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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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
[ ] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-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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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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PARAMETRIC TECHNOLOGY CORPORATION
128 TECHNOLOGY DRIVE
WALTHAM, MA 02453
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on February 10, 2000
We will hold the Annual Meeting of Stockholders of Parametric Technology
Corporation ("PTC") at the Boston-Newton Marriott Hotel, 2345 Commonwealth
Avenue, Newton, MA 02466 on Thursday, February 10, 2000 at 9:00 a.m., local
time. At this year's Annual Meeting, we will ask you to:
1. Elect three Class I directors to serve for the next three years.
2. Amend PTC's Articles of Organization to increase the number of
shares of common stock PTC is authorized to issue from 350,000,000
to 500,000,000.
3. Approve PTC's 2000 Employee Stock Purchase Plan in order to obtain
beneficial tax treatment for participants.
4. Approve PTC's 2000 Equity Incentive Plan.
5. Consider other business that may further or relate to the
foregoing.
You may vote at the Annual Meeting if you were a PTC stockholder at the close
of business on December 15, 1999. Along with this Proxy Statement, we are
sending you PTC's 1999 Annual Report to Stockholders, including our Annual
Report on Form 10-K with our consolidated financial statements.
By Order of the Board of Directors,
DAVID R. FRIEDMAN, Senior Vice
President, General Counsel and
Clerk
Waltham, Massachusetts
January , 2000
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, OR VOTE
BY TELEPHONE OR ON THE INTERNET, IN ORDER TO ENSURE REPRESENTATION OF YOUR
SHARES. NO POSTAGE IS REQUIRED IF THE PROXY IS MAILED IN THE UNITED STATES.
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TABLE OF CONTENTS
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Page
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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING........................... 1
Why Did You Send Me this Proxy Statement?............................... 1
How Many Votes Do I Have?............................................... 1
How Do I Vote by Proxy?................................................. 1
How Do I Vote by Telephone or Via the Internet?......................... 1
May I Revoke My Proxy?.................................................. 2
How Do I Vote in Person?................................................ 2
What Is the Effect of Broker Non-Votes and Abstentions?................. 2
Is Voting Confidential?................................................. 2
What Are the Costs of Soliciting these Proxies?......................... 2
How Do I Obtain an Annual Report on Form 10-K?.......................... 3
Where Can I Find the Voting Results?.................................... 3
Whom Should I Call If I Have Any Questions?............................. 3
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD OF DIRECTORS............. 3
Proposal 1: Elect Three Directors....................................... 3
Proposal 2: Approve an Amendment to Our Articles of Organization to
Increase the Number of Authorized Shares of Common Stock We May Issue
from 350,000,000 to 500,000,000......................................... 4
Proposal 3: Approve Our 2000 Employee Stock Purchase Plan in Order to
Obtain Beneficial Tax Treatment for Participants........................ 5
Proposal 4: Approve Our 2000 Equity Incentive Plan...................... 6
Other Matters........................................................... 9
INFORMATION ABOUT PTC COMMON STOCK OWNERSHIP.............................. 10
Which Stockholders Own at least 5% of PTC?.............................. 10
How Much Stock is Owned By Directors and Officers?...................... 10
Section 16(a) Beneficial Ownership Reporting Compliance................. 11
INFORMATION ABOUT THE DIRECTORS........................................... 11
Who are Our Directors?.................................................. 11
Board Meetings.......................................................... 12
Are Our Directors Independent?.......................................... 12
The Committees of the Board............................................. 12
How We Compensate Our Directors......................................... 13
Information About Certain Insider Relationships......................... 14
INFORMATION ABOUT EXECUTIVE COMPENSATION.................................. 15
Summary Compensation Table.............................................. 15
Option Grants in Fiscal 1999............................................ 16
Aggregated Option Exercises During Fiscal 1999 and Year-End Option
Values................................................................. 17
Report of the Compensation Committee.................................... 17
Stock Performance Graph................................................. 18
Employment Agreements with Executive Officers........................... 19
INFORMATION ABOUT OUR AUDITORS............................................ 20
INFORMATION ABOUT STOCKHOLDER PROPOSALS................................... 20
</TABLE>
APPENDIX A--Parametric Technology Corporation 2000 Employee Stock Purchase Plan
APPENDIX B--Parametric Technology Corporation 2000 Equity Incentive Plan
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PROXY STATEMENT FOR THE PARAMETRIC TECHNOLOGY CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why Did You Send Me this Proxy Statement?
As a stockholder, you have a right to attend and vote at the Parametric
Technology Corporation (PTC) 2000 Annual Meeting of Stockholders. If you
attend the Annual Meeting, you may vote your shares directly. However, if you
do not attend, you may vote by proxy, which allows you to direct another
person to vote your shares at the meeting on your behalf. The PTC Board of
Directors is soliciting your proxy to encourage your participation in voting
at the meeting and to obtain your support on each of the proposals presented.
There are two parts to our proxy solicitation: this proxy statement and the
enclosed voting instruction form (which may also be called a "proxy card").
The proxy statement explains the matters to be voted on at the Annual Meeting
and PTC's reasons for proposing them. You use the voting instruction form to
authorize your shares to be voted as you wish.
To vote, simply complete, sign and return the form, and your shares will be
voted as you direct. If you wish, in most cases, you may vote by telephone or
via the Internet instead.
We will begin mailing this proxy statement on January , 2000 to all
stockholders entitled to vote. If you owned PTC common stock at the close of
business on December 15, 1999, you are entitled to vote. On that date, there
were 274,178,008 shares of PTC common stock outstanding. PTC common stock is
our only class of voting stock.
How Many Votes Do I Have?
You have one vote for each share of PTC common stock that you owned at the
close of business on December 15, 1999. Your proxy card or other voting
instruction form indicates the number.
How Do I Vote by Proxy?
When you return your voting instruction form, or vote by telephone or via the
Internet, before the meeting, you are giving your "proxy" to the individuals
we have designated to vote your shares as you direct at the meeting. If you
sign the form but do not make specific choices, they will vote your shares for
each agenda item as recommended by the Board. If any matter not listed in the
Notice of Meeting is presented at the Annual Meeting, they will vote your
shares in accordance with their best judgment. At the time we began printing
this Proxy Statement, we knew of no matters that needed to be acted on at the
meeting other than those discussed in this Proxy Statement.
Whether you plan to attend the Annual Meeting or not, we urge you to complete,
sign and date the enclosed voting instruction form and to return it promptly
in the envelope provided. Returning the form will not affect your right to
attend the Annual Meeting and vote.
How Do I Vote by Telephone or Via the Internet?
Instead of submitting your vote by mail on the enclosed voting instruction
form, you may vote by telephone or via the Internet. Please note that there
are separate telephone and Internet arrangements depending on whether you are
a registered stockholder (that is, if you hold your stock in your own name) or
you hold your shares in "street name" (that is, in the name of a brokerage
firm or bank which holds your securities account). In either case, you must
follow the procedures described on your voting instruction form.
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The telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. Stockholders voting via the Internet should understand that there
might be costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies, that must be borne by the
stockholder.
We encourage you to vote via the Internet. If you do so, please authorize us
to deliver future annual reports and proxy statements to you via e-mail. This
lowers costs and speeds delivery.
May I Revoke My Proxy?
Yes. You may change your mind after you send in your voting instructions by
following any of these procedures. For a registered stockholder to revoke a
proxy:
. Send in another signed voting instruction form with a later date; or
. Send a letter revoking your proxy to PTC's Clerk at the address
indicated on page 20 under "Information About Stockholder Proposals"; or
. Attend the Annual Meeting, notify us in writing that you are revoking
your proxy and vote in person.
A holder of stock in street name must follow the procedures required by the
brokerage firm or bank to revoke a proxy. You should contact that firm
directly for more information on these procedures.
How Do I Vote in Person?
If you plan to attend the Annual Meeting and wish to vote in person, we will
give you a ballot when you arrive. If your shares are held in street name, you
must bring an account statement or letter from the brokerage firm or bank
showing that you were the direct or indirect (beneficial) owner of the shares
on December 15, 1999 in order to be admitted to the meeting. To be able to
vote, you will need to obtain a "legal proxy" from the holder of record.
What Is the Effect of Broker Non-Votes and Abstentions?
If your shares are held in street name, the broker or bank may vote your
shares on all four proposals even if it does not receive instructions from
you. Because the proposal to increase our authorized common stock must be
approved by vote of a majority of the shares outstanding, if you abstain from
voting or if your broker or bank does not vote on the proposal, it will count
as a vote against that proposal. However, because the directors elected at the
meeting will be those receiving the highest number of votes and the stock
plans may be approved by vote of a majority of the shares actually voting, if
you abstain from voting or if your broker or bank does not vote on any of
those proposals, it will not count as a vote against those proposals.
Is Voting Confidential?
We maintain a policy of keeping all the proxies, ballots and voting
tabulations confidential. The Inspectors of Election will forward to
management any written comments that you make on the proxy card without
providing a shareholder name.
What Are the Costs of Soliciting these Proxies?
PTC will pay all the costs of soliciting these proxies. Although we are
mailing these proxy materials, our directors and employees may also solicit
proxies by telephone, by fax or other electronic means of communication, or in
person. In addition, Georgeson Shareholder Services is assisting us with the
solicitation of proxies for a fee of approximately $7,500, plus out-of-pocket
expenses. We will reimburse banks, brokers, nominees and other fiduciaries for
the expenses they incur in forwarding the proxy materials to you.
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How Do I Obtain an Annual Report on Form 10-K?
