-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OjXzXVP3o8JcL2rV0oaXWrUlzGH6Tt9RE2thtgBNa4w8ozH31vp9ig+BzY/wh1bV CxK1IOl4PCxtY7/qLJR99Q== 0000927016-97-001311.txt : 19970509 0000927016-97-001311.hdr.sgml : 19970509 ACCESSION NUMBER: 0000927016-97-001311 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARAMETRIC TECHNOLOGY CORP CENTRAL INDEX KEY: 0000857005 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042866152 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18059 FILM NUMBER: 97598207 BUSINESS ADDRESS: STREET 1: 128 TECHNOLOGY DR CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6173985000 MAIL ADDRESS: STREET 1: 128 TECHNOLOGY CORP CITY: WALTHAM STATE: MA ZIP: 02154 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended: MARCH 29, 1997 Commission File Number: 0-18059 -------------- ------- PARAMETRIC TECHNOLOGY CORPORATION --------------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2866152 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 128 TECHNOLOGY DRIVE, WALTHAM, MA 02154 ---------------------------------------- (Address of principal executive offices, including zip code) (617) 398-5000 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---------- ---------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, par value $.01 per share 127,563,454 - -------------------------------------- ----------------------------- Class Outstanding at March 29, 1997 Total number of pages: 12 Exhibit index appears on page 12 PARAMETRIC TECHNOLOGY CORPORATION INDEX -----
Page ---- PART I FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheet 3 March 29, 1997 and September 30, 1996 Consolidated Statement of Income 4 Three and six months ended March 29, 1997 and March 30, 1996 Consolidated Statement of Cash Flows 5 Six months ended March 29, 1997 and March 30, 1996 Notes to Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of 7 Financial Condition and Results of Operations PART II OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 10 Item 6 Exhibits 10 SIGNATURE 11
2 PARAMETRIC TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEET (amounts in thousands)
ASSETS March 29, 1997 September 30, 1996 -------------- ------------------ (unaudited) Current assets: Cash and cash equivalents $212,088 $201,614 Short-term investments 289,528 232,602 Accounts receivable, net 138,439 117,273 Other current assets 16,347 10,561 -------- -------- Total current assets 656,402 562,050 Marketable investments -- 21,896 Property and equipment, net 40,745 36,517 Other assets 45,395 38,754 -------- -------- Total assets $742,542 $659,217 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 45,592 $ 39,416 Accrued compensation 35,540 32,186 Deferred revenue 70,431 56,420 Income taxes 31,962 17,970 -------- -------- Total current liabilities 183,525 145,992 Other liabilities 744 793 Stockholders' equity: Preferred stock, $.01 par value; 5,000 shares authorized; none issued -- -- Common stock, $.01 par value; 350,000 shares authorized; 128,148 and 127,452 shares issued 1,281 1,275 Additional paid-in capital 230,952 207,039 Retained earnings 362,955 306,638 Treasury stock, at cost, 585 and 23 shares (32,081) (1,164) Other equity (4,834) (1,356) -------- -------- Total stockholders' equity 558,273 512,432 -------- -------- Total liabilities and stockholders' equity $742,542 $659,217 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 PARAMETRIC TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF INCOME (amounts in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended -------------------- -------------------- March 29, March 30, March 29, March 30, 1997 1996 1997 1996 --------- --------- --------- --------- Revenue: License $147,054 $103,420 $285,496 $194,850 Service 50,958 37,073 96,017 71,040 -------- -------- -------- -------- Total revenue 198,012 140,493 381,513 265,890 -------- -------- -------- -------- Cost of revenue: License 2,737 987 4,728 1,766 Service 15,824 12,402 31,381 24,077 -------- -------- -------- -------- Total cost of revenue 18,561 13,389 36,109 25,843 -------- -------- -------- -------- Gross profit 179,451 127,104 345,404 240,047 -------- -------- -------- -------- Operating expenses: Sales and marketing 77,263 56,303 148,924 106,754 Research and development 13,292 8,901 25,426 16,726 General and administrative 9,719 6,814 18,424 12,748 -------- -------- -------- -------- Total operating expenses 100,274 72,018 192,774 136,228 -------- -------- -------- -------- Operating income 79,177 55,086 152,630 103,819 Other income, net 2,450 2,651 5,075 5,674 -------- -------- -------- -------- Income before income taxes 81,627 57,737 157,705 109,493 Provision for income taxes 28,569 20,900 55,196 39,636 -------- -------- -------- -------- Net income $ 53,058 $ 36,837 $102,509 $ 69,857 ======== ======== ======== ======== Net income per share $ 0.39 $ 0.28 $ 0.76 $ 0.53 ====== ====== ====== ====== Weighted average number of common and dilutive common equivalent shares outstanding 135,328 133,329 135,212 132,982 ======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 4 PARAMETRIC TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (amounts in thousands) (unaudited)
Six Months Ended ---------------------------------- March 29, 1997 March 30, 1996 ----------------- --------------- Cash flows from operating activities: Net income $ 102,509 $ 69,857 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,338 6,297 Deferred income taxes 754 5,698 Changes in assets and liabilities: Increase in accounts receivable (26,498) (13,357) Increase in other current assets (3,466) (6,900) (Increase) decrease in other assets (958) 1,626 Increase in accounts payable and accrued expenses 7,672 8,128 Increase in accrued compensation 4,536 2,396 Increase in deferred revenue 16,157 6,989 Increase in income taxes 28,158 9,177 --------- --------- Net cash provided by operating activities 139,202 89,911 --------- --------- Cash flows from investing activities: Additions to property and equipment, net (13,427) (16,252) Additions to capitalized and purchased software costs (814) (400) Proceeds from sale of investments 113,702 30,193 Purchases of investments (156,811) (107,795) --------- --------- Net cash used by investing activities (57,350) (94,254) --------- --------- Cash flows from financing activities: Repayment of long-term obligations (91) (63) Proceeds from issuance of common stock 28,185 19,311 Purchases of treasury stock (95,020) (25,538) --------- --------- Net cash provided (used) by financing activities (66,926) (6,290) --------- --------- Effects of exchange rate changes on cash (4,452) (1,582) --------- --------- Net increase (decrease) in cash and cash equivalents 10,474 (12,215) Cash and cash equivalents at beginning of period 201,614 145,638 --------- --------- Cash and cash equivalents at end of period $ 212,088 $ 133,423 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 5 PARAMETRIC TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION: The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, and have been prepared by the Company in accordance with generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair presentation of the Company's financial position, results of operations and cash flows at the dates and for the periods indicated. While the Company believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10- K for the fiscal year ended September 30, 1996. The results of operations for the three-month and six-month periods ended March 29, 1997 are not necessarily indicative of the results expected for the full fiscal year. 2. NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 establishes a different method of computing net income per share than is currently required under the provisions of Accounting Principles Board Opinion No. 15. Under SFAS No. 128, the Company will be required to present both basic net income per share and diluted net income per share. Basic net income per share for the three-month and six-month periods ended March 29, 1997 would have been $.42 and $.80 per share, respectively as compared with $.29 and $.55 per share for the corresponding periods in fiscal 1996. The impact of SFAS No. 128 on the calculation of diluted net income per share for these quarters is not expected to be materially different from primary earnings per share. The Company plans to adopt SFAS No. 128 in its first quarter for fiscal 1998 and at that time all historical net income per share data presented will be restated to conform to the provisions of SFAS No. 128. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Parametric Technology Corporation is the CAD/CAM/CAE (computer-aided design, manufacturing and engineering) industry's leading supplier of software tools used to automate the mechanical development of a product from its conceptual design through its release into manufacturing. Information provided by the Company, including information contained in this Quarterly Report on Form 10-Q, or by its spokespersons from time to time may contain forward-looking statements concerning projected financial performance, industry segment growth, product development and commercialization or other aspects of future operations. In particular, the statements in this Report concerning anticipated revenue, geographical growth rates and projected expenses made pursuant to the safe harbor established by recent securities legislation are based on the assumptions and expectations of the Company's management at the time such statements are made. The Company cautions investors that its performance (and, therefore, any forward-looking statement) is subject to risks and uncertainties. Important information about the basis for those assumptions including factors that may cause actual results to vary from those forecast are discussed below and are also contained in "Important Factors Regarding Future Results" included in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in the 1996 Annual Report to Stockholders, incorporated herein by reference. RESULTS OF OPERATIONS Revenue, including license and service revenues, for the three-month and six- month periods ended March 29, 1997 was $198,012,000 and $381,513,000, respectively, compared with $140,493,000 and $265,890,000 for the three-month and six-month periods ended March 30, 1996. These totals represent increases of 41% for the three-month period and 43% for the six-month period over the corresponding periods in fiscal 1996. Net income, as a percentage of revenue, was 27% for the three-month and six-month periods ended March 29, 1997 compared to 26% in the corresponding periods in fiscal 1996. This represents an increase in net income of 44% and 47% from the three-month and six-month periods ended March 30, 1996. The Company derives its revenue from the sale and support of software used in the mechanical segment of the CAD/CAM/CAE industry. Revenue growth in the three- month and six-month periods ended March 29, 1997 reflects the continued worldwide acceptance of the Company's products and services and the Company's ongoing investment in expanding its worldwide direct sales force. License revenue was $147,054,000 and $285,496,000 for the three-month and six-month periods ended March 29, 1997, a 42% and 47% increase from $103,420,000 and $194,850,000 for the corresponding periods in fiscal 1996. This growth results from an increase in the number of seats of software licensed and from a higher price realized per seat. A seat of software generally consists of various software products configured to serve the needs of a single end user. The Company licensed 7,475 and 14,459 seats of software respectively in the three- month and six-month periods ended March 29, 1997, an increase of 37% and 38% from 5,446 and 10,454 seats of software in the comparable periods in fiscal 1996. The increase in the number of seats licensed was achieved as a result of continued market penetration of the Company's products. The average price per seat during the three months and six months ended March 29, 1997 was $19,700, compared with an average price of $19,000 and $18,600 for the same periods in fiscal 1996. The average price per seat has increased as a result of customers purchasing configurations of seats containing more modules and an increase in the percentage of the Company's revenue derived from international markets, where the prices have typically been higher than in North America. Service revenue is derived from the sale of software maintenance contracts and the performance of training and consulting services. Service revenue was $50,958,000 and $96,017,000 for the three-month and six-month periods ended March 29, 1997, an increase of 37% and 35% from $37,073,000 and $71,040,000 for the comparable periods in fiscal 1996. The increase in service revenue is a result of the growth in the Company's installed customer base and, to a lesser extent, increased training and consulting services performed for these customers. The Company derived 56% and 57% of revenue from sales to international customers in the three-month and six-month periods ended March 29, 1997, compared with 55% and 54% for the same periods in fiscal 1996. The increase in international revenue is primarily attributable to continued international acceptance of the Company's products and services and the growth 7 in the sales force in Europe and Asia/Pacific, although revenue derived from Japan was weaker than anticipated due in part to the strengthening of the dollar in relationship to the yen. The Company has taken measures to strengthen results in the Asia/Pacific region and anticipates that total revenue will increase throughout fiscal 1997 from continued penetration in the mechanical CAD/CAM/CAE industry, and that international revenue will continue to account for a significant portion of that total growth; however, growth in international revenue will continue to be affected by foreign exchange rates and the stronger dollar's impact on the Company's ability to forecast quarter to quarter results. Although the Company expects revenues to grow throughout fiscal 1997, there can be no assurance that quarterly revenue growth rates and/or geographical growth rates will be comparable with those achieved in the three-month and six-month periods ended March 29, 1997. The rate of continued revenue growth throughout the remainder of fiscal 1997 depends upon the strength of the U.S. dollar as well as the Company's ability to implement recent measures taken to strengthen results in the Asia/Pacific region, to adequately manage the Company's exposure to foreign currency fluctuations, to continue to penetrate the mechanical segment of the CAD/CAM/CAE industry, to attract and retain skilled personnel, and to deliver timely product enhancements. Cost of license revenue consists of the amortization of capitalized computer software costs and costs associated with reproducing software, printing user manuals, royalties, packaging and shipping. The increase in cost of license revenue is a result of the increase in the number of seats licensed and the royalty costs associated with those licenses during the three-month and six- month periods ended March 29, 1997 as compared to the corresponding periods in fiscal 1996. Cost of service revenue includes the costs associated with training and consulting personnel, such as salaries and related costs and travel, and costs related to software maintenance, including costs incurred for customer support personnel and the release of maintenance updates. The increase in cost of service revenue resulted primarily from growth in the staffing necessary to generate and support increased worldwide service revenue and provide ongoing quality customer support to the Company's increasing installed base. Combined, these expenses increased to $18,561,000 and $36,109,000 for the three-month and six-month periods ended March 29, 1997 from $13,389,000 and $25,843,000 for the corresponding periods in fiscal 1996. Total cost of revenue as a percentage of revenue remained stable between 9% and 10% for both the three-month and six-month periods ended March 29, 1997 and the corresponding periods in fiscal 1996. Sales and marketing expenses primarily include salaries, sales commissions, travel and facility costs. Sales and marketing expenses increased to $77,263,000 and $148,924,000 for the three-month and six-month periods ended March 29, 1997 from $56,303,000 and $106,754,000 for the corresponding period in fiscal 1996. These costs decreased as a percentage of revenue to 39% for both the three-month and six-month periods ended March 29, 1997, compared with 40% for the comparable periods in fiscal 1996. The absolute increase in these expenses was due primarily to worldwide expansion of the sales force and sales commissions associated with higher revenue. Total sales and marketing headcount increased to 1,877 at March 29, 1997, an increase of 36% from 1,379 at March 30, 1996. The Company expects to continue the growth of its worldwide sales and marketing organization