<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: MARCH 29, 1997 Commission File Number: 0-18059
-------------- -------
PARAMETRIC TECHNOLOGY CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2866152
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
128 TECHNOLOGY DRIVE, WALTHAM, MA 02154
----------------------------------------
(Address of principal executive offices, including zip code)
(617) 398-5000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---------- ----------
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 127,563,454
- -------------------------------------- -----------------------------
Class Outstanding at March 29, 1997
Total number of pages: 12
Exhibit index appears on page 12
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheet 3
March 29, 1997 and September 30, 1996
Consolidated Statement of Income 4
Three and six months ended March 29, 1997 and
March 30, 1996
Consolidated Statement of Cash Flows 5
Six months ended March 29, 1997 and March 30, 1996
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 6 Exhibits 10
SIGNATURE 11
</TABLE>
2
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEET
(amounts in thousands)
<TABLE>
<CAPTION>
ASSETS March 29, 1997 September 30, 1996
-------------- ------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $212,088 $201,614
Short-term investments 289,528 232,602
Accounts receivable, net 138,439 117,273
Other current assets 16,347 10,561
-------- --------
Total current assets 656,402 562,050
Marketable investments -- 21,896
Property and equipment, net 40,745 36,517
Other assets 45,395 38,754
-------- --------
Total assets $742,542 $659,217
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 45,592 $ 39,416
Accrued compensation 35,540 32,186
Deferred revenue 70,431 56,420
Income taxes 31,962 17,970
-------- --------
Total current liabilities 183,525 145,992
Other liabilities 744 793
Stockholders' equity:
Preferred stock, $.01 par value;
5,000 shares authorized; none issued -- --
Common stock, $.01 par value;
350,000 shares authorized;
128,148 and 127,452 shares issued 1,281 1,275
Additional paid-in capital 230,952 207,039
Retained earnings 362,955 306,638
Treasury stock, at cost, 585 and 23 shares (32,081) (1,164)
Other equity (4,834) (1,356)
-------- --------
Total stockholders' equity 558,273 512,432
-------- --------
Total liabilities and stockholders' equity $742,542 $659,217
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
License $147,054 $103,420 $285,496 $194,850
Service 50,958 37,073 96,017 71,040
-------- -------- -------- --------
Total revenue 198,012 140,493 381,513 265,890
-------- -------- -------- --------
Cost of revenue:
License 2,737 987 4,728 1,766
Service 15,824 12,402 31,381 24,077
-------- -------- -------- --------
Total cost of revenue 18,561 13,389 36,109 25,843
-------- -------- -------- --------
Gross profit 179,451 127,104 345,404 240,047
-------- -------- -------- --------
Operating expenses:
Sales and marketing 77,263 56,303 148,924 106,754
Research and development 13,292 8,901 25,426 16,726
General and administrative 9,719 6,814 18,424 12,748
-------- -------- -------- --------
Total operating expenses 100,274 72,018 192,774 136,228
-------- -------- -------- --------
Operating income 79,177 55,086 152,630 103,819
Other income, net 2,450 2,651 5,075 5,674
-------- -------- -------- --------
Income before income taxes 81,627 57,737 157,705 109,493
Provision for income taxes 28,569 20,900 55,196 39,636
-------- -------- -------- --------
Net income $ 53,058 $ 36,837 $102,509 $ 69,857
======== ======== ======== ========
Net income per share $ 0.39 $ 0.28 $ 0.76 $ 0.53
====== ====== ====== ======
Weighted average number of
common and dilutive
common equivalent shares
outstanding 135,328 133,329 135,212 132,982
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------
March 29, 1997 March 30, 1996
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 102,509 $ 69,857
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,338 6,297
Deferred income taxes 754 5,698
Changes in assets and liabilities:
Increase in accounts receivable (26,498) (13,357)
Increase in other current assets (3,466) (6,900)
(Increase) decrease in other assets (958) 1,626
Increase in accounts payable and accrued expenses 7,672 8,128
Increase in accrued compensation 4,536 2,396
Increase in deferred revenue 16,157 6,989
Increase in income taxes 28,158 9,177
--------- ---------
Net cash provided by operating activities 139,202 89,911
--------- ---------
Cash flows from investing activities:
Additions to property and equipment, net (13,427) (16,252)
Additions to capitalized and purchased software costs (814) (400)
Proceeds from sale of investments 113,702 30,193
Purchases of investments (156,811) (107,795)
--------- ---------
Net cash used by investing activities (57,350) (94,254)
--------- ---------
Cash flows from financing activities:
Repayment of long-term obligations (91) (63)
Proceeds from issuance of common stock 28,185 19,311
Purchases of treasury stock (95,020) (25,538)
--------- ---------
Net cash provided (used) by financing activities (66,926) (6,290)
--------- ---------
Effects of exchange rate changes on cash (4,452) (1,582)
--------- ---------
Net increase (decrease) in cash and cash equivalents 10,474 (12,215)
Cash and cash equivalents at beginning of period 201,614 145,638
--------- ---------
Cash and cash equivalents at end of period $ 212,088 $ 133,423
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, and have been
prepared by the Company in accordance with generally accepted accounting
principles. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
those of a normal recurring nature, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows at the dates
and for the periods indicated. While the Company believes that the disclosures
presented are adequate to make the information not misleading, these financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Company's Annual Report on Form 10-
K for the fiscal year ended September 30, 1996.
The results of operations for the three-month and six-month periods ended
March 29, 1997 are not necessarily indicative of the results expected for the
full fiscal year.
2. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
No. 128 establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS No. 128, the Company will be required to present both basic
net income per share and diluted net income per share. Basic net income per
share for the three-month and six-month periods ended March 29, 1997 would have
been $.42 and $.80 per share, respectively as compared with $.29 and $.55 per
share for the corresponding periods in fiscal 1996. The impact of SFAS No. 128
on the calculation of diluted net income per share for these quarters is not
expected to be materially different from primary earnings per share. The Company
plans to adopt SFAS No. 128 in its first quarter for fiscal 1998 and at that
time all historical net income per share data presented will be restated to
conform to the provisions of SFAS No. 128.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Parametric Technology Corporation is the CAD/CAM/CAE (computer-aided design,
manufacturing and engineering) industry's leading supplier of software tools
used to automate the mechanical development of a product from its conceptual
design through its release into manufacturing.
Information provided by the Company, including information contained in this
Quarterly Report on Form 10-Q, or by its spokespersons from time to time may
contain forward-looking statements concerning projected financial performance,
industry segment growth, product development and commercialization or other
aspects of future operations. In particular, the statements in this Report
concerning anticipated revenue, geographical growth rates and projected expenses
made pursuant to the safe harbor established by recent securities legislation
are based on the assumptions and expectations of the Company's management at the
time such statements are made. The Company cautions investors that its
performance (and, therefore, any forward-looking statement) is subject to risks
and uncertainties. Important information about the basis for those assumptions
including factors that may cause actual results to vary from those forecast are
discussed below and are also contained in "Important Factors Regarding Future
Results" included in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section in the 1996 Annual Report to
Stockholders, incorporated herein by reference.
RESULTS OF OPERATIONS
Revenue, including license and service revenues, for the three-month and six-
month periods ended March 29, 1997 was $198,012,000 and $381,513,000,
respectively, compared with $140,493,000 and $265,890,000 for the three-month
and six-month periods ended March 30, 1996. These totals represent increases of
41% for the three-month period and 43% for the six-month period over the
corresponding periods in fiscal 1996. Net income, as a percentage of revenue,
was 27% for the three-month and six-month periods ended March 29, 1997 compared
to 26% in the corresponding periods in fiscal 1996. This represents an increase
in net income of 44% and 47% from the three-month and six-month periods ended
March 30, 1996.
The Company derives its revenue from the sale and support of software used in
the mechanical segment of the CAD/CAM/CAE industry. Revenue growth in the three-
month and six-month periods ended March 29, 1997 reflects the continued
worldwide acceptance of the Company's products and services and the Company's
ongoing investment in expanding its worldwide direct sales force. License
revenue was $147,054,000 and $285,496,000 for the three-month and six-month
periods ended March 29, 1997, a 42% and 47% increase from $103,420,000 and
$194,850,000 for the corresponding periods in fiscal 1996. This growth results
from an increase in the number of seats of software licensed and from a higher
price realized per seat. A seat of software generally consists of various
software products configured to serve the needs of a single end user. The
Company licensed 7,475 and 14,459 seats of software respectively in the three-
month and six-month periods ended March 29, 1997, an increase of 37% and 38%
from 5,446 and 10,454 seats of software in the comparable periods in fiscal
1996. The increase in the number of seats licensed was achieved as a result of
continued market penetration of the Company's products. The average price per
seat during the three months and six months ended March 29, 1997 was $19,700,
compared with an average price of $19,000 and $18,600 for the same periods in
fiscal 1996. The average price per seat has increased as a result of customers
purchasing configurations of seats containing more modules and an increase in
the percentage of the Company's revenue derived from international markets,
where the prices have typically been higher than in North America.
