<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
PROGRESS SOFTWARE CORPORATION
(Name of Registrant as Specified In Its Charter)
PROGRESS SOFTWARE CORPORATION
(Name of Person(s) Filing Proxy Statement)
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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PROGRESS SOFTWARE CORPORATION
14 OAK PARK
BEDFORD, MASSACHUSETTS 01730
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Progress
Software Corporation (the "Company") will be held on Thursday, April 20, 2000,
commencing at 10:00 A.M., local time, at the principal executive offices of the
Company, at 14 Oak Park, Bedford, Massachusetts 01730, for the following
purposes:
1. To fix the number of directors constituting the full Board of
Directors of the Company at seven;
2. To consider and vote upon the election of seven directors;
3. To act upon a proposal to amend the Company's Restated Articles of
Organization to increase the authorized common stock, $.01 par value
per share, of the Company ("Common Stock") from 75,000,000 shares to
100,000,000 shares;
4. To act upon a proposal to amend the Company's 1997 Stock Incentive
Plan (the "1997 Plan") to increase the maximum number of shares that
may be issued under such plan from 5,040,000 shares to 7,540,000
shares; and
5. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on February 25, 2000
as the record date for determination of shareholders entitled to receive notice
of and vote at the meeting and any adjournment thereof.
By Order of the Board of Directors,
James D. Freedman
Clerk
March 21, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS
POSSIBLE. A POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
PROGRESS SOFTWARE CORPORATION
14 OAK PARK
BEDFORD, MASSACHUSETTS 01730
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Progress Software Corporation (the "Company") of
proxies for use at the 2000 Annual Meeting of Shareholders (the "2000 Annual
Meeting") to be held on April 20, 2000, at 10:00 A.M., local time, at the
principal executive offices of the Company, at 14 Oak Park, Bedford,
Massachusetts 01730. It is anticipated that this Proxy Statement and the
accompanying form of proxy will first be mailed to shareholders on or about
March 21, 2000. The cost of solicitation of proxies will be borne by the
Company. Directors, officers and employees may assist in the solicitation of
proxies by mail, telephone, facsimile, in person or otherwise, without
additional compensation. The Company has also retained Corporate Investor
Communications, Inc., 111 Commerce Road, Carlstadt, New Jersey 07072, to assist
in the solicitation of proxies for the 2000 Annual Meeting at an estimated cost
of $5,000, plus reasonable out-of-pocket expenses.
At the 2000 Annual Meeting, the shareholders of the Company will be asked
to consider and vote upon the following matters:
1. To fix the number of directors constituting the full Board of
Directors of the Company at seven;
2. To consider and vote upon the election of seven directors;
3. To act upon a proposal to amend the Company's Restated Articles of
Organization to increase the authorized common stock, $.01 par value
per share, of the Company ("Common Stock") from 75,000,000 shares to
100,000,000 shares;
4. To act upon a proposal to amend the Company's 1997 Stock Incentive
Plan (the "1997 Plan") to increase the maximum number of shares that
may be issued under such plan from 5,040,000 shares to 7,540,000
shares; and
5. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The information contained in the "Compensation Committee Report" on pages
12 and 13 and the "Stock Performance Graph" on page 14 shall not be deemed
"filed" with the Securities and Exchange Commission (the "Commission") or
subject to Regulations 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended.
VOTING PROCEDURES
Only holders of record of Common Stock outstanding at the close of business
on February 25, 2000 are entitled to vote at the 2000 Annual Meeting and any
adjournment thereof. As of that date, there were 35,686,598 shares outstanding
and entitled to vote. Each outstanding share entitles the holder to one vote on
any proposal presented at the meeting.
Any shareholder who has given a proxy may revoke it at any time prior to
its exercise at the 2000 Annual Meeting by giving written notice of such
revocation to the Clerk of the Company, by signing and duly delivering a proxy
bearing a later date or by attending and voting in person at the 2000 Annual
Meeting. Duly executed proxies received and not revoked prior to the meeting
will be voted in accordance with the instructions indicated in the proxy. If no
instructions are indicated, such proxies will be voted FOR the
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<PAGE> 4
proposal to fix the number of directors constituting the full Board of Directors
at seven, FOR the election of the nominees for director named in the proxy, FOR
the amendment to the Company's Restated Articles of Organization, FOR the
amendment to the 1997 Plan and in the discretion of the proxies as to other
matters that may properly come before the 2000 Annual Meeting.
Votes withheld from any nominee for election as director, abstentions and
broker "non-votes" will be counted as present or represented at the meeting for
purposes of determining the presence or absence of a quorum for the meeting. A
broker "non-vote" occurs when a broker or other nominee who holds shares for a
beneficial owner withholds his vote on a particular proposal with respect to
which he does not have discretionary voting power or instructions from the
beneficial owner. Abstentions with respect to a proposal are included in the
number of shares present or represented and entitled to vote on such proposal,
and therefore have the effect of voting against the proposal. Broker "non-votes"
are not so included, but where the matter requires approval of a specified
percentage of the Company's outstanding Common Stock (as in the case of approval
of the amendment to the Company's Restated Articles of Organization) have the
effect of voting against the proposal. An automated system administered by the
Company's transfer agent tabulates the votes.
The Board of Directors of the Company knows of no other matters to be
presented at the meeting. If any other matter should be presented at the meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as proxies.
ELECTION OF DIRECTORS
The Company's by-laws provide for a Board of Directors, the number of which
shall be fixed from time to time by the shareholders of the Company, and may be
enlarged or reduced by vote of a majority of the Board of Directors. The Board
of Directors has recommended that the number of directors be fixed at seven and
has nominated for election as directors Joseph W. Alsop, Larry R. Harris, Roger
J. Heinen, Jr., Michael L. Mark, Arthur J. Marks, Scott A. McGregor and Amram
Rasiel, each of whom is currently a director of the Company. Each director
elected at the 2000 Annual Meeting will hold office until the next Annual
Meeting of Shareholders or special meeting in lieu thereof and until his
successor has been duly elected and qualified, or until his earlier death,
resignation or removal. There are no family relationships among any of the
executive officers or directors of the Company.
Each of the nominees has agreed to serve as a director if elected, and the
Company has no reason to believe that any nominee will be unable to serve. In
the event that one or more nominees should become unwilling or unable to serve,
however, the persons named in the enclosed proxy will vote such proxy for such
other person or persons as may thereafter be nominated for director by the Board
of Directors of the Company.
If a quorum is present at the meeting, the vote of a majority of the shares
of Common Stock present or represented and entitled to vote at the meeting will
be necessary to fix the number of directors constituting the full Board of
Directors at seven, and a plurality of the votes properly cast will be required
to elect a nominee to the office of director.
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<PAGE> 5
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO FIX THE
NUMBER OF DIRECTORS CONSTITUTING THE FULL BOARD OF DIRECTORS AT SEVEN, AND THAT
YOU VOTE FOR THE ELECTION OF THE SEVEN INDIVIDUALS NAMED BELOW AS DIRECTORS OF
THE COMPANY.
