<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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 204.14a-12
PARAMETRIC TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11: (Set forth the amount on which the filing fee is calculated and
state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY FILING
PARAMETRIC TECHNOLOGY CORPORATION
128 TECHNOLOGY DRIVE
WALTHAM, MA 02154
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 13, 1997
The Annual Meeting of Stockholders of Parametric Technology
Corporation, a Massachusetts corporation (the "Company"), will be held at the
offices of the Company, 128 Technology Drive, Waltham, MA 02154 on Thursday,
February 13, 1997 at 9:00 a.m., local time, to consider and act upon the
following matters:
1. To elect three Class I directors to serve for the ensuing three years.
2. To approve an amendment to the Company's Articles of Organization to
increase the number of authorized shares of the Company's common stock
from 215,000,000 to 350,000,000.
3. To approve the Company's 1997 Incentive Stock Option Plan.
4. To transact such other business as may be in furtherance of or
incidental to the foregoing.
Stockholders of record at the close of business on December 18, 1996 will
be entitled to vote at the meeting or any adjournment thereof. The stock
transfer books of the Company will remain open.
By Order of the Board of Directors,
MARTHA L. DURCAN, Clerk
Waltham, Massachusetts
December 30, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
PRELIMINARY FILING
PARAMETRIC TECHNOLOGY CORPORATION
128 TECHNOLOGY DRIVE
WALTHAM, MA 02154
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 13, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Parametric Technology Corporation, a
Massachusetts corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on February 13, 1997 and at any adjournment of that
meeting (the "Annual Meeting"). All proxies will be voted in accordance with
the stockholders' instructions contained therein. If no choice is specified,
proxies will be voted in favor of the matters set forth in the accompanying
Notice of Annual Meeting. Any proxy may be revoked by a stockholder at any time
before its exercise by delivery of a written revocation and subsequently dated
proxy to the Clerk of the Company or by voting in person at the Annual Meeting.
On December 18, 1996, the record date for the determination of
stockholders entitled to vote at the Annual Meeting, there were outstanding and
entitled to vote an aggregate of [ ] shares of common stock of
the Company (the "Common Stock"). Stockholders are entitled to one vote per
share on all matters.
The Company's Annual Report for the fiscal year ended September 30,
1996 is being mailed to stockholders with the mailing of this Notice and Proxy
Statement on or about December 30, 1996.
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the shares of
Common Stock represented and voting at the Annual Meeting is required for the
election of directors. The affirmative vote of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote as of the record date is
required for the approval of the amendment to the Company's Articles of
Organization to increase the number of authorized shares of the Company's Common
Stock. The affirmative vote of the holders of a majority of the shares of
Common Stock represented and voting at the Annual Meeting is required for the
approval of the Company's 1997 Incentive Stock Option Plan (the "1997 Option
Plan").
Shares of Common Stock represented in person or by proxy at the Annual
Meeting (including shares which abstain from or do not vote with respect to one
or more of the matters presented at the Annual Meeting and broker non-votes, as
described below) will be tabulated by the inspectors of election appointed for
the Annual Meeting and will determine whether or not a quorum is present. If a
broker holding stock in "street name" indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and voting at the Annual
Meeting with respect to the matter (a "broker non-vote"). Neither an abstention
nor a broker non-vote will be treated as voting on a matter requiring a
plurality or a majority of the shares represented and voting. Accordingly,
abstentions and broker non-votes have no effect on the voting for election of
directors or approval of the 1997 Option Plan. However, since the increase in
the number of authorized shares of Common Stock requires the affirmative vote of
a majority of the shares of Common Stock outstanding and entitled to vote, any
shares not voted in favor of the action, including abstentions and broker non-
votes, will have the same effect as a vote "against" the matter.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of October 31,
1996, with respect to the beneficial ownership of the Company's Common Stock by
(i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock based upon information provided to the
Company; (ii) each director and nominee for director; (iii) each executive
officer named in the Summary Compensation Table; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage of Common
Beneficially Owned(1)(2) Stock Outstanding(3)
------------------ --------------------
<S> <C> <C>
Alberto W. Vilar & Gary A. Tanaka(4) 7,475,100 5.86%
c/o Amerindo Investment Advisors Inc.
One Embarcadero Center, Suite 2300
San Francisco, CA 94111
Putnam Investments, Inc. (5) 7,238,826 5.68%
One Post Office Square
Boston, MA 02109
Robert N. Goldman 40,000 *
Donald K. Grierson 10,000 *
Oscar B. Marx, III (6) 21,000 *
Michael E. Porter 38,000 *
Noel G. Posternak 90,000 *
Steven C. Walske 1,013,500 *
C. Richard Harrison Jr.(7) 489,644 *
Michael E. McGuinness(7) 175,510 *
Edwin J. Gillis(7) 75,301 *
Thomas W. Jensen, Ph.D. 20,000 *
All directors, nominees for director and
executive officers as a group (16 persons) 2,180,437 1.70%
</TABLE>
- ------------
* Less than 1% of outstanding shares of Common Stock.
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares. Unless
otherwise indicated, each stockholder referred to above has sole voting and
investment power with respect to the shares listed.
2
<PAGE>
(2) The amounts listed include the following shares of Common Stock that may be
acquired on or prior to December 30, 1996 through the exercise of options:
Mr. Goldman, 40,000 shares; Mr. Grierson, 10,000 shares; Mr. Marx, 20,000
shares; Mr. Porter, 28,000 shares; Mr. Posternak, 80,000 shares; Mr. Walske,
100,000 shares; Mr. Harrison, 323,700 shares; Mr. McGuinness, 167,600
shares; Mr. Gillis, 75,000 shares; Dr. Jensen, 20,000 shares; and all
directors and executive officers as a group, 1,053,099 shares.
(3) For purposes of determining the percentage of Common Stock outstanding, the
number of shares deemed outstanding is 127,462,608 shares outstanding as of
October 31, 1996 and any shares subject to options held by the person or
entity in question that are exercisable on or prior to December 30, 1996.
(4) Alberto W. Vilar and Gary A. Tanaka have filed a Securities and Exchange
Commission Schedule 13D reporting the above stock ownership as of October
25, 1996, a copy of which has been sent to the Company. As the sole
directors and shareholders of Amerindo Investment Advisors Inc., and another
advisory company, Messrs. Vilar and Tanaka share with those companies voting
and investment power with respect to 7,471,100 shares held in client
accounts of those companies. As the sole trustee of the Amerindo Investment
Advisors Inc. Profit Sharing Trust (the "Trust"), Mr. Vilar shares voting
and investment power with respect to an additional 4,000 shares. Messrs.
Vilar and Tanaka disclaim beneficial ownership of all stock beneficially
owned by the advisory companies and Mr. Vilar disclaims beneficial ownership
of all stock owned by the Trust except to the extent of his pro rata
interest in the Trust.
(5) Putnam Investments, Inc. ("PI") has filed a Securities and Exchange
Commission Schedule 13G reporting the above stock ownership as of December
31, 1995, a copy of which has been sent to the Company. Stock reported as
being beneficially owned by PI consists of stock held in client accounts of
subsidiaries of PI that are registered investment advisers. PI and its
subsidiaries share voting power with respect to 411,450 shares and share
investment power with respect to 7,238,826 shares. PI expressly disclaims
beneficial ownership of all such stock.
(6) 1,000 shares are held by the O.B. Marx, III Revocable Trust.
(7) The amounts listed include the following shares of Common Stock owned by the
named person jointly with his or her spouse: Mr. Harrison, 4,304 shares; Mr.
McGuinness, 206 shares; and Mr. Gillis, 301 shares.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. There are
currently three Class I directors, two Class II directors and two Class III
directors, whose terms expire, respectively, at the 1997, 1998 and 1999 Annual
Meetings of Stockholders (in all cases subject to the election and qualification
of their successors and to their earlier death, resignation or removal). At
each Annual Meeting of Stockholders, directors are elected for a term of three
years to succeed those directors whose terms then expire. The three Class I
directors elected at the Annual Meeting will be elected to serve until the 2000
Annual Meeting of Stockholders (subject to the election and qualification of
their successors and to their earlier death, resignation or removal).
The persons named in the enclosed proxy will vote to elect Donald K.
Grierson, Oscar B. Marx, III and Noel G. Posternak as Class I directors, unless
authority to vote for the election of any of the nominees is withheld by marking
the proxy to that effect. Each of the nominees is currently a Class I director
of the Company.
Each of the nominees has indicated his willingness to serve, if elected;
however, if any nominee should be unable or unwilling to stand for election,
proxies may be voted for a substitute nominee designated by the Board of
Directors.
The table on the following page sets forth, for each nominee as a Class I
director and for each director of the Company whose term continues after the
Annual Meeting, his name and age, his positions and offices with the Company,
his principal occupations and business experience for the past five years, the
names of other publicly-held companies of which he is a director, the year since
which he has served as a director of the Company, and the year his term as a
director of the Company will expire.