during fiscal 1997, reflecting the Company's commitment to focus its resources on increasing its installed base and to continue to expand its global market penetration. The Company's ability to meet this expectation depends upon its ability to attract and retain highly skilled technical, managerial and sales personnel. The Company continued to make significant investments in research and development, consisting principally of salaries and benefits, expenses associated with product translations, costs of computer equipment used in software development, and facility expenses. Research and development expenses increased to $13,292,000 and $25,426,000 for the three-month and six-month periods ended March 29, 1997 from $8,901,000 and $16,726,000 for the corresponding periods in fiscal 1996. Total research and development expenses increased to 7% of revenue for the three-month and six-month periods ended March 29, 1997, compared with 6% for the same periods in fiscal 1996. The Company believes that research and development expenditures are essential to maintaining its competitive position in the mechanical CAD/CAM/CAE industry and expects the expenditure levels to increase in absolute dollars throughout fiscal 1997. General and administrative expenses include the costs of corporate, finance, information technology, human resources and administrative functions of the Company. These expenses increased to $9,719,000 and $18,424,000 for the three- month and six-month periods ended March 29, 1997 from $6,814,000 and $12,748,000 for the corresponding periods in fiscal 1996. General and administrative expenses as a percentage of revenue remained constant at 5% for the three-month and six-month periods ended March 29, 1997 and March 30, 1996. The absolute increase in these expenses was primarily due to the hiring of additional employees necessary to support the Company's worldwide growth. 8 Other income, net, primarily includes interest income and expense and foreign currency gains and losses. Other income decreased to $2,450,000 and $5,075,000 for the three-month and six-month periods ended March 29, 1997 compared with $2,651,000 and $5,674,000 for the corresponding periods in fiscal 1996. As the international portion of the Company's business continues to increase, a growing percentage of the Company's revenue and expenses is transacted in foreign currencies. In order to reduce its exposure to fluctuations in foreign exchange rates, the Company engages in hedging transactions involving the use of forward foreign exchange contracts in the primary European and Asian currencies. The Company's effective tax rate for the three-month and six-month periods ended March 29, 1997 was 35%, compared with 36.2% for the same periods in fiscal 1996. The difference between the effective and statutory federal tax rate was due primarily to the benefits of tax-exempt interest income and the tax benefits from the use of the foreign sales corporation, offset by the impact of state income taxes. The number of worldwide employees increased 32% to 3,133 at March 29, 1997 compared with 2,365 at March 30, 1996. Employment increased significantly to support higher revenues and international expansion, with the largest portion of this growth occurring in the sales department. LIQUIDITY AND CAPITAL RESOURCES As of March 29, 1997, the Company had $212,088,000 of cash and cash equivalents and $289,528,000 of investments. Net cash generated by operating activities and proceeds from issuance of the Company's stock under stock plans provided sufficient resources to fund the Company's headcount growth, capital asset needs and stock repurchases for the six months ended March 29, 1997. Net cash provided by operating activities, consisting primarily of net income from operations before depreciation and amortization and increases in working capital, was $139,202,000 for the six-month period ended March 29, 1997 compared with $89,911,000 for the corresponding period in fiscal 1996. Net cash used by investing activities totaled $57,350,000 for the six-month period ended March 29, 1997, compared with $94,254,000 for the corresponding period in fiscal 1996. The decrease is principally due to the proceeds from the sale of investments and the timing associated with those investments. Investment activities consisted primarily of purchases and sales of investments, and additions to property and equipment. The Company acquired $13,427,000 of capital equipment consisting primarily of computer equipment, software, and office equipment to meet the needs resulting from the growth in employee headcount, continued expansion of its worldwide sales and support operations and increased investment in information technologies and in computer workstations to keep field and development employees current with changes in the hardware and software marketplace. For the remainder of fiscal 1997, the Company plans to continue spending at current levels; however, the level of spending will be dependent on various factors, including the growth of the business and general economic conditions. Financing activities, consisting primarily of proceeds from issuance of common stock offset by the purchases of treasury stock, used $66,926,000 for the six months ended March 29, 1997 and $6,290,000 for the six months ended March 30, 1996. The 1997 increase was due principally to higher stock repurchases under the Company's stock repurchase program. On May 12, 1994, the Company announced that its Board of Directors had authorized a plan that allows the Company to repurchase up to 6,000,000 shares of its common stock. The Company intends to repurchase these shares to partially offset the dilution caused by the exercise of stock options under the Company's option plans and the purchase of shares under the employee stock purchase plan. During the three-month and six-month periods ended March 29, 1997, the Company repurchased 977,000 and 1,757,000 shares at a cost of $54,898,500 and $95,020,000, respectively, of which 585,000 remained in treasury on March 29, 1997. Since the inception of the plan, the Company has repurchased 3,850,000 shares. Ongoing repurchases will be funded through the use of available cash, cash generated from operations and cash received from stock option exercises and employee stock purchase plan purchases. The Company believes that existing cash and short-term investment balances, together with cash generated from operations and issuance of the Company's common stock under stock plans, will be sufficient to meet the Company's currently projected working capital, financing and capital expenditure requirements through at least fiscal 1997, subject to the risks and uncertainties referred to herein. 9 PART II - OTHER INFORMATION ITEM 4: Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders of the Company held on February 13, 1997, the stockholders of the Company (1) elected Donald K. Grierson, Oscar B. Marx, III, and Noel G. Posternak as Class I directors of the Company to hold office until the 2000 Annual Meeting of Stockholders (subject to the election and qualification of their successors and to their earlier death, resignation or removal) and no other nominations were made; (2) approved an amendment to the Company's Articles of Organization increasing the number of authorized shares of the Company's common stock from 215,000,000 to 350,000,000; and (3) approved the Company's 1997 Incentive Stock Option Plan. The votes were as follows:
Votes withheld Broker Votes for or opposed Abstentions non-votes ------------- ------------------- ---------------- ------------ (1) Election of Directors: Donald K. Grierson 116,245,374 261,337 -- -- Oscar B. Marx, III 116,245,522 261,189 -- -- Noel G. Posternak 116,243,029 263,682 -- -- (2) Approval of Amendment to Articles of Organization: 110,016,910 5,519,638 231,276 738,887 (3) Approval of 1997 Incentive Stock Option Plan: 106,776,634 8,950,735 289,669 489,673 ITEM 6: Exhibits 10.1 1997 Incentive Stock Option Plan 10.2 Amended and Restated Severance Agreement with Steven C. Walske, dated February 13, 1997 10.3 Amended and Restated Severance Agreement with C. Richard Harrison, dated February 13, 1997 10.4 Amended and Restated Severance Agreement with Edwin J. Gillis, dated February 13, 1997 13.1 Annual Report to Stockholders for the fiscal year ended September 30, 1996 (which is not deemed to be "filed" except to the extent that portions thereof are expressly incorporated by reference in this Quarterly Report on Form 10-Q).
