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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 0-18708
MICROGRAFX, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1952080
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1303 E. ARAPAHO ROAD, RICHARDSON, TEXAS 75081
(Address of principal executive offices) (Zip Code)
(972) 234-1769
(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 .
--- ---
As of April 30, 1997, 10,232,029 shares of the Company's common stock were
outstanding.
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MICROGRAFX, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I.
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of 3
March 31, 1997 and June 30, 1996
Consolidated Statements of Operations for the three 4
and nine months ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for 5
the nine months ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II.
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
MICROGRAFX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $10,988 $13,790
Short-term investments 4,553 4,844
Accounts receivable, less allowances of $4,417 and $3,092 12,024 9,417
Inventories 1,298 1,284
Deferred tax asset 1,922 497
Other current assets 1,881 1,709
------- -------
Total current assets 32,666 31,541
Property and equipment, net 2,747 3,150
Capitalized software development costs
and acquired product rights, net 6,360 5,282
Other assets 116 125
------- -------
Total assets $41,889 $40,098
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,714 $ 4,230
Other accrued liabilities 7,333 6,079
------- -------
Total current liabilities 14,047 10,309
Deferred income taxes and other liabilities 659 684
Shareholders' equity 27,183 29,105
------- -------
Total liabilities and shareholders' equity $41,889 $40,098
======= =======
</TABLE>
See accompanying notes
3
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MICROGRAFX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
---------------------------- ---------------------------
1997 1996 1997 1996
-------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 17,124 $ 18,355 $ 49,827 $ 56,175
Cost of revenues 5,134 4,637 15,076 13,470
-------- -------- -------- --------
Gross profit 11,990 13,718 34,751 42,705
Operating expenses:
Sales and marketing 8,333 8,745 25,041 27,082
General and administrative 1,707 2,401 6,166 6,739
Research and development 1,737 2,027 5,170 5,831
Restructuring charge -- -- 1,964 --
-------- -------- -------- --------
Total operating expenses 11,777 13,173 38,341 39,652
-------- -------- -------- --------
Income (loss) from operations 213 545 (3,590) 3,053
Non operating expense (income) 30 (151) (137) 106
-------- -------- -------- --------
Income (loss) before income taxes 183 696 (3,453) 2,947
Income taxes 62 209 (1,174) 884
-------- -------- -------- --------
Net income (loss) $ 121 $ 487 $ (2,279) $ 2,063
======== ======== ======== ========
Income (loss) per share $ 0.01 $ 0.05 $ (0.22) $ 0.21
======== ======== ======== ========
Shares used in computing
income (loss) per share 10,235 10,177 10,232 10,032
======== ======== ======== ========
</TABLE>
See accompanying notes
4
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MICROGRAFX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
---------------------------
1997 1996
--------- --------
<S> <C> <C>
Net cash flows provided by operating activities $ 3,795 $ 5,796
Cash flows from investing activities:
Proceeds from maturities of short-term investments 7,710 4,914
Purchases of short-term investments (7,419) (5,516)
Capitalization of software development costs and
purchases of acquired product rights (5,921) (4,597)
Purchases of property and equipment (1,335) (1,155)
-------- --------
Net cash used in investing activities (6,965) (6,354)
Cash flows from financing activities:
Proceeds from employee stock programs 398 1,892
Issuance of related party notes payable -- 906
Treasury stock acquired (52) (969)
Other -- 295
-------- --------
Net cash provided by financing activities 346 2,124
Effect of exchange rates on cash and cash equivalents 22 (469)
-------- --------
Net (decrease) increase in cash and cash equivalents (2,802) 1,097
Cash and cash equivalents, beginning of period 13,790 11,329
-------- --------
Cash and cash equivalents, end of period $ 10,988 $ 12,426
======== ========
</TABLE>
See accompanying notes.
5
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MICROGRAFX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BUSINESS COMBINATION
On April 2, 1996, Micrografx, Inc. and subsidiaries ("Micrografx" or "the
Company") acquired all of the issued and outstanding capital stock and options
of Visual Software, Inc., a California corporation ("Visual"). The acquisition
has been accounted for as a pooling of interests. Accordingly, the accompanying
consolidated financial statements have been restated to retroactively include
the accounts and operations of Visual for all periods presented.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Micrografx at
March 31, 1997 and for the three and nine-month periods ended March 31, 1997
and 1996 are unaudited but reflect all adjustments which are of a normal
recurring nature and, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations for the
periods presented. The accompanying financial statements and notes thereto
should be read in conjunction with the Company's audited financial statements
for the year ended June 30, 1996, included in the 1996 Annual Report to
Shareholders. The results of operations for the periods ended March 31, 1997
are not necessarily indicative of results to be expected for the year ending
June 30, 1997.
RESTRUCTURING CHARGE
Effective December 31, 1996, J. Paul Grayson resigned as Chairman of the Board
and Chief Executive Officer of the Company. An evaluation of the Company's
organization and operations resulted in the decision to make certain
organization changes. These changes resulted in a charge of $1.8 million for
the termination of seven members of management. The Company also recorded a
$0.2 million charge related to the termination of commitments made by the
previous management for which no future benefit will be received. Approximately
$1.2 million of this charge remains classified as an accrued liability as of
March 31, 1997.
INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
-------------- -------------
<S> <C> <C>
Raw materials $ 825 $ 849
Finished goods 473 435
------ ------
$1,298 $1,284
====== ======
</TABLE>
6
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MICROGRAFX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
FORWARD CONTRACTS
The Company periodically enters into foreign exchange contracts to hedge
against certain exposure to changes in foreign currency exchange rates. This
exposure results from the Company's foreign operations in countries including
Germany, France, the United Kingdom, The Netherlands, and Japan that are
denominated in currencies other than the U.S. dollar. As of March 31, 1997, the
Company had foreign exchange forward contracts outstanding to sell 20 million
Yen for $0.2 million expiring April 3, 1997 and to sell 45 million Yen for
$0.4 million expiring May 2, 1997. The difference between the carrying amount
and current market settlement value of the forward contracts was not
significant.
INCOME PER SHARE
Income per share (in thousands) for all periods presented is based on the
weighted average common and dilutive equivalent shares outstanding using the
treasury stock method.
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
March 31, March 31,
------------------ -----------------
1997 1996 1997 1996
------ -------- ------ -------
<S> <C> <C> <C> <C>
Weighted average common stock
outstanding during the period 10,235 9,771 10,232 9,702
Common stock equivalents of employee
stock programs -- 406 -- 330
------ ------ ------ ------
Shares used in primary income per
share calculation 10,235 10,177 10,232 10,032
====== ====== ====== ======
</TABLE>
Fully diluted income per share was not materially different from primary income
per share for all periods presented.
7
<PAGE> 8
MICROGRAFX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Micrografx, Inc. ("Micrografx" or the "Company") was founded in 1982 and
incorporated in 1984 in the state of Texas. Micrografx is the global leader in
enterprise graphics and personal creativity software and is the acknowledged
pioneer of Windows business and consumer graphics software.
On April 2, 1996, the Company acquired all of the issued and outstanding
capital stock and options of Visual Software, Inc., a California corporation
("Visual"). The acquisition has been accounted for as a pooling of interests.