3
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation, Director Term
Business Experience and Directorships Since Expires
- --------------------------------------------------------------------------------- -------- ------------
<S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS:
Donald K. Grierson, age 62 1987 1997
Chief Executive Officer and President of ABB Vetco Gray, Inc., an
oil services business, since May 1991; Chairman of the Board of ABB
Vetco Gray, Inc. from November 1990 to May 1991;
director of Alpha Technology, Inc.
Oscar B. Marx, III, age 58 1995 1997
Chief Executive Officer and President of TMW Enterprises, a
start-up venture in the autoparts industry, since July 1995; Chief
Executive Officer and President of Electro - Wire Products, Inc., an
electrical distribution company, from June 1994 to July 1995;
Vice President - Automotive Components Group of Ford Motor
Company from January 1988 to June 1994;
director of Tesma International.
Noel G. Posternak, age 60 1989 1997
Senior Partner in the law firm of Posternak, Blankstein & Lund, L.L.P.
since 1980.
CONTINUING DIRECTORS:
CLASS II DIRECTORS
Michael E. Porter, age 49 1995 1998
Professor at Harvard Business School since 1973; director of
Thermo Quest Corporation and Alpha Beta Technologies, Inc.
Steven C. Walske, age 44 1986 1998
Chairman of the Board of Directors of the Company since August
1994; Chief Executive Officer of the Company since December
1986; President of the Company from December 1986 to August 1994;
director of Synopsys, Inc., Video Server, Inc., Cascade Communications, Corp.
and Object Design Inc.
CLASS III DIRECTORS
C. Richard Harrison Jr., age 41 1994 1999
President and Chief Operating Officer of the Company since August
1994; Senior Vice President of Sales and Distribution of the Company
from September 1991 to August 1994; Vice President of Sales and
Distribution of the Company from May 1987 to September 1991.
Robert N. Goldman, age 47 1991 1999
Chief Executive Officer and President of Object Design Inc., a software
developer since November 1995; Chairman of the Board of Trinzic Corp.,
a software developer, from June 1986 to August 1995; Chief Executive
Officer of Trinzic Corp. from June 1986 to October 1992;
director of Intersolv, Inc., SystemSoft Corporation, Citrix Systems and
Object Design Inc.
</TABLE>
4
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Board of Directors held three meetings during the fiscal year ended
September 30, 1996. Each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors and of other meetings held by
all committees of the Board of Directors on which he then served.
The Board of Directors has an Audit Committee which meets with the Company's
independent accountants and reports on such meetings to the Company's Board of
Directors. The Audit Committee reviews the performance of the independent
accountants in the annual audit and in assignments unrelated to the audit,
reviews fees of the independent accountants, discusses the Company's internal
accounting control policies and procedures and considers and recommends the
selection of the Company's independent accountants. The Audit Committee met
seven times during the fiscal year ended September 30, 1996. The fiscal 1996
Audit Committee members were Messrs. Goldman, Marx and Porter (Chairman). The
current members of the Audit Committee are Messrs. Grierson, Marx and Porter
(Chairman).
The Board of Directors has a Compensation Committee which provides
recommendations to the Board of Directors regarding executive and employee
compensation and administers the Company's bonus programs, the Company's 1987
Incentive Stock Option Plan (the "1987 Option Plan"), the 1997 Option Plan and
the Company's 1991 Employee Stock Purchase Plan (the "Purchase Plan"). The
Compensation Committee met once during the fiscal year ended September 30, 1996.
The fiscal 1996 Compensation Committee members were Messrs. Goldman (Chairman)
and Posternak. Messrs. Goldman (Chairman) and Posternak also constitute the
Officers' Stock Option Committee, which grants stock options under the 1987 and
1997 Option Plans to employee directors and officers subject to Section 16
(collectively "Section 16 Officers") of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Officers' Stock Option Committee met three
times during the fiscal year ended September 30, 1996. The current members of
both the Compensation Committee and the Officers' Stock Option Committee are
Messrs. Goldman (Chairman) and Posternak.
DIRECTOR COMPENSATION
During the fiscal year ended September 30, 1996, directors who were not
employees of the Company received the following directors' fees in consideration
of their services as directors of the Company: an annual retainer in the amount
of $10,000 and $2,000 per Board of Directors meeting attended, as well as
reimbursement of travel expenses. Members of the Audit Committee of the Board
of Directors received a fee of $1,000 per meeting of the Audit Committee
attended. Members of the Compensation Committee of the Board of Directors
received a fee of $1,000 per meeting of the Compensation Committee attended.
Directors who are also employees of the Company do not receive any compensation
for their services as directors of the Company.
Under the Company's 1996 Director Stock Option Plan (the "1996 Director
Plan"), which superseded the 1992 Director Stock Option Plan (the "1992 Director
Plan"), non-qualified stock options to purchase 20,000 shares (subject to future
adjustment for stock splits and similar capital changes) of Common Stock are
automatically granted to each outside director at the time of initial election
to the Board of Directors at an annual meeting or otherwise. In addition,
immediately following the Annual Meeting of Stockholders each year, each outside
director continuing in office will automatically be granted options to purchase
5,000 shares (subject to future adjustment for stock splits and similar capital
changes) of Common Stock. Accordingly, options to purchase 5,000 shares of
Common Stock were automatically granted to Messrs. Goldman, Grierson, Marx,
Porter, and Posternak on February 8, 1996. The options become exercisable in
four equal annual installments commencing one year following the date of grant,
but only if the option holder is a director on that anniversary date. Options
have a term of ten years and an exercise price equal to the fair market value of
the Common Stock on the grant date, which will be the closing price of the
Company's Common Stock as reported by the Nasdaq Stock Market on the date of
grant.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain information for the fiscal years ended
September 30, 1996, 1995 and 1994 concerning compensation paid to or accrued for
the Company's Chief Executive Officer and the other four most highly compensated
executive officers who were serving as executive officers of the Company on
September 30, 1996 and whose salary and bonus for fiscal year 1996 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
-----------------
Awards
-----------------
Annual Compensation Shares Underlying All Other
--------------------
Name and Principal Position Year Salary($)(1) Bonus($)(2) Options(#)(3) Compensation($)(4)
- ----------------------------------------- ----- ------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Steven C. Walske 1996 330,000 700,000 300,000 3,167
Chairman of the Board 1995 300,000 500,000 600,000 4,620
of Directors and Chief 1994 300,000 426,400 200,000 4,620
Executive Officer
C. Richard Harrison Jr. 1996 275,000 700,000 300,000 3,167
President and Chief 1995 250,000 500,000 600,000 3,968
Operating Officer 1994 60,000 497,165 400,000 3,000
Michael E. McGuinness 1996 60,000 538,628 220,000 3,000
Executive Vice President 1995 60,000 498,362 150,000 2,990
of Sales 1994 50,000 130,343 100,000 2,500
Edwin J. Gillis 1996 250,000 300,000 150,000 3,167
Executive Vice President of 1995 0 0 300,000 0
Finance and Administration,
Chief Financial Officer and Treasurer
Thomas W. Jensen, Ph.D. 1996 130,000 65,000 50,000 1,000
Senior Vice President of 1995 54,000 34,500 120,000 0
Research and Development
</TABLE>
- ------------
(1) Salary includes amounts deferred pursuant to the Parametric Technology
Corporation 401(k) Savings Plan.
(2) Amounts shown, except for those discussed below relating to Messrs. Harrison
and McGuinness, are the awards made under the Company's incentive plans,
which amounts are earned and accrued during the fiscal years indicated and
paid subsequent to the end of each fiscal year. Amounts shown for Mr.
Harrison for fiscal year 1994 and for Mr. McGuinness for fiscal years 1996,
1995 and 1994 are comprised of sales commissions based on revenue. Mr.
McGuinness, in fiscal years 1996, 1995 and 1994, and Mr. Harrison, in fiscal
year 1994, were not entitled to receive awards under the Company's incentive
plans.
(3) Amounts shown for Fiscal Year 1996 include stock options granted on October
2, 1996.
(4) Amounts shown are the Company's matching contributions made under the
Parametric Technology Corporation 401(k) Savings Plan.
