UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

 

Proxy Statement Pursuant to Section 14(A) of the Securities

Exchange Act of 1934

 

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o  Soliciting Material Pursuant to § 240.14a-12

 

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PARAMETRIC TECHNOLOGY CORPORATION
140 KENDRICK STREET
NEEDHAM, MASSACHUSETTS 02494

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 5, 2008

 

We will hold the Annual Meeting of Stockholders of Parametric Technology Corporation (“PTC”) at our principal executive offices, 140 Kendrick Street, Needham, Massachusetts 02494, on Wednesday, March 5, 2008 at 9:00 a.m., local time. At this year’s Annual Meeting, we will ask you to:

 

1. Elect two directors to serve for the next three years.

 

2. Confirm the selection of PricewaterhouseCoopers LLP as PTC’s independent registered public accounting firm for the current fiscal year.

 

3. 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 January 7, 2008.

 

Whether or not you expect to attend the meeting, we urge you to vote your shares by proxy in advance of the meeting as described in the enclosed materials.

 

By Order of the Board of Directors

 

AARON C. VON STAATS
Clerk

 

Needham, Massachusetts

January 22, 2008

 

Directions to our offices are as follows:

 

From the North:

 

Route 128 South to Exit 19B, to Highland Avenue. At the first traffic light, take a left onto Hunting Road. At the next light, take a left onto Kendrick Street. PTC entrance is on the right hand side.

 

From the South:

 

Route 128 North to Exit 18, right onto Great Plain Avenue. Right onto Greendale Avenue. Right onto Kendrick Street. PTC entrance is on the right hand side.

 

From either the East or West:

 

Mass Pike to Route 128 South to Exit 19B, to Highland Avenue. At the first traffic light, take a left onto Hunting Road. At the next light, take a left onto Kendrick Street. PTC entrance is on the right hand side.

TABLE OF CONTENTS

 

 

PROXY STATEMENT FOR THE PARAMETRIC TECHNOLOGY CORPORATION
2008 ANNUAL MEETING OF STOCKHOLDERS

 

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

Notice of Internet Availability of Proxy Materials.  We are making this proxy statement and our annual report available to stockholders at www.investorEconnect.com. On January 22, 2008, we will begin mailing to our stockholders a notice containing instructions on how to access and review this proxy statement and our annual report at that website. The notice also instructs you how you may submit your proxy over the Internet. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the notice.

 

Why This Proxy Statement Was Made Available to You.  As a stockholder, you have the right to attend and vote at the Parametric Technology Corporation (PTC) 2008 Annual Meeting of Stockholders. If you attend the Annual Meeting, you may vote your shares directly. Whether or not you attend, you may vote by proxy, by which you 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 for the proposals presented. The proxy statement explains the proposals to be voted on at the Annual Meeting.

 

You have one vote for each share of common stock that you owned at the close of business on January 7, 2008. On that date, there were 115,956,999 shares of common stock outstanding. Common stock is our only class of voting stock.

 

How You May Vote by Proxy.  You may vote by proxy using the Internet or the telephone by following the instructions on your notice or your proxy card, as applicable. If you requested a printed set of materials, you may also vote by mail by signing, dating and returning the proxy card.

 

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 that holds your securities account). In either case, you must follow the procedures described on your notice or proxy card.

 

When you vote, you are giving your “proxy” to the individuals we have designated to vote your shares at the meeting as you direct. If you do not make specific choices, they will vote your shares to:

 

 

If any matter not listed in the Notice of Meeting is properly presented at the Annual Meeting, they will vote your shares in accordance with their best judgment. As of the date hereof, we knew of no matters that needed to be acted on at the meeting other than as discussed in this proxy statement.

 

Whether you plan to attend the Annual Meeting or not, we urge you to vote promptly. Voting promptly will not affect your right to attend the Annual Meeting. If you wish to vote at the Annual Meeting despite having voted previously, you may do so by following the procedure described below under “Revoking Your Proxy” and “How You May Vote in Person.”

 

Revoking Your Proxy.  You may change your vote after you have voted as described below.

 

Registered Stockholders.  A registered stockholder may revoke a proxy by following any of these procedures:

 

 

Street Name Holders.  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 those procedures.

 

How You May Vote in Person.  If you 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 beneficial owner of the shares on January 7, 2008 in order to be admitted to the meeting. If you are not the holder of record, you will need to obtain a “legal proxy” from the holder of record in order to be able to vote at the Annual Meeting.