10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PARAMETRIC TECHNOLOGY CORPORATION Date: May 8, 1997 by: /S/ Edwin J. Gillis ------------------------------------ Edwin J. Gillis Executive Vice President of Finance and Administration, Chief Financial Officer and Treasurer 11 EXHIBIT INDEX 10.1* 1997 Incentive Stock Option Plan, as approved by the Stockholders of the Company on February 13, 1997; filed herewith. 10.2* Amended and Restated Severance Agreement with Steven C. Walske, dated February 13, 1997; filed herewith. 10.3* Amended and Restated Severance Agreement with C. Richard Harrison, dated February 13, 1997; filed herewith. 10.4* Amended and Restated Severance Agreement with Edwin J. Gillis, dated February 13, 1997; filed herewith. 13.1 Annual Report to Stockholders for the fiscal year ended September 30, 1996 (which is not deemed to be "filed" except to the extent that portions thereof are expressly incorporated by reference in this Quarterly Report on Form 10-Q); filed as Exhibit 13.1 to the Annual Report on Form 10-K for the fiscal year ended September 30, 1996 and incorporated herein by reference. ___________ *Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of the Company participates. EX-10.1 2 1997 INCENTIVE STOCK OPTION PLAN EXHIBIT 10.1 ------------ PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN 1. PURPOSE The purpose of the Parametric Technology Corporation 1997 Incentive Stock Option Plan (the "Plan") is to attract and retain key employees and consultants of the Company and its Affiliates, to provide an incentive for them to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company. 2. DEFINITIONS "Affiliate" means any business entity in which the Company owns directly or indirectly 50% or more of the total voting power or has a significant financial interest as determined by the Committee. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor law. "Committee" means one or more committees each comprised of not less than two members of the Board appointed by the Board to administer the Plan or a specified portion thereof. If a Committee is authorized to grant Options to a Reporting Person or a "covered employee" within the meaning of Section 162(m) of the Code, each member shall be a "Non- Employee Director" or the equivalent within the meaning of Rule 16b-3 under the Exchange Act or an "outside director" or the equivalent within the meaning of Section 162(m) of the Code, respectively. "Common Stock" or "Stock" means the Common Stock, $.01 par value, of the Company. "Company" means Parametric Technology Corporation. "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, "Designated Beneficiary" means the Participant's estate. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor law. "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time. "Incentive Stock Option" - See Section 6(a). "Nonstatutory Stock Option" - See Section 6(a). "Option" - Unless the context otherwise requires, an Incentive Stock Option or a Nonstatutory Stock Option. "Participant" means a person selected by the Committee to receive an Option under the Plan. "Reporting Person" means a person subject to Section 16 of the Exchange Act. 3. ADMINISTRATION The Plan shall be administered by the Committee, provided that the Board may in any instance perform any of the functions of the Committee. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Committee's decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to grant Options to Participants who are not Reporting Persons or covered employees and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Options for all such Participants and a maximum for any one Participant. 4. ELIGIBILITY All employees and, in the case of Nonstatutory Stock Options, consultants of the Company or any Affiliate, capable of contributing significantly to the successful performance of the Company, other than a person who has irrevocably elected not to be eligible, are eligible to be Participants in the Plan. Incentive Stock Options may be granted only to persons eligible to receive such Options under the Code. 5. STOCK AVAILABLE FOR OPTIONS (a) AMOUNT. Subject to adjustment under subsection (b), Options may be granted under the Plan for up to 6,000,000 shares of Common Stock. If any Option expires or is terminated unexercised or is forfeited or settled in a manner that results in fewer shares outstanding than were granted, the shares subject to such Option, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for grant under the Plan. Common Stock issued through the assumption or substitution of outstanding grants from an acquired 2 company shall not reduce the shares available for grant under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) ADJUSTMENT. In the event of any stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, or other transaction affecting the Common Stock, then (subject in the case of Incentive Stock Options to any limitation required under the Code) (i) the number and kind of shares in respect of which Options may be granted under the Plan, (ii) the number and kind of shares subject to outstanding Options, and (iii) the exercise price with respect to any of the foregoing shall be proportionately adjusted to the extent required equitably to preserve the benefits available hereunder, provided that the number of shares subject to any Option shall always be a whole number, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Option. (c) LIMIT ON INDIVIDUAL GRANTS. The maximum number of shares of Common Stock subject to Options that may be granted to any Participant in the aggregate in any calendar year shall not exceed 1,000,000 shares, subject to adjustment under subsection (b) above. 6. STOCK OPTIONS (a) GRANT OF OPTIONS. Subject to the provisions of the Plan, the Committee may grant Options to purchase shares of Common Stock (i) complying with the requirements of Section 422 of the Code or any successor provision and any regulations thereunder ("Incentive Stock Options") and (ii) not intended to comply with such requirements ("Nonstatutory Stock Options"). The Committee shall determine the number of shares subject to each Option and the exercise price therefor, which shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. No Incentive Stock Option may be granted hereunder more than ten years after the effective date of the Plan. (b) TERMS AND CONDITIONS. Each Option shall have a term no longer than ten years from the date of grant and shall be exercisable at the time(s) and subject to the terms and conditions set forth in the respective form of option certificate included in Appendix I hereto or as the Committee may otherwise specify in the applicable grant or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. (c) PAYMENT. No shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price therefor is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Committee at or after the grant of the Option, by delivery of a note or shares of Common Stock owned by the Participant or by retaining shares otherwise issuable pursuant to the Option, in each case valued at their Fair Market Value on the date of delivery or retention, or such other lawful consideration, including a payment commitment of a financial or brokerage institution, as the Committee may determine. 3 7. TERMINATION OF EMPLOYMENT OR ENGAGEMENT If the Optionholder's status as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason (voluntary or involuntary) and the period of exercisability for a particular Option following such termination has not been specified by the Board, each such Option then held by that Participant shall expire to the extent not previously exercised ten (10) calendar days after such Participant's employment or engagement is terminated, except that - ------ ---- (a) If the Participant is on military, sick leave or other bona ---- fide leave of absence (such as temporary employment by the federal government), - ---- his or her employment or engagement with the Company will be treated as continuing intact if the period of such leave does not exceed ninety (90) days, or, if longer, so long as the Participant's right to reemployment or the survival of his or her service arrangement with the Company is guaranteed either by statute or by contract; otherwise, the Participant's employment or engagement will be deemed to have terminated on the 91st day of such leave. (b) If the Participant's employment is terminated by reason of his or her retirement from the Company at normal retirement age, each Option then held by the Participant, to the extent exercisable at retirement, may be exercised by the Participant at any time within three (3) months after such retirement unless terminated earlier by its terms. (c) If the Participant's employment or engagement is terminated by reason of his or her death, each Option then held by the Participant, to the extent exercisable at the date of death, may be exercised at any time within one year after that date (unless terminated earlier by its terms) by the person(s) to whom the Participant's option rights pass by will or by the applicable laws of descent and distribution. (d) If the Participant's employment or engagement is terminated by reason of his or her becoming permanently and totally disabled, each Option then held by the Participant, to the extent exercisable upon the occurrence of permanent and total disability, may be exercised by the Participant at any time within one (1) year after such occurrence unless terminated earlier by its terms. For purposes hereof, an individual shall be deemed to be "permanently and totally disabled" if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. Any determination of permanent and total disability shall be made in good faith by the Company on the basis of a report signed by a qualified physician. 8. GENERAL PROVISIONS APPLICABLE TO OPTIONS (a) LIMITATIONS ON TRANSFERABILITY. Options shall not be transferable by the recipient other than by will or the laws of descent and distribution and are exercisable during such person's lifetime only by such person or by such person's guardian or legal representative; provided that the Committee may in its discretion waive such restriction in any case. 4 (b) DOCUMENTATION. Each Option under the Plan shall be evidenced by a written stock option certificate delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles. (c) COMMITTEE DISCRETION. Options may be granted alone, in addition to or in relation to any other Option. The terms of each Option need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Option, any determination with respect to an Option may be made by the Committee at the time of grant or at any time thereafter. (d) DIVIDENDS AND CASH OPTIONS. In the discretion of the Committee, any Option under the Plan may provide the Participant with (i) dividends or dividend equivalents payable (in cash or in the form of Options under the Plan) currently or deferred with or without interest, and (ii) cash payments in lieu of or in addition to an Option. (e) CHANGE IN CONTROL. In order to preserve a Participant's rights under an Option in the event of a change in control (as defined by the Committee) of the Company, the Committee in its discretion may, at the time an Option is granted or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise of the Option, (ii) provide for payment to the Participant of cash or other property with a Fair Market Value equal to the value that would have been received upon the exercise of the Option had the Option been exercised upon the change in control, (iii) adjust the terms of the Option in a manner determined by the Committee to reflect the change in control, (iv) cause the Option to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable to Participants and in the best interests of the Company. (f) LOANS. The Committee may authorize the making of loans or cash payments to Participants in connection with the grant or exercise of any Option under the Plan, which loans may be secured by any security, including Common Stock, underlying such Option (provided that the loan shall not exceed the Fair Market Value of the security subject to such Option), and which may be forgiven upon such terms and conditions as the Committee may establish at the time of such loan or at any time thereafter. (g) WITHHOLDING TAXES. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Options under the Plan no later than the date of the event creating the tax liability. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. In the Committee's discretion, the Participant may pay any taxes due with respect to an Option in whole or in part in shares of Common Stock, including shares retained from the Option creating the tax obligation, valued at their Fair Market Value on the date of retention or delivery. 5 (h) FOREIGN NATIONALS. Options may be granted to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws. (i) AMENDMENT OF OPTION. The Committee may amend, modify or terminate any outstanding Option in any respect, including converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. The Committee shall not, without further approval of the stockholders of the Company, authorize the amendment of any outstanding option to reduce the option price. Furthermore, no option shall be canceled and replaced with options having a lower option price or base price without approval of the stockholders of the Company. 9. MISCELLANEOUS (a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be granted an Option. Each employee of the Company or any of its Affiliates is an employee-at-will (that is to say that either the Participant or the Company or any Affiliate may terminate the employment relationship at any time for any reason or no reason at all) unless, and only to the extent, provided in a written employment agreement for a specified term executed by the chief executive officer of the Company or his duly authorized designee or the authorized signatory of any Affiliate. Neither the adoption, maintenance, nor operation of the Plan nor any Option hereunder shall confer upon any employee of the Company or of any Affiliate any right with respect to the continuance of his/her employment by the Company or any such Affiliate nor shall they interfere with the right of the Company (or Affiliate) to terminate any employee at any time or otherwise change the terms of employment, including, without limitation, the right to promote, demote or otherwise re-assign any employee from one position to another within the Company or any Affiliate. (b) EFFECT OF GRANT. Participant shall not earn any Options granted hereunder until such time as all the conditions put forth herein which are required to be met in order to exercise the Option have been fully satisfied. (c) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable Option, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. (d) EFFECTIVE DATE. Subject to the approval of the stockholders of the Company, the Plan shall be effective on the date of its approval by the Board. (e) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, subject to any stockholder approval that the Board determines to be necessary or advisable. 6 (f) GOVERNING LAW. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of Massachusetts. (g) COMPLETE AGREEMENT The Plan constitutes the complete understanding of the parties regarding the subject matter hereof and supersedes all prior contemporaneous agreements of the parties, whether written or oral. This Plan may be amended, altered, or modified only by a writing, specifying such amendment, alteration or modification, signed by both parties. _______________________________________ Adopted at the November 14, 1996 Board of Directors Meeting. Approved at the 1997 Annual Meeting of Stockholders. 7 APPENDIX I No. __________ _________ Shares PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN Incentive Stock Option Certificate Parametric Technology Corporation (the "Company"), a Massachusetts corporation, hereby grants to the person named below an option to purchase shares of Common Stock, $0.01 par value, of the Company (the "Option") under and subject to the Company's 1997 Incentive Stock Option Plan (the "Plan") exercisable on the following terms and conditions set forth below and those attached hereto and in the Plan: Name of Optionholder: ____________________________ Address: ____________________________ ____________________________ Social Security No. ____________________________ Number of Shares: __________________ Option Price: __________________ Date of Grant: __________________ Exercisability Schedule: After , 19 , as to ______ shares, after , 19 , as to ______ additional shares, after , 19 , as to ______ additional shares, after , 19 , as to ______ additional shares, after , 19 , as to ______ additional shares. Expiration Date: __________________ This Option is intended to be treated as an Incentive Stock Option under section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). By acceptance of this Option, the Optionholder agrees to the terms and conditions set forth above and those attached hereto and in the Plan. OPTIONHOLDER PARAMETRIC TECHNOLOGY CORPORATION By:___________________________ By: ____________________________ PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN INCENTIVE STOCK OPTION TERMS AND CONDITIONS 1. Plan Incorporated by Reference. This Option is issued pursuant to ------------------------------ the terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Corporate Counsel of the Company. 2. Option Price. The price to be paid for each share of Common Stock ------------ issued upon exercise of the whole or any part of this Option is the Option Price set forth on the face of this certificate. 3. Exercisability Schedule. This Option may be exercised at any time ----------------------- and from time to time for the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the Expiration Date. 4. Method of Exercise. To exercise this Option, the Optionholder shall ------------------ deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery or a payment commitment of a financial or brokerage institution, as the Committee may approve. Promptly following such notice, the Company will deliver to the Optionholder a certificate representing the number of shares with respect to which the Option is being exercised. 5. No Right To Employment. No person shall have any claim or right to be ---------------------- granted an Option. Each employee of the Company or any of its Affiliates is an employee-at-will (that is to say that either the Participant or the Company or any Affiliate may terminate the employment relationship at any time for any reason or no reason at all) unless, and only to the extent, provided in a written employment agreement for a specified term executed by the chief executive officer of the Company or his duly authorized designee or the authorized signatory of any Affiliate. Neither the adoption, maintenance, nor operation of the Plan nor any Option hereunder shall confer upon any employee of the Company or of any Affiliate any right with respect to the continuance of his/her employment by the Company or any such Affiliate nor shall they interfere with the right of the Company (or Affiliate) to terminate any employee at any time or otherwise change the terms of employment, including, without limitation, the right to promote, demote or otherwise re-assign any employee from one position to another within the Company or any Affiliate. 6. Effect of Grant. Participant shall not earn any Options granted ---------------- hereunder until such time as all the conditions put forth herein and in the Plan which are required to be met in order to exercise the Option have been fully satisfied. 7. Recapitalization, Mergers, Etc. As provided in the Plan, in the event ------------------------------ of corporate transactions affecting the Company's outstanding Common Stock, the Committee shall equitably adjust the number and kind of shares subject to this Option and the exercise price hereunder or make provision for a cash payment. If such transaction involves a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, then in lieu of the foregoing, the Committee may upon written notice to the Optionholder provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period. 8. Option Not Transferable. This Option is not transferable by the ----------------------- Optionholder otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionholder's lifetime, only by the Optionholder. The naming of a Designated Beneficiary does not constitute a transfer. 9. Termination of Employment or Engagement. If the Optionholder's status ---------------------------------------- as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason (voluntary or involuntary) and the period of exercisability for a particular Option following such termination has not been specified by the Board, each such Option then held by that Participant shall expire to the extent not previously exercised ten (10) calendar days after such Participant's employment or engagement is terminated, except that - - ------ ---- (a) If the Participant is on military, sick leave or other bona fide leave of ---- ---- absence (such as temporary employment by the federal government), his or her employment or engagement with the Company will be treated as continuing intact if the period of such leave does not exceed ninety (90) days, or, if longer, so long as the Participant's right to reemployment or the survival of his or her service arrangement with the Company is guaranteed either by statute or by contract; otherwise, the Participant's employment or engagement will be deemed to have terminated on the 91st day of such leave. (b) If the Participant's employment is terminated by reason of his or her retirement from the Company at normal retirement age, each Option then held by the Participant, to the extent exercisable at retirement, may be exercised by the Participant at any time within three (3) months after such retirement unless terminated earlier by its terms. (c) If the Participant's employment or engagement is terminated by reason of his or her death, each Option then held by the Participant, to the extent exercisable at the date of death, may be exercised at any time within one year after that date (unless terminated earlier by its terms) by the person(s) to whom the Participant's option rights pass by will or by the applicable laws of descent and distribution. (d) If the Participant's employment or engagement is terminated by reason of his or her becoming permanently and totally disabled, each Option then held by the Participant, to the extent exercisable upon the occurrence of permanent and total disability, may be exercised by the Participant at any time within one (1) year after such occurrence unless terminated earlier by its terms. For purposes hereof, an individual shall be deemed to be "permanently and totally disabled" if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. Any determination of permanent and total disability shall be made in good faith by the Company on the basis of a report signed by a qualified physician. 