STRUCTURAL DYNAMICS RESEARCH CORPORATION
2000 Eastman Drive
Milford, Ohio 45150
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1997
TO THE SHAREHOLDERS OF STRUCTURAL DYNAMICS RESEARCH CORPORATION:
You are cordially invited to attend the Annual Meeting of the
Shareholders of Structural Dynamics Research Corporation to be
held on April 29, 1997 at 2:00 P.M. at the Company's offices, 2000
Eastman Drive, Milford, Ohio 45150, for the purpose of considering
and acting on the following:
1. Election of three Class II directors to serve until
the 1999 Annual Meeting.
2. Amendment to the Company's Amended Articles of
Incorporation to permit certain internal reorganizations without
shareholder approval.
3. Ratification of the appointment of Price Waterhouse
LLP as the independent auditors of the Company for 1997.
4. Transaction of such other business as may properly
come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on March 11,
1997 will be entitled to vote at the meeting.
By Order of the Board of Directors
John A. Mongelluzzo
Secretary
March 25, 1997<PAGE>
IMPORTANT
A proxy statement and proxy are submitted herewith. As a
shareholder, you are urged to complete and mail the proxy promptly
whether or not you plan to attend this Annual Meeting in person.
The enclosed envelope for return of proxy requires no postage if
mailed in the U.S.A. Shareholders attending the meeting may
personally vote on all matters which are considered in which event
their signed proxies are revoked. It is important that your
shares be voted. In order to avoid the additional expense to the
Company of further solicitation, we ask your cooperation in
mailing your proxy promptly.
<PAGE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION
2000 Eastman Drive
Milford, Ohio 45150 March 25, 1997
PROXY STATEMENT
The enclosed form of proxy is being solicited on behalf of
the Board of Directors of Structural Dynamics Research Corporation
(also referred to as "SDRC" or the "Company") for the Annual
Meeting of Shareholders to be held on April 29, 1997. Each of the
___________ shares of Common Stock, without par value, outstanding
on March 11, 1997, the record date of the meeting, is entitled to
one vote on all matters coming before the meeting. Only
shareholders of record on the books of the Company at the close of
business on March 11, 1997 will be entitled to vote at the meeting
either in person or by proxy. The Company has hired Morrow & Co.,
Inc. to assist it in soliciting proxies. This Proxy Statement is
being mailed to shareholders on or about March 25, 1997.
The shares represented by all properly executed proxies which
are sent to the Company will be voted as designated and each not
designated will be voted affirmatively. Each person granting a
proxy may revoke it by giving notice to the Company's Secretary in
writing or in open meeting at any time before it is voted.
Proxies will be solicited principally by mail, but may also be
solicited by directors, officers and other regular employees of
the Company who will receive no compensation therefor in addition
to their regular salaries. Brokers and others who hold stock in
trust will be asked to send proxy materials to the beneficial
owners of the stock, and the Company will reimburse them for their
expenses. The expense of soliciting proxies will be borne by the
Company.
The Annual Report of the Company for the fiscal year ended
December 31, 1996 is enclosed with this Proxy Statement.
ELECTION OF DIRECTORS
The Company's Board of Directors is comprised of Class I,
consisting of four directors, and Class II, consisting of three
directors, with no vacancies. At this Annual Meeting, three
directors of Class II are to be elected to hold office until the
1999 Annual Meeting of Shareholders. It is the intention of the
individuals named in the proxy to vote for the election of only
the three nominees designated for Class II directorships. Only
the maximum of three Class II directors may be elected. The
Company is not currently aware of any potential candidates who may
be nominated at or prior to the meeting, and in no event will the
proxies solicited hereby be voted for other than the three
nominees designated for Class II directorships.
The nominees, John E. McDowell, James W. Nethercott and
Gilbert R. Whitaker, Jr., are currently serving as members of the
Board of Directors. While management has no reason to believe
that any of the nominees will, prior to the date of the meeting,
refuse or be unable to accept the nominations, should any nominee
so refuse or become unable to accept, the proxies will be voted
for the election of such substitute nominee, if any, as may be
recommended by the Board of Directors. Nominees receiving the
three highest totals of votes cast in the election will be elected
as directors. Proxies in the form solicited hereby which are
returned to the Company will be voted in favor of the three
nominees specified above unless otherwise instructed by the
shareholders. Abstentions and shares not voted by brokers and
other entities holding shares on behalf of beneficial owners will
not be counted and will have no effect on the outcome of the
election.
Information with respect to each of the three nominees is as
follows:
CLASS II DIRECTORS
(Terms Expire in 1997)
JOHN E. McDOWELL, Partner in the Cincinnati law firm of
Dinsmore & Shohl and counsel to the Company since its inception.
Mr. McDowell also served as Secretary of the Company from 1967
until 1983. Mr. McDowell is 69 years of age and has been a
director of the Company since October, 1967.
JAMES W. NETHERCOTT, retired Senior Vice President, chief
financial officer and a director of The Procter & Gamble Company
(a diversified consumer products manufacturer), having served in
all three capacities from 1979 until his retirement in 1991. Mr.
Nethercott is also a director of The Ohio National Life Insurance
Company. Mr. Nethercott is 69 years of age and has been a
director of the Company since February, 1995.
