UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1997
Commission File Number: 0-24318
DIEHL GRAPHSOFT, INC.
(Name of Small Business Issuer in its charter)
Maryland 52-1407016
(State or other Jurisdiction
I.R.S. Employer
of incorporation or organization) Identification No.
10270 Old Columbia Road Suite 100
Columbia, Maryland 21046
(Address of principal executive offices) (Zip code)
Issuer's telephone number (410) 290-5114
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ____
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B in this form, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. __X__
State Issuer's revenues for its most recent fiscal year. $6,022,714
State the aggregate market value of the voting and non-voting common stock
held by non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a
specified date within the past 60 days. As of August 8, 1997, $4,481,953.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
3,140,739 shares of the sole class of common stock as of August 8, 1997.
TABLE OF CONTENTS
ITEM
PAGE
Item 1 Description of Business
1
Item 2 Description of Property
7
Item 3 Legal Proceedings
7
Item 4 Submission of Matters to a Vote of Security Holders
7
Item 5 Market for Common Equity and Related Stockholder Matters
7
Item 6 Management's Discussion and Analysis
8
Item 7 Financial Statements
10
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
10
Item 9 Directors, Executive Officers, Promoters and Control Persons
10
Item 10 Executive Compensation
10
Item 11 Security Ownership of Certain Beneficial Owners and Management
10
Item 12 Certain Relationships and Related Transactions
11
Item 13 Exhibits and Reports on Form 8-K
11
Financial Statements12-21
Signatures
22
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
Diehl Graphsoft, Inc. ("Company") was founded in June, 1985, with the intent
to develop a new and original approach to computer aided design (CAD)
software to enable sophisticated design, architectural, and engineering
projects to be successfully undertaken on relatively inexpensive computer
hardware, thereby expanding the market for CAD software and decreasing costs
of such work in the industry. The Company's strategy also includes offering
integrated industry-specific software tools based on the Company's CAD
technology to service the needs of design, engineering, and architectural
professionals in a cost effective manner.
The business of the Company is more technically described as the design,
development, manufacture and marketing of interactive graphics and CAD
software. As part of that business, Diehl Graphsoft publishes a newsletter
four times a year as a service to its users and as a sales tool for
additional products and upgrades. The Company also creates manuals for its
software users, which are included as part of the software products, and has
taken on other projects related to computer graphics and software
development. Diehl Graphsoft also offers electronic information services on
the Internet as a service to its customers and as a sales tool.
The Company has developed a related series of CAD software packages for the
Apple Macintosh microcomputer and for IBM compatible microcomputers using the
Microsoft Windows operating systems. The Company has also developed and
marketed a 2- and 3- dimensional CAD program called MiniCAD with broad
capabilities including a database, report generation, and programmability.
The Company initially acquired its basic CAD system software from Richard
Diehl on September 4, 1985 in exchange for 90,000 common shares in the
Company valued at $1,000.00 at that time. As part of his employment
agreement, Mr. Diehl has agreed to assign rights to future software developed
by him to the Company. See "Certain Relationship and Related Transactions."
The Company has developed specialized modules which enhance the ability of
MiniCAD to serve specialized markets such as architectural, civil, and
mechanical engineering. These specialized modules are included in MiniCAD
itself.
Reorganization
Effective June 24, 1996, the Company consummated a tax-free reorganization
for the purpose of becoming a Maryland corporation by issuing one share of a
new class of $.01 par value common stock in exchange for each share of the
then outstanding no par value common stock.
Distribution
Distribution of the Company's present software products is accomplished by
three methods (percentage of sales from each for the fiscal year ending May
31, 1997 is shown in parentheses): 1) direct sales between the Company and
the end user (11%); 2) through dealers (1%); and 3) through distributors (88%
with 32 distributors, both foreign and domestic). In comparison, for the
fiscal year ending May 31, 1996, distribution was as follows: 1) direct
sales between the Company and the end user (11%); 2) through dealers (1%);
and 3) through distributors (88% with 32 distributors, both foreign and
domestic). In the fiscal years ending May 31, 1997 and 1996, sales to two
distributors accounted for approximately 52% and 51% of sales, respectively.
The Company also engages in extensive advertising of its products in trade
magazines. The loss of one or both of these distributors could have a
material adverse effect on the Company.
Product Description
Present Products
Currently, the Company sells MiniCAD into both the Macintosh and Windows
markets, and two products into the Macintosh market alone: Blueprint (soon to
become MiniCAD Lt) and Azimuth. MiniCAD provided approximately 96% of the
Company's revenues for the year ended May 31, 1997. Blueprint and Azimuth
use the same technology as MiniCAD, but have reduced capabilities and are
sold into specialized markets. Blueprint is sold as a low-end drafting
product; Azimuth is a mapping product. The Company has established itself in
the industry as a medium-cost supplier of Macintosh and Windows software, and
competes for market share with the largest of the industry leaders, such as
AutoDesk and Intergraph. MiniCAD has won both of the Macintosh industry's
two most prestigious awards, the MacWorld* World Class Award for CAD (in
1996, 1994, 1989), and the MacUser** Editor's Choice Award for CAD (Winner,
1990; Finalist, 1992). These awards are based upon the merits of the
products as compared with other competing products and are the most desired
awards in the Company's industry. Management believes these awards have a
positive effect on sales of the product. MiniCAD has also won the 1988
Australian MacWorld Class Award, the 1992 Switzerland MacWorld Best CAD
Award, the 1993 and 1995 MacLife Grand Prix Award for Best CAD program in
Japan, and the 1994 Oscar di Applicando Award for best CAD package in Italy.
In 1996, MiniCAD for Windows received its first award: it was named by
Computer Graphics World as one of 1996's "Most Innovative Products." There
can be no assurance that the Company's products will continue to achieve this
level of industry acceptance in the future.
*MacWorld is a registered trademark of IDG Corporation
**MacUser is a registered trademark of Ziff-Davis, Inc.
Core Technology
The Company maintains a core technology of over 300,000 lines of computer
code, the actual program which creates the images seen on the computer
screen. This core technology is used to build MiniCAD, Blueprint, and
Azimuth, and is available for use in additional products the Company may
choose to create. The code represents the accumulated result of research and
development expenditures made by the Company since inception. The core
technology can be roughly divided into 2-dimensional drafting, 3-dimensional
drafting, database and report generation, and programmability. These aspects
of the core technology are described in more detail below, but as a whole
they form the technological basis for the Company's business.
The 2-Dimensional System
The 2-Dimensional CAD system forms the basic technology upon which CAD is
built into MiniCAD, Blueprint, and Azimuth. The 2-Dimensional drafting
system allows the user to draw on a computer screen an object such as a
house, a nut and bolt, a piece of furniture, or an engine part, and produce
the necessary drawings to specify the manufacture, evaluation, or
construction of the item by a third party. The system duplicates the
functionality of a drafting board as used by conventional draftspersons, and
in addition brings added capability which greatly increases the overall cost
effectiveness for the user.
This core technology includes a broad array of features for support of basic
drafting and CAD functions, including symbol libraries, list management,
class and layer management, text with specialized fonts, linestyles, fill
patterns, and user interface considerations, such as snapping and gridding.
More advanced technology such as code for the Boolean intersections of
polygons, polylines, automatic dimensioning, and special wall objects for
architects increases the value of this technology to the user. Included in
this technology is code to interact with the operating system of the
Macintosh. The Company has also developed MiniCAD for the Windows 3.1,
Windows NT, and Windows 95 operating systems.