10. Compliance with Securities Laws. It shall be a condition to the ------------------------------- Optionholder's right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issuance upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company's Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Optionholder shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Optionholder, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law. 11. Payment of Taxes. The Optionholder shall pay to the Company, or make ---------------- provision satisfactory to the Company for payment of, any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other Federal or state taxes imposed on the sale of the shares to be paid by the Optionholder. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Optionholder. 12. Notice of Sale of Shares Required. The Optionholder agrees to notify --------------------------------- the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Option if such disposition occurs within two years of the date of the grant of this Option or within one year after such purchase. Adopted November 14, 1996 No._________ _________ Shares PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN Nonstatutory Stock Option Certificate Parametric Technology Corporation (the "Company"), a Massachusetts corporation, hereby grants to the person named below an option to purchase shares of Common Stock, $0.01 par value, of the Company (the "Option") under and subject to the Company's 1997 Incentive Stock Option Plan (the "Plan") exercisable on the following terms and conditions set forth below and those attached hereto and in the Plan: Name of Optionholder: ____________________________ Address: ____________________________ ____________________________ Social Security No. ____________________________ Number of Shares: __________________ Option Price: __________________ Date of Grant: __________________ Exercisability Schedule: After , 19 , as to ______ shares, after , 19 , as to ______ additional shares, after , 19 , as to ______ additional shares, after , 19 , as to ______ additional shares, after , 19 , as to ______ additional shares. Expiration Date: __________________ This Option shall not be treated as an Incentive Stock Option under section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). By acceptance of this Option, the Optionholder agrees to the terms and conditions set forth above and those attached hereto and in the Plan. OPTIONHOLDER PARAMETRIC TECHNOLOGY CORPORATION By: ____________________________ By: ____________________________ PARAMETRIC TECHNOLOGY CORPORATION 1997 INCENTIVE STOCK OPTION PLAN NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS 1. Plan Incorporated by Reference. This Option is issued pursuant to the ------------------------------ terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Corporate Counsel of the Company. 2. Option Price. The price to be paid for each share of Common Stock ------------ issued upon exercise of the whole or any part of this Option is the Option Price set forth on the face of this certificate. 3. Exercisability Schedule. This Option may be exercised at any time and ----------------------- from time to time for the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the Expiration Date. 4. Method of Exercise. To exercise this Option, the Optionholder shall ------------------ deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery or a payment commitment of a financial or brokerage institution, as the Committee may approve. Promptly following such notice, the Company will deliver to the Optionholder a certificate representing the number of shares with respect to which the Option is being exercised. 5. No Right To Employment. No person shall have any claim or right to be ---------------------- granted an Option. Each employee of the Company or any of its Affiliates is an employee-at-will (that is to say that either the Participant or the Company or any Affiliate may terminate the employment relationship at any time for any reason or no reason at all) unless, and only to the extent, provided in a written employment agreement for a specified term executed by the chief executive officer of the Company or his duly authorized designee or the authorized signatory of any Affiliate. Neither the adoption, maintenance, nor operation of the Plan nor any Option hereunder shall confer upon any employee of the Company or of any Affiliate any right with respect to the continuance of his/her employment by the Company or any such Affiliate nor shall they interfere with the right of the Company (or Affiliate) to terminate any employee at any time or otherwise change the terms of employment, including, without limitation, the right to promote, demote or otherwise re-assign any employee from one position to another within the Company or any Affiliate. 6. Effect of Grant. Participant shall not earn any Options granted ---------------- hereunder until such time as all the conditions put forth herein and in the Plan which are required to be met in order to exercise the Option have been fully satisfied. 7. Recapitalization, Mergers, Etc. As provided in the Plan, in the event ------------------------------ of corporate transactions affecting the Company's outstanding Common Stock, the number and kind of shares subject to this Option and the exercise price hereunder shall be equitably adjusted. If such transaction involves a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, then in lieu of the foregoing, the Committee may upon written notice to the Optionholder provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period. 8. Option Not Transferable. This Option is not transferable by the ----------------------- Optionholder otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionholder's lifetime, only by the Optionholder. The naming of a Designated Beneficiary does not constitute a transfer. 9. Termination of Employment or Engagement. If the Optionholder's status ---------------------------------------- as an employee or consultant of (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason (voluntary or involuntary) and the period of exercisability for a particular Option following such termination has not been specified by the Board, each such Option then held by that Participant shall expire to the extent not previously exercised ten (10) calendar days after such Participant's employment or engagement is terminated, except that - ------ ---- (a) If the Participant is on military, sick leave or other bona fide ---- ---- leave of absence (such as temporary employment by the federal government), his or her employment or engagement with the Company will be treated as continuing intact if the period of such leave does not exceed ninety (90) days, or, if longer, so long as the Participant's right to reemployment or the survival of his or her service arrangement with the Company is guaranteed either by statute or by contract; otherwise, the Participant's employment or engagement will be deemed to have terminated on the 91st day of such leave. (b) If the Participant's employment is terminated by reason of his or her retirement from the Company at normal retirement age, each Option then held by the Participant, to the extent exercisable at retirement, may be exercised by the Participant at any time within three (3) months after such retirement unless terminated earlier by its terms. (c) If the Participant's employment or engagement is terminated by reason of his or her death, each Option then held by the Participant, to the extent exercisable at the date of death, may be exercised at any time within one year after that date (unless terminated earlier by its terms) by the person(s) to whom the Participant's option rights pass by will or by the applicable laws of descent and distribution. (d) If the Participant's employment or engagement is terminated by reason of his or her becoming permanently and totally disabled, each Option then held by the Participant, to the extent exercisable upon the occurrence of permanent and total disability, may be exercised by the Participant at any time within one (1) year after such occurrence unless terminated earlier by its terms. For purposes hereof, an individual shall be deemed to be "permanently and totally disabled" if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. Any determination of permanent and total disability shall be made in good faith by the Company on the basis of a report signed by a qualified physician. 10. Compliance with Securities Laws. It shall be a condition to the ------------------------------- Optionholder's right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issuance upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company's Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Optionholder shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Optionholder, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law. 11. Payment of Taxes. The Optionholder shall pay to the Company, or make ---------------- provision satisfactory to the Company for payment of, any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other Federal or state taxes imposed on the sale of the shares to be paid by the Optionholder. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Optionholder. Adopted November 14, 1996 EX-10.2 3 AMENDED & RESTATED AGREEMENT W/WALSKE EXHIBIT 10.2 ------------ AMENDED AND RESTATED AGREEMENT ------------------------------ This Amended and Restated Agreement is entered into as of this 13th day of February, 1997 between Parametric Technology Corporation, a Massachusetts corporation (the "Company"), and Steven C. Walske (the "Executive"), and amends and restates the Agreement dated June 20, 1990, as previously amended by the First Amendment to the Agreement executed on June 15, 1993. WHEREAS, the Executive is the Chairman of the Board and Chief Executive Officer of the Company; and WHEREAS, to provide incentive for the Executive to remain with the Company, the Company desires to make the following arrangements with the Executive concerning his termination of employment; NOW, THEREFORE, the Company and the Executive hereby agree as follows: 1. Termination Notice. The Company agrees that it may not terminate the ------------------ employment of the Executive unless (i) it does so for Cause (as defined below) or (ii) the Company has delivered to the Executive a written notice of such termination of employment (the "Termination Notice") at least six months in advance of the effective date thereof. The duties of the Executive during the period from the date of delivery of a Termination Notice until the termination of his employment shall be as determined by the Board of Directors. 