GILBERT R. WHITAKER, JR., Professor of Business Economics,
University of Michigan from 1979 until the present. Previously
Provost and Executive Vice President for Academic Affairs of the
University of Michigan from 1990 to 1995. Dr. Whitaker also
served as Dean of the School of Business Administration of the
University of Michigan from 1979 to 1990. Dr. Whitaker is also a
director of Johnson Controls, Inc., Lincoln National Corporation
and the Handleman Company. Dr. Whitaker is 65 years of age and
has been a director of the Company since July, 1988.
The following sets forth similar information with respect to
incumbent directors in Class I of the Board of Directors who are
not nominees for election at this Annual Meeting of Shareholders:
CLASS I DIRECTORS
(Terms Expire in 1998)
WILLIAM P. CONLIN, Lead Director since October, 1996 and
Chairman of the Board of the Company from February, 1995 to
October, 1996. Mr. Conlin served as President of CalComp, Inc., a
subsidiary of Lockheed Corporation, from 1983 to 1993. Mr. Conlin
is also a director of Syntellect Incorporated. Mr. Conlin is 63
years of age and has been a director of the Company since April,
1993.
ALBERT F. PETER, Chairman of the Board and Chief Executive
Officer since October, 1996. Mr. Peter joined the Company in 1967
and served in various capacities until his election to the office
of Vice President, a position he held until his retirement in
December, 1991. In November, 1994 Mr. Peter was named acting
Chief Executive Officer of the Company and served in that position
until his election as President and Chief Executive Officer in
February, 1995. Mr. Peter is 54 years of age and has been a
director of the Company since 1983.
BANNUS B. HUDSON, is currently President and Chief Executive
Officer of Equity Enterprises, Inc., a strategic consulting firm.
Prior to that Mr. Hudson served as President and Chief Executive
Officer of The United States Shoe Corporation, having served in
such capacities for more than five years, until May, 1995. Mr.
Hudson is also a director of Ohio National Financial Services,
U.S. Biomaterials Corporation and Castle Dental Centers, Inc. Mr.
Hudson is 51 years of age and has been a director of the Company
since June, 1995.
ARTHUR B. SIMS, Chairman of the Board and Chief Executive
Officer of 3D Systems Corporation, (developer, manufacturer and
marketer of rapid prototyping systems) since August, 1993 and
Chief Executive Officer of its California subsidiary since
September, 1991. For one year prior to that he was the President
and Chief Executive Officer of Quadratron Systems, Incorporated (a
developer and marketer of office automation software). Mr. Sims
is 59 years of age and has been a director of the Company since
July, 1995.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
In the fiscal year ended December 31, 1996, the Board of
Directors met on seven occasions. Each incumbent director during
the last fiscal year attended 75% or more of the aggregate of (i)
the total number of meetings of the Board of Directors (held
during the period for which he has been a director) and (ii) the
total number of meetings held by all committees of the Board on
which he served (during the periods that he served).
The Board's committee structure is governed by formal Board
of Directors Guidelines on Corporate Governance Issues (the
"Corporate Governance Guidelines") which include written charters
for each committee. Among other provisions, the Corporate Governance Guidelines
specify that
only outside directors may serve on the committees. Information regarding
the committees is set
forth below.
The Company has an Audit Committee of the Board of Directors, which held
seven meetings
during 1996. The Audit Committee recommends to the entire Board of Directors
the independent
auditors to be employed by the Company, consults with the independent
auditors with respect to
their audit plans, reviews the independent auditors' audit report and any
management letters
issued by the auditors, and consults with the independent auditors with
regard to financial
reporting and the adequacy of internal controls. The present members of the
Audit Committee are
Messrs. Nethercott (Chairman), McDowell and Conlin.
The Company has a Compensation Committee of the Board of Directors,
which held seven
meetings during 1996. The Compensation Committee recommends to the entire
Board of Directors
the compensation arrangements for the Chief Executive Officer, determines
the compensation of
the corporate officers of the Company, administers the Company's stock
option plans, and
reviews proposed changes in management organization. The present members of
the Compensation
Committee are Messrs. Hudson (Chairman) and Conlin and Dr. Whitaker.
The Board of Directors has a Nominating and Director Affairs Committee,
which held two
meetings during 1996. The functions of this Committee are to recommend
corporate governance
policies, to lead the annual self-evaluation of the Board and to
periodically seek out qualified
candidates for election to the Board and to make recommendations to the
whole Board with respect
to nominees. The Committee also makes recommendations as to exercise of the
Board's authority
to determine the number of its members, within the limits provided by the
Company's Amended Code
of Regulations. The members of the Nominating and Director Affairs
Committee are Messrs.
McDowell (Chairman), Conlin and Sims. Shareholders wishing to communicate
with the Nominating
and Director Affairs Committee concerning potential director candidates may
do so by
corresponding with the Company's Secretary, John A. Mongelluzzo, and
including the name and
biographical data of the individual being suggested.