A copy of our Annual Report on Form 10-K for the year ended September 30,
1999, was included with this Proxy Statement and is available on our Web site
at www.ptc.com. If you would like another copy, we will send you one without
charge. Please write to:
Investor Relations
Parametric Technology Corporation
128 Technology Drive
Waltham, MA 02453
or by telephone at (781) 398-5000 or e-mail at [email protected].
Where Can I Find the Voting Results?
We will publish the voting results on PTC's Website at www.ptc.com following
the Annual Meeting and in our Form 10-Q for the second quarter of 2000, which
we file with the SEC in May 2000.
Whom Should I Call If I Have Any Questions?
If you have any questions about the Annual Meeting or your ownership of PTC
common stock, please contact PTC Investor Relations by telephone at (781) 398-
5000 or e-mail at [email protected].
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD OF DIRECTORS
The board has nominated three current directors--Donald K. Grierson, Oscar B.
Marx, III and Noel G. Posternak--for new, three-year terms and recommends that
you vote for their re-election. The Board has approved an increase of
150,000,000 in the number of shares of common stock that PTC is authorized to
issue, and recommends that you vote for that increase. In addition, the board
has approved a new Employee Stock Purchase Plan and recommends that you vote
to approve the plan in order to obtain certain beneficial tax treatment for
employees participating in that plan under Section 423 of the Internal Revenue
Code. The board has also approved a new Equity Incentive Plan and recommends
that you vote for approval of that plan.
Proposal 1: Elect Three Directors
The first proposal on the agenda for the Annual Meeting will be electing three
Class I directors for three-year terms beginning at this Annual Meeting and
expiring at the 2003 Annual Meeting. (For a description of the three classes
of directors, see "Information About The Directors" beginning on page 11.) The
three nominees who receive the most votes will be elected.
The following table contains background information about each of the Class I
director nominees. For a description of their holdings of PTC's stock, see
"How Much Stock is Owned by Directors and Officers?" beginning on page 10.
Class I Director Nominees:
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Director Term
Name, Age, Principal Occupation, Business Experience and Directorships Since Expires
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Donald K. Grierson, age 65............................................ 1987 2000
Chief Executive Officer and President of ABB Vetco Gray, Inc., an
oil services business, since May 1991; also director of Alpha
Technologies Group, Inc.
</TABLE>
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Name, Age, Principal Occupation, Director Term
Business Experience and Directorships Since Expires
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Oscar B. Marx, III, age 61...................................... 1995 2000
Chief Executive Officer and President of TMW Enterprises Inc.,
an auto parts business, 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; also director of
Amerigon Inc., Smtek International, Inc. and Tesma
International Inc.
Noel G. Posternak, age 63....................................... 1989 2000
Senior Partner in the law firm of Posternak, Blankstein &
Lund, L.L.P. since 1980 practicing in the area of securities
law and corporate finance.
</TABLE>
The Board of Directors recommends that you vote FOR the election of Donald K.
Grierson, Oscar B. Marx, III and Noel G. Posternak as Class I directors.
Proposal 2: Approve an Amendment to Our Articles of Organization to Increase
the Number of Authorized Shares of Common Stock We May Issue from
350,000,000 to 500,000,000
Our Board of Directors recommends that you approve the amendment to our
Articles of Organization to increase the number of shares of common stock that
we may issue from 350,000,000 to 500,000,000. The Board believes that
increasing the number of authorized shares is essential to ensure that PTC
continues to have an adequate number of shares of common stock available for
future issuance. As of December 15, 1999, there were 274,178,008 shares of PTC
common stock outstanding, 58,119,919 shares reserved for issuance under PTC's
employee stock option plans, 1,477,497 shares reserved for issuance to former
employees of companies we have acquired in order to replace their prior stock
options, 2,185,805 shares reserved for issuance under our employee stock
purchase plan and 740,000 shares reserved for issuance under our director
compensation plans. In addition, we are asking the stockholders to approve our
2000 Equity Incentive Plan providing for the issuance of up to 11,500,000
shares.
At the 1997 Annual Meeting, our stockholders approved an increase in the
number of authorized shares of common stock from 215,000,000 to 350,000,000.
That increase permitted our Board to declare a two-for-one stock split of the
common stock on February 12, 1998. Among other things, the 1997 increase also
permitted us to make important acquisitions to expand our product and solution
offerings, as well as to provide competitive compensation to key employees in
a very tight market.
If the stockholders approve this increase, our Board would be able to issue
stock for any valid corporate purpose that it may deem advisable, including
stock splits and stock dividends, financings, funding employee benefit plans
and acquisitions. Any of these actions could be taken without further
stockholder approval, except to the extent required by state law or Nasdaq
requirements for the particular transaction. Although the availability of
additional shares of common stock provides desirable flexibility in carrying
out corporate purposes, such availability, as well as the availability of
preferred stock that the Board may issue on such terms as it selects, could
have the effect of making it more difficult for a third party to acquire a
majority of our outstanding voting stock. In addition, the issuance of
additional shares of common stock could lead to the dilution of existing
stockholders.
While we have no current plan to do another stock split, the proposed increase
would give the Board flexibility to do so if conditions warrant. Although on
occasion we may review potential acquisition candidates, we have no present
commitments or agreements for any transactions involving the issuance of
additional shares of common stock.
The Board of Directors believes that the amendment to the Articles of
Organization is in the best interest of PTC and its stockholders and
recommends a vote FOR approval of the amendment.
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Proposal 3: Approve Our 2000 Employee Stock Purchase Plan in Order to Obtain
Beneficial Tax Treatment for Participants
Our Board of Directors approved PTC's 2000 Employee Stock Purchase Plan (the
"2000 ESPP") on September 16, 1999. The first offering period commenced on
October 1, 1999 and will end on March 31, 2000. We are requesting that the
stockholders approve the 2000 ESPP for purposes of qualifying it under Section
423 of the Internal Revenue Code ("Section 423"). This will permit our
employees to benefit from the favorable tax treatment described below. The
Board of Directors believes this provides a potentially significant benefit to
employees and is in the interests of PTC and its stockholders generally.
Why the 2000 Employee Stock Purchase Plan is Important
The 2000 ESPP gives our employees the opportunity and incentive to invest in
PTC by purchasing shares of our common stock through convenient payroll
deductions. The plan is intended to promote stock ownership among employees,
which should lead to increased identification with stockholders' interests. It
also serves an important compensation function. We previously used the 1991
Employee Stock Purchase Plan to achieve these goals, but that plan has
expired. The Board reserved a total of 2,000,000 shares of common stock for
issuance under the 2000 ESPP, subject to adjustment for stock splits and
similar capital changes. The closing price of our common stock on November 30,
1999, as reported by the Nasdaq Stock Market, was $22.6875.
The following is a summary of the plan's principal features. A copy of the
plan is printed as Appendix A to this Proxy Statement.
General
The 2000 ESPP is intended to qualify as an "employee stock purchase plan"
under Section 423, although if it does not qualify because the stockholders do
not give approval, that will not affect the employees' rights to purchase
shares. Rights to purchase shares of common stock under the plan are granted
at the discretion of a committee appointed by our Board of Directors, which
also determines the frequency and duration of individual offerings under the
plan and the date(s) when stock may be purchased. Offerings may last up to
twenty-seven months, but we currently expect that each will last six months,
the same offering period as under the 1991 Employee Stock Purchase Plan. All
employees of PTC and its subsidiaries who have worked for a specified amount
of time are eligible to participate in the 2000 ESPP.
Eligible employees participate voluntarily and may withdraw from any offering
at any time before stock is purchased. Participation terminates automatically
upon termination of employment for any reason. The purchase price per share in
any offering is 85% of the lower of the fair market value of the common stock
on the first day or last day of the offering, and may be paid through regular
payroll deductions, lump sum cash payments or a combination of both, as
determined by the committee. An employee's purchases in any year are limited
to the lessor of $25,000 worth of stock, determined by the fair market value
of the common stock at the time the offering begins, or 15% of the employee's
base pay (or such lesser percentage as the Board of Directors may fix). The
2000 ESPP terminates on September 30, 2009.
Federal Income Tax Consequences Relating to the 2000 Employee Stock Purchase
Plan
If the stockholders approve Section 423 treatment for the 2000 ESPP,
participants will not realize taxable income at the commencement of an
offering or at the time shares are purchased under the 2000 ESPP. Furthermore,
if a participant holds shares purchased under the 2000 ESPP for at least two
years from the offering commencement date, then upon sale of the shares, the
participant will be treated as having received taxable compensation income of
15% of the fair market value of the stock at the commencement of the offering
(or, if less, any amount realized on sale of such shares in excess of the
purchase price). No deduction will be allowed to us for Federal income tax
purposes upon the purchase of shares or, if the participant waits the
prescribed period to sell, upon sale. However, if the participant does not
wait the prescribed period to sell, he or she will be treated as having
received
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taxable compensation income upon sale equal to the excess of the fair market
value of the stock on the date of purchase over the actual purchase price, and
we will be allowed to deduct that amount. In either case, any difference over
or under the participant's tax cost (the purchase price plus the amount of
taxable compensation income that the participant recognizes upon sale of the
shares) will be treated as capital gain or loss.
Assuming stockholder approval, if a participant dies during the two-year
holding period while owning shares purchased under the 2000 ESPP, 15% of the
fair market value of the stock at the commencement of the offering period (or,
if less, the fair market value of such shares on the date of death in excess
of the purchase price) is taxed to the participant as ordinary income in the
year of death, and we would not be allowed a deduction for Federal income tax
purposes.