The 3-Dimensional CAD System
The 3-Dimensional system is used to construct actual models of objects rather
than a two dimensional representation. This technology goes beyond what a
customer could do on a conventional drafting system. Once an object is
entered into the computer, the user may view it from any angle, in any scale,
and choose from various standard projections such as perspective, orthogonal,
isometric, cabinet, or cavalier. These projections allow the user to
duplicate traditional ways of displaying an object in three dimensions. The
user can obtain from the computer a drawing with top, side, front, and
perspective views of an object after creating the object just once. This
model is linked into the 2-Dimensional CAD system in a unique way, which
allows several views of the object to be drawn and dimensioned
simultaneously. The user may duplicate the object, add objects together, and
edit the object at any time. The computer will display the object as a
transparent wire-frame, solid, or shaded solid.
Key features of the CAD system include the ability to construct architectural
models directly from the floorplan. Modules can also be constructed from
other 2-Dimensional objects for mechanical applications. The unique nature
of the database allows the user to re-edit the original floorplan or object
and re-construct a new model with the changes included. In 1996, the Company
licensed technology enabling MiniCAD to produce solid modeling. MiniCAD now
supports true 3D Boolean operations. Additional capabilities of 3-
Dimensional construction are now under development at the Company. There can
be no assurance, however, that the Company will be able to develop such
capabilities.
Database and Report Generation Technology
The database technology allows the user to attach text and numeric
information to objects in the CAD system. These data records each adhere to
a particular format described by the user. For example, a user may define a
"Furniture" record which contains information about the manufacturer, color,
item number, date of acquisition, and cost which is attached to each piece of
furniture in the drawing. Another record may specify HVAC system maintenance
information, and can be attached to the appropriate symbols in the drawing.
This technology is flexible and is used by customers to perform facility
management functions and cost estimations.
This technology also includes a spreadsheet-like report generation capability
which works in a similar way to stand-alone spreadsheets. This spreadsheet
allows direct display of information in the drawing, including sizes,
perimeters, areas, and database records.
Programming Technology
As part of the Company's main product, MiniCAD, the Company includes a macro-
programming capability to allow users to extend or customize the program.
The Company has marketed its macro-language programming capability under the
name of MiniPascal for several years. This language contains an extensive
application programmers interface (A.P.I.) which contains the routines
necessary for the direct manipulation of the drawing and database by the
programmer. With this capability, users can extend the functions of the
program to automate specific tasks in their work.
The Company released a CAD development kit as a separate product in April,
1994. This development system is used in three ways. First, the system is
used by corporate developers for in-house use. Second, third party
developers may use the system to develop add-on products which work with the
Company's products to facilitate their use in special niche markets. And
third, the system is used by the Company to develop specialized products for
certain high profile niche markets. The system requires the use of C++, a
high level language which provides more extensive capabilities than provided
in older languages. In addition to the prior language, C++ allows
development of professional quality CAD functions at the most advanced levels.
Vertical Market Solutions: The Design and Drafting Toolkit
The Company also produces industry-specific features, tools, symbols,
worksheets, parametrics, and other resources within the MiniCAD software to
reach target markets based on a 1991 Company analysis of the CAD field
showing that professionals wanted integrated industry-specific tools in their
CAD package. An integrated Design and Drafting Toolkit allows engineers and
designers to access tools tailored for their profession from within MiniCAD.
Integrated modules for architecture, mechanical engineering, space planning,
theater lighting design, food service, HVAC, landscape design and more have
been created and included free of charge within MiniCAD to purchasers of the
current product. The Company recently added an integrated DTM (Digital
Terrain Modeling) module for civil engineering and landscape professionals.
Manuals and Tutorials
The Company maintains a capability to produce manuals and training materials
in-house. Because of the complexity of the CAD software, these manuals are
an important part of the product to the customer. MiniCAD currently has four
separate manuals, one for the programming language, two which are technical
references for the users to explain specific features (the User manual and
the Reference manual), and the Toolkit manual to explain the industry-
specific features contained in MiniCAD. A tutorial to assist new users in
learning each product ships on the product disk. The manuals are produced in
FrameMaker in both Macintosh and Windows and are printed and bound by
outside vendors.
Technical Services
As is common in the software industry, the Company has established a group of
trained representatives inside the Company to provide information and
assistance to the user. Most support is provided by telephone or telefax.
The Company provides access to its customer support services free of charge
to its customers but does not provide a toll free number for this service.
International distributors are required to have technical service departments
in their respective countries.
Quality Assurance and Testing
Systematic testing and field testing are methods used by developers to ensure
a quality product free of defects, bugs, and unfriendly features. Systematic
testing is performed at the Company by two quality assurance specialists, who
employ a test suite developed specifically for the Company's products.
Results of these tests are posted, placed in a database for resolution, and
reviewed at engineering meetings.
Field testing consists of sending early versions of the Company's products
free of charge to users who have agreed to test under certain conditions.
The users are interviewed to determine if changes are necessary before
marketing, and are required to return data sheets on their findings.
Competition
There are presently several full-featured CAD systems on the market for the
Apple Macintosh computer, Microsoft Windows, and other operating systems
which may present competition for the Company. In addition, there are
numerous companies which have products aimed at specific segments of the
market. Corel's VisualCAD is a new competitor due to the port over to the
Windows market. The Company has pursued a strategy of aggressively marketing
high-quality, easy-to-use CAD programs through mass market channels to keep
costs, and hence product price, low. However, these companies may have
greater capital resources, larger staffs, and more sophisticated facilities
than the Company. Other companies may produce products which are more
effective than any developed by the Company and may be more successful than
the Company in their production and marketing of such products. There can be
no assurance that other companies will not enter the markets developed by the
Company.
Research and Future Products
Future products and product improvements are developed by the employees of
the Company, purchased from outside the Company, or licensed from other
developers. Product improvements are required on a continuing basis to
prevent the Company's products from becoming obsolete resulting in
deterioration of sales. While at the present time the Company believes that
its product is of a high quality, there can be no assurance that the Company
will be able to maintain its present market position in the future. The
Company bears all of its own research and development expenses.
Future Industry-Specific Systems
The Company intends to continue developing industry-specific, vertical market
modules for inclusion in MiniCAD. The Company maintains a separate team of
professionals to develop these modules on an ongoing basis. However, there
can be no assurances that the Company will be successful with this strategy.
SALES AND MARKETING
The Company sells its own products and products of other companies. The
Company markets software though a combination of direct sales generated from
reviews and advertising in trade publications, retail outlets, and bulk
distributors. Most of the Company's product is sold wholesale to a few main
distributors, who in turn push the product through the retail and mail-order
channels. The Company's staff participates in professional seminars and
conferences, user group presentations, and trade shows, and assists in sales.
The Company has a staff of nine full-time and one part-time marketing
professionals.
Employees
The Company employs 4 executives, 16 programmers, 2 quality assurance
personnel, 7 technical support personnel, 10 marketing personnel, 3
bookkeepers, 2 shipping clerks, 4 Customer Service personnel, and 2
administrative assistants. The Company employs a total of 50 persons, 48 of
them full-time.
Licensing Agreements
The Company maintains a licensing agreement with Altura Software allowing the
Company to convert its developed software for use in a Windows-based personal
computer or compatible environment. During the year ended May 31, 1997, the
Company entered into an additional software licensing agreement with Stephen
Richards for the use of certain translation software.
Proprietary Rights
The Company does not hold any patents and relies on a combination of trade
secret, copyright and trademark laws, nondisclosure, and other contractual
agreements and technical measures to protect its proprietary rights in its
products. Despite these precautions, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that
the Company regards as proprietary.
The Company believes that because of the rapid pace of technological change
in the CAD software industry, the legal protection for its products are less
significant factors in the Company's success than the knowledge, ability, and
experience of the Company's employees, the frequency of product enhancements,
and the timeliness and quality of support services provided by the Company.
