<PAGE>
TOTAL NUMBER OF PAGES IS 18
PAGE 1 OF 18
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[_] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission File Number 0-27692
ORCAD, INC.
(Exact name of registrant as specified in its charter)
Incorporated in the State of Delaware
(State or other jurisdiction of incorporation or registration)
93-1062832
(I.R.S. Employer Identification No.)
9300 S.W. Nimbus Avenue, Beaverton, Oregon 97008
(Address of principal executive offices, including zip code)
Telephone: (503) 671-9500
(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. [X] Yes [_] No
The number of shares outstanding of the Company's Common Stock ($.01 par value)
as of September 30, 1998 was 9,344,575 shares.
<PAGE>
OrCAD, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - September 30, 1998
and December 31, 1997 3
Consolidated Statements of Operations - Three months and nine months
ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1998 and 1997 5
Notes to consolidated financial statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
- -----------------------------------------------------------------------------------------------------
Item 2. Changes in Securities 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
<PAGE>
ORCAD, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 DECEMBER 31,
(Unaudited) 1997
------------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 13,495 $ 31,618
SHORT-TERM INVESTMENTS 28,379 3,408
TRADE ACCOUNTS RECEIVABLE, NET OF DOUBTFUL ACCOUNTS
AND SALES RETURN ALLOWANCES OF $915 AND $793 7,243 8,800
INVENTORY, NET 245 675
OTHER CURRENT ASSETS 2,580 3,348
-------------------- ------------------
TOTAL CURRENT ASSETS 51,942 47,849
-------------------- ------------------
INVESTMENTS, LONG-TERM - 2,722
FIXED ASSETS, NET 3,750 3,360
PURCHASED SOFTWARE TECHNOLOGY, NET 310 474
GOODWILL AND INTANGIBLE ASSETS, NET 2,895 2,378
OTHER ASSETS 692 124
-------------------- -----------------
TOTAL ASSETS $ 59,589 $ 56,907
==================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 273 $ 661
ACCRUED PAYROLL AND RELATED LIABILITIES 2,003 2,241
ACCRUED LIABILITIES 2,926 1,870
ACCRUED INCOME TAXES 890 1,081
DEFERRED REVENUE 6,052 4,881
-------------------- -----------------
TOTAL CURRENT LIABILITIES 12,144 10,734
DEFERRED TAXES 19 19
STOCKHOLDERS' EQUITY:
COMMON STOCK 93 92
ADDITIONAL PAID-IN CAPITAL 37,928 37,583
RETAINED EARNINGS 9,526 8,604
ACCUMULATED OTHER COMPREHENSIVE LOSS (102) (78)
NOTES RECEIVABLE - EMPLOYEE STOCK PURCHASES (19) (47)
-------------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 47,426 46,154
-------------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 59,589 $ 56,907
==================== =================
</TABLE>
See notes to Consolidated Financial Statements.
3
<PAGE>
OrCAD, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three-months ended Nine-months ended
-------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Product $ 7,842 $ 7,961 $ 25,345 $ 24,889
Service 3,394 2,292 9,433 6,142
--------------- --------------- -------------- ---------------
Total revenue 11,236 10,253 34,778 31,031
Cost and expenses:
Cost of revenue - product 657 1,207 2,219 3,600
Cost of revenue - service 690 426 1,865 1,219
Research and development 2,833 2,879 8,619 8,367
Marketing and sales 4,559 3,849 13,844 11,090
General and administrative 1,410 1,209 4,044 3,499
Merger and acquisition related charges - - 4,081 2,203
--------------- --------------- -------------- ---------------
Total cost and expenses 10,149 9,570 34,672 29,978
--------------- --------------- -------------- ---------------
Income from operations 1,087 683 106 1,053
Other income (expense):
Interest income, net 363 465 1,274 1,368
Other, net 19 (29) (24) (11)
--------------- --------------- -------------- ---------------
382 436 1,250 1,357
--------------- --------------- -------------- ---------------
Income before income taxes 1,469 1,119 1,356 2,410
Income tax expense 474 405 434 876
--------------- --------------- -------------- ---------------
Net income $ 995 $ 714 $ 922 $ 1,534
=============== =============== ============== ===============
Basic net income per share $ 0.11 $ 0.08 $ 0.10 $ 0.17
=============== =============== ============== ===============
Diluted net income per share $ 0.10 $ 0.08 $ 0.10 $ 0.16
=============== =============== ============== ===============
Shares used in basic net income per share calculation 9,342 9,172 9,300 9,147
=============== =============== ============== ===============
Shares used in diluted net income per share calculation 9,495 9,501 9,511 9,422
=============== =============== ============== ===============
</TABLE>
See notes to Consolidated Financial Statements.
4
<PAGE>
OrCAD, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine-months ended
---------------------------------------
September 30, September 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 922 $ 1,534
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,524 1,286
Provision for losses on trade accounts receivable and sales returns 159 165
Provision for inventory reserves (60) (23)
Deferred income taxes (5) 2
Write-off of research and development costs acquired - 2,203
Loss on disposal of assets 30 22
Changes in assets and liabilities:
Trade accounts receivable 2,342 (1,921)
Inventory 488 244
Other current assets 201 (593)
Accounts payable (1,228) (262)
Accrued payroll and related liabilities (198) 187
Accrued liabilities 940 493
Deferred revenue 1,202 799
Accrued income taxes (207) (413)
-------------- -------------
Total adjustments 5,188 2,189
-------------- -------------
Net cash provided by operating activities 6,110 3,723
Cash flows from investing activities:
Acquisition of fixed assets (1,343) (2,334)
Acquisition of software technology - (2,450)
Acquisition of intangible assets (956) (165)
Proceeds from matured investment securities 91,588 149,626
Purchases of investment securities (113,823) (148,045)
-------------- -------------
Net cash used in investing activities (24,534) (3,368)
Cash flows from financing activities:
Repayment of notes receivable - employee stock purchases, net 29 17
Repurchase of common stock - (247)
Issuance of common stock, net 347 223
-------------- -------------
Net cash provided by (used in) financing activities 376 (7)
Effects of exchange rate on cash (75) (11)
-------------- -------------
Net increase (decrease) in cash and cash equivalents (18,123) 337
Cash and cash equivalents at the beginning of period 31,618 28,077
-------------- -------------
Cash and cash equivalents at the end of period $ 13,495 $ 28,414
============== =============
Supplemental Disclosures of Cash Flow Information:
Income taxes paid $ 1,005 $ 1,105
</TABLE>
See notes to Consolidated Financial Statements.
5
<PAGE>
OrCAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share data)
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
statements include all adjustments necessary (which are of a normal and
recurring nature) for the fair presentation of the results of the interim
periods presented. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements for the year
ended December 31, 1997, as included in the Company's Annual Report on Form
10-KSB as filed with the Securities and Exchange Commission. Restated
financial statements resulting from the merger with MicroSim Corporation
are included in Summit Design, Inc.'s report on Form S-4/A filed with the
Securities and Exchange Commission on November 10, 1998.
2. Acquisitions
------------
On September 20, 1998, OrCAD entered into an Agreement and Plan of
Reorganization ("the Reorganization Agreement") with Summit Design, Inc.
("Summit"), a publicly held Delaware Corporation. Under the terms of the
Reorganization Agreement, each share of issued and outstanding Common Stock
of OrCAD will be converted into the right to receive 1.05 shares of common
stock of Summit. In addition, each outstanding option to purchase shares of
OrCAD Common Stock will be assumed by Summit. The Reorganization, which is
expected to be accounted for as a pooling-of-interests, is subject to the
approval of the OrCAD and Summit Stockholders as well as other standard
closing conditions.