EXECUTIVE COMPENSATION
Summary
The following table is a summary of certain information concerning the
compensation awarded
or paid to, or earned by, the Company's chief executive officer and each of
the Company's other
four most highly compensated executive officers who held office as of the
end of 1996 (the
"named executives") during each of the last three fiscal years:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
____________ ___________________
Name and
Principal Year Salary Bonus($) Securities All Other
Position ($) (1) Underlying Options# Compensation(2)
_____________________ ____ ______ ________ ____________________ _________________
<S> <C> <C> <C> <C> <C>
Albert F. Peter
President and Chief 1996 -------- -------- 200,000 shs. ____(4)
Executive Officer 1995 300,000 350,000 75,000 shs. 2,321(4)
1994 23,864 -------- 10,000 shs.(3) 22,500(4)
John A. Mongelluzzo
Vice President 1996 -------- -------- 20,000 shs --------(5)
Secretary, and 1995 134,000 100,000 15,000 shs. 4,257 (5)
General Counsel 1994 113,503 -------- 15,000 shs. 3,513 (5)
Martin A. Neads
Vice President - 1996 -------- -------- 35,000 shs. -------- (6)
SDRC Operations 1995 206,313 170,000 15,000 shs. 104,498(6)
1994 151,873 -------- 55,000 shs. 5,101(6)
Martin D. Schussel
Vice President - 1996 -------- -------- 25,000 shs. ---------(7)
Product Development 1995 147,633 120,000 22,000 shs. 6,306(7)
1994 -------- -------- --------- ---------
Jeffrey J. Vorholt
Vice President, Chief 1996 -------- -------- 25,000 shs.
- -------- (8)
Financial Officer 1995 154,568 120,000 15,000 shs.
5,065(8)
and Treasurer 1994 -------- -------- ---------
- ---------
</TABLE>
___________________
(1) Amounts shown include cash bonuses paid in 1996 and
1997 with respect to the Company's performance in 1995 and 1996,
respectively, under the Company's Incentive Compensation Plan for
Key Management Personnel.
(2) All amounts shown include amounts contributed by the
Company pursuant to the Company's Tax Deferred Capital
Accumulation (401(k)) Plan, except in the case of Mr. Peter, who
does not participate, and Mr. Neads who was not eligible to
participate in 1994. Participants in the Company's 401(k) plan
may elect to reduce their salaries by no less than 1% per month
and no greater than 15% per year and to have such amount
contributed to their accounts in this plan. They may also make
other voluntary contributions from time to time. With respect to
any fiscal year, the Company may elect to partially match employee
contributions. Such matching contributions may be either in cash
or in shares of the Company's Common Stock. The Company elected
to make such contributions for all the years shown. The Company's
contributions were made in the form of Common Stock. Amounts in
this plan become available for payout upon termination or
retirement only.
(3) Consists of stock options granted to Mr. Peter in his
capacity as a non-employee director, pursuant to the Company's
Directors' Non-Discretionary Stock Option Plan, prior to his
election as President and Chief Executive Officer.
(4) Consists of director's fees paid to Mr. Peter in his
capacity as a non-employee director in 1994 prior to his election
as President and Chief Executive Officer, and $2,321 in 1995 and
$_____ in 1996 which were term life insurance premiums for
insurance benefiting the named executive.
(5) Includes, for 1996, 1995 and 1994, respectively,
$_______, $4,121 and $3,405 representing the Company 401(k) plan
contributions, and $______, $136 and $108 , which were term life
insurance premiums paid by the Company for insurance benefiting
the named executive.
(6) Consists in 1994 of contributions to the Company's
executive pension plan for United Kingdom employees, and includes,
for 1996 and 1995, respectively, $______ and $4,586 representing
the Company's 401(k) plan contribution and $_________ and $1,402
which were term life insurance premiums for insurance benefiting
the named executive. Also includes, for 1995, $70,835 in payment
of costs associated with Mr. Neads' relocation from England to the
United States and for 1996 and 1995, respectively, $________ and
$27,675 in payment of the private school tuition costs of Mr.
Neads' children which the Company reimburses under the employment
arrangement with Mr. Neads. See "Executive Compensation --
Employment Agreement."
(7) Includes, for 1996 and 1995, respectively, $_______
and $4,837 representing the Company's 401(k) plan contribution,
and $______ and $1,469, which were term life insurance premiums
paid by the Company for insurance benefiting the named executive.
(8) Includes, for 1996 and 1995, respectively, $_______
and $4,500 representing the Company's 401(k) plan contribution,
and $______ and $565, which were term life insurance premiums paid
by the Company for insurance benefiting the named executive.
Stock Options
The following table sets forth information regarding stock
options granted to the named FSexecutives during 1996:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
_________________ _______________________
<CAPTION>
Number of % of
Securities Total
Underlying Options
Options Granted to Exercise of
Granted Employees in Base Price Expiration 5% 10%
Name #(1) Fiscal Year ($/Sh.) Date ($) ($)
_________ _________ ___________ ___________ __________ __ __
<S> <C> <C> <C> <C> <C><C>
Albert F.
Peter
John A.
Mongel-
luzzo
Martin A.
Neads
Martin D.
Schussel
Jeffrey J.
Vorholt
</TABLE>
_______________________
(1) All such options first become exercisable as to 33% of the
shares covered after the end of the first year after the date of
grant, as to 67% of the shares covered after the end of two years,
and are exercisable in full after the end of three years. The
option exercise price is not adjustable over the 10-year term of
the options except due to stock splits and similar occurrences
affecting all outstanding stock.