 

Votes Required; Effect of Abstentions and Broker Non-Votes.  The directors elected at the meeting will be those receiving the highest number of votes. Confirmation of the selection of PricewaterhouseCoopers LLP may be approved by the affirmative vote of a majority of the votes cast. Accordingly, if you abstain from voting, or if your broker or bank does not vote on any proposal because it has not received instructions from you and does not have the authority to vote in its discretion (a broker non-vote), it will not count as a vote for or against a proposal.

 

Voting and Tabulation of the Votes are Confidential.  We keep 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 your name.

 

Disclosure of Voting Results.  We will publish the voting results on our website at www.ptc.com following the Annual Meeting and in our Quarterly Report on Form 10-Q for the second quarter of 2008, which we expect to file with the Securities and Exchange Commission in May 2008.

 

Costs of Soliciting Proxies.  PTC will pay all the costs of soliciting proxies. In addition to mailing the notices and providing these proxy materials, our directors and employees may solicit proxies by telephone, fax or other electronic means of communication, or in person. We will reimburse banks, brokers, nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you.

 

Stockholders Sharing the Same Surname and Address.  In some cases, stockholders holding their shares in a brokerage or bank account who share the same surname and address and have not given contrary instructions received only one copy of the notice. This practice is designed to reduce duplicate mailings and save printing and postage costs as well as natural resources. If you would like to have a separate copy of the notice or our annual report and/or proxy statement mailed to you or to receive separate copies of future mailings, please submit your request to the address or phone number that appears on your notice or proxy card. We will deliver such additional copies promptly upon receipt of such request.

 

In other cases, stockholders receiving multiple copies at the same address may wish to receive only one. If you would like to receive only one copy if you now receive more than one, please submit your request to the address or phone number that appears on your notice or proxy card.

 

Obtaining a Copy of Our Annual Report on Form 10-K.  A copy of our Annual Report on Form 10-K for the year ended September 30, 2007 was made available with this proxy statement. If you would like another copy, it is available on our website at www.ptc.com. We will also send you one without charge if you call (781) 370-5000, e-mail to IR@ptc.com, or write to:

 

Parametric Technology Corporation

140 Kendrick Street

Needham, MA 02494-2714

 

Additional Information.  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) 370-5000 or e-mail at IR@ptc.com.

 

DISCUSSION OF PROPOSALS

 

Proposal 1:  Elect Two Directors

 

The first proposal on the agenda for the Annual Meeting is to elect two Class III directors for three-year terms beginning at this Annual Meeting and expiring at the 2011 Annual Meeting. For a description of the three classes of directors, see “Information About Our Directors” beginning on page 5.

 

Upon the recommendation of the Nominating & Corporate Governance Committee, the Board of Directors has nominated two current directors — Robert N. Goldman and C. Richard Harrison — for new, three-year terms and recommends that you vote for their election.

 

The nomination of Mr. Goldman was based on consideration of his credentials and experience, his contributions as Chairman of the Compensation Committee and as a member of the Audit Committee and expected future contributions and his 100% board and committee meeting attendance record over his current three-year term.

 

The nomination of Mr. Harrison was based on his position as President and Chief Executive Officer of PTC. The Committee believes that Mr. Harrison’s participation in the meetings of the Board and its committees is essential to the work and performance of the Board. Mr. Harrison attended 100% of the board meetings held during his current term (excluding meetings of the outside directors only).

 

The Nominating & Corporate Governance Committee’s process for selecting and evaluating director nominees is described under “Information About the Nominating Functions of the Nominating & Corporate Governance Committee” on page 12. There were no nominees for director proposed by PTC stockholders.

 

The following table contains background information about each of the nominees. For a description of their holdings of PTC stock, see “Stock Owned by Directors and Officers” beginning on page 17.

 

 

The Board of Directors recommends that you vote FOR the election of Robert N. Goldman and C. Richard Harrison as Class III directors.

 

Proposal 2:  Confirm the Selection of PricewaterhouseCoopers LLP as PTC’s Independent Registered Public Accounting Firm for the Current Fiscal Year.

 

The second proposal on the agenda for the Annual Meeting is to confirm the selection by the Audit Committee of the Board of Directors of PricewaterhouseCoopers LLP, an independent registered public accounting firm, as PTC’s independent registered public accounting firm for the fiscal year ending September 30, 2008. PricewaterhouseCoopers LLP served as our independent auditor for the fiscal year ended September 30, 2007. Further information about PricewaterhouseCoopers LLP appears under “Information about our Independent Registered Public Accounting Firm” on page 10. Although stockholder confirmation of the selection of PricewaterhouseCoopers LLP is not required by law or our by-laws, and although this vote will not be binding on PTC, the Board of Directors believes that it is advisable to give stockholders an opportunity to provide guidance on this selection. If this confirmation is not received, the Board will request that the Audit Committee reconsider its selection of PricewaterhouseCoopers LLP.