On April 15, 1998, OrCAD U.K. Ltd., a wholly-owned subsidiary of the
Company formed in March of 1998, purchased certain assets and assumed
certain liabilities of ARS Microsystems Ltd., (ARS) for approximately $1.1
million. Of that amount, $1 million was allocated to goodwill and is being
amortized over a five-year estimated life. ARS was previously the
Company's value added reseller in the United Kingdom. The cost of the
acquisition was allocated on the basis of the estimated fair value of the
assets acquired and the liabilities assumed.
On January 20, 1998 OCA Merger Corporation, a wholly-owned subsidiary of
OrCAD, was merged with and into MicroSim Corporation ("MicroSim") and all
of the issued and outstanding shares of MicroSim Common Stock and all of
the rights to acquire MicroSim Common Stock were converted into and
exchanged for 2,427,632 shares of OrCAD Common Stock ("the Merger"). The
Merger was accounted for as a pooling-of-interests in 1998. The combined
financial statements of OrCAD and MicroSim are included in this report and
prior periods presented have been restated to reflect the Merger.
6
<PAGE>
3. Basic and Diluted Net Income Per Share
--------------------------------------
Basic net income per share was computed using the weighted average number
of common shares outstanding during the period. Diluted net income per
share was computed using the weighted average number of common shares
outstanding and common equivalent shares from stock options, when dilutive,
using the treasury stock method.
4. Use of Estimates
----------------
Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amount of assets,
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
5. Revenue Recognition
-------------------
During the first quarter of 1998, the Company adopted Statement of Position
("SOP") 97-2, "Software Revenue Recognition" and SOP 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, 'Software Revenue Recognition.'"
The provisions of SOP 97-2 have been applied to transactions entered into
beginning January 1, 1998. SOP 97-2 generally requires revenue earned on
software arrangements involving multiple elements to be allocated to each
element based on the relative fair values of the elements. The revenue
allocated to software products is generally recognized upon the delivery of
the products. The revenue allocated to extended support agreements is
recognized ratably over the term of the maintenance agreement and revenue
allocated to service elements is recognized as the services are performed.
OrCAD sells its products internationally, exclusive of Japan and the United
Kingdom, through value added resellers (VARs) and recognizes revenue from
sales to VARs after shipment of product and when no significant contractual
obligations remain outstanding.
OrCAD provides a thirty-day right of return and a ninety-day warranty that
its products are free from defects. Estimated sales returns and estimated
warranty costs are recorded upon shipment of the product.
SOP 98-4 defers for one year, the application of several paragraphs and
examples in SOP 97-2. These paragraphs limit the definition of "vendor
specific objective evidence" of the fair value of various elements in a
multiple element arrangement.
6. Software Development Costs
--------------------------
Under Statement of Financial Accounting Standards No. 86 ("SFAS 86"),
software development costs are to be capitalized beginning when a product's
technological feasibility has been established and ending when a product is
made available for general release to customers. To date, the establishment
of technological feasibility of the Company's products has occurred shortly
before general release, and accordingly no costs have been capitalized.
7. Income Taxes
------------
The provision for income taxes has been recorded based on the Company's
current estimate of the Company's annual effective tax rate. This rate
differs from the combined federal and state statutory rate of approximately
38.5% primarily due to the benefit of the Company's foreign sales
corporation, research and experimentation tax credits, and certain
investment income which is exempt from federal tax.
7
<PAGE>
8. Cash Equivalents and Investments
--------------------------------
Cash equivalents consist of highly liquid investments with original
maturity dates of three months or less. Cash equivalents are stated at cost
and consist primarily of money market funds, municipal bonds and municipal
notes. The carrying amount approximates fair value due to the short-term
nature of these investments. Those instruments with original maturity dates
greater than three months and less than one year from the balance sheet
date are considered to be short-term investments. Investments with original
maturity dates greater than one year from the balance sheet date are
considered to be long-term investments. Investments, which primarily
consist of corporate debt securities, auction rate receipts, market auction
preferred notes, and municipal bonds, are reported at fair value, and are
classified as available-for-sale securities. The cost of securities sold is
determined using the specific identification method when computing realized
gains and losses. Fair value is determined using available market
information.
9. Comprehensive Income
---------------------
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" on
January 1, 1998. This statement establishes standards for reporting
comprehensive income and its components in the consolidated financial
statements. The objective of SFAS 130 is to report changes in equity that
result from transactions and economic events other than transactions with
owners. Comprehensive income is the total of net income and all other non-
owner changes in equity. Adoption of SFAS 130 did not have a material
affect on OrCAD's consolidated financial position, results of operations or
cash flows for the three and nine month periods ended September 30, 1998
and 1997. The reconciliation of net income to comprehensive income is as
follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1998 1997 1998 1997
----------- -------- --------- ----------
<S> <C> <C> <C> <C>
Net income $ 995 $ 714 $ 922 $1,534
Unrealized gain (loss) on investments, net 26 (2) 14 (6)
Foreign currency translation adjustment (11) (20) (38) (14)
------ ----- ----- ------
Comprehensive income $1,010 $ 692 $ 898 $1,514
====== ===== ===== ======
</TABLE>
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
OrCAD develops, markets, and supports software products that assist
electronics designers in the management of component data and in the design of
field-programmable gate arrays (FPGAs), including complex programmable logic
devices, analog and mixed analog-digital circuits, and printed circuit boards
(PCBs). OrCAD operates in a single business segment, comprising the electronic
design automation industry and serves most segments of the electronics industry,
including aerospace, telecom, industrial control, military, medical equipment,
and consumer products. OrCAD's products enable electronics designers to reduce
time to market, improve product capability, and reduce design costs. OrCAD's
Windows-based EDA solutions support the design process for mainstream
components, from schematic capture to programmable logic design and verification
to circuit simulation and printed circuit board layout. Over 240,000 products
bearing the OrCAD name have been sold worldwide since 1984.
On September 20, 1998 OrCAD entered into an Agreement and Plan of
Reorganization ("the Reorganization Agreement") with Summit Design, Inc.
("Summit"), a publicly held Delaware Corporation. Under the terms of the
Reorganization Agreement, each share of issued and outstanding Common Stock of
OrCAD will be converted into the right to receive 1.05 shares of Summit common
stock ("the Reorganization"). In addition, each outstanding option to purchase
shares of OrCAD Common Stock will be assumed by Summit. The Reorganization is
expected to be accounted for as a pooling-of-interests. The Reorganization is
subject to regulatory, OrCAD, and Summit stockholder approval and standard
closing conditions.
On April 15, 1998, OrCAD U.K. Ltd., a wholly-owned subsidiary of the
Company formed in March of 1998, purchased certain assets and assumed certain
liabilities of ARS Microsystems Ltd., (ARS) for approximately $1 million. Of
that amount, $1 million was allocated to goodwill and is being amortized over a
five-year estimated life. ARS was previously the Company's value added reseller
in the United Kingdom. The cost of the acquisition was allocated on the basis
of the estimated fair value of the assets acquired and the liabilities assumed.
On January 20, 1998 OCA Merger Corporation, a wholly-owned subsidiary of
OrCAD, was merged with and into MicroSim Corporation ("MicroSim") and all of the
issued and outstanding shares of MicroSim common stock and all of the rights to
acquire MicroSim common stock were converted into and exchanged for 2,427,632
shares of OrCAD common stock, (the "Merger"). The Merger was accounted for as a
pooling-of-interests in 1998.