The Company believes that its products, trademark, and other proprietary
rights do not infringe on the proprietary rights of third parties. There can
be no assurance, however, that third parties will not assert infringement
claims against the Company in the future.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 10,865 square feet of office space and 4,000
square feet of manufacturing space for a total of 14,865 square feet of space
at 10270 Old Columbia Road, Suite 100, Columbia, Maryland 21046-1751 from an
unrelated party at a monthly rent, including allocated property taxes, of
$11,263 through July 31, 1998. The Company believes these facilities are
adequate to meet its needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently engaged in any material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the last fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company is a public company quoted on the NASDAQ Small Cap market (NASDAQ
stock symbol DIEG), with corporate headquarters located in Columbia, MD.
The following table sets forth the range of high and low bid information for
the Company's common stock for the periods indicated as quoted in the NASDAQ
Small Cap market. These over-the-counter market quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.
Fiscal Years Ending May 31, 1996 May 31, 1997
High Bid Low Bid High Bid Low Bid
First Quarter $ 9 3/4 $ 3 5/8 $ 9 $ 6 1/4
Second Quarter 11 1/8 6 1/4 9 1/4 6 23/32
Third Quarter 7 1/2 4 7/8 8 5 1/2
Fourth Quarter 8 1/8 5 6 5/8 4 7/8
The Company currently has 3,140,739 shares of stock outstanding. As of
August 8, 1997, the closing bid and ask prices for the Company's common stock
were 3 7/8 and 4 3/8, respectively.
Holders
The Company has approximately 94 holders of its common stock.
Dividend Policy
The Company has never declared or paid cash dividends on its common stock,
and may elect to retain its net income in the future to increase its capital
base. The Corporation does not currently anticipate paying cash dividends on
its common stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations for the year ended May 31, 1997 compared to year ended
May 31, 1996
Revenue
Product revenues were $6,022,714 for the year ending May 31, 1997 as compared
with $4,927,636 for the year ending May 31, 1996 representing an increase of
22.2%. This increase is attributable to the commencement of sales of MiniCAD
for Windows in July 1996, which totaled $1,695,139 in product revenues for
the year ended May 31, 1997. Sales of MiniCAD for the Apple Macintosh
declined to $4,073,774 for the year ended May 31, 1997 from $4,465,368 for
the year ended May 31, 1996, representing a decrease of 8.8%. This decline
is due to a decline in sales by Apple Computer during the year.
Cost of Revenue
Cost of revenue for the year ending May 31, 1997 was $1,650,903 as compared
with $1,233,986 for the year ending May 31, 1996, representing an increase of
33.8%. The gross profit percentages for the year ended May 31, 1997 and 1996
were 73% and 75%, respectively. This decrease in gross profit percentage is
due to an increase in amortization of software development costs resulting
from an increased commitment to software development activities.
Amortization expenses charged to cost of revenue totaled $645,301 for the
year ended May 31, 1997, as compared with $387,567 for the year ended May 31,
1996, representing an increase of 66.5%. Royalty expenses charged to cost of
revenues for use of certain translation software for MiniCAD for Windows
totaled $48,000 for the year ended May 31, 1997. The Company incurred no
royalty expenses for the year ended May 31, 1996 since MiniCAD for Windows
was in a developmental stage through most of that year. Costs to scrap old
and obsolete inventory also rose by $86,210 in the year ended May 31, 1997 as
compared with the year ended May 31, 1996. The increase in this cost is
attributable to the unexpected decline in sales of MiniCAD for the Apple
Macintosh, principally in the six months ended May 31, 1997, prior to the
introduction of MiniCAD 7 in May 1997.
Operating Expenses
General and administrative expenses were $1,770,858 for the year ended May
31, 1997 as compared with $1,765,829 for the year ended May 31, 1996. Legal
expenses declined to $163,892 for the year ended May 31, 1997 as compared
with $370,596 for the year ended May 31, 1996, due primarily to a settlement
of a patent infringement claim against the Company in June 1996. Other
general and administrative expenses increased with an increased commitment to
other functional operations and the overall growth of the Company resulting
from the introduction of MiniCAD for Windows.
Selling and marketing expenses were $1,896,966 for the year ended May 31,
1997 as compared to $954,244 for the year ended May 31, 1996, representing an
increase of 99%. Advertising expenses for MiniCAD rose to $1,334,006 for the
year ended May 31, 1997 as compared with $526,313 for the year ended May 31,
1996. This increase is principally due to the introduction of MiniCAD for
Windows in July 1996. Salaries and trade show expenses also rose for the year
ended May 31, 1997 when compared with the year ended May 31, 1996 with the
need to reach the broader market provided by MiniCAD for Windows.
Research and development expenses were $243,339 for the year ended May 31,
1997 as compared with $224,471 for the year ended May 31, 1996, representing
an increase of 8%. This increase is primarily attributable to an increased
commitment by the Company to this area.
Other Income and Expenses
Other income was $380,084 for the year ended May 31, 1997 as compared with
$337,734 for the year ended May 31, 1996, representing an increase of 13%.
This increase is attributable to an increase in investment income from
marketable securities resulting from a larger investment in these securities
during the year ended May 31, 1997 as compared with the year ended May 31,
1996.
Income Taxes
The provision for income taxes was $294,728 for the year ended May 31, 1997
as compared with $ 417,842 for the year ended May 31, 1996, representing a
decrease of 29%. The effective income tax rate was 35.1% for the year ending
May 31, 1997 as compared to 38.4% for the year ending May 31, 1996. The
decline in the effective tax rate for the year ended May 31, 1997 is
attributable to an increase in tax exempt investment income.
Net Income
Net profit declined to $546,004 or $.17 per share for the year ending May 31,
1997 as compared with $668,998 or $.22 per share for the year ending May 31,
1996, representing a decline in net income of 18%.
Liquidity and Capital Resources
The Company increased its working capital by $422,268 from $6,997,170 at May
31, 1996 to $7,419,438 at May 31, 1997, representing an increase of 6%. This
increase is the result of cash flows from operations during the year ended
May 31, 1997. The increase in working capital has been invested in
marketable securities which rose from $6,218,925 at May 31, 1996 to
$6,686,705 at May 31, 1997. Marketable securities at May 31, 1997 consist
principally of United States Treasury bills and municipal obligations. Cash
flows from operations during the year ended May 31, 1997 were also used to
purchase equipment and invest in software development and licensing costs,
which are included on the balance sheet at May 31, 1997.
The Company's future capital requirements will depend upon many factors,
including the extent, timing, and progress of the Company's development of
new software. The Company anticipates that its existing capital resources
and earnings from operations will be adequate to satisfy the capital
requirements for the next twelve months.
The Company will continue to have working capital needs that will be affected
by the progress of the Company's research and development activities and
capital expenditures. However, the Company expects that the cash generated
from future operations and the proceeds from the initial public offering will
satisfy its operating cash needs for the foreseeable future.
ITEM 7. FINANCIAL STATEMENTS
Financial statements for the fiscal years ended May 31, 1997 and 1996 are
attached hereto at Page 12. The following financial statements, including
the independent auditors reports, appear on sequential Pages 12 through 22
of this Annual Report:
1. Report of independent Auditors dated August 15, 1997;
2. Balance Sheet at May 31, 1997 and 1996;
3. Statements Income for the fiscal years ended May 31, 1997 and 1996;
4. Statements of Cash Flows for the years ended May 31, 1997 and 1996;
5. Statement of Stockholders' Equity for the years ended May 31, 1997 and
May 31, 1996; and,
6. Notes to the Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On June 12, 1996 the shareholders ratified the appointment of Ernst & Young,
LLP, as the Company's new auditors. No dispute regarding accounting
principles or any other accounting matters was present.
Thomas Monahan, Certified Public Accountant, had been the Corporation's
auditor for the previous four years.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The information included herein is incorporated by reference to the Company's
proxy filing for the annual shareholder meeting of November 4, 1997.