If the stockholders do not approve our 2000 ESPP, a participant will be
treated as having received taxable compensation income at the time of purchase
equal to the excess of the fair market value of the stock on the date of
purchase over the actual purchase price, and we will be allowed to deduct that
amount.
The Board of Directors believes that the 2000 ESPP serves important goals for
PTC and recommends that you vote FOR approval of the plan.
Proposal 4: Approve Our 2000 Equity Incentive Plan
The 2000 Equity Incentive Plan (the "2000 Equity Plan") is another important
element of PTC's program to align employee motivation with our stockholders'
interests and to provide appropriate equity compensation to employees. The
plan was approved by the Board of Directors on September 16, 1999, although it
will not be implemented until approved by the stockholders.
Why the 2000 Equity Incentive Plan is Important
We believe that the 2000 Equity Plan is essential for us to be able to
attract, retain and motivate key personnel. Competition for top-notch software
developers, sales personnel and other skilled employees has become more
intense as Internet and other high tech companies proliferate at a rapid pace.
Stock options and other equity grants historically have been a critical
element of compensation and incentive for PTC employees. Indeed, in fiscal
1999, we granted options to approximately 77% of our employees. Equity
incentives are equally common and important among our competitors and
throughout the high technology industry, and the strength of the U.S. economy
has only made equity more appealing to employees. Therefore, we continue to
consider it crucial that we have in place appropriate equity plans for
granting stock compensation to our employees. The 2000 Equity Plan will permit
us to continue granting necessary stock compensation while expanding the types
of equity awards we can grant, providing flexibility not available to us under
our current plans.
Options also benefit us in a number of other ways. For example, they tie
compensation to our performance; they conserve cash and reduce fixed costs; in
most cases 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 shareholders generally; the exercise of
options increases our capital; and we are entitled to a tax deduction upon the
exercise of nonstatutory stock options or the disqualifying disposition of
incentive stock options.
The following is a summary of the plan's principal features. A copy of the
plan is printed as Appendix B to this Proxy Statement.
General
Common Stock available under We have reserved 11,500,000 shares of our
2000 Equity Plan common stock for issuance under the 2000 Equity
Plan. No awards have yet been made under the
2000 Equity Plan.
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Administration
The 2000 Equity Plan is administered by a
committee composed of two members of our Board
who meet certain tests under the tax and
securities laws for independence from PTC
management. If there are not at least two such
members, then the entire Board serves as the
committee for purposes of the 2000 Equity Plan.
Types of Awards Under the 2000 Equity Plan, the committee may
award stock options, stock appreciation rights,
restricted and common stock.
Eligibility The committee may make awards to employees,
directors and consultants of our company and
its subsidiaries based upon their anticipated
contribution to the achievement of our
objectives and other relevant matters. Because
the awards will be within the discretion of the
committee, it is not possible to predict to
whom awards will be granted under the 2000
Equity Plan, or the amount of any awards.
Stock Options and Their The committee may award incentive stock options
Terms qualifying under Section 422 of the Internal
Revenue Code ("ISOs") and nonstatutory stock
options. The committee determines the terms of
the option awards, including the amount,
exercise price, vesting schedule and term,
which may not exceed ten years. The per share
exercise price of an option may not be less
than the fair market value of a share of common
stock on the date of grant, except that a
nonstatutory stock option granted to a newly
hired employee or consultant may have a lower
exercise price so long as it is not less than
100% of fair market value on the date the
person accepts PTC's offer of employment or the
date employment begins, whichever is lower.
A participant may pay the exercise price of an
option in cash or, if permitted by the
committee, other consideration, including by
surrendering common stock he or she holds.
Stock Appreciation Rights The committee may grant stock appreciation
rights, or "SARs," which are rights to receive
any excess in value of shares of common stock
over the exercise price. We expect that these
would be granted primarily to non-U.S.
employees who may be subject to adverse stock
option taxation rules. The Committee shall
determine at or after the time of grant whether
SARs are settled in cash, common stock or other
securities of PTC, awards or other property and
may define the manner of determining the excess
in value of the shares of common stock.
Restricted and Common Stock The committee may make awards of common stock
subject to certain restrictions during a
specified period, such as the participant's
continued service with the company or the
company's achieving certain financial goals.
The participant generally will forfeit the
shares if the specified conditions are not met.
PTC holds the shares during the restriction
period, and the participant cannot transfer the
shares before termination of that period. The
participant is, however, entitled to vote the
shares and receive any dividends during the
restriction period. The committee may also
award
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common stock without restrictions to recognize
outstanding achievements or as a supplement to
restricted stock awards when the company's
performance exceeds established financial
goals. The committee determines what, if
anything, the participant must pay to receive
such a stock award, but the number of shares
that may be granted under the 2000 Equity Plan
for less than fair market value is limited to
10% of the shares authorized under the plan.
Limitations on Individual The committee may not in any calendar year
Grants grant to any person options or stock
appreciation rights representing more than
2,000,000 shares of common stock, nor more than
500,000 shares of performance-based restricted
or unrestricted stock awards. These limits are
subject to adjustment for changes in the
company's structure or capitalization that
affect the number of shares of common stock
outstanding.
Termination of Service The committee determines the effect on an award
of the disability, death, retirement or other
termination of service of a participant in the
2000 Equity Plan.
Transferability The committee has the authority to permit
participants to transfer any award, provided
that ISOs may be transferable only to the
extent permitted by the tax code.
Change in Capitalization If there is a change in the company's
capitalization that affects its outstanding
common stock, the aggregate number of shares
that are reserved for issuance under the plan,
as well as the number of shares subject to
outstanding options, SARs and restricted and
common stock awards, together with option and
SAR exercise prices, will be adjusted by the
committee to preserve the benefits intended to
be provided under the plan.
Change in Control The committee may act to preserve a
participant's rights under an award in the
event of a change in control of the company by,
among other things, accelerating any time
period relating to the exercise or payment of
the award, causing the award to be assumed by
another entity or providing for compensating
payments to the participant.
Amendment or Repricing of The committee may amend or terminate any
Outstanding Awards outstanding award, for which the respective
participant's consent would be required unless
the amendment would not materially and
adversely affect the participant. However, the
committee may not, without stockholder
approval, amend any outstanding option to
reduce the exercise price or replace it with an
option at a lower exercise price.
Amendment of the Plan The Board of Directors may amend, suspend or
terminate the 2000 Equity Plan, subject to any
stockholder approval it deems necessary or
appropriate. For example, under provisions
currently applicable to PTC, the board may not
increase the number of shares of common stock
issuable under the plan (except in the case of
a recapitalization, stock split or similar
event) without stockholder approval.
8
<PAGE>
Federal Income Tax Consequences Relating to Stock Options
Incentive Stock Options. A participant does not realize taxable income upon
the grant or exercise of an ISO under the 2000 Equity Plan.
If a participant does not dispose of shares received upon exercise of an ISO
for at least two years from the date of grant and one year from the date of
exercise, then (a) upon sale of the shares, any amount realized in excess of
the exercise price is taxed to the participant as long-term capital gain and
any loss sustained will be a long-term capital loss and (b) we may not take a
deduction 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 participant.
If shares of common stock acquired upon the exercise of an ISO are disposed of
before the end of the one and two-year periods described above (a
"disqualifying disposition") then the participant realizes 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. We would be entitled to deduct
that amount. Any further gain realized by the participant would be taxed as a
short-term or long-term capital gain and would not result in any deduction for
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 participant at the
time a nonstatutory option is granted. Upon exercise, the participant 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. We
would receive 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 by the company.
A participant who receives any accelerated vesting or exercise of options or
stock appreciation rights or accelerated lapse of restrictions on restricted
stock in connection with a change in control might be deemed to have received
an "excess parachute payment" under federal tax law. In such cases, the
participant may be subject to an excise tax and the company may be denied a
tax deduction.
The Board of Directors recommends that you vote FOR the approval of the 2000
Equity Incentive Plan.
Other Matters
While the Notice of Meeting calls for transaction of any other business that
may further or relate to the matters described in the Notice, the Board of
Directors does not know of any other matters that may come before the meeting.
However, if any other matters are properly presented to the Annual Meeting,
the persons named in the accompanying proxy will vote, or otherwise act, in
accordance with their judgment on such matters.
9
<PAGE>
INFORMATION ABOUT PTC COMMON STOCK OWNERSHIP
Which Stockholders Own at Least 5% of PTC?
The following table shows all persons we know to be beneficial owners of at
least 5% of PTC common stock as of October 31, 1999. "Beneficial owners" of
PTC common stock are those who have the power to vote or to sell that stock.
Our information is based in part on reports filed with the Securities and
Exchange Commission by each of the firms listed in the table below. If you
wish, you may obtain these reports from the SEC.
<TABLE>
<CAPTION>
Number of Shares Percentage of Common
Beneficially Owned(1) Stock Outstanding(2)
--------------------- --------------------
<S> <C> <C>
Putnam Investments, Inc.(3)......... 32,852,944 12.1%
One Post Office Square
Boston, MA 02109
T. Rowe Price Associates, Inc.(4)... 30,035,414 11.1%
100 E. Pratt Street
Baltimore, MD 21202
Oak Associates, ltd.(5)............. 20,589,000 7.6%
3875 Embassy Parkway
Akron, OH 44333
</TABLE>
- --------
The footnotes for this table appear below the next table.
How Much Stock is Owned by Directors and Officers?
The following table shows the PTC common stock beneficially owned by PTC's
directors and executive officers named in the Summary Compensation Table, as
well as all current directors and executive officers as a group, as of October
31, 1999.