Accordingly, the accompanying tables and discussion have been restated to
retroactively include the accounts and operations of Visual for all periods
presented.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net revenues of certain items in the Company's Consolidated
Statements of Operations. Historical results and percentage relationships are
not necessarily indicative of operating results for any future period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ ------------------
1997 1996 1997 1996
------- ------- ------ ------
<S> <C> <C> <C> <C>
Net revenues 100% 100% 100% 100%
Cost of revenues 30% 25% 30% 24%
---- ---- ---- ----
Gross profit 70% 75% 70% 76%
Operating expenses:
Sales and marketing 49% 48% 50% 48%
General and administrative 10% 13% 12% 12%
Research and development 10% 11% 11% 10%
Restructuring charge -- -- 4% --
---- ---- ---- ----
Total operating expenses 69% 72% 77% 70%
Income (loss) from operations 1% 3% (7%) 6%
Non operating (income) expense -- (1%) -- --
Income (loss) before income taxes 1% 4% (7%) 6%
Income taxes -- 1% (2%) 2%
Net income (loss) 1% 3% (5%) 4%
</TABLE>
8
<PAGE> 9
Revenues by customer category for the three and nine month periods ended March
31, 1997 and 1996 are shown below (in thousands). The Business Graphics
category includes Micrografx FlowCharter(R), Micrografx Graphics Suite(TM),
Webtricity(TM), Simply 3D(TM), Picture Publisher(R), Small Business Graphics
and Print Studio(R), Micrografx Designer(TM), Designer Power Pack, ABC
ToolKit(TM), ABC SnapGraphics(TM), PhotoMagic(R), Instant 3D(TM) and Visual
Reality(R). The Personal Creativity category includes American Greetings(R)
CreataCard(R) Plus(TM), American Greetings(R) CreataCard(R) Gold(TM),
Crayola(TM) Amazing Art Adventure(TM), Crayola(TM) Art Studio(TM),
Crayola(TM)Art Studio(TM)2, Crayola(TM)Art(TM), and Hallmark Connections(TM)
Card Studio(TM). Revenues from Windows Draw(R) are categorized as either
Business Graphics or Personal Creativity depending on the Company's assessment
of the market or channel into which the product is sold.
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
---------------------------------------- ------------------------------------
1997 % 1996 % 1997 % 1996 %
----------- --- --------- --- -------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Business Graphics $ 12,574 73% $ 13,513 74% $ 35,169 71% $ 43,395 77%
Personal Creativity 4,550 27% 4,842 26% 14,658 29% 12,780 23%
----------- --- --------- --- -------- --- -------- --
Total $ 17,124 100% $ 18,355 100% $ 49,827 100% $ 56,175 100%
=========== === ========= === ======== === ======== ===
</TABLE>
The seven percent decline in business revenues resulted as sales of products
released in the third fiscal quarter did not offset the loss of sales for
products on which the Company no longer focuses. Two factors accounted for this
loss of sales: first, due to the rapid change in technology related to personal
computers and software, the majority of sales for a version of a software
product occur within the first year of its release; second, during the first
quarter of this year, the Company decided to shift the release of its business
software to fiscal Q3 after the close of the Christmas season. While the
Company did release new or upgraded versions of FlowCharter, Graphics Suite,
Webtricity, and Simply 3D, mostly during the latter part of the third quarter
of fiscal 1997, the delay in introducing these products meant that older titles
such as Designer Power Pack, Instant 3D, and Visual Reality had lost their
prior year sales momentum. During the quarter, revenues from the Micrografx
Graphics Suite and the standalone versions of Micrografx FlowCharter combined
represented more than half of the Company's business products revenues.
The six percent revenue decline in the Company's consumer products in the third
fiscal quarter was despite positive reaction to the introduction of American
Greetings CreataCard Gold, an expanded version of the Company's established
CreataCard Plus product. Revenues from the Company's CreataCard products
declined slightly compared to prior year sales of the Company's Hallmark
product due to lower prices and increased competition from Microsoft's Hallmark
Greetings Workshop. The Company had no revenues related to its former Hallmark
product due to the cessation of shipments of the Hallmark product on September
30, 1996 compared to revenues of $3.0 million in the third quarter of the prior
year. The overall decline in Personal Creativity also reflects reduced sales of
products licensed under the Crayola brand name. The Company's agreement for
marketing those products expired on March 31, 1997 and revenues representing
the final sales of the products were $1.0 million during the quarter compared
to $1.2 million in the prior year quarter. For the third quarter, the
CreataCard products represented more than half of the Company's consumer
product revenues.
Revenues by geographical region for the three and nine months ended March 31,
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
-------------------------------------- ------------------------------------
1997 % 1996 % 1997 % 1996 %
--------- --- --------- ---- --------- --- --------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Americas 9,324 54% 9,718 53% $ 26,143 52% 28,009 50%
Europe 5,422 32% 6,337 34% 16,222 33% 20,010 36%
Pacific Rim 2,378 14% 2,300 13% 7,462 15% 8,156 14%
--------- --- --------- --- -------- --- --------- ---
Total $ 17,124 100% $ 18,355 100% $ 49,827 100% $ 56,175 100%
========= === ========= === ======== === ========= ===
</TABLE>
9
<PAGE> 10
The seventeen percent decline in European revenues for the third quarter of
fiscal 1997 resulted from the product release schedules. As previously
discussed, the Company released new or upgraded English versions of its
products during the latter part of the third quarter. Of the five products
released during the third quarter, only one had localized versions available
during the quarter. While two of the products are not currently being
localized, the Company has or will introduce localized versions of the
remaining two products during the fourth quarter.
Cost of revenues for the three months ended March 31, 1997 was $5.1 million, or
30% of net revenues, compared to $4.6 million, or 25% of net revenues, for the
three months ended March 31, 1996. The increase in cost of revenues for the
three months ended March 31, 1997 is attributable to lower selling prices on
the Company's greeting card software products, increased amortization of
acquired product rights, and increased external royalties. Also contributing to
the rise in cost of revenues as a percent of revenues was an unfavorable shift
in product mix to boxed products which contain typical content (packaging,
manuals, CD's or floppy disks) from OEM and license revenues which require
substantially less content. The Company's objective is to return the product
mix to a more historically normal relationship between boxed and OEM and
license products.
The Company's operating results are affected by foreign exchange rates. Had the
exchange rates in effect during the second quarter of the prior year been in
effect during the second quarter of 1997, revenues would have been $0.7 million
higher. This decrease resulted from the change in exchange rates of European
currencies and the Japanese Yen versus the U.S. Dollar. Since European
manufacturing costs and European and Japanese operating expenses are also
incurred in those local currencies, the relative translation impact of exchange
rates on net income is less than on revenues.
Sales and marketing expenses for the three months ended March 31, 1997 were
$8.3 million, or 49% of revenues, compared to $8.7 million, or 48% of revenues
for the same period in the previous year. The decrease in sales and marketing
expense reflects the efficiencies gained by eliminating duplicate costs
subsequent to the acquisition of Visual, the recent reduction in executive
overhead and management layers, and cost control measures.
General and administrative expenses decreased twenty-nine percent to $1.7
million for the quarter, compared to $2.4 million for the third quarter of last
year. This decline also reflects the efficiencies gained by eliminating
duplicate costs subsequent to the acquisition of Visual, the recent reduction
in executive overhead and management layers, and cost control measures.
Net research and development expenses for the three months ended March 31, 1997
were $1.7 million, compared to $2.0 million for the quarter ended March 31,
1996. Gross research and development expenses, before capitalization, for the
three months ended March 31, 1997 declined to $2.7 million versus $3.0 million
in the prior year. Research and development expenses capitalized in each period
approximated amortization of the previously capitalized expenses.
For the three months ended March 31, 1997, non-operating expenses resulting
from foreign exchange losses approximately offset interest income. For the
prior year quarter, non-operating income of $0.2 million resulted as interest
income exceeded foreign exchange losses.
For the nine months ended March 31, 1997, net revenues of $49.8 million
decreased eleven percent compared with $56.2 million for the nine months ended
March 31, 1996. This decrease was across all geographies and is a result of the
timing of the product life cycle, as previously discussed, partially offset by
50% growth in revenues from the Company's greeting card products.
