<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 Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(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):
/ / 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:
------------------------------------------------------------------------
/X/ 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>
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 SIGNATURE]
John A. Mongelluzzo
Secretary
March 25, 1997
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 32,906,924 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
1
<PAGE>
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 Ohio National Financial
Services. 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, University of Michigan from 1990 to 1995. Dr.
Whitaker also served as Dean of the School of Business Administration,
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)
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.
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.
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.
2
<PAGE>
ARTHUR B. SIMS, has served as Chief Executive Officer and Chairman of the
Board of 3D Systems Corporation, (developer, manufacturer and marketer of rapid
prototyping systems) since August, 1993 and, since September, 1991 has also
served as Chief Executive Officer of 3D Systems, Inc., a California corporation
which is an indirect, wholly-owned subsidiary of 3D Systems Corporation. From
September, 1990 until September, 1991, Mr. Sims was an independent management
consultant. 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 retained 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.
3
<PAGE>
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:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(2)
- ---------------------------------------- ---- --------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Albert F. Peter 1996 333,333 325,000 200,000 shs. 2,333(4)
Chairman of the Board 1995 300,000 350,000 75,000 shs. 2,321(4)
and Chief Executive Officer 1994 23,864 -- 10,000 shs.(3) 22,500(4)
John A. Mongelluzzo 1996 147,333 75,000 20,000 shs. 4,658(5)
Vice President, 1995 134,000 100,000 15,000 shs. 4,257(5)
Secretary, and 1994 113,503 -- 15,000 shs. 3,513(5)
General Counsel
Martin A. Neads 1996 231,667 140,000 35,000 shs. 55,247(6)
Vice President, 1995 206,313 170,000 15,000 shs. 104,498(6)
General Manager 1994 151,873 -- 55,000 shs. 5,101(6)
SDRC Operations, Inc.
Martin D. Schussel 1996 176,667 115,000 25,000 shs. 6,372(7)
Vice President-Product 1995 147,633 120,000 22,000 shs. 6,306(7)
Development 1994 -- -- -- --
Jeffrey J. Vorholt 1996 180,000 115,000 25,000 shs. 5,167(8)
Vice President, Chief 1995 154,568 120,000 15,000 shs. 5,065(8)
Financial Officer and 1994 -- -- -- --
Treasurer
</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
Executive 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
4
<PAGE>
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 $2,333 in 1996 and $2,321 in 1995 which were term
life insurance premiums for insurance benefiting the named executive.
(5) Includes, for 1996, 1995 and 1994, respectively, $4,500, $4,121 and $3,405
representing the Company 401(k) plan contributions, and $158, $136 and $108,
which were term life insurance premiums paid by the Company for insurance
benefiting the named executive.
(6) Includes, for 1995 and 1994, $9,000 and $5,101 in contributions to the
Company's executive pension plan for United Kingdom employees. Also
includes, for 1996 and 1995, respectively, $4,500 and $4,586 representing
the Company's 401(k) plan contribution and $1,402 and $1,402 which were term
life insurance premiums for insurance benefiting the named executive. Also
includes, for 1996 and 1995, respectively, $18,230 and $70,835 in payment of
costs associated with Mr. Neads' relocation from England to the United
States and $31,115 and $18,675 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, $4,500 and $4,837 representing
the Company's 401(k) plan contribution, and $1,872 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, $4,500 and $4,500 representing
the Company's 401(k) plan contribution, and $667 and $565, which were term
life insurance premiums paid by the Company for insurance benefiting the
named executive.
5
<PAGE>
STOCK OPTIONS
The following table sets forth information regarding stock options granted
to the named executives during 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------- AT ASSUMED ANNUAL
% OF RATES
NUMBER OF TOTAL OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED#(1) YEAR ($/SH.) DATE 5%($) 10%($)
- ---------------------------------------- ----------- ------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Peter 200,000 15.6% 31.25 4/30/2006 3,930,600 9,960,900
John A. Mongelluzzo 20,000 1.6% 31.25 4/30/2006 393,060 996,090
Martin A. Neads 35,000 2.7% 31.25 4/30/2006 687,855 1,743,158
Martin D. Schussel 25,000 2.0% 31.25 4/30/2006 491,325 1,245,113
Jeffrey J. Vorholt 25,000 2.0% 31.25 4/30/2006 491,325 1,245,113
</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:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------- ----------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Albert F. Peter 0 0 54,750 250,250 496,328 675,234
John A. Mongelluzzo 0 0 79,200 35,000 448,722 177,741
Martin A. Neads 28,380 600,167 103,700 63,200 405,538 357,591
Martin D. Schussel 12,000 351,000 63,860 43,040 433,899 179,297
Jeffrey J. Vorholt 0 0 15,000 40,000 212,241 206,822
</TABLE>
6
<PAGE>
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
1996 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.
In February 1997, the Board of Directors formally adopted director stock
ownership guidelines under which directors are expected to achieve and maintain
significant levels of Common Stock ownership which the Directors' Plan is
designed to facilitate.
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.), he will be given a severance benefit
equal to 12 months of his annual pay (defined as base salary plus the target
bonus for the current year).
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
7
<PAGE>
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.
8
<PAGE>
- 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
9
<PAGE>
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 unless otherwise
approved by the Compensation Committee. 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 is 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. The Committee recommended, and the
Board of Directors awarded, an
10
<PAGE>
executive bonus to Mr. Peter for 1996 of $325,000, or 93% of his 1996 base
salary, representing revenue and earnings growth between target and outstanding.
