the Company's health and welfare benefit
plans (without continued participation in the Company's Profit Sharing Plan).
The Separation Agreement further provides that stock options previously granted
to Richard MacNeal continue to vest and be exercisable by him subject to earlier
termination as provided under the terms of the plans, but will expire January
31, 1998. Richard MacNeal also agreed that until January 31, 1998, he would not
compete with the businesses of the Company and until January 31, 2000, he would
not solicit business from a customer of the Company or employ a person employed
by the Company. In addition, Richard MacNeal agreed not to disclose confidential
Company information.
SEPARATION AGREEMENT WITH BRUCE MACNEAL. Effective January 31, 1997, Bruce
MacNeal resigned as Vice President of the Company. Bruce MacNeal's severance
package includes severance pay for fifteen months based on his current base
salary of $145,000 per year, outplacement assistance with an approximate value
of $20,000, continued medical benefits for a maximum of fifteen months,
continuation of lease reimbursement for fifteen months under the Company
Automobile Benefits Program, one final contribution to the Company Profit
Sharing Plan and Supplemental Retirement and Deferred Compensation Plan, and
accelerated vesting for all his options to January 31, 1997.
SEPARATION AGREEMENT WITH DENNIS NAGY. Effective August 24, 1995, the
Company entered into a Separation Agreement with Dennis Nagy for a term of ten
years. The Agreement provides that if the
11
<PAGE>
Company terminates Dr. Nagy for reasons other than cause, or Dr. Nagy elects to
leave the Company as a result of certain events viewed as a constructive
termination, including substantial diminishment of his responsibilities, the
Company must provide certain benefits to him. Dr. Nagy tendered his resignation
effective January 31, 1997, because his responsibilities had been substantially
diminished. However, pursuant to negotiations between Dr. Nagy and Thomas Curry,
Dr. Nagy agreed to continue to work on a month-to-month basis until April 30,
1997, or such other period of time as Dr. Nagy and the Company may agree. While
Dr. Nagy is employed on a month-to-month basis he continues to receive his
regular salary and benefits. Upon the date of his actual resignation, the
Company will be required to pay to him the following benefits that are required
to be paid pursuant to the Agreement: payment of all accrued but unused vacation
pay; payment of the base salary he was receiving at the time of termination for
a period of 18 months from the effective date of the termination (the
"Termination Date"); continued medical benefits for a maximum of 18 months
(provided that such medical premiums cease upon him commencing employment with
another employer); continued participation in the Company Automobile Benefits
Program for a maximum of 18 months; accelerated vesting of all non-qualified
stock options with the options expiring 12 months after the Termination Date;
and outplacement assistance for an amount up to $35,000.
CHANGE IN CONTROL SEVERANCE AGREEMENTS. The Company has entered into
severance agreements with each of the named executive officers as well as with
certain other key employees. These severance agreements provide that, if the
Company or the employee terminates the employee's employment with the Company
(other than as a result of death or disability) for any reason within two years
after a change of control of the Company, the employee will receive a severance
payment. Under the severance agreements, a change in control is defined to
include the following transactions unless approved by a majority of the Board of
Directors: (i) any person or group becomes the beneficial owner of 20% or more
of the combined voting power of the Company's then outstanding securities, (ii)
the election in a contest for election of a majority of the Board of Directors
who were not directors prior to such contest, (iii) the stockholders approve the
dissolution or liquidation of the Company, (iv) the stockholders approve a
merger, consolidation or other reorganization of the Company, as a result of
which less than 50% of the outstanding voting securities of the resulting entity
are owned by former stockholders of the Company, or (v) the stockholders approve
the sale of all or substantially all of the assets of the Company to a person or
entity which is not a subsidiary of the Company. The amount of such severance
payment, for each of the named executive officers with severance agreements,
will be a cash payment of two and one-half times the average of the last five
years of such employee's total cash compensation. Other key employees with
severance agreements (totaling 72 employees) will receive at least one times the
average of the last five years of such employee's total cash compensation,
provided the employee has been employed by the Company at least five years,
increasing ratably to a maximum of two times the average of the last five years
of such employee's total cash compensation if employed by the Company for ten
years or more. The severance payments will be reduced to the extent any payment
is not deductible by the Company for federal income tax purposes under Section
280G of the Code. The severance agreements are automatically renewed annually
unless the Company gives written notice that it does not wish to extend them. In
addition, the agreements will continue in effect for three years after a change
of control of the Company.
SEPARATION AGREEMENT WITH THOMAS CURRY. The Company has entered into a
Separation Agreement with Thomas Curry which provides for certain payments to
Mr. Curry upon his termination of employment with the Company. If Mr. Curry
resigns his position, dies or otherwise terminates his employment with the
Company, or if the Company terminates Mr. Curry's employment for "cause," Mr.
Curry receives the pro rata share of his base salary then in effect plus any
accrued vacation time. "Cause" includes dishonesty, fraud, theft, embezzlement,
conviction of a misdemeanor involving moral turpitude or of any felony, failure
to perform duties in a manner satisfactory to the Board of Directors after being
advised in writing of a performance deficiency, unauthorized absence from work
for a period of five or more consecutive work days, violation of Company policy
or procedure, inability
12
<PAGE>
to perform the essential functions of the job for a period of 180 days due to
any physical or mental disability, competing with the Company while in its
employ, or violation of the terms of a non-disclosure agreement signed by Mr.
Curry upon his employment. If the Company terminates for reasons other than
"cause," the Company must continue to pay Mr. Curry the base salary he was
receiving at the time of termination for a period of 18 months from the
effective date of the termination. The Company must also continue Mr. Curry's
participation in the Company's health benefit plans for up to eighteen months
after the termination date and reimburse Mr. Curry's outplacement fees (up to
$35,000). The Separation Agreement also requires the Company in such
circumstances to amend 70,000 options previously granted to Mr. Curry under the
1991 Plan to allow (i) full vesting as of the termination date and (ii) exercise
of those options for a period of twelve months from the termination date.
The 1991 Plan provides, under certain circumstances, for options to vest
upon a change in control. See "Compensation of Executive Officers -- Option
Grants in Last Fiscal Year."
CERTAIN TRANSACTIONS
CONSULTING AGREEMENT WITH RUSSELL HENKE. Russell Henke was elected to the
Board of Directors on September 13, 1995. He also agreed to provide
technical/business management consulting services to the Company at a rate of
$250 per hour under a standard form consulting agreement. In June 1996 Dr. Henke
entered into a revised one year consulting agreement with the Company which
required he devote more than fifty percent of his time to Company related
business. Dr. Henke resigned from the Board in June 1996 coincident with his
revised consulting agreement, in which he was to be paid a minimum of $21,333.33
per month. Pursuant to the revised consulting agreement, if the Company
terminated the revised consulting agreement during the first six months of the
term, the Company would pay the remaining monthly fee until June 1997; if the
Company terminated the revised consulting agreement after the first six months
of such agreement, the Company would have to pay Dr. Henke the minimum monthly
fee of $21,333.33 for six months after notice of termination, even if those
payments extended past June 1997.
The Company paid consulting fees to Dr. Henke amounting to $255,890 for the
fiscal year ended January 1997.