10
<PAGE> 11
Operating profit for the first three quarters of fiscal 1997 declined due to
the drop in revenue, the degradation of gross margins, and a second quarter
$2.0 million restructuring charge which was almost entirely related to
severance for certain members of the senior management team in the U.S. and
abroad. These factors were partially offset by efficiencies gained in all areas
resulting from the Visual acquisition, reducing executive overhead and
management layers, and cost control measures.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company's principal sources of liquidity consisted of
cash and cash equivalents of $11.0 million and short-term investments of $4.6
million.
For the nine months ended March 31, 1997, cash used by investing activities
exceeded cash provided by operating and financing activities, resulting in a
decrease of $2.8 million in cash and cash equivalents. Operating activities
provided $3.8 million in cash during the nine months ended March 31, 1997,
consisting of depreciation and amortization of $6.6 million and an increase in
accounts payable and accrued liabilities of $3.7 million, partially offset by a
net loss of $2.3 million and increases in accounts receivable of $2.6 million
and deferred tax asset of $1.4 million. During the first three quarters of
fiscal 1997, the accounts receivable allowance increased $1.3 million resulting
from the overall increase in receivables.
Investing activities used $7.0 million in cash during the nine months ended
March 31, 1997 primarily due to capitalized software development costs and
purchases of acquired product rights of $5.9 million and capital expenditures
of $1.3 million. Financing activities provided $0.3 million in cash during the
nine months ended March 31, 1997, consisting primarily of proceeds from
employee stock programs. As discussed in the footnotes to the financial
statements, $1.2 million of the $2.0 million restructuring charge remains on
the balance sheet as an accrued liability. The Company expects to pay this
amount during the fourth quarter.
The Company expects that cash flow from operations and existing cash and
short-term investments will be sufficient to meet the Company's capital
requirements in the short term.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In February 1997, the FASB issued SFAS 128, 'Earnings per Share,' which will
become effective December 15, 1997. Early adoption of the standard is not
permitted. The pro-forma Basic Earnings per Share calculated pursuant to SFAS
128 for the three and nine-month periods ended March 31, 1997, would be the
same as reported Earnings per Share, and the pro-forma Diluted Earnings per
Share calculated pursuant to SFAS 128 would not be materially lower than
reported Earnings per Share.
FORWARD-LOOKING STATEMENTS
The Company notes that, with the exception of historical information, the
matters discussed above are forward-looking statements that involve risks and
uncertainties. Additional information on the factors that could affect the
Company's financial results is included in the Company's 1996 Annual Report to
Shareholders and other filings with the Securities and Exchange Commission. The
Company's actual results may differ materially from the results discussed in
these forward-looking statements. Factors that could cause or contribute to
such differences include, without limitation, changes in the market, new
products and announcements from other companies, changes in technology, and
competition from larger, more established competitors.
11
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MICROGRAFX, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to certain legal proceedings and claims which arise in
the ordinary course of business. In the opinion of management, the resolution
of these legal proceedings and claims will not have a material effect on the
Company's consolidated financial position and results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Settlement agreement between J. Paul Grayson and the Company.
10.2 Severance agreement between Herman DeLatte and the Company.
27 The Financial Data Schedule required by Item 601(b)(27) of
Regulation S-K has been included with the electronic filing
of this Form 10-Q.
(b) Filings on Form 8-K
None.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROGRAFX, INC.
Date: May 15, 1997 By /s/ Larry G. Morris
----------------------------------
Larry G. Morris
Chief Financial Officer
and Treasurer
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------------------------------------------------------
<S> <C>
10.1 Settlement agreement between J. Paul Grayson and the Company
10.2 Severance agreement between Herman DeLatte and the Company
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT ("Agreement") between Micrografx, Inc., a
Texas corporation, (referred to herein as the "Company"), and J. Paul Grayson
("Executive"), is entered into and effective as of the 15th day of April,
1997, and sets forth the terms and conditions concerning Executive's separation
from employment with the Company.
THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO ARTICLE 17.
WHEREAS, the parties have agreed on the terms and conditions of the
termination of employment of Executive from the Company;
NOW, THEREFORE, in consideration of the agreement of such terms and
conditions as contained herein, the parties agree as follows:
1. Effective Date of Termination of Employment. The Company and
Executive agree that the effective date of Executive's termination of
employment and as a member of the Board of Directors was the close of business
on December 31, 1996, (the "Effective Date").
2. Settlement Compensation
(a) The Company agrees to pay Executive a Settlement amount of Two
Hundred Six Thousand Dollars ($206,000) in two equal payments upon the
execution of this Agreement by all parties. The first payment will be made on
April 25, 1997 and the second payment on July 1, 1997. Such payment shall be
subject to appropriate withholding and deductions consistent with the Company's
normal payroll policies. Executive acknowledges that payment of the Settlement
amount described herein is made by the Company in consideration of the
agreements, releases and undertakings of Executive made herein, and is also in
full and complete satisfaction of all of the Company's obligations to
Executive, including, without limitation, the Company's obligations pursuant to
the (i) Employee Non-Disclosure Agreement dated June 1, 1982, (ii) Executive
Severance Agreement, and Executive Severance Policy (Non-Change in Control),
delivered as of October 21, 1996 but not executed by the parties, all of which
agreements and any other agreements respecting employment, compensation or
benefits are terminated and of no further force or effect upon the execution of
this Agreement by all parties and the payment of the sums required hereunder,
except for the provisions of the Nondisclosure Agreement, which shall expressly
survive.
Executive represents and warrants to the Company that no other sums
are now or will be in the future due and payable to Executive by the Company
other than those amounts specified in this Agreement, the receipt of which is
hereby acknowledged.
3. American Express Charges. Executive agrees to return his corporate
American Express Card to Company and to make no further charges to such
account. Executive agrees to pay any personal charges which have been charged
to such account. Company shall pay any business charges on such account in
accordance with Company's current expense reimbursement policy and will provide
Executive with any documentary copies or evidence of such charges.
1
<PAGE> 2
4. Options and Stock. The Company and Executive acknowledge and agree
that as of the Effective Date, all stock options previously granted to
Executive pursuant to the company's Incentive and Nonstatutory Stock Option
Plans, not otherwise vested, have been terminated and are of no further force
or effect. Employee represents and warrants to the Company that he has neither
purchased nor sold any shares of the common stock of the Company during the
period beginning 6 months prior to January 10, 1997 and through and including
the date of execution hereof not otherwise reported.
5. Insurance Plans. The Company and Executive acknowledge and agree
that as of the Effective Date, Executive has no further rights to participate
in any of the Company's group or other insurance (medical, dental, life,
retirement, or other insurance or group benefit programs) plans, except as may
be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985
(i.e., COBRA), at Executive's expense.
8. Duties of Executive
a. Termination as Officer and Director. The Company and Executive
hereby acknowledge that all directorships, offices and other positions held by
Executive with the Company and all of its subsidiaries and affiliates
terminated on December 31, 1996. The Company agrees to remove Executive from
such positions on a timely basis, as may be necessary, and Executive agrees to
cooperate with Company in such actions.
b. Non-disclosure and Non-competition. Executive acknowledges
that he is subject to, and Executive hereby reaffirms and agrees to abide by,
the terms and conditions of that certain Employee Non-Disclosure Agreement
dated June 1, 1982, and further acknowledges and agrees that the provisions of
such Employee Non-disclosure Agreement shall apply to Executive. The
non-competitive provisions of such agreement shall hereby continue to be in
full force and effect.
c. Non-solicitation. For a period of one (1) year immediately
following the termination of Executive's employment with the Company, Executive
shall not either directly or indirectly make known to any person, firm, or
corporation the names and addresses of any of the customers of the Company or
any other information pertaining to the customers or call on, solicit, or take
away, or attempt to call on, solicit, or take away, any of the customers of the
Company on whom Executive called or with whom he became acquainted during the
term of employment with the Company under this Agreement, either for himself or
for any other person, firm, or corporation.
d. Non-hire. For a period of one (1) year immediately following
the termination of Executive's employment with the Company, Executive shall not
employ, offer to employ, solicit or hire as an Executive, agent or contractor
or in any other capacity, any current Executive or contractor of the Company.
e. Comments About the Company. Executive and Company each
agree that they will not say, publish or do any act or thing that disparages or
casts the other party, its officers, directors, Executives, agents and/or
representatives as the case may be in an unfavorable light, or which could
result in injury to any such person or party's reputation. Either party shall
make no public statements or announcements regarding Executive's past
employment by the Company or any of the matters set forth herein without first
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consulting with the Company and obtaining its prior written approval as to the
timing and content of the proposed statements and/or announcements, except that
other party may disclose dates of employment, title, job description and final
base annual salary of Executive with the Company. The parties agree that
neither shall make any press release or other public announcement concerning
this Agreement except to the extent required by applicable law.