The financial statements of OrCAD and its wholly owned subsidiary,
MicroSim, are included in this report and all prior periods have been restated
to reflect the Merger. Results of operations of all acquisitions accounted for
as purchases are included in the Company's Consolidated Financial Statements
only from the date of acquisition forward. All intercompany balances have been
eliminated in consolidation.
9
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
TOTAL REVENUE
The Company derives revenue from the licensing of its software products and
from the provision of maintenance, training and consulting services to
customers. The Company recognizes revenue from software licenses after shipment
of product and when no significant contractual obligations remain outstanding.
Service revenue is derived primarily from extended support agreements that
provide customers access to product enhancements, technical support, and the
OrCAD Design Network ("ODN") which includes the OrCAD Knowledge Base, the OrCAD
Knowledge Exchange, OrCAD Tech Tips, and an electronic Technical Support
Connection. Revenue from each extended support agreement is deferred and
recognized ratably over the term of the support agreement. Revenue from customer
training and consulting is recognized as services are performed.
Total revenue increased 10% to $11.2 million in the third quarter of 1998
from $10.3 million in the third quarter of 1997. The increase in total revenue
was due to growth in service revenue offset by a slight decrease in product
revenue. As a percentage of total revenue, product revenue decreased to 70% in
the third quarter of 1998 from 78% in the third quarter of 1997. Conversely,
service revenue increased as a percentage of total revenue to 30% in the third
quarter of 1998 from 22% in the third quarter of 1997.
Product revenue decreased 1% to $7.8 million in the third quarter of 1998
from $8 million in the third quarter of 1997. The decline in product revenue is
primarily attributable to decreased sales related to the OrCAD PSpice product
family, slightly offset by increased sales in the OrCAD Capture and Layout
product families. Unfavorable economic conditions in Asia partially offset by
increases in North American and European product revenue also account for this
decline.
Service revenue increased 48% to $3.4 million in the third quarter of 1998
from $2.3 million in the third quarter of 1997. The increase in service revenue
from the third quarter of 1997 to the third quarter of 1998 was primarily
attributable to increased sales of extended support agreements, training and
consulting services.
Total North American revenue increased 22% to $7.7 million in the third
quarter of 1998 from $6.3 million in the third quarter of 1997. Total revenue
generated outside of North America decreased 10% to $3.6 million in the third
quarter of 1998 from $4 million in the third quarter of 1997. As a percentage of
the Company's total revenue, North American revenue increased to 68% in the
third quarter of 1998 from 61% in the third quarter of 1997. The increase in the
proportion of revenue generated within North America was primarily attributable
to decreased sales to Asian markets reflecting the unfavorable economic
condition in that region.
10
<PAGE>
COST OF REVENUE
The cost of product revenue represents the costs associated with the
licensing of the Company's products, such as expenses of reproducing product
documentation, media and packaging, hardware locks, shipping costs, and
royalties paid to external developers. The cost of product revenue decreased 46%
to $657,000 in the third quarter of 1998 from $1.2 million in the third quarter
of 1997. The decreased cost of product revenue was primarily the result of
reduced materials costs, consolidation of the Company's Irvine, California
shipping function into the Beaverton, Oregon shipping operation, and reduced
royalty payments which accounted for cost reductions of $223,000, $183,000, and
$49,000, respectively, in the third quarter of 1998 compared to the third
quarter of 1997. As a percentage of product revenue, cost of product revenue
decreased to 8% in the third quarter of 1998 from 15% in the third quarter of
1997.
The cost of service revenue includes the costs of providing software
maintenance, such as technical support, and the costs of providing consulting
and training services. The cost of service revenue increased 62% to $690,000 in
the third quarter of 1998 from $426,000 in the third quarter of 1997. This
increase was attributable to an increase in personnel costs and costs associated
with the delivery of services corresponding with the increased service revenue.
As a percentage of service revenue, the cost of service revenue remained
relatively flat increasing 1% to 20% in the third quarter of 1998 from 19% in
the third quarter of 1997.
RESEARCH AND DEVELOPMENT
Research and development expenses include the costs of developing new
products and enhancements to existing products. Software development costs are
generally expensed as incurred because technological feasibility is generally
not established until shortly before the release of a new product and no
material development costs are incurred after establishment of technological
feasibility. Research and development expenses remained relatively constant
decreasing 2% to $2.8 million in the third quarter of 1998 from $2.9 million in
the third quarter of 1997. As a percentage of total revenue, research and
development expenses decreased to 25% in the third quarter of 1998 from 28% in
the third quarter of 1997.
MARKETING AND SALES
Marketing and sales expenses include salaries, commissions and related
personnel costs, and other sales and promotional expenses. Marketing and sales
expenses increased 18% to $4.6 million in the third quarter of 1998 from $3.8
million in the third quarter of 1997. Total marketing and sales expenses
increased as a result of increased promotional activity and continued expansion
of the Company's sales and marketing organizations. The number of employees in
the Company's marketing and sales functions increased to 121 at September 30,
1998 from 91 at September 30, 1997. As a percentage of total revenue, marketing
and sales expenses increased to 41% in the third quarter of 1998 from 38% in the
third quarter of 1997.
11
<PAGE>
GENERAL AND ADMINISTRATIVE
General and administrative expenses include the costs associated with the
Company's executive office, human resources, finance, and administrative
functions. General and administrative expenses increased 17% to $1.4 million in
the third quarter of 1998 from $1.2 million in the third quarter of 1997. This
increase was primarily the result of rising administrative costs associated with
increased personnel, the Company's allowance for bad debt and travel
expenditures, which accounted for expense increases of $102,000, $62,000, and
$36,000, respectively, in the third quarter of 1998 compared to the third
quarter of 1997. The Company's increase in allowance for bad debt correlates
with a $615,000 increase in trade accounts receivable as of September 30, 1998
compared to the same period in 1997. As a percentage of total revenue, general
and administrative expenses remained relatively constant at 13% in the third
quarter of 1998 as compared to 12% in the third quarter of 1997.
INCOME FROM OPERATIONS
In the third quarter of 1998, OrCAD generated income from operations of
$1.1 million as compared to $683,000 for the same period in the prior year. The
increase in income from operations in the third quarter of 1998 from the third
quarter of 1997 was primarily attributable to lower cost of product revenue and
lower costs in research and development measured as a percentage of revenue
partially offset by increases in marketing and sales, and general and
administrative costs measured as a percentage of revenue.
OTHER INCOME, NET
Other income, net primarily consists of interest income, gains and losses
on the disposal of fixed assets, sublease income, royalty income, and foreign
currency gains and losses. Interest income consists primarily of the earnings on
available cash balances and marketable securities, which have generally been
invested in short-term money market investments, treasury bills and corporate
debt securities. Other income, net decreased to $382,000 in the third quarter of
1998 from $436,000 in the third quarter of 1997. The Company shifted certain of
its investment securities into securities that are generally exempt from federal
tax and yield interest at a lower rate than taxable investment securities in
which the Company previously invested. As a result of this change, other income,
net for the third quarter of 1998 decreased from the same period in the prior
year.
INCOME TAX EXPENSE
The Company's effective tax rate differs from the combined federal and
state statutory rate of approximately 38.5% primarily due to the benefit of the
Company's foreign sales corporation, utilization of research and experimentation
tax credits, and certain investment income which is exempt from federal tax.
Income tax expense for the third quarter of 1998 was $474,000 as compared to
$405,000 for the third quarter of 1997.