COMPENSATION OF DIRECTORS
Directors who are not also officers of the Company are paid $12,500 per
year, $1,550 per Board meeting attended, and $775 per committee or telephone
meeting attended. Effective February 1, 1997, George Riordan was elected
Chairman of the Board and receives $200,000 per year, plus medical benefits, for
his services as Chairman.
The Company does not additionally compensate employee directors. All other
directors are reimbursed for all expenses incurred in connection with attendance
at meetings of the Board and the performance of Board duties.
Dr. Henke also provided consulting services to the Company. In fiscal 1997,
the Company paid Dr. Henke $77,482 while he was a Director of the Company. See
"Consulting Agreement with Russell Henke."
On June 10, 1992, the stockholders approved the 1991 Plan, including the
Non-Employee Director Program. The Non-Employee Director Program provides for
option grants to members of the Board of Directors who are not officers or
employees of the Company or its subsidiaries. Upon stockholder approval, each
eligible director received a non-discretionary grant of nonqualified stock
options for the purchase of 2,000 shares of the Common Stock at an exercise
price of $8.00 per share. On June 14, 1995, the stockholders approved an
amendment to the 1991 Plan (the "Amendment").
13
<PAGE>
The Amendment provides that each non-employee director receive an annual grant
of options to purchase 3,000 shares of the Common Stock on the first business
day of each calendar year. There was a grant as of the first business day in
calendar 1996 at an exercise price of $15.875. On January 2, 1997, there was a
grant at the exercise price of $7.75. Subsequent grants will occur on such day
in each subsequent year through 2001. All options granted under the Plan become
exercisable in full 12 months after the award date and expire on the fifth
anniversary of the award date. Vesting may be accelerated in certain events
related to changes in control of the Company. The purchase price payable upon
the exercise of a director's option equals the fair market value of the Common
Stock on the award date. In addition, on March 15, 1995, each current
non-employee director, except Dr. Henke (see below), received a one-time
nonqualified stock option to purchase 10,000 shares of Common Stock pursuant to
the Amendment at an exercise price of $12.50. On September 13, 1995 concurrent
with his election to the Board of Directors, Dr. Henke received a one-time
nonqualified stock option to purchase 10,000 shares of Common Stock pursuant to
the Amendment at an exercise price of $19.375. Dr. Henke's previous grants of
non-qualified stock options, granted under the 1991 Plan, were cancelled upon
his resignation from the Board of Directors in June 1996.
A maximum of 500,000 shares of Company Common Stock may be issued upon the
exercise of options under the Non-Employee Director Program.
REPORT OF THE HUMAN RESOURCES COMMITTEE
OF THE BOARD OF DIRECTORS
THE HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS HAS FURNISHED THE
FOLLOWING REPORT ON EMPLOYEE COMPENSATION. SUCH REPORT WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY
STATEMENT INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933 OR
UNDER THE SECURITIES ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE
BE DEEMED SOLICITING MATERIAL OR BE DEEMED FILED UNDER SUCH ACTS.
The Human Resources Committee of the Board of Directors reviews and
establishes the general compensation policies of the Company, and administers
the Company's various compensation plans, including its stock option plans and
annual salary and bonus plans.
Each year, the Committee undertakes a comprehensive review of the
compensation plans and levels of compensation of the Company's Chief Executive
Officer and the other senior executive officers of the Company. The purposes of
this review are to assure that compensation is appropriately tied to performance
and that salary and potential bonus compensation levels are appropriate. In
undertaking this review, the Committee considers the compensation levels of the
Company's executive officers in light of the performance of the Company over the
past fiscal year and other historical periods.
The compensation of the Chief Executive Officer and of the Company's other
senior executive officers, is comprised of three components: base salary, bonus
and options. Generally, base salaries are not tied specifically to Company or
individual performance but rather set at an amount that the Committee believes
the Company must pay as riskless compensation in order to attract qualified
candidates in a competitive market. However, the compensation policy of the
Company, which is endorsed by the Committee, is that a significant portion of
the compensation of upper management should be contingent upon the performance
of the Company, and/or components or specific business units of the Company,
and/or individual contributions of each senior manager. Accordingly, bonuses are
tied specifically to performance. The annual bonus for the CEO is subject to
overall Company performance. Performance is measured against the annual budgeted
operating income before the effects of capitalized software. The annual bonus
for other executive officers is partially subject to the performance of their
component or specific business unit, as measured against the specific units'
annual budgeted operating income before the effects of capitalized software,
partially subject to their
14
<PAGE>
individual contributions and partially subject to overall Company performance. A
significant portion of senior executive officers' compensation is therefore
considered to be "at risk." Compensation of all senior executive officers is
also reviewed with the Board. For the Chief Executive Officer and all other
senior officers, approximately 38% of total expected compensation is at risk.
The Committee awards options in an amount it believes necessary to provide
incentives for future performance, taking into account individual performance
and length of service with the Company.
BASE SALARY. The base salary of Mr. Thomas Curry, who succeeded Richard
MacNeal as Chief Executive Officer, was set at $275,000, effective March 27,
1996, and was determined by the Committee in the manner set forth above. The
Committee subjectively considered the compensation of CEO's of other relevant
companies and the proportion of compensation that would be "at risk" in setting
Mr. Curry's salary. The base salaries for the period from June 1, 1996 to May
31, 1997 for the remaining senior executive officers were similarly reviewed and
set, with consideration also given to the relationship of such salaries to the
salary of Mr. Curry.
ANNUAL BONUS. For fiscal 1998, based upon the method described above, the
Committee established an expected annual compensation objective for Mr. Curry
and the other senior executive officers consisting of a base salary component
and an incentive component. Under the Company's Executive Bonus Plan, Mr.
Curry's expected bonus was set at 50% of his annual base salary with a range of
potential bonus pay outs varying from zero to 60% of his base salary dependent
upon Company performance. Mr. Curry did not receive a bonus in fiscal 1997 under
the bonus program, due to the Company's performance.
The expected annual compensation objective for other senior executive
officers also consists of a base salary component and an incentive component.
Under the fiscal 1998 program, other senior executive officers' expected bonus
was set at 50% of their annual base salary with a range of potential bonus
payments varying from zero to 60% of base salary dependent partially upon
specific performance factors established in advance by the CEO and partially
upon Company performance. No bonuses were earned by the other executive officers
in fiscal 1997.
STOCK OPTIONS. During fiscal 1997, the Committee authorized 645,000 stock
option grants under the 1991 Plan. In conjunction with the method described
above, in December 1996 the Committee assigned option awards to Mr. Curry and
other executive officers based on their respective expected fiscal 1997
compensation levels, their individual performance during the 1996 fiscal year,
and their length of service with the Company.
In December 1995, the United States Internal Revenue Service issued final
regulations affecting all publicly held United States corporations (the
"Regulations") interpreting the statutory limitation on the tax deductibility of
compensation in excess of $1 million for certain executive officers. In general,
the Human Resources Committee considers the anticipated tax treatment to the
Company and to its executives of various payments and benefits. However, the
Committee will not necessarily limit executive compensation to that which is
deductible under the Regulations. The Committee will consider various
alternatives for preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.