Executive further agrees at Company's reasonable request, to
appear jointly with Company's President or to be interviewed for industry
publications, where such appearances or interviews do not interfere with
Executive's schedule and may be beneficial to Company's public image. Executive
also agrees to reasonably cooperate or assist Company with any dispute or
litigation which the Company may have and to which Executive may have
information.
Company will also cause to be mailed a letter to the editor of
the Dallas Morning News, a copy of which attached hereto as Exhibit A, which
has been agreed by the parties. The parties acknowledge that Company cannot
guarantee publication or the form of publication of such letter. An originally
signed duplicate of the letter shall be mailed to Executive for his file.
f. Assistance. Executive agrees to provide reasonable assistance
to management of the Company in connection with the Chili for Children
Foundation, and in furtherance thereof, shall commit his best efforts to cause
the relationship to continue with Company consistent with the agreement set
forth as Exhibit B herein, and to henceforth vote in favor of such agreement
now and in the future. The parties agree that any dispute or alleged breach of
or under Exhibit B shall not be a breach of this Agreement.
g. Return of Company Property. Executive agrees to return all
Company property in his possession concurrently with the execution of this
Agreement on both parties, including, without limitation, all computers,
printers, software, hardware, communications equipment, credit cards,
telephone, automobiles, the airpass issued in Executive's name, business
records and any other related items, except when the parties agree in writing
to assign such item to Executive.
h. Referral. The Company and Executive acknowledge and agree
that Executive shall direct all inquiries concerning the employment history of
Executive from a prospective employer to the Director of Human Resources, and
the Company shall provide such prospective employer only with the dates of
Executive`s employment with the Company, title and final base salary, or a
letter or statement which the parties may otherwise agree.
9. Releases
a. In consideration of the premises and mutual promises,
agreements, and covenants contained herein, including the payments to Executive
in which the spouse of Executive has a community property interest and subject
to the full and timely payment to Executive the Settlement Compensation set
forth in 2 above, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Executive and his spouse hereby
fully, finally, completely and generally release the Company, its subsidiaries
and/or affiliates and their respective officers, directors, Executives,
shareholders, attorneys, agents and representatives from any and all claims,
actions, demands, losses, liabilities, expenses, obligations and/or causes of
action, of whatever kind or character (collectively the "Claims"), arising out
of
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occurrences prior to the date of execution of this Agreement, whether known or
unknown, arising from, relating to, or in any way connected with Executive's
employment with the Company or to any Claim or defense that Executive or his
spouse may have with respect to the Promissory Note or the Loan Documents, the
termination of Executive's employment with the Company, his service as an
officer of the Company and any of its subsidiaries and/or affiliates, and from
any and all Claims arising under the Civil Rights Act of 1964, Americans with
Disabilities Act of 1990, Texas Commission on Human Rights Act, Texas Handicap
Discrimination Act, and any and all other Claims arising under any statute,
common law or contract (whether oral or written), and subject to the full and
timely payment to Executive of all Settlement Compensation in 2. above, and his
spouse further agree not to take any legal action or file any suit, action, or
proceeding against the Company, its subsidiaries and/or affiliates and their
respective officers, directors, Executives, shareholders, attorneys, agents or
representatives related thereto, or aid, assist or abet any party pursuing a
suit, action or proceeding against the Company with respect to the Claims. This
release shall not affect the rights of Executive or the Company created or
continued under this Settlement Agreement.
b. In consideration of the premises and mutual promises,
agreements, and covenants contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Company (by and through its directors and officers) and those directors of the
company listed under the acknowledgment below, hereby fully, finally,
completely and generally release Executive from any and all claims, actions,
demands, losses, liabilities, expenses and/or causes of action of whatever kind
and character, arising out of occurrences prior to the date of execution of
this Agreement, whether known or unknown, arising from, relating to, or in any
way connected with Executive's employment with the Company and the termination
of his employment with the Company, and his service as an officer of the
Company and any of its affiliates and/or subsidiaries, arising under any
statute, common law or contract (whether oral or written), provided, however,
that this release is based upon Executive's representation that he has not
taken any action that would make the Company, its subsidiaries and/or
affiliates, or their respective officers, directors, Executives, shareholders
and/or agents liable for any illegal activities, intentionally and individually
without Board of Management approval or joinder.
c. Each party understands and agrees that this Agreement
constitutes a valid and enforceable waiver and release, and creates enforceable
rights as described herein, and acknowledges that this waiver and release is
made knowingly and voluntarily.
d. Executive and Company agree to fully and immediately dismiss
any pending administrative or judicial action that has been filed against the
other.
10. Binding Nature. EXECUTIVE, HIS SPOUSE AND THE COMPANY ACKNOWLEDGE
THAT EACH HAS CAREFULLY READ THIS AGREEMENT, THAT EACH FULLY UNDERSTANDS ITS
PROVISIONS AND ITS FINAL AND BINDING EFFECT, AND THAT EACH IS SIGNING THIS
AGREEMENT VOLUNTARILY. EXECUTIVE, HIS SPOUSE AND THE COMPANY FURTHER
ACKNOWLEDGE THAT EACH HAS BEEN AFFORDED THE OPPORTUNITY TO CONSULT WITH AN
ATTORNEY OF THEIR CHOICE PRIOR TO EXECUTING THIS AGREEMENT. THIS AGREEMENT AND
ALL OF THE RIGHTS OF THE COMPANY UNDER THIS AGREEMENT WILL INURE TO THE BENEFIT
OF AND WILL BE ENFORCEABLE BY THE COMPANY'S SUCCESSORS AND ASSIGNS. THIS
AGREEMENT AND ALL OF THE RIGHTS OF EXECUTIVE UNDER THIS AGREEMENT WILL INURE TO
THE BENEFIT OF AND WILL BE ENFORCEABLE BY HIS PERSONAL OR LEGAL
REPRESENTATIVES, EXECUTORS, ADMINISTRATORS, SUCCESSORS, HEIRS, DISTRIBUTEES,
DEVISEES AND LEGATEES. EXECUTIVE AND COMPANY REPRESENT THAT EACH OF THEM HAS
THE REQUISITE AUTHORITY AND COMPETENCY TO EXECUTE THIS AGREEMENT, AND THE
COMPANY
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REPRESENTS THAT THE UNDERSIGNED OFFICER HAS THE REQUISITE AUTHORITY AND
COMPETENCY TO EXECUTE THIS AGREEMENT ON BEHALF OF THE COMPANY.
11. Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, in whole or in part, then both
parties will be relieved of all obligations arising under such provision, but
only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be
deemed amended by modifying any such illegal, unenforceable or void provision
to the extent necessary to make it legal and enforceable while preserving its
intent, or if such is not possible, by substituting therefor another provision
that is legal and enforceable and achieves the same objectives. Notwithstanding
the foregoing, if the remainder of this Agreement will not be affected by such
declaration or finding and is capable of substantial performance, then each
provision not so affected will be enforced to the extent permitted by law.