12
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
TOTAL REVENUE
Total revenue increased 12% to $34.8 million for the first nine months of
1998 from $31 million for the first nine months of 1997. The increase in total
revenue was due to growth in both product and service revenue. As a percentage
of total revenue, product revenue decreased to 73% for the first nine months of
1998 from 80% for the first nine months of 1997. Conversely, service revenue
increased as a percentage of total revenue to 27% for the first nine months of
1998 from 20% for the first nine months of 1997.
Product revenue increased 2% to $25.3 million for the first nine months of
1998 from $24.9 million for the first nine months of 1997. The slight increase
in product revenue is primarily attributable to increased sales in the Company's
Capture and Layout product families, offset by decreased sales related to the
OrCAD PSpice product family. Increased North American and European revenue was
partially offset by decreased revenue in Asian markets as a result of
unfavorable economic conditions in that region.
Service revenue increased 54% to $9.4 million for the first nine months of
1998 from $6.1 million for the first nine months of 1997. The increase in
service revenue in the respective periods was primarily attributable to the
increased sales of extended support agreements, training and consulting.
Total North American revenue increased 25% to $24.2 million for the first
nine months of 1998 from $19.3 million for the first nine months of 1997. Total
revenue generated outside of North America decreased 10% to $10.6 million for
the first nine months of 1998 from $11.7 million for the first nine months of
1997. As a percentage of the Company's total revenue, North American revenue
increased to 70% for the first nine months of 1998 from 62% for the first nine
months of 1997. The increase in the proportion of revenue generated within North
America was attributable to decreased sales to Asian markets reflecting the
unfavorable economic conditions in that region.
COST OF REVENUE
The cost of product revenue decreased 38% to $2.2 million for the first
nine months of 1998 from $3.6 million for the first nine months of 1997. The
decreased cost of product revenue was primarily the result of reduced materials
costs, the consolidation of the Company's Irvine, California shipping function
into the Beaverton, Oregon operation, and reduced freight charges, which
accounted for cost reductions of $681,000, $502,000,and $109,000, respectively,
in the first nine months of 1998 compared to the first nine months of 1997. As a
percentage of product revenue, cost of product revenue decreased to 9% for the
first nine months of 1998 from 14% for the first nine months of 1997.
The cost of service revenue increased 53% to $1.9 million for the first
nine months of 1998 from $1.2 million for the first nine months of 1997. This
increase was primarily attributable to increased sales of maintenance contracts
and the expansion of the Company's Enterprise Services organization. As a
percentage of service revenue, the cost of service revenue remained constant at
20% for the first nine months of 1998 and for the corresponding period of 1997.
13
<PAGE>
RESEARCH AND DEVELOPMENT
Research and development expenses increased 3% to $8.6 million for the
first nine months of 1998 from $8.4 million for the first nine months of 1997.
The increase in research and development expenses was primarily attributable to
increased third-party consulting costs partially offset by a decrease in
personnel costs. As a percentage of total revenue, research and development
expenses decreased to 25% for the first nine months of 1998 from 27% for the
first nine months of 1997.
MARKETING AND SALES
Marketing and sales expenses increased 25% to $13.8 million for the first
nine months of 1998 from $11.1 million for the first nine months of 1997. Total
marketing and sales expenses increased as a result of increased promotional
activity and continued expansion of the Company's sales and marketing
organizations. The number of employees in the Company's marketing and sales
functions increased to 121 at September 30, 1998 from 91 at September 30, 1997.
As a percentage of total revenue, marketing and sales expenses increased to 40%
for the first nine months of 1998 from 36% for the first nine months of 1997.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 16% to $4 million for the
first nine months of 1998 from $3.5 million for the first nine months of 1997.
This increase was primarily the result of increased administrative costs
associated with investor relations expenditures and the Company's allowance for
bad debt, which accounted for expense increases of $197,000 and $178,000,
respectively, in the first nine months of 1998 compared to the first nine months
of 1997. The Company's increase in allowance for bad debt correlates with a
$615,000 increase in trade accounts receivable as of September 30, 1998 compared
to the same period in 1997. As a percentage of total revenue, general and
administrative expenses increased to 12% in the first nine months of 1998 from
11% for the first nine months of 1997.
MERGER AND ACQUISITION RELATED CHARGES
In the first nine months of 1998, OrCAD incurred merger-related charges of
$4.1 million in connection with the MicroSim Merger relating primarily to
financial advisory fees, legal and accounting services, personnel severance
costs and the cancellation and continuation of contractual obligations.
Personnel severance costs relate primarily to the termination of approximately
35 employees, most of which were employed by MicroSim in connection with a plan
of eliminating and redirecting certain of MicroSim's general, administrative,
sales, and marketing related functions to OrCAD's Beaverton, Oregon facility.
OrCAD also recognized certain costs for asset impairments and the cancellation
and continuation of contractual obligations related primarily to MicroSim's
facility lease as a result of eliminating and redirecting the aforementioned
operating functions in Irvine, California. The cash outflows for each of the
respective merger and acquisition related charges through the nine month period
ended September 30, 1998 are as follows: personnel severance-$1.4 million;
legal, accounting, investment banking and investor relations-$1.2 million;
continuation and cancellation of contractual obligations-$57,000; asset
impairment $114,000; and other $260,000. Payments related to the continuation
and cancellation of contractual obligations are being made in accordance with
the terms of the agreements that existed prior to the consummation of the merger
with MicroSim. All other remaining amounts are expected to be disbursed by the
end of 1998.
INCOME FROM OPERATIONS
For the first nine months of 1998, OrCAD generated income from operations
of $106,000 as compared to $1.1 million for the same period in the prior year.
Excluding merger and acquisition related charges of $4.1 million and $2.2
million in the first nine months of 1998 and 1997, respectively, income from
operations was $4.2 million and $3.3 million for the first nine months of 1998
and 1997, respectively. The increase in income from operations in the first nine
months of 1998 from the same period in 1997, excluding merger and acquisition
related charges, was primarily attributable to lower cost of product revenue and
lower expenses in research and development measured as a percentage of revenue
partially offset by increases in marketing and sales, and general and
administrative expenses measured as a percentage of revenue.
OTHER INCOME, NET
Other income, net decreased to $1.3 million for the first nine months of
1998 from $1.4 million for the first nine months of 1997. The Company shifted
certain of its investment securities into securities that are generally exempt
from federal tax and yield interest at a lower rate than taxable investment
securities in which the Company previously invested. As a result of this change,
other income for the nine months of 1998 decreased from the same period in the
prior year.
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INCOME TAX EXPENSE
The effective tax rate for the first nine months of 1998 was 32%. This rate
differs from the combined federal and state statutory rate of approximately
38.5% primarily due to the benefit of the Company's foreign sales corporation,
utilization of research and experimentation tax credits, and certain investment
income which is exempt from federal tax. Income tax expense for the first nine
months of 1998 was $434,000 as compared to $876,000 for the first nine months of
1997.
LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents were $13.5 million at September 30, 1998 as
compared to $31.6 million at December 31, 1997. Cash provided by operations was
$6.1 million for the first nine months of 1998 as compared to $3.7 million for
the first nine months of 1997. The increase in cash provided by operations from
the first nine months of 1998 as compared to the first nine months of 1997 was
primarily due to collections of accounts receivable. Cash used in investment
activities was $24.5 million for the first nine months of 1998 as compared to
$3.4 million for the corresponding period in 1997. The increase in cash used in
investment activities during the first nine months of 1998 as compared to the
first nine months of 1997 was due primarily to purchases of investment
securities partially offset by maturities thereof. Cash provided by financing
activities was $376,000 for the first nine months of 1998 as compared to $7,000
used in financing activities during the first nine months of 1997. The increase
in cash provided by financing activities in the first nine months of 1998 was
primarily due to proceeds from the issuance of common stock upon the exercise of
stock options.