<TABLE>
<CAPTION>
NOMINEE AGE PRESENT PRINCIPAL EMPLOYER AND BUSINESS EXPERIENCE
- ------- --- --------------------------------------------------
<S> <C> <C>
Joseph W. Alsop........................ 54 Mr. Alsop, a founder of the Company, has been a
director and President of the Company since its
inception in 1981.
Larry R. Harris........................ 52 Dr. Harris has been a director of the Company since
January 1995. Dr. Harris is a founder of EasyAsk, Inc.
and has been its President since 1994.
Roger J. Heinen, Jr.................... 49 Mr. Heinen has been a director of the Company since
March 1999. Mr. Heinen has worked in the computer
industry since 1973 as a software developer and
manager. Mr. Heinen served as Senior Vice President,
Developer Division, at Microsoft Corporation from 1992
until 1996. Mr. Heinen currently is also a director of
ANSYS Inc., MAPICS, Inc., AVID Technologies, Inc.,
Glassbook, Inc. and RADNET, Inc.
Michael L. Mark........................ 54 Mr. Mark has been a director of the Company since July
1987. Mr. Mark is a private investor and has been
President of Refined Reports, Inc., an electronic
publishing company, since 1990.
Arthur J. Marks........................ 55 Mr. Marks has been a director of the Company since July
1987. Mr. Marks has served as a General Partner of New
Enterprise Associates, a venture capital partnership,
since August 1984. His investment activities focus on
information technology companies. Mr. Marks is also a
director of Epicor Software Corporation, eXcelon, Inc.
and Talk.com Inc.
Scott A. McGregor...................... 43 Mr. McGregor has been a director of the Company since
March 1998. Mr. McGregor has been a Senior Vice
President and General Manager of Philips Electronics,
N.A. since February 1998. He was a software consultant
from June 1997 until January 1998. From 1992 until May
1997, Mr. McGregor was Senior Vice President, Products,
of The Santa Cruz Operation, Inc.
Amram Rasiel........................... 70 Dr. Rasiel has been a director of the Company since
April 1983. Dr. Rasiel is a private investor. Dr.
Rasiel is also a director of PRI Automation, Inc.
</TABLE>
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held five meetings during the fiscal
year ended November 30, 1999. No director attended fewer than 75% of the
aggregate number of meetings of the Board of Directors and of any committee of
the Board of Directors on which he served. The Audit Committee, of which Mr.
Mark and Dr. Rasiel are members, reviews the scope and results of the audit and
other services provided by the Company's independent auditors and also makes
recommendations to the Board as to the selection of independent auditors. The
Audit Committee held one meeting during the fiscal year ended November 30, 1999.
The Compensation Committee, of which Messrs. Marks and McGregor are members,
also held one meeting during the fiscal year ended November 30, 1999. The
Compensation Committee makes recommenda-
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<PAGE> 6
tions concerning salaries and incentive compensation for employees of the
Company and determines the salaries and incentive compensation for executive
officers of the Company. The Compensation Committee also administers the
Company's stock plans. The Audit and Compensation Committees are the only
standing committees of the Board of Directors.
DIRECTORS' COMPENSATION
Each of the Company's non-employee directors who rendered services during
fiscal 1999 received an annual fee of $18,000 and has been reimbursed, upon
request, for expenses incurred in attending Board of Directors' meetings. In
addition, each non-employee member of the Audit and Compensation Committees
received an annual fee of $2,000 for each committee on which he served during
fiscal 1999. Directors who are employees of the Company are not paid any
separate fees for service as directors.
During fiscal 1995, Dr. Harris was granted an option pursuant to the 1993
Directors' Stock Option Plan (the "1993 Directors' Plan") to purchase 60,000
shares of Common Stock. During fiscal 1998, Mr. McGregor was granted an option
pursuant to the Company's 1994 Stock Incentive Plan to purchase 60,000 shares of
Common Stock. During fiscal 1999, Mr. Heinen was granted an option pursuant to
the Company's 1994 Stock Incentive Plan to purchase 10,000 shares of Common
Stock. During fiscal 1999, each of Messrs. Heinen and McGregor was granted an
option pursuant to the Company's 1997 Stock Incentive Plan to purchase 10,000
shares of Common Stock. Each option granted to a non-employee director pursuant
to the 1993 Directors' Plan, the 1994 Stock Incentive Plan and the 1997 Stock
Incentive Plan expires on the tenth anniversary of the date of grant. Options
granted pursuant to each of these plans, except for each of Mr. Heinen's options
and the fiscal 1999 grant to Mr. McGregor, which represent annual grants, become
exercisable in seventy-two equal monthly installments commencing the month
following the date of grant, provided that the optionee is a director at the end
of each such period. Messrs. Heinen and McGregor's annual option grants are
exercisable in full on the grant date. Each of these plans requires that the
exercise price of each option be equal to the closing price of the Common Stock,
as reported by the Nasdaq Stock Market, on the date the option was granted. The
1993 Directors' Plan was terminated in April 1997. Options granted and
outstanding under the 1993 Directors' Plan remain outstanding and are
exercisable in accordance with their terms, but no further options will be
granted under this plan.
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<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN HOLDERS AND MANAGEMENT
The following table sets forth the numbers of shares of the Company's
Common Stock beneficially owned by all persons known by the Company to be the
beneficial owners of more than 5% of the Company's Common Stock, by each of the
Company's current directors, by each of the executive officers named in the
Summary Compensation Table appearing on Pages 9 and 10, and by all executive
officers and directors of the Company as a group, as of March 15, 2000.
<TABLE>
<CAPTION>
BENEFICIALLY OWNED
SHARES
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
--------------------------------------- ------ -------
<S> <C> <C>
Private Capital Management, Inc.(2)...................... 3,558,388 9.95%
Bruce S. Sherman
and
Michael J. Seaman
3003 Tamiami Trail North
Naples, FL 33940
Joseph W. Alsop(3)....................................... 2,494,900 6.68%
14 Oak Park
Bedford, MA 01730
T. Rowe Price Associates, Inc.(4)........................ 1,980,400 5.54%
100 East Pratt Street
Baltimore, MD 21202
Amram Rasiel(5).......................................... 470,000 1.31%
David P. Vesty(6)........................................ 142,322 *
Michael L. Mark(7)....................................... 126,000 *
Richard D. Reidy(8)...................................... 107,635 *
David G. Ireland(9)...................................... 67,963 *
Arthur J. Marks(10)...................................... 64,451 *
Norman R. Robertson(11).................................. 60,520 *
Larry R. Harris(12)...................................... 54,167 *
Scott A. McGregor(13).................................... 44,500 *
Roger J. Heinen, Jr.(14)................................. 20,000 *
All executive officers and directors as a group (13
persons)(15)........................................... 3,705,730 9.74%
</TABLE>
- ---------------
* Less than 1%
(1) All persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and subject to the
information contained in the footnotes to this table.