12. Waiver. No delay or omission by either party to this Agreement to
exercise any right or power under this Agreement will impair such right or
power or be construed as a waiver thereof. A waiver by either of the parties to
this Agreement of any of the covenants to be performed by the other or any
breach thereof will not be construed to be a waiver of any succeeding breach
thereof or of any other covenant contained in this Agreement. All remedies
provided for in this Agreement will be cumulative and in addition to and not in
lieu of any other remedies available to either party at law, in equity, or
otherwise.
13. Full Payment. The payments and obligations of the Company
described herein satisfy all of Executive's and his spouse's Claims against the
Company. Executive further agrees that he will be solely responsible for and
will indemnify and hold the Company harmless from, any federal or state income
tax, FICA, or other tax liability, if any, resulting from the payments made to
Executive pursuant to this Agreement, or other sums previously paid to
Executive during his employment by the Company, except as may have been
withheld by the Company in accordance herewith. Executive and his spouse
recognize that if either of them breaches their respective agreements contained
herein, that they shall be jointly and severally liable to the Company as a
result thereof for all payments made hereunder by the Company to Executive in
reliance upon and in consideration for their respective agreements herein
contained. Provided, however, notwithstanding any liability Executive or his
spouse may have to the Company as a result of any breach of this Agreement, the
releases, waivers and other agreements contained herein shall not be affected
and shall continue in full force and effect.
14. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY
PRINCIPLE OF CONFLICT-OF-LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANY OTHER JURISDICTION. THE PARTIES HERETO SUBMIT THEMSELVES TO THE
JURISDICTION OF THE TRIBUNALS OF THE STATE OF TEXAS, INCLUDING WITHOUT
LIMITATION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
TEXAS, WHICH MAY SO HAVE JURISDICTION, EXPRESSLY WAIVING ANY VENUE TO WHICH
THEY MAY BE ENTITLED BY THEIR PRESENT OR FUTURE DOMICILES.
15. Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or on the
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expiration of three (3) days after being mailed by United States registered
mail, return receipt requested, postage prepaid, or immediately by facsimile,
addressed as follows:
If to Executive: J. Paul Grayson
6325 Murphy Rd.
Garland, TX 75048
If to the Company: President
Micrografx, Inc.
1303 Arapaho Road
Richardson, Texas 75081
cc: Legal Department
Or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
16. ARBITRATION. EXECUTIVE, HIS SPOUSE AND THE COMPANY AGREE THAT ANY
DISPUTE ARISING UNDER THIS AGREEMENT, SHALL BE SUBMITTED TO ARBITRATION IN
DALLAS, TEXAS IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. THE DECISION OF THE ARBITRATOR(S) WILL BE BINDING, CONCLUSIVE AND
NON-APPEALABLE, AND THAT COSTS OF SUCH ARBITRATION SHALL BE PAID BY THE PARTY
CHARGED BY THE ARBITRATOR(S) IN RENDERING ITS (THEIR) DECISION. EXECUTIVE AND
HIS SPOUSE AGREE THAT, NOTWITHSTANDING THIS PROVISION, THE COMPANY MAY OBTAIN
ANY INJUNCTIVE, EQUITABLE OR COMMON LAW RELIEF NECESSARY TO ENFORCE EXECUTIVE'S
OBLIGATIONS ARISING UNDER SECTIONS 8(B), 8(C) AND 8(D) OF THIS AGREEMENT.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. EQUITABLE REMEDIES. EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT
NEITHER HE NOR THE COMPANY WOULD ENTER INTO THIS AGREEMENT BUT FOR THE
AGREEMENTS OF THE OTHER CONTAINED HEREIN AND THAT THE OTHER WOULD BE
IRREPARABLY INJURED BY A VIOLATION OF THE PROVISIONS OF THIS AGREEMENT AND THAT
NEITHER WOULD HAVE ADEQUATE REMEDY AT LAW IN THE EVENT OF SUCH VIOLATION.
THEREFORE, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT INJUNCTIVE RELIEF,
SPECIFIC PERFORMANCE OR ANY OTHER APPROPRIATE EQUITABLE REMEDY (WITHOUT BOND OR
OTHER SECURITY BEING REQUIRED) ARE APPROPRIATE REMEDIES TO ENFORCE COMPLIANCE
BY THE OTHER OF ITS OBLIGATIONS HEREUNDER.
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties to this Agreement with respect to the subject matter of
this Agreement and there are no understandings or agreements relative to this
Agreement which are not fully expressed in this Agreement, except for that
certain Employee Nondisclosure Agreement dated June 1, 1982, between Executive
and the Company. All prior agreements between the parties with respect to the
subject matter of this Agreement, whether oral or written, are expressly
superseded by this Agreement. No change, waiver or discharge of this Agreement
will be valid unless in writing and signed by the party against which such
change, waiver or discharge is to be enforced.
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This Agreement is executed on this 15th day of April, 1997, to be
effective as of the Effective Date.
MICROGRAFX, INC. Executive
By: /s/ DOUGLAS RICHARD /s/ J. PAUL GRAYSON
------------------------- ------------------------------------
Title: Chief Executive Officer J. Paul Grayson
-------------------------
ACKNOWLEDGMENT AND FURTHER AGREEMENT
I, ____________ Barbara J. Martin, for the consideration to my spouse
J. Paul Grayson in which I have a community property interest, and for other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby acknowledge and agree to abide by the terms and
conditions of this Agreement.
Spouse
/s/ BARBARA J. MARTIN
-----------------------------------
Barbara J. Martin
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EXHIBIT A
Letter to the Editor
Dallas Morning News
Subject: Clarification of comments regarding J. Paul Grayson in the Business
Section of the Dallas Morning News of Wednesday March 12, 1997.
In an article entitled "7th Level's Grayson leaving Firm", your writer Alan
Goldstein apparently quoted Seymour Merrin (a Micrografx Board Member) out of
context in relating comments Mr. Merrin made about George Grayson to his
brother Paul.
As the Co-founder, and current Chairman of the Board of Micrografx, I speak for
the employees of Micrografx in stating my conviction that J. Paul Grayson made
a significant and long-lasting contribution to the success of Micrografx, and
we take issue with any interpretation of the article to the contrary.
In fact, during Mr. Grayson's recent tenure as CEO (July 1994 through November
1996), Micrografx recorded nine straight quarters of profitability. In
addition, the Company's cash position improved significantly reaching a record
level. During this period, the Company also reduced sales and marketing,
operational, and employment expenses without laying off any employees.
Mr. Grayson was also directly responsible for bringing in a number of talented
outside corporate Directors and professional managers to Micrografx, including
our CEO, Douglas Richard.
Thanks in a large part to Mr. Grayson's leadership, the Company today has an
excellent financial position, is debt free, has adequate cash reserves and is
well positioned to continue its success in the future.
Sincerely,
Joseph A. Kupke
Chairman of the Board of Directors, Micrografx, Inc.
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February 11, 1997
J. Paul Grayson
President, Micrografx Chili For Children Foundation, Inc.
1303 East Arapaho Rd.
Richardson, Texas 75081
SUBJECT: Continuation of Relationship Between Foundation and Micrografx, Inc.
Dear Paul:
As you know the Company has been considering the basis upon which it may
continue to work cooperatively with the Foundation in sponsorship and a
relationship beyond sponsorship in connection with the chili cook-off, under
the direction of Larry Morris. Since the event of the chili cook-off, as well
as the Foundation, presents a mutually beneficial relationship to the Company
and the Foundation, we are pleased in proposing that the relationship continue
and even become more strong at the present time. Therefore, we submit the
following proposal for the Foundation's Board of Directors to consider:
1. The Company agrees to continue its sponsorship at the Cattle Baron
sponsorship level at the current rate of $30,000 per year.