The Company has available borrowing capacity consisting of a commitment for
a $3.0 million line of credit from a commercial bank. The Company believes that
current cash and investment balances, cash flows from operations and the unused
line of credit are sufficient to meet current and anticipated future capital
requirements for at least the next twelve months. The Company currently does not
have any material commitments for capital expenditures. OrCAD has from time to
time evaluated and continues to evaluate opportunities for acquisitions and
expansion. Any such transactions, if consummated, may use a portion of the
Company's working capital or necessitate additional bank borrowings. No
assurance can be given that additional borrowing capacity will be available or
that if available, such financing will be obtainable on terms favorable to the
Company or its stockholders.
YEAR 2000
The Company is aware of the potential inability of computer programs to
adequately process date information after December 31, 1999 (the year 2000
issue). The Company has anticipated problems surrounding the year 2000 issue
and modified its product offerings as necessary to make them year 2000
compliant. All currently marketed and supported OrCAD products for Microsoft
Windows NT and Windows 95 are year 2000 compliant. The Company makes no
assurances that its DOS products, which are no longer being sold or marketed,
are year 2000 compliant. The year 2000 issue with regard to OrCAD's Microsoft
Windows NT and Windows 95 products is not expected to have a material adverse
effect on the Company's financial condition or results of operations.
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In addition, the Company will be implementing a program to review the year
2000 compliance status of computer software programs licensed from third parties
and used in its internal business processes to obtain appropriate assurances of
year 2000 compliance from manufacturers of these products. The Company believes
that it will be able to complete its year 2000 compliance review and make any
necessary modifications prior to the end of 1999. The Company further believes
that such a review and modification, if necessary, will not require the Company
to incur any additional material expense. However, the compliance of systems
acquired from third parties is dependent on factors outside the Company's
control. If key systems, or a significant number of systems fail as a result of
year 2000 problems, the Company could incur substantial expense and experience a
disruption of business operations, which would potentially have a material
adverse effect on the Company's business.
Furthermore, the purchasing patterns of customers and potential customers
may be affected by year 2000 issues as companies may be required to devote
significant resources to correct or patch their current software systems for
year 2000 compliance. These expenditures may result in reduced funds available
to purchase the Company's software products that could have a materially adverse
effect on the Company's financial condition and results of operations. There can
be no assurance that there will not be any year 2000 related operating problems
or material expenses that will occur with OrCAD's computer systems or in
connection with the interface with OrCAD's major vendors or suppliers.
VARIABILITY OF OPERATING RESULTS
The Company's quarterly operating results may vary significantly in the
future depending on factors such as demand for the Company's products, the
timely development and market acceptance of new products and upgrades to
existing products, the impact of competitive products and pricing, length of
sales cycles, timing of significant orders, seasonal factors, mix of direct and
indirect sales, product mix, domestic and international economic conditions,
changes in the financial condition of or the relationship with distributors,
changes in tax rates, merger and acquisition activities, the integration of
acquired entities, and market conditions in the EDA industry.
A substantial portion of the Company's revenue in each quarter results from
orders booked in that quarter. The Company's expense levels are based, in part,
on its expectations as to future revenue. If revenue levels are below
expectations, operating results are likely to be adversely affected. In
particular, net income may be disproportionately affected by a reduction in
revenue because only a small portion of the Company's expenses varies with its
revenue.
The Company sells its software products and provides services to customers
throughout the world. Managing global operations presents challenges associated
with organizational alignment, cultural and language differences. Moreover,
each region in the global EDA market exhibits unique characteristics that can
cause purchasing patterns to differ significantly from period to period.
Although international markets provide the Company with significant revenue
opportunities, periodic downturns, trade balance issues, political instability
and fluctuations in interest and foreign currency exchange rates are all risks
that could affect global product and service demand. Many countries are
currently experiencing banking and currency difficulties that could lead to
economic recession in those countries which could result in a decline in the
purchasing power of the Company's customers in those countries. This in turn
could result in the cancellation or delay of orders for the Company's products
from customers in those countries, thus adversely affecting the Company's
operations.
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The Company is dependent upon the efforts and abilities of its senior
management, its research and development staff and a number of other key
management, sales, support, technical, and service personnel. The Company has
recently increased its focus on the offering of professional services to its
customers, the growth of which is directly dependent upon the attraction and
retention of personnel. The market for highly skilled employees is intensely
competitive. To the extent that the Company is not able to retain, train,
attract and motivate highly skilled employees who are able to provide EDA and
other design services that satisfy customers' expectations, the Company's
business, operating results, and financial condition could be materially
adversely affected.
Acquisitions of complimentary businesses are an integral part of the
Company's overall business strategy. There are several risks associated with
this strategy including, but not limited to, integration of sales channels,
training and education of sales forces for new product offerings, integration of
product development efforts, retention of key employees, retention of systems of
internal controls, and integration of information systems. All of these factors
can impair the Company's ability to forecast and meet quarterly revenue and
earnings targets and effectively manage the business for long-term growth.
While the Company is aware of, and is addressing such issues, there can be no
assurance that these challenges will be effectively met.
OrCAD's success is dependent, in part, upon its proprietary technology.
The Company generally relies on patents, copyrights, trademarks, and trade
secret laws to establish and maintain its proprietary rights to its technology
and products. OrCAD has been issued a number of patents. There can be no
assurance that any of these patents will not be challenged, invalidated or
circumvented, or that any rights granted thereunder will provide competitive
advantages to the Company. In addition, the laws of some foreign countries may
not permit the protection of OrCAD's proprietary rights to the same extent as
the laws of the United States.
Because of the existence of a large number of patents in the EDA industry
there can be no assurance that OrCAD products or any of their components do not
infringe on the patent rights of others. If a third party were to allege
infringement, OrCAD believes that, based on industry practice, any necessary
license or rights under such patents may be obtained on terms that would not
have a material adverse effect on the Company's business, operating results or
financial condition. Nevertheless, there can be no assurance that the necessary
licenses would be available on acceptable terms, or at all, or that the Company
would prevail in any such challenge. Some of the Company's products are designed
to include software or other intellectual property licensed from third parties.
It may be necessary in the future to seek or renew such licenses. The inability
to obtain certain licenses or other rights on favorable terms could have a
material adverse effect on the Company's business, operating results, or
financial condition.
Software products of the complexity of OrCAD's may contain errors that may
be detected at any point in the products' life cycles. The Company has
discovered software errors in certain of its products in the past. The
correction of these errors has caused delays in shipment. There can be no
assurance, despite arduous testing by OrCAD, its customers, and potential
customers, that errors will not be detected. Errors may result in the loss of,
or delay in market acceptance and sales. Such errors may require the Company to
divert development resources, incur increased service and royalty costs and the
Company may suffer injury to its reputation. As such, there can be no assurance
that such errors will not have a material adverse effect on the Company's
business, financial condition, results of operations, or cash flows.
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EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In September of 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The standard also requires that changes in the derivatives' fair value be
recognized currently in results of operations unless specific hedge accounting
criteria are met. SFAS 133 is effective for fiscal years beginning after
September 15, 1999. The Company does not expect SAFS 133 to have a material
impact on its consolidated financial statements.
In March of 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The statement requires that certain software costs
related to the development or purchase of software to be used in internal
business processes be capitalized and amortized over the estimated useful life
of the software. SOP 98-1 is effective for financial statements issued for
fiscal years beginning after December 15, 1998. Adoption of SOP 98-1 is not
expected to have a material effect on the results of Operations of OrCAD.