(2) Derived from Schedule 13-G -- Amendment 1 dated February 15, 2000. The
persons named reported beneficial ownership of the following shares:
Private Capital Management, Inc. (3,550,388); Bruce S. Sherman (3,550,388);
and Michael J. Seaman (8,000). Bruce S. Sherman is Chairman of Private
Capital Management, Inc. ("PCM") and exercises shared dispositive power
with respect to shares held by it on behalf of its clients. Mr. Seaman is
an employee of PCM or affiliates thereof and he (i) does not exercise sole
or shared dispositive or voting powers with respect to shares held by PCM,
(ii) disclaims beneficial ownership of shares held by Mr. Sherman and PCM,
and (iii) disclaims, along with Mr. Sherman, the existence of a group.
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<PAGE> 8
(3) Includes 1,683,510 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(4) Derived from Schedule 13G dated February 14, 2000. The Schedule 13-G states
that these securities are owned by various individual and institutional
investors which T. Rowe Price Associates, Inc. ("Price Associates") serves
as investment adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
Price Associates, Inc. exercises sole voting power for 310,300 shares and
sole dispositive power for all shares.
(5) Includes 90,000 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(6) Includes 83,235 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(7) Includes 90,000 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(8) Includes 106,149 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(9) Includes 64,565 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(10) Includes 60,000 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(11) Includes 40,010 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(12) Consists of 54,167 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(13) Includes 32,500 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(14) Consists of 20,000 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
(15) Includes 2,371,065 shares issuable upon the exercise of outstanding options
that are exercisable within 60 days of March 15, 2000.
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<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership of, and transactions in, the Company's securities with the Securities
and Exchange Commission. This information is also filed with the Nasdaq Stock
Market. Such directors, executive officers and ten-percent shareholders are also
required to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on a review of the copies of such forms received by it, and on
written representations from certain reporting persons, the Company believes
that with respect to the fiscal year ended November 30, 1999, its directors,
officers and ten-percent shareholders complied with all applicable Section 16(a)
filing requirements.
In the fiscal year ended November 30, 1999, Mr. Alsop, President of the
Company, reported information to correct two inadvertent omissions, which
occurred in the fiscal year ended November 30, 1998. The two omissions concerned
the withdrawal of shares from a voting trust for which Mr. Alsop is trustee and
under which he has sole voting power of shares held in the trust. The two
withdrawals were reported on Mr. Alsop's Form 4 for the month ending April 30,
1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1994, the Company purchased 100,000 shares of Series A Preferred
Stock from EasyAsk, Inc. ("EasyAsk"), formerly known as Linguistic Technology
Corporation, for $100,000. In March 1996, the Company purchased approximately
87,000 shares of Series B Preferred Stock from EasyAsk for $200,000, and an
additional 30,000 shares of Series B Preferred Stock in January 1997 for
$70,000. In August 1998, the Company purchased $200,000 principal amount of
Subordinated Convertible Promissory Notes and Stock Purchase Warrants of
EasyAsk. In each of the months, July and November 1999, the Company purchased an
additional $100,000 principal amount of Subordinated Convertible Promissory
Notes and Stock Purchase Warrants. Assuming conversion of the Subordinated
Convertible Promissory Notes and exercise of the Stock Purchase Warrants, in
total, these purchases represent an aggregate interest in EasyAsk of
approximately 7%. Dr. Larry R. Harris, a director of the Company, is a founder
and President of EasyAsk.
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<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation earned by (i)
the President and (ii) each of the Company's four most highly compensated
executive officers other than the President during the 1999 fiscal year
(collectively, the "Named Executive Officers"), for services rendered in fiscal
1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------- ALL OTHER
------------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS/SARS(#)(2) ($)(3)
--------------------------- ---- --------- ----------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Joseph W. Alsop..................... 1999 $350,000 $432,500 310,000 $56,652
President 1998 $300,000 $531,000 490,000 $65,365
1997 $200,000 $319,000 300,000 $24,549
David G. Ireland(4)................. 1999 $215,000 $121,000 80,000 $13,861
Vice President and General 1998 $198,333 $225,020 60,000 $11,420
Manager, Worldwide Field 1997 $ 46,250 $ 27,000 150,000 $ 1,983
Operations
Richard D. Reidy.................... 1999 $200,000 $127,624 140,000 $25,243
Vice President, Products 1998 $188,333 $200,697 114,000 $25,757
1997 $147,500 $ 65,250 255,000 $12,123
Norman R. Robertson................. 1999 $220,000 $115,067 80,000 $26,437
Vice President, 1998 $181,917 $202,487 144,000 $14,554
Finance and Administration 1997 $158,750 $ 95,458 48,000 $ 7,798
and Chief Financial Officer
David P. Vesty(5)................... 1999 $210,000 $187,000 80,000 $39,111
Vice President, 1998 $200,000 $401,200 114,000 $44,723
Worldwide Sales 1997 $190,000 $213,765 205,500 $21,690
</TABLE>
- ---------------
(1) The amounts shown in this column reflect bonuses and commissions earned
under (i) the Company's Bonus Program for Executives and Key Contributors
and (ii) the Company's sales commission plan.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payouts during
fiscal 1999, 1998 and 1997.
(3) The amounts disclosed in this column include:
(a) Company contributions for fiscal 1999 to a defined contribution
plan, the Progress Software Corporation 401(k) Plan (the "401(k)
Plan") as follows: Mr. Alsop, $10,080; Mr. Ireland, $5,040; Mr.
Reidy, $10,080; Mr. Robertson, $10,080; and Mr. Vesty, $10,080.
(b) Payments by the Company for fiscal 1999 of 401(k) Plan matching
contributions in excess of participation limits imposed on
higher-paid individuals under federal tax law, as follows: Mr.
Alsop, $45,423; Mr. Ireland, $8,821; Mr. Reidy, $15,163; Mr.
Robertson, $15,922; and Mr. Vesty, $28,451.
(c) Payments by the Company in fiscal 1999 of term life insurance
premiums for the benefit of the following executive officers: Mr.
Alsop, $1,149; Mr. Robertson, $435; and Mr. Vesty, $580
(d) Company contributions for fiscal 1998 to the 401(k) Plan as follows:
Mr. Alsop, $16,128; Mr. Ireland, $8,064; Mr. Reidy, $16,128; Mr.
Robertson, $8,064; and Mr. Vesty, $16,128.
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<PAGE> 11
(e) Payments by the Company for fiscal 1998 of 401(k) Plan matching
contributions in excess of participation limits imposed on
higher-paid individuals under federal tax law, as follows: Mr.
Alsop, $48,088; Mr. Ireland, $3,356; Mr. Reidy, $9,629; Mr.