6
<PAGE>
FISCAL YEAR 1996 STOCK OPTION GRANTS
The following table provides information regarding options granted under
the 1987 Option Plan for the fiscal year ended September 30, 1996 (including
Fiscal Year 1996 options granted on October 2, 1996) to the executive officers
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------
Number of Potential Realizable Value
Shares Percentage of Total at Assumed Annual Rates
Underlying Options Granted Exercise of Stock Price Appreciation
Options to Employees for Price Per Expiration for Option Term(3)
Name Granted (#) Fiscal Year (%)(2) Share ($) Date 5%($)(4) 10% ($)(4)
---------- ---------------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven C. Walske 200,000 3.2753% 45.25 5/16/06 5,691,496 14,423,369
100,000 1.6377% 51.25 10/02/06 3,223,085 8,167,930
C. Richard Harrison Jr. 200,000 3.2753% 45.25 5/16/06 5,691,496 14,423,369
100,000 1.6377% 51.25 10/02/06 3,223,085 8,167,930
Michael E. McGuinness 20,000 0.3275% 33.50 11/17/05 421,359 1,067,807
100,000 1.6377% 45.25 5/16/06 2,845,748 7,211,685
100,000 1.6377% 51.25 10/02/06 3,223,085 8,167,930
Edwin J. Gillis 100,000 1.6377% 45.25 5/16/06 2,845,748 7,211,685
50,000 0.8188% 51.25 10/02/06 1,611,542 4,083,965
Thomas W. Jensen, Ph.D. 50,000 0.8188% 45.25 5/16/06 1,422,874 3,605,842
</TABLE>
- ----------------
(1) All options granted to the named executive officers are exercisable in four
equal annual installments, commencing one year after the date of grant. The
exercise price of each option is at least 100% of the fair market value of
the Company's Common Stock on the date the option was granted. The exercise
price may be paid in cash or, subject to certain limitations for shares
previously acquired upon exercise of options, in shares of Common Stock, or
in a combination of cash and shares. Pursuant to employment agreements, the
options held by Messrs. Walske, Harrison and Gillis become exercisable in
full upon a "change in control" of the Company (as described under the
section entitled "Employment Agreements") or, for Messrs. Walske and
Harrison only, upon the individual's death or disability, and the options
held by Messrs. Walske and Harrison become exercisable for the number of
shares for which they would have been exercisable had the optionee's
employment continued for an additional year after the termination of the
optionee's employment without "cause" or after a "change in status."
(2) For the fiscal year ended September 30, 1996, the Company granted options
under the 1987 Option Plan to its employees and consultants to purchase a
total of 6,106,250 shares of Common Stock (including Fiscal Year 1996
options granted on October 2, 1996) and canceled options to purchase
1,275,629 shares of Common Stock.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% appreciation rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future appreciation,
if any, in the price of the Common Stock. No gain to the optionees is
possible without an increase in the price of the Common Stock, which will
benefit all stockholders proportionately.
(4) In order to realize the potential values over the ten year option term set
forth in the 5% and 10% columns of this table, the per share price of the
Common Stock at the end of the option term would be as follows:
<TABLE>
<CAPTION>
Date of Exercise Price Prices at: Percentage Increases at:
- ------------------- ----------------- ------------ -------------------------
Grant per Share ($) 5% 10% 5% 10%
- ------------------- ----------------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
11/17/95 33.50 54.57 86.89 63% 159%
5/16/96 45.25 73.71 117.37 63% 159%
10/02/96 51.25 83.48 132.93 63% 159%
</TABLE>
7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FY-END OPTION VALUES
The following table sets forth information regarding stock options
exercised by the named executive officers during fiscal 1996 and the value of
in-the-money unexercised options held by them as of September 30, 1996.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#)(2) at FY-End($)(3)
Shares ------------------------ ---------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized ($)(1) Unexercisable Unexercisable
- ------------------------- ----------- --------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
Steven C. Walske 675,000 19,663,445 155,000/ 5,714,688/
850,000 19,996,875
C. Richard Harrison Jr. 356,300 12,539,517 373,700/ 12,081,891/
890,000 21,685,625
Michael E. McGuinness 66,900 1,803,791 152,600/ 5,836,966/
282,500 5,245,625
Edwin J. Gillis 0 0 75,000/ 1,443,750/
325,000 4,743,750
Thomas W. Jensen, Ph.D. 10,000 216,875 20,000/ 468,125/
140,000 2,437,500
</TABLE>
- -------------
(1) Market value of the underlying shares on the date of exercise less the
option exercise price.
(2) Does not include options disclosed above that were granted on October 2,
1996 with respect to Fiscal Year 1996.
(3) Market value of shares covered by in-the-money options on September 30,
1996, less the option exercise price. Options are in-the-money if the market
value of the shares covered thereby is greater than the option exercise
price.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed of two
outside directors. The two outside directors also serve as the Officers' Stock
Option Committee to grant stock options to Section 16 Officers. The
compensation for the Company's executive officers is set by the Board of
Directors, after consideration of the Compensation Committee's recommendations.
Compensation Objectives
The basic philosophy underlying the Company's compensation programs is to
align executive compensation with increases in stockholder value. Several key
objectives are reflected within this basic philosophy, one of which is to enable
the Company to attain its annual market penetration and financial targets.
Another key objective is to ensure that a major portion of each executive's cash
compensation is linked to significant improvements in the Company's financial
performance. The third key objective is to make it possible for the Company to
attract, retain and reward executives who are responsible for leading the
Company in achieving or exceeding corporate performance goals.
Compensation Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), imposes a limit on tax deductions for annual compensation in excess of
one million dollars paid by a corporation to its chief executive officer and the
other four most highly compensated executive officers of the corporation. This
provision excludes certain forms of "performance based compensation," including
options granted under the 1987 Option Plan, from the compensation taken into
account for the purposes of that limit. The Committee believes that, although it
is desirable for executive compensation to be tax deductible whenever in the
Committee's judgment that would be consistent with the objectives pursuant to
which the particular compensation is paid, the Company should compensate its
executive officers fairly in accordance with the guidelines discussed in this
report and not be unduly limited by the anticipated tax treatment. Accordingly,
the total compensation paid to an executive officer in any year may exceed the
amount that is deductible. The Compensation Committee will continue to assess
the impact of Section 162(m) of the Code on its compensation practices and
determine what further action, if any, is appropriate.
Executive Compensation Programs
The Company's executive compensation programs, which contain no special
perquisites, consist of three principal elements: base salary, cash bonus and
stock options. The Company's objective is to emphasize incentive compensation
in the form of bonuses and stock option grants, rather than base salary. The
Board of Directors sets the annual base salary for executives after
consideration of the recommendations of the Compensation Committee. Prior to
making its recommendations, the Compensation Committee reviews historical
compensation levels of the executives, evaluations of past performance and
assessments of expected future contributions of the executives. In making the
determinations regarding base salaries, the Company considers generally
available information regarding salaries prevailing in the industry but does not
utilize any particular indices.
The Company maintains incentive plans (the "IPs") under which executive
officers (including the Chief Executive Officer), other than the officer
participating in sales activities, are paid cash bonuses subsequent to the end
of each fiscal year. The executive officer who does not participate in the IPs
is paid a commission based on revenue and receives a special cash bonus if he
meets target bookings. The bonuses under the IPs are dependent primarily on the
Company's financial performance and achievement of corporate objectives
established by the Board of Directors prior to the start of each fiscal year.
The IPs for fiscal 1996 set forth three performance factors including, for
each participating officer, earnings per share and revenue. The third factor
for two of the participating officers (including the Chief Executive Officer)
was based upon the number of software seats licensed, and for the remaining two,
on other individual performance goals. Three different target levels were
established for each performance factor and a gross target bonus corresponding
to each of the three target levels was set. A weight was then assigned to each
of the performance factors and the actual bonus earned was calculated using a
formula which weighed the three performance factors. If the Company failed to
meet the minimum profitability target for
9
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fiscal 1996, the executives would not have been eligible to receive a cash
bonus. The various elements of the bonus calculation formula were set by the
Board of Directors, after consideration of the Compensation Committee's
recommendation.
Total compensation for executive officers also includes long-term
incentives offered by stock options, which are generally provided through
initial stock option grants at the date of hire and periodic additional stock
option grants. Stock options serve as compensation and are instrumental in
promoting the alignment of long-term interests between the Company's executive
officers and stockholders due to the fact that executives realize gains only if
the stock price increases over the fair market value at the date of grant and
the executives exercise their options. In determining the amount of such
grants, the Officers' Stock Option Committee evaluates the job level of the
executive, responsibilities to be assumed in the upcoming fiscal year,
responsibilities of each executive in prior years and the size of awards made to
each such officer in prior years relative to the Company's overall performance.
It has been the Company's practice to fix the exercise price of options, which
generally become exercisable in equal annual installments over a period of four
years commencing one year after the date of grant, at 100% of the fair market
value on the date of grant. Therefore, the long-term value realized by
executives through option exercises can be directly linked to the enhancement of
stockholder value.
Chief Executive Officer Compensation
The Chief Executive Officer's performance was evaluated, and his
compensation determined, in accordance with the factors described above
applicable to executive officers generally. For the fiscal year ended September
30, 1996, the Chief Executive Officer earned a cash bonus of $700,000, which
represented 68% of his total cash compensation (base salary plus cash bonus) and
a 40% increase over the cash bonus earned in fiscal 1995. This amount reflects
the increases in earnings per share of 56.6% (excluding nonrecurring charges),
revenue of 52.2%, and the number of software seats licensed of 44.5% over the
prior year.