<TABLE>
<CAPTION>
Number of Shares Percentage of Common
Beneficially Owned(1)(6) Stock Outstanding(2)
------------------------ --------------------
<S> <C> <C>
Robert N. Goldman................ 35,000 *
Donald K. Grierson............... 25,000 *
C. Richard Harrison(7)........... 3,261,598 1.2%
Oscar B. Marx, III(8)............ 183,100 *
Michael E. Porter................ 439,240 *
Noel G. Posternak................ 55,000 *
Steven C. Walske(9).............. 3,364,000 1.2%
James P. Baum.................... 179,974 *
Barry Cohen...................... 157,742 *
Edwin J. Gillis.................. 1,060,548 *
All directors, nominees for
director, and executive officers
as a group (12 persons)......... 8,992,689 3.2%
</TABLE>
- --------
*Less than 1% of outstanding shares of common stock.
(1) This describes shares as beneficially owned based on information available
to us and applicable regulations. This does not constitute an admission by
any stockholder that he or she beneficially owns the shares listed. Unless
otherwise indicated, each stockholder referred to above has sole voting
and investment power over the shares listed.
10
<PAGE>
(2) For purposes of determining the percentage of common stock outstanding,
the number of shares deemed outstanding includes the 271,068,732 shares
outstanding as of October 31, 1999 and any shares subject to options held
by the person or entity in question that are exercisable on or before
December 30, 1999.
(3) Putnam Investments, Inc. ("PI") has filed a SEC Schedule 13G reporting the
above stock ownership as of January 26, 1999, a copy of which has been
sent to PTC. Stock reported as being beneficially owned by PI consists of
stock held in client accounts of subsidiaries of PI that are registered
investment advisors. PI and its subsidiaries share voting power with
respect to 517,761 shares and share investment power with respect to all
such shares. One of those entities, Putnam Investment Management, Inc.,
One Post Office Square, Boston, MA 02109, reports beneficial ownership of
30,539,944 of the shares beneficially owned by PI, over which it has
shared investment power and no voting power.
(4) These shares are owned by various individual and institutional investors
(including T. Rowe Price Science and Technology Fund, 100 E. Pratt Street,
Baltimore, MD, which owns 14,000,000 shares, or 5.2% of the outstanding
shares), for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment adviser. Price Associates has sole investment power
for the entire holding of 30,035,414 shares and sole voting power with
respect to 3,333,822 shares. Price Associates disclaims beneficial
ownership of all such shares.
(5) Oak Associates, ltd. ("Oak") has filed a SEC Schedule 13G reporting the
above stock ownership as of February 12, 1999, a copy of which has been
sent to PTC. Oak is a registered investment advisor, in which capacity it
has sole voting power and shared investment power over all such shares.
(6) The amounts listed include the following shares of common stock that may
be acquired on or before December 30, 1999 through the exercise of
options: Mr. Porter, 419,000 shares; Mr. Marx, 175,000 shares; Mr.
Posternak, 55,000 shares; Mr. Goldman, 35,000 shares; Mr. Grierson, 15,000
shares; Mr. Walske, 2,090,000 shares; Mr. Harrison, 2,884,740 shares; Mr.
Gillis, 1,051,000 shares; Mr. Cohen, 157,742 shares; Mr. Baum 173,897
shares; and all directors and executive officers as a group, 7,283,129
shares.
(7) 9,160 shares are held jointly by Mr. Harrison with his spouse.
(8) 8,000 shares are held by the O.B. Marx, III Revocable Trust. 100 shares
are custodial shares held by Mr. Marx's spouse for a minor relative.
(9) 25,000 shares are held by a foundation of which Mr. Walske is co-trustee
with shared voting and investment powers. Mr. Walske disclaims beneficial
ownership of these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that our
insiders--our directors, executive officers and 10%-or-greater stockholders--
file reports with the SEC on their initial beneficial ownership of PTC common
stock and any subsequent changes. They must also provide us with copies of the
reports.
Based on our review of all reports furnished to us, we believe that all of our
insiders complied with their filing requirements for 1999.
INFORMATION ABOUT THE DIRECTORS
Who are Our Directors?
Our Board of Directors is divided into three classes with 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 2000, 2001
and 2002 Annual Meetings of Stockholders. The Class I directors, who are
described on pages 3 and 4, are nominated for re-election at this Annual
Meeting. The Class II and III directors will continue in office following the
Annual Meeting. The following table contains some information about each of
the Class II and III directors. You will find information on director holdings
of PTC stock in the section called "How Much Stock is Owned by Directors and
Officers?" beginning on page 10.
11
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation, Business Experience and Director Term
Directorships Since Expires
- -------------------------------------------------------- -------- -------
<S> <C> <C>
Class II Directors
Michael E. Porter, age 52.................................... 1995 2001
Professor at Harvard Business School since 1973; also
director of R&B Falcon Corporation and ThermoQuest Corporation.
Steven C. Walske, age 47..................................... 1986 2001
Chairman of the Board of Directors of PTC since August
1994; Chief Executive Officer of PTC since December 1986;
President of PTC from December 1986 to August 1994;
also director of Synopsys, Inc.
Class III Directors
C. Richard Harrison, age 44.................................. 1994 2002
President and Chief Operating Officer of PTC since August
1994; Senior Vice President of Sales and Distribution of PTC
from September 1991 to August 1994.
Robert N. Goldman, age 50.................................... 1991 2002
Chief Executive Officer and President of Object Design,
Inc., a software developer, since November 1995;
Chairman of the Board of Trinzic Corporation, a
software developer, from June 1986 to August 1995;
also director of Citrix Systems, Inc. and Object Design, Inc.
</TABLE>
Board Meetings
PTC's Board usually meets four times per year in regularly scheduled meetings,
but will meet more often if necessary. The Board met six times during 1999.
All directors attended 100% of the Board meetings.
Are Our Directors Independent?
Each non-employee member of the Board of Directors is an "independent
director" under the current rules of the Nasdaq Stock Market. None is, or has
ever been, an employee of PTC or any subsidiary, although we have hired
Professor Porter from time to time as a speaker and organizer of executive
management seminars on our behalf. The terms of that arrangement for fiscal
1999 are described in "Certain Business Relationships" on page 14. The Nasdaq
Stock Market has proposed new rules to govern the qualifications of the
members of our Audit Committee. Under the proposed rules, Professor Porter
would not be considered "independent" as a result of his speaking and
organizing activities for us. However, our Board has determined that these
activities do not interfere with his ability to exercise independent judgment
in carrying out his responsibilities and that, in light of Professor's
Porter's unique knowledge, background and financial acumen, his continued
membership on the Audit Committee is required in the best interests of PTC and
its stockholders.
The Committees of the Board
The Board has three standing committees: the Audit, Compensation and Stock
Option Committees.
12
<PAGE>
The Audit Committee
The Audit Committee considers and recommends the selection of our independent
accountants, reviews the performance of the independent accountants in the
annual audit and in assignments unrelated to the audit and reviews the fees of
the independent accountants. The Committee also meets privately, outside the
presence of PTC management, with the independent accountants to discuss our
internal accounting control policies and procedures and reports on such
meetings to our Board of Directors. The Audit Committee's mandate is set out
in a charter that is reviewed and approved by the Board of Directors.
Messrs. Marx, Porter (Chairman), and Posternak currently serve as members of
the Audit Committee. This committee met six times during fiscal 1999. Mr.
Porter was unable to attend two of the six meetings.
The Compensation and Stock Option Committees
The Compensation Committee provides recommendations to the Board of Directors
regarding executive and employee compensation and administers PTC's bonus
programs, stock option plans and employee stock purchase plans. Each year, as
the SEC requires, the Committee reports to you on executive compensation. The
Committee's report for 1999 is printed below on pages 17 to 18.
Messrs. Goldman (Chairman) and Grierson currently serve as members of the
Compensation Committee. This committee met twice during fiscal 1999.
During fiscal 1999, Messrs. Goldman (Chairman) and Grierson also constituted
the Officers' Stock Option Committee, which grants stock options to executive
officers of the company. The Officers' Stock Option Committee met once during
fiscal 1999.
How We Compensate Our Directors
Annual Cash Fee We compensate directors who are not employees
of PTC or our subsidiaries with an annual cash
fee of $10,000 per year.
Annual Stock Option Award We also grant each non-employee director 15,000
stock options on the date of each annual
meeting. These options have an exercise price
equal to the fair market value of our stock on
the Nasdaq Stock Market on the date of grant.
The options vest annually in four equal parts
beginning on the first anniversary of the grant
date and expire ten years from the grant date.
The options stop vesting when the director no
longer serves on the PTC board.
Stock Option Award to We grant each new non-employee director 40,000
New Board Members stock options at the time of initial election
to the Board on the same terms as the annual
option grants described above.
Meeting Fees We also pay each non-employee director meeting
fees of:
$2,000 for attendance at each Board meeting;
and
$1,000 for attendance at each meeting of the
Audit or Compensation Committee held.
Expenses PTC reimburses all directors for travel and
other related expenses incurred in attending
Board and committee meetings.
Directors who are PTC We do not compensate our employees for service
Employees as a director.
13
<PAGE>
Information About Certain Insider Relationships
Compensation Committee Interlocks and Insider Participation
Robert N. Goldman serves on both the Compensation Committee and the Officers'
Stock Option Committee of the Board of Directors. During a portion of our last
fiscal year, Steven C. Walske, PTC's Chairman and Chief Executive Officer,
served on the Board of Directors of Object Design, Inc., a software
development company whose Chief Executive Officer and President is Mr.