LEGAL PROCEEDINGS
From time to time, OrCAD becomes involved in ordinary, routine or
regulatory legal proceedings incidental to the business of OrCAD. OrCAD is not
presently a party to any litigation, the outcome of which would have a material
adverse effect on OrCAD's business, financial condition or results of
operations.
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PART II - OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES
During the third quarter of 1998, the Company sold securities without
registration under the Securities Act of 1933 (the "Securities Act") upon the
exercise of stock options granted under the Company's stock option plans. An
aggregate of 5,894 shares of Common Stock were issued at exercise prices ranging
from $.35 to $3.50. These transactions were effected in reliance upon Rule 701
promulgated pursuant to the authority of the Securities and Exchange Commission
under Section 3(b) of the Securities Act.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Agreement and Plan of Reorganization*
10.1 Employment Agreement with Michael F. Bosworth Dated September
17, 1998
10.2 Employment Agreement with William Cibulsky Dated September 17,
1998
10.3 Employment Agreement with Donald G. Tannenbaum Dated September
17, 1998
10.4 Employment Agreement with Stuart Harrington Dated September 17,
1998
10.5 Employment Agreement with James M. Plymale Dated September 17,
1998
10.6 Employment Agreement with P. David Bundy Dated September 17,
1998
10.7 Employment Agreement with Phillip J. Kilcoin Dated September 17,
1998
10.8 Employment Agreement with Graham K. Sheldon Dated September 17,
1998
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on October 2, 1998, relating to the
Agreement and Plan of Reorganization (the "Merger Agreement") among Summit
Design, Inc., Hood Acquisition Corp., and OrCAD.
* Hereby incorporated by reference to the Company's report on Form 8-K filed on
October 2, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OrCAD, Inc.
Dated: November 13, 1998 /s/ P. David Bundy
--------------------------------------------
Vice President, Finance and Secretary
(Principal Financial and Accounting Officer)
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and Michael F. Bosworth (Executive), enter this agreement,
effective September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targeted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targeted compensation and benefits for the
Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occurred
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targeted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occured within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
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<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
MICHAEL BOSWORTH ORCAD, INC.
Sign: /s/ Michael F. Bosworth By: /s/ P. David Bundy
----------------------- ------------------
Date: September 17, 1998 Print: P. David Bundy
Title: Vice President of Finance,
Secretary and Chief Financial
Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
Michael F. Bosworth September 16, 1998
- ------------------- ------------------
Name Date
1. Position: President & CEO
2. Base Salary (Annual): $185,000
3. Target Incentive (Annual): $115,000
4. Severance Period: 12 Months
5. Other Benefits: Medical, Dental, Vision, Life
Insurance
OrCAD, Inc.
By: /s/ Michael F. Bosworth By: /s/ P. David Bundy
------------------- ------------------
Print: Michael F. Bosworth Print: P. David Bundy
Title: Chairman of the Board, Title: Vice President of Finance,
President and Chief Executive Secretary and Chief Financial
Officer Officer
Date: September 17, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and William Cibulsky (Executive), enter this agreement, effective
September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targetted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targetted compensation and benefits for
the Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occured
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targetted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occured within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page 4 -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
WILLIAM E. CIBULSKY ORCAD, INC.
Sign: /s/ William E. Cibulsky By: /s/ Michael F. Bosworth
----------------------- -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief Executive
Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
William Cibulsky September 17, 1998
- ---------------- ------------------
Name Date
1. Position: Senior Vice President of Sales
2. Base Salary (Annual): $140,000
3. Target Incentive (Annual): $100,000
4. Severance Period: 3 Months
5. Other Benefits: Medical, Dental, Vision, Life
Insurance
OrCAD, Inc.
By: /s/ William E. Cibulsky By: /s/ Michael F. Bosworth
----------------------- -----------------------
Print: William E. Cibulsky Print: Michael F. Bosworth
Title: Senior Vice President of Sales Title: Chairman of the Board,
President and Chief Executive
Officer
Date: September 17, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and Donald G. Tannenbaum (Executive), enter this agreement,
effective September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targeted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targetted compensation and benefits for
the Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occurred
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targeted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occurred within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page 4 -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
DONALD G. TANNENBAUM ORCAD, INC.
Sign: /s/ Donald G. Tannenbaum By: /s/ Michael F. Bosworth
------------------------ -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief
Executive Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
Donald G. Tannenbaum September 17, 1998
- -------------------- ------------------
Name Date
1. Position: Vice President of Integration &
Development
2. Base Salary (Annual): $130,000
3. Target Incentive (Annual): $ 20,000
4. Severance Period: 6 Months
5. Other Benefits: Medical, Dental, Vision,
Life Insurance
OrCAD, Inc.
By: /s/ Donald G. Tannenbaum By: /s/ Michael F. Bosworth
---------------------------- ----------------------------
Print: Donald G. Tannenbaum Print: Michael F. Bosworth
Title: Vice President of Integration & Title: Chairman of the Board,
Development President and
Chief Executive Officer
Date: September 17, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and Stuart Harrington (Executive), enter this agreement, effective
September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targeted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targetted compensation and benefits for
the Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occurred
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targeted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occurred within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page 4 -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
STUART A. HARRINGTON ORCAD, INC.
Sign: /s/ Stuart A. Harrington By: /s/ Michael F. Bosworth
------------------------ -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief
Executive Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
Stuart A. Harrington September 16, 1998
- -------------------- ------------------
Name Date
1. Position: President of OrCAD Japan KK
2. Base Salary (Annual): 26,400,000 Yen
3. Target Incentive (Annual):
4. Severance Period: 12 Months
5. Other Benefits: Medical, Dental, Vision,
Life Insurance, Rent,
Company Car
OrCAD, Inc.
By: /s/ Stuart A. Harrington By: /s/ Michael F. Bosworth
---------------------------- ----------------------------
Print: Stuart A. Harrington Print: Michael F. Bosworth
Title: Vice President & President, Title: Chairman of the Board,
OrCAD Japan, K.K. President and
Chief Executive Officer
Date: September 16, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and James M. Plymale (Executive), enter this agreement, effective
September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targeted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targetted compensation and benefits for
the Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occurred
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targeted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occurred within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page 4 -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
JAMES M. PLYMALE ORCAD, INC.
Sign: /s/ James M. Plymale By: /s/ Michael F. Bosworth
--------------------- -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief
Executive Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
James M. Plymale September 16, 1998
- ----------------- ------------------
Name Date
1. Position: Vice President of Marketing
2. Base Salary (Annual): $135,000
3. Target Incentive (Annual): $ 45,000
4. Severance Period: 12 Months
5. Other Benefits: Medical, Dental, Vision,
Life Insurance
OrCAD, Inc.
By: /s/ James M. Plymale By: /s/ Michael F. Bosworth
---------------------------- ----------------------------
Print: James M. Plymale Print: Michael F. Bosworth
Title: Vice President of Marketing Title: Chairman of the Board,
President and
Chief Executive Officer
Date: September 17, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and P. David Bundy (Executive), enter this agreement, effective
September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targeted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targeted compensation and benefits for the
Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occurred
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targeted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occurred within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
P. DAVID BUNDY ORCAD, INC.
Sign: /s/ P. David Bundy By: /s/ Michael F. Bosworth
------------------ -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief Executive
Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
P. David Bundy September 16, 1998
- -------------- ------------------
Name Date
1. Position: Vice President of Finance, CFO
2. Base Salary (Annual): $120,000
3. Target Incentive (Annual): $ 50,000
4. Severance Period: 12 Months
5. Other Benefits: Medical, Dental, Vision, Life
Insurance
OrCAD, Inc.