Robertson, $6,055; and Mr. Vesty, $26,192.
(f) Payments by the Company in fiscal 1998 of term life insurance
premiums for the benefit of the following executive officers: Mr.
Alsop, $1,149; Mr. Robertson, $435; and Mr. Vesty, $324.
(g) Company contributions for fiscal 1997 to the 401(k) Plan as follows:
Mr. Alsop, $11,638; Mr. Ireland, $1,983; Mr. Reidy, $11,638; Mr.
Robertson, $5,819; and Mr. Vesty, $11,638.
(h) Payments by the Company for fiscal 1997 of 401(k) Plan matching
contributions in excess of participation limits imposed on
higher-paid individuals under federal tax law, as follows: Mr.
Alsop, $11,810; Mr. Reidy, $485; Mr. Robertson, $1,562; and Mr.
Vesty, $6,708.
(i) Payments by the Company in fiscal 1997 of term life insurance
premiums for the benefit of the following executive officers: Mr.
Alsop, $1,101; Mr. Robertson, $417; and Mr. Vesty, $311.
(4) Mr. Ireland joined the Company in September 1997.
(5) Mr. Vesty relinquished his position as Vice President, Worldwide Sales,
effective September 30, 1999, but continues as a part-time employee of the
Company. Amount shown under "Annual Compensation-Bonus" includes commissions
paid by the Company of $32,515 in fiscal 1997.
OPTION GRANTS IN FISCAL 1999
The following table sets forth certain information with respect to the
grant of incentive and non-qualified stock options in fiscal year 1999 for each
of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
---------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE)(3) DATE 5%($) 10%($)
---- ------------- -------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Alsop......... 247,200(5) 9.70% $12.81 2/10/09 $2,017,033 $5,087,854
800(6) 0.03% $12.81 2/10/09 $ 6,528 $ 16,466
62,000(5) 2.43% $10.47 5/17/09 $ 436,593 $1,079,664
David G. Ireland........ 64,000(5) 2.51% $12.81 2/10/09 $ 522,209 $1,317,244
16,000(5) 0.63% $10.47 5/17/09 $ 112,669 $ 278,623
Richard D. Reidy........ 88,000(5) 3.45% $12.81 2/10/09 $ 718,038 $1,811,210
52,000(5) 2.04% $10.47 5/17/09 $ 366,174 $ 905,524
Norman R. Robertson..... 64,000(5) 2.51% $12.81 2/10/09 $ 522,209 $1,317,244
16,000(5) 0.63% $10.47 5/17/09 $ 112,669 $ 278,623
David P. Vesty.......... 63,400(5) 2.49% $12.81 2/10/09 $ 517,313 $1,304,895
600(6) 0.02% $12.81 2/10/09 $ 4,896 $ 12,349
16,000(5) 0.63% $10.47 5/17/09 $ 112,669 $ 278,623
</TABLE>
- ---------------
(1) These options vest monthly over a 60-month period commencing on March 1,
1999.
(2) The Company granted total options to purchase 2,549,590 shares of Common
Stock in fiscal 1999. The Company granted no SARs during fiscal 1999.
(3) All options were granted at the closing price of the Common Stock, as
reported by the Nasdaq Stock Market, on the date of grant.
10
<PAGE> 12
(4) Potential Realizable Value is computed based on the value of stock price
appreciation at assumed annual rates, reduced by the exercise price of the
option, compounded annually over the actual option term (10 years). Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved.
(5) These options were granted as non-qualified stock options.
(6) These options were granted as incentive stock options.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information with respect to option
exercises in fiscal year 1999 and the value of unexercised options, as of
November 30, 1999, for each of the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END(#)(1) FISCAL YEAR-END($)(1)(2)
--------------------- ------------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Joseph W. Alsop............. 28,000 $ 118,312 1,547,210/740,390 $21,283,448/$8,178,384
David G. Ireland............ 42,400 $ 453,960 28,383/219,219 $ 295,733/$2,525,955
Richard D. Reidy............ 190,150 $2,230,980 56,537/335,513 $ 655,144/$3,964,702
Norman R. Robertson......... 121,600 $1,331,092 18,558/183,336 $ 187,232/$2,068,011
David P. Vesty.............. 350,704 $3,869,931 38,860/239,736 $ 490,198/$2,953,003
</TABLE>
- ---------------
(1) As of November 30, 1999, the Company had issued no SARs.
(2) Calculated on the basis of $20.02 per share which was the average of the
high and the low sale prices of the Company's Common Stock on November 30,
1999, as reported by the Nasdaq Stock Market, less the applicable exercise
price.
EMPLOYEE RETENTION AND MOTIVATION AGREEMENT
The Company has entered into an agreement (an "Employee Retention and
Motivation Agreement") with the President and each of the Named Executive
Officers ("Covered Persons"). Each Employee Retention and Motivation Agreement
provides for certain payments and benefits upon a Change in Control (as defined
in such agreement) and upon an Involuntary Termination (as defined in such
agreement). Upon a Change in Control, the final twelve-month vesting portion of
each outstanding unvested option grant held by the Covered Persons shall
automatically accelerate. Each Covered Person's annual cash bonus award for the
then current year shall be fixed and guaranteed at their respective target
level. Payment of such bonus will immediately occur on a pro-rata basis with
respect to the elapsed part of the relevant fiscal year and the balance of such
bonus will be paid at the end of such fiscal year or immediately upon
Involuntary Termination of such Covered Person if such event occurs prior to the
end of the relevant fiscal year. Upon Involuntary Termination of a Covered
Person, the final twelve-month vesting portion of each outstanding unvested
option held by such Covered Person shall automatically accelerate. If such
Involuntary Termination occurs within six months following a Change in Control
then the Covered Person shall receive a lump sum payment equal to nine months of
target compensation and such Covered Person's benefits shall continue for nine
months. If such Involuntary Termination occurs after six months but prior to
twelve months following a Change in
11
<PAGE> 13
Control then the Covered Person shall receive a lump sum payment equal to six
months of target compensation and such Covered Person's benefits shall continue
for six months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Company's Board of
Directors are Arthur J. Marks and Scott A. McGregor. Neither of them is or has
ever been an officer or employee of the Company or of any of its subsidiaries.
No member of the Compensation Committee is a party to any relationship required
to be disclosed under Item 402(j) or Item 404 of Regulation S-K promulgated by
the Commission.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is established by the
Compensation Committee. The Company's philosophy is to reward executives based
upon corporate and individual performance as well as to provide long-term
incentive for the achievement of future financial and strategic goals. These
goals include growth of the Company, defined primarily in terms of growth in
revenue and earnings per share. It is also the Company's philosophy to base a
significant portion of the executive's total compensation opportunity on
performance incentives consistent with the scope and level of the executive's
responsibilities.