ITEM 10. EXECUTIVE COMPENSATION
The information included herein is incorporated by reference to the Company's
proxy filing for the annual shareholder meeting of November 4, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information included herein is incorporated by reference to the Company's
proxy filing for the annual shareholder meeting of November 4, 1997.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included herein is incorporated by reference to the Company's
proxy filing for the annual shareholder meeting of November 4, 1997.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits
Exhibit 3.1 - Articles of Incorporation
Exhibit 3.2 - Bylaws
Exhibit 10.1 - Directors Compensation Plan
Exhibit 10.2 - Stock Option Plan
Exhibit 11 - Computation of Shares Outstanding
Exhibit 21 - Subsidiary
Exhibit 23 - Consent of Independent Auditors
Exhibit 24 - Power of Attorney
Exhibit 27 - Financial Data Schedule
(b) The Company made no filing on Form 8-K
Report of Independent Auditors
To the Board of Directors and Stockholders of
Diehl Graphsoft, Inc.
We have audited the accompanying balance sheets of Diehl Graphsoft, Inc. as
of May 31, 1997 and 1996, and the related statements of income, stockholders'
equity, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diehl Graphsoft, Inc. at May
31, 1997 and 1996, and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Vienna, Virginia
August 15, 1997
DIEHL GRAPHSOFT, INC.
BALANCE SHEET
May 31,
ASSETS 1997
1996
Current assets:
Cash and
equivalents$
247,359$
375,278
Marketable
securities6,68
6,7056,218,925
Accounts
receivable,
net331,135
336,391
Inventory162,8
28134,713
Income taxes
receivable133,
370127,799
Other
167,565
163,529
Total current assets 7,728,962
7,356,635
Fixed assets:
Equipment633,3
29511,350
Furnishings
and
fixtures110,60
477,767
Leasehold
improvements
41,038 33,963
784,971623,080
Accumulated
depreciation
(465,816)
(344,518)
Net fixed assets 319,155
278,562
Other assets:
Unamortized
organization
expenses32,235
29,69
Software
development
and licensing
costs,
net of
accumulated
amortization
776,676
692,272
Total other assets 808,911
721,964
Total assets $ 8,857,028
$ 8,357,161
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts
payable and
accrued
expenses$
279,926$
273,941
Deferred
income taxes
29,598
85,524
Total current liabilities 309,524
359,465
Long term liabilities:
Deferred
income taxes
278,865
275,061
Total liabilities 588,389
634,526
Stockholders' equity:
Common stock
-
$.01 par
value;
10,000,000
shares
authorized,
3,140,739
shares issued
and
outstanding
at May 31,
1997 and 1996
31,40731,407
Additional
paid in
capital4,147,6
054,147,605
Retained
earnings4,089,
6273,543,623
Total stockholders' equity 8,268,639
7,722,635
Total liabilities and
stockholders' equity $ 8,857,028
$ 8,357,161
See accompanying notes to financial statements.
DIEHL GRAPHSOFT, INC.
STATEMENT OF INCOME
For the year ended May 31,
1997 1996
Revenues $ 6,022,714 $ 4,927,636
Cost of revenue 1,650,903 1,233,986
Gross profit 4,371,811 3,693,650
Operating expenses:
General and
administrative
1,770,8581,765,829
Selling and
marketing1,896,966
954,244
Research and
development
243,339 224,471
Total operating expenses 3,911,163 2,944,544
Income from operations 460,648 749,106
Other income and expenses:
Interest
income380,383
344,142
Gain (loss) on
disposition of
equipment
(299) (6,408)
Total other income and expenses 380,084 337,734
Income before income taxes 840,732 1,086,840
Provision for income taxes 294,728 417,842
Net income $ 546,004 $ 668,998
Net income per share $ .17 $ .22
Weighted average number of shares outstanding 3,164,548 3,050,693
See accompanying notes to financial statements.
DIEHL GRAPHSOFT, INC.
STATEMENT OF CASH FLOWS
For the year ended May 31,
1997
1996
Operating activities:
Net
income
$
546,00$
668,998
Adjustment
s:
Amortizations of bond premiums and discounts (279,638)
(202,953)
Other depreciation and amortization 789,296
500,767
Loss on disposition of fixed assets 299
6,408
Deferred income taxes (52,122)
(16,104)
Change in operating assets and liabilities:
Accounts receivable 5,256188,981
Inventory (28,115)(1,893)
Income taxes receivable/payable (5,571)(390,996)
Other current assets (4,036)(67,060)
Accounts payable and accrued expenses 5,985
156,953
Net cash provided by operating activities 977,358
843,101
Investing activities:
Purchase
of
marketable
securitie
s(5,547,14
2)
(3,119,459
)
Maturation
s of
marketable
securitie
s5,359,000
840,00
Capitalize
d
software
and
licensing
costs(729,
704)(613,9
75)
Purchase
of fixed
assets(181
,306)(163,
208)
Capitatize
d
organizati
onal
expenses
(6,125)(29
,692)
Loan
repayment
from
officer
-
225,000
Net
cash used
by
investing
activities
(1,105,277
)(2,861,33
4)
Financing activities:
Net
proceeds
from
issuance
of common
stock -
1,671,395
Net cash
provided
by
financing
activities
-
1,671,395
Net change in cash and equivalents (127,919)
(346,838)
Cash and equivalents at beginning of period 375,278
722,116
Cash and equivalents at end of period $ 247,359
$ 375,278
See accompanying notes to financial statements.
DIEHL GRAPHSOFT, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Common Paid
in
Retained
Shares Stock Capital
Earnings Total
<S> <C> <C> <C> <C> <C>
Balance-May 31, 19952,893,125 $ 28,931 $ 2,478,686 $ 2,874,625 $ 5,382,242
Sale of common stock 247,614 2,4761,668,919 - 1,671,395
Net income for year - - - 668,998 668,998
Balance-May 31, 19963,140,73931,407 4,147,605 3,543,623 7,722,635
Net income for year - - - 546,004 546,004
Balance-May 31, 19973,140,739$ 31,407$ 4,147,605$ 4,089,627$ 8,268,639
</TABLE>
See accompanying notes to financial statements
.
DIEHL GRAPHSOFT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR YEARS ENDED MAY 31, 1997 AND 1996
Note 1. Description of Company and Significant Accounting Policies
The Company is a computer software developer and publisher of computer aided
design (CAD) and computer aided engineering (CAE) software for use on
relatively inexpensive computer hardware.
Certain amounts reported in the financial statements as of and for the year
ended May 31, 1996 have been reclassified to conform with the 1997
presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. Significant
accounting policies include the following:
a. Cash and Cash Equivalents - Temporary investments with a maturity of
less than three months are treated as cash.
b. Inventory - Inventory is recorded at the lower of cost or market. Cost
is computed using the average cost method of accounting.
c. Fixed Assets - Fixed Assets are stated at cost less accumulated
depreciation. Depreciation is computed using the declining balance and
straight line methods over lives of generally five to seven years.
d. Selling and Marketing - Certain selling and marketing costs are
expensed in the period in which the cost pertains. Other selling and
marketing costs are expensed as incurred.
e. Revenue Recognition - Revenue is recognized at the time the software is
shipped, net of allowance for future estimated returns, provided that
no significant vendor obligations remain.
f. Stock Options - Stock options are accounted for using the intrinsic
value method of accounting. The pro forma effect of applying the fair
value method of accounting to stock options is insignificant to net
income.
g. Earnings Per Share - Earnings per share have been computed based on net
income and the weighted average number of shares outstanding during the
year, including common stock equivalents. Changes in the calculation
of earnings per share for 1998 and beyond, as required by the Financial
Accounting Standards Board, will have an immaterial effect to the
Company.
Note 2 Business Concentrations
The Company derives its sales from both domestic and foreign customers.
Export sales approximate 56% and 49% of total revenues for the years ended
May 31, 1997 and 1996, respectively. The Company also derived 52% and 51% of
sales from two major customers for the years ended May 31, 1997 and 1996,
respectively.
Note 3. Investments
Marketable securities are recorded at fair value which approximates cost.