The following table sets forth information regarding stock
options exercised by the named executives during 1996 and the
value of unexercised in-the-money options held by the named
parties as of December 31, 1996:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<CAPTION>
Value of
Number of Securities Unexercised
Underlying In-the-Money
Unexercised Options Options at
at FY-End (#) at FY-End($)
Shares
Acquired Value
on Exercise Realized Exer- Unexer- Exer- Unex-
Name ( #) ($) cisable cisable cisable cisable
_________ ___________ _________ _______ _______ ________ _______
<S> <C> <C> <C> <C> <C> <C>
Albert F.
Peter
John A.
Mongel-
luzzo
Martin A.
Neads
Martin D.
Schussel
Jeffrey J.
Vorholt
</TABLE>
Compensation of Directors
During the year ended December 31, 1996, the Company's
outside directors (those directors who are not employees of the
Company) were compensated for their services as directors at the
rate of $15,000 per year. In addition, directors received $1,500
for each Board of Directors meeting and $750 for each committee
meeting they attended, and individuals who served as committee
chairmen received an additional $250 per committee meeting
attended. Currently, the Lead Director, a non-executive position,
receives an additional $10,000 per month. The Company does not
additionally compensate employee directors. All directors are
reimbursed for all expenses incurred in connection with attendance
at meetings of the Board and the performance of Board duties.
In addition, outside directors currently receive stock
options under the Structural Dynamics Research Corporation
Directors' Non-Discretionary Stock Plan (the "Directors' Plan").
The Directors' Plan provides that upon their initial election or
appointment, non-employee directors are automatically issued
options to purchase 10,000 shares of the Company's Common Stock
and that at every annual organizational meeting of directors each
then-serving director will receive an additional option to
purchase 10,000 shares. All options granted under the Directors'
Plan have a five year term and an exercise price equal to 100% of
the fair market value of the Common Stock on the date of issuance.
Options are not exercisable at all for six months after their
issuance, at which time they become exercisable as to 50% of the
shares covered. After 12 months, they become exercisable in full
until expiration.
The Directors' Plan also permits directors, in advance on an
annual basis, to elect to receive all or a specified percentage of
their annual $15,000 in the form of Common Stock rather than cash.
Employment Agreement
In November, 1994, Martin A. Neads, who was then Vice
President and General Manager - European Operations, was asked to
relocate to the Company's headquarters in the United States and to
assume the position of Senior Vice President - SDRC Operations.
The Company agreed to pay all expenses incurred in connection with
Mr. Neads' relocation from England. The Company also agreed to
pay the school tuition costs of Mr. Neads' children and to pay the
airfare for two return trips to England for his family during the
first three years of his assignment in the United States. The
arrangement with Mr. Neads also provides that, although Mr. Neads
is to remain an "at will" employee of the Company, in the event
Mr. Neads is terminated by the Company for reasons other than
cause (defined as gross misconduct, theft, etc.) while he is on
assignment in the United States, he will be given a severance
benefit equal to 12 months of his annual pay (defined as base
salary plus the prior year's bonus).
Severance Compensation Agreements
In order to minimize distraction in circumstances arising
from a change in control, the Company has entered into severance
compensation agreements with each of the named executives, as well
as other executive officers of the Company, which provide for the
payment of severance compensation in the event the employment of
the named executive or other officer is terminated by the Company
within two years following a change in control of the Company
other than due to death or disability or for cause, or if the
executive terminates his or her employment for "good reason."
Good reason is defined in detail in the agreements and generally
exists if there is a material change in the terms and conditions
of the executive's employment. The severance benefits payable
under these agreements are equal to 250% of the sum of the prior
year's base salary and annual bonus target.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the
Company has furnished the following report on executive
compensation:
Overview and Philosophy
The Compensation Committee of the Board of Directors (the
"Compensation Committee") is comprised of three non-employee
directors of the Company. No member of the Compensation Committee
has any insider or interlocking relationship with the Company, as
these terms are defined in applicable rules and regulations of the
Securities and Exchange Commission. The Compensation Committee is
responsible for developing and recommending the Company's
executive compensation principles, policies and programs to the
Board of Directors. In addition, the Compensation Committee
recommends to the Board of Directors on an annual basis the
compensation to be paid to the Chief Executive Officer and, with
advice from the Chief Executive Officer, determines the amount
paid to each of the other executive officers of the Company,
including the named executives.
The Compensation Committee works with an outside compensation
consultant and supports its compensation decisions by analysis of
published surveys and special studies undertaken periodically.
The Company's compensation programs are designed to provide
its executive officers with market competitive salaries and the
opportunity to earn incentive compensation related to performance
expectations identified by the Board. The objectives of the
Company's executive compensation program as developed by the
Compensation Committee are to:
Provide a direct link between executive officer
compensation and the interests of the Company's
shareholders by making a significant portion of
executive officer compensation dependent upon the
financial performance of the Company and the price
performance of the Company's Common Stock.
Support the achievement of the Company's annual and
long-term goals and objectives as determined annually
by the Board.
Establish base salaries targeted at a median level for
comparable positions within a comparison group of
companies, with incentive opportunities designed to
pay total compensation well above average for
outstanding Company performance.
Provide opportunities for equity ownership based on
competitive levels, corporate/segment performance,
share price performance, and share dilution
considerations.
Achieve and maintain desired levels of Common Stock
ownership within the executive officer group; desired
levels of Common Stock ownership are amounts valued at
three times the salary level for the Chief Executive
Officer and two times or one time the salary level for
other executive officers of the Company. The
Company's 1994 Long-Term Stock Incentive Plan is
designed to provide opportunities for ownership
through retention of shares obtained through the
exercise of options.