The Board of Directors recommends that you CONFIRM the selection of PricewaterhouseCoopers LLP as PTC’s independent registered public accounting firm.

 

Other Matters

 

The Board of Directors does not know of any other matters to come before the meeting. If any other matters are properly presented to the Annual Meeting, the persons named in the voting instruction or proxy card will vote, or otherwise act, in accordance with their judgment on such matters.

 

INFORMATION ABOUT OUR DIRECTORS

 

Our Directors

 

Our Board of Directors is divided into three classes with staggered three-year terms. There are currently two Class I directors, two Class II directors and three Class III directors, whose terms expire, respectively, at the 2009, 2010 and 2008 Annual Meetings of Stockholders. As of the 2008 Annual Meeting, the number of Class III directors will be reduced to two. The two Class III directors described on page 3 have been nominated for re-election at this Annual Meeting. The Class I and II directors will continue in office following the Annual Meeting. The following table contains information about each of the Class I and II directors. You will find information on director holdings of PTC stock in the section called “Stock Owned by Directors and Officers” beginning on page 17.

 

 

Independence

 

Our Board of Directors has determined that all of our directors except Mr. Harrison (our Chief Executive Officer and President) and Professor Porter (who has a consulting agreement with PTC as described in “Transactions with Related Persons” on page 16) are “independent directors” as defined in the NASDAQ Global Select Market listing standards. None of the independent directors, to our knowledge, had any business, financial, family or other type of relationship with PTC or its management other than as a director and stockholder.

 

Certain Relationships

 

Mr. Harrison and Paul J. Cunningham, PTC’s Executive Vice President, Worldwide Sales, are first cousins.

 

Board Meetings and Attendance at the Annual Meeting

 

PTC’s Board currently schedules seven regular meetings during each fiscal year, but will meet more often if necessary. The Board met eight times during 2007 and all directors attended all meetings except for one director who was unable to attend one meeting. We expect that each director will attend the Annual Meeting of Stockholders each year, barring other significant commitments or special circumstances. All directors attended the 2007 Annual Meeting of Stockholders.

 

Communications with the Board

 

Stockholders may send communications to the Board of Directors in the manner described on the Investor Relations page of our website, www.ptc.com.

 

The Committees of the Board

 

The Board has four standing committees:

 

 

The Audit Committee

 

The Audit Committee assists our Board in fulfilling its oversight responsibilities for accounting and financial reporting compliance. This includes reviewing the financial information provided to the stockholders and others, PTC’s accounting policies, disclosure controls and procedures, internal accounting and financial controls, and the audit process. In undertaking these responsibilities, the Committee meets with management and with our independent registered public accounting firm to discuss our financial reporting policies and procedures, our internal control over financial reporting, the results of the independent auditor’s examinations, PTC’s critical accounting policies and the overall quality of PTC’s financial reporting, and the Committee reports on such matters to our Board. The Committee meets with the independent auditor with and without PTC management present.

 

The Committee is directly responsible for the appointment (and where appropriate, replacement), evaluation and compensation of the independent auditor. The Committee reviews the independent auditor’s performance in conducting the annual financial statement audit and the audit of our internal control over financial reporting, assesses the independence of the auditor, and reviews the auditor’s fees. The Committee is also responsible for pre-approving audit and non-audit related services that may be performed by the independent auditor. At least once every three years, the Committee evaluates the independent auditor’s tenure, the quality of its engagements and the associated costs to determine if rotation to a different independent auditor is advisable. Further information about the services and fees of PricewaterhouseCoopers LLP, our independent auditor, is provided in “Information About our Independent Registered Public Accounting Firm” on page 10.

 

The Audit Committee operates under a written charter, which is available on the Investor Relations page of our website at www.ptc.com. Messrs. Marx (Chairman), Goldman and Posternak currently serve as members of the Audit Committee. All committee members are “independent directors” under both SEC rules and the listing requirements of the NASDAQ Global Select Market governing the qualifications of members of the Audit Committee, and none of them has ever been an employee of PTC or any of its subsidiaries. During 2007, Oscar B. Marx, Chairman of the Audit Committee, qualified as an Audit Committee Financial Expert, as defined by the SEC. The Audit Committee met 12 times during 2007 and all members attended each meeting.