While technically we would like the opportunity to reconsider the
level of sponsorship should the amount dramatically increase from
$30,000, I do not see any reason why the Company cannot continue to
agree to sponsorship at the Cattle Baron level for this year and years
beyond.
2. Micrografx will continue to sponsor the event cocktail party as it
has in the past. While there has been some sharing of the expenses for
the party, we assume that the cost of the party in the future will be
a Micrografx marketing expense, with the party to be similar to those
as we have had in the past.
Exhibit B
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Mr. J. Paul Grayson
Page 2
3. The Foundation and the Company shall basically share at the rate of
50% each the out-of-pocket costs for continued operation of the
Foundation on a daily basis. While we can provide a more detailed
schedule, the costs of the total expenses should include the cost,
salary and benefits for Kate Potts, 75% of the time for Laura Calava,
allocated real estate, any extraordinary use of Micrografx associates
used for the chili cook-off, and miscellaneous expenses such as office
supplies and telephone. The costs for those items for the year just
ending as of the chili cook-off was approximately $66,000. Therefore,
each of us would contribute $33,000, necessitating the Foundation
provide a check to Micrografx each year in that amount. Since the
Foundation has currently agreed to pay to the Company $25,000 per
year, this should only be a slight increase in any given year.
If you wish we can also agree to a floor and a ceiling for such
amount. That is, Micrografx will always agree to contribute expenses
so that its share of such amounts equal or exceed $25,000, and would
request in return that the matching contribution which the Company
would be required to contribute would be $75,000. In connection with
this arrangement, Kate and Laura would remain on the payroll of
Micrografx, Inc. but would have only a dotted line reporting
responsibility to an internal officer of the Company for planning
purposes. That individual at the present time would be John Dearborn,
in order to maximize the marketing benefits of the cook-off to the
Company. Kate would be under the direct supervision of yourself, and
would be free to come and go as she pleases and work at your
direction.
The Company would also ask that under John's leadership that Kate and
John would work together on issues which are related to the event,
such as providing John an advance look at annual planning, mutual
planning of the party, and purchasing, accounting, and other items of
mutual contact within the Company.
4. The Company would have the ability to appoint a member of its
management team to the Foundation's Board of Directors, and such
individual would continue to be elected as a director during the
Company's sponsorship of the event.
5. In order to build a lasting relationship to which the Company and the
Foundation can invest, we suggest that this relationship be formally
documented for a period of five (5) years, including our participation
in the chili cook-off for 1997.
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Mr. J. Paul Grayson
Page 3
6. The Foundation will agree to not change the name of the Foundation
without the permission of the Company.
Paul, we look forward to doing more to support the Foundation in connection
with these points, as opposed to taking a lesser role. We believe in the
charitable purpose of the Foundation, and will commit ourselves obviously in
many ways in which we cannot document and for which we do not expect
reimbursement. If these items are agreeable to you, we will document them in a
brief memorandum and be pleased to continue the relationship with you and the
Foundation.
Very truly yours,
/s/ DOUGLAS RICHARD
- -----------------------------
Douglas Richard
AGREED AND ACCEPTED:
/s/ J. PAUL GRAYSON
- -----------------------------
J. Paul Grayson
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EXHIBIT 10.2
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (`Agreement") between Micrografx, Inc., a
Texas corporation and Micrografx B.V., a Dutch corporation, (collectively
referred to herein as the "Company"), and Herman DeLatte ("Employee"), is
entered into and effective as of the 1st day of February, 1997, and sets forth
the terms and conditions concerning Employee's separation from employment with
the Company.
WHEREAS, the parties have agreed on the terms and conditions of the
termination of employment of Employee from the Company;
NOW, THEREFORE, in consideration of the agreement of such terms and
conditions as contained herein, the parties agree as follows:
1. Effective Date of Termination of Employment. The Company and
Employee agree that the effective date of Employee's termination of employment
is the close of business on February 1, 1997, (the "Effective Date").
2. Severance Compensation. The Company agrees to pay Employee
severance compensation and as compensation for the non-competition and duties
set forth in paragraph 8, and in the aggregate amount of Six Hundred and Sixty
Thousand (660,000) Dutch guilders in one single lump sum payment upon the
execution of this Agreement by all parties. THE SEVERANCE PAYMENT IS MADE FOR
THE LOSS OF THE INCOME IN FUTURE YEARS AT THE TERMINATION OF THE LABOR CONTRACT
WITH MICROGRAFX, B.V. Such payment shall be subject to appropriate withholding
and deductions consistent with the Company's normal payroll policies. Employee
acknowledges that payment of the severance compensation described herein is
made by the Company in consideration of the agreements, releases and
undertakings of Employee made herein, and is also in full and complete
satisfaction of all of the Company's obligations to Employee, including,
without limitation, the Company's obligations pursuant to the (i) offer letter
of October 30, 1991, (ii) Executive Severance Policy (non-change in control)
dated March 24,1994, (iii) Executive Severance Agreement dated March 24, 1994,
(iv) the Employee Non-disclosure Agreement dated March 24, 1994, and (v) any
document relating to tax equalization of compensation existing by virtue of the
January 29, 1993 or April 18, 1996 letters from Arthur Andersen or the May 29,
1996 Email from Greg Peters, all of which agreements and any other agreements
respecting employment, compensation or benefits shall hereby terminate and be
of no further force or effect upon the execution of this Agreement by all
parties and the payment of the sums required hereunder.
Employee represents and warrants to the Company that no other sums are
now or will be in the future due and payable to Employee by the Company other
than those amounts specified in this section 2, the receipt of which is hereby
acknowledged.
3. Promissory Note. Employee acknowledges and hereby reaffirms and
agrees to abide by the terms of that certain Promissory Note made by Employee
and payable to the Company in the principal amount of $20,000, dated November,
1992, and agree to pay within ten (10) days of execution of this Agreement the
principal amount outstanding and accrued and unpaid interest pursuant to the
Promissory Note, in accordance with the terms therein. Employee agrees that the
amount of such payment may be offset from other amounts to be paid hereunder.
If at any time hereafter the parties discover that the Promissory Note has been
satisfied and heretofore paid by Employee, Company agrees to immediately pay to
Employee such amount of the Promissory Note or as set forth in any related
agreement.
4. Options and Stock. The Company and Employee acknowledge and agree
that as of the Effective Date, all stock options previously granted to Employee
pursuant to the company's Incentive and Nonstatutory Stock Option Plans, not
otherwise vested, have been terminated and are of no further force or effect.
Employee represents and warrants to the Company that he has neither purchased
nor sold any shares of the common stock of the Company during the period
beginning 6 months prior to January 31, 1997 and through and including the date
of execution hereof not otherwise reported.
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5. Restricted Stock. Company acknowledges Employee's entitlement to
have issued 600 shares (2,400 * 25% = 600) of restricted stock which are and
vested pursuant to the Company's 1993 Restricted Stock Plan. Employee agrees
with such number of shares to be those to which he is entitled.
6. Stock Purchase Plan. The Company and Employee acknowledge and agree
that pursuant to the terms of the Micrografx, Inc. Employee Stock Purchase Plan
("ESPP"), his eligibility to participate in the ESPP ceased as of the Effective
Date, and all moneys for ESPP previously withheld by payroll deduction during
the Purchase Period in effect on the Effective Date which remain unused, have
been or will be refunded to Employee by the Company. The parties acknowledge
and agree that the sum of $12,464.90 will be refunded to Employee in connection
therewith.
7. Insurance Plans. The Company and Employee acknowledge and agree
that as of the Effective Date, Employee has no further rights to participate in
any of the Company's group or other insurance (medical, dental, life,
retirement, or other insurance or group benefit programs) plans, except as may
be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985
(i.e., COBRA), at Employee's expense.