For the fiscal year ended September 30, 1996, the Officers' Stock Option
Committee granted to the Chief Executive Officer options to purchase 300,000
shares of the Company's Common Stock. The amount of the grant reflects the
senior position held by the Chief Executive Officer within the Company, the
strong results achieved by the Company during fiscal 1996, and the significant
contributions anticipated to be made by the Chief Executive Officer in the
future.
Compensation Committee
Robert N. Goldman, Chairman
Noel G. Posternak
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert N. Goldman (Chairman) and Noel G. Posternak constitute the
Compensation Committee and the Officers' Stock Option Committee of the Board of
Directors. Steven C. Walske, the Company's Chairman and Chief Executive
Officer, serves on the Board of Directors of Object Design Inc., a software
development company whose Chief Executive Officer and President is Robert N.
Goldman.
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STOCK PERFORMANCE GRAPH
The Stock Performance Graph set forth below compares the cumulative
stockholder return on the Common Stock of the Company from September 30, 1991 to
September 30, 1996, with the cumulative total return of the Nasdaq (U.S.
Companies) Index and the Nasdaq Computer & Data Processing Index over the same
period. The Stock Performance Graph assumes that the value of the investment in
the Company's Common Stock and each of the comparison groups was $100 on
September 30, 1991 and assumes the reinvestment of dividends. The Company has
never declared a dividend on the Common Stock of the Company. The stock price
performance depicted in the graph below is not necessarily indicative of future
price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG PARAMETRIC TECHNOLOGY
CORPORATION, NASDAQ (U.S. COMPANIES) INDEX AND NASDAQ COMPUTER
AND DATA PROCESSING INDEX
PTC: Parametric Technology Corporation
Nasdaq: Nasdaq (U.S. Companies) Index
NC&D: Nasdaq Computer & Data Processing Index
<TABLE>
<CAPTION>
9/30/91 9/30/92 9/30/93 9/30/94 9/29/95 9/30/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Parametric Technology Corporation $ 100 $ 285 $ 495 $ 406 $ 751 $ 1,206
Nasdaq (U.S. Companies) Index 100 112 147 148 204 243
Nasdaq Computer & Data Processing Index 100 118 141 156 250 310
</TABLE>
11
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EMPLOYMENT AGREEMENTS
Agreement with Mr. Walske
The Company has entered into an agreement with Mr. Walske which provides
for certain benefits for him in the event of a termination of his employment
under certain circumstances and upon the occurrence of certain events. Under
the agreement, in the event the Company elects to terminate Mr. Walske's
employment (other than for "cause," as defined in the agreement), or effects a
"change in status" of Mr. Walske (which, as defined in the agreement, includes a
diminution in title, responsibilities or compensation), Mr. Walske shall be
entitled to receive (i) during the six-month period following such an event (or
until such earlier date as he commences employment with another company), a
salary at a rate equal to two times the highest annual salary (excluding
bonuses) received by him in the prior six months, and (ii) provided he remains
employed with the Company for such six-month period, a bonus equal to Mr.
Walske's most recent fiscal year-end bonus. The agreement also provides that
the outstanding options held by Mr. Walske under the Company's Option Plans
shall become exercisable (i) in full upon a "change in control" of the Company,
which in general includes (a) any person becoming the beneficial owner of 50% or
more of the voting power of the Company, (b) a change in a majority of the
Company's directors, or (c) the approval by the stockholders of a merger or
consolidation in which the Company's stockholders do not have majority voting
power of the surviving entity, a liquidation of the Company or a sale or
disposition of all or substantially all of the Company's assets, or upon the
death or disability of Mr. Walske, and (ii) for such number of shares of Common
Stock for which they would have been exercisable had Mr. Walske's employment
continued for one year following a termination of his employment without "cause"
or a "change in status" of Mr. Walske.
Agreement with Mr. Harrison
The Company has entered into an agreement with Mr. Harrison which provides
for certain benefits for him in the event of a termination of his employment
under certain circumstances and upon the occurrence of certain events. The
benefits provided under this agreement are substantially similar to those
provided to Mr. Walske discussed above under this section except for the
following: in the event the Company elects to terminate the employment of Mr.
Harrison without "cause," or effects a "change in status" of Mr. Harrison, there
is no provision for a bonus to be paid to Mr. Harrison.
Agreement with Mr. Gillis
The Company has entered into an agreement with Mr. Gillis which provides
that (i) in the event the Company terminates the employment of Mr. Gillis
without "cause," he is entitled to receive, during the six-month period
following notice of termination (or until such earlier date as he commences
employment with another company) a salary at a rate equal to the highest annual
salary (excluding bonuses) received by him in the prior six months and (ii) in
the event of a change in control of the Company, the outstanding options held by
Mr. Gillis under the Company's Option Plans shall become exercisable in full.
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<PAGE>
APPROVAL OF AMENDMENT TO THE ARTICLES OF ORGANIZATION INCREASING AUTHORIZED
SHARES OF COMMON STOCK
The Board of Directors of the Company recommends that the stockholders
approve an amendment to Article 3 of the Company's Articles of Organization to
increase the number of authorized shares of Common Stock from 215,000,000 to
350,000,000. The Board of Directors believes that it is important to ensure that
the Company will continue to have an adequate number of authorized and unissued
shares of Common Stock available for future use. As of October 31, 1996, the
Company had a total of 127,462,608 shares of Common Stock outstanding,
20,053,663 shares reserved for issuance under its stock option plans, 1,109,911
shares reserved for issuance under its Purchase Plan, 180,000 shares reserved
for issuance under its 1996 Director Plan and 290,000 shares reserved for
issuance under its 1992 Director Plan.
At the 1996 Annual Meeting, the stockholders approved an increase in the
number of authorized shares of Common Stock from 75,000,000 to 215,000,000. That
increase permitted the Company's Board of Directors to declare a 2-for-1 split
of the Common Stock effective on February 29, 1996, when the market price of the
Common Stock was $74.375. Beginning at an initial post-split price of $37.1875,
the market price of the Common Stock had again increased to $54.625 as of
December 2, 1996. While the Company has no current plans to effect another stock
split, the proposed increase would give the Board of Directors desirable
additional flexibility.
If this amendment is adopted by the stockholders, the additional authorized
Common Stock would be available for issuance from time to time in the future for
such corporate purposes, including stock splits and stock dividends, financings,
funding employee benefit plans, and acquisitions, as the Board may deem
advisable. Any such action could be taken without stockholder approval, except
to the extent required by state law or Nasdaq requirements for the particular
transaction. The issuance of additional shares of Common Stock, while providing
desirable flexibility in carrying out corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company. In addition, the issuance of additional shares of Common Stock could
also lead to the dilution of existing stockholders. The Company may from time
to time be reviewing potential acquisition candidates but has no present
commitments or agreement with respect to any transactions involving the issuance
of additional shares of Common Stock. The Board of Directors of the Company
believes that the amendment to the Articles of Organization is in the best
interest of the Company and its stockholders and recommends a vote FOR the
proposal to approve the amendment to the Articles of Organization.
APPROVAL OF 1997 STOCK OPTION PLAN
The Board of Directors has adopted the Parametric Technology Corporation
1997 Incentive Stock Option Plan (the "1997 Option Plan" or the "Plan"), subject
to stockholder approval, to replace the Company's 1987 Incentive Stock Option
Plan (the "1987 Option Plan"), which will expire on February 6, 1997. Up to
6,000,000 shares of Common Stock may be issued under the 1997 Option Plan.
The Company's success depends in large part on its ability to attract,
retain, and motivate key employees and consultants. Stock options are a
significant element of compensation for the Company, as they are in the software
industry generally. Options benefit the Company in a number of ways. For
example, they tie compensation to Company performance; they conserve cash and
reduce fixed costs; they result in no charge to reported earnings, either upon
grant or exercise; they produce no dilution to earnings per share without an
increase in the stock price that benefits stockholders generally; the exercise
of options increases the Company's capital; and the Company is entitled to a tax
deduction upon the exercise of nonstatutory options or the disqualifying
disposition of incentive stock options.
As of October 31, 1996, approximately 2,800 employees were eligible to
receive options under the 1997 Option Plan. In fiscal 1996, the Company granted
options under the 1987 Option Plan to approximately 1,500 employees and
consultants, demonstrating the importance of options as compensation and to
create incentives across a broad base. The Board of Directors believes that it
is important for the Company's future competitiveness to continue to offer
equity compensation to employees and consultants as has been the Company's long
term practice.