Report of the Audit Committee

 

In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements for 2007 with management and with PricewaterhouseCoopers LLP. The Committee has also discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the Committee has discussed with PricewaterhouseCoopers LLP their independence from PTC and its management, including the matters in the letter and written disclosures received from PricewaterhouseCoopers LLP as required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. The Audit Committee also considered whether the independent auditor’s provision of the non-audit related services to PTC, which are referred to in “Information About our Independent Registered Public Accounting Firm” below, is compatible with maintaining independence.

 

Based on the Committee’s review and discussions with management and PricewaterhouseCoopers LLP and the Committee’s review of the independent auditor’s report to the Committee, the Committee recommended to the Board of Directors that the audited financial statements be included in PTC’s Annual Report on Form 10-K for the year ended September 30, 2007 for filing with the Securities and Exchange Commission.

 

Audit Committee

 

Oscar B. Marx, Chairman

Robert N. Goldman

Noel G. Posternak

 

The Compensation Committee

 

The Compensation Committee determines PTC’s compensation philosophy, establishes the compensation levels for our executive officers and oversees our employee compensation programs, including the corporate bonus programs. This includes setting corporate goals and objectives relevant to compensation of executive officers and evaluating performance against those goals and objectives. The Committee is responsible for administering our stockholder approved equity compensation plans. It also reviews and makes recommendations to the Board with respect to director compensation.

 

The Compensation Committee acts under a written charter, which is available on the Investor Relations page of our website at www.ptc.com. Messrs. Goldman (Chairman) and Grierson, both of whom qualify as “independent directors” under the NASDAQ Global Select Market listing requirements, currently serve as members of the Compensation Committee. The Committee met six times during 2007 and both members attended each meeting.

 

Each year, the Compensation Committee begins the process of establishing executive compensation for the next fiscal year at its May meeting. At this meeting, the Committee reviews peer group compensation as compared to compensation of PTC’s executive officers. The Committee then meets again in mid summer. This meeting is held in connection with a meeting of the full board of directors and the executive officers at which anticipated corporate performance for the current fiscal year is evaluated and the business plan for the next fiscal year is developed. At this meeting, the Committee reviews executive and company performance for the current fiscal year and begins developing the executive compensation program to align it with the business plan for the next fiscal year. The Committee meets again in September to evaluate the anticipated corporate performance for the current fiscal year, including the amounts expected to be earned by the executives under the company’s annual executive incentive plan and with respect to the annual performance-based restricted stock granted at the beginning of the fiscal year, and to further refine the executive compensation portfolio to align it with the business plan for the next fiscal year. The Committee also establishes base salaries for the executive officers for the next fiscal year at this meeting. The Committee then meets again in November to review the financial results for the completed fiscal year and determine the extent to which the performance criteria for the annual executive incentive plan and annual performance-based restricted stock were met. At that time, the Committee establishes the performance criteria for the current fiscal year’s executive incentive plan and performance-based restricted stock grant. The Committee also determines the target annual incentive

compensation amounts and the value of the annual performance-based restricted stock grant for each of the executives. The Compensation Committee also usually makes the annual time-based restricted stock grants to the executives at this meeting each year. Decisions made with respect executive compensation for 2007 are discussed in detail in “Compensation Discussion and Analysis” beginning on page 19.

 

At the meeting of the Board of Directors held directly after the Annual Meeting of Stockholders, the Compensation Committee recommends to the Board the compensation to be paid to the directors for the year. The Board, based on this recommendation, then establishes the annual compensation for the directors. In making its recommendation, the Committee considers a competitive assessment of the company’s director compensation with that of the peer group and reviews each element of director compensation, including the annual retainer, the committee chair retainer, meeting fees and equity awards, to determine whether the amounts are competitive and reasonable for the services provided by the directors. In the past two years, the amount of the committee chair retainer paid and the annual equity grant awarded to the chairmen of the Compensation Committee and the Audit Committee have been increased to reflect the increased responsibility associated with those positions.

 

To support its decision-making processes, the Compensation Committee engages an independent compensation consultant for advice on the structure and competitiveness of our compensation programs, as well as the consistency of those programs with our executive compensation philosophy. At its own initiative, the Committee may engage outside compensation consultants to provide information and advice to the Committee, and the costs of such engagements are paid from corporate funds. During 2007, the Compensation Committee’s compensation consultant was Pearl Meyer & Partners.

 

The compensation consultant interacts with members of the management team when necessary. For example, PTC’s Corporate Vice President of Human Resources and PTC’s Vice President of Executive Compensation and Global Benefits each work with the compensation consultant to provide the Committee with compensation and performance data for the executives and PTC. In addition, the compensation consultant on occasion may perform additional services for PTC under a separate engagement. For example, in 2007, this included the review of performance metrics for the 2008 employee compensation plans, including those of the executives.