No member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries, or is employed by a company whose Board of
Directors includes a member of the management of the Company.
Human Resources Committee:
Dale D. Myers, Chairman
Bernard J. Bannan
Paul B. MacCready
15
<PAGE>
PERFORMANCE GRAPH
The following graph provides a five year comparison of cumulative total
returns for the Company, the Standard & Poor's Software/Computer Services Index,
the New York Stock Exchange (NYSE) Market Value Index and the American Stock
Exchange (AMEX) Market Value Index. (The Company is using the NYSE Index in
place of the AMEX Index because the Company's Common Stock became listed on the
NYSE during fiscal 1997.) The comparison covers the five-year period from the
first day of the Company's 1993 fiscal year (February 1, 1992) to the last day
of the Company's 1997 fiscal year (January 31, 1997) and assumes that $100 was
invested at the beginning of the five-year period in the Company's Common Stock
and in each index.
THE MACNEAL-SCHWENDLER CORPORATION
STOCK PRICE PERFORMANCE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MACNEAL SCHWENDLER CORP INDUSTRY INDEX NYSE INDEX AMEX INDEX
<S> <C> <C> <C> <C>
1992 100 100 100 100
1993 145.53 124.83 106.59 98.21
1994 128.43 151.64 125.18 117.27
1995 118.38 172.16 119.41 102.35
1996 153.86 263.14 161.79 131.19
1997 103.34 428.08 198.22 141.19
</TABLE>
Cumulative total returns assumes reinvestment of dividends on the date such
dividends were declared.
THE STOCK PRICE PERFORMANCE DEPICTED IN THE ABOVE GRAPH IS NOT NECESSARILY
INDICATIVE OF FUTURE PRICE PERFORMANCE. THE PERFORMANCE GRAPH WILL NOT BE DEEMED
TO BE INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS
PROXY STATEMENT INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933
OR UNDER THE SECURITIES ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE
BE DEEMED SOLICITING MATERIAL OR BE DEEMED FILED UNDER SUCH ACTS.
16
<PAGE>
2. 1996 EMPLOYEE STOCK PURCHASE PLAN
At the 1997 Annual Meeting, stockholders will be asked to approve The
MacNeal-Schwendler Corporation 1996 Employee Stock Purchase Plan (the "Plan")
which was adopted by the Company's Board of Directors (the "Board") on September
11, 1996. The Plan is contingent upon and subject to approval by the
stockholders of the Company. The following summary of the Plan is qualified in
its entirety by the full text of the Plan, a copy of which is attached to this
Proxy Statement as Exhibit A.
THE PLAN
INTRODUCTION
Under the Plan, shares of the Company's Common Stock are available for
purchase by eligible Employees (as such term is defined below) electing to
participate in the Plan. Such eligible Employees are entitled semi-annually to
purchase Common Stock, by means of limited payroll deductions, at a 10% discount
from the fair market value of the Common Stock as of specified dates.
PURPOSE
The purpose of the Plan is to provide employees of the Company and
subsidiaries which have been designated by the Board from time to time
("Designated Subsidiaries") with an opportunity to purchase Common Stock of the
Company. The Plan is intended to provide an additional incentive to
participating eligible Employees, through the ownership of Common Stock, to
advance the best interests of the Company.
SHARES AVAILABLE FOR PURCHASE
The maximum aggregate number of shares of the Company's Common Stock which
will be made available for sale under the Plan is 750,000, subject to adjustment
as described below. If the outstanding shares of Common Stock are increased,
decreased or changed into, or exchanged for, a different number or kind of
shares or securities of the Company through a reorganization or merger, or
through a combination, recapitalization, reclassification, stock split, stock
dividend, or similar event, an appropriate adjustment will be made in the number
and kind of shares that may be issued under the Plan, all as described more
fully in Section 18 of the Plan.
ADMINISTRATION
The Plan is administered by the Board or a committee named by the Board (the
"Committee"). The Board or Committee has the full power and discretion to adopt,
amend or rescind any rules and regulations for carrying out the Plan. The Board
or Committee has full power and discretion to construe and interpret the Plan,
which construction or interpretation is final and conclusive on all persons.
ELIGIBILITY
Only certain Employees are eligible to participate in the Plan. An eligible
Employee is an employee (including an officer) of the Company or one of its
Designated Subsidiaries who is customarily employed for at least twenty (20)
hours per week and more than five (5) months in a calendar year and who has been
employed as an Employee for three (3) months as of the Offering Date of a given
Offering Period (as such terms are defined below). The approximate number of
current eligible Employees is 611. Notwithstanding other provisions of the Plan,
no Employee shall be granted an option under the Plan (i) if, immediately after
such grant, such Employee would own stock and/or hold outstanding options to
purchase stock representing 5% or more of the total combined voting power or
value of all classes of stock of the Company or a subsidiary, or (ii) if such
option would permit such
17
<PAGE>
Employee's rights under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the fair market value of such stock for the calendar year in which
such option is outstanding at any time.
OPERATION OF THE PLAN
The Plan operates as follows. Prior to October 1, 1996 and February 1 and
August 1 of each year commencing August 1, 1997 (each, an "Offering Date"),
eligible Employees are given the opportunity to participate in the Plan.
Participating eligible Employees ("Participants") designate a certain amount of
their Compensation (as defined below) to be applied as Contributions pursuant to
the Plan over the Offering Period (as hereafter defined) to purchase Common
Stock. "Offering Period" means the period from October 1, 1996 to July 31, 1997,
and thereafter, the period commencing February 1 and August 1 of each year and
ending on the next succeeding July 31 and January 31, respectively. On the
Offering Date of each Offering Period, each Participant will be granted an
option to purchase on the last day of the Offering Period (the "Exercise Date"),
subject to certain limitations described in the Plan, a number of shares of the
Company's Common Stock determined by dividing such Participant's Contributions
accumulated prior to the Exercise Date and retained in the Participant's account
as of the Exercise Date by the lower of (i) ninety percent (90%) of the fair
market value of a share of the Company's Common Stock on the Offering Date, or
(ii) ninety percent (90%) of the fair market value of a share of the Company's
Common Stock on the Exercise Date. The purchase price of each share of Common
Stock will be 90% of the last price for a share of Common Stock on the Offering
Date or the Exercise Date, whichever is lower, as furnished by The New York
Stock Exchange, as reported in THE WALL STREET JOURNAL. If the Company's Common
Stock is not traded on the date the purchase price is to be determined, the date
used to determine value will be the immediately preceding trading date. The
Company will generally issue to the Participants stock certificates representing
the shares purchased under the Plan shortly after the Exercise Date. (Special
rules may apply to persons who are subject to Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act").
Unless a Participant withdraws from the Plan, as described below, his or her
option for the purchase of shares will be exercised automatically on the
Exercise Date of the Offering Period, without any further action on the
optionee's part, and the maximum number of full shares subject to option will be
purchased at the applicable option price with the accumulated Contributions in
his or her account. The shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the Participant on the Exercise Date.
During his or her lifetime, a Participant's option to purchase shares hereunder
is exercisable only by him or her.