Provide compensation plans and arrangements that
encourage the retention of better-performing
executives.
The Compensation Committee's executive compensation policies
seek to provide an opportunity for compensation, that varies with
performance, which compares favorably to levels provided to
executives within a comparative group of companies engaged in high
technology businesses. These companies are generally either
competitive with or complementary to the Company's business and
are generally of comparable size, business characteristics and
complexity (the "Comparative Group"). All of the companies in the
Comparative Group whose shares are traded on the Nasdaq National
Market are included in the Nasdaq Computer and Data Processing
Services Stocks Index (see "Executive Compensation--Financial
Performance"). The Comparative Group also includes certain
companies whose shares are traded on other exchanges, and are
therefore not included in such index, but are nevertheless
considered to be comparable to the Company for this purpose.
The Compensation Committee developed an executive
compensation strategy which targets total direct compensation
(base salary plus annual incentives plus long-term incentives) at
competitive levels compared to the Comparative Group in a manner
which directly links the interests of the Company's executives and
its shareholders and focuses executives on sustainable long-term
growth. Individual compensation levels recommended by the
Compensation Committee may vary significantly among the Company's
executive officers and from year to year, because such levels may
also be based in major part on annual and long-term corporate
performance, as well as on individual performance. The
Compensation Committee assigns more weight to long-term corporate
performance for higher level executives and more weight to annual
corporate and individual performance for lower level executives in
determining the compensation level of any individual executive
officer.
Compensation of Executive Officers
The compensation of executive officers of the Company
includes (i) base salary, (ii) annual incentive cash bonuses, and
(iii) long-term incentive compensation currently in the form of
stock options. Bonuses and stock options (collectively,
"Incentive Compensation") may represent between one-third and two-thirds of
an executive officer's potential annual compensation,
depending upon the position. In general, the proportion of an
executive officer's compensation that is Incentive Compensation
increases with the level of responsibility of the officer.
Executive officers also receive various benefits generally
available to all employees of the Company, such as 401(K) and
medical plans.
Base Salaries
The Compensation Committee seeks to set base salaries for the
Company's executive officers at levels which are competitive with
median levels for executives with similar roles and
responsibilities within the Comparative Group. In setting annual
salaries for individuals, the Compensation Committee first
considers the compensation paid for similar positions within the
Comparative Group and the executive's level and scope of
responsibility as a benchmark reference. It then considers
individual performance of the executive. The Compensation
Committee primarily considers individual performance against
expectations in developing its salary increase recommendations.
Based on these principles, salary increases were granted to named
executives in 1996.
Annual Incentive Bonuses
Working with an outside compensation consultant and analyzing
the total executive compensation components of the Comparative
Group, the Compensation Committee has developed an Executive
Incentive Compensation Plan ( EIC Plan"). The EIC Plan was
approved by the Board of Directors at its regular meeting in
February, 1996. Under the EIC Plan, the Compensation Committee
recommends to the Board of Directors an aggregate target cash
bonus amount for incentive-eligible executives. A target bonus
pool will be established based upon specific performance measures
approved by the Board of Directors, which will include a test of
reasonableness for incentive compensation as a percentage of pre-tax income of
the Company.
Each year the Board establishes three levels of achievement
for EIC Plan performance goals - threshold, target and
outstanding. Generally, at performance levels below the
threshhold, no bonuses are payable. The target bonus pool is
determined by the sum of individual participants' awards at target
performance levels. Individual bonuses at target may range from
10% to 60% of base annual salary at target. Upon reaching the
threshold performance goals, a participant will be eligible for up
to 50% of his or her target bonus. Actual bonus payments will be
interpolated between threshold (50%), target (100%) and
outstanding (150% - 200%) and will not exceed 200% of the target
bonus.
Applying the basic principles of the EIC Plan to 1996 Company
and individual performances, the Compensation Committee
recommended and the Board of Directors approved bonuses for the
named executives and other key executives representing a level of
performance in 1996 approximately midway between target and
outstanding. (See "Executive Compensation -- Summary Compensation
Table.")
Option Grants
The Company's 1994 Long-Term Stock Incentive Plan authorizes
the Compensation Committee to award stock options and restricted
stock to key executives. Stock option grants are designed to
align the long-term interests of the Company's executives with
those of its shareholders by directly linking executive
compensation to shareholder interest, as well as enabling
executives to develop and maintain significant long-term equity
ownership positions. The number of options granted to an
executive is a function of grants for similar positions made by
the companies within the Comparative Group and the executive's
level of responsibility. Variance from these numbers are based
upon the Compensation Committee's reasoned expectation of the
executive's future contribution to the Company. Generally, the
Compensation Committee grants non-statutory options early in each
fiscal year at an exercise price equal to the fair market value of
Company Common Stock on the date of grant. Option grants are
designed to enable key executives to achieve and maintain the
stock ownership guidelines established for key executives over a
five year period of time.