 

Members of management, including our Chief Executive Officer and Corporate Vice President of Human Resources, participate in Compensation Committee meetings as requested by the Committee to present recommendations and discuss the materials provided. The Compensation Committee makes decisions regarding the Chief Executive Officer’s compensation with input from the Corporate Vice President of Human Resources and makes decisions regarding compensation of other executives with the additional input of the Chief Executive Officer and the Executive Vice President of Strategic Services and Partners, who is responsible for Human Resources. Although the Committee solicits input from these executives with respect to executive compensation, all decisions on executive compensation are made solely by the Compensation Committee without the presence of the Chief Executive Officer.

 

The Committee is authorized to delegate to executive officers the power to make awards under the 2000 Equity Incentive Plan other than to directors and executive officers and all determinations under the Plan with respect thereto, provided that the Committee establishes the aggregate and individual maximum amounts of such awards. The Committee has delegated to our Chief Executive Officer the authority to make awards to employees under the 2000 Equity Incentive Plan within established parameters, including the permitted timing of such grants.

 

The Nominating & Corporate Governance Committee

 

The Nominating & Corporate Governance Committee is appointed by the Board to assess Board membership, make recommendations regarding potential candidates for election to the Board and membership on committees of the Board, develop and recommend policies and processes regarding corporate governance matters and maintain a CEO succession plan in order to ensure continuity of leadership for PTC. The

Committee’s policies and procedures for considering director nominations are described in “Information About the Nominating Functions of the Nominating and Corporate Governance Committee” on page 12.

 

The Nominating & Corporate Governance Committee acts under a written charter, which is available on the Investor Relations page of our website at www.ptc.com. Messrs. Posternak (Chairman), Goldman and Grierson currently serve as members of the Committee. All Committee members qualify as “independent directors” under the NASDAQ Global Select Market listing requirements. The Committee met twice during 2007 and all members attended each meeting.

 

The Corporate Development Committee

 

The Corporate Development Committee is appointed by the Board to evaluate corporate development opportunities, including mergers and acquisitions, and to assist management in developing strategies and processes regarding such initiatives. The Committee is authorized to approve transactions having a price below a threshold established by the Board from time to time. The Committee acts under a written charter, which is available on the Investor Relations page of our website at www.ptc.com.

 

Messrs. Porter (Chairman) and Joseph P. O’Donnell (a director through the 2008 Annual Meeting), each of whom has extensive business expertise (including in the area of corporate strategy), served as members of the Corporate Development Committee in 2007. The Committee met twice during 2007 and both members attended each meeting.

 

INFORMATION ABOUT OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

PricewaterhouseCoopers LLP, an independent registered public accounting firm, served as PTC’s independent auditor for 2007 and has reported on our 2007 consolidated financial statements and internal control over financial reporting. The Audit Committee of the Board of Directors has reappointed PricewaterhouseCoopers LLP for 2008 and, as described above, the Board is seeking your confirmation of that appointment. Representatives of PricewaterhouseCoopers LLP are expected to be present at our Annual Meeting. They will have the opportunity to make a statement if they so desire and will also be available to respond to appropriate questions from stockholders.

 

The Audit Committee is responsible for the engagement of our independent auditor and for approving, in advance, all audit services and permitted non-audit services to be provided by the independent auditor. The Audit Committee has adopted a policy for the engagement of the independent auditor that is intended to maintain the independent auditor’s independence from PTC. In adopting the policy, the Audit Committee considered the various services that the independent auditor has historically performed or may be asked to perform in the future. The policy, which is to be reviewed and re-adopted at least annually by the Audit Committee:

 

 

Any approval required under the policy must be given by the Audit Committee, by the Chairman of the Committee in office at the time, or by any other Committee member to whom the Committee has delegated that authority. The Audit Committee does not delegate its responsibilities to approve services performed by the independent auditor to any member of management.

 

The standard applied by the Audit Committee in determining whether to grant approval of any engagement of the independent auditor is whether the services to be performed, the compensation to be paid therefor and other related factors are consistent with the independent auditor’s independence under guidelines of the Securities and Exchange Commission, the Public Company Accounting Oversight Board, and applicable professional standards. The Committee considers, among items:

 

 

Services and Fees

 

The following table shows the fees we incurred for professional services rendered during 2007 and 2006 by our independent registered public accounting firm, PricewaterhouseCoopers LLP.