8. Duties of Employee
a. Termination as Officer and Director. The Company and
Employee hereby acknowledge that all directorships, offices and other positions
held by Employee with the Company and all of its subsidiaries and affiliates
shall be terminated with all deliberate speed by the parties. The Company
agrees to remove Employee from such positions on a timely basis, and Employee
agrees to cooperate with Company in such actions.
b. Non-disclosure and Non-competition. Employee acknowledges
that he is subject to, and Employee hereby reaffirms and agrees to abide by,
the terms and conditions of that certain Employee Non-Disclosure Agreement
dated March 24, 1994, and further acknowledges and agrees that the provisions
of such Employee Non-disclosure Agreement shall apply without limitation to
Employee. The non-competitive provisions of such agreement shall hereby be
amended to be as follows:
Because Employee has had access to proprietary
information and intellectual property and has received
specialized training from the employer, Employee
acknowledges that such information and training would
provide an unfair advantage if used in unlimited
competition with the employer. In order to avoid this,
Employee agrees that with termination of the employment
he shall not directly or indirectly, either as an
individual as or a partner or joint-venturer, or as an
employee or agent for any person, or as an officer,
director or shareholder associate with, or enter into
agreement written or oral, in any of the capacities
aforementioned with any entity that develops, markets or
distributes software products that directly compete with
the following products of Micrografx:
1. ABC Flow Charter Suite, including ABC Flow
Charter, ABC Toolkit, ABC SnapGrafx.
2. The Designer Power Pack Suite, including Picture
Publisher Designer, Clip Art, Photos and images,
third party graphics program.
3. ABC Graphic Suite, including Micrografx Designer,
Picture Publisher, ABC Flow Charter, Instant
3-D, ABC Media Manager
4. Windows Draw
5. Crayola Art Studio
6. Hallmark Connections Card Studio
7. American Greetings Creatacard
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Competitors in this connection are those companies which
market or sell products directly competitive to those of
MGX, and includes, but is not limited to, the following
companies: Adobe, Corel, Visio and Macromedia. This
restrictive covenant will be applicable for a period of
one (1) year after termination of Employee's employment
with the employer. There will be no compensation for this
restrictive covenant other than the severance payment
mentioned above.
c. Non-solicitation. For a period of one (1) year immediately
following the termination of Employee's employment with the Company, Employee
shall not either directly or indirectly make known to any person, firm, or
corporation the names and addresses of any of the customers of the Company or
any other information pertaining to the customers or call on, solicit, or take
away, or attempt to call on, solicit, or take away, any of the customers of the
Company on whom Employee called or with whom he became acquainted during the
term of employment with the Company under this Agreement, either for himself or
for any other person, firm, or corporation.
d. Non-hire. For a period of one (1) year immediately
following the termination of Employee's employment with the Company, Employee
shall not employ, offer to employ, solicit or hire as an employee, agent or
contractor or in any other capacity, any current employee or contractor of the
Company.
e. Comments About the Company. Employee agrees that he will
not say, publish or do any act or thing that disparages or casts the Company,
its officers, directors, employees, agents and/or representatives in an
unfavorable light, or which could result in injury to any such person's
reputation. Employee shall make no public statements or announcements regarding
his past employment by the Company or any of the matters set forth herein
without first consulting with the Company and obtaining its prior written
approval as to the timing and content of the proposed statements and/or
announcements, except that Employee may disclose his dates of employment,
title, job description and final base annual salary with the Company. The
Company agrees that it shall make no public announcement regarding Employee`s
past employment with the Company which disparages or casts Employee in a false
light. The parties agree that neither shall make any press release or other
public announcement concerning this Agreement except to the extent required by
applicable law.
f. Assistance. Employee agrees to provide reasonable
assistance to management of the Company in connection with the general
operations of the business, including but not limited to, assistance in
strategic business issues, operations, sales, joint venturers, personal
matters, or litigation assistance. These activities shall not exceed eighteen
(18) days of time, over a six (6) month period. Time increments of less than
one hour shall not be counted toward this total.
g. Return of Company Property. Employee agrees to return all
Company property in his possession concurrently with the execution of this
Agreement on both parties, including, without limitation, all computers,
printers, software, hardware, communications equipment, credit cards, Airpass
cards, business records and any other related items, except when the parties
agree in writing to assign such item to Employee.
h. Referral. The Company and Employee acknowledge and agree
that Employee shall direct all inquiries concerning Employee from a prospective
employer of to Doug Richard, or his successor, and Mr. Richard shall provide
such prospective employer only with the dates of Employee`s employment with the
Company, title and final base salary, or a letter or statement which the
parties may agree.
i. Company Car Lease Contract. Company and Employee
acknowledge and agree that Employee takes over the lease contract (AVIS
Contract No. 5088541) for the company Car, a Mercedes E 320, from June 1, 1997.
Until this date Company will bear all the monthly costs and expenses related to
the Company car. From June 1, 1997 Employee will bear all these costs and
expenses.
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<PAGE> 4
9. Releases
a. In consideration of the premises and mutual promises,
agreements, and covenants contained herein, including the payment to Employee
in which the spouse of Employee has a community property interest, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, Employee and his spouse hereby fully, finally, completely
and generally release the Company, its subsidiaries and/or affiliates and their
respective officers, directors, employees, shareholders, attorneys, agents and
representatives from any and all claims, actions, demands, losses, liabilities,
expenses, obligations and/or causes of action, of whatever kind or character
(collectively the "Claims"), arising out of occurrences prior to the date of
execution of this Agreement, whether known or unknown, arising from, relating
to, or in any way connected with Employee's employment with the Company or to
any Claim or defense that Employee or his spouse may have with respect to the
Promissory Note or the Loan Documents, the termination of Employee's employment
with the Company, his service as an officer of the Company and any of its
subsidiaries and/or affiliates, and from any and all Claims arising under the
Civil Rights Act of 1964, Americans with Disabilities Act of 1990, Texas
Commission on Human Rights Act, Texas Handicap Discrimination Act, and any and
all other Claims arising under any statute, common law or contract (whether
oral or written), and Employee and his spouse further agree not to take any
legal action or file any suit, action, or proceeding against the Company, its
subsidiaries and/or affiliates and their respective officers, directors,
employees, shareholders, attorneys, agents or representatives related thereto,
or aid, assist or abet any party pursuing a suit, action or proceeding against
the Company with respect to the Claims. This release shall not affect the
rights of Employee or the Company created or continued under this Severance
Agreement.
b. In consideration of the premises and mutual promises,
agreements, and covenants contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Company (by and through its directors and officers) and those directors of the
company listed under the acknowledgment below, hereby fully, finally,
completely and generally release Employee from any and all claims, actions,
demands, losses, liabilities, expenses and/or causes of action of whatever kind
and character, arising out of occurrences prior to the date of execution of
this Agreement, whether known or unknown, arising from, relating to, or in any
way connected with Employee's employment with the Company and the termination
of his employment with the Company, and his service as an officer of the
Company and any of its affiliates and/or subsidiaries, arising under any
statute, common law or contract (whether oral or written), but excluding the
Loan Documents, provided, however, that this release is based upon Employee's
representation that he has not taken any action that would make the Company,
its subsidiaries and/or affiliates, or their respective officers, directors,
employees, shareholders and/or agents liable for any illegal activities, and
that Employee agrees to indemnify and hold the Company, its affiliates and
their respective officers, directors, employees, shareholders and/or agents
harmless from any and all losses, liabilities, claims, causes of actions and
expenses (including attorney's fees) resulting from or arising out of any of
this actions for which such parties may be held liable. This release pursuant
to this subparagraph 9(b) shall in no way affect the rights of the Company or
Company's and Employee's continuing obligations under this Agreement and/or
pursuant to the Loan Documents or any related documentation.
c. Each party understands and agrees that this Agreement
constitutes a valid and enforceable waiver and release, and creates enforceable
rights as described herein, and acknowledges that this waiver and release is
made knowingly and voluntarily.
d. Employee and Company agree to fully and immediately
dismiss any pending administrative or judicial action that has been filed
against the other.