The executive compensation program for fiscal 1999 consisted of the
following three elements: (1) base salary; (2) incentive compensation in the
form of annual cash bonus awards earned under the Company's Fiscal 1999 Bonus
Program for Executives and Key Contributors (the "1999 Bonus Program"); and (3)
equity-based long-term incentive compensation in the form of stock options. The
Compensation Committee believes that executive compensation should be aligned
with long-term shareholder value. Therefore, the elements of the executive
compensation program are weighted such that the equity-based long-term element
is potentially the most rewarding element. All elements of the executive
compensation program are designed to be competitive with those of comparable
technology companies. A further explanation of the elements of the executive
compensation program as they relate to the President and the Named Executive
Officers listed in the Summary Compensation Table is as follows:
Base salary increases for fiscal year 1999 were based upon individual and
departmental contribution and performance. Base salary for Mr. Alsop increased
16.7% during fiscal year 1999. Base salaries for the other Named Executive
Officers increased during fiscal year 1999 by the following percentages: Mr.
Ireland 0.0%, Mr. Reidy 0.0%, Mr. Robertson 13.4% and Mr. Vesty 5.0%.
The 1999 Bonus Program was established by the Compensation Committee and
approved by the Board of Directors. For each participant, the 1999 Bonus Program
provided for a specified payment as a percentage of base salary depending on the
attainment of targeted growth levels for revenue and earnings per share. The
target growth levels are approved by the Board of Directors. If the Company
achieves 100% of its revenue and earnings per share targets, 100% of the
specified bonus is paid. More or less than 100% of the specified bonus is paid
depending on the Company's level of achievement and the Compensation Committee's
assessment of the Company's strength, stability and strategic position, as well
as individual contribution. Bonus awards paid in fiscal 1999 were based upon
increases in the Company's revenue and earnings per share and the Compensation
Committee's favorable assessment of the Company's strength, stability and
strategic position.
The total compensation received by Mr. Alsop and the other Named Executive
Officers (computed on an annualized basis for all such persons) decreased for
fiscal year 1999 over fiscal year 1998. Total compensation decreased 6.4% for
Mr. Alsop, 19.5% for Mr. Ireland, 14.9% for Mr. Reidy, 9.4% for Mr. Robertson
and 32.5% for Mr. Vesty.
12
<PAGE> 14
Mr. Alsop's 6.4% decrease in fiscal 1999 total compensation was due to a
lower payout of cash bonus partially offset by a base salary increase. Mr.
Alsop's base salary increase was based on individual performance. Mr. Alsop's
bonus was based on fiscal 1999 Company accomplishments as compared to target
objectives as described above.
Long-term incentive compensation, in the form of stock options, is intended
to correlate executive compensation with the Company's long-term success as
measured by the Company's stock price. Stock options are tied to the future
success of the Company because options granted have an exercise price equal to
the closing market value at the date of the grant and will only provide value to
the extent that the price of the Company's stock increases above the exercise
price. Since options granted generally vest monthly over a five year period,
option participants are encouraged to continue employment with the Company.
During fiscal 1999, Mr. Alsop and the other Named Executive Officers received
incentive and non-qualified stock options as disclosed in the Option Grant Table
on pages 10 and 11.
The Compensation Committee approved a discretionary matching contribution
to the 401(k) Plan for fiscal 1999, representing up to 6.3% of each eligible
employee's calendar year compensation, including base salary, commissions and
bonus, depending on the employee's length of service with the Company and the
employee's contribution level. The Named Executive Officers also received such a
contribution, except that, due to limitations imposed on 401(k) matching
contributions to higher-paid individuals under federal tax law, a portion of the
contributions that otherwise would have been received by Mr. Alsop and the other
Named Executive Officers disclosed in the Summary Compensation Table, pursuant
to the 401(k) Plan were instead paid directly to such individuals. All such
amounts are disclosed as "Other Compensation" in the Summary Compensation Table
on pages 9 and 10.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") imposes an annual limit of $1,000,000 on tax deductions that an employer
may claim for compensation of certain executives. Section 162(m) of the Code
provides exceptions to the deduction limitation for "performance-based"
compensation, and it is the intent of the Compensation Committee to take
advantage of such exceptions to the extent feasible and in the best interests of
the Company.
Arthur J. Marks
Scott A. McGregor
13
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following line graph compares the Company's cumulative shareholder
return with that of a broad market index (Nasdaq Stock Market Index for U.S.
Companies) and a published industry index (Nasdaq Computer and Data Processing
Services Stocks). Each of these indices is calculated assuming that $100 was
invested on November 30, 1994.
COMPARATIVE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG PROGRESS SOFTWARE CORPORATION, NASDAQ STOCK MARKET INDEX
AND NASDAQ COMPUTER AND DATA PROCESSING SERVICES STOCKS
<TABLE>
<CAPTION>
PROGRESS SOFTWARE NASDAQ STOCK MARKET NASDAQ COMPUTER & DATA
CORPORATION INDEX PROCESSING SERVICES STOCKS
----------------- ------------------- --------------------------
<S> <C> <C> <C>
11/94 100.00 100.00 100.00
11/95 175.00 143.00 156.00
11/96 111.00 175.00 192.00
11/97 114.00 217.00 248.00
11/98 210.00 267.00 361.00
11/99 330.00 448.00 649.00
</TABLE>
14
<PAGE> 16
PROPOSED AMENDMENT TO THE COMPANY'S
RESTATED ARTICLES OF ORGANIZATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
On March 14, 2000, the Company's Board of Directors voted to recommend to
the shareholders that the Company's Restated Articles of Organization be amended
to increase the number of authorized shares of Common Stock, $.01 par value per
share, from 75,000,000 to 100,000,000 shares (the "Amendment"). Shares of the
Company's Common Stock, including the additional shares proposed for
authorization, do not have preemptive or similar rights.
The Company's Board of Directors believes that the authorized number of
shares of Common Stock should be increased to provide sufficient shares for such
corporate purposes as may be determined by the Board of Directors to be
necessary or desirable, which may include, without limitation, raising capital
or acquiring property through the sale of stock, acquiring businesses through
mergers or the exchange of stock, effecting stock splits and attracting or
retaining valuable employees by the issuance of stock-based compensation awards.
The Company at present has no commitments, agreements or undertakings obligating
the Company to issue any such additional shares; however, the Board of Directors
considers the authorization of additional shares of Common Stock advisable to
ensure prompt availability of shares for issuance should the occasion arise.
On February 25, 2000, the record date for the 2000 Annual Meeting, there
were issued and outstanding 35,686,598 shares of Common Stock and an additional
8,435,391 shares were reserved for issuance upon exercise of options outstanding
under the Company's 1997 Stock Incentive Plan, the 1994 Stock Incentive Plan,
the 1993 Director's Plan, the 1992 Incentive and Non-qualified Stock Option Plan
and the 1991 Employee Stock Purchase Plan. If the Amendment is approved, the
Board will have authorization to issue an additional 55,878,011 shares of Common
Stock Under Massachusetts law, the Board of Directors generally may issue
authorized but unissued shares of Common Stock without shareholder approval. The
Board of Directors does not currently intend to seek shareholder approval prior
to any future issuance of additional shares of Common Stock, unless shareholder
action is required in a specific case by applicable law, the rules of any
exchange or market on which the Company's securities may then be listed, or the
Restated Articles of Organization or by-laws of the Company then in effect.