The term "Compensation" means all regular straight time gross earnings,
payment for overtime, shift premium, incentive compensation, incentive payments,
bonuses, commissions and other cash compensation.
ELECTION TO PARTICIPATE
An eligible Employee may become a Participant by completing a subscription
agreement on the form provided by the Company and filing it with the Company's
payroll office prior to the applicable Offering Date, unless a different time
for filing the subscription agreement is set by the Board for all eligible
Employees with respect to a given Offering Period. The subscription agreement
shall set forth the percentage of the Participant's Compensation (which shall be
not less than 1% and not more than 10%) to be applied as Contributions pursuant
to the Plan. Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the
Exercise Date of the Offering Period to which the subscription agreement is
applicable, unless the Participant withdraws all, but not less than all, the
Contributions credited to his or her account under the Plan at any time prior to
ten (10) days prior to the Exercise Date of the Offering Period by giving
written notice to the Company or upon termination of the Participant's
continuous status as an
18
<PAGE>
Employee prior to the Exercise Date of an Offering Period for any reason,
including retirement or death.
All Contributions received or held by the Company under the Plan may be used
by the Company for any corporate purpose, and the Company shall not be obligated
to segregate such Contributions. No interest shall accrue on the Contributions
of a Participant in the Plan.
LIMITATIONS ON AMOUNT OF SHARES PURCHASED
The fair market value of stock (valued as of the Offering Date of an
Offering Period) purchased by any Participant may not exceed $12,500 in any
Offering Period. In addition, the maximum amount that a Participant may elect to
set aside under the Plan in each Offering Period is 10% of his or her eligible
Compensation. The minimum amount that a Participant may elect to set aside each
pay period is 1% of his or her eligible Compensation.
WITHDRAWAL FROM THE PLAN
The Plan provides that a Participant may withdraw all but not less than all
Contributions credited to his or her account under the Plan at anytime prior to
ten (10) days prior to the Exercise Date of the Offering Period by giving
written notice to the Company. The Participant shall receive a refund of the
balance credited to his or her account for that Offering Period without
interest. A Participant who withdraws or who is deemed to withdraw from the Plan
will generally be able to participate as of the first day of the next Offering
Period provided he or she is an eligible Employee on such date. Special rules
may apply in the case of a Participant who is subject to Section 16(b) of the
Exchange Act.
TERMINATION OF EMPLOYMENT
The Plan does not restrict the Company's or a subsidiary's right to
terminate the employment of Participants. Upon termination of a Participant's
continuous status as an Employee prior to the Exercise Date of the Offering
Period for any reason, including retirement or death, the Contributions credited
to his or her account will be returned to him or her or, in the case of his or
her death, to his or her beneficiaries designated under the Plan, and his or her
options will be automatically terminated. Termination of employment has no
effect on shares previously purchased under the Plan.
NO TRANSFERABILITY
A Participant's options or rights with regard to the exercise of options or
to receive shares under the Plan as well as Contributions credited to his or her
Account may not be assigned, transferred, pledged or otherwise disposed of in
any way except by will or the laws of descent and distribution, or unless
otherwise provided by law.
TERM OF THE PLAN; CONSEQUENCE OF NOT RECEIVING STOCKHOLDER APPROVAL
Unless sooner terminated by the Board, the Plan will be effective from
September 11, 1996 through September 10, 2006. However, the Plan is contingent
upon and subject to approval by the stockholders of the Company. If the Plan is
not approved by the stockholders, all Participant Contributions previously made
will be returned to the Participants, without interest, and no shares of Common
Stock of the Company may be purchased thereunder.
AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time terminate or amend the Plan. Except as provided in
the Plan (see ADJUSTMENTS herein), no termination shall affect options
previously granted, nor shall an amendment
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make any change in an outstanding option which adversely affects the rights of
the optionee. In addition, under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor rule or provision or any
applicable law or regulation), the Company shall obtain stockholder approval in
such a manner and to such a degree as so required. Without stockholder consent
and without regard to whether any Participant rights may be considered to have
been adversely affected, the Board or the Committee shall be entitled to change
the Offering Periods, limit the frequency and/ or number of changes in the
amount withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's Compensation, and
establish such other limitations or procedures as the Board or the Committee
determines in its sole discretion advisable which are consistent with the Plan.
In addition, the Board or the Committee shall have the right to designate from
time to time the subsidiaries where employees may be eligible to participate in
the Plan and such designations shall not constitute an amendment to the Plan
requiring stockholder approval in accordance with Treasury Regulations Section
1.423-2(c)(4).
ADJUSTMENTS
The number of shares of Common Stock covered by each option under the Plan
which has not yet been exercised and the number of shares of Common Stock which
have been authorized for issuance under the Plan but have not yet been placed
under option, as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of shares of Common Stock effected without receipt of consideration
by the Company. In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, each
option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Exercise Date.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is not subject to the Employee Retirement Income Security Act of
1974, as amended, and is not qualified under Section 401(a) of the Code.
REGULATORY REQUIREMENTS
The Company is not required to deliver any shares pursuant to the Plan
unless and until any then applicable requirements of the SEC or any other
regulatory agencies having jurisdiction and of any quotation systems or
exchanges upon which stock of the Company may be listed or quoted have been
fully complied with. The Company filed with the SEC a registration statement on
Form S-8 under the Securities Act of 1933, as amended (the "Securities Act") and
a listing application with the New York Stock Exchange.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences relating to
the Plan is based on present federal tax laws and regulations and does not
purport to be a complete description of the federal income tax laws.
Participants may also be subject to certain state and local taxes which are not
described below.
The Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The Plan is subject to stockholder approval, as
required by Section 423. Under the Code, no taxable income is generally
recognized by a Participant either as of the Offering Date or as of the Exercise
Date. Depending upon the length of time the acquired shares are held by the
Participant, the federal income tax consequences will vary. If the shares are
held for a period of two years or more from the Offering Date and for at least
one year from the Exercise Date (the "Required Period"), and are sold at a price
in excess of the purchase price paid by the Participant for the shares, the gain
on the sale of the shares will be taxed as ordinary income to the Participant to
the extent of the lesser of (i) the amount by which the fair market value of the
shares on the Offering Date exceeded the purchase price, or (ii) the amount by
which the fair market value of the shares at the time of their sale exceeded the
purchase price. Any portion of the gain not taxed as ordinary income will be
treated as long-term capital gain. If the shares are held for the Required
Period and are sold at a price less than the purchase price paid by the
Participant for the shares, the loss on the sale will be treated as a long-term
capital loss to the Participant. The Company will not be entitled to any
deduction for federal income tax purposes for shares held for the Required
Period that are subsequently sold by the Participant, whether at a gain or loss.
If a Participant disposes of shares within the Required Period (a
"Disqualifying Disposition"), the Participant will recognize ordinary income in
an amount equal to the difference between the purchase price paid by the
Participant for the shares and the fair market value of the shares on the
Exercise Date, and the Company will be entitled to a corresponding deduction for
federal income tax purposes. In addition, if a Participant makes a Disqualifying
Disposition at a price in excess of the purchase price paid by the Participant
for the shares, the Participant will recognize a capital gain in an amount equal
to the difference between the selling price of the shares and the fair market
value of the shares on the Exercise Date. Alternatively, if a Participant makes
a Disqualifying Disposition at a price less than the fair market value of the
shares on the Exercise Date, the Participant will recognize a capital loss in an
amount equal to the difference between the fair market value of the shares on
the Exercise Date and the selling price of the shares. The Company will not
receive a deduction for federal income tax purposes with respect to any capital
gain recognized by a Participant who makes a Disqualifying Disposition.