Goldman. Mr. Walske resigned from the Object Design, Inc. Board on February
23, 1999.
Certain Business Relationships
Professor Michael E. Porter has a consulting arrangement with PTC under which
he aids in the development of and participates in a series of executive
management seminars sponsored by PTC. In lieu of his customary honoraria for
these services, in 1999 Mr. Porter received an option to purchase 100,000
shares of PTC's common stock at an exercise price of $14.1875 per share, the
fair market value of our common stock on the date of grant. The option became
exercisable as to 50% of the shares on each of April 5, 1999 and July 5, 1999.
The spouse of David R. Friedman, our Senior Vice President, General Counsel
and Clerk, is a partner in the law firm of Jackson, Lewis, Schnitzler &
Krupman, which has provided legal services to PTC since before Mr. Friedman
became an executive officer. We incurred approximately $118,330 in fees for
such services during the fiscal year ended September 30, 1999 and anticipate
engaging Jackson, Lewis during fiscal 2000.
14
<PAGE>
INFORMATION ABOUT EXECUTIVE COMPENSATION
The tables on pages 15 through 17 show salaries, bonuses and other
compensation paid during the last three fiscal years, options granted in
fiscal 1999, options exercised in fiscal 1999 and option values as of year-end
fiscal 1999 for the Chief Executive Officer and our next four most highly
compensated executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------ -----------------
Name and Principal Shares Underlying All Other
Position Year Salary($)(1) Bonus($)(2) Options(#) Compensation($)(3)
- ------------------ ---- ------------ ----------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Steven C. Walske........ 1999 375,000 200,000 500,000 5,000
Chairman of the Board of 1998 345,000 0 1,000,000 5,000
Directors
and Chief Executive 1997 345,000 385,000 1,200,000 4,750
Officer
C. Richard Harrison..... 1999 375,000 200,000 500,000 5,000
President and Chief 1998 345,000 0 1,000,000 5,000
Operating Officer
1997 290,000 385,000 1,200,000 4,750
Edwin J. Gillis......... 1999 280,000 210,000 300,000 5,000
Executive Vice 1998 250,000 150,000 400,000 5,000
President,
Chief Financial Officer 1997 250,000 225,000 400,000 4,750
and Treasurer
Barry Cohen(4).......... 1999 250,000 150,000 200,000 2,885
Executive Vice 1998 179,500 1,203,107 420,000 0
President, Marketing
James P. Baum........... 1999 150,000 150,000 200,000 3,727
Executive Vice 1998 110,250 70,000 234,000 5,000
President,
Research and Development 1997 87,500 42,000 180,000 3,640
</TABLE>
15
<PAGE>
- --------
(1) Salary includes amounts deferred pursuant to our 401(k) Savings Plan.
(2) Amounts shown are earned and accrued during the fiscal years indicated and
paid after the end of each fiscal year. The bonus paid to Mr. Cohen in
fiscal 1998 includes $1,103,117 that was paid in connection with his
severance arrangement with Computervision Corporation following our merger
with them in January 1998.
(3) Amounts shown are our matching contributions made under the 401(k) Savings
Plan.
(4) Mr. Cohen joined PTC in January 1998.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Potential Realizable
Value
at Assumed Annual
Rates of Stock Price
Appreciate for
Individual Grants Option Term(2)
----------------------------------------------------- --------------------
Percentage
of Total
Options
Granted to
Number of Shares Employees Exercise
Underlying Options for Fiscal Price Expiration
Name Granted(#)(1) Year(%) Per Share($) Date 5%($)(3) 10%($)(3)
---- ------------------ ---------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven C. Walske........ 500,000 3.2525 15.5625 9/16/09 4,893,100 12,401,300
C. Richard Harrison..... 500,000 3.2525 15.5625 9/16/09 4,893,600 12,401,300
Edwin J. Gillis......... 300,000 1.9515 15.5625 9/16/09 2,936,160 7,440,780
Barry Cohen............. 200,000 1.3010 15.5625 9/16/09 1,957,440 4,960,520
James P. Baum........... 200,000 1.3010 15.5625 9/16/09 1,957,440 4,960,520
</TABLE>
- --------
(1) The exercise price of each option is 100% of the fair market value of our
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. All options granted to the named executive
officers are exercisable in four equal annual installments, commencing one
year after the date of grant and may become exercisable sooner as
described in "Employment Agreements With Executive Officers" on pages 19
to 20.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% appreciation rates set by the SEC and, therefore, are not
intended to forecast possible future appreciation, if any, in the price of
our common stock. No gain to the optionees is possible without an increase
in the price of our common stock, which will benefit all stockholders
proportionately.
(3) 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>
Percentage
Prices at: Increases at:
Date of Exercise Price --------------------- --------------------
Grant per Share ($) 5%($) 10%($) 5% 10%
------- -------------- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C>
9/16/99 15.5625 25.35 40.37 63 159
</TABLE>
16
<PAGE>
Aggregated Option Exercises During Fiscal 1999 and Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End(#) at FY-End($)(2)
Acquired Value ------------------------- -------------------------
Name on Exercise(#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- -------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Steven C. Walske........ 0 0 2,040,000/ 3,206,961/
2,050,000 2,671,875
C. Richard Harrison..... 0 0 2,834,740/ 6,908,629/
2,050,000 2,671,875
Edwin J. Gillis......... 0 0 1,026,000/ 356,250/
900,000 1,068,750
Barry Cohen............. 0 0 157,742/ 106,875/
521,930 320,625
James P. Baum........... 0 0 165,897/ 94,250/
473,499 267,188
</TABLE>
- --------
(1) Market value of the underlying shares on the date of exercise less the
option exercise price.
(2) Market value of shares covered by in-the-money options on September 30,
1999 ($13.50) 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.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors consists of two outside
directors. The two outside directors also serve as the Officers' Stock Option
Committee to grant stock options to executive officers. The compensation for
our executive officers is set by our Board of Directors, after consideration
of the Compensation Committee's recommendations.
Executive Compensation Programs
Our executive compensation programs, which contain no special perquisites,
consist of three principal elements: base salary, cash bonus and stock
options. Our objective is to emphasize incentive compensation in the form of
bonuses and stock option grants, rather than base salary. Our 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, evaluates past performance and assesses expected
future contributions of the executives. In making the determinations regarding
base salaries, the Committee considers generally available information
regarding salaries prevailing in the industry but does not tie salaries to any
particular indices.
We maintain incentive plans under which executive officers (including the
Chief Executive Officer) are paid cash bonuses after the end of each fiscal
year. The bonuses under the incentive plans are based in part on our
achievement of certain financial targets established by our Board of Directors
before the start of each fiscal year.
The incentive plans for fiscal 1999 set forth several performance factors
including, for each participating officer, earnings per share and revenue.
Because PTC's earnings per share did not reach the target for the year,
Messrs. Walske and Harrison were not eligible to receive a cash bonus under
our incentive plans in 1999. However, in order to acknowledge and reward them
for their significant contributions to PTC in 1999 and to bring their total
compensation more in line with that of their peers in the industry, the
Compensation Committee increased their salary for fiscal 2000 and awarded them
non-incentive plan bonuses for fiscal 1999. Messrs. Baum, Cohen and Gillis
received portions of their bonuses under their specific incentive plans as a
result of achievements unrelated to earnings per share and revenue targets.
Mr. Baum was also awarded an additional non-incentive plan bonus in
recognition of his special contributions in 1999.
17
<PAGE>
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 are instrumental in promoting the alignment of long-term
interests between our 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
considered the contributions of each executive to our overall success in
fiscal 1999, the responsibilities to be assumed in the upcoming fiscal year,
the appropriate incentives for the promotion of our long-term growth and
grants to other executives in the industry holding comparable positions as
well as the executive's position within our company. It has been our 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.
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 stock options, 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, we should compensate our 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.
Chief Executive Officer Compensation
Mr. Walske'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, 1999, Mr. Walske's base
salary was increased $30,000 after remaining unchanged in 1998. The Committee
recommended and the Board approved a $25,000 salary increase for fiscal 2000.
As discussed above, Mr. Walske was awarded a non-incentive plan cash bonus in
the amount of $200,000 in 1999. In addition, the Officers' Stock Option
Committee granted Mr. Walske options to purchase 500,000 shares of PTC's
common stock. The amount of his bonus and option grant reflect Mr. Walske's
overall contribution to PTC during fiscal 1999 in positioning PTC for future
growth and the significant contributions that PTC anticipates he will make in
the future, as well as the factors applicable to executive officers generally
described above.
Compensation Committee
Robert N. Goldman, Chairman
Donald K. Grierson
Stock Performance Graph
The Stock Performance Graph set forth below compares the cumulative
stockholder return on our common stock from September 30, 1994 to September
30, 1999, with the cumulative total return of the Nasdaq (U.S. Companies)
Index and the Nasdaq Computer & Data Processing Index (approximately 540
companies) over the
18
<PAGE>
same period. The Stock Performance Graph assumes that the value of the
investment in PTC common stock and each of the comparison groups was $100 on
September 30, 1994 and assumes the reinvestment of dividends. We have never
declared a dividend on our common stock. The stock price performance depicted
in the graph below is not necessarily indicative of future price performance.