Frequently, opportunities arise that require prompt action, and the Company
believes that the delay necessitated for shareholder approval of a specific
issuance could be to the detriment of the Company and its shareholders.
The Company has no present plans to issue any of the additional shares of
Common Stock proposed to be authorized hereby. The issuance of additional shares
of Common Stock may have a dilutive effect on the Company's earnings per share
and, for a shareholder that does not purchase additional shares to maintain such
shareholder's pro rata interest in the Company, on such shareholder's percentage
of voting power. In addition, the issuance of the additional shares of Common
Stock authorized by the proposed amendment may render more difficult or
discourage a merger, tender offer or proxy contest involving the Company, the
assumption of control of the Company by the holder of a large block of the
Company's securities or the removal of incumbent management. For example, the
issuance of the additional shares of Common Stock could discourage a potential
acquiror by (i) increasing the number of shares of Common Stock necessary to
gain control of the Company; (ii) permitting the Company, through the public or
private issuance of shares of Common Stock, to dilute the stock ownership of the
potential acquiror; and (iii) permitting the Company to privately place shares
of Common Stock with purchasers who would side with the Board of Directors in
opposing a takeover bid. The proposed amendment is not being recommended in
response to any specific effort of which the Company's management is aware to
accumulate shares or obtain control of the Company.
15
<PAGE> 17
The additional shares of Common Stock authorized for issuance pursuant to
the Amendment will have all of the rights and privileges that the presently
outstanding shares of Common Stock possess. The increase in authorized shares
would not affect the terms, or rights of the holders, of existing shares of
Common Stock. All outstanding shares would continue to have one vote per share
on all matters to be voted on by the shareholders, including the election of
directors.
The vote of a majority of the shares of Common Stock outstanding and
entitled to vote at the meeting will be necessary to approve the proposed
amendment to the Company's Restated Articles of Organization.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND
THE COMPANY'S RESTATED ARTICLES OF ORGANIZATION.
PROPOSED AMENDMENT TO THE COMPANY'S
1997 STOCK INCENTIVE PLAN
TO INCREASE SHARES AUTHORIZED FOR ISSUANCE
The Company's 1997 Stock Incentive Plan (the "1997 Plan") was adopted by
the shareholders of the Company at the annual meeting of shareholders held on
April 25, 1997. As of February 25, 2000, a total of 5,040,000 shares of Common
Stock were authorized for issuance under the 1997 Plan, of which 290,038 had
already been issued upon exercise of options under the Plan, 2,823,854 were
reserved for issuance upon exercise of outstanding stock options, and 1,926,108
remained available for the future grant of stock options. On March 14, 2000, the
Board of Directors unanimously approved an increase in the number of shares of
Common Stock authorized for issuance under the 1997 Plan by 2,500,000 shares to
a total of 7,540,000 shares, which increase is subject to shareholder approval
being received at the 2000 Annual Meeting. The Company has no present plans to
issue any of the additional shares of Common Stock proposed to be authorized for
issuance hereby, during this fiscal year.
The Board of Directors believes that stock options and other stock-based
awards can play an important role in the success of the Company, by encouraging
and enabling the officers, directors and employees of, and other persons
providing services to, the Company and its subsidiaries upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company. The Board of
Directors believes that the availability of an adequate reserve of shares for
issuance under the 1997 Plan is essential to enable the Company to maintain its
competitive position with respect to recruiting and retaining highly skilled
personnel.
SUMMARY OF THE PROVISIONS OF THE 1997 PLAN
The following summary of the 1997 Plan is qualified in its entirety by the
specific language of the 1997 Plan, a copy of which is available to any
shareholder upon request.
The 1997 Plan is administered by the Compensation Committee (the
"Committee") consisting of at least two "Outside Directors." An "Outside
Director" means any director who (i) is not an employee of the Company or of any
"affiliated group," as such term is defined in Section 1504(a) of the Internal
Revenue Code of 1986, as amended, which includes the Company (an "Affiliate"),
(ii) is not a former employee of the Company or any Affiliate who is receiving
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the Company's or any Affiliate's taxable year, (iii) has
not been an officer of the Company or any Affiliate and (iv) does not receive
remuneration from the Company or any Affiliate, either directly or indirectly,
in any capacity other than as a director.
The 1997 Plan permits the granting to officers, directors, employees and
others who provide services to the Company, at the discretion of the Committee,
of a variety of stock incentive awards based on the Common
16
<PAGE> 18
Stock of the Company. Awards under the 1997 Plan include stock options (both
incentive and non-qualified), grants of conditioned stock, unrestricted grants
of stock, grants of stock contingent upon the attainment of performance goals
and stock appreciation rights. The Committee selects the person to whom awards
are granted and the number, type and terms of the award granted.
Stock Options. The 1997 Plan permits the granting of (i) options to
purchase Common Stock intended to qualify as incentive stock options ("Incentive
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) options that do not so qualify ("Non-Qualified Options").
The option exercise price of each option is determined by the Committee but may
not be less than 100% of the fair market value of the shares on the date of
grant in the case of both Incentive Options and Non-Qualified Options.
The term of each option is fixed by the Committee and may not exceed 10
years from date of grant in the case of an Incentive Option. The Committee
determines at what time or times each option may be exercised and, subject to
the provisions of the 1997 Plan, the period of time, if any, after death,
disability or termination of employment during which options may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Committee.
The exercise price of options granted under the 1997 Plan may be paid in
cash or bank check or other instrument acceptable to the Committee, or, with the
consent of the Committee, in shares of Common Stock. The exercise price may also
be delivered by a broker pursuant to irrevocable instructions to the broker from
the optionee. At the discretion of the Committee, options granted under the 1997
Plan may include a so-called "reload" feature pursuant to which an optionee
exercising an option by delivery of shares of Common Stock may be automatically
granted an additional option to purchase that number of shares of Common Stock
equal to the number delivered to exercise the original option.
To qualify as Incentive Options, options must meet additional requirements,
including a $100,000 limitation on the value of shares subject to Incentive
Options which first become exercisable in any one year, and a maximum 5-year
term and exercise price of at least 110% of fair market value in the case of
options granted to greater-than-10% shareholders.
Conditioned Stock. The Committee may also award shares of Common Stock
subject to such conditions and restrictions as the Committee may determine
("Conditioned Stock"). These conditions and restrictions may include provisions
for vesting conditioned upon the achievement of certain performance objectives
and/or continued employment with the Company through a specified vesting period.
The purchase price, if any, of shares of Conditioned Stock is determined by the
Committee.