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NEW PLAN BENEFITS
THE MACNEAL-SCHWENDLER CORPORATION 1996 EMPLOYEE STOCK PURCHASE PLAN(1)
<TABLE>
<CAPTION>
DOLLAR VALUE NUMBER OF
NAME AND POSITION ($) UNITS(2)
- ----------------------------------------------------------------- --------------- -----------
<S> <C> <C>
Richard A. MacNeal .............................................. -- --
Chairman and Chief Executive Officer(3)
Thomas C. Curry ................................................. 706 1,057
Chief Executive Officer and President
Dennis A. Nagy .................................................. 2,562 3,833
Senior Vice President, Operations
Louis A. Greco .................................................. 1,024 1,533
Chief Financial Officer
Bruce E. MacNeal ................................................ -- --
Vice President(4)
Kenneth D. Blakely .............................................. 834 1,249
Vice President
Executive Group ................................................. 7,266 10,874
Non-Executive Director Group(5) ................................. -- --
Non-Executive Officer Employee Group ............................ 77,325 115,718
</TABLE>
- ------------------------
(1) Benefits or amounts that will be received by or allocated to each of the
following individuals or groups of individuals are not determinable because
benefits or amounts depend, among other things, on the rate at which
Participants participate in the Plan, if at all, the Participant's
Compensation and the price of the Company's Common Stock in the future.
Accordingly, amounts listed are benefits or amounts which would have been
received by or allocated to each of the following individuals or groups of
individuals for the last completed fiscal year if the Plan had been in
effect for such period, assuming that Contributions would have been made in
the last full completed fiscal year for such entire period at the same rates
actually designated by such persons for the October 1, 1996 to July 31, 1997
Offering Period.
(2) Shares of the Company's Common Stock.
(3) No amounts are shown for Richard MacNeal because he was not eligible to
participate in the Plan.
(4) No amounts are shown for Bruce MacNeal because he elected not to participate
in the Plan.
(5) Non-employee directors are not eligible to participate in the Plan.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors believes that the adoption of the Plan will promote
the interests of the Company and its shareholders and continue to enable the
Company to attract, retain and reward its employees. The Plan encourages
employee ownership of the Company's Common Stock and this should facilitate the
attainment of long-term corporate goals and objectives.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE PLAN AND RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE EMPLOYEE STOCK PURCHASE PLAN. PROXIES RECEIVED BY
THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR
PROXY A CONTRARY CHOICE.
3. STOCKHOLDER PROPOSAL A
The Company has been notified that a certain stockholder of the Company
intends to present for consideration and action at the annual meeting the
following stockholder proposal. The name and
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address of the proponent and the number of shares of the voting security held by
the proponent will be furnished by the Company to any person, orally or in
writing as requested, promptly upon the receipt of any oral or written request
therefor. The Board of Directors unanimously recommends that stockholders vote
AGAINST the proposal for the reasons set forth below:
BE IT RESOLVED, that the Stockholders of The MacNeal-Schwendler Corporation
recommend that the Board of Directors immediately engage the services of an
independent investment banking firm with substantial experience in computer
software industry transactions to explore all alternatives to enhance the value
of the Company, including, but not limited to, reinstating the dividend,
repurchasing Common Stock of the Company, revising Company compensation policy
and practice to align it with the interests of outside shareholders, and the
possible sale of the Company.
SUPPORTING STATEMENT
The MacNeal-Schwendler Corporation has had three Presidents in the last
three years. Selecting the Presidents of two companies they acquired and
bringing back the Company's founder once suggests a lack of serious effort to
search out the best business talent to run the company. The neglect shows --
both in operating results and share prices.
Here are five-year COMPOUND ANNUAL TOTAL RETURN NUMBERS for
MacNeal-Schwendler shareholders and two comparative stock market indices,
commencing in 1991, through November 22, 1996:
<TABLE>
<S> <C>
Dow Jones Software Index........................................... + 33.3%
Dow Jones Equity Market Index...................................... + 18.2%
MacNeal-Schwendler Corp............................................ +3.2%
</TABLE>
- ------------------------
(Source: IDD Information Services)
Coming off this record, the Board decided they needed to expropriate
shareholder dividends in 1996 -- doing so in a startling two-step: a 63% cut
then followed by an elimination a couple of months later -- even as management
indicated operating results were improving. They want to reinvest our dividends
for us.
Unfortunately, the record is not encouraging on this count. The results of
the last seven years of robust research and development spending has been
invisible to shareholders. Shades of THE EMPEROR'S NEW CLOTHES? Without the
dividend over the last five years, shareholders would have actually lost money
during the greatest stock market advance of all time.
Dramatic change is required to reverse the erosion of our Company's value.
The Board needs to retain the best brains in software investment banking to help
it unlock the value of that MacNeal-Schwendler business franchise. This may
require sale of the Company to one of its peers that is strategically better
situated and has proven ability to realize value for shareholders.
If you believe, as I do, that the value of the underlying business franchise
of our Company is currently not reflected in the stock price, then I urge you to
give the Board a helping hand, as well as a wake-up call, by voting FOR this
modest proposal.
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
The Board believes that it is not in the best interests of the Company and
its stockholders to engage the services of an investment banking firm at this
time. Hiring an investment banking firm involves high costs and the funds can be
used more effectively and efficiently to support the core operations of the
Company.
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The Board has engaged, and will in the future engage, the services of
investment banking firms from time to time to assist the Board in making
decisions which significantly impact the Company. Recently, in connection with
the Company's 1994 acquisition of PDA Engineering, the Board retained Hambrecht
& Quist Incorporated and Duff & Phelps Financial Consulting Co. The Company also
periodically conducts its own internal financial and valuation analyses, and
regularly explores all options to enhance the value of the Company. As a result
of this process, the Electronics Business Unit was sold in fiscal year 1997 for
$5.6 million.
In addition, two members of the current Board of Directors collectively have
over 58 years of investment banking experience. George Riordan, the Chairman of
the Board, currently is a Managing Director of George Riordan & Co., an
investment banking firm, and formerly was a Managing Director of Dean Witter
Reynolds, Inc. Harold Harrigian currently is a Partner and Director of the
Corporate Finance Department of Crowell, Weedon & Co., an investment banking and
securities firm. Thus, the Board benefits from having investment banking
expertise without the costs of always retaining outside investment bankers. In
addition, the Board has the experience to know when to retain an investment
banking firm.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST THIS PROPOSAL
PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
4. STOCKHOLDER PROPOSAL B
The Company has been notified that a certain stockholder of the Company
intends to present for consideration and action at the annual meeting the
following stockholder proposal. The name and address of the proponent and the
number of shares of the voting security held by the proponent will be furnished
by the Company to any person, orally or in writing as requested, promptly upon
the receipt of any oral or written request therefor. The Board of Directors
unanimously recommends that stockholders vote AGAINST the proposal for the
reasons set forth below:
BE IT RESOLVED, that the stockholders of The MacNeal-Schwendler Corporation
request that the Board of Directors immediately take the necessary steps to
declassify the Board of Directors and establish annual elections of directors,
whereby directors would be elected annually and not by classes. This policy
would take effect immediately and be applicable to the reelection of any
incumbent director whose term, under the current classified system, subsequently
expires.