Chief Executive Officer Compensation
During 1996, the compensation of Albert F. Peter, Chairman
and Chief Executive Officer of the Company, was recommended to
the Board of Directors by the Compensation Committee based upon
similar basic objectives and principles described above for the
other senior executives. In developing its recommendations during
1996, the Compensation Committee took into account Mr. Peter's
significant contributions to the Company's record revenues of
$224,138,000 in 1995 (compared to $185,358,000 in 1994) and
record operating income of $23,809,000 in 1995 (compared to an
operating loss of $4,462,000 in 1994). The Compensation Committee
also considered the Company's continued turnaround from a troubled
base period during the time Mr. Peter has been Chief Executive
Officer, compared to a cumulative operating loss of $11,358,000 in
the two years prior to Mr. Peter's election. On this basis, the
Compensation Committee recommended, and the Board of Directors
determined, that Mr. Peter's 1996 base salary would be increased
$50,000 per year to $350,000, a 16.7% increase over Mr. Peter's
1995 base salary. As in the case of the Company's other key
executives, the Committee determined that Mr. Peter's 1996
performance represented a level approximately midway between
target and outstanding. Based on this determination, the
Committee recommended, and the Board of Directors awarded, an
executive bonus to Mr. Peter for 1996 of $325,000, or 93% of his
1996 base salary. A stock option grant of 200,000 shares of
Common Stock was made to Mr. Peter in 1996 consistent with the
Compensation Committee's long-term incentive guidelines and was
based upon the Compensation Committee's expectations of Mr.
Peter's future contributions to the success of the Company.
William P. Conlin Bannus B. Hudson
Gilbert R. Whitaker, Jr.
FINANCIAL PERFORMANCE
The following graph summarizes the cumulative return on $100
invested in the Company's Common Stock, the S&P 500 Stock Index
and the Nasdaq Computer and Data Processing Services Stocks Index
over a five year period as calculated by the Center for Research
in Security Prices at the University of Chicago.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SDRC, S&P STOCKS INDEX AND
NASDAQ COMPUTER & DATA PROCESSING STOCKS INDEX
<CAPTION>
Measurement period
(Fiscal year Covered) SDRC S&P 500 Nasdaq C&DD
________ __________ _____________
Index Index
<S> <C> <C> <C>
Measurement PT-
12/31/91 $ 100.00 $ 100.00 $ 100.00
<C>
FYE 12/31/92 $ 37.9 $ 107.7 $ 107.6
FYE 12/31/93 $ 59.5 $ 118.2 $ 113.9
FYE 12/31/94 $ 18.5 $ 119.8 $ 138.2
FYE 12/31/95 $ 101.3 $ 164.8 $ 210.5
FYE 12/31/96 $ 69.0 $ 203.2 $ 260.0
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners
Under Section 13(d) of the Securities Exchange Act of 1934
and the rules promulgated thereunder, a beneficial owner of a
security is any person who directly or indirectly has or shares
voting power or investment power over such security. Such
beneficial owner under this definition need not enjoy the economic
benefit of such securities. The following shareholders are known
by the Company to be the beneficial owners of 5% or more of the
Company's Common Stock as of December 31, 1996:
<TABLE>
Title of Name and Address of Amount and Nature Percent of
Class Beneficial Owner of Ownership Class
______________ ___________________ __________________ __________
<S> <C> <C> <C>
Common State of Wisconsin 2,406,800 (1) 7.25%
Stock Investment Board
P.O. Box 7842
Madison, WI 53707
Common
Stock Fred Alger Management, 1,766,950(2) 5.32%
Inc.
75 Maiden Lane
New York, NY 10038
Common
Stock J. & W. Seligman Co., 3,481,980(3) 10.49%
Inc.
100 Park Avenue
New York, NY 10017
</TABLE>
____________
(1) The information in the above table and in this
footnote was obtained from a Schedule 13G filed by such
shareholder. Such shareholder has the sole power to vote and to
direct the disposition of such shares.
(2) The information in the above table and in this
footnote was obtained from a Schedule 13G filed by such
shareholder. Such shareholder has the sole power to vote 23,400
of such shares and the shared power to vote 1,743,550 of such
shares. Such shareholder has the sole power to direct the
disposition of 1,761,850 of such shares. The type of dispositive
power held with respect to the other shares listed above is not
specified in the Schedule 13G.
(3) The information in the above table and in this
footnote was obtained from a Schedule 13G filed by such
shareholder. Such shareholder has the sole power to vote
3,435,300 of such shares. The voting power held with respect to
the other shares listed above is not specified in the Schedule
13G. Such shareholder has the sole power to direct the
disposition of all such shares.
Management
The following table sets forth the beneficial ownership of
the Company's Common Stock by its directors, the named executives,
and all directors and executive officers as a group, as of March
___, 1996:
<TABLE>
Amount and
Title of Name of Beneficial Nature Percent of
Class Owner of Ownership (1) (2)
___________ __________________ ________________ ___________
<S> <C> <C> <C> <C>
Common Stock William P. Conlin _____ shs. (3) ____%
Common Stock Albert F. Peter _____ shs. (4) ____%
Common Stock Bannus B. Hudson _____ shs. (5) ____%
Common Stock John E. McDowell _____ shs. (6) ____%
Common Stock James W. Nethercott _____ shs. (7) ____%
Common Stock Arthur B. Sims _____ shs. (8) ____%
Common Stock Gilbert R. Whitaker _____ shs. (9) ____%
, Jr.