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<PAGE>
PRINCIPAL TERMS OF THE 1997 OPTION PLAN
The 1997 Option Plan permits the grant of incentive stock options ("ISOs")
and nonstatutory stock options. It is administered by the Compensation
Committee of the Board of Directors (and with respect to grants to Section 16
Officers, the Officers' Stock Option Committee). The Committee determines the
persons to whom, and the times at which, options are granted, the type of option
to be granted, the number of shares and the exercise price for each option, and
all other related terms, conditions, and provisions. The Compensation Committee
may delegate to one or more officers the power to make awards to employees who
are not Section 16 Officers. In making awards, the Committee will take into
account various factors including, but not limited to, the employee's
responsibilities, present and potential contributions to the success of the
Company, and anticipated years of future service.
Although the Committee has discretion in granting options, no option may
have a term longer than ten years, and the exercise price of each option may not
be less than 100% of the fair market value of the Company's Common Stock on the
date of the grant. The closing price of the Company's Common Stock as reported
by the Nasdaq Stock Market on December 2, 1996 was $54.625. Grants to any
individual under the 1997 Option Plan in any fiscal year are limited to
1,000,000 shares.
Under the 1987 Option Plan, options have been granted subject to forfeiture
restrictions that lapse over time during the optionee's employment and vested
options are cancelled if not exercised within a specified time after termination
of the optionee's employment. It is anticipated that the Committee will
generally grant options under the 1997 Option Plan on similar terms. Options
granted under the 1997 Option Plan are generally not transferable by the
optionee other than by will or the laws of descent and distribution; however,
the Committee may permit transferability in appropriate circumstances.
The 1997 Option Plan may be amended or terminated at any time by the Board
of Directors, subject to any necessary approval by the stockholders. In
particular, under currently applicable requirements of the Internal Revenue Code
and the Nasdaq Stock Market, any Plan amendment that would increase the number
of shares issuable upon exercise of ISOs or to officers of the Company,
respectively, would require stockholder approval. The aggregate number of
shares issuable under the 1997 Option Plan is subject to appropriate adjustment
in the event of a stock split or other recapitalization. Shares also may be
issued under the 1997 Option Plan through the assumption or substitution of
outstanding grants from an acquired company without reducing the total number of
shares available under the Plan.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
Incentive Stock Options. An optionee will not realize taxable income upon
the grant or exercise of an ISO under the 1997 Option Plan. If the optionee
does not dispose of shares issued upon exercise of an ISO within two years from
the date of grant or within one year from the date of exercise, then, upon the
sale of such shares, any amount realized in excess of the exercise price is
taxed to the optionee as long-term capital gain, and any loss sustained will be
a long-term capital loss. No deduction would be allowed to the Company for
Federal income tax purposes. The exercise of ISOs gives rise to an adjustment
in computing alternative minimum taxable income that may result in alternative
minimum tax liability for the optionee. If shares of Common Stock acquired upon
the exercise of an ISO are disposed of before the expiration of the two-year and
one-year holding periods described above (a "disqualifying disposition"), the
optionee would realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on a sale of such shares) over the exercise
price thereof, and the Company would be entitled to deduct such amount. Any
further gain realized would be taxed as a short-term or long-term capital gain
and would not result in any deduction to the Company. A disqualifying
disposition in the year of exercise will generally avoid the alternative minimum
tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, the optionee realizes
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise, and the Company
is entitled to a tax deduction for the same amount. Upon disposition of the
shares, appreciation or depreciation after the date of exercise is treated as a
short-term or long-term capital gain or loss and will not result in any
deduction for the Company.
RECOMMENDATION OF THE BOARD
The Board of Directors considers the Company's ongoing program of granting
stock options broadly across the employee base to be important to the Company's
ability to compete for top talent and a significant incentive to promote the
14
<PAGE>
Company's success and, therefore, in the best interests of the Company's
stockholders. The Board recommends a vote FOR approval of the 1997 Incentive
Stock Option Plan. The enclosed proxy will be so voted unless a contrary
specification is made or it is a broker non-vote.
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Coopers & Lybrand
L.L.P. to serve as the Company's independent accountants for the fiscal year
ending September 30, 1997.
On November 17, 1995 the Board of Directors of the Company upon
recommendation of its Audit Committee approved a change in the Company's
independent accountants from Price Waterhouse LLP to Coopers & Lybrand L.L.P.
effective for the fiscal year ending September 30, 1996. Price Waterhouse LLP
served as the Company's independent accountants for fiscal years 1992 through
1995. During these periods, the Company did not have any disagreements with
Price Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, nor did any
reports issued by Price Waterhouse LLP contain an adverse opinion or a
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles.
Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the Annual Meeting. They will have the opportunity to make a statement if
they desire to do so and will also be available to respond to appropriate
questions from stockholders.
OTHER MATTERS
While the Notice of Meeting calls for transaction of such other business as
may be in furtherance of, or incidental to, the matters described in the Notice,
the Board of Directors does not know of any other matters which may come before
the Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. Such
costs will include a $7,500 fee to Georgeson & Company Inc., which has been
retained to assist with proxy solicitations. The Company's directors, officers
and regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials.
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Waltham, Massachusetts not later than September 1, 1997 for inclusion in the
proxy statement for that meeting. In order to curtail controversy as to the
date on which a proposal was received by the Company, proponents should submit
their proposals by Certified Mail-Return Receipt Requested.
By Order of the Board of Directors,
MARTHA L. DURCAN, Clerk
December 30, 1996
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
15
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
(As adopted at the November 14, 1996 Board of Directors Meeting.
Subject to stockholder approval at the 1997 Annual Meeting of Stockholders.)
1. PURPOSE
The purpose of the Parametric Technology Corporation 1997 Incentive
Stock Option Plan (the "Plan") is to attract and retain key employees and
consultants of the Company and its Affiliates, to provide an incentive for
them to achieve long-range performance goals, and to enable them to
participate in the long-term growth of the Company.
2. DEFINITIONS
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total voting power or has a
significant financial interest as determined by the Committee.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor law.
"Committee" means one or more committees each comprised of not less
than two members of the Board appointed by the Board to administer the Plan or
a specified portion thereof. If a Committee is authorized to grant Options to
a Reporting Person or a "covered employee" within the meaning of Section
162(m) of the Code, each member shall be a "Non- Employee Director" or the
equivalent within the meaning of Rule 16b-3 under the Exchange Act or an
"outside director" or the equivalent within the meaning of Section 162(m) of
the Code, respectively.
"Common Stock" or "Stock" means the Common Stock, $.01 par value, of
the Company.
"Company" means Parametric Technology Corporation.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due
or exercise rights of the Participant in the event of the Participant's death.
In the absence of an effective designation by a Participant, "Designated
Beneficiary" means the Participant's estate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor law.
<PAGE>
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the
Committee in good faith or in the manner established by the Committee from
time to time.
"Incentive Stock Option" - See Section 6(a).
"Nonstatutory Stock Option" - See Section 6(a).
"Option" - Unless the context otherwise requires, an Incentive
Stock Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Committee to receive an
Option under the Plan.
"Reporting Person" means a person subject to Section 16 of the
Exchange Act.
3. ADMINISTRATION
The Plan shall be administered by the Committee, provided that the Board
may in any instance perform any of the functions of the Committee. The
Committee shall have authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it
shall from time to time consider advisable, and to interpret the provisions of
the Plan. The Committee's decisions shall be final and binding. To the
extent permitted by applicable law, the Committee may delegate to one or more
executive officers of the Company the power to grant Options to Participants
who are not Reporting Persons or covered employees and all determinations
under the Plan with respect thereto, provided that the Committee shall fix the
maximum amount of such Options for all such Participants and a maximum for any
one Participant.
4. ELIGIBILITY
All employees and, in the case of Nonstatutory Stock Options, consultants
of the Company or any Affiliate, capable of contributing significantly to the
successful performance of the Company, other than a person who has irrevocably
elected not to be eligible, are eligible to be Participants in the Plan.
Incentive Stock Options may be granted only to persons eligible to receive
such Options under the Code.
5. STOCK AVAILABLE FOR OPTIONS
(a) AMOUNT. Subject to adjustment under subsection (b), Options may be
granted under the Plan for up to 6,000,000 shares of Common Stock. If any
Option expires or is terminated unexercised or is forfeited or settled in a
manner that results in fewer shares outstanding than were granted, the shares
subject to such Option, to the extent of such expiration, termination,
forfeiture or decrease, shall again be available for grant under the Plan.
Common Stock issued through the assumption or substitution of outstanding
grants from an acquired company shall not reduce the shares available for
grant under the Plan. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
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<PAGE>
(b) ADJUSTMENT. In the event of any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, or other transaction affecting the
Common Stock, then (subject in the case of Incentive Stock Options to any
limitation required under the Code) (i) the number and kind of shares in
respect of which Options may be granted under the Plan, (ii) the number and
kind of shares subject to outstanding Options, and (iii) the exercise price
with respect to any of the foregoing shall be proportionately adjusted to the
extent required equitably to preserve the benefits available hereunder,
provided that the number of shares subject to any Option shall always be a
whole number, and if considered appropriate, the Committee may make provision
for a cash payment with respect to an outstanding Option.