SUPPORTING STATEMENT
The ability to elect directors is the single most important use of the
shareholder franchise. Accordingly, all directors should be accountable to
shareholders on an annual basis. The current system of electing
MacNeal-Schwendler directors by classes for three-year terms, in my opinion,
minimizes director accountability and precludes the full exercise of the rights
of shareholders to approve or disapprove annually the performance of a director
or directors.
This proposal would eliminate the existing classified board and require each
director to stand for election annually. This change would allow shareholders an
opportunity to annually register their views on the performance of the Board
collectively and each director individually.
The corporate governance procedure of annual elections of all directors is
supported by such well-respected institutions as California Public Employees'
Retirement System (CalPERS), National Association of Corporate Directors and
Institutional Shareholder Services. As CalPERS has stated, "A
24
<PAGE>
company's corporate governance procedures and practices, and the level of
management accountability they impose, are related to its financial performance.
It is intuitive that, when directors are accountable, they perform better."
The primary reasons usually given by management for a classified board are
to encourage continuity of the board and to discourage hostile tender offers.
Based on the Company's stock performance over the last five years, continuity of
directors has done absolutely nothing for the shareholders of MacNeal
Schwendler. As of December 19, 1996, the five-year compound annual return on an
investment in MacNeal-Schwendler was -1.5% compared to 28.8% for the Dow Jones
Software Index and 15.0% for the Dow Jones Equity Market Index. (Source:
Barron's and IDD Information Services) Why would shareholders want to continue
this poor performance? As for discouraging hostile tender offers, faced with the
prospects of continuing poor stock performance or a hostile tender offer price,
shareholders would probably prefer to encourage offers and then have the option
to determine if they want to sell their shares at a given higher price.
For these reasons, I urge you to vote FOR the annual election of all
directors as a powerful tool to enforce director accountability and, ultimately,
enhance shareholder value.
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
The Company has had a classified Board since June 1990. The Board continues
to believe that a classified Board is in the best interests of the Company and
its stockholders.
A classified Board increases the likelihood that a majority of the Board at
any given time has prior experience serving as Directors of the Company. This
provides stability in the leadership and policies of the Company while
preserving the ability of the Company's stockholders to make changes in the
Board's membership. A classified Board's long term experience and familiarity
with Company operations and prior value enhancement initiatives enables the
Board to better evaluate opportunities to enhance shareholder value. A
classified Board's tenure also allows the Board to focus on long-term
opportunities without the distraction of being measured against short-term
annual returns.
The Board believes that three year terms for Directors assist the Company in
attracting quality Director candidates. Interested nominees are willing to make
long-term commitments to serve the Company, increasing the overall knowledge and
experience of the Board with respect to the Company's operations.
A classified Board is also intended to encourage persons seeking to acquire
control of the Company to initiate such action through arms-length negotiations
with the Board rather than through a surprise proxy contest designed to change
the control of the Company in a single election. Only the Board is in a position
to negotiate a transaction which is fair to all of the Company's stockholders.
Election of directors by classes is a common practice that is used by many
public companies. Currently, classified boards exist at over half of the major
U.S. companies tracked by the Investor Responsibility Research Center.
Statistics compiled by the American Society of Corporate Secretaries show that
stockholders of public companies have continued to support the use of classified
boards. Based upon information from the Society, more than 92% of the
stockholder proposals to eliminate classified boards which were voted upon in
the past four proxy seasons (1993-1996) have been defeated.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST THIS PROPOSAL.
PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
25
<PAGE>
5. RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company's Board of Directors has selected Ernst & Young LLP to serve as
the Company's independent accountants during the current fiscal year. A
representative of Ernst & Young LLP is expected to be present at the 1997 Annual
Meeting to make such statements as he or she may desire and will be available to
answer appropriate questions from stockholders.
Services provided by Ernst & Young LLP to the Company and its subsidiaries
during the fiscal year ended January 31, 1997 included the examination of the
Company's consolidated financial statements and consultation on various tax and
accounting matters.
Ratification of the appointment of Ernst & Young LLP will require the
affirmative vote of at least a majority of the shares of the Company's Common
Stock represented in person or by proxy and entitled to vote at the 1997 Annual
Meeting, assuming the presence of a quorum.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THIS PROPOSAL
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
VOTES REQUIRED
The nominees for election as directors who receive the vote of a plurality
of the shares entitled to be voted at the Annual Meeting, a quorum being
present, shall become directors at the conclusion of the tabulation of the
votes. Approval of the Employee Stock Purchase Plan, approval of the stockholder
proposals, and approval and ratification of the appointment of the auditors each
requires the vote of a majority of the shares represented at the Annual Meeting
and entitled to vote on any matter. A majority of the Company's outstanding
shares of Common Stock as of April 18, 1997 must be represented in person or by
proxy to constitute a quorum for the 1997 Annual Meeting.
Votes cast by proxy or in person at the annual meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum and for purposes of determining the
outcome of any matter submitted to the stockholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality.
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote that the broker
or nominee does not have discretionary power to vote on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, in accordance with the rules of the New York
Stock Exchange, brokers and nominees may be precluded from exercising their
voting discretion with respect to certain matters to be acted upon. Accordingly,
for purposes of determining the outcome of any matter as to which the broker has
physically indicated on the proxy for such shares that it does not have
discretionary authority to vote on a particular subject, those shares will be
treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered entitled to vote for quorum purposes
and may be entitled to vote on other matters).
Any unmarked proxies, including those submitted by brokers or nominees, will
be voted as indicated in the accompanying proxy card and as summarized elsewhere
in this Proxy Statement.
26
<PAGE>
OTHER MATTERS
OTHER BUSINESS
The Board of Directors has no present intention of bringing before the 1997
Annual Meeting any matters for action other than those listed in the Notice of
Annual Meeting and discussed above in this Proxy Statement, and management is
not aware of any matters which may be presented by others. If any other business
properly comes before the meeting, however, the proxy confers discretionary
authority to vote with respect to such matters, and the persons named in the
Proxy Card will vote on such matters, if any, in accordance with their best
judgment.
PROPOSALS OF SECURITY HOLDERS
It is expected that the Company's 1998 Annual Meeting will be held on or
about June 10, 1998. Stockholders desiring to submit proposals for inclusion in
the Company's proxy materials for, and for action at, that meeting will be
required to submit them to the Company on or before December 31, 1997 (120 days
before April 30, 1998). Any such stockholder proposal must also be proper in
form and substance in accordance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, in order to be so
included. Proposals should be submitted to Mr. Louis A. Greco, Secretary, The
MacNeal-Schwendler Corporation, 815 Colorado Boulevard, Los Angeles, California
90041.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than 10% of a registered class
of the Company's equity securities (collectively, the "Reporting Persons") to
file reports of ownership and changes in ownership with the SEC and the New York
Stock Exchange and to furnish the Company with copies of these reports.
