<p>Progress Software Derivative Litigation</p> <p style= text-align: justify; >According to a press release by a law firm a shareholder filed on August 17th, 2006, a derivative action in the District of Massachusetts on behalf of Progress Software Corporation against certain of the Company’s officers and directors who had received hundreds of thousands of Progress stock options that the Company has admitted were improperly backdated or manipulated. The Company has also disclosed that executives participated in this misconduct and knew of the proper accounting rules that should have applied to the options, but failed to apply them.</p>
<p style= text-align: justify; >On August 28, 2006, Plaintiff served on the Progress Board of Directors a demand letter providing the Board with the opportunity to remedy the harm to the Company, and offering to stay the action. In the 90 days following service of the letter, the Board did not respond. Rather, on September 8, 2006, Defendants, all represented at that time by the Company’s outside counsel, Foley Hoag LLP — which, as the Company has disclosed, was aware of the retrospective dating of Progress options at the time it occurred — filed a motion to dismiss the complaint on the basis that Plaintiff had not made a pre-suit demand. That motion was denied as moot after Plaintiff filed its Amended Complaint on November 30, 2006.</p>
<p style= text-align: justify; >In January and March of 2007, Defendants filed a second round of motions to dismiss and the recently-appointed Special Litigation Committee (”SLC”) requested that the Court hear only Defendants’ arguments related to pre-suit demand. Plaintiff has opposed the motions to dismiss and also challenged the SLC members’ independence to investigate the misconduct at issue. For instance, one member of the SLC is presently named as a defendant in another derivative action brought on behalf of another corporation alleging that he had received backdated options. A hearing on the SLC’s motion was held on May 14, 2007, and the Court dismissed the action on September 22, 2007, on the ground that Plaintiff failed to make a pre-suit demand. Plaintiff has made a new demand on the Progress Board and its investigation is ongoing.</p>