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
9/30/94 9/30/95 9/29/96 9/30/97 9/30/98 9/30/99
Parametric Technology
Corporation (PTC)............. $100 $185 $297 $265 $121 $162
Nasdaq (U.S. Companies) Index
(Nasdaq)...................... 100 138 164 225 229 372
Nasdaq Computer & Data
Processing Index (NC&D)....... 100 160 199 269 349 586
</TABLE>
Employment Agreements with Executive Officers
Agreement with Mr. Walske
Mr. Walske has an agreement that provides him with certain benefits in the
event of a termination of his employment under certain circumstances and upon
the occurrence of certain events. If we elect to terminate his employment
(other than for "cause," as defined in the agreement), or cause a "change in
status" (which, as defined in the agreement, includes a diminution in title,
responsibilities or compensation), he is 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 us for such six-
month period, a bonus equal to his most recent fiscal year-end bonus. The
agreement also provides that the outstanding options he holds under our option
plans become exercisable (i) in full upon a "change in control" (which in
general includes (a) any person or entity becoming the beneficial owner of 50%
or more of the voting power of PTC, (b) a change in a majority of our directors
or (c) the approval by the stockholders of a merger or consolidation in which
our stockholders do not have majority voting power of the surviving entity, our
liquidation or a sale or disposition of all or substantially all of our assets
or upon the death or disability of Mr. Walske) and (ii) for the number of
shares of Common Stock for which they would have otherwise become exercisable
had his employment continued for one year following a termination of his
employment without "cause" or a "change in status."
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Agreement with Mr. Harrison
Mr. Harrison has an agreement with PTC that provides him with certain benefits
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 described above for Mr. Walske,
except for the following: in the event we elect to terminate his employment
without "cause," or effect a "change in status," there is no provision for a
bonus to be paid to Mr. Harrison.
Agreements with Messrs. Cohen and Gillis
PTC has entered into similar agreements with Messrs. Cohen and Gillis which
provide that (i) in the event we terminate their employment without "cause,"
they are entitled to receive, during the six-month period following notice of
termination (or until such earlier date as they commence employment with
another company), a salary at a rate equal to the highest annual salary
(excluding bonuses) received in the prior six months and (ii) in the event of
a change in control of PTC, their outstanding options under PTC's option plans
become exercisable in full.
INFORMATION ABOUT OUR AUDITORS
PricewaterhouseCoopers LLP served as PTC's independent accountants for fiscal
1999 and has reported on our 1999 consolidated financial statements. The Board
of Directors has re-appointed PricewaterhouseCoopers LLP for fiscal year 2000.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
our 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.
INFORMATION ABOUT STOCKHOLDER PROPOSALS
If you wish to submit proposals to be presented at the 2001 Annual Meeting of
Stockholders, we must receive them on or before September , 2000 to be
included in our proxy statement for that meeting. Please address your
proposals to: David R. Friedman, Clerk, Parametric Technology Corporation, 128
Technology Drive, Waltham, Massachusetts 02453. In order to curtail
controversy as to the date on which PTC receives a proposal, you should submit
your proposals by Certified Mail-Return Receipt Requested.
Proxies may confer discretionary authority to vote on any matter of which we
receive notice after November , 2000, without the matter being described in
the proxy statement.
By Order of the Board of Directors,
DAVID R. FRIEDMAN, Senior Vice
President, General Counsel and
Clerk
January , 2000
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 OR VOTE BY TELEPHONE OR
ON THE INTERNET. A PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR
THE MEETING AND YOUR COOPERATION WILL BE APPRECIATED.
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APPENDIX A
PARAMETRIC TECHNOLOGY CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
This 2000 Employee Stock Purchase Plan (the "Plan") is adopted by Parametric
Technology Corporation (the "Company") to provide Eligible Employees who wish
to become shareholders of the Company an opportunity to purchase shares of
Common Stock, par value $.01 per share, of the Company ("Common Stock"). The
Plan is intended to qualify as an "employee stock purchase plan" under Section
423 of the Internal Revenue Code of 1986, as amended (the "Code"), and the
provisions of the Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 423;
provided that, if and to the extent authorized by the Board, the fact that the
Plan does not comply in all respects with the requirements of Section 423
shall not affect the operation of the Plan or the rights of Employees
hereunder.
2. Certain Definitions.
As used in this Plan:
(a) "Board" means the Board of Directors of the Company, and "Committee"
means the Compensation Committee of the Board or such other committee as
the Board may appoint from time to time to administer the Plan.
(b) "Coordinator" means the officer of the Company or other person
charged with day-to-day supervision of the Plan as appointed from time to
time by the Board or the Committee.
(c) "Designated Beneficiary" means a person designated by an Employee in
the manner prescribed by the Committee or the Coordinator to receive
certain benefits provided in this Plan in the event of the death of the
Employee.
(d) "Eligible Employee" with respect to any Offering hereunder means any
Employee who, as of the Offering Commencement Date for such Offering:
(i) has been a Full-time Employee of the Company or any of its
Subsidiaries for not less than 80 days; and
(ii) would not, immediately after any right to acquire Shares in such
Offering is granted, own stock or rights to purchase stock possessing
five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any subsidiary
corporation, determined in accordance with Section 423.
(e) "Employee" means an employee (as that term is used in Section 423) of
the Company or any of its Subsidiaries.
(f) "Fair Market Value" of a Share shall mean the fair market value of a
shares of Common Stock, as determined by the Committee.
(g) "Full-time Employee" is an Employee whose customary employment is for
more than (i) 20 hours per week and (ii) five months, in the calendar year
during which the respective Offering Commencement Date occurs.
(h) "Offering" is an offering of Shares pursuant to Section 5 of the
Plan.
(i) "Offering Commencement Date" means the date on which an Offering
under the Plan commences, and "Offering Termination Date" means the date on
which an Offering under the Plan terminates.
(j) "Purchase Date" means each date on which the rights granted under the
Plan may be exercised for the purchase of Shares.
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(k) "Section 423" and subdivisions thereof refer to Section 423 of the
Code or any successor provision(s).
(l) "Shares" means the shares of Common Stock issuable under the Plan.
(m) "Subsidiary" means a subsidiary corporation, as defined in Section
424 of the Code, of the Company the Employees of which are designated by
the Board of Directors or the Committee as eligible to participate in the
Plan.
3. Administration of the Plan.
The Committee shall administer, interpret and apply all provisions of the
Plan as it deems necessary or appropriate, subject, however, at all times to
the final jurisdiction of the Board of Directors. The Board may in any
instance perform any of the functions of the Committee hereunder. The
Committee may delegate administrative responsibilities to the Coordinator, who
shall, for matters involving the Plan, be an ex officio member of the
Committee. Determinations made by the Committee and approved by the Board of
Directors with respect to any provision of the Plan or matter arising in
connection therewith shall be final, conclusive and binding upon the Company
and upon all participants, their heirs or legal representatives.
4. Shares Subject to the Plan.
The maximum aggregate number of Shares that may be purchased upon exercise
of rights granted under the Plan shall be 2,000,000 plus the number of shares,
if any, previously approved by the Company's stockholders for issuance under
the Company's 1991 Employee Stock Purchase Plan that remain unissued as of the
termination of the final offering under that plan. Appropriate adjustments in
such amount, the number of Shares covered by outstanding rights granted
hereunder, the securities that may be purchased hereunder, the Exercise Price,
and the maximum number of Shares or other securities that an employee may
purchase (pursuant to Section 8 below) shall be made to give effect to any
mergers, consolidations, reorganizations, recapitalizations, stock splits,
stock dividends or other relevant changes in the capitalization of the Company
occurring after the effective date of the Plan; provided that any fractional
Share otherwise issuable hereunder as a result of such an adjustment shall be
adjusted downward to the nearest full Share. Any agreement of merger or
consolidation involving the Company will include appropriate provisions for
protection of the then existing rights of participating employees under the
Plan. Either authorized and unissued Shares or treasury Shares may be
purchased under the Plan. If for any reason any right under the Plan
terminates in whole or in part, Shares subject to such terminated right may
again be subjected to a right under the Plan.
5. Offerings; Participation.
(a) From time to time, the Company, by action of the Committee, will grant
rights to purchase Shares to Eligible Employees pursuant to one or more
Offerings, each having an Offering Commencement Date, an Offering Termination
Date, and one or more Purchase Dates as designated by the Committee. No
Offering may last longer than twenty-seven (27) months or such longer period
as may then be consistent with Section 423. The Committee may limit the number
of Shares issuable in any Offering, either before or during such Offering.
(b) Participation in each Offering shall be limited to Eligible Employees
who elect to participate in such Offering in the manner, and within the time
limitations, established by the Committee. No person otherwise eligible to
participate in any Offering under the Plan shall be entitled to participate if
he or she has elected not to participate. Any such election not to participate
may be revoked only with the consent of the Committee.
(c) An Employee who has elected to participate in an Offering may make such
changes in the level of payroll deductions as the Committee may permit from
time to time, or may withdraw from such Offering, by giving written notice to
the Company before any Purchase Date. No Employee who has withdrawn from
participating in an Offering may resume participation in the same Offering,
but he or she may participate in any subsequent Offering if otherwise
eligible.
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(d) Upon termination of a participating Employee's employment for any
reason, including retirement but excluding death or disability (as defined in
Section 22(e)(3) of the Code) while in the employ of the Company or a
Subsidiary, such Employee will be deemed to have withdrawn from participation
in all pending Offerings.