2. Salary. ------ (a) During the period from the date of delivery of a Termination Notice (the "Notice Date") until the earlier of (i) the date six months after the Notice Date, or (ii) the date the Executive commences employment with another company or organization, the Company shall pay to the Executive a salary (the "Severance Period Salary") that is equal, on an annualized basis, to two times the highest annual salary (excluding any bonuses) in effect with respect to the Executive during the six-month period immediately preceding the Termination Notice. (b) In the event that a Change in Status of the Executive occurs prior to a Notice Date, the Company shall pay the Severance Period Salary to the Executive during the period from the effective date of the Change in Status until the earlier of (i) the date six months after such date or (ii) the date the Executive commences employment with another company or organization; and the Company shall have no obligation to make any payments to the Executive under Section 2(a) above. (c) In the event that the Executive remains employed with the Company for a period of six months following the earlier of (i) a Notice Date or (ii) the effective date of a Change in Status, the Company shall pay to the Executive on such six-month anniversary date an amount equal to the most recent fiscal year end bonus paid to the Executive. For purposes of this Agreement, "fiscal year end bonus" shall include all amounts paid to the Executive under any bonus plans or programs of the Company with respect to his services to the Company in the preceding fiscal year. 3. Stock Options. ------------- (a) Effective upon (i) a Change in Control (as defined below) of the Company or (ii) the death or Disability (as defined below) of the Executive, all stock options granted to the Executive and then outstanding under any Stock Option Plan (as defined below) of the Company shall become exercisable in full, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such options; and the Company and the Executive hereby agree that such option agreements are hereby and will be deemed amended to give effect to this provision. (b) Effective upon (i) a termination by the Company of the Executive's employment without Cause or (ii) a Change in Status of the Executive, all stock options granted to the Executive and then outstanding under any Stock Option Plan of the Company shall become exercisable for such number of shares of common stock for which such options would have been exercisable had the Executive's employment with the Company continued for one year following the date of the employment termination or the Change in Status, as the case may be, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such options; and the Company and the Executive hereby agree that such option agreements are hereby amended to give effect to this provision. 4. Definitions. ----------- (a) The Company shall be deemed to have terminated the Executive's employment for "Cause" if it does so (i) for the Executive's willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from the Employee's incapacity due to physical or mental illness or any such actual or anticipated failure after a Change in Status of the Executive), provided that the Company has delivered a written demand for substantial performance to the Executive specifically identifying the manner in which the Company believes that the Executive has not substantially performed his duties and that the Executive has not cured such failure within 30 days after such demand, (ii) for willful conduct by the Executive which is demonstrably and materially injurious to the Company, or (iii) for the Executive's willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by the Executive in connection with his employment by the Company. For purposes of this paragraph, no act or failure to act on the Executive's part shall be deemed "willful" unless done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Company. (b) A "Change in Control" of the Company shall mean the occurrence of any of the following events: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any -2- corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities (other than as a result of acquisitions of such securities from the Company); (ii) individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company) shall be, for purposes of this Agreement, considered to be a member of the Incumbent Board; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) acquires more than 20% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (c) A "Change in Status" of the Executive shall mean the occurrence, without the Executive's written consent, of any of the following circumstances (unless such circumstances constitute an isolated, insubstantial and inadvertent action not taken in bad faith and are fully remedied by the Company within 30 days after receipt of notice thereof given by the Executive): (i) any diminution or change in a manner adverse to the Executive of (A) his title, office or position with the Company, (B) his salary or other benefits, or (C) his duties, responsibilities or employment condition, or (ii) the failure by the Company to pay to the Executive any portion of his compensation within ninety (90) days after such compensation is due. (d) "Disability" shall mean the inability of the Executive, for a period of at least 60 consecutive days, to perform his employment duties as a result of a physical or mental illness or incapacity. (e) A "Stock Option Plan" of the Company shall mean any stock option or equity compensation plan of the Company in effect at any time, including without limitation the 1987 Incentive Stock Option Plan and the 1997 Incentive Stock Option Plan. 5. Term. This Agreement shall continue in effect until February 13, ---- 2000, unless extended by the mutual written consent of the Company and the Executive. -3- 6. Successors. ---------- (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement. 7. Miscellaneous. ------------- (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. (b) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows: If to the Company: ----------------- Parametric Technology Corporation 128 Technology Drive Waltham, MA 02154 Attention: Corporate Counsel If to the Executive: ------------------- Steven C. Walske 164 Chestnut Hill Road Chestnut Hill, MA 02167 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Any Notice or communication shall be deemed to be delivered upon the date of hand -4- delivery, one day following delivery to such overnight courier service, or three days following mailing by registered or certified mail. EXECUTED as of the date first written above. PARAMETRIC TECHNOLOGY CORPORATION By: /S/ C. Richard Harrison ------------------------------------- C. Richard Harrison President and Chief Operating Officer /S/ Steven C. Walske ------------------------------------- Steven C. Walske -5- EX-10.3 4 AMENDED & RESTATED AGREEMENT W/HARRISON EXHIBIT 10.3 ------------ AMENDED AND RESTATED AGREEMENT ------------------------------ This Amended and Restated Agreement is entered into as of this 13th day of February, 1997 between Parametric Technology Corporation, a Massachusetts corporation (the "Company"), and C. Richard Harrison (the "Executive"), and amends and restates the Agreement dated August 19, 1994 with the Executive. WHEREAS, the Executive is the President and Chief Operating Officer of the Company; and WHEREAS, to provide incentive for the Executive to remain with the Company, the Company desires to make the following arrangements with the Executive concerning his termination of employment; NOW, THEREFORE, the Company and the Executive hereby agree as follows: 1. Termination Notice. The Company agrees that it may not terminate the ------------------ employment of the Executive unless (i) it does so for Cause (as defined below) or (ii) the Company has delivered to the Executive a written notice of such termination of employment (the "Termination Notice") at least six months in advance of the effective date thereof. The duties of the Executive during the period from the date of delivery of a Termination Notice until the termination of his employment shall be as determined by the Board of Directors. 2. Salary. ------ (a) During the period from the date of delivery of a Termination Notice (the "Notice Date") until the earlier of (i) the date six months after the Notice Date, or (ii) the date the Executive commences employment with another company or organization, the Company shall pay to the Executive a salary (the "Severance Period Salary") that is equal, on an annualized basis, to two times the highest annual salary (excluding any bonuses) in effect with respect to the Executive during the six-month period immediately preceding the Termination Notice. (b) In the event that a Change in Status of the Executive occurs prior to a Notice Date, the Company shall pay the Severance Period Salary to the Executive during the period from the effective date of the Change in Status until the earlier of (i) the date six months after such date or (ii) the date the Executive commences employment with another company or organization; and the Company shall have no obligation to make any payments to the Executive under Section 2(a) above. 3. Stock Options. ------------- (a) Effective upon (i) a Change in Control (as defined below) of the Company or (ii) the death or Disability (as defined below) of the Executive, all stock options granted to the Executive and then outstanding under any Stock Option Plan (as defined below) of the Company shall become exercisable in full, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such options; and the Company and the Executive hereby agree that such option agreements are hereby and will be deemed amended to give effect to this provision. (b) Effective upon (i) a termination by the Company of the Executive's employment without Cause or (ii) a Change in Status of the Executive, all stock options granted to the Executive and then outstanding under any Stock Option Plan of the Company shall become exercisable for such number of shares of common stock for which such options would have been exercisable had the Executive's employment with the Company continued for one year following the date of the employment termination or the Change in Status, as the case may be, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such options; and the Company and the Executive hereby agree that such option agreements are hereby amended to give effect to this provision. 