Common Stock John A. Mongelluzzo _____ shs.(10) ____%
Common Stock Martin A. Neads _____ shs.(11) ____%
Common Stock Martin D. Schussel _____ shs.(12) ____%
Common Stock Jeffrey J. Vorholt _____ shs.(13) ____%
Common Stock All Directors and _____ shs.(14) ____%
Executive Officers
as Group
(13 Persons)
</TABLE>
__________________________________
(1) The persons and entities named in the above table have
sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to
community property laws where applicable and the information
contained in other footnotes to this table. For purposes of this
table, stock options are considered to be currently exercisable if
by their terms they may be exercised as of the date of mailing of
this Proxy Statement or if they become exercisable within 60 days
thereafter.
(2) These percentages assume the exercise of certain currently
exercisable stock options, which options have not in fact been
exercised.
(3) Includes ___ shares held of record or beneficially by Mr.
Conlin and _____ shares which are issuable upon the exercise of
currently exercisable, but unexercised stock options.
(4) Includes _____ shares held of record by Mr. Peter; _____
shares held of record by Mr. Peter as custodian for his children;
_____ shares held of record by Mr. Peter's wife; _____ shares held
by Mr. Peter's wife as a joint tenant with other members of her
family; and _____ shares which are issuable upon the exercise of
currently exercisable, but unexercised stock options.
(5) Includes _____ shares held of record by Mr. Hudson and
_____ shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(6) Includes _____ shares held of record by Mr. McDowell;
_____ shares held of record by Mr. McDowell's wife (including
shares held in trust for the benefit of their grandchildren); and
_____ shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(7) Includes _____ shares which are issuable upon the exercise
of currently exercisable but unexercised stock options held by Mr.
Nethercott.
(8) Includes _____ shares which are issuable upon the exercise
of currently exercisable but unexercised stock options held by
Mr. Sims.
(9) Includes _____ shares held of record by Dr. Whitaker and
_____ shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(10) Includes _____ shares held beneficially by Mr.
Mongelluzzo, _____ shares held in trust for his children and _____
shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(11) Includes _____ shares held of record or beneficially by
Mr. Neads and _____ shares which are issuable upon the exercise of
currently exercisable, but unexercised stock options.
(12) Includes _____ shares held of record or beneficially by
Mr. Schussel and _____ shares which are issuable upon the exercise
of currently exercisable, but unexercised stock options.
(13) Includes _____ shares held of record or beneficially by
Mr. Vorholt and _____ shares which are issuable upon the exercise
of currently exercisable but unexercised stock options.
(14) Includes a total of _____ shares which are issuable upon
the exercise of currently exercisable, but unexercised stock
options.
PROPOSAL TO AMEND
ARTICLES OF INCORPORATION
Paragraph 1 of Article Fifth of the Company's Amended
Articles of Incorporation , a copy of which is set forth on
Exhibit A hereto, enumerates a number of fundamental corporate
events which may be undertaken by the Company only with the prior
affirmative vote of the holders of at least two-thirds of the
Company's outstanding Common Stock.
Included among the fundamental events is "any merger or
consolidation of the Corporation with or into any other
corporation," see Article Fifth, Paragraph (1)(a). This language,
which was originally included in the Amended Articles of
Incorporation years prior to the Company's initial public offering
in 1987, does not distinguish between mergers involving third
parties unrelated to the Company, for which the Board believes the
shareholder approval requirement is quite appropriate, and
internal reorganizational transactions involving only the
Company's wholly-owned subsidiaries, for which the Board believes
the shareholder requirement is unnecessary and inefficient.
In the absence of a provision in the articles of
incorporation to the contrary, Ohio law permits the merger of a
subsidiary into a parent corporation without shareholder approval
so long as the parent owns at least 90% of the subsidiary's
outstanding capital stock. Such mergers are commonly referred to
as "short form mergers" and are permitted under the corporation
statutes of most states. The Ohio short form merger statute is
presently Section 1701.80 of the Ohio Revised Code.
The Board of Directors believes that it is in the best
interests of the Company and its shareholders to modify the
Company's Amended Articles of Incorporation to provide that
shareholder approval will not be required for any merger that
otherwise would be permitted under the applicable Ohio statute as
a short form merger without shareholder approval. The specific
language of the amendment recommended by the Board appears on
Exhibit A hereto.
The affirmative vote of the holders of shares entitling them
to exercise a majority of the voting power of the Company is
required to adopt the resolution to amend the Amended Articles of
Incorporation. Proxies will be voted in favor of the following
resolution unless otherwise instructed by the shareholders.
Abstentions and shares not voted by brokers and other entities
holding shares on behalf of beneficial owners will have the same
effect as a vote against the resolution. The Board of Directors
recommends the adoption of the resolution.
The resolution states:
RESOLVED, that Article Fifth, Paragraph 1(a) of the Company's
Amended Articles of Incorporation be, and it hereby is, amended as
set forth in Exhibit A.