Service revenue is derived from the sale of software maintenance contracts
and the performance of training and consulting services. Service revenue was
$50,958,000 and $96,017,000 for the three-month and six-month periods ended
March 29, 1997, an increase of 37% and 35% from $37,073,000 and $71,040,000 for
the comparable periods in fiscal 1996. The increase in service revenue is a
result of the growth in the Company's installed customer base and, to a lesser
extent, increased training and consulting services performed for these
customers.
The Company derived 56% and 57% of revenue from sales to international
customers in the three-month and six-month periods ended March 29, 1997,
compared with 55% and 54% for the same periods in fiscal 1996. The increase in
international revenue is primarily attributable to continued international
acceptance of the Company's products and services and the growth
7
<PAGE>
in the sales force in Europe and Asia/Pacific, although revenue derived from
Japan was weaker than anticipated due in part to the strengthening of the dollar
in relationship to the yen. The Company has taken measures to strengthen results
in the Asia/Pacific region and anticipates that total revenue will increase
throughout fiscal 1997 from continued penetration in the mechanical CAD/CAM/CAE
industry, and that international revenue will continue to account for a
significant portion of that total growth; however, growth in international
revenue will continue to be affected by foreign exchange rates and the stronger
dollar's impact on the Company's ability to forecast quarter to quarter results.
Although the Company expects revenues to grow throughout fiscal 1997, there can
be no assurance that quarterly revenue growth rates and/or geographical growth
rates will be comparable with those achieved in the three-month and six-month
periods ended March 29, 1997. The rate of continued revenue growth throughout
the remainder of fiscal 1997 depends upon the strength of the U.S. dollar as
well as the Company's ability to implement recent measures taken to strengthen
results in the Asia/Pacific region, to adequately manage the Company's exposure
to foreign currency fluctuations, to continue to penetrate the mechanical
segment of the CAD/CAM/CAE industry, to attract and retain skilled personnel,
and to deliver timely product enhancements.
Cost of license revenue consists of the amortization of capitalized computer
software costs and costs associated with reproducing software, printing user
manuals, royalties, packaging and shipping. The increase in cost of license
revenue is a result of the increase in the number of seats licensed and the
royalty costs associated with those licenses during the three-month and six-
month periods ended March 29, 1997 as compared to the corresponding periods in
fiscal 1996. Cost of service revenue includes the costs associated with
training and consulting personnel, such as salaries and related costs and
travel, and costs related to software maintenance, including costs incurred for
customer support personnel and the release of maintenance updates. The increase
in cost of service revenue resulted primarily from growth in the staffing
necessary to generate and support increased worldwide service revenue and
provide ongoing quality customer support to the Company's increasing installed
base. Combined, these expenses increased to $18,561,000 and $36,109,000 for the
three-month and six-month periods ended March 29, 1997 from $13,389,000 and
$25,843,000 for the corresponding periods in fiscal 1996. Total cost of revenue
as a percentage of revenue remained stable between 9% and 10% for both the
three-month and six-month periods ended March 29, 1997 and the corresponding
periods in fiscal 1996.
Sales and marketing expenses primarily include salaries, sales commissions,
travel and facility costs. Sales and marketing expenses increased to
$77,263,000 and $148,924,000 for the three-month and six-month periods ended
March 29, 1997 from $56,303,000 and $106,754,000 for the corresponding period in
fiscal 1996. These costs decreased as a percentage of revenue to 39% for both
the three-month and six-month periods ended March 29, 1997, compared with 40%
for the comparable periods in fiscal 1996. The absolute increase in these
expenses was due primarily to worldwide expansion of the sales force and sales
commissions associated with higher revenue. Total sales and marketing headcount
increased to 1,877 at March 29, 1997, an increase of 36% from 1,379 at March 30,
1996. The Company expects to continue the growth of its worldwide sales and
marketing organization during fiscal 1997, reflecting the Company's commitment
to focus its resources on increasing its installed base and to continue to
expand its global market penetration. The Company's ability to meet this
expectation depends upon its ability to attract and retain highly skilled
technical, managerial and sales personnel.
The Company continued to make significant investments in research and
development, consisting principally of salaries and benefits, expenses
associated with product translations, costs of computer equipment used in
software development, and facility expenses. Research and development expenses
increased to $13,292,000 and $25,426,000 for the three-month and six-month
periods ended March 29, 1997 from $8,901,000 and $16,726,000 for the
corresponding periods in fiscal 1996. Total research and development expenses
increased to 7% of revenue for the three-month and six-month periods ended March
29, 1997, compared with 6% for the same periods in fiscal 1996. The Company
believes that research and development expenditures are essential to maintaining
its competitive position in the mechanical CAD/CAM/CAE industry and expects the
expenditure levels to increase in absolute dollars throughout fiscal 1997.
General and administrative expenses include the costs of corporate, finance,
information technology, human resources and administrative functions of the
Company. These expenses increased to $9,719,000 and $18,424,000 for the three-
month and six-month periods ended March 29, 1997 from $6,814,000 and $12,748,000
for the corresponding periods in fiscal 1996. General and administrative
expenses as a percentage of revenue remained constant at 5% for the three-month
and six-month periods ended March 29, 1997 and March 30, 1996. The absolute
increase in these expenses was primarily due to the hiring of additional
employees necessary to support the Company's worldwide growth.
8
<PAGE>
Other income, net, primarily includes interest income and expense and foreign
currency gains and losses. Other income decreased to $2,450,000 and $5,075,000
for the three-month and six-month periods ended March 29, 1997 compared with
$2,651,000 and $5,674,000 for the corresponding periods in fiscal 1996. As the
international portion of the Company's business continues to increase, a growing
percentage of the Company's revenue and expenses is transacted in foreign
currencies. In order to reduce its exposure to fluctuations in foreign exchange
rates, the Company engages in hedging transactions involving the use of forward
foreign exchange contracts in the primary European and Asian currencies.
The Company's effective tax rate for the three-month and six-month periods
ended March 29, 1997 was 35%, compared with 36.2% for the same periods in fiscal
1996. The difference between the effective and statutory federal tax rate was
due primarily to the benefits of tax-exempt interest income and the tax benefits
from the use of the foreign sales corporation, offset by the impact of state
income taxes.
The number of worldwide employees increased 32% to 3,133 at March 29, 1997
compared with 2,365 at March 30, 1996. Employment increased significantly to
support higher revenues and international expansion, with the largest portion of
this growth occurring in the sales department.
LIQUIDITY AND CAPITAL RESOURCES
As of March 29, 1997, the Company had $212,088,000 of cash and cash
equivalents and $289,528,000 of investments. Net cash generated by operating
activities and proceeds from issuance of the Company's stock under stock plans
provided sufficient resources to fund the Company's headcount growth, capital
asset needs and stock repurchases for the six months ended March 29, 1997. Net
cash provided by operating activities, consisting primarily of net income from
operations before depreciation and amortization and increases in working
capital, was $139,202,000 for the six-month period ended March 29, 1997 compared
with $89,911,000 for the corresponding period in fiscal 1996. Net cash used by
investing activities totaled $57,350,000 for the six-month period ended March
29, 1997, compared with $94,254,000 for the corresponding period in fiscal 1996.
The decrease is principally due to the proceeds from the sale of investments and
the timing associated with those investments. Investment activities consisted
primarily of purchases and sales of investments, and additions to property and
equipment. The Company acquired $13,427,000 of capital equipment consisting
primarily of computer equipment, software, and office equipment to meet the
needs resulting from the growth in employee headcount, continued expansion of
its worldwide sales and support operations and increased investment in
information technologies and in computer workstations to keep field and
development employees current with changes in the hardware and software
marketplace. For the remainder of fiscal 1997, the Company plans to continue
spending at current levels; however, the level of spending will be dependent on
various factors, including the growth of the business and general economic
conditions. Financing activities, consisting primarily of proceeds from issuance
of common stock offset by the purchases of treasury stock, used $66,926,000 for
the six months ended March 29, 1997 and $6,290,000 for the six months ended
March 30, 1996. The 1997 increase was due principally to higher stock
repurchases under the Company's stock repurchase program.