4. Definitions. ----------- (a) The Company shall be deemed to have terminated the Executive's employment for "Cause" if it does so (i) for the Executive's willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from the Employee's incapacity due to physical or mental illness or any such actual or anticipated failure after a Change in Status of the Executive), provided that the company has delivered a written demand for substantial performance to the Executive specifically identifying the manner in which the Company believes that the Executive has not substantially performed his duties and that the Executive has not cured such failure within 30 days after such demand, (ii) for willful conduct by the Executive which is demonstrably and materially injurious to the Company, or (iii) for the Executive's willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by the Executive in connection with his employment by the Company. For purposes of this paragraph, no act or failure to act on the Executive's part shall be deemed "willful" unless done or omitted to be done by the Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Company. (b) A "Change in Control" of the Company shall mean the occurrence of any of the following events: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock in the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities (other than as a result of acquisitions of such securities from the -2- Company); (ii) individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company) shall be, for purposes of this Agreement, considered to be a member of the Incumbent Board; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) acquires more than 20% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (c) A "Change in Status" of the Executive shall mean the occurrence, without the Executive's written consent, of any of the following circumstances (unless such circumstances constitute an isolated, insubstantial and inadvertent action not taken in bad faith and are fully remedied by the Company within 30 days after receipt of notice thereof by the Executive): (i) any diminution or change in a manner adverse to the Executive of (A) his title, office or position with the Company, (B) his salary or other benefits, or (C) his duties, responsibilities or employment condition, or (ii) the failure by the Company to pay to the Executive any portion of his compensation within ninety (90) days after such compensation is due. (d) "Disability" shall mean the inability of the Executive, for a period of at least 60 consecutive days, to perform his employment duties as a result of a physical or mental illness or incapacity. (e) A "Stock Option Plan" of the Company shall mean any stock option or equity compensation plan of the Company in effect at any time, including without limitation the 1987 Incentive Stock Option Plan and the 1997 Incentive Stock Option Plan. 5. Term. This Agreement shall continue in effect until February 13, ---- 2000, unless extended by the mutual written consent of the Company and the Executive. -3- 6. Successor. --------- (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement. 7. Miscellaneous. ------------- (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. (b) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) This Agreement constitutes the entire understanding and agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements, whether oral or written, including without limitation that certain agreement dated as of June 20, 1990 and amended as of the 15th day of June 1993 between the Company and the Executive which agreement shall be of no force or effect during the term of this Agreement. (d) All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows: If to the Company: ------------------ Parametric Technology Corporation 128 Technology Drive Waltham, MA 02154 Attention: Corporate Counsel -4- If to the Executive ------------------- C. Richard Harrison 15 Claridge Drive Weston, MA 02193 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Any Notice or communication shall be deemed to be delivered upon the date of hand delivery, one day following delivery to such overnight courier service, or three days following mailing by registered or certified mail. EXECUTED as of the date first written above. PARAMETRIC TECHNOLOGY CORPORATION By: /S/ Steven C. Walske --------------------------------------- Steven. C. Walske Chairman of the Board and Chief Executive Officer /S/ C. Richard Harrison ------------------------------------ C. Richard Harrison -5- EX-10.4 5 AMENDED & RESTATED AGREEMENT W/GILLIS EXHIBIT 10.4 ------------ AMENDED AND RESTATED AGREEMENT ------------------------------ This Amended and Restated Agreement is entered into as of this 13th day of February, 1997 between Parametric Technology Corporation, a Massachusetts corporation (the "Company"), and Edwin J. Gillis (the Officer"), and amends and restates the Agreement dated October 2, 1995 with the Officer. WHEREAS, the Officer is the Executive Vice President of Finance and Administration, Chief Financial Officer and Treasurer of the Company; and WHEREAS, to provide incentive for the Officer to maintain employment with the Company, the Company desires to make the following arrangements with the Officer concerning his termination of employment. NOW, THEREFORE, the Company and the Officer hereby agree as follows: 1. Termination Notice. The Company agrees that it may not terminate ------------------ the employment of the Officer unless (i) such termination is for Cause (as defined below) or (ii) the Company has delivered to the Officer a written notice of such termination (the "Termination Notice") at least six months in advance of the termination date. The duties of the Officer during the period from the date of delivery of a Termination Notice until the termination of his employment shall be as determined by the Board of Directors. 2. Salary. During the period from the date of delivery of the ------ Termination Notice (the "Notice Date") until the earlier of (i) the date six months after the Notice Date or (ii) the date the Officer commences employment with another company or organization, the Company shall pay to the Officer a salary that is equal, on an annualized basis, to the highest annual salary (excluding any bonuses) in effect with respect to the Officer during the six- month period immediately preceding the Termination Notice. 3. Stock Options. Effective upon a Change in Control (as defined below) ------------- of the Company, all stock options granted to the Officer and then outstanding under any Stock Option Plan (as defined below) of the Company shall become exercisable in full, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such options; and the Company and the Officer hereby agree that such option agreements are hereby and will be deemed amended to give effect to this provision. 4. Definitions. ----------- (a) A termination by the Company of the Officer's employment for "Cause" shall mean termination (i) for the Officer's willful and continued failure to substantially perform his duties to the Company (other than any such failure resulting from the Officer's incapacity due to physical or mental illness or any such actual or perceived failure after a Change in Status of the Officer), provided that (a) the Company has delivered a written demand for substantial performance to the Officer specifically identifying the manner in which the Company believes that the Officer has not substantially performed his duties, and (b) the Officer has not cured such failure within 30 days after such demand, (ii) for willful conduct by the Officer which is demonstrably and materially injurious to the Company, or (iii) for the Officer's willful violation of any material provision of any confidentiality, nondisclosure, assignment of invention, noncompetition or similar agreement entered into by the Officer in connection with his employment by the Company. For purposes of this paragraph, no act or failure to act on the Officer's part shall be deemed "willful" unless done or omitted to be done by the Officer not in good faith and without reasonable belief that his action or omission was in the best interests of the Company. (b) A "Change in Control" of the Company shall mean the occurrence of any of the following events: (i) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock in the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities (other than as a result of acquisitions of such securities from the Company); (ii) individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company) shall be, for purposes of this Agreement, considered to be a member of the Incumbent Board; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) acquires more than 20% of the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (c) A "Stock Option Plan" of the Company shall mean any stock option or equity compensation plan of the Company in effect at any time, including without limitation the 1987 Incentive Stock Option Plan and the 1997 Incentive Stock Option Plan. 5. Term. This Agreement shall continue in effect until February 13, ---- 2000, unless extended by the mutual written consent of the Company and the Officer. -2- 6. Successors. ---------- (a) This Agreement is personal to the Officer and without the prior written consent of the Company shall not be assignable by the Officer otherwise than by will or the laws of descent and distribution. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement. 7. Miscellaneous. ------------- (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. (b) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) All notices and other communications hereunder shall be in writing and shall be delivered by hand delivery, by a reputable overnight courier service, or by registered or certified mail, return receipt requested, postage prepaid, in each case addressed as follows: If to the Company: ----------------- Parametric Technology Corporation 128 Technology Drive Waltham, MA 02154 Attention: Corporate Counsel If to the Officer: ------------------ Edwin J. Gillis 7 Merrill Street Hingham, MA 02043 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Any notice or communication shall be deemed to be delivered upon the date of hand delivery, one day following delivery to such overnight courier service, or three days following mailing by registered or certified mail. -3- EXECUTED as of the date first written above. PARAMETRIC TECHNOLOGY CORPORATION By: /S/ C. Richard Harrison ------------------------------------- C. Richard Harrison President and Chief Operating Officer /S/ Edwin J. Gillis ------------------------------------- Edwin J. Gillis -4- EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS SEP-30-1997 MAR-29-1997 212,088 289,528 140,979 2,540 0 656,402 0 0 742,542 183,525 0 0 0 1,281 556,992 742,542 147,054 198,012 2,737 18,561 100,274 0 0 81,627 28,569 53,058 0 0 0 53,058 0.39 0.39
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