(e) Upon termination of a participating Employee's employment because of
disability or death, the Employee or his or her Designated Beneficiary, if
any, as the case may be, shall have the right to elect, with respect to each
Offering in which the Employee was then participating, by written notice given
to the Coordinator within 30 days after the date of termination of employment
(but not later than the next applicable Purchase Date for each Offering),
either (i) to withdraw from such Offering or (ii) to exercise the Employee's
right to purchase Shares on the next Purchase Date of such Offering to the
extent of the accumulated payroll deductions or other contributions in the
Employee's account as the date of termination of employment. If no such
election with respect to any Offering is made within such period, the Employee
shall be deemed to have withdrawn from such Offering on the date of
termination of employment. The foregoing election is not available to any
person, such as a legal representative, as such, other than the Employee of a
Designated Beneficiary.
6. Exercise Price.
The rights granted under the Plan shall be exercised and Shares shall be
purchased at a price per Share (the "Exercise Price") determined by the
Committee from time to time; provided that the Exercise Price shall not be
less than eighty-five percent (85%) of the Fair Market Value of a Share on (a)
the respective Offering Commencement Date or (b) the respective Purchase Date,
whichever is lower.
7. Exercise of Rights; Method of Payment.
(a) Participating Employees may pay for Shares purchased upon exercise of
rights granted hereunder through regular payroll deductions, by lump sum cash
payment, by delivery of shares of Common Stock valued at Fair Market Value on
the date of delivery, or a combination thereof, as determined by the Committee
from time to time. No interest shall be paid upon payroll deductions or other
amounts held hereunder (whether or not used to purchase Shares) unless
specifically provided for by the Committee. All payroll deductions and other
amounts received or held by the Company under this Plan may be used by the
Company for any corporate purpose, and the Company shall not be obligated to
segregate such amounts.
(b) Subject to any applicable limitation on purchases under the Plan, and
unless the Employee has previously withdrawn from the respective Offering,
rights granted to a participating Employee under the Plan will be exercised
automatically on the Purchase Date of the respective Offering coinciding with
the Offering Termination Date, and the Committee may provide that such rights
may at the election of the Employee be exercised on one or more other Purchase
Dates designated by the Committee within the period of the Offering, for the
purchase of the number of whole Shares that may be purchased at the applicable
Exercise Price with the accumulated payroll deductions or other amounts
contributed by such Employee as of the respective Purchase Date. Fractional
Shares will not be issued under the Plan, and any amount that would otherwise
have been applied to the purchase of a fractional Share shall be retained and
applied to the purchase of Shares in the following Offering unless the
respective Employee elects otherwise. The Company will deliver to each
participating Employee a certificate representing the shares of Common Stock
purchased within a reasonable time after the Purchase Date.
(c) Any amounts contributed by an Employee or withheld from the Employee's
compensation that are not used for the purchase of Shares, whether because of
such Employee's withdrawal from participation in an Offering (voluntarily,
upon termination of employment, or otherwise) or for any other reason, except
as provided in Section 7(b), shall be repaid to the Employee or his or her
Designated Beneficiary or legal representative, as applicable, within a
reasonable time thereafter unless the Employee is eligible to and does elect
to apply such amounts to the purchase of Shares in the next Offering to
commence after the date of withdrawal.
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(d) The Company's obligation to offer, sell and deliver Shares under the
Plan at any time is subject to (i) the approval of any governmental authority
required in connection with the authorized issuance or sale of such Shares,
(ii) satisfaction of the listing requirements of any national securities
exchange or securities market on which the Common Stock is then listed, and
(iii) compliance, in the opinion of the Company's counsel, with all applicable
federal and state securities and other laws.
8. Limitations on Purchase Rights.
(a) Any provision of the Plan or any other employee stock purchase plan of
the Company or any subsidiary (collectively, "Other Plans") to the contrary
notwithstanding, no Employee shall be granted the right to purchase Common
Stock (or other stock of the Company and any subsidiary) under the Plan and
all Other Plans at a rate that exceeds an aggregate of $25,000 (or such other
maximum as may be prescribed from time to time by Section 423) in Fair Market
Value of such stock (determined at the time the rights are granted) for each
calendar year in which any such right is outstanding.
(b) An Employee's participation in any one or a combination of Offerings
under the Plan shall not exceed such additional limits as the Committee may
from time to time impose.
9. Tax Withholding.
Each participating Employee shall pay to the Company or the applicable
Subsidiary, or make provision satisfactory to the Committee for payment of,
any taxes required by law to be withheld in respect of the purchase or
disposition of Shares no later than the date of the event creating the tax
liability. In the Committee's discretion and subject to applicable law, such
tax obligations may be paid in whole or in part by delivery of Shares to the
Company, including Shares purchased under the Plan, valued at Fair Market
Value on the date of delivery. The Company or the applicable Subsidiary may,
to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Employee or withhold Shares purchased
hereunder, which shall be valued at Fair Market Value on the date of
withholding.
10. Participant's Rights as Shareholders and Employees.
(a) No participating Employee shall have any rights as a shareholder in the
Shares covered by a right granted hereunder until such right has been
exercised, full payment has been made for such Shares, and the Share
certificate is actually issued.
(b) Each Employee is an employee-at-will (that is to say that either the
Employee or the Company or any Subsidiary 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 Subsidiary. Neither the adoption,
maintenance, nor operation of the Plan nor any grant of rights hereunder shall
confer upon any Employee any right with respect to the continuance of his/her
employment with the Company or any Subsidiary nor shall they interfere with
the rights of the Company or Subsidiary 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 Subsidiary.
11. Rights Not Transferable.
Rights under the Plan are not assignable or transferable by a participating
Employee other than by will or the laws of descent and distribution and,
during the Employee's lifetime, are exercisable only by the Employee. The
Company may treat any attempted inter vivos assignment as an election to
withdraw from all pending Offerings.
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12. Amendments to or Termination of the Plan.
The Board shall have the right to amend, modify or terminate the Plan at any
time without notice, subject to any stockholder approval that the Board
determines to be necessary or advisable; provided that the rights of Employees
hereunder with respect to any ongoing or completed Offering shall not be
adversely affected.
13. Governing Law.
Subject to overriding federal law, the Plan shall be governed by and
interpreted consistently with the laws of the Commonwealth of Massachusetts.
14. Effective Date and Term.
This Plan will become effective October 1, 1999, and no rights shall be
granted hereunder after September 30, 2009.
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APPENDIX B
PARAMETRIC TECHNOLOGY CORPORATION
2000 EQUITY INCENTIVE PLAN
1. Purpose.
The purpose of the Parametric Technology Corporation 2000 Equity Incentive
Plan (the "Plan") is to attract and retain directors and key employees and
consultants of the Company and its Affiliates, to provide an incentive for
them to achieve performance goals, and to enable them to participate in the
growth of the Company by granting Awards with respect to the Company's Common
Stock. Certain capitalized terms used herein are defined in Section 9 below.
2. 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 hereunder.
The Committee shall select the Participants to receive Awards and shall
determine the terms and conditions of the Awards. 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 make Awards 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 Awards for all such Participants and a maximum for any one Participant.
3. Eligibility.
All directors and all employees and consultants of the Company or any
Affiliate capable of contributing to the successful performance of the Company
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.
4. Stock Available for Awards.
(a) Amount. Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 11,500,000 shares of Common Stock, provided that no
more than 10% of the maximum number of shares authorized from time to time to
be issued hereunder may be granted as Restricted Stock or unrestricted stock
Awards for consideration less than 100% of the Fair Market Value of the Common
Stock on the date of the respective grant. If any Award expires or is
terminated unexercised or is forfeited or settled in a manner that results in
fewer shares outstanding than were awarded, the shares subject to such Award,
to the extent of such expiration, termination, forfeiture or decrease, shall
again be available for award 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 Awards under the Plan. Shares issued
under the Plan may consist of authorized but unissued shares or treasury
shares.
(b) Adjustment. In the event that the Committee determines that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of shares or
other transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits intended to be provided by the Plan, then
the Committee (subject in the case of Incentive Stock Options to any
limitation required under the Code) shall equitably adjust any or all of (i)
the number and kind of shares in respect of which Awards may be made under the
Plan, (ii) the number and kind of shares subject to outstanding Awards and
(iii) the exercise price with respect to any of the foregoing, provided that
the number of shares subject to any Award shall always be a whole number, and
if considered appropriate, the Committee may make provision for a cash payment
with respect to an outstanding Award.
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(c) Limit on Individual Grants. The maximum number of shares of Common Stock
subject to Options and Stock Appreciation Rights that may be granted to any
Participant in the aggregate in any calendar year shall not exceed 2,000,000,
and the maximum number of shares of Common Stock that may be granted as
Restricted Stock or unrestricted stock Awards, with respect to which
performance goals apply under Section 7 below, to any Participant in the
aggregate in any calendar year shall not exceed 500,000, subject to adjustment
under subsection (b).
5. Stock Options.
(a) Grant of Options. Subject to the provisions of the Plan, the Committee
may grant options ("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, provided that a Nonstatutory
Stock Option granted to a new employee or consultant in connection with the
hiring of such person may have a lower exercise price so long as it is not
less than 100% of Fair Market Value on the date the person accepts the
Company's offer of employment or the date employment commences, whichever is
lower. No Options may be granted hereunder more than ten years after the
effective date of the Plan.
(b) Terms and Conditions. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may 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 other commitment satisfactory to the Committee or shares
of Common Stock owned by the optionee valued at their Fair Market Value on the
date of delivery, or such other lawful consideration, including a payment
commitment of a financial or brokerage institution, as the Committee may
determine.
6. Stock Appreciation Rights.
(a) Grant of SARs. Subject to the provisions of the Plan, the Committee may
grant rights to receive any excess in value of shares of Common Stock over the
exercise price ("Stock Appreciation Rights" or "SARs"). The Committee shall
determine at the time of grant or thereafter whether SARs are settled in cash,
Common Stock or other securities of the Company, Awards or other property, and
may define the manner of determining the excess in value of the shares of
Common Stock.