Cost represents the purchase price adjusted for amortization of discounts and
premiums, if any, using the interest method. The Company has not had any
significant unrealized gains or losses on its investments during the periods
presented. A summary of marketable securities which are held available for
sale at May 31, 1997 and 1996 is as follows:
1997 1996
Money Market Fund $ 5,000 $ 5,000
United States Treasury Bills 3,177,144 4,790,335
Municipal Bonds 3,504,561 1,423,590
$ 6,686,705 $ 6,218,925
Note 4. Software Development Costs
The Company develops and tests software code to produce a software master
which becomes the core product sold to customers. The Company also purchases
and licenses software code contractually to include with the software master.
The cost of software developed, licensed, and purchased for inclusion with
the software master is amortized using the straight line method over the
product's estimated useful life, which is typically two years. Software
licensed for a periodic royalty fee, discussed in Note 8, is expensed to the
period to which it pertains.
The costs to establish the technological feasibility of software products,
including the designing, coding and testing activities that are necessary to
establish that a software product is both feasible and can be produced, are
treated as research and development costs and are expensed as incurred.
A summary of software development costs at May 31, 1997 and 1996 is as
follows:
1997 1996
Cost incurred for product development
and licensing $ 1,928,809 $ 1,531,026
Accumulated amortization 1,152,133 838,754
$ 776,676 $ 692,272
During the years ended May 31, 1997 and 1996, amortization expense reported
in cost of sales totaled $645,301 and $387,567, respectively.
Note 5. Pension Plan
The Company maintains a 401K defined contribution pension plan which provides
for all eligible employees to contribute up to 15% of qualifying wages to the
plan. The Company may make discretionary contributions up to 50% of the
first 6% the employee elects to contribute to the plan. For the years ended
May 31, 1997 and 1996, the Company contributed $34,081 and $29,271,
respectively to the plan.
Note 6. Income Taxes
Significant components of deferred tax assets and liabilities at May 31, 1997
and 1996 are as follows:
1997 1996
Deferred tax asset:
Accounts payable and
accrued expenses
$ 100,713$ 95,192
Deferred tax liabilities:
Accounts
receivable(91,271)(129,567)
Unamortized
software(286,918)(267,355)
Other(30,987) (58,855)
Net deferred tax liability $ (308,463) $ (360,585)
The provision for income taxes for the years ended May 31, 1997 and 1996
consist of the following:
1997 1996
Current provision:
Federal $ 302,475
$ 366,663
State 44,375 67,283
Total current portion 346,850 433,946
Deferred provision:
Federal (42,676)
(14,177)
State (9,446) (1,927)
Total deferred income taxes (52,122) (16,104)
Total provisions for federal and
state income taxes $ 294,728 $ 417,842
The Company's provision for income taxes resulted in effective tax rates that
varied from the statutory federal income tax rate as follows for the years
ended May 31, 1997 and 1996:
1997 1996
Expected federal income tax
provision 34.0% 34.0%
State income tax net of federal
benefit 4.6% 4.6%
Benefit from tax-exempt securites (3.5%) (0.2%)
35.1% 38.4%
For the years ended May 31, 1997 and 1996, the Company paid income taxes of
$352,421 and $824,942, respectively.
Note 7. Stock Warrants
The Company completed a sale of common stock and warrants in February 1995.
Each warrant, other than underwriter warrants, granted the right to purchase
one additional share of stock at a price of $6.75 per share prior to the
expiration of the warrant in November, 1995. Underwriter warrants, which
carry an exercise price of $7.00 per share, granted the right to purchase one
share of stock, with one additional warrant to purchase an additional share
of stock at $6.75 per share. All underwriter warrants originally issued
remain outstanding at May 31, 1997 and are due to expire in November, 1999. A
summary of warrant activity is as follows:
Warrants outstanding at May 31, 1995 660,000
Warrants exercised (247,614)
Warrants canceled (352,386)
Warrants outstanding at May 31, 1997 and 1996 60,000
Note 8. Stock Options
The Company amended and restated its stock option plan during the year ended
May 31, 1997. The restated plan increased the number of shares reserved for
issue from 150,000 shares to 300,000 shares, and provides for the issuance of
incentive stock options in addition to non-qualified stock options. These
options, which are non-transferable, carry a maximum life of ten years and
are issuable to officers, directors, and key employees in such amounts and
terms as determined by the Board of Directors within the limitations of the
plan. Company options outstanding at May 31, 1997 carry an exercise price
ranging from $4.25 per share to $6.44 per share with a weighted average
exercise price of $5.00 per share and weighted average remaining contractual
life of 5 years. Option activity is summarized as follows:
Options outstanding at May 31, 1996 and 1995
64,000
Options issued
35,000
Options cancelled
(10,000)
Options exercised for future issuance of stock
( 2,000
Options outstanding at May 31, 1997
87,000
Note 9. Commitments
a. Lease Agreement - The Company leases office space in Columbia,
Maryland, under an agreement that expires in July 1998. For the years
ended May 31, 1997 and 1996, rent expense totaled $132,742 and $105,450,
respectively. Future annual minimum lease payments plus allocated property
taxes are required as follows:
May 31, Total
1998
$135,156
1999
22,526
b. Employment Agreement - The Company maintains a two year employment
agreement with its president which provides for a salary of $169,000 per
year through November 1, 1997 plus allocable benefits as described in the
agreement.
c. Software Licensing Agreements - The Company maintains two significant
software licensing agreements for use of software with its software master.
An agreement with Altura Software Inc., permits the Company to convert its
developed software for use on a Windows-based personal computer or
compatible environment. The agreement requires the Company to pay an
annual royalty equal to the greater of $48,000 or three percent of
qualifying sales as defined in the agreement capped at the Company's option
at $250,000 per year. During the year ended May 31, 1997, royalty expenses
charged to cost of revenues totaled $48,000. During the year ended May 31,
1996, the product was in a developmental stage requiring only developmental
fees for use of the software which were accounted for pursuant to the
accounting policy for purchased and developed software described in Note 4.
During the year ended May 31, 1997, the Company entered into an additional
software licensing agreement with Stephen Richards for the use of certain
translation software which provides for an annual royalty of $30,000
beginning in June 1997.
SIGNATURES:
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by this undersigned,
thereunto duly authorized.
DIEHL GRAPHSOFT, INC.
a Maryland Corporation
Date: September 11, 1997 BY: s/Richard Diehl
Richard Diehl
President
Chief Executive Officer
Chairman, Board of Directors
Date: September 11, 1997 BY: s/Joseph Schmelzle
Joseph Schmelzle
Treasurer
Chief Financial and
Accounting Officer
Director
Date: September 11, 1997 BY: /s/ Joseph Schmelzle
Joseph Schmelzle
Attorney in Fact for
Richard Hug, Director
Date: September 11, 1997 BY: /s/ Joseph Schmelzle
Joseph Schmelzle
Attorney in Fact for
Frederic Unger, Director
ARTICLES OF INCORPORATION
OF
DIEHL GRAPHSOFT - MARYLAND, INC.
ARTICLE I
INCORPORATOR
The undersigned, Robin L. Zimelman, whose post office address is
1800 Mercantile Bank and Trust Building, 2 Hopkins Plaza, Baltimore, Maryland
21201, being over eighteen years of age and acting as incorporator, hereby
forms a corporation under the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the corporation (which is hereinafter called the
"Corporation") is: Diehl Graphsoft - Maryland, Inc.
ARTICLE III
PURPOSES FOR WHICH CORPORATION FORMED
The purposes for which the Corporation is formed are as follows:
(a) To engage in the business of designing, developing,
manufacturing, and marketing computer software products.
(b) To engage in any other lawful act or activity for
which corporations may be organized under the Maryland General Corporation
Law.