10. Binding Nature. EMPLOYEE, HIS SPOUSE AND THE COMPANY ACKNOWLEDGE
THAT EACH HAS CAREFULLY READ THIS AGREEMENT, THAT EACH FULLY UNDERSTANDS ITS
PROVISIONS AND ITS FINAL AND BINDING
4
<PAGE> 5
EFFECT, AND THAT EACH IS SIGNING THIS AGREEMENT VOLUNTARILY. EMPLOYEE, HIS
SPOUSE AND THE COMPANY FURTHER ACKNOWLEDGE THAT EACH HAS BEEN AFFORDED THE
OPPORTUNITY TO CONSULT WITH AN ATTORNEY OF THEIR CHOICE PRIOR TO EXECUTING THIS
AGREEMENT. THIS AGREEMENT AND ALL OF THE RIGHTS OF THE COMPANY UNDER THIS
AGREEMENT WILL INURE TO THE BENEFIT OF AND WILL BE ENFORCEABLE BY THE COMPANY'S
SUCCESSORS AND ASSIGNS. THIS AGREEMENT AND ALL OF THE RIGHTS OF EMPLOYEE UNDER
THIS AGREEMENT WILL INURE TO THE BENEFIT OF AND WILL BE ENFORCEABLE BY HIS
PERSONAL OR LEGAL REPRESENTATIVES, EXECUTORS, ADMINISTRATORS, SUCCESSORS,
HEIRS, DISTRIBUTEES, DEVISEES AND LEGATEES. EMPLOYEE AND COMPANY REPRESENT THAT
EACH OF THEM HAS THE REQUISITE AUTHORITY AND COMPETENCY TO EXECUTE THIS
AGREEMENT, AND THE COMPANY REPRESENTS THAT THE UNDERSIGNED OFFICER HAS THE
REQUISITE AUTHORITY AND COMPETENCY TO EXECUTE THIS AGREEMENT ON BEHALF OF THE
COMPANY.
11. Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, in whole or in part, then both
parties will be relieved of all obligations arising under such provision, but
only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be
deemed amended by modifying any such illegal, unenforceable or void provision
to the extent necessary to make it legal and enforceable while preserving its
intent, or if such is not possible, by substituting therefor another provision
that is legal and enforceable and achieves the same objectives. Notwithstanding
the foregoing, if the remainder of this Agreement will not be affected by such
declaration or finding and is capable of substantial performance, then each
provision not so affected will be enforced to the extent permitted by law.
12. Waiver. No delay or omission by either party to this Agreement to
exercise any right or power under this Agreement will impair such right or
power or be construed as a waiver thereof. A waiver by either of the parties to
this Agreement of any of the covenants to be performed by the other or any
breach thereof will not be construed to be a waiver of any succeeding breach
thereof or of any other covenant contained in this Agreement. All remedies
provided for in this Agreement will be cumulative and in addition to and not in
lieu of any other remedies available to either party at law, in equity, or
otherwise.
13. Full Payment. The payments and obligations of the Company
described herein satisfy all of Employee's and his spouse's Claims against the
Company. Employee further agrees that he will be solely responsible for and
will indemnify and hold the Company harmless from, any federal or state income
tax, FICA, or other tax liability, if any, resulting from the payments made to
Employee pursuant to this Agreement, or other sums previously paid to Employee
during his employment by the Company, except as may have been withheld by the
Company in accordance herewith. Employee and his spouse recognize that if
either of them breaches their respective agreements contained herein, that they
shall be jointly and severally liable to the Company as a result thereof for
all payments made hereunder by the Company to Employee in reliance upon and in
consideration for their respective agreements herein contained. Provided,
however, notwithstanding any liability Employee or his spouse may have to the
Company as a result of any breach of this Agreement, the releases, waivers and
other agreements contained herein shall not be affected and shall continue in
full force and effect.
14. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE COUNTRY OF THE
NETHERLANDS WITHOUT GIVING EFFECT TO ANY PRINCIPLE OF CONFLICT-OF-LAWS THAT
WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION. THE PARTIES
HERETO SUBMIT THEMSELVES TO THE JURISDICTION OF THE TRIBUNALS OF THE STATE OF
TEXAS, INCLUDING WITHOUT LIMITATION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS, AND THE COURTS OF THE NETHERLANDS WHICH MAY SO HAVE
JURISDICTION, EXPRESSLY WAIVING ANY VENUE TO WHICH THEY MAY BE ENTITLED BY
THEIR PRESENT OR FUTURE DOMICILES.
15. Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or on the
5
<PAGE> 6
expiration of three (3) days after being mailed by United States registered
mail, return receipt requested, postage prepaid, or immediately by facsimile,
addressed as follows:
If to Employee: Herman DeLatte
45 Chemin Du Petit
1255 Veyrier
Switzerland
If to the Company: President
Micrografx, Inc.
1303 Arapaho Road
Richardson, Texas 75081
cc: Legal Department
Or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change
of address shall be effective only upon receipt.
16. Arbitration. Employee, his spouse and the Company agree that any
dispute arising under this Agreement, shall be submitted to arbitration in
Dallas, Texas in accordance with the rules of the American Arbitration
Association. The decision of the arbitrator(s) will be binding, conclusive and
nonappealable, and that costs of such arbitration shall be paid by the party
charged by the arbitrator(s) in rendering its (their) decision. Employee and
his spouse agree that, notwithstanding this provision, (i) the Company may use
any judicial or non-judicial remedy to enforce any obligation of Employee
and/or his spouse arising under the Promissory Note or the Loan Documents, and
(ii) the Company may obtain any injunctive, equitable or common law relief
necessary to enforce Employee's obligations arising under sections 8(b) and
8(d) of this Agreement.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Equitable Remedies. Employee and the Company acknowledge that
neither he nor the Company would enter into this Agreement but for the
agreements of the other contained herein and that the other would be
irreparably injured by a violation of the provisions of this Agreement and that
neither would have adequate remedy at law in the event of such violation.
Therefore, Employee and the Company acknowledge that injunctive relief,
specific performance or any other appropriate equitable remedy (without bond or
other security being required) are appropriate remedies to enforce compliance
by the other of its obligations hereunder.
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties to this Agreement with respect to the subject matter of
this Agreement and there are no understandings or agreements relative to this
Agreement which are not fully expressed in this Agreement, except for that
certain Employee Non-disclosure Agreement dated March 24, 1994, between
Employee and the Company and the Loan Documents. All prior agreements between
the parties with respect to the subject matter of this Agreement, whether oral
or written, are expressly superseded by this Agreement. No change, waiver or
discharge of this Agreement will be valid unless in writing and signed by the
party against which such change, waiver or discharge is to be enforced.
6
<PAGE> 7
This Agreement is executed on this 6th day of February, 1997, to be
effective as of the Effective Date.
MICROGRAFX, INC. Employee
By: /s/ DOUGLAS RICHARD /s/ HERMAN DELATTE
---------------------------- --------------------------------
Title: President
----------------------------
MICROGRAFX B.V.
By: /s/ R. EDWIN PEARCE
----------------------------
Title: Managing Director
----------------------------
ACKNOWLEDGMENT AND FURTHER AGREEMENT
I, Mrs. DeLatte, for the consideration to my spouse Herman DeLatte in
which I have a community property interest, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, do
hereby acknowledge and agree to abide by the terms and conditions of this
Agreement.
Spouse
/s/ MRS. DELATTE
-----------------------------
7
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