(b) Exercise Price. The Committee shall fix the exercise price of each SAR
or specify the manner in which the price shall be determined. An SAR may not
have an exercise price less than 100% of the Fair Market Value of the Common
Stock on the date of the grant, provided that such an SAR granted to a new
employee or consultant in connection with the hiring of such person may have a
lower exercise price so long as it is not less than 100% of Fair Market Value
on the date the person accepts the Company's offer of employment or the date
employment commences, whichever is lower.
7. Stock Awards.
(a) Grant of Restricted or Unrestricted Stock Awards. The Committee may
grant shares of Common Stock subject to forfeiture ("Restricted Stock") and
determine the duration of the period (the "Restricted Period") during which,
and the conditions under which, the shares may be forfeited to the Company and
the
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other terms and conditions of such Awards. Shares of Restricted Stock may not
be sold, assigned, transferred, pledged or otherwise encumbered, except as
permitted by the Committee, during the Restricted Period. Shares of Restricted
Stock shall be evidenced in such manner as the Committee may determine. Any
certificates issued in respect of shares of Restricted Stock shall be
registered in the name of the Participant and unless otherwise determined by
the Committee, deposited by the Participant, together with a stock power
endorsed in blank, with the Company. At the expiration of the Restricted
Period, the Company shall deliver such certificates to the Participant or if
the Participant has died, to the Participant's Designated Beneficiary. The
Committee also may make Awards of shares of Common Stock that are not subject
to restrictions or forfeiture, on such terms and conditions as the Committee
may determine from time to time.
(b) Performance Goals. The Committee may establish performance goals for the
granting of Restricted Stock or unrestricted stock Awards or the lapse of risk
of forfeiture of Restricted Stock. Such performance goals may be based on
earnings per share, revenues, sales or expense targets of the Company or any
subsidiary, division or product line thereof, stock price, or such other
business criteria as the Committee may determine. Shares of Restricted Stock
or unrestricted stock may be issued for no cash consideration, such minimum
consideration as may be required by applicable law or such other consideration
as the Committee may determine.
8. General Provisions Applicable to Awards.
(a) Documentation. Each Award under the Plan shall be evidenced by a writing
delivered to the Participant or agreement executed by 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.
(b) Committee Discretion. Each type of Award may be made alone, in addition
to or in relation to any other Award. The terms of each type of Award need not
be identical, and the Committee need not treat Participants uniformly. Except
as otherwise provided by the Plan or a particular Award, any determination
with respect to an Award may be made by the Committee at the time of grant or
at any time thereafter.
(c) Dividends and Cash Awards. In the discretion of the Committee, any Award
under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable (in cash or in the form of Awards under the Plan)
currently or deferred with or without interest and (ii) cash payments in lieu
of or in addition to an Award.
(d) Termination of Service. The Committee shall determine the effect on an
Award of the disability, death, retirement or other termination of service of
a Participant and the extent to which, and the period during which, the
Participant's legal representative, guardian or Designated Beneficiary may
receive payment of an Award or exercise rights thereunder.
(e) Change in Control. In order to preserve a Participant's rights under an
Award in the event of a change in control of the Company (as defined by the
Committee), the Committee in its discretion may, at the time an Award is made
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 or
payment of the Award, (ii) provide for payment to the Participant of cash or
other property with a Fair Market Value equal to the amount that would have
been received upon the exercise or payment of the Award had the Award been
exercised or paid upon the change in control, (iii) adjust the terms of the
Award in a manner determined by the Committee to reflect the change in
control, (iv) cause the Award 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) Transferability. In the discretion of the Committee, any Award may be
made transferable upon such terms and conditions and to such extent as the
Committee determines, provided that Incentive Stock Options may be
transferable only to the extent permitted by the Code. The Committee may in
its discretion waive any restriction on transferability.
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(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 Awards 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 due to the Participant hereunder or otherwise. In the
Committee's discretion, the minimum tax obligations required by law to be
withheld in respect of Awards may be paid in whole or in part in shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value on the date of retention or
delivery.
(h) Foreign Nationals. Awards may be made 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 Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required (a) if such
action would terminate, or reduce the number of shares issuable under, an
Option, unless any time period relating to the exercise of such Option or the
eliminated portion, as the case may be, is accelerated before such termination
or reduction, in which case the Committee may provide for the Participant to
receive cash or other property equal to the net value that would be received
upon exercise of the terminated Option or the eliminated portion, as the case
may be, and (b) in any other case, 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 exercise price. Furthermore, no Option shall
be canceled and replaced with Options having a lower exercise price without
approval of the stockholders of the Company.
9. Certain 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.
"Award" means any Option, Stock Appreciation Right or Restricted Stock
granted under the Plan.
"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. Unless otherwise determined by the Board, if a
Committee is authorized to grant Awards to a Reporting Person or a Covered
Employee, each member shall be a "non-employee director" within the meaning of
Rule 16b-3 under the Exchange Act or an "outside director" 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, a Massachusetts
corporation.
"Covered Employee" means a "covered employee" within the meaning of Section
162(m) of the Code.
"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.
4
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor law.
"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.
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Reporting Person" means a person subject to Section 16 of the Exchange Act.
10. Miscellaneous.
(a) No Right To Employment. No person shall have any claim or right to be
granted an Award. 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 Award hereunder shall confer upon any employee
or consultant of the Company or of any Affiliate any right with respect to the
continuance of his/her employment by or other service with the Company or any
such Affiliate nor shall they interfere with the rights 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) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be issued under the
Plan until he or she becomes the holder thereof. A Participant to whom Common
Stock is awarded shall be considered the holder of the Stock at the time of
the Award except as otherwise provided in the applicable Award.
(c) Effective Date. The Plan shall be effective on the date it is approved
by the stockholders.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, subject to such stockholder approval as the
Board determines to be necessary or advisable to comply with any tax or
regulatory requirement.
(e) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
5
<PAGE>
TO VOTE BY MAIL, PLEASE DETACH THE PROXY CARD HERE
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PARAMETRIC TECHNOLOGY CORPORATION
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
FEBRUARY 10, 2000
The undersigned, having received notice of and the Proxy Statement relating to
the 2000 Annual Meeting of Stockholders to be held on February 10, 2000 at 9:00
a.m. at the Boston-Newton Marriott Hotel, 2345 Commonwealth Avenue, Newton, MA
02466, and revoking all prior proxies, hereby appoint(s) Edwin J. Gillis and
David R. Friedman, 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, of
Parametric Technology Corporation (PTC) that the undersigned would be entitled
to vote if personally present at the 2000 Annual Meeting of Stockholders and any
adjournment or adjournments thereof (the "Annual Meeting"). THE PROXIES ARE
AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING.
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 OF
THE ABOVE PROPOSALS, 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 PTC.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE COMMENTS?
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
----------------
SEE REVERSE SIDE
----------------
<PAGE>
Instructions for Voting Your Proxy
Parametric Technology Corporation is now offering stockholders of record three
alternative ways of voting your proxies:
. By Telephone (using a touch-tone telephone)
. Through the Internet (using a browser)
. By Mail (traditional method)
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy card. We encourage you to
use these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
- ----------------
TELEPHONE VOTING Available only until 5:00 p.m. Eastern time on
- ----------------
February 9, 2000
. This method of voting is available for residents of the U.S. and Canada
. On a touch tone telephone, call TOLL FREE 1-800-848-7964, 24 hours a day,
7 days a week
. You will be asked to enter ONLY the CONTROL NUMBER shown below
. Have your proxy card ready, then follow the simple recorded instructions.
. Your vote will be confirmed and cast as you directed
- ---------------
INTERNET VOTING Available only until 5:00 p.m. Eastern time on February 9, 2000
- ---------------
. Visit our Internet voting Website at http://www.cybervote.georgeson.com
. Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen
. You will incur only your usual Internet charges, if applicable.
- --------------
VOTING BY MAIL
- --------------
. Mark, sign and date the attached proxy card and return it in the postage-paid
envelope enclosed
. If you vote by telephone or the Internet, please do not mail your proxy card.
---------------- ----------------
COMPANY NUMBER CONTROL NUMBER
---------------- ----------------
TO VOTE BY MAIL, PLEASE DETACH THE PROXY CARD HERE
- -------------------------------------------------------------------------------
[X] Votes must be indicated, as
in Example to the left, in
Black or Blue Ink.
- -------------------------------------------------------------------------------
THE DIRECTORS RECOMMEND A VOTE "FOR" ALL NOMINEES LISTED IN ITEM 1 AND "FOR"
ITEMS 2 AND 3.
- -------------------------------------------------------------------------------
FOR ALL WITHHOLD
Nominees AUTHORITY to FOR ALL
Listed vote for all EXCEPT*
1. Election of Directors:
Donald K. Grierson, [_] [_] [_]
Oscar B. Marx, III and
Noel G. Posternak
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the "FOR ALL EXCEPT" box and write that nominee's name on the space provided.
*Exceptions
-----------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approve Increase in PTC's Authorized
Shares of common stock to 500,000,000. [_] [_] [_]
FOR AGAINST ABSTAIN
3. Approve PTC's 2000 Employee Stock
Purchase Plan. [_] [_] [_]
FOR AGAINST ABSTAIN
4. Approve PTC's 2000 Equity Incentive Plan. [_] [_] [_]
DATE: , 2000
--------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SIGNATURE(S)
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.