ELECTION OF AUDITORS
The accounting firm of Price Waterhouse LLP is presently
serving as the Company's independent accounting firm as
recommended by the Audit Committee. Price Waterhouse LLP also
served as the Company's independent auditors with respect to the
Company's financial statements for the fiscal year ended December
31, 1996. Representatives of Price Waterhouse LLP are expected to
be present at the Annual Meeting. They will have an opportunity
to make a statement if they desire to do so and will be available
to respond to appropriate questions. The affirmative vote of a
majority of the Company's Common Stock present in person or by
proxy at the Annual Meeting and entitled to vote is required to
adopt the resolution. Action by shareholders is not required by
law in the appointment of independent auditors, but their
appointment is submitted by the Board of Directors in order to
give the shareholders a voice in the selection of auditors. If
the resolution is rejected by the shareholders, the Board of
Directors will reconsider its choice of Price Waterhouse LLP as
the Company's independent auditors. Proxies in the form solicited
hereby which are returned to the Company will be voted in favor of
the resolution unless otherwise instructed by the shareholders.
Abstentions will have the same effect as votes cast against the
resolution, provided such shares are properly present at the
meeting in person or by proxy. Shares not voted by brokers and
other entities holding shares on behalf of beneficial owners will
have no effect on the outcome of the proposal. The Board of
Directors recommends the adoption of the resolution.
The resolution states:
RESOLVED, that shareholders of the Company hereby ratify
the action of the Board of Directors in retaining Price Waterhouse
LLP as the independent auditors of the Company for 1997.
1998 SHAREHOLDER PROPOSALS
In order for any shareholder proposals for the 1998 Annual
Meeting of Shareholders to be eligible for inclusion at the
meeting, they must be received by the Secretary of the Company at
2000 Eastman Drive, Milford, Ohio 45150, prior to November 25,
1997.
OTHER MATTERS
The Company has retained Morrow & Co., Inc., a professional
solicitation firm, to assist in soliciting proxies for a fee
estimated at $_______. Morrow & Co., Inc. will use approximately
30 people to solicit proxies on behalf of the Company.
The Board of Directors does not know of any other business to
be presented to the meeting and does not intend to bring other
matters before the meeting. However, if other matters properly
come before the meeting, it is intended that the persons named in
the accompanying proxy will vote thereon according to their best
judgment in the interests of the Company.
By Order of the Board of Directors
John A. Mongelluzzo
Secretary
<PAGE>
Exhibit A
AMENDMENT TO ARTICLE
FIFTH, PARAGRAPH 1(a) OF
THE AMENDED ARTICLES OF INCORPORATION
Current Article Fifth, Paragraph 1
FIFTH: The following provisions shall define, limit and
regulate the exercise of the authority of the Corporation, or of
its shareholders, or of any class of shareholders, or of its
Directors, or create and define rights and privileges of the
shareholders among themselves.
1. Except as may be otherwise provided in the Articles of
Incorporation or Code of Regulations of the Corporation:
(a) any merger or consolidation of the Corporation
with or into any other corporation; and
(b) any sale, lease, exchange or other disposition
of all, or substantially all, the assets with or without goodwill
of the Corporation;
(c) adoption of a resolution of dissolution; and
(d) any amendment to the Articles of Incorporation
of the Corporation;
shall require the affirmative vote of the holders of shares
entitling them to two-thirds (2/3rds) of the voting power of the
Corporation, notwithstanding that some lesser percentage may be
specified or permitted by law. Action on any other matter at any
shareholders' meeting may be taken by the affirmative vote of the
holders of the majority of shares entitled to vote thereon, unless
the Articles of Incorporation or Code of Regulations expressly
provide for a greater proportion of such voting power on any such
matter.
Article Fifth, Paragraph 1(a) As Proposed to be Amended
"(a) any merger (other than a merger described in
Section 1701.80 of the Ohio Revised Code as in effect on January
1, 1997, as the same may be amended from time to time, or any
successor statute thereto) or consolidation of the Corporation
with or into any other corporation; and..."
PROXY
STRUCTURAL DYNAMICS RESEARCH CORPORATION
2000 Eastman Drive
Milford, Ohio 45150
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Albert F. Peter, John A.
Mongelluzzo and Jeffrey J. Vorholt, and each of them, with full
power of substitution, as proxies to vote, as designated below,
for and in the name of the undersigned all shares of stock of
Structural Dynamics Research Corporation which the undersigned is
entitled to vote at the Annual Meeting of the Shareholders of said
Company scheduled to be held on April 29, 1997 at 2:00 p.m. at the
Company's offices, 2000 Eastman Drive, Milford, Ohio 45150 or at
any adjournment or recess thereof.
Please mark X in the appropriate box. The Board of Directors
recommends a FOR vote on each proposal.
1. ELECTION OF CLASS I DIRECTORS.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below)
JOHN E. MCDOWELL, GILBERT R. WHITAKER, JR., JAMES W.
NETHERCOTT
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write the nominee's name on the space provided
below)
__________________________________________________________________
2. APPROVAL of an amendment to the Company's Amended Articles
of Incorporation to permit certain internal reorganizations
without shareholder approval.
FOR ABSTAIN AGAINST
3. APPROVAL of the appointment of KPMG Peat Marwick as the
independent auditors of the Company for 1997.
4. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meting or
any adjournment thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction
is made, this proxy will be voted FOR the election of Directors
and FOR the proposals in paragraphs 2 and 3.
ALL FORMER PROXIES ARE HEREBY REVOKED.
NUMBER OF SHARES _____________ Dated:________________, 1997
_______________________________ __________________________
(Signature of Shareholder) (Signature of
Shareholder)
(Please sign exactly as your name appears hereon. All joint
owners should sign. When signing in a fiduciary capacity or as a
corporate officer, please give your full title as such)