If a participant who holds unvested shares of Conditioned Stock terminates
employment for any reason (including death), the Company has the right to
repurchase the unvested shares or to require their forfeiture in exchange for
the amount, if any, which the participant paid for them. Prior to the
fulfillment of the applicable conditions, the participant will have all rights
of a shareholder with respect to the shares of Conditioned Stock, including
voting and dividend rights, subject only to the conditions and restrictions set
forth in the 1997 Plan and in the participant's Conditioned Stock award.
Unrestricted Stock. The Committee may also grant shares of Common Stock
(at no cost or for a purchase price determined by the Committee) which are free
from any restrictions under the 1997 Plan ("Unrestricted Stock"). Unrestricted
Stock may be issued to employees in recognition of past services or other valid
consideration, and may be issued in lieu of cash bonuses to be paid to employees
pursuant to other bonus plans of the Company. Outside Directors of the Company
may elect to receive all or a portion of their directors' fees, on a current or
deferred basis, in shares of Unrestricted Stock by entering into an irrevocable
agreement with the Company at least six months in advance of the beginning of a
calendar year. Employees,
17
<PAGE> 19
with the permission of the Committee, may make similar irrevocable elections to
receive a portion of their compensation in Unrestricted Stock.
Performance Share Awards. The Committee may also grant performance share
awards entitling the recipient to receive shares of Common Stock upon the
achievement of individual or Company performance goals and such other conditions
as the Committee determines ("Performance Share Awards"). Except as otherwise
determined by the Committee, rights under a Performance Share Award not yet
earned will terminate upon a participant's termination of employment.
Stock Appreciation Rights. The Committee may also grant stock appreciation
rights ("Stock Appreciation Rights") which entitle the holder to receive, upon
exercise, Common Stock having a fair market value equal to (or, with the consent
of the Committee, cash in the amount of) the amount by which the fair market
value of the Common Stock on the date of exercise exceeds the exercise price of
the Stock Appreciation Right, multiplied by the number of shares with respect to
which the Stock Appreciation Right is exercised. Stock Appreciation Rights may
be granted in conjunction with an option, in which event, upon exercise of one
of the awards, the number of shares with respect to which the other award may be
exercised is correspondingly reduced.
Amendments and Terminations. The Board of Directors may at any time amend
or discontinue the 1997 Plan and the Committee may at any time amend or cancel
outstanding awards (or provide substitute awards at the same or a reduced
exercise or purchase price) for the purpose of satisfying changes in the law or
for any other lawful purpose. Among other things, the Committee has the
authority to accelerate the exercisability or vesting of an award or extend the
period for exercise of an award. However, no such action may be taken which
adversely affects any rights under outstanding awards without the holder's
consent. Moreover, no such amendment, unless approved by the shareholders of the
Company, shall be effective if it would cause the 1997 Plan to fail to satisfy
any then applicable incentive stock option rules under Federal tax law or
applicable requirements of Rule 16b-3 under the Securities Exchange Act of 1934,
or cause any member of the Committee to cease to be a "disinterested person" as
defined thereunder.
Change of Control Provisions. The 1997 Plan provides that in the event of
a "Change of Control" (as defined in the 1997 Plan) of the Company, options and
certain other awards will become exercisable for the securities, cash or
property that the holders of Common Stock received in connection with the Change
of Control. In addition, the Committee may accelerate awards and waive
conditions and restrictions on any awards to the extent it may determine
appropriate. The Committee may also, in its discretion, cancel outstanding
options and other awards effective upon the Change of Control, provided that
holders have at least thirty days prior to such date in which to exercise such
options and awards, to the extent then exercisable.
FEDERAL TAX ASPECTS OF THE 1997 PLAN
The following is a summary of the principal Federal income tax consequences
of transactions under the 1997 Plan. It does not describe all Federal tax
consequences under the 1997 Plan, nor does it describe state or local tax
consequences.
Incentive Options. No taxable income is realized by an optionee upon the
grant or exercise of an Incentive Option. If shares issued to an optionee
pursuant to the exercise of an Incentive Option are not sold or transferred
within two years from the date of grant and within one year after the date of
exercise, then (a) upon sale of such shares, any amount realized in excess of
the option price (the amount paid for the shares) will be taxed to the optionee
as a long-term capital gain and any loss sustained will be a long-term capital
loss, and (b) there will be no deduction for the Company for Federal income tax
purposes. The exercise of an Incentive Option will give rise to an item of tax
preference that may result in alternative minimum tax liability for the
optionee.
18
<PAGE> 20
If shares of Common Stock acquired upon the exercise of an Incentive Option
are disposed of prior to the expiration of the two-year or one-year holding
periods described above (a "disqualifying disposition"), generally (a) the
optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on a sale of such shares) over the option
price thereof, and (b) the Company will be entitled to deduct such amount.
Special rules apply where all or a portion of the exercise price of the
Incentive Option is paid by tendering shares of Common Stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment (or one year in the case of termination of employment
by reason of disability.)
Non-Qualified Options. With respect to Non-Qualified Options under the
1997 Plan, no income is realized by the optionee at the time the option is
granted. Generally, (a) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and the fair
market value of the shares on the date of exercise, and the Company receives a
tax deduction for the same amount, and (b) at disposition of the shares acquired
upon exercise, appreciation or depreciation after the date of exercise is
treated as either short-term or long-term capital gain or loss depending on how
long the shares have been held.
Conditioned Stock. A recipient of Conditioned Stock generally will be
subject to tax at ordinary income rates on the fair market value of the stock at
the time that the stock is no longer subject to forfeiture, minus any amount
paid for such stock. However, a recipient who so elects under Section 83(b) of
the Code, within 30 days of the date of issuance of the Conditioned Stock, will
realize ordinary income on the date of issuance equal to the fair market value
of the shares of Conditioned Stock at that time (measured as if the shares were
unrestricted and could be sold immediately), minus any amount paid for such
stock. If the shares subject to such election are forfeited, the recipient will
not be entitled to any deduction, refund or loss for tax purposes with respect
to the forfeited shares. The Company generally will receive a tax deduction
equal to the amount includable as ordinary income to the recipient.
Unrestricted Stock. The recipient of Unrestricted Stock will generally be
subject to tax at ordinary income rates on the fair market value of such
Unrestricted Stock on the date that such Unrestricted Stock is issued to the
participant, minus any amount paid for such stock. The Company generally will be
entitled to a deduction equal to the amount treated as compensation that is
taxable as ordinary income to the recipient.
Performance Shares. The recipient of a Performance Share Award will
generally be subject to tax at ordinary income rates on the fair market value of
any Common Stock issued under the award, and the Company will generally be
entitled to a deduction equal to the amount of ordinary income realized by the
recipient.