Based on the Company's review of the copies of these reports received by it,
and written representations received from Reporting Persons, the Company
believes that all filings required to be made by Reporting Persons for the
period February 1, 1996 through January 31, 1997 were made on a timely basis.
ANNUAL REPORT TO STOCKHOLDERS
Enclosed with this Proxy Statement is the Annual Report of the Company for
the fiscal year ended January 31, 1997. The enclosed Annual Report is included
for the convenience of stockholders only and should not be viewed as part of the
proxy solicitation material.
EXHIBITS TO ANNUAL REPORT ON FORM 10-K
If any person who was a beneficial owner of Common Stock of the Company on
the record date for the 1997 Annual Meeting desires additional information, a
copy of the exhibits to the Company's Report on Form 10-K will be furnished upon
receipt of a written request and payment of copying charges. The request should
identify the person requesting the exhibits as a stockholder of the Company as
of April 18, 1997. Requests should be directed to Mr. Louis A. Greco, Secretary,
The MacNeal-Schwendler Corporation, 815 Colorado Boulevard, Los Angeles,
California 90041.
By Order of the Board of Directors
Louis A. Greco
SECRETARY AND CHIEF FINANCIAL OFFICER
April 30, 1997
27
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EXHIBIT A
THE MACNEAL-SCHWENDLER CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of The MacNeal-Schwendler Corporation.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Plan shall, accordingly, be construed so
as to extend and limit participation in a manner consistent with the
requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean The MacNeal-Schwendler Corporation, a Delaware
corporation.
(e) "COMPENSATION" shall mean all regular straight time gross earnings,
payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses, commissions and other cash compensation.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "CONTRIBUTIONS" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
(h) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan (including any Subsidiaries which have been so
designated after the date the Plan is approved by stockholders).
(i) "EMPLOYEE" shall mean any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "EXERCISE DATE" shall mean the last day of each Offering Period of the
Plan.
(l) "OFFERING DATE" shall mean the first business day of each Offering
Period of the Plan.
(m) "OFFERING PERIOD" shall mean a period of six (6) months, subject to and
except as otherwise provided in Section 4.
(n) "PLAN" shall mean this Employee Stock Purchase Plan.
(o) "SUBSIDIARY" shall mean any corporation, domestic or foreign, in an
unbroken line of corporations (beginning with the Company) in which each
corporation (other than the last corporation) has stock possessing 50% or more
of the total combined voting power of all classes of stock in one or more
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of the other corporations in the chain, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who has been employed as an Employee for three (3) months as
of the Offering Date of a given Offering Period shall be eligible to participate
during such Offering Period under the Plan, subject to the requirements of
Section 5(a) and the limitations imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (after applying the attribution rules contained in Section 424(d)
of the Code) would own stock and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Subsidiary, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty Five Thousand Dollars
($25,000) of fair market value of such stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at any
time. For this purpose, a right to purchase stock occurs when it first becomes
exercisable during the calendar year.
4. OFFERING PERIODS. The first Offering Period shall commence on October
1, 1996 (or such other date as the Board of Directors shall determine) and
terminate on July 31, 1997. All subsequent new Offering Periods shall commence
on or about February 1 and August 1 of each year (or at such other time or times
as may be determined by the Board of Directors) and shall terminate on the next
succeeding July 31 and January 31, respectively. The Plan shall continue until
terminated in accordance with Sections 19 or 23 hereof. The Board of Directors
of the Company shall have the power to change the duration and/or the frequency
of Offering Periods with respect to future offerings without stockholder
approval if such change is announced at least ten (10) days prior to the
scheduled beginning of the first Offering Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement on the form provided by the Company and filing it with
the Company's payroll office prior to the applicable Offering Date, unless a
different time for filing the subscription agreement is set by the Board for all
eligible Employees with respect to a given Offering Period. The subscription
agreement shall set forth the percentage of the participant's Compensation
(which shall be not less than 1% and not more than 10%) to be applied as
Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid on or prior to the Exercise
Date of the Offering Period to which the subscription agreement is applicable,
unless sooner terminated by the participant as provided in Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) The participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than ten percent (10%) of such participant's Compensation on each
such payday. The Company will maintain on its books or cause to be maintained by
a recordkeeper an account in the name of such participant. All payroll
deductions made by a participant shall be credited to his or her account under
the Plan. A participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan as
provided in Section 10, or, on one occasion only during the Offering Period, may
decrease the rate of his or her Contributions
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during the Offering Period by completing and filing with the Company a new
subscription agreement. The change in rate shall be effective as of the
beginning of the fiscal quarter following the date of filing of the new
subscription agreement.
(c) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) herein, a participant's payroll
deductions may be decreased to 0% at such time during any Offering Period which
is scheduled to end during the current calendar year that the aggregate of all
payroll deductions accumulated with respect to such Offering Period and any
other Offering Period ending within the same calendar year equal $22,500.
Payroll deductions shall re-commence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
the Exercise Date a number of shares of the Company's Common Stock determined by
dividing such Employee's Contributions accumulated prior to such Exercise Date
and retained in the participant's account as of the Exercise Date by the lower
of (i) ninety percent (90%) of the fair market value of a share of the Company's
Common Stock on the Offering Date, or (ii) ninety percent (90%) of the fair
market value of a share of the Company's Common Stock on the Exercise Date;
PROVIDED, HOWEVER, that the maximum number of shares an Employee may purchase
during each Offering Period shall be determined at the Offering Date by dividing
$12,500 by the fair market value of a share of the Company's Common Stock on the
Offering Date, and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12. The fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given Offering
Period shall be the lower of: (i) 90% of the fair market value of a share of the
Common Stock of the Company on the Offering Date; or (ii) 90% of the fair market
value of a share of the Common Stock of the Company on the Exercise Date. The
fair market value of the Company's Common Stock on a given date shall be the
closing price on The New York Stock Exchange on such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in THE WALL STREET JOURNAL or, in the event the
Common Stock is not listed on The New York Stock Exchange, the fair market value
shall be the closing price of the Common Stock for such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by the National Association of Securities Dealers
Automated Quotation ("Nasdaq") or, if such price is not reported, the mean of
the bid and asked prices per share of the Common Stock as reported by Nasdaq or,
if such prices are not so reported, as determined by the Board in its
discretion.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on the Exercise Date of the Offering Period, without any
further action on the optionee's part, and the maximum number of full shares
subject to option will be purchased at the applicable option price with the
accumulated Contributions in his or her account. The shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Exercise Date. During his or her lifetime, a participant's
option to purchase shares hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option. Only cash remaining to the credit of a participant's account
under the Plan after a purchase by him or her of shares at the termination of
each Offering Period which is insufficient to purchase a whole share of Common
Stock of the Company
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shall be carried over in the participant's account and applied to the option
price for the succeeding Offering Period.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT; REDUCTION IN SERVICE.