ARTICLE IV
RESIDENT AGENT AND PRINCIPAL OFFICE
The post office address of the principal office of the
Corporation in this State is 10270 Old Columbia Road, Columbia, Maryland
21046. The resident agent of the Corporation in this State is Richard Diehl,
whose post office address is 10270 Old Columbia Road, Columbia, Maryland
21046. Said resident agent is a citizen of the State of Maryland, and
actually resides therein.
ARTICLE V
AUTHORIZED STOCK
The total number of shares of stock of all classes which the
Corporation has authority to issue is ten million (10,000,000) shares, of the
par value of one cent ($.01) each, all of which shares are of one class and
are designated Common Stock. The aggregate par value of all shares having
par value is One Hundred Thousand Dollars ($100,000).
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Number of Directors.
The Corporation shall have three (3) directors, which number may
be increased or decreased pursuant to the Bylaws, but the number of directors
shall not be less than the lesser of three (3) or the number of stockholders.
The directors shall be divided into three classes (denominated as Class I,
Class II and Class III), as nearly equal in number as reasonably possible,
with the term of office of the Class I directors to expire at the first
annual meeting of stockholders, the term of office of the Class II directors
to expire at the second annual meeting of stockholders and the term of office
of the Class III directors to expire at the third annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors
whose terms expire shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders after their election,
provided that the stockholders electing new or replacement directors may from
time to time specify a term of less than three years in order to maintain the
number of directors in each class as nearly equal as possible.
Section 2. Initial Directors.
The following individuals shall serve as the initial directors,
in the classes specified below.
Class I director - Richard E. Hug
Class II director - Joseph Schmelzle
Class III director - Richard Diehl
As used elsewhere in this charter, the term "Continuing Director"
at any time shall mean any director named above who shall be serving as a
director of the Corporation at such time and any additional individual
serving as a director of the Corporation at such time whose election or
appointment to the Board of Directors shall have been approved by a majority
of the Continuing Directors serving as directors of the Corporation at the
time of such approval.
Section 3. Board Authorization of Stock Issuance.
The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, and securities convertible into shares
of its stock, of any class or classes, whether now or hereafter authorized,
for such consideration as the Board of Directors may deem advisable.
Section 4. Classification of Stock.
The Board of Directors shall have the power to classify or
reclassify any unissued stock, whether now or hereafter authorized, by
setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms
or conditions of redemption of such stock.
Section 5. Conflict of Interest.
No contract or other transaction between this Corporation and any
other corporation, partnership, individual or other entity and no act of this
Corporation shall in any way be affected or invalidated by the fact that any
of the directors of this Corporation are directors, principals, partners, or
officers of such other entity, or are peculiarly or otherwise interested in
such contract, transaction or act; provided that (i) the existence of such
relationship or such interest shall be disclosed or known to the Board of
Directors or to a committee of the Board of Directors if the matter involves
a committee decision, and the contract, transaction or act shall be
authorized, approved or ratified by a majority of disinterested directors on
the Board or on such committee, as the case may be, even if the number of
disinterested directors constitutes less than a quorum or (ii) the contract,
transaction or act shall be authorized, ratified or approved in any other
manner permitted by the Maryland General Corporation Law.
Section 6. Removal of Directors.
Any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and then only by the affirmative
vote of the holders of at least 80% of the aggregate combined voting power of
all classes of capital stock entitled to vote generally in the election of
directors, voting as one class, and only at a special meeting of stockholders
called for such purpose. If, however, such removal shall be approved by
directors of the Corporation constituting a majority of the Continuing
Directors at the time of such approval, the vote required for removal at such
special meeting shall be the affirmative vote of at least a majority of the
aggregate combined voting power of all classes of capital stock entitled to
vote generally in the election of directors, voting as one class. For
purposes of this Section, "cause" shall mean the willful and continuous
failure of a director to perform duties to the Corporation (other than any
such failure resulting from temporary incapacity due to physical or mental
illness) or gross misconduct materially and demonstrably injurious to the
Corporation.
ARTICLE VII
PROVISIONS CONCERNING CERTAIN RIGHTS
OF THE CORPORATION AND THE SHAREHOLDERS
Section 1. Right to Amend Charter.
The Corporation reserves the right to make, from time to time,
any amendments of its charter which may now or hereafter be authorized by
law, pursuant to the vote of stockholders required by law, including any
amendments which alter the contract rights of any class of outstanding stock
as expressly set forth in the charter; provided, however, that any amendment
to, repeal of or adoption of any provision inconsistent with Section 1 of
Article VI, Section 6 of Article VI, Section 4 of this Article, Section 5 of
this Article, or this Section 1 of this Article, shall be effective only if
it is approved by the affirmative vote of the holders of at least 80% of the
aggregate combined voting power of all classes of capital stock entitled to
vote thereon, voting as one class. If, however, such amendment shall be
approved by directors of the Corporation constituting a majority of the
Continuing Directors at the time of such approval, the vote required for such
amendment shall be the affirmative vote of at least a majority of the
aggregate combined voting power of all classes of capital stock entitled to
vote generally in the election of directors, voting as one class.
Section 2. Elimination of Preemptive Rights.
Unless otherwise provided by the Board of Directors, no holder of
stock of any class shall be entitled to preemptive rights to subscribe for or
purchase or receive any part of any new or additional issue of stock of any
class of the Corporation or securities convertible into stock of any class of
the Corporation.
Section 3. Required Stockholder Vote.
Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a greater
proportion of the votes of all classes or of any class of stock of the
Corporation, such action shall be effective and valid if (i) taken or
authorized by the affirmative vote of a majority of the aggregate combined
voting power of all classes of capital stock entitled to vote thereon, voting
as one class, and (ii) approved by directors of the Corporation constituting
a majority of the Continuing Directors at the time of such approval.
Section 4. Bylaws.
The Board of Directors, and not the stockholders, shall have the
exclusive power to make, alter, amend, or repeal the Bylaws of the
Corporation.
Section 5. Business Combination Statute.
The Corporation elects not to be governed by Section 3-602 of
Subtitle 6 (the "Business Combination Law") of Title 3 of the Maryland
General Corporation Law, as the same may be amended from time to time
(including any successor statute), with respect to any business combination
of the Corporation or any subsidiary of the Corporation with Richard Diehl,
or with any present or future affiliate or associate of his. As used in this
Section, the terms "business combination," "affiliate," "associate," and
"subsidiary" shall have the meanings ascribed to them in the Business
Combination Law.
ARTICLE VIII
INDEMNIFICATION AND LIMITATION OF LIABILITY
Section 1. Mandatory Indemnification.
The Corporation shall indemnify its currently acting and its
former directors and officers against any and all liabilities and expenses
incurred in connection with their services in such capacities to the maximum
extent permitted by the Maryland General Corporation Law, as from time to
time amended.
Section 2. Discretionary Indemnification.
If approved by the Board of Directors, the Corporation may
indemnify its officers, employees, agents, and persons who serve and have
served, at its request, as a director, officer, partner, trustee, employee,
or agent of another corporation, partnership, joint venture, or other
enterprise or employee benefit plan to the extent determined to be
appropriate by the Board of Directors.
Section 3. Advancing Expenses Prior to a Decision.
The Corporation shall advance expenses to its directors and
officers to the maximum extent permitted by the Maryland General Corporation
Law, as from time to time amended, and may in the discretion of the Board of
Directors advance expenses to officers, employees, agents, and others who may
be granted indemnification.
Section 4. Other Provisions for Indemnification.
The Board of Directors may, by bylaw, resolution or agreement,
make further provision for indemnification of directors, officers, employees,
and agents.
Section 5. Limitation of Liability of Directors and Officers.
To the maximum extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law,
as from time to time amended, no director or officer of the Corporation shall
have any liability to the Corporation or its stockholders for money damages.
This limitation on liability applies to events occurring at the time a person
serves as a director or officer of the Corporation whether or not such person
is a director or officer at the time of any proceeding in which liability is
asserted.