Stock Appreciation Rights. The recipient of a Stock Appreciation Right
will generally be subject to tax at ordinary income rates on any cash, or the
fair market value of any stock, received upon exercise of the Stock Appreciation
Right. The Company generally will be entitled to a deduction equal to the amount
of ordinary income realized by the recipient.
Dividends. Dividends paid on Common Stock (including Conditioned Stock)
will be taxed at ordinary income rates to the recipient. Generally, the Company
will not be entitled to any deduction for dividends, except in the case of
dividends paid on Conditioned Stock with respect to which no Section 83(b)
election has been filed.
19
<PAGE> 21
If a quorum is present at the 2000 Annual Meeting, the vote of a majority
of the shares of Common Stock present or represented and entitled to vote at the
meeting will be necessary to approve the proposed amendment to the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND
THE 1997 PLAN.
SELECTION OF AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP,
independent certified public accountants, to serve as the Company's independent
auditors for the fiscal year ending November 30, 2000. The Company has been
advised that a representative of Deloitte & Touche LLP will be present at the
2000 Annual Meeting. This representative will have the opportunity to make a
statement if he desires and will be available to respond to appropriate
questions presented at the meeting.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In
addition to soliciting shareholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of nominees and, if so, will reimburse such banks, brokers and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
costs in forwarding proxy materials to the beneficial owners of shares held of
record by them. Directors, officers and regular employees of the Company may,
without additional compensation, solicit shareholders in person or by mail,
telephone, facsimile, in person or otherwise following the original
solicitation. The Company has also retained Corporate Investor Communications,
Inc., 111 Commerce Road, Carlstadt, New Jersey 07072, to assist in the
solicitation of proxies for the 2000 Annual Meeting at an estimated cost of
$5,000, plus reasonable out-of-pocket expenses.
PROPOSALS OF SHAREHOLDERS FOR 2001 ANNUAL MEETING
The Company anticipates that its 2001 Annual Meeting of Shareholders will
be held on or about April 19, 2001. Proposals of shareholders of the Company
intended to be presented at the 2001 Annual Meeting must, in order to be
included in the Company's proxy statement and the form of proxy for the 2001
Annual Meeting, be received at the Company's principal executive offices by
November 24, 2000.
In addition, under the by-laws of the Company, any shareholder intending to
present at the 2001 Annual Meeting any proposal (other than a proposal made by,
or at the direction of, the Board of Directors of the Company) must give written
notice of such proposal (including certain information about any nominee or
matter proposed and the proposing shareholder) to the Clerk of the Company not
less than 60 days nor more than 90 days prior to the date of the scheduled
annual meeting; provided, however, that if less than 70 days' notice or prior
public disclosure of the scheduled annual meeting is given or made, such notice,
to be timely, must be given within 10 days following such public disclosure or
mailing of such notice, whichever is earlier.
20
<PAGE> 22
AVAILABLE INFORMATION
Shareholders of record on February 25, 2000 have previously received or
will receive with this Proxy Statement a copy of the Company's 1999 Annual
Report ("1999 Annual Report"), containing detailed financial information
concerning the Company, which is incorporated herein by reference. The Company
will mail, without charge, a copy of the Company's Annual Report on Form 10-K,
without exhibits, to any shareholder solicited hereby who requests it in
writing. Please submit your written request to Investor Relations, Progress
Software Corporation, 14 Oak Park, Bedford, Massachusetts 01730 or call (781)
280-4450. The 1999 Annual Report is also available on-line from the U.S.
Securities and Exchange Commission's EDGAR database at the following address:
www.sec.gov/cgi-bin/srch-edgar?progress+software.
21
<PAGE> 23
DETACH CARD DETACH CARD
PROGRESS SOFTWARE CORPORATION
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, April
20, 2000.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Progress Software Corporation
<PAGE> 24
PROGRESS SOFTWARE CORPORATION
14 OAK PARK, BEDFORD MASSACHUSETTS 01730
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- APRIL 20, 2000
The undersigned shareholder of Progress Software Corporation, revoking all prior
proxies, hereby appoints Joseph W. Alsop, Norman R. Robertson and Robert L.
Birnbaum, or any of them acting singly, proxies, with full power of
substitution, to vote all shares of Common Stock of Progress Software
Corporation which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at the Company's office at 14 Oak Park,
Bedford, Massachusetts on April 20, 2000, at 10:00 A.M., local time, and at any
adjournments thereof, upon matters set forth in the Notice of Annual Meeting and
Proxy Statement dated March 21, 2000, a copy of which has been received by the
undersigned, and in their discretion, upon any other business that may properly
come before the meeting or any adjournments thereof. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. A SHAREHOLDER WISHING TO VOTE
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS NEED ONLY SIGN
AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. Attendance of the
undersigned at the meeting or any adjourned session thereof will not be deemed
to revoke the proxy unless the undersigned shall affirmatively indicate the
intention of the undersigned to vote the shares represented hereby in person.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, IT WILL BE VOTED FOR THE PROPOSALS SET FORTH ON THE REVERSE.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND MAIL IT IN THE
ENCLOSED ENVELOPE TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. PLEASE SIGN EXACTLY AS NAME(S) APPEAR(S)
ON STOCK CERTIFICATE. IF SHAREHOLDER IS A CORPORATION OR PARTNERSHIP, PLEASE
HAVE AN AUTHORIZED OFFICER SIGN ON BEHALF OF THE CORPORATION OR PARTNERSHIP.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- -------------------------------------- ------------------------------------
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<PAGE> 25
<TABLE>
<S> <C>
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE For Against Abstain
--------------------------------------
PROGRESS SOFTWARE CORPORATION 1. To fix the number of directors constituting [ ] [ ] [ ]
-------------------------------------- the full Board of Directors of the Company at
seven.
Mark box at right if you plan to attend the [ ] 2. Election of Directors.
Annual Meeting.
With- For All
Joseph W. Alsop Arthur J. Marks For held Except
Mark box at right if an address change or [ ] Larry R. Harris Scott A. McGregor [ ] [ ] [ ]
comment has been noted on the reverse Roger J. Heinen, Jr. Amran Rasiel
side of this card Michael L. Mark
RECORD DATES SHARES: NOTE: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and strike a line through
name(s) of the nominee(s). Your shares will be voted for the
remaining nominee(s).
3. To act upon a proposal to amend the For Against Abstain
Company's Restated Articles of [ ] [ ] [ ]
Organization to increase the authorized
Common Stock, $.01 par value per share,
of the Company ("Common Stock") from
75,000,000 shares to 100,000,000 shares.
4. To act upon a proposal to amend the For Against Abstain
Company's 1997 Stock Incentive Plan (the [ ] [ ] [ ]
"1997 Plan") to increase the maximum number
of shares that may be issued under such
plan from 5,040,000 shares to 7,540,000
shares.
</TABLE>
------------------
Please be sure to sign and date this Proxy. Date
- -----------------------------------------------------------------
- ------------------------------ ---------------------------
Shareholder sign here Co-owner sign here