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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SDRC STOCK S&P 500 NASDAQ C&D
<S> <C> <C> <C>
1991 $100.0 $100.0 $100.0
1992 $37.9 $107.7 $107.6
1993 $59.5 $118.2 $113.9
1994 $18.5 $119.8 $138.2
1995 $101.3 $164.8 $210.5
1996 $69.0 $203.2 $260.0
</TABLE>
11
<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>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
CLASS BENEFICIAL OWNER OF OWNERSHIP OF CLASS
- ------------ ----------------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock State of Wisconsin Investment 2,406,800(1) 7.25%
Board
P.O. Box 7842
Madison, WI 53707
Common Stock Fred Alger Management, Inc. 1,766,950(2) 5.32%
75 Maiden Lane
New York, NY 10038
Common Stock J. & W. Seligman Co., Inc. 3,481,980(3) 10.49%
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.
12
<PAGE>
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 11, 1997:
<TABLE>
<CAPTION>
TITLE OF AMOUNT AND NATURE OF PERCENT OF
CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
- ------------ ------------------------------------ ----------------------- ----------
<S> <C> <C> <C>
Common Stock Albert F. Peter 318,791 shs.(3) 1.0%
Common Stock William P. Conlin 54,900 shs.(4) .2%
Common Stock Bannus B. Hudson 36,473 shs.(5) .1%
Common Stock John E. McDowell 88,425 shs.(6) .3%
Common Stock James W. Nethercott 27,589 shs.(7) .1%
Common Stock Arthur B. Sims 23,480 shs.(8) .1%
Common Stock Gilbert R. Whitaker, Jr. 54,400 shs.(9) .2%
Common Stock John A. Mongelluzzo 98,179 shs.(10) .3%
Common Stock Martin A. Neads 131,216 shs.(11) .4%
Common Stock Martin D. Schussel 99,820 shs.(12) .3%
Common Stock Jeffrey J. Vorholt 33,622 shs.(13) .1%
Common Stock All Directors and Executive Officers 979,941 shs.(14) 2.9%
as Group (14 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 March 11, 1997 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 142,205 shares held of record by Mr. Peter; 6,000 shares held of
record by Mr. Peter as custodian for his children; 29,680 shares held of
record by Mr. Peter's wife; 4,656 shares held by Mr. Peter's wife as a joint
tenant with other members of her family; and 136,250 shares which are
issuable upon the exercise of currently exercisable, but unexercised stock
options.
(4) Includes 8,900 shares held of record or beneficially by Mr. Conlin and
46,000 shares which are issuable upon the exercise of currently exercisable,
but unexercised stock options.
(5) Includes 12,500 shares held of record by Mr. Hudson and 23,973 shares which
are issuable upon the exercise of currently exercisable, but unexercised
stock options.
13
<PAGE>
(6) Includes 16,225 shares held of record by Mr. McDowell; 32,200 shares held
of record by Mr. McDowell's wife (including 1,600 shares held in trust for
the benefit of their grandchildren); and 40,000 shares which are issuable
upon the exercise of currently exercisable, but unexercised stock options.
(7) Includes 27,589 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options held by Mr. Nethercott.
(8) Includes 23,480 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options held by Mr. Sims.
(9) Includes 14,400 shares held of record by Dr. Whitaker and 40,000 shares
which are issuable upon the exercise of currently exercisable, but
unexercised stock options.
(10) Includes 3,321 shares held of record or beneficially by Mr. Mongelluzzo, 8
shares held in trust for his children and 94,850 shares which are issuable
upon the exercise of currently exercisable, but unexercised stock options.
(11) Includes 5,916 shares held of record or beneficially by Mr. Neads and
125,300 shares which are issuable upon the exercise of currently
exercisable, but unexercised stock options.
(12) Includes 16,930 shares held of record or beneficially by Mr. Schussel and
82,890 shares which are issuable upon the exercise of currently exercisable,
but unexercised stock options.
(13) Includes 5,272 shares held of record or beneficially by Mr. Vorholt and
28,350 shares which are issuable upon the exercise of currently exercisable,
but unexercised stock options.
(14) Includes a total of 680,232 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.
14
<PAGE>
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.
15
<PAGE>
OTHER MATTERS
The Company has retained Morrow & Co., Inc., a professional solicitation
firm, to assist in soliciting proxies for a fee estimated at $5,500. 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
[SIGNATURE]
John A. Mongelluzzo
Secretary
16
<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..."
A-1
<PAGE>
[SDRC LOGO]
-------------------------------------------
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
----------------------------
1997
ANNUAL MEETING
OF SHAREHOLDERS
APRIL 29, 1997
<PAGE>
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 II DIRECTORS.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below)
JOHN E. McDOWELL, JAMES W. NETHERCOTT, GILBERT R. WHITAKER, JR.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the space provided below)
----------------------------------------------------------------------------
2. Approval of the adoption of an amendment to the Company's Amended Articles
of Incorporation to permit certain internal reorganizations without
Shareholder approval.
/ / FOR / / ABSTAIN / / AGAINST
<PAGE>
3. Ratification of the appointment of Price Waterhouse LLP as the independent
auditors of the Company for 1997.
/ / FOR / / ABSTAIN / / AGAINST
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting 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 _____________
------------------------------
(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)
Dated: _________________, 1997