On May 12, 1994, the Company announced that its Board of Directors had
authorized a plan that allows the Company to repurchase up to 6,000,000 shares
of its common stock. The Company intends to repurchase these shares to
partially offset the dilution caused by the exercise of stock options under the
Company's option plans and the purchase of shares under the employee stock
purchase plan. During the three-month and six-month periods ended March 29,
1997, the Company repurchased 977,000 and 1,757,000 shares at a cost of
$54,898,500 and $95,020,000, respectively, of which 585,000 remained in treasury
on March 29, 1997. Since the inception of the plan, the Company has repurchased
3,850,000 shares. Ongoing repurchases will be funded through the use of
available cash, cash generated from operations and cash received from stock
option exercises and employee stock purchase plan purchases.
The Company believes that existing cash and short-term investment balances,
together with cash generated from operations and issuance of the Company's
common stock under stock plans, will be sufficient to meet the Company's
currently projected working capital, financing and capital expenditure
requirements through at least fiscal 1997, subject to the risks and
uncertainties referred to herein.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 4: Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company held on February 13,
1997, the stockholders of the Company (1) elected Donald K. Grierson, Oscar B.
Marx, III, and Noel G. Posternak as Class I directors of the Company to hold
office until the 2000 Annual Meeting of Stockholders (subject to the election
and qualification of their successors and to their earlier death, resignation or
removal) and no other nominations were made; (2) approved an amendment to the
Company's Articles of Organization increasing the number of authorized shares of
the Company's common stock from 215,000,000 to 350,000,000; and (3) approved the
Company's 1997 Incentive Stock Option Plan. The votes were as follows:
<TABLE>
<CAPTION>
Votes withheld Broker
Votes for or opposed Abstentions non-votes
------------- ------------------- ---------------- ------------
<S> <C> <C> <C> <C>
(1) Election of Directors:
Donald K. Grierson 116,245,374 261,337 -- --
Oscar B. Marx, III 116,245,522 261,189 -- --
Noel G. Posternak 116,243,029 263,682 -- --
(2) Approval of Amendment
to Articles of Organization: 110,016,910 5,519,638 231,276 738,887
(3) Approval of 1997
Incentive Stock Option Plan: 106,776,634 8,950,735 289,669 489,673
ITEM 6: Exhibits
10.1 1997 Incentive Stock Option Plan
10.2 Amended and Restated Severance Agreement with Steven C. Walske, dated February 13, 1997
10.3 Amended and Restated Severance Agreement with C. Richard Harrison, dated February 13, 1997
10.4 Amended and Restated Severance Agreement with Edwin J. Gillis, dated February 13, 1997
13.1 Annual Report to Stockholders for the fiscal year ended September 30, 1996 (which is not
deemed to be "filed" except to the extent that portions thereof are expressly incorporated
by reference in this Quarterly Report on Form 10-Q).
</TABLE>
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARAMETRIC TECHNOLOGY CORPORATION
Date: May 8, 1997 by: /S/ Edwin J. Gillis
------------------------------------
Edwin J. Gillis
Executive Vice President of Finance
and Administration, Chief Financial
Officer and Treasurer
11
<PAGE>
EXHIBIT INDEX
10.1* 1997 Incentive Stock Option Plan, as approved by the Stockholders of the
Company on February 13, 1997; filed herewith.
10.2* Amended and Restated Severance Agreement with Steven C. Walske, dated
February 13, 1997; filed herewith.
10.3* Amended and Restated Severance Agreement with C. Richard Harrison, dated
February 13, 1997; filed herewith.
10.4* Amended and Restated Severance Agreement with Edwin J. Gillis, dated
February 13, 1997; filed herewith.
13.1 Annual Report to Stockholders for the fiscal year ended September 30,
1996 (which is not deemed to be "filed" except to the extent that
portions thereof are expressly incorporated by reference in this
Quarterly Report on Form 10-Q); filed as Exhibit 13.1 to the Annual
Report on Form 10-K for the fiscal year ended September 30, 1996 and
incorporated herein by reference.
___________
*Identifies a management contract or compensatory plan or arrangement in which
an executive officer or director of the Company participates.
<PAGE>
EXHIBIT 10.1
------------
PARAMETRIC TECHNOLOGY CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of the Parametric Technology Corporation 1997 Incentive
Stock Option Plan (the "Plan") is to attract and retain key employees and
consultants of the Company and its Affiliates, to provide an incentive for them
to achieve long-range performance goals, and to enable them to participate in
the long-term growth of the Company.
2. DEFINITIONS
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total voting power or has a
significant financial interest as determined by the Committee.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor law.
"Committee" means one or more committees each comprised of not less
than two members of the Board appointed by the Board to administer the Plan or a
specified portion thereof. If a Committee is authorized to grant Options to a
Reporting Person or a "covered employee" within the meaning of Section 162(m) of
the Code, each member shall be a "Non- Employee Director" or the equivalent
within the meaning of Rule 16b-3 under the Exchange Act or an "outside director"
or the equivalent within the meaning of Section 162(m) of the Code,
respectively.
"Common Stock" or "Stock" means the Common Stock, $.01 par value, of
the Company.
"Company" means Parametric Technology Corporation.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, "Designated
Beneficiary" means the Participant's estate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor law.
<PAGE>
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" - See Section 6(a).
"Nonstatutory Stock Option" - See Section 6(a).
"Option" - Unless the context otherwise requires, an Incentive Stock
Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Committee to receive an
Option under the Plan.
"Reporting Person" means a person subject to Section 16 of the
Exchange Act.
3. ADMINISTRATION
The Plan shall be administered by the Committee, provided that the
Board may in any instance perform any of the functions of the Committee. The
Committee shall have authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time consider advisable, and to interpret the provisions of the
Plan. The Committee's decisions shall be final and binding. To the extent
permitted by applicable law, the Committee may delegate to one or more executive
officers of the Company the power to grant Options to Participants who are not
Reporting Persons or covered employees and all determinations under the Plan
with respect thereto, provided that the Committee shall fix the maximum amount
of such Options for all such Participants and a maximum for any one Participant.
4. ELIGIBILITY
All employees and, in the case of Nonstatutory Stock Options,
consultants of the Company or any Affiliate, capable of contributing
significantly to the successful performance of the Company, other than a person
who has irrevocably elected not to be eligible, are eligible to be Participants
in the Plan. Incentive Stock Options may be granted only to persons eligible to
receive such Options under the Code.
5. STOCK AVAILABLE FOR OPTIONS
(a) AMOUNT. Subject to adjustment under subsection (b), Options may be
granted under the Plan for up to 6,000,000 shares of Common Stock. If any Option
expires or is terminated unexercised or is forfeited or settled in a manner that
results in fewer shares outstanding than were granted, the shares subject to
such Option, to the extent of such expiration, termination, forfeiture or
decrease, shall again be available for grant under the Plan. Common Stock issued
through the assumption or substitution of outstanding grants from an acquired
2
<PAGE>
company shall not reduce the shares available for grant under the Plan. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
(b) ADJUSTMENT. In the event of any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, or other transaction affecting the
Common Stock, then (subject in the case of Incentive Stock Options to any
limitation required under the Code) (i) the number and kind of shares in respect
of which Options may be granted under the Plan, (ii) the number and kind of
shares subject to outstanding Options, and (iii) the exercise price with respect
to any of the foregoing shall be proportionately adjusted to the extent required
equitably to preserve the benefits available hereunder, provided that the number
of shares subject to any Option shall always be a whole number, and if
considered appropriate, the Committee may make provision for a cash payment with
respect to an outstanding Option.
(c) LIMIT ON INDIVIDUAL GRANTS. The maximum number of shares of Common
Stock subject to Options that may be granted to any Participant in the aggregate
in any calendar year shall not exceed 1,000,000 shares, subject to adjustment
under subsection (b) above.
6. STOCK OPTIONS
(a) GRANT OF OPTIONS. Subject to the provisions of the Plan, the
Committee may grant Options to purchase shares of Common Stock (i) complying
with the requirements of Section 422 of the Code or any successor provision and
any regulations thereunder ("Incentive Stock Options") and (ii) not intended to
comply with such requirements ("Nonstatutory Stock Options"). The Committee
shall determine the number of shares subject to each Option and the exercise
price therefor, which shall not be less than 100% of the Fair Market Value of
the Common Stock on the date of grant. No Incentive Stock Option may be granted
hereunder more than ten years after the effective date of the Plan.
(b) TERMS AND CONDITIONS. Each Option shall have a term no longer than
ten years from the date of grant and shall be exercisable at the time(s) and
subject to the terms and conditions set forth in the respective form of option
certificate included in Appendix I hereto or as the Committee may otherwise
specify in the applicable grant or thereafter. The Committee may impose such
conditions with respect to the exercise of Options, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable.
(c) PAYMENT. No shares shall be delivered pursuant to any exercise of
an Option until payment in full of the exercise price therefor is received by
the Company. Such payment may be made in whole or in part in cash or, to the
extent permitted by the Committee at or after the grant of the Option, by
delivery of a note or shares of Common Stock owned by the Participant or by
retaining shares otherwise issuable pursuant to the Option, in each case valued
at their Fair Market Value on the date of delivery or retention, or such other
lawful consideration, including a payment commitment of a financial or brokerage
institution, as the Committee may determine.
3
<PAGE>
7. TERMINATION OF EMPLOYMENT OR ENGAGEMENT
If the Optionholder's status as an employee or consultant of (a) the
Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary
corporation of such corporation) issuing or assuming a stock option in a
transaction to which section 424(a) of the Code applies, is terminated for any
reason (voluntary or involuntary) and the period of exercisability for a
particular Option following such termination has not been specified by the
Board, each such Option then held by that Participant shall expire to the extent
not previously exercised ten (10) calendar days after such Participant's
employment or engagement is terminated, except that -
------ ----
(a) If the Participant is on military, sick leave or other bona
----
fide leave of absence (such as temporary employment by the federal government),
- ----
his or her employment or engagement with the Company will be treated as
continuing intact if the period of such leave does not exceed ninety (90) days,
or, if longer, so long as the Participant's right to reemployment or the
survival of his or her service arrangement with the Company is guaranteed either
by statute or by contract; otherwise, the Participant's employment or engagement
will be deemed to have terminated on the 91st day of such leave.
(b) If the Participant's employment is terminated by reason of
his or her retirement from the Company at normal retirement age, each Option
then held by the Participant, to the extent exercisable at retirement, may be
exercised by the Participant at any time within three (3) months after such
retirement unless terminated earlier by its terms.
(c) If the Participant's employment or engagement is terminated
by reason of his or her death, each Option then held by the Participant, to the
extent exercisable at the date of death, may be exercised at any time within one
year after that date (unless terminated earlier by its terms) by the person(s)
to whom the Participant's option rights pass by will or by the applicable laws
of descent and distribution.
(d) If the Participant's employment or engagement is terminated
by reason of his or her becoming permanently and totally disabled, each Option
then held by the Participant, to the extent exercisable upon the occurrence of
permanent and total disability, may be exercised by the Participant at any time
within one (1) year after such occurrence unless terminated earlier by its
terms. For purposes hereof, an individual shall be deemed to be "permanently and
totally disabled" if he or she is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months. Any
determination of permanent and total disability shall be made in good faith by
the Company on the basis of a report signed by a qualified physician.
8. GENERAL PROVISIONS APPLICABLE TO OPTIONS
(a) LIMITATIONS ON TRANSFERABILITY. Options shall not be transferable
by the recipient other than by will or the laws of descent and distribution
and are exercisable during such person's lifetime only by such person or by
such person's guardian or legal representative; provided that the Committee
may in its discretion waive such restriction in any case.
4
<PAGE>
(b) DOCUMENTATION. Each Option under the Plan shall be evidenced by a
written stock option certificate delivered to the Participant specifying the
terms and conditions thereof and containing such other terms and conditions
not inconsistent with the provisions of the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable tax and regulatory laws and accounting principles.
(c) COMMITTEE DISCRETION. Options may be granted alone, in addition to
or in relation to any other Option. The terms of each Option need not be
identical, and the Committee need not treat Participants uniformly. Except as
otherwise provided by the Plan or a particular Option, any determination with
respect to an Option may be made by the Committee at the time of grant or at any
time thereafter.
(d) DIVIDENDS AND CASH OPTIONS. In the discretion of the Committee,
any Option under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable (in cash or in the form of Options under the Plan)
currently or deferred with or without interest, and (ii) cash payments in lieu
of or in addition to an Option.
(e) CHANGE IN CONTROL. In order to preserve a Participant's rights
under an Option in the event of a change in control (as defined by the
Committee) of the Company, the Committee in its discretion may, at the time an
Option is granted or at any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise of the Option, (ii) provide for payment to the Participant of cash or
other property with a Fair Market Value equal to the value that would have been
received upon the exercise of the Option had the Option been exercised upon the
change in control, (iii) adjust the terms of the Option in a manner determined
by the Committee to reflect the change in control, (iv) cause the Option to be
assumed, or new rights substituted therefor, by another entity, or (v) make such
other provision as the Committee may consider equitable to Participants and in
the best interests of the Company.
(f) LOANS. The Committee may authorize the making of loans or cash
payments to Participants in connection with the grant or exercise of any Option
under the Plan, which loans may be secured by any security, including Common
Stock, underlying such Option (provided that the loan shall not exceed the Fair
Market Value of the security subject to such Option), and which may be forgiven
upon such terms and conditions as the Committee may establish at the time of
such loan or at any time thereafter.
(g) WITHHOLDING TAXES. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Options under the Plan no later than the
date of the event creating the tax liability. The Company and its Affiliates
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Participant. In the Committee's
discretion, the Participant may pay any taxes due with respect to an Option in
whole or in part in shares of Common Stock, including shares retained from the
Option creating the tax obligation, valued at their Fair Market Value on the
date of retention or delivery.
5
<PAGE>
(h) FOREIGN NATIONALS. Options may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee
considers necessary or advisable to achieve the purposes of the Plan or to
comply with applicable laws.
(i) AMENDMENT OF OPTION. The Committee may amend, modify or terminate
any outstanding Option in any respect, including converting an Incentive Stock
Option to a Nonstatutory Stock Option, provided that the Participant's consent
to such action shall be required unless the Committee determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant. The Committee shall not, without further
approval of the stockholders of the Company, authorize the amendment of any
outstanding option to reduce the option price. Furthermore, no option shall be
canceled and replaced with options having a lower option price or base price
without approval of the stockholders of the Company.
9. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to
be granted an Option. Each employee of the Company or any of its Affiliates is
an employee-at-will (that is to say that either the Participant or the Company
or any Affiliate may terminate the employment relationship at any time for any
reason or no reason at all) unless, and only to the extent, provided in a
written employment agreement for a specified term executed by the chief
executive officer of the Company or his duly authorized designee or the
authorized signatory of any Affiliate. Neither the adoption, maintenance, nor
operation of the Plan nor any Option hereunder shall confer upon any employee of
the Company or of any Affiliate any right with respect to the continuance of
his/her employment by the Company or any such Affiliate nor shall they interfere
with the right of the Company (or Affiliate) to terminate any employee at any
time or otherwise change the terms of employment, including, without limitation,
the right to promote, demote or otherwise re-assign any employee from one
position to another within the Company or any Affiliate.
(b) EFFECT OF GRANT. Participant shall not earn any Options granted
hereunder until such time as all the conditions put forth herein which are
required to be met in order to exercise the Option have been fully satisfied.
(c) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Option, no Participant or Designated Beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she becomes the holder thereof.
(d) EFFECTIVE DATE. Subject to the approval of the stockholders of the
Company, the Plan shall be effective on the date of its approval by the Board.
(e) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to any stockholder approval
that the Board determines to be necessary or advisable.
6
<PAGE>
(f) GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Massachusetts.
(g) COMPLETE AGREEMENT The Plan constitutes the complete understanding
of the parties regarding the subject matter hereof and supersedes all prior
contemporaneous agreements of the parties, whether written or oral. This Plan
may be amended, altered, or modified only by a writing, specifying such
amendment, alteration or modification, signed by both parties.
_______________________________________
Adopted at the November 14, 1996 Board of Directors Meeting.
Approved at the 1997 Annual Meeting of Stockholders.
7
<PAGE>
APPENDIX I
No. __________ _________ Shares
PARAMETRIC TECHNOLOGY CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
Incentive Stock Option Certificate
Parametric Technology Corporation (the "Company"), a Massachusetts
corporation, hereby grants to the person named below an option to purchase
shares of Common Stock, $0.01 par value, of the Company (the "Option") under
and subject to the Company's 1997 Incentive Stock Option Plan (the "Plan")
exercisable on the following terms and conditions set forth below and those
attached hereto and in the Plan:
Name of Optionholder: ____________________________
Address: ____________________________
____________________________
Social Security No. ____________________________
Number of Shares: __________________
Option Price: __________________
Date of Grant: __________________
Exercisability Schedule: After , 19 , as to ______ shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares.
Expiration Date: __________________
This Option is intended to be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
By acceptance of this Option, the Optionholder agrees to the terms and
conditions set forth above and those attached hereto and in the Plan.
OPTIONHOLDER PARAMETRIC TECHNOLOGY CORPORATION
By:___________________________ By: ____________________________
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN
INCENTIVE STOCK OPTION TERMS AND CONDITIONS
1. Plan Incorporated by Reference. This Option is issued pursuant to
------------------------------
the terms of the Plan and may be amended as provided in the Plan. Capitalized
terms used and not otherwise defined in this certificate have the meanings given
to them in the Plan. This certificate does not set forth all of the terms and
conditions of the Plan, which are incorporated herein by reference. The
Committee administers the Plan and its determinations regarding the operation of
the Plan are final and binding. Copies of the Plan may be obtained upon written
request without charge from the Corporate Counsel of the Company.
2. Option Price. The price to be paid for each share of Common Stock
------------
issued upon exercise of the whole or any part of this Option is the Option Price
set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any time
-----------------------
and from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the face of this certificate, but only for
the purchase of whole shares. This Option may not be exercised as to any shares
after the Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder shall
------------------
deliver written notice of exercise to the Company specifying the number of
shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form, including shares of Common Stock of the Company valued at their
Fair Market Value on the date of delivery or a payment commitment of a financial
or brokerage institution, as the Committee may approve. Promptly following such
notice, the Company will deliver to the Optionholder a certificate representing
the number of shares with respect to which the Option is being exercised.
5. No Right To Employment. No person shall have any claim or right to be
----------------------
granted an Option. Each employee of the Company or any of its Affiliates is an
employee-at-will (that is to say that either the Participant or the Company or
any Affiliate may terminate the employment relationship at any time for any
reason or no reason at all) unless, and only to the extent, provided in a
written employment agreement for a specified term executed by the chief
executive officer of the Company or his duly authorized designee or the
authorized signatory of any Affiliate. Neither the adoption, maintenance, nor
operation of the Plan nor any Option hereunder shall confer upon any employee of
the Company or of any Affiliate any right with respect to the continuance of
his/her employment by the Company or any such Affiliate nor shall they interfere
with the right of the Company (or Affiliate) to terminate any employee at any
time or otherwise change the terms of employment, including, without limitation,
the right to promote, demote or otherwise re-assign any employee from one
position to another within the Company or any Affiliate.
6. Effect of Grant. Participant shall not earn any Options granted
----------------
hereunder until such time as all the conditions put forth herein and in the Plan
which are required to be met in order to exercise the Option have been fully
satisfied.
7. Recapitalization, Mergers, Etc. As provided in the Plan, in the event
------------------------------
of corporate transactions affecting the Company's outstanding Common Stock, the
Committee shall equitably adjust the number and kind of shares subject to this
Option and the exercise price hereunder or make provision for a cash payment.
If such transaction involves a consolidation or merger of the Company with
another entity, the sale or exchange of all or substantially all of the assets
of the Company or a reorganization or liquidation of the Company, then in lieu
of the foregoing, the Committee may upon written notice to the Optionholder
provide that this Option shall terminate on a date not less than 20 days after
the date of such notice unless theretofore exercised. In connection with such
notice, the Committee may in its discretion accelerate or waive any deferred
exercise period.
8. Option Not Transferable. This Option is not transferable by the
-----------------------
Optionholder otherwise than by will or the laws of descent and distribution, and
is exercisable, during the Optionholder's lifetime, only by the Optionholder.
The naming of a Designated Beneficiary does not constitute a transfer.
9. Termination of Employment or Engagement. If the Optionholder's status
----------------------------------------
as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a
corporation (or parent or subsidiary corporation of such corporation) issuing or
assuming a stock option in a transaction to which section 424(a) of the Code
applies, is terminated for any reason (voluntary or
<PAGE>
involuntary) and the period of exercisability for a particular Option following
such termination has not been specified by the Board, each such Option then held
by that Participant shall expire to the extent not previously exercised ten (10)
calendar days after such Participant's employment or engagement is terminated,
except that -
- ------ ----
(a) If the Participant is on military, sick leave or other bona fide leave of
---- ----
absence (such as temporary employment by the federal government), his or her
employment or engagement with the Company will be treated as continuing intact
if the period of such leave does not exceed ninety (90) days, or, if longer, so
long as the Participant's right to reemployment or the survival of his or her
service arrangement with the Company is guaranteed either by statute or by
contract; otherwise, the Participant's employment or engagement will be deemed
to have terminated on the 91st day of such leave.
(b) If the Participant's employment is terminated by reason of his or her
retirement from the Company at normal retirement age, each Option then held by
the Participant, to the extent exercisable at retirement, may be exercised by
the Participant at any time within three (3) months after such retirement unless
terminated earlier by its terms.
(c) If the Participant's employment or engagement is terminated by reason of his
or her death, each Option then held by the Participant, to the extent
exercisable at the date of death, may be exercised at any time within one year
after that date (unless terminated earlier by its terms) by the person(s) to
whom the Participant's option rights pass by will or by the applicable laws of
descent and distribution.
(d) If the Participant's employment or engagement is terminated by reason of his
or her becoming permanently and totally disabled, each Option then held by the
Participant, to the extent exercisable upon the occurrence of permanent and
total disability, may be exercised by the Participant at any time within one (1)
year after such occurrence unless terminated earlier by its terms. For purposes
hereof, an individual shall be deemed to be "permanently and totally disabled"
if he or she is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. Any determination of
permanent and total disability shall be made in good faith by the Company on the
basis of a report signed by a qualified physician.
10. Compliance with Securities Laws. It shall be a condition to the
-------------------------------
Optionholder's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) that the shares of Common Stock
reserved for issuance upon the exercise of this Option shall have been duly
listed, upon official notice of issuance, upon any national securities exchange
or automated quotation system on which the Company's Common Stock may then be
listed or quoted, (b) that either (i) a registration statement under the
Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in
the opinion of counsel for the Company, the proposed purchase shall be exempt
from registration under that Act and the Optionholder shall have made such
undertakings and agreements with the Company as the Company may reasonably
require, and (c) that such other steps, if any, as counsel for the Company shall
consider necessary to comply with any law applicable to the issue of such shares
by the Company shall have been taken by the Company or the Optionholder, or
both. The certificates representing the shares purchased under this Option may
contain such legends as counsel for the Company shall consider necessary to
comply with any applicable law.
11. Payment of Taxes. The Optionholder shall pay to the Company, or make
----------------
provision satisfactory to the Company for payment of, any taxes required by law
to be withheld with respect to the exercise of this Option. The Committee may,
in its discretion, require any other Federal or state taxes imposed on the sale
of the shares to be paid by the Optionholder. In the Committee's discretion,
such tax obligations may be paid in whole or in part in shares of Common Stock,
including shares retained from the exercise of this Option, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Optionholder.
12. Notice of Sale of Shares Required. The Optionholder agrees to notify
---------------------------------
the Company in writing within 30 days of the disposition of any shares purchased
upon exercise of this Option if such disposition occurs within two years of the
date of the grant of this Option or within one year after such purchase.
Adopted November 14, 1996
<PAGE>
No._________ _________ Shares
PARAMETRIC TECHNOLOGY CORPORATION
1997 INCENTIVE STOCK OPTION PLAN
Nonstatutory Stock Option Certificate
Parametric Technology Corporation (the "Company"), a Massachusetts
corporation, hereby grants to the person named below an option to purchase
shares of Common Stock, $0.01 par value, of the Company (the "Option") under and
subject to the Company's 1997 Incentive Stock Option Plan (the "Plan")
exercisable on the following terms and conditions set forth below and those
attached hereto and in the Plan:
Name of Optionholder: ____________________________
Address: ____________________________
____________________________
Social Security No. ____________________________
Number of Shares: __________________
Option Price: __________________
Date of Grant: __________________
Exercisability Schedule: After , 19 , as to ______ shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares,
after , 19 , as to ______ additional shares.
Expiration Date: __________________
This Option shall not be treated as an Incentive Stock Option under
section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
By acceptance of this Option, the Optionholder agrees to the terms and
conditions set forth above and those attached hereto and in the Plan.
OPTIONHOLDER PARAMETRIC TECHNOLOGY CORPORATION
By: ____________________________ By: ____________________________
<PAGE>
PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS
1. Plan Incorporated by Reference. This Option is issued pursuant to the
------------------------------
terms of the Plan and may be amended as provided in the Plan. Capitalized terms
used and not otherwise defined in this certificate have the meanings given to
them in the Plan. This certificate does not set forth all of the terms and
conditions of the Plan, which are incorporated herein by reference. The
Committee administers the Plan and its determinations regarding the operation of
the Plan are final and binding. Copies of the Plan may be obtained upon written
request without charge from the Corporate Counsel of the Company.
2. Option Price. The price to be paid for each share of Common Stock
------------
issued upon exercise of the whole or any part of this Option is the Option Price
set forth on the face of this certificate.
3. Exercisability Schedule. This Option may be exercised at any time and
-----------------------
from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the face of this certificate, but only for
the purchase of whole shares. This Option may not be exercised as to any shares
after the Expiration Date.
4. Method of Exercise. To exercise this Option, the Optionholder shall
------------------
deliver written notice of exercise to the Company specifying the number of
shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form, including shares of Common Stock of the Company valued at their
Fair Market Value on the date of delivery or a payment commitment of a financial
or brokerage institution, as the Committee may approve. Promptly following such
notice, the Company will deliver to the Optionholder a certificate representing
the number of shares with respect to which the Option is being exercised.
5. No Right To Employment. No person shall have any claim or right to be
----------------------
granted an Option. Each employee of the Company or any of its Affiliates is an
employee-at-will (that is to say that either the Participant or the Company or
any Affiliate may terminate the employment relationship at any time for any
reason or no reason at all) unless, and only to the extent, provided in a
written employment agreement for a specified term executed by the chief
executive officer of the Company or his duly authorized designee or the
authorized signatory of any Affiliate. Neither the adoption, maintenance, nor
operation of the Plan nor any Option hereunder shall confer upon any employee of
the Company or of any Affiliate any right with respect to the continuance of
his/her employment by the Company or any such Affiliate nor shall they interfere
with the right of the Company (or Affiliate) to terminate any employee at any
time or otherwise change the terms of employment, including, without limitation,
the right to promote, demote or otherwise re-assign any employee from one
position to another within the Company or any Affiliate.
6. Effect of Grant. Participant shall not earn any Options granted
----------------
hereunder until such time as all the conditions put forth herein and in the Plan
which are required to be met in order to exercise the Option have been fully
satisfied.
7. Recapitalization, Mergers, Etc. As provided in the Plan, in the event
------------------------------
of corporate transactions affecting the Company's outstanding Common Stock, the
number and kind of shares subject to this Option and the exercise price
hereunder shall be equitably adjusted. If such transaction involves a
consolidation or merger of the Company with another entity, the sale or exchange
of all or substantially all of the assets of the Company or a reorganization or
liquidation of the Company, then in lieu of the foregoing, the Committee may
upon written notice to the Optionholder provide that this Option shall terminate
on a date not less than 20 days after the date of such notice unless theretofore
exercised. In connection with such notice, the Committee may in its discretion
accelerate or waive any deferred exercise period.
8. Option Not Transferable. This Option is not transferable by the
-----------------------
Optionholder otherwise than by will or the laws of descent and distribution, and
is exercisable, during the Optionholder's lifetime, only by the Optionholder.
The naming of a Designated Beneficiary does not constitute a transfer.
9. Termination of Employment or Engagement. If the Optionholder's status
----------------------------------------
as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a
corporation (or parent or subsidiary corporation of such corporation) issuing or
<PAGE>
assuming a stock option in a transaction to which section 424(a) of the Code
applies, is terminated for any reason (voluntary or involuntary) and the period
of exercisability for a particular Option following such termination has not
been specified by the Board, each such Option then held by that Participant
shall expire to the extent not previously exercised ten (10) calendar days after
such Participant's employment or engagement is terminated, except that -
------ ----
(a) If the Participant is on military, sick leave or other bona fide
---- ----
leave of absence (such as temporary employment by the federal government), his
or her employment or engagement with the Company will be treated as continuing
intact if the period of such leave does not exceed ninety (90) days, or, if
longer, so long as the Participant's right to reemployment or the survival of
his or her service arrangement with the Company is guaranteed either by statute
or by contract; otherwise, the Participant's employment or engagement will be
deemed to have terminated on the 91st day of such leave.
(b) If the Participant's employment is terminated by reason of his or her
retirement from the Company at normal retirement age, each Option then held by
the Participant, to the extent exercisable at retirement, may be exercised by
the Participant at any time within three (3) months after such retirement unless
terminated earlier by its terms.
(c) If the Participant's employment or engagement is terminated by reason
of his or her death, each Option then held by the Participant, to the extent
exercisable at the date of death, may be exercised at any time within one year
after that date (unless terminated earlier by its terms) by the person(s) to
whom the Participant's option rights pass by will or by the applicable laws of
descent and distribution.
(d) If the Participant's employment or engagement is terminated by reason
of his or her becoming permanently and totally disabled, each Option then held
by the Participant, to the extent exercisable upon the occurrence of permanent
and total disability, may be exercised by the Participant at any time within one
(1) year after such occurrence unless terminated earlier by its terms. For
purposes hereof, an individual shall be deemed to be "permanently and totally
disabled" if he or she is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months. Any determination
of permanent and total disability shall be made in good faith by the Company on
the basis of a report signed by a qualified physician.
10. Compliance with Securities Laws. It shall be a condition to the
-------------------------------
Optionholder's right to purchase shares of Common Stock hereunder that the
Company may, in its discretion, require (a) that the shares of Common Stock
reserved for issuance upon the exercise of this Option shall have been duly
listed, upon official notice of issuance, upon any national securities exchange
or automated quotation system on which the Company's Common Stock may then be
listed or quoted, (b) that either (i) a registration statement under the
Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in
the opinion of counsel for the Company, the proposed purchase shall be exempt
from registration under that Act and the Optionholder shall have made such
undertakings and agreements with the Company as the Company may reasonably
require, and (c) that such other steps, if any, as counsel for the Company shall
consider necessary to comply with any law applicable to the issue of such shares
by the Company shall have been taken by the Company or the Optionholder, or
both. The certificates representing the shares purchased under this Option may
contain such legends as counsel for the Company shall consider necessary to
comply with any applicable law.
11. Payment of Taxes. The Optionholder shall pay to the Company, or make
----------------
provision satisfactory to the Company for payment of, any taxes required by law
to be withheld with respect to the exercise of this Option. The Committee may,
in its discretion, require any other Federal or state taxes imposed on the sale
of the shares to be paid by the Optionholder. In the Committee's discretion,
such tax obligations may be paid in whole or in part in shares of Common Stock,
including shares retained from the exercise of this Option, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Optionholder.
Adopted November 14, 1996
<PAGE>
EXHIBIT 10.2
------------
AMENDED AND RESTATED AGREEMENT
------------------------------
This Amended and Restated Agreement is entered into as of this 13th day of
February, 1997 between Parametric Technology Corporation, a Massachusetts
corporation (the "Company"), and Steven C. Walske (the "Executive"), and amends
and restates the Agreement dated June 20, 1990, as previously amended by the
First Amendment to the Agreement executed on June 15, 1993.
WHEREAS, the Executive is the Chairman of the Board and Chief Executive
Officer of the Company; and
WHEREAS, to provide incentive for the Executive to remain with the Company,
the Company desires to make the following arrangements with the Executive
concerning his termination of employment;
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
1. Termination Notice. The Company agrees that it may not terminate the
------------------
employment of the Executive unless (i) it does so for Cause (as defined below)
or (ii) the Company has delivered to the Executive a written notice of such
termination of employment (the "Termination Notice") at least six months in
advance of the effective date thereof. The duties of the Executive during the
period from the date of delivery of a Termination Notice until the termination
of his employment shall be as determined by the Board of Directors.
2. Salary.
------
(a) During the period from the date of delivery of a Termination
Notice (the "Notice Date") until the earlier of (i) the date six months after
the Notice Date, or (ii) the date the Executive commences employment with
another company or organization, the Company shall pay to the Executive a salary
(the "Severance Period Salary") that is equal, on an annualized basis, to two
times the highest annual salary (excluding any bonuses) in effect with respect
to the Executive during the six-month period immediately preceding the
Termination Notice.
(b) In the event that a Change in Status of the Executive occurs prior
to a Notice Date, the Company shall pay the Severance Period Salary to the
Executive during the period from the effective date of the Change in Status
until the earlier of (i) the date six months after such date or (ii) the date
the Executive commences employment with another company or organization; and the
Company shall have no obligation to make any payments to the Executive under
Section 2(a) above.
(c) In the event that the Executive remains employed with the Company
for a period of six months following the earlier of (i) a Notice Date or (ii)
the effective date of a Change in Status, the Company shall pay to the Executive
on such six-month anniversary date an amount equal to the most recent fiscal
year end bonus paid to the Executive. For purposes of this Agreement, "fiscal
year end bonus" shall include all amounts paid to the Executive under any bonus
<PAGE>
plans or programs of the Company with respect to his services to the Company in
the preceding fiscal year.
3. Stock Options.
-------------
(a) Effective upon (i) a Change in Control (as defined below) of the
Company or (ii) the death or Disability (as defined below) of the Executive, all
stock options granted to the Executive and then outstanding under any Stock
Option Plan (as defined below) of the Company shall become exercisable in full,
notwithstanding any vesting schedule or other provisions to the contrary in the
agreements evidencing such options; and the Company and the Executive hereby
agree that such option agreements are hereby and will be deemed amended to give
effect to this provision.
(b) Effective upon (i) a termination by the Company of the Executive's
employment without Cause or (ii) a Change in Status of the Executive, all stock
options granted to the Executive and then outstanding under any Stock Option
Plan of the Company shall become exercisable for such number of shares of common
stock for which such options would have been exercisable had the Executive's
employment with the Company continued for one year following the date of the
employment termination or the Change in Status, as the case may be,
notwithstanding any vesting schedule or other provisions to the contrary in the
agreements evidencing such options; and the Company and the Executive hereby
agree that such option agreements are hereby amended to give effect to this
provision.
4. Definitions.
-----------
(a) The Company shall be deemed to have terminated the Executive's
employment for "Cause" if it does so (i) for the Executive's willful and
continued failure to substantially perform his duties to the Company (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such actual or anticipated failure after a Change in
Status of the Executive), provided that the Company has delivered a written
demand for substantial performance to the Executive specifically identifying the
manner in which the Company believes that the Executive has not substantially
performed his duties and that the Executive has not cured such failure within 30
days after such demand, (ii) for willful conduct by the Executive which is
demonstrably and materially injurious to the Company, or (iii) for the
Executive's willful violation of any material provision of any confidentiality,
nondisclosure, assignment of invention, noncompetition or similar agreement
entered into by the Executive in connection with his employment by the Company.
For purposes of this paragraph, no act or failure to act on the Executive's part
shall be deemed "willful" unless done or omitted to be done by the Executive not
in good faith and without reasonable belief that his action or omission was in
the best interests of the Company.
(b) A "Change in Control" of the Company shall mean the occurrence of
any of the following events: (i) any "person", as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
-2-
<PAGE>
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities
(other than as a result of acquisitions of such securities from the Company);
(ii) individuals who, as of the date hereof, constitute the Board of Directors
of the Company (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company) shall be, for purposes of this Agreement, considered
to be a member of the Incumbent Board; (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as defined above) acquires more than 20% of the combined
voting power of the Company's then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(c) A "Change in Status" of the Executive shall mean the occurrence,
without the Executive's written consent, of any of the following circumstances
(unless such circumstances constitute an isolated, insubstantial and inadvertent
action not taken in bad faith and are fully remedied by the Company within 30
days after receipt of notice thereof given by the Executive): (i) any diminution
or change in a manner adverse to the Executive of (A) his title, office or
position with the Company, (B) his salary or other benefits, or (C) his duties,
responsibilities or employment condition, or (ii) the failure by the Company to
pay to the Executive any portion of his compensation within ninety (90) days
after such compensation is due.
(d) "Disability" shall mean the inability of the Executive, for a
period of at least 60 consecutive days, to perform his employment duties as a
result of a physical or mental illness or incapacity.
(e) A "Stock Option Plan" of the Company shall mean any stock option
or equity compensation plan of the Company in effect at any time, including
without limitation the 1987 Incentive Stock Option Plan and the 1997 Incentive
Stock Option Plan.
5. Term. This Agreement shall continue in effect until February 13,
----
2000, unless extended by the mutual written consent of the Company and the
Executive.
-3-
<PAGE>
6. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement.
7. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws.
(b) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(c) All notices and other communications hereunder shall be in writing
and shall be delivered by hand delivery, by a reputable overnight courier
service, or by registered or certified mail, return receipt requested, postage
prepaid, in each case addressed as follows:
If to the Company:
-----------------
Parametric Technology Corporation
128 Technology Drive
Waltham, MA 02154
Attention: Corporate Counsel
If to the Executive:
-------------------
Steven C. Walske
164 Chestnut Hill Road
Chestnut Hill, MA 02167
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Any Notice or communication shall be deemed to
be delivered upon the date of hand
-4-
<PAGE>
delivery, one day following delivery to such overnight courier service, or three
days following mailing by registered or certified mail.
EXECUTED as of the date first written above.
PARAMETRIC TECHNOLOGY CORPORATION
By: /S/ C. Richard Harrison
-------------------------------------
C. Richard Harrison
President and Chief Operating Officer
/S/ Steven C. Walske
-------------------------------------
Steven C. Walske
-5-
<PAGE>
EXHIBIT 10.3
------------
AMENDED AND RESTATED AGREEMENT
------------------------------
This Amended and Restated Agreement is entered into as of this 13th day of
February, 1997 between Parametric Technology Corporation, a Massachusetts
corporation (the "Company"), and C. Richard Harrison (the "Executive"), and
amends and restates the Agreement dated August 19, 1994 with the Executive.
WHEREAS, the Executive is the President and Chief Operating Officer of the
Company; and
WHEREAS, to provide incentive for the Executive to remain with the Company,
the Company desires to make the following arrangements with the Executive
concerning his termination of employment;
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
1. Termination Notice. The Company agrees that it may not terminate the
------------------
employment of the Executive unless (i) it does so for Cause (as defined below)
or (ii) the Company has delivered to the Executive a written notice of such
termination of employment (the "Termination Notice") at least six months in
advance of the effective date thereof. The duties of the Executive during the
period from the date of delivery of a Termination Notice until the termination
of his employment shall be as determined by the Board of Directors.
2. Salary.
------
(a) During the period from the date of delivery of a Termination
Notice (the "Notice Date") until the earlier of (i) the date six months after
the Notice Date, or (ii) the date the Executive commences employment with
another company or organization, the Company shall pay to the Executive a salary
(the "Severance Period Salary") that is equal, on an annualized basis, to two
times the highest annual salary (excluding any bonuses) in effect with respect
to the Executive during the six-month period immediately preceding the
Termination Notice.
(b) In the event that a Change in Status of the Executive occurs prior
to a Notice Date, the Company shall pay the Severance Period Salary to the
Executive during the period from the effective date of the Change in Status
until the earlier of (i) the date six months after such date or (ii) the date
the Executive commences employment with another company or organization; and the
Company shall have no obligation to make any payments to the Executive under
Section 2(a) above.
3. Stock Options.
-------------
(a) Effective upon (i) a Change in Control (as defined below) of the
Company or (ii) the death or Disability (as defined below) of the Executive, all
stock options granted to the Executive and then outstanding under any Stock
Option Plan (as
<PAGE>
defined below) of the Company shall become exercisable in full, notwithstanding
any vesting schedule or other provisions to the contrary in the agreements
evidencing such options; and the Company and the Executive hereby agree that
such option agreements are hereby and will be deemed amended to give effect to
this provision.
(b) Effective upon (i) a termination by the Company of the Executive's
employment without Cause or (ii) a Change in Status of the Executive, all stock
options granted to the Executive and then outstanding under any Stock Option
Plan of the Company shall become exercisable for such number of shares of common
stock for which such options would have been exercisable had the Executive's
employment with the Company continued for one year following the date of the
employment termination or the Change in Status, as the case may be,
notwithstanding any vesting schedule or other provisions to the contrary in the
agreements evidencing such options; and the Company and the Executive hereby
agree that such option agreements are hereby amended to give effect to this
provision.
4. Definitions.
-----------
(a) The Company shall be deemed to have terminated the Executive's
employment for "Cause" if it does so (i) for the Executive's willful and
continued failure to substantially perform his duties to the Company (other than
any such failure resulting from the Employee's incapacity due to physical or
mental illness or any such actual or anticipated failure after a Change in
Status of the Executive), provided that the company has delivered a written
demand for substantial performance to the Executive specifically identifying the
manner in which the Company believes that the Executive has not substantially
performed his duties and that the Executive has not cured such failure within 30
days after such demand, (ii) for willful conduct by the Executive which is
demonstrably and materially injurious to the Company, or (iii) for the
Executive's willful violation of any material provision of any confidentiality,
nondisclosure, assignment of invention, noncompetition or similar agreement
entered into by the Executive in connection with his employment by the Company.
For purposes of this paragraph, no act or failure to act on the Executive's part
shall be deemed "willful" unless done or omitted to be done by the Executive not
in good faith and without reasonable belief that his action or omission was in
the best interests of the Company.
(b) A "Change in Control" of the Company shall mean the occurrence of
any of the following events: (i) any "person", as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock in the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities (other
than as a result of acquisitions of such securities from the
-2-
<PAGE>
Company); (ii) individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company) shall be, for purposes of this
Agreement, considered to be a member of the Incumbent Board; (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no "person" (as defined above) acquires more
than 20% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(c) A "Change in Status" of the Executive shall mean the occurrence,
without the Executive's written consent, of any of the following circumstances
(unless such circumstances constitute an isolated, insubstantial and inadvertent
action not taken in bad faith and are fully remedied by the Company within 30
days after receipt of notice thereof by the Executive): (i) any diminution or
change in a manner adverse to the Executive of (A) his title, office or position
with the Company, (B) his salary or other benefits, or (C) his duties,
responsibilities or employment condition, or (ii) the failure by the Company to
pay to the Executive any portion of his compensation within ninety (90) days
after such compensation is due.
(d) "Disability" shall mean the inability of the Executive, for a
period of at least 60 consecutive days, to perform his employment duties as a
result of a physical or mental illness or incapacity.
(e) A "Stock Option Plan" of the Company shall mean any stock option
or equity compensation plan of the Company in effect at any time, including
without limitation the 1987 Incentive Stock Option Plan and the 1997 Incentive
Stock Option Plan.
5. Term. This Agreement shall continue in effect until February 13,
----
2000, unless extended by the mutual written consent of the Company and the
Executive.
-3-
<PAGE>
6. Successor.
---------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement.
7. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws.
(b) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(c) This Agreement constitutes the entire understanding and agreement
between the parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements, whether oral or written, including
without limitation that certain agreement dated as of June 20, 1990 and amended
as of the 15th day of June 1993 between the Company and the Executive which
agreement shall be of no force or effect during the term of this Agreement.
(d) All notices and other communications hereunder shall be in writing
and shall be delivered by hand delivery, by a reputable overnight courier
service, or by registered or certified mail, return receipt requested, postage
prepaid, in each case addressed as follows:
If to the Company:
------------------
Parametric Technology Corporation
128 Technology Drive
Waltham, MA 02154
Attention: Corporate Counsel
-4-
<PAGE>
If to the Executive
-------------------
C. Richard Harrison
15 Claridge Drive
Weston, MA 02193
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Any Notice or communication shall be deemed to
be delivered upon the date of hand delivery, one day following delivery to such
overnight courier service, or three days following mailing by registered or
certified mail.
EXECUTED as of the date first written above.
PARAMETRIC TECHNOLOGY CORPORATION
By: /S/ Steven C. Walske
---------------------------------------
Steven. C. Walske
Chairman of the Board and Chief Executive Officer
/S/ C. Richard Harrison
------------------------------------
C. Richard Harrison
-5-
<PAGE>
EXHIBIT 10.4
------------
AMENDED AND RESTATED AGREEMENT
------------------------------
This Amended and Restated Agreement is entered into as of this 13th day of
February, 1997 between Parametric Technology Corporation, a Massachusetts
corporation (the "Company"), and Edwin J. Gillis (the Officer"), and amends and
restates the Agreement dated October 2, 1995 with the Officer.
WHEREAS, the Officer is the Executive Vice President of Finance and
Administration, Chief Financial Officer and Treasurer of the Company; and
WHEREAS, to provide incentive for the Officer to maintain employment with
the Company, the Company desires to make the following arrangements with the
Officer concerning his termination of employment.
NOW, THEREFORE, the Company and the Officer hereby agree as follows:
1. Termination Notice. The Company agrees that it may not terminate
------------------
the employment of the Officer unless (i) such termination is for Cause (as
defined below) or (ii) the Company has delivered to the Officer a written notice
of such termination (the "Termination Notice") at least six months in advance of
the termination date. The duties of the Officer during the period from the date
of delivery of a Termination Notice until the termination of his employment
shall be as determined by the Board of Directors.
2. Salary. During the period from the date of delivery of the
------
Termination Notice (the "Notice Date") until the earlier of (i) the date six
months after the Notice Date or (ii) the date the Officer commences employment
with another company or organization, the Company shall pay to the Officer a
salary that is equal, on an annualized basis, to the highest annual salary
(excluding any bonuses) in effect with respect to the Officer during the six-
month period immediately preceding the Termination Notice.
3. Stock Options. Effective upon a Change in Control (as defined below)
-------------
of the Company, all stock options granted to the Officer and then outstanding
under any Stock Option Plan (as defined below) of the Company shall become
exercisable in full, notwithstanding any vesting schedule or other provisions to
the contrary in the agreements evidencing such options; and the Company and the
Officer hereby agree that such option agreements are hereby and will be deemed
amended to give effect to this provision.
4. Definitions.
-----------
(a) A termination by the Company of the Officer's employment for
"Cause" shall mean termination (i) for the Officer's willful and continued
failure to substantially perform his duties to the Company (other than any such
failure resulting from the Officer's incapacity due to physical or mental
illness or any such actual or perceived failure after a Change in Status of the
Officer), provided that (a) the Company has delivered a written demand for
substantial performance to the Officer specifically identifying the manner in
which the Company believes that the Officer has not substantially performed his
duties, and (b) the Officer has not cured such
<PAGE>
failure within 30 days after such demand, (ii) for willful conduct by the
Officer which is demonstrably and materially injurious to the Company, or (iii)
for the Officer's willful violation of any material provision of any
confidentiality, nondisclosure, assignment of invention, noncompetition or
similar agreement entered into by the Officer in connection with his employment
by the Company. For purposes of this paragraph, no act or failure to act on the
Officer's part shall be deemed "willful" unless done or omitted to be done by
the Officer not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company.
(b) A "Change in Control" of the Company shall mean the occurrence of
any of the following events: (i) any "person", as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock in the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities (other
than as a result of acquisitions of such securities from the Company); (ii)
individuals who, as of the date hereof, constitute the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company) shall be, for purposes of this Agreement, considered to be a member of
the Incumbent Board; (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as defined above) acquires more than 20% of the combined voting power
of the Company's then outstanding securities; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets.
(c) A "Stock Option Plan" of the Company shall mean any stock option
or equity compensation plan of the Company in effect at any time, including
without limitation the 1987 Incentive Stock Option Plan and the 1997 Incentive
Stock Option Plan.
5. Term. This Agreement shall continue in effect until February 13,
----
2000, unless extended by the mutual written consent of the Company and the
Officer.
-2-
<PAGE>
6. Successors.
----------
(a) This Agreement is personal to the Officer and without the prior
written consent of the Company shall not be assignable by the Officer otherwise
than by will or the laws of descent and distribution.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement.
7. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws.
(b) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(c) All notices and other communications hereunder shall be in writing
and shall be delivered by hand delivery, by a reputable overnight courier
service, or by registered or certified mail, return receipt requested, postage
prepaid, in each case addressed as follows:
If to the Company:
-----------------
Parametric Technology Corporation
128 Technology Drive
Waltham, MA 02154
Attention: Corporate Counsel
If to the Officer:
------------------
Edwin J. Gillis
7 Merrill Street
Hingham, MA 02043
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Any notice or communication shall be deemed to
be delivered upon the date of hand delivery, one day following delivery to such
overnight courier service, or three days following mailing by registered or
certified mail.
-3-
<PAGE>
EXECUTED as of the date first written above.
PARAMETRIC TECHNOLOGY CORPORATION
By: /S/ C. Richard Harrison
-------------------------------------
C. Richard Harrison
President and Chief Operating Officer
/S/ Edwin J. Gillis
-------------------------------------
Edwin J. Gillis
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-Q FOR THE QUARTER ENDED MARCH 29,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-29-1997
<CASH> 212,088
<SECURITIES> 289,528
<RECEIVABLES> 140,979
<ALLOWANCES> 2,540
<INVENTORY> 0
<CURRENT-ASSETS> 656,402
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 742,542
<CURRENT-LIABILITIES> 183,525
<BONDS> 0
0
0
<COMMON> 1,281
<OTHER-SE> 556,992
<TOTAL-LIABILITY-AND-EQUITY> 742,542
<SALES> 147,054
<TOTAL-REVENUES> 198,012
<CGS> 2,737
<TOTAL-COSTS> 18,561
<OTHER-EXPENSES> 100,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 81,627
<INCOME-TAX> 28,569
<INCOME-CONTINUING> 53,058
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,058
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