(a) A participant may withdraw all but not less than all the Contributions
credited to his or her account under the Plan at any time prior to ten (10) days
prior to the Exercise Date of the Offering Period by giving written notice to
the Company. All of the participant's Contributions credited to his or her
account will be paid to him or her within fifteen (15) days after receipt of his
or her notice of withdrawal and his or her option for the current period will be
automatically terminated. No further Contributions for the purchase of shares
will be made during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an Employee
prior to the Exercise Date of the Offering Period for any reason, including
retirement or death, the Contributions credited to his or her account will be
returned to him or her or, in the case of his or her death, to the person or
persons entitled thereto under Section 14, and his or her option will be
automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as an
Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any effect
upon his or her eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Company.
11. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be 750,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in Section
18. If the total number of shares which would otherwise be subject to options
granted pursuant to Section 7(a) on the Offering Date of an Offering Period
exceeds the number of shares then available under the Plan (after deduction of
all shares for which options have been exercised or are then outstanding), the
Company shall make a pro rata allocation of the shares remaining available for
option grant in as uniform a manner as shall be practicable and as it shall
determine to be equitable. In such event, the Company shall give written notice
of such reduction of the number of shares subject to the option to each Employee
affected thereby and shall similarly reduce the rate of Contributions, if
necessary.
(b) The participant will have no interest or voting right in shares covered
by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or, if requested by the participant,
in the name of the participant and his or her spouse.
13. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power and discretion to
adopt, amend and rescind any rules deemed desirable and appropriate for the
administration of the Plan and not inconsistent with the Plan, to construe and
interpret the Plan, and to make all other determinations necessary or advisable
for the administration of the Plan. The composition of the committee shall be in
accordance with the requirements to obtain or retain any available exemption
from the operation of Section 16(b) of the Exchange Act.
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14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of the
Offering Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Exercise Date of the Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective in a form
prescribed by the Board.
(b) Such designation of beneficiary may be changed by the participant (and
his or her spouse, if any) at any time by written notice to the Company. In the
event of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
15. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any options or rights with regard to the exercise of options or to
receive shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
16. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. REPORTS. Individual bookkeeping accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Exercise Date, which statements will set forth
the amount of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) ADJUSTMENT. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised and the number of shares of Common Stock
which have been authorized for issuance under the Plan but have not yet been
placed under option (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each option under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; PROVIDED,
HOWEVER, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
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<PAGE>
(b) CORPORATE TRANSACTIONS. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board. In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
each option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Exercise Date (the "New
Exercise Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New Exercise Date, that the Exercise Date for his or her option has been
changed to the New Exercise Date and that his or her option will be exercised
automatically on the New Exercise Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 10. For purposes of
this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); PROVIDED, HOWEVER, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value of the per share consideration received by holders of Common Stock in the
sale of assets or merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time terminate or amend
the Plan. Except as provided in Section 18, no such termination shall affect
options previously granted, nor shall an amendment make any change in an
outstanding option which adversely affects the rights of the optionee. In
addition, to the extent necessary to comply with Section 423 of the Code (or any
successor rule or provision or any applicable law or regulation), the Company
shall obtain stockholder approval in such a manner and to such a degree as so
required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan. In addition, the Board (or its committee)
shall have the
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right to designate from time to time the Subsidiaries where employees may be
eligible to participate in the Plan and such designations shall not constitute
an amendment to the Plan requiring stockholder approval in accordance with
Treasury Regulations Section 1.423-2(c)(4).
20. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the Plan is adopted by the Board. Such stockholder approval shall be
obtained in the manner and to the extent required under applicable federal and
state law.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for that purpose.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, any applicable state
securities laws, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19.
24. PLAN CONSTRUCTION. It is the intent of the Company that transactions
in and affecting options in the case of Participants who are or may be subject
to Section 16 of the Exchange Act satisfy any then applicable requirements of
Rule 16b-3 so that such persons (unless they otherwise agree) will be entitled
to the exemptive relief of Rule 16b-3 in respect of those transactions and will
not be subjected to avoidable liability thereunder. Accordingly, this Plan shall
be deemed to contain, and such options shall contain, and the shares issued upon
exercise thereof shall be subject to, such additional conditions and
restrictions as may be required by Rule 16b-3 to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.
If any provision of this Plan or of any option would otherwise frustrate or
conflict with the intent expressed above, that provision to the extent possible
shall be interpreted as to avoid such conflict. If the conflict remains
irreconcilable, the Board or the committee may disregard the provision if it
concludes that to do so furthers the interest of the Company and is consistent
with the purposes of this Plan as to such persons in the circumstances.
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PROXY PROXY
THE MacNEAL-SCHWENDLER CORPORATION
Annual Meeting of Stockholders June 11, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE MacNEAL-SCHWENDLER CORPORATION
The undersigned hereby appionts Bernard J. Bannan and George N. Riordan,
and each of them, proxyholders, each with full power of substitution to vote
for the undersigned at the Annual Meeting of Stockholders of The
MacNeal-Schwendler Corporation to be held on June 11, 1997, and at any
adjournments thereof, with respect to the following matters, which were more
fully described in the Proxy Statement dated April 30, 1997 (the "Proxy
Statement"), receipt of which is hereby acknowledged by the undersigned.
THIS PROXY WILL BE VOTED AS DIRECTED, UNLESS OTHERWISE DIRECTED, THIS
PROXY WILL BE VOTED FOR THE RE-ELECTION OF THE TWO DIRECTOR NOMINEES, FOR
APPROVAL OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN, AGAINST THE TWO
STOCKHOLDER PROPOSALS, AND FOR THE RATIFICATION OF THE ACCOUNTANTS.
SEE REVERSE SIDE
<PAGE>
Please mark
your choice /X/
like this
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES
ON PROPOSAL 1, FOR PROPOSAL 2 AGAINST PROPOSAL 3, AGAINST PROPOSAL 4
AND FOR PROPOSAL 5.
FOR all nominees
listed below WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below.) listed below.
1. The election of the directors
specified in the Proxy Statement / / / /
to Class III of the Board of
Directors,
Dale D. Myers Arthur H. Reidel
(INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME IN THE LIST ABOVE.)
FOR AGAINST ABSTAIN
2. Approval of the 1996 Employee Stock / / / / / /
Purchase Plan.
3. Stockholder Proposal A. / / / / / /
4. Stockholder Proposal B. / / / / / /
5. Ratification of Accountants. To ratify
the appointment of Ernst & Young to serve / / / / / /
as the Company's Independent accountants for
the fiscal year ending January 31, 1998.
6. Such other matters as may properly come before the meeting or any
adjournment thereof. As to such other matters, the undersigned
hereby confers discretionary authority.
------------------------------------
(Please Print Name)
------------------------------------
(Signature of Holder of Common Stock)
------------------------------------
(Signature if held Jointly)
Dated: , 1997
-----------------------
NOTE: Please sign exactly as your name is printed. Each joint tenant should
sign. Executors, administrators, trustees and guardians should give full titles
when signing. Corporations and partnerships should sign in full corporate or
partnership name by authorized person. Please mark, sign, date and return your
Proxy promptly in the enclosed envelope, which requires no postage if mailed in
the United States.