By: /s/ P. David Bundy By: /s/ Michael F. Bosworth
------------------ -----------------------
Print: P. David Bundy Print: Michael F. Bosworth
Title: Vice President of Finance, Title: Chairman of the Board,
Secretary and Chief Financial President and Chief
Officer Executive Officer
Date: September 17, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and Philip J. Kilcoin (Executive), enter this agreement,
effective September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targetted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targetted compensation and benefits for
the Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occured
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targetted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occured within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page 4 -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
PHILIP J. KILCOIN ORCAD, INC.
Sign: /s/ Philip J. Kilcoin By: /s/ Michael F. Bosworth
--------------------- -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief Executive
Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
Philip J. Kilcoin September 17, 1998
- ----------------- ------------------
Name Date
1. Position: Vice President of Product Operations
2. Base Salary (Annual): $115,000
3. Target Incentive (Annual): $ 25,000
4. Severance Period: 6 Months
5. Other Benefits: Medical, Dental, Vision, Life
Insurance
OrCAD, Inc.
By: /s/ Philip J. Kilcoin By: /s/ Michael F. Bosworth
--------------------- -----------------------
Print: Philip J. Kilcoin Print: Michael F. Bosworth
Title: Vice President of Product Title: Chairman of the Board,
Operations President and Chief Executive
Officer
Date: September 17, 1998 Date: September 17, 1998
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
OrCAD, Inc. (Company), whose address is 9300 SW Nimbus Avenue, Beaverton,
Oregon 97008, and Graham K. Sheldon (Executive), enter this agreement,
effective September 17, 1998.
Executive is an experienced manager of Company's business, and Company
believes Executive's continued employment by Company enhances shareholder value
and will contribute to Company's future success.
Company and Executive have therefore elected to capture in contract certain
policies and rights under which Executive is employed by the Company, intending
thereby not to change any substantive right, but to describe such rights with
clarity.
The parties agree as follows:
1. EMPLOYMENT.
1.1 LENGTH. Executive's employment with Company will continue until
ended as this Agreement provides.
1.2 FULL TIME. Executive will work full time. Executive will devote
Executive's good faith efforts in support of Company's operations and goals,
during the term of this Agreement. While Executive's employment by Company
under this Agreement continues, Executive will not engage in any other
employment without Company's advance written consent.
1.3 EXECUTIVE'S DUTIES. Executive will serve in the Position shown on
Exhibit A, and in that position will assume such duties and perform such tasks
as Company from time to time requires.
2. COMPENSATION PLAN.
2.1 BASE SALARY. As of the date of this Agreement, Company pays
Executive at the rate per year shown as the Base Salary on Exhibit A, payable in
equal increments on Company's standard payroll schedules. Executive's Base
Salary will be reviewed on an annual basis, as with other executives of the
Company.
2.2 INCENTIVE SALARY. Company will pay Executive such incentive
component of salary as may be earned under the terms of any executive incentive
plan put in place by the Company.
2.3 STOCK. Executive has been or may in the future be granted rights to
purchase stock or stock options on the exercise and vesting schedules and terms
and conditions shown in the grant documents. These are referred to as "options"
herein.
2.4 OTHER COMPENSATION. Company will also provide benefits, such as
medical insurance, life insurance, disability insurance, 401(k) plan, vacation
time, sick leave, and other fringe benefits, in accordance with Company's then-
existing policies applicable generally to senior executives.
2.5 OTHER BENEFITS. Any other benefits particularly applicable to
Executive are shown on Exhibit A.
3. TERM AND TERMINATION.
3.1 AT WILL, CONDITIONS. Executive is hired for employment at will,
subject to the
Page 1 -- Executive Employment Agreement
<PAGE>
agreements described here.
3.2 TERMINATION BY COMPANY. Company may terminate Executive's
employment with or without cause. A termination is effective as of the date
specified in the Notice of termination.
3.3 CONSTRUCTIVE TERMINATION. If, without Executive's advance written
consent, Company reassigns Executive to duties not reasonably considered of
equivalent or greater responsibility, changes Executive's title to one not
reasonably considered equivalent or greater, or reduces Executive's overall
targeted compensation (that is, the sum of base and incentive compensation), or
directs Executive to report to a level of management below the level to which
Executive previously reported (measured by reference to levels of management
intervening below the President of the parent company), Executive may elect to
treat the change as "constructive termination" by the Company, and may resign
from the Company and be treated as if terminated without cause. To do so,
Executive must give Notice of Executive's resignation, citing the specific
events that constitute constructive termination, within ninety days of the event
that constitutes the constructive termination, or lose the right to make that
declaration with respect to that particular event.
3.4 CAUSE. For the purposes of this Agreement, termination is "with
cause" if the Executive's employment is terminated because Executive is
convicted of a crime involving the company's business; or has misappropriated
Company monies or assets; or has committed fraud; or has been grossly negligent
in or willfully fails to accomplish the performance of his duties, provided that
before terminating Executive for such reasons, the Company shall have given
Executive at least five days' Notice of the allegations with an opportunity to
respond and provide evidence refuting them within that period.
3.5 EFFECT OF VOLUNTARY RESIGNATION OR WITH CAUSE TERMINATION. If
Executive resigns voluntarily, or is properly terminated for cause, pay and
benefits will cease as of the effective date of the resignation or termination.
Executive will also forfeit any entitlement to the rights on change in control
described in Section 4. Executive will use good faith efforts to provide
Company as much notice as reasonably possible of any such resignation.
3.6 COMPENSATION ON TERMINATION WITHOUT CAUSE BY COMPANY. If
Executive is terminated without cause, or resigns following constructive
termination as described above, Company will give Executive severance benefits
as follows.
3.6.1 COMPENSATION EARNED THROUGH TERMINATION DATE. On
termination by Company without cause, Company will pay Executive's Base
Salary, any commissions, and any incentive component of salary, all as
earned through the termination date, and a buyout of accumulated but unused
vacation time in accordance with then-effective Company policies concerning
rights to accumulate such time, all to be paid within thirty days of
termination.
3.6.2 BASE PAY. On termination by Company without cause, Company
will in addition pay Executive's targetted compensation and benefits for
the Severance Period defined in Exhibit A. Payment of the Executive's Base
Salary and incentive compensation shall be made on Company's standard
payroll schedules from the date of termination, as if the Executive had not
been terminated.
3.7 COMMITMENT CONCERNING COMPETITION. While Company continues to pay
Executive's salary during Executive's employment or after termination, unless
Company consents in writing, Executive will not consult for, be employed by,
serve on the board of, or otherwise take other than a passive investor role in,
any company that is in the business of automated electronic design; nor will
Executive encourage, influence, or assist any employee of the Company in
securing other
Page 2 -- Executive Employment Agreement
<PAGE>
employment with a competitor so defined. For purposes of this paragraph, an
"employee" includes anyone who is then employed by the Company, or who has
voluntarily resigned, or been terminated for cause, from his or her position
with the Company within the previous three months.
3.8 OFFSET. To the extent permissible under applicable law, without
prejudice to other remedies, Company may offset any amounts Executive owes
Company against any amounts (net of taxes and other deductions) due employee
upon termination or thereafter.