Section 6. Effect of Amendment or Repeal.
No amendment or repeal of any section of this Article, or the
adoption of any provision of the Corporation's charter inconsistent with this
Article, shall apply to or affect in any respect the rights to
indemnification or limitation of liability of any director of the Corporation
with respect to any alleged act or omission which occurred prior to such
amendment, repeal, or adoption.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation
on the 11th day of March, 1996, and have acknowledged such Articles to be my
act.
/S/ ROBIN L. ZIMELMAN
Robin L. Zimelman, Incorporator
BYLAWS
OF
DIEHL GRAPHSOFT - MARYLAND, INC.
ARTICLE I
Stockholders
Section 1. Annual Meetings
The annual meeting of the stockholders of the Corporation shall
be held on such date within the month of November as may be fixed from time
to time by the Board of Directors. Not less than 10 nor more than 90 days
written or printed notice stating the place, day, and hour of each annual
meeting shall be given in the manner provided in Section 1 of Article IX
hereof. The business to be transacted at the annual meetings shall include
the election of the class of directors to be elected at such meeting,
consideration and action upon the reports of officers and directors, and any
other business within the power of the Corporation. All annual meetings
shall be general meetings at which any business may be considered without
being specified as a purpose in the notice unless otherwise required by law.
Section 2. Special Meetings Called by Chairman of the Board, President or
Board of Directors
At any time in the interval between annual meetings, special
meetings of stockholders may be called by the Chairman of the Board, or by
the President, or by the Board of Directors. Not less than 10 days nor more
than 90 days written notice stating the place, day, and hour of such meeting
and the matters proposed to be acted on thereat shall be given in the manner
provided in Section 1 of Article IX. No business shall be transacted at any
special meeting except that specified in the notice.
Section 3. Special Meeting Called by Stockholders
Upon the request in writing delivered to the Secretary by the
stockholders entitled to cast at least 25% of all the votes entitled to be
cast at the meeting, it shall be the duty of the Secretary to call a special
meeting of the stockholders. Such request shall state the purpose of such
meeting and the matters proposed to be acted on thereat, and no other
business shall be transacted at any such special meeting. No such meeting
shall be required to be called for the election of directors except under the
circumstances set forth in Section 10 of Article I or Sections 7(b) or 7(c)
of these Bylaws. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing the notice of the
meeting, and upon payment to the Corporation of such costs, the Secretary
shall give not less than 10 nor more than 90 days notice of the time, place,
and purpose of the meeting in the manner provided in Section 1 of Article IX.
Unless requested by stockholders entitled to cast a majority of all the
votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter
voted on at any special meeting of the stockholders held during the preceding
12 months.
Section 4. Place of Meetings
All meetings of stockholders shall be held at the principal
office of the Corporation in the State of Maryland or at such other place
within the United States as may be fixed from time to time by the Board of
Directors and designated in the notice.
Section 5. Quorum
At any meeting of stockholders the presence in person or by proxy
of stockholders entitled to cast a majority of the votes thereat shall
constitute a quorum. In the absence of a quorum, the Chairman of the
meeting, or stockholders present in person or by proxy acting by majority
vote, may adjourn the meeting from time to time without notice other than by
announcement at the meeting, but not for a period exceeding 120 days after
the original record date, until a quorum shall attend.
Section 6. Adjourned Meetings
A meeting of stockholders convened on the date for which it was
called (including one adjourned to achieve a quorum as above provided in
Section 5 of this Article) may be adjourned (in the manner provided in said
Section 5) from time to time without further notice other than by
announcement at the meeting to a date not more than 120 days after the
original record date, and any business may be transacted at any adjourned
meeting which could have been transacted at the meeting as originally called.
Section 7. Voting
A plurality of all the votes cast at a meeting of stockholders
duly called and at which a quorum is present shall be sufficient to elect a
director. Each share of stock may be voted for as many individuals as there
are directors to be elected and for whose election the share is entitled to
be voted.
A majority of the votes cast at a meeting of stockholders, duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any other matter which may properly come before the
meeting, unless more than a majority of votes cast is required by statute or
by the Charter. The Board of Directors may fix the record date for the
determination of stockholders entitled to vote in the manner provided in
Article VIII, Section 3 of these Bylaws. Unless otherwise provided in the
Charter, each outstanding share of stock, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.
Section 8. Proxies
A stockholder may vote the shares owned of record either in
person or by proxy. The proxy shall be in writing and shall be signed by the
stockholder or by the stockholder's duly authorized attorney-in-fact or be in
such other form as may be permitted by the Maryland General Corporation Law,
including documents conveyed by electronic transmission. A copy, facsimile
transmission, or other reproduction of the writing or transmission may be
substituted for the original writing or transmission for any purpose for
which the original transmission could be used. Every proxy shall be dated,
but need not be sealed, witnessed, or acknowledged. No proxy shall be valid
after 11 months from its date, unless otherwise provided in the proxy. In
the case of stock held of record by more than one person, any co-owner or co-
fiduciary may execute the proxy without the joiner of the co-owner(s) or co-
fiduciary(ies), unless the Secretary of the Corporation is notified in
writing by any co-owner or co-fiduciary that the joiner of more than one is
to be required. At all meetings of stockholders, the proxies shall be filed
with and verified by the Secretary of the Corporation, or, if the meeting
shall so decide, by the Secretary of the meeting.
Section 9. Order of Business
At all meetings of stockholders, any stockholder present and
entitled to vote in person or by proxy shall be entitled to require, by
written request to the Chairman of the meeting, that the order of business
shall be as follows:
(1) Organization;
(2) Proof of notice of meeting or of waivers thereof. (The
certificate of the Secretary of the Corporation, or the affidavit of any
other person who mailed or published the notice or caused the same to be
mailed or published, shall be proof of service of notice.)
(3) Submission by Secretary of the Corporation to the Chairman
of the meeting of a list of the stockholders entitled to vote, present in
person or by proxy;
(4) A reading of unapproved minutes of preceding meetings and
action thereon;
(5) Reports;
(6) If an annual meeting, or a special meeting called for that
purpose, the election of directors;
(7) Unfinished business;
(8) New business; and,
(9) Adjournment.
Section 10. Removal of Directors
At any special meeting of the stockholders called in the manner
provided for by this Article, the stockholders, by the vote required by the
Charter, may remove any director from office, but only for cause as provided
in the Charter, and may elect a successor to fill the resulting vacancy for
the remainder of the term of the removed director.
Section 11. Informal Action by Stockholders
Any action required or permitted to be taken at any meeting of
stockholders may be taken without a meeting if a consent in writing setting
forth such action is signed by all the stockholders entitled to vote thereon,
a written waiver of any right to dissent is signed by each stockholder
entitled to notice of, but not the right to vote on, such action and such
consent is filed with the records of stockholders' meetings.
Section 12. Advance Notice of Matters to be Presented at an Annual Meeting of
Stockholders
At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting as
set forth below. To be properly brought before an annual meeting, such
business must (1) be specified in the notice of the meeting (or any
supplement thereto) given by the Corporation pursuant to Section 1 of Article
IX of these bylaws, or (2) be brought before the meeting by or under the
direction of the Board of Directors (or the Chairman of the Board or the
President), or (3) be properly brought before the meeting by a stockholder.
In addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
Secretary at the principal executive offices of the Corporation, not less
than 20 days nor more than 30 days prior to the meeting (or, with respect to
a proposal required to be included in the Company's proxy statement pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, or its successor
provision, the earlier date such proposal was received); provided, however,
that in the event that less than 30 days notice or prior public disclosure of
the date of the meeting is given or made by the Corporation, notice by the
stockholder to be timely must be so received by the Secretary not later than
the close of business on the 10th day following the earlier of the day on
which the Corporation's notice of the date of the annual meeting was mailed
or the day on which the Corporation's first public disclosure of the date of
the annual meeting was made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with
the procedures set forth in this Section 12.