(c) LIMIT ON INDIVIDUAL GRANTS. The maximum number of shares of Common
Stock subject to Options that may be granted to any Participant in the
aggregate in any calendar year shall not exceed 1,000,000 shares, subject to
adjustment under subsection (b) above.
6. STOCK OPTIONS
(a) GRANT OF OPTIONS. Subject to the provisions of the Plan, the Committee
may grant Options to purchase shares of Common Stock (i) complying with the
requirements of Section 422 of the Code or any successor provision and any
regulations thereunder ("Incentive Stock Options") and (ii) not intended to
comply with such requirements ("Nonstatutory Stock Options"). The Committee
shall determine the number of shares subject to each Option and the exercise
price therefor, which shall not be less than 100% of the Fair Market Value of
the Common Stock on the date of grant. No Incentive Stock Option may be
granted hereunder more than ten years after the effective date of the Plan.
(b) TERMS AND CONDITIONS. Each Option shall have a term no longer than ten
years from the date of grant and shall be exercisable at the time(s) and
subject to the terms and conditions set forth in the respective form of option
certificate included in Appendix I hereto or as the Committee may otherwise
specify in the applicable grant or thereafter. The Committee may impose such
conditions with respect to the exercise of Options, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable.
(c) PAYMENT. No shares shall be delivered pursuant to any exercise of an
Option until payment in full of the exercise price therefor is received by the
Company. Such payment may be made in whole or in part in cash or, to the
extent permitted by the Committee at or after the grant of the Option, by
delivery of a note or shares of Common Stock owned by the Participant or by
retaining shares otherwise issuable pursuant to the Option, in each case
valued at their Fair Market Value on the date of delivery or retention, or
such other lawful consideration, including a payment commitment of a financial
or brokerage institution, as the Committee may determine.
7. TERMINATION OF EMPLOYMENT OR ENGAGEMENT
If the Optionholder's status as an employee or consultant of (a) the
Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary
corporation of such corporation) issuing or assuming a stock option in a
transaction to which section 424(a) of the Code applies, is
3
<PAGE>
terminated for any reason (voluntary or involuntary) and the period of
exercisability for a particular Option following such termination has not been
specified by the Board, each such Option then held by that Participant shall
expire to the extent not previously exercised ten (10) calendar days after such
Participant's employment or engagement is terminated, except that -
------ ----
(a) If the Participant is on military, sick leave or other bona fide
---- ----
leave of absence (such as temporary employment by the federal government), his
or her employment or engagement with the Company will be treated as continuing
intact if the period of such leave does not exceed ninety (90) days, or, if
longer, so long as the Participant's right to reemployment or the survival of
his or her service arrangement with the Company is guaranteed either by
statute or by contract; otherwise, the Participant's employment or engagement
will be deemed to have terminated on the 91st day of such leave.
(b) If the Participant's employment is terminated by reason of his or
her retirement from the Company at normal retirement age, each Option then
held by the Participant, to the extent exercisable at retirement, may be
exercised by the Participant at any time within three (3) months after such
retirement unless terminated earlier by its terms.
(c) If the Participant's employment or engagement is terminated by
reason of his or her death, each Option then held by the Participant, to the
extent exercisable at the date of death, may be exercised at any time within
one year after that date (unless terminated earlier by its terms) by the
person(s) to whom the Participant's option rights pass by will or by the
applicable laws of descent and distribution.
(d) If the Participant's employment or engagement is terminated by
reason of his or her becoming permanently and totally disabled, each Option then
held by the Participant, to the extent exercisable upon the occurrence of
permanent and total disability, may be exercised by the Participant at any time
within one (1) year after such occurrence unless terminated earlier by its
terms. For purposes hereof, an individual shall be deemed to be "permanently
and totally disabled" if he or she is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12) months.
Any determination of permanent and total disability shall be made in good faith
by the Company on the basis of a report signed by a qualified physician.
8. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) LIMITATIONS ON TRANSFERABILITY. Options shall not be transferable by
the recipient other than by will or the laws of descent and distribution and
are exercisable during such person's lifetime only by such person or by such
person's guardian or legal representative; provided that the Committee may in
its discretion waive such restriction in any case.
(b) DOCUMENTATION. Each Option under the Plan shall be evidenced by a
written stock option certificate delivered to the Participant specifying the
terms and conditions thereof and containing such other terms and conditions
not inconsistent with the provisions of the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable tax and regulatory laws and accounting principles.
4
<PAGE>
(c) COMMITTEE DISCRETION. Options may be granted alone, in addition to or
in relation to any other Option. The terms of each Option need not be
identical, and the Committee need not treat Participants uniformly. Except as
otherwise provided by the Plan or a particular Option, any determination with
respect to an Option may be made by the Committee at the time of grant or at
any time thereafter.
(d) DIVIDENDS AND CASH OPTIONS. In the discretion of the Committee, any
Option under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable (in cash or in the form of Options under the
Plan) currently or deferred with or without interest, and (ii) cash payments
in lieu of or in addition to an Option.
(e) CHANGE IN CONTROL. In order to preserve a Participant's rights under
an Option in the event of a change in control (as defined by the Committee) of
the Company, the Committee in its discretion may, at the time an Option is
granted or at any time thereafter, take one or more of the following actions:
(i) provide for the acceleration of any time period relating to the exercise
of the Option, (ii) provide for payment to the Participant of cash or other
property with a Fair Market Value equal to the value that would have been
received upon the exercise of the Option had the Option been exercised upon
the change in control, (iii) adjust the terms of the Option in a manner
determined by the Committee to reflect the change in control, (iv) cause the
Option to be assumed, or new rights substituted therefor, by another entity,
or (v) make such other provision as the Committee may consider equitable to
Participants and in the best interests of the Company.
(f) LOANS. The Committee may authorize the making of loans or cash
payments to Participants in connection with the grant or exercise of any
Option under the Plan, which loans may be secured by any security, including
Common Stock, underlying such Option (provided that the loan shall not exceed
the Fair Market Value of the security subject to such Option), and which may
be forgiven upon such terms and conditions as the Committee may establish at
the time of such loan or at any time thereafter.
(g) WITHHOLDING TAXES. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Options under the Plan no later than the date
of the event creating the tax liability. The Company and its Affiliates may,
to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Participant. In the Committee's
discretion, the Participant may pay any taxes due with respect to an Option in
whole or in part in shares of Common Stock, including shares retained from the
Option creating the tax obligation, valued at their Fair Market Value on the
date of retention or delivery.
(h) FOREIGN NATIONALS. Options may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee
considers necessary or advisable to achieve the purposes of the Plan or to
comply with applicable laws.
(i) AMENDMENT OF OPTION. The Committee may amend, modify or terminate any
outstanding Option in any respect, including converting an Incentive Stock
Option to a
5
<PAGE>
Nonstatutory Stock Option, provided that the Participant's consent to such
action shall be required unless the Committee determines that the action,
taking into account any related action, would not materially and adversely
affect the Participant. The Committee shall not, without further approval of
the stockholders of the Company, authorize the amendment of any outstanding
option to reduce the option price. Furthermore, no option shall be canceled
and replaced with options having a lower option price or base price without
approval of the stockholders of the Company.
9. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be
granted an Option. Each employee of the Company or any of its Affiliates is
an employee-at-will (that is to say that either the Participant or the Company
or any Affiliate may terminate the employment relationship at any time for any
reason or no reason at all) unless, and only to the extent, provided in a
written employment agreement for a specified term executed by the chief
executive officer of the Company or his duly authorized designee or the
authorized signatory of any Affiliate. Neither the adoption, maintenance, nor
operation of the Plan nor any Option hereunder shall confer upon any employee
of the Company or of any Affiliate any right with respect to the continuance
of his/her employment by the Company or any such Affiliate nor shall they
interfere with the right of the Company (or Affiliate) to terminate any
employee at any time or otherwise change the terms of employment, including,
without limitation, the right to promote, demote or otherwise re-assign any
employee from one position to another within the Company or any Affiliate.
(b) EFFECT OF GRANT. Participant shall not earn any Options granted
hereunder until such time as all the conditions put forth herein which are
required to be met in order to exercise the Option have been fully satisfied.
(c) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Option, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the holder thereof.
(d) EFFECTIVE DATE. Subject to the approval of the stockholders of the
Company, the Plan shall be effective on the date of its approval by the Board.
(e) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, subject to any stockholder approval that
the Board determines to be necessary or advisable.
(f) GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Massachusetts.
(g) COMPLETE AGREEMENT The Plan constitutes the complete understanding of
the parties regarding the subject matter hereof and supersedes all prior
contemporaneous agreements of the parties, whether written or oral. This Plan
may be amended, altered, or modified only by a writing, specifying such
amendment, alteration or modification, signed by both parties.
6
<PAGE>
APPENDIX I
No. __________ _________ Shares
PARAMETRIC TECHNOLOGY CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
Incentive Stock Option Certificate
Parametric Technology Corporation (the "Company"), a Massachusetts
corporation, hereby grants to the person named below an option to purchase
shares of Common Stock, $0.01 par value, of the Company (the "Option") under
and subject to the Company's 1997 Incentive Stock Option Plan (the "Plan")
exercisable on the following terms and conditions set forth below and those
attached hereto and in the Plan:
Name of Optionholder: ____________________________
Address: ____________________________
____________________________
Social Security No. ____________________________
Number of Shares: __________________
Option Price: __________________
Date of Grant:
__________________
Exercisability Schedule: After , 19 , as to ______ shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares.
Expiration Date: __________________
This Option is intended to be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
By acceptance of this Option, the Optionholder agrees to the terms and
conditions set forth below and those attached hereto and in the Plan.
OPTIONHOLDER PARAMETRIC TECHNOLOGY CORPORATION
By: By:
------------------------- ----------------------------
7
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN
INCENTIVE STOCK OPTION TERMS AND CONDITIONS
1. Plan Incorporated by Reference. This Option is issued pursuant to
------------------------------
the terms of the Plan and may be amended as provided in the Plan. Capitalized
terms used and not otherwise defined in this certificate have the meanings
given to them in the Plan. This certificate does not set forth all of the
terms and conditions of the Plan, which are incorporated herein by reference.
The Committee administers the Plan and its determinations regarding the
operation of the Plan are final and binding. Copies of the Plan may be
obtained upon written request without charge from the Corporate Counsel of the
Company.
2. Option Price. The price to be paid for each share of Common Stock
------------
issued upon exercise of the whole or any part of this Option is the Option
Price set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any time
-----------------------
and from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the face of this certificate, but only
for the purchase of whole shares. This Option may not be exercised as to any
shares after the Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder shall
------------------
deliver written notice of exercise to the Company specifying the number of
shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form, including shares of Common Stock of the Company valued at
their Fair Market Value on the date of delivery or a payment commitment of a
financial or brokerage institution, as the Committee may approve. Promptly
following such notice, the Company will deliver to the Optionholder a
certificate representing the number of shares with respect to which the Option
is being exercised.
5. No Right To Employment. No person shall have any claim or right to be
----------------------
granted an Option. Each employee of the Company or any of its Affiliates is
an employee-at-will (that is to say that either the Participant or the Company
or any Affiliate may terminate the employment relationship at any time for any
reason or no reason at all) unless, and only to the extent, provided in a
written employment agreement for a specified term executed by the chief
executive officer of the Company or his duly authorized designee or the
authorized signatory of any Affiliate. Neither the adoption, maintenance, nor
operation of the Plan nor any Option hereunder shall confer upon any employee
of the Company or of any Affiliate any right with respect to the continuance
of his/her employment by the Company or any such Affiliate nor shall they
interfere with the right
8
<PAGE>
of the Company (or Affiliate) to terminate any employee at any time or
otherwise change the terms of employment, including, without limitation, the
right to promote, demote or otherwise re-assign any employee from one position
to another within the Company or any Affiliate.
6. Effect of Grant. Participant shall not earn any Options granted
----------------
hereunder until such time as all the conditions put forth herein and in the
Plan which are required to be met in order to exercise the Option have been
fully satisfied.
7. Recapitalization, Mergers, Etc. As provided in the Plan, in the event
------------------------------
of corporate transactions affecting the Company's outstanding Common Stock,
the Committee shall equitably adjust the number and kind of shares subject to
this Option and the exercise price hereunder or make provision for a cash
payment. If such transaction involves a consolidation or merger of the
Company with another entity, the sale or exchange of all or substantially all
of the assets of the Company or a reorganization or liquidation of the
Company, then in lieu of the foregoing, the Committee may upon written notice
to the Optionholder provide that this Option shall terminate on a date not
less than 20 days after the date of such notice unless theretofore exercised.
In connection with such notice, the Committee may in its discretion accelerate
or waive any deferred exercise period.
8. Option Not Transferable. This Option is not transferable by the
-----------------------
Optionholder otherwise than by will or the laws of descent and distribution,
and is exercisable, during the Optionholder's lifetime, only by the
Optionholder. The naming of a Designated Beneficiary does not constitute a
transfer.
9. Termination of Employment or Engagement. If the Optionholder's status
----------------------------------------
as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a
corporation (or parent or subsidiary corporation of such corporation) issuing
or assuming a stock option in a transaction to which section 424(a) of the
Code applies, is terminated for any reason (voluntary or involuntary) and the
period of exercisability for a particular Option following such termination
has not been specified by the Board, each such Option then held by that
Participant shall expire to the extent not previously exercised ten (10)
calendar days after such Participant's employment or engagement is terminated,
except that -
------ ----
(a) If the Participant is on military, sick leave or other bona fide
---- ----
leave of absence (such as temporary employment by the federal government), his
or her employment or engagement with the Company will be treated as continuing
intact if the period of such leave does not exceed ninety (90) days, or, if
longer, so long as the Participant's right to reemployment or the survival of
his or her service arrangement with the Company is guaranteed either by
statute or by contract; otherwise, the Participant's employment or engagement
will be deemed to have terminated on the 91st day of such leave.
9
<PAGE>
(b) If the Participant's employment is terminated by reason of his or her
retirement from the Company at normal retirement age, each Option then held by
the Participant, to the extent exercisable at retirement, may be exercised by
the Participant at any time within three (3) months after such retirement
unless terminated earlier by its terms.
(c) If the Participant's employment or engagement is terminated by reason
of his or her death, each Option then held by the Participant, to the extent
exercisable at the date of death, may be exercised at any time within one year
after that date (unless terminated earlier by its terms) by the person(s) to
whom the Participant's option rights pass by will or by the applicable laws of
descent and distribution.
(d) If the Participant's employment or engagement is terminated by reason
of his or her becoming permanently and totally disabled, each Option then held
by the Participant, to the extent exercisable upon the occurrence of permanent
and total disability, may be exercised by the Participant at any time within
one (1) year after such occurrence unless terminated earlier by its terms.
For purposes hereof, an individual shall be deemed to be "permanently and
totally disabled" if he or she is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than twelve (12) months.
Any determination of permanent and total disability shall be made in good
faith by the Company on the basis of a report signed by a qualified physician.
10. Compliance with Securities Laws. It shall be a condition to the
-------------------------------
Optionholder's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) that the shares of Common Stock
reserved for issuance upon the exercise of this Option shall have been duly
listed, upon official notice of issuance, upon any national securities
exchange or automated quotation system on which the Company's Common Stock may
then be listed or quoted, (b) that either (i) a registration statement under
the Securities Act of 1933 with respect to the shares shall be in effect, or
(ii) in the opinion of counsel for the Company, the proposed purchase shall be
exempt from registration under that Act and the Optionholder shall have made
such undertakings and agreements with the Company as the Company may
reasonably require, and (c) that such other steps, if any, as counsel for the
Company shall consider necessary to comply with any law applicable to the
issue of such shares by the Company shall have been taken by the Company or
the Optionholder, or both. The certificates representing the shares purchased
under this Option may contain such legends as counsel for the Company shall
consider necessary to comply with any applicable law.
11. Payment of Taxes. The Optionholder shall pay to the Company, or make
----------------
provision satisfactory to the Company for payment of, any taxes required by
law to be withheld with respect to the exercise of this Option. The Committee
may, in its discretion, require any other Federal or state taxes imposed on
the sale of the shares to be paid by the Optionholder. In the Committee's
discretion, such tax obligations may be paid
10
<PAGE>
in whole or in part in shares of Common Stock, including shares retained from
the exercise of this Option, valued at their Fair Market Value on the date of
delivery. The Company and its Affiliates may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the Optionholder.
12. Notice of Sale of Shares Required. The Optionholder agrees to notify
---------------------------------
the Company in writing within 30 days of the disposition of any shares
purchased upon exercise of this Option if such disposition occurs within two
years of the date of the grant of this Option or within one year after such
purchase.
Adopted 11/14/96
11
<PAGE>
No._________ _________ Shares
PARAMETRIC TECHNOLOGY CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
Nonstatutory Stock Option Certificate
Parametric Technology Corporation (the "Company"), a Massachusetts
corporation, hereby grants to the person named below an option to purchase
shares of Common Stock, $0.01 par value, of the Company (the "Option") under
and subject to the Company's 1997 Incentive Stock Option Plan (the "Plan")
exercisable on the following terms and conditions set forth below and those
attached hereto and in the Plan:
Name of Optionholder: ____________________________
Address: ____________________________
____________________________
Social Security No. ____________________________
Number of Shares: __________________
Option Price: __________________
Date of Grant:
__________________
Exercisability Schedule: After , 19 , as to ______ shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares.
Expiration Date: __________________
This Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
By acceptance of this Option, the Optionholder agrees to the terms and
conditions set forth below and those attached hereto and in the Plan.
OPTIONHOLDER PARAMETRIC TECHNOLOGY CORPORATION
By: By:
--------------------------- ----------------------------
12
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS
1. Plan Incorporated by Reference. This Option is issued pursuant
------------------------------
to the terms of the Plan and may be amended as provided in the Plan.
Capitalized terms used and not otherwise defined in this certificate have the
meanings given to them in the Plan. This certificate does not set forth all
of the terms and conditions of the Plan, which are incorporated herein by
reference. The Committee administers the Plan and its determinations
regarding the operation of the Plan are final and binding. Copies of the Plan
may be obtained upon written request without charge from the Corporate Counsel
of the Company.
2. Option Price. The price to be paid for each share of Common
------------
Stock issued upon exercise of the whole or any part of this Option is the
Option Price set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any
-----------------------
time and from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the face of this certificate, but only
for the purchase of whole shares. This Option may not be exercised as to any
shares after the Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder
------------------
shall deliver written notice of exercise to the Company specifying the number
of shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form, including shares of Common Stock of the Company valued at
their Fair Market Value on the date of delivery or a payment commitment of a
financial or brokerage institution, as the Committee may approve. Promptly
following such notice, the Company will deliver to the Optionholder a
certificate representing the number of shares with respect to which the Option
is being exercised.
5. No Right To Employment. No person shall have any claim or right to be
----------------------
granted an Option. Each employee of the Company or any of its Affiliates is
an employee-at-will (that is to say that either the Participant or the Company
or any Affiliate may terminate the employment relationship at any time for any
reason or no reason at all) unless, and only to the extent, provided in a
written employment agreement for a specified term executed by the chief
executive officer of the Company or his duly authorized designee or the
authorized signatory of any Affiliate. Neither the adoption, maintenance, nor
operation of the Plan nor any Option hereunder shall confer upon any employee
of the Company or of any Affiliate any right with respect to the continuance
of his/her employment by the Company or any such Affiliate nor shall they
interfere with the right of the Company (or Affiliate) to terminate any
employee at any time or otherwise change the terms of employment, including,
without limitation, the right to promote, demote
13
<PAGE>
or otherwise re-assign any employee from one position to another within the
Company or any Affiliate.
6. Effect of Grant. Participant shall not earn any Options granted
----------------
hereunder until such time as all the conditions put forth herein and in the
Plan which are required to be met in order to exercise the Option have been
fully satisfied.
7. Recapitalization, Mergers, Etc. As provided in the Plan, in the event
------------------------------
of corporate transactions affecting the Company's outstanding Common Stock,
the number and kind of shares subject to this Option and the exercise price
hereunder shall be equitably adjusted. If such transaction involves a
consolidation or merger of the Company with another entity, the sale or
exchange of all or substantially all of the assets of the Company or a
reorganization or liquidation of the Company, then in lieu of the foregoing,
the Committee may upon written notice to the Optionholder provide that this
Option shall terminate on a date not less than 20 days after the date of such
notice unless theretofore exercised. In connection with such notice, the
Committee may in its discretion accelerate or waive any deferred exercise
period.
8. Option Not Transferable. This Option is not transferable by the
-----------------------
Optionholder otherwise than by will or the laws of descent and distribution,
and is exercisable, during the Optionholder's lifetime, only by the
Optionholder. The naming of a Designated Beneficiary does not constitute a
transfer.
9. Termination of Employment or Engagement. If the Optionholder's status
----------------------------------------
as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a
corporation (or parent or subsidiary corporation of such corporation) issuing
or assuming a stock option in a transaction to which section 424(a) of the
Code applies, is terminated for any reason (voluntary or involuntary) and the
period of exercisability for a particular Option following such termination
has not been specified by the Board, each such Option then held by that
Participant shall expire to the extent not previously exercised ten (10)
calendar days after such Participant's employment or engagement is terminated,
except that -
------ ----
(a) If the Participant is on military, sick leave or other bona fide
---- ----
leave of absence (such as temporary employment by the federal government), his
or her employment or engagement with the Company will be treated as continuing
intact if the period of such leave does not exceed ninety (90) days, or, if
longer, so long as the Participant's right to reemployment or the survival of
his or her service arrangement with the Company is guaranteed either by
statute or by contract; otherwise, the Participant's employment or engagement
will be deemed to have terminated on the 91st day of such leave.
(b) If the Participant's employment is terminated by reason of his or her
retirement from the Company at normal retirement age, each Option then held by
the Participant, to the extent exercisable at retirement, may be exercised by
the Participant at
14
<PAGE>
any time within three (3) months after such retirement unless terminated
earlier by its terms.
(c) If the Participant's employment or engagement is terminated by reason
of his or her death, each Option then held by the Participant, to the extent
exercisable at the date of death, may be exercised at any time within one year
after that date (unless terminated earlier by its terms) by the person(s) to
whom the Participant's option rights pass by will or by the applicable laws of
descent and distribution.
(d) If the Participant's employment or engagement is terminated by reason
of his or her becoming permanently and totally disabled, each Option then held
by the Participant, to the extent exercisable upon the occurrence of permanent
and total disability, may be exercised by the Participant at any time within
one (1) year after such occurrence unless terminated earlier by its terms.
For purposes hereof, an individual shall be deemed to be "permanently and
totally disabled" if he or she is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than twelve (12) months.
Any determination of permanent and total disability shall be made in good
faith by the Company on the basis of a report signed by a qualified physician.
10. Compliance with Securities Laws. It shall be a condition to the
-------------------------------
Optionholder's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) that the shares of Common Stock
reserved for issuance upon the exercise of this Option shall have been duly
listed, upon official notice of issuance, upon any national securities
exchange or automated quotation system on which the Company's Common Stock may
then be listed or quoted, (b) that either (i) a registration statement under
the Securities Act of 1933 with respect to the shares shall be in effect, or
(ii) in the opinion of counsel for the Company, the proposed purchase shall be
exempt from registration under that Act and the Optionholder shall have made
such undertakings and agreements with the Company as the Company may
reasonably require, and (c) that such other steps, if any, as counsel for the
Company shall consider necessary to comply with any law applicable to the
issue of such shares by the Company shall have been taken by the Company or
the Optionholder, or both. The certificates representing the shares purchased
under this Option may contain such legends as counsel for the Company shall
consider necessary to comply with any applicable law.
11. Payment of Taxes. The Optionholder shall pay to the Company, or make
----------------
provision satisfactory to the Company for payment of, any taxes required by
law to be withheld with respect to the exercise of this Option. The Committee
may, in its discretion, require any other Federal or state taxes imposed on
the sale of the shares to be paid by the Optionholder. In the Committee's
discretion, such tax obligations may be paid in whole or in part in shares of
Common Stock, including shares retained from the exercise of this Option,
valued at their Fair Market Value on the date of delivery. The Company and
its Affiliates may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to the Optionholder.
Adopted 11/14/96
15
<PAGE>
PRELIMINARY FILING
PARAMETRIC TECHNOLOGY CORPORATION
PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 13, 1997
The undersigned, having received notice of and the Proxy Statement relating to
the 1997 Annual Meeting of Stockholders to be held on February 13, 1997, at 9:00
a.m. at 128 Technology Drive, Waltham, MA 02154, and revoking all prior proxies,
hereby appoint(s) Edwin J. Gillis and Martha L. Durcan, and each of them acting
singly, with full power of substitution, as proxies to represent and vote on
behalf of the undersigned, as designated below, all shares of common stock, $
.01 par value per share, (the "Common Stock") of Parametric Technology
Corporation (the "Company") which the undersigned would be entitled to vote if
personally present at the 1997 Annual Meeting of Stockholders and any
adjournment or adjournments thereof (the "Annual Meeting"). IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
1. Election of directors NOMINEES: Donald K. Grierson, Oscar B. Marx, III and
Noel G. Posternak
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
-------------------
-------------------
2. To approve an amendment to the Company's Articles of Organization to
increase the number of authorized shares of the Company's Common Stock from
215,000,000 to 350,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the Company's 1997 Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF A CHOICE IS NOT SPECIFIED WITH RESPECT TO
ANY PROPOSAL LISTED ABOVE, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
Attendance of the undersigned at the Annual Meeting will not be deemed to revoke
this Proxy unless the undersigned shall revoke this Proxy in writing and shall
vote in person at the Annual Meeting.
EACH STOCKHOLDER SHOULD SIGN THIS PROXY PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY.
Date:
--------------------
--------------------------------------------
--------------------------------------------
PLEASE SIGN NAME(S) EXACTLY AS APPEARING ON
YOUR STOCK CERTIFICATE. IF SHARES ARE HELD
JOINTLY, EACH JOINT OWNER SHOULD PERSONALLY
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