4. CHANGE IN CONTROL AND ACQUISITION RESTRUCTURING POLICIES.
4.1 "CONTROL CHANGE." A "Control Change" is the sale of substantially
all Company's assets to, or acquisition of a majority of Company's voting stock
or entry into a voting or common control agreement covering a majority of the
company's voting stock by, an entity (or a set of entities under effective
common control) in which those controlling the acquiring entity or entities are
not the same as those who have majority ownership and effective control of
Company before the sale or acquisition.
4.2 "CONTROL CHANGE WINDOW." The Control Change Window begins thirty
days before the LOI Date, and ends one year after the date on which the Control
Change becomes effective.
4.3 "LOI DATE." The "LOI Date" is the date a letter of intent, term
sheet, or other similar document is first executed by the Company or one or more
of its Shareholders and by anyone acting on behalf of the entity with respect to
which a Control Change later occurs, which document evidences an agreement in
principle to pursue a course of action that is intended to result in a Control
Change. If no such document is executed, the "LOI Date" shall be regarded as
being the date on which a definitive merger agreement is approved by the Board
of Directors, or the date on which the Control Change occurs, whichever is
earlier.
4.4 EQUIVALENT TREATMENT TRANSACTIONS. The Company may engage in
acquisitions, mergers, or other similar transactions that do not amount to a
Control Change, but as a result of which the Company determines to restructure
its executive team. If the Board of Directors (or any committee of the Board
charged with responsibility for executive compensation) in its sole discretion,
determines that Executive's employment was (or is to be) terminated without
cause due to changes in the executive team occasioned by such a transaction,
then that transaction will be treated as one in which a Control Change occurred
on the date Executive's employment is terminated, or on the date of the
determination, whichever is later.
4.5 SPECIAL BENEFITS ON TERMINATION DURING CONTROL CHANGE WINDOW. If
Executive is terminated without cause within a Control Change Window, then
Company shall provide these special benefits:
4.5.1 OPTIONS. The Company will accelerate the exercise date of
Executive's options, such that, for each year during which Executive has
been employed by the Company, measured through the date on which
Executive's employment terminates, 25% of all options that were not
otherwise exercisable as of the date of termination shall become
exercisable, provided that if such acceleration alone stands in the way of
allowing "pooling of interests" accounting treatment for such acquisition,
such acceleration would not take place. Service with companies acquired by
the Company shall count toward the service time total thus computed. If
less than all options are accelerated under this paragraph, acceleration
shall occur in ascending order by option exercise price.
4.5.2 SALARY. The Company shall either provide the targeted
compensation
Page 3 -- Executive Employment Agreement
<PAGE>
continuation benefits of Section 3.6.2, or if it is more favorable to the
Executive, pay Executive target (base plus incentive) salary such that, for
each year during which Executive has been employed by the Company,
Executive receives three months of continuation at target salary levels, up
to but not exceeding one full year of such continuation (subject to all
applicable withholding.) Such salary shall be paid over the course of the
continuation period, in accordance with the Company's usual payroll
schedules.
4.6 COMPANY'S ELECTION TO DECLARE COVERAGE UNDER THIS SECTION. If as of
the date of termination the Control Change has not yet occurred, but the Company
is within a period that will become a control change window upon the effective
date of the applicable Control Change, the Company may elect nonetheless to
treat the termination under this Section 4, by Notice to Executive.
4.7 COMPANY'S OBLIGATION IF COVERAGE IS NOT DECLARED. If Executive is
terminated without benefits under this Section 4 and it later becomes apparent
that the termination occurred within a Control Change Window, Company shall make
available to Executive the benefits to which Executive was entitled under this
Section 4, by Notice, provided that benefits paid to Executive under Section
3.6.2 and 3.6.3 shall be offset against benefits otherwise due hereunder. If
Executive's options do not as of the date of Notice have at least 30 days
remaining in which they can be exercised (or if the options cannot be, or the
Board determines it is inadvisable that they be, extended for such a period)
then the Board may elect, instead of allowing the acceleration of unvested
options otherwise contemplated hereunder, to provide Executive stock whose fair
market value is equivalent to the in-the-money value of the unvested options
that would accelerate hereunder, measured as of the last reported sale on the
NASDAQ system of the Company's common stock on the day of (or if none, prior to
the day of) termination.
5. OTHER MATTERS.
5.1 NOTICE. Notice to Executive shall be sent to Executive's most
recent address shown in Company's personnel records. Notice to Company shall be
sent to Company's headquarters address, marked attention: Chief Financial
Officer. Either party may change its address by Notice. Notice shall be
effective when the person to whom it is sent actually gets it, if sent by any
method that leaves a paper or electronic record in the hands of the recipient.
If sent certified or registered mail, postage prepaid, return receipt requested,
to the proper address this section defines, notice shall be considered effective
whether or not actually received on the date the return receipt shows the notice
was accepted, refused, or returned undeliverable.
5.2 SEVERABILITY. Each clause of this agreement is severable. If any
clause is ruled void or unenforceable, the balance of the agreement shall
nonetheless remain in effect.
5.3 NON-WAIVER. A waiver of one or more breaches of any clause of this
agreement shall not act to waive any other breach, whether of the same or
different clauses.
5.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company, its successors and assigns and shall be binding upon and
inure to the benefit of Executive, and Executive's administrators, executors,
legatees, and heirs. This Agreement shall not be assigned by Executive.
5.5 GOVERNING LAW. This agreement is entered in, and is governed by,
the laws of the state of Oregon.
5.6 JURISDICTION, SERVICE, INJUNCTIVE RELIEF. Jurisdiction over
disputes arising under this Agreement rests exclusively in the state or federal
courts located in Multnomah County, Oregon,
Page 4 -- Executive Employment Agreement
<PAGE>
and each party consents to that jurisdiction. Each party consents to service of
process through the method prescribed for notice. As violation of the non-
competition or non-solicitation obligations of this agreement, or those related
to rights in intellectual property, would result in damage to Company that could
not be cured by an award of money alone, Company shall be entitled to injunctive
relief in cases where a violation of those obligations is shown.
5.7 ATTORNEYS' FEES. The prevailing party in any suit, action,
arbitration, or appeal filed or held concerning this agreement shall be entitled
to reasonable attorneys' fees and the actual, reasonably necessary costs of the
proceeding, as determined by the court.
5.8 INTEGRATION. This agreement supersedes all prior employment
agreements or understandings between the parties, written or oral, and
supplements the Executive's Stock Option Agreements, and Executive's agreements
with the Company concerning proprietary and confidential information and
inventions. This agreement may be modified only in writing signed by the
original parties hereto, or by their successors or superiors in office.
GRAHAM K. SHELDON ORCAD, INC.
Sign: /s/ Graham K. Sheldon By: /s/ Michael F. Bosworth
--------------------- -----------------------
Date: September 17, 1998 Print: Michael F. Bosworth
Title: Chairman of the Board,
President and Chief
Executive Officer
Date: September 17, 1998
Page 5 -- Executive Employment Agreement
<PAGE>
EXHIBIT A TO EMPLOYMENT AGREEMENT
Compensation Package
Graham K. Sheldon September 16, 1998
- ----------------- ------------------
Name Date
1. Position: Vice President of Operations
2. Base Salary (Annual): $100,000
3. Target Incentive (Annual): $ 20,000
4. Severance Period: 12 Months
5. Other Benefits: Medical, Dental, Vision,
Life Insurance
OrCAD, Inc.
By: /s/ Graham K. Sheldon By: /s/ Michael F. Bosworth
---------------------------- ----------------------------
Print: Graham K. Sheldon Print: Michael F. Bosworth
Title: Vice President of Operations Title: Chairman of the Board,
President and
Chief Executive Officer
Date: September 17, 1998 Date: September 17, 1998
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