The Chairman of the meeting shall have the authority, if the
facts warrant, to determine that business was not properly brought before the
meeting in accordance with the provisions of this Section 12, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 13. Advance Notice of Nominees for Directors
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors at any meeting of
stockholders. Nominations of persons for election to the Board of Directors
of the Corporation may be made at an annual meeting of stockholders or at a
special meeting of stockholders as to which the notice of meeting provides
for election of directors, by or under the direction of the Board of
Directors, or by any nominating committee or person appointed by the Board of
Directors, or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures
set forth in this Section 13. Such nominations, other than those made by or
under the direction of the Board of Directors or by any nominating committee
or person appointed by the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary. To be timely, such stockholder's
notice shall be delivered to or mailed and received by the Secretary at the
principal executive offices of the Corporation not less than 20 days nor more
than 30 days prior to the meeting; provided, however, that in the event that
less than 30 days' notice or prior public disclosure of the date of the
meeting is given or made by the Corporation, notice by the stockholder to be
timely must be so received by the Secretary no later than the close of
business on the 10th day following the earlier of the day on which the
Corporation's notice of the date of the meeting was mailed or the day on
which the Corporation's first public disclosure of the date of the meeting
was made. Such stockholder's notice shall set forth: (a) as to each person
whom the stockholder proposes to nominate for election as a director, (i) the
name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number
of shares of stock of the Corporation which are beneficially owned by the
person, and (iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of
directors pursuant to the rules and regulations under the Securities Exchange
Act of 1934; and (b) as to the stockholder giving the notice, (i) the name
and address of the stockholder and (ii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. No person
shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall have the authority, if the
facts warrant, to determine that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
ARTICLE II
Directors
Section 1. Powers
The business and affairs of the Corporation shall be managed
under the direction of its Board of Directors. All powers of the Corporation
may be exercised by or under the authority of the Board of Directors except
as conferred on or reserved to the stockholders by law, by the Charter or by
these Bylaws. A director need not be a stockholder. The Board of Directors
shall keep minutes of its meetings and full and fair accounts of its
transactions.
Section 2. Number; Term of Office
The number of directors of the Corporation shall be not less than
three or the same number as the number of stockholders (or one if there is no
stockholder), whichever is less; provided, however, that such number may be
increased and thereafter decreased from time to time by vote of a majority of
the entire Board of Directors. The number of directors shall not exceed
seven ( 7 ). The Board of Directors shall be divided into three classes,
with one class to be elected at each annual meeting, as provided in the
Charter.
Section 3. Annual Meeting; Regular Meetings
As soon as practicable after each annual meeting of stockholders,
the Board of Directors shall meet for the purpose of organization and the
transaction of other business. No notice of the annual meeting of the Board
of Directors need be given if it is held immediately following the annual
meeting of stockholders and at the same place. Other regular meetings of the
Board of Directors may be held at such times and at such places, within or
without the State of Maryland, as shall be designated in the notice for such
meeting by the party making the call. All annual and regular meetings shall
be general meetings, and any business may be transacted thereat.
Section 4. Special Meetings
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President, or by a majority of the directors.
Section 5. Quorum; Voting
A majority of the Board of Directors shall constitute a quorum
for the transaction of business at every meeting of the Board of Directors;
but, if at any meeting there be less than a quorum present, a majority of
those present may adjourn the meeting from time to time, but not for a period
exceeding 10 days at any one time or 60 days in all, without notice other
than by announcement at the meeting, until a quorum shall attend. At any
such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the meeting as originally
called. Except as hereinafter provided or as otherwise provided by the
Charter or by law, directors shall act by a vote of a majority of those
members in attendance at a meeting at which a quorum is present.
Section 6. Notice of Meetings
Notice of the time and place of every regular and special meeting
of the Board of Directors shall be given to each director in the manner
provided in Section 2 of Article IX hereof. Subsequent to each Board
meeting, and as soon as practicable thereafter, each director shall be
furnished with a copy of the minutes of said meeting. At least 24 hours
notice shall be given of all meetings. The purpose of any meeting of the
Board of Directors need not be stated in the notice.
Section 7. Vacancies
(a) If the office of a director becomes vacant for any reason,
including increase in the size of the Board, such vacancy may be filled by
the Board by a vote of a majority of directors then in office, although such
majority is less than a quorum.
(b) If the vacancy occurs as a result of the removal of a
director, the stockholders may elect a successor at the meeting at which the
removal occurs.
(c) If the entire Board of Directors shall become vacant, any
stockholder may call a special meeting in the same manner that the Chairman
of the Board or the President may call such meeting, and directors for the
unexpired terms may be elected at such special meeting in the manner provided
for their election at annual meetings.
(d) A director elected by the Board of Directors to fill a
vacancy shall serve until the next annual meeting of stockholders and until a
successor is elected and qualifies. A director elected by the stockholders
to fill a vacancy shall serve for the unexpired term and until a successor is
elected and qualifies.
Section 8. Rules and Regulations
The Board of Directors may adopt such rules and regulations for
the conduct of its meetings and the management of the affairs of the
Corporation as it may deem proper and not inconsistent with the laws of the
State of Maryland, these Bylaws, and the Charter.
Section 9. Executive Committee
The Board of Directors may constitute an Executive Committee,
composed of at least two directors, from among its members. The Executive
Committee shall hold office at the pleasure of the Board of Directors.
Between sessions of the Board of Directors, such Committee shall have all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, except those powers specifically denied by law.
If any position on the Executive Committee becomes vacant, or if the number
of members is increased, such vacancy may be filled by the Board of
Directors. The taking of any action by the Executive Committee shall be
conclusive evidence that the Board of Directors was not in session at the
time of such action. The Executive Committee shall hold formal meetings and
keep minutes of all of its proceedings. A copy of such minutes shall, after
approval by the members of the Committee, be sent to all directors as a
matter of information. Any action taken by the Executive Committee within
the limits permitted by law shall have the force and effect of Board action
unless and until revised or altered by the Board. The presence of not less
than a majority of the Committee shall be necessary to constitute a quorum.
Action may be taken without a meeting if a unanimous written consent is
signed by all of the members of the Committee, and if such consent is filed
with the records of the Committee. The Executive Committee shall have the
power to elect one of its members to serve as its Chairman unless the Board
of Directors shall have designated such Chairman.
Section 10. Compensation
The directors may receive a stated salary or an attendance fee
for each meeting of the Board of Directors or any committee thereof attended,
plus reimbursement of reasonable expenses of attendance. The amount of the
salary or attendance fee and any entitlement to reimbursement of expenses
shall be determined by resolution of the Board; provided, however, that
nothing herein contained shall be construed as precluding a director from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 11. Place of Meetings
Regular or special meetings of the Board may be held within or
without the State of Maryland, as the Board may from time to time determine.
The time and place of meeting may be fixed by the party calling the meeting.
Section 12. Informal Action by the Directors
Any action required or permitted to be taken at any meeting of
the Board may be taken without a meeting, if a written consent to such action
is signed by all members of the Board and such consent is filed with the
minutes of the Board.
Section 13. Telephone Conference
Members of the Board of Directors or any committee thereof may
participate in a meeting of the Board or such committee by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting.
Section 14. Audit Committee
The Board of Directors may constitute an Audit Committee,
composed of at least two directors, the majority of whom shall be outside
directors. If any position on the Audit Committee becomes vacant, or if the
number of members is increased, such vacancy may be filled by the Board of
Directors. The presence of not less than a majority of the Committee shall
be necessary to constitute a quorum. Action may be taken without a meeting
if a unanimous written consent is signed by all of the members of the
Committee, and if such consent is filed with the records of the Committee.
The Audit Committee shall have the power to elect one if its members to serve
as its Chairman unless the Board of Directors shall have designated such
Chairman.
The Audit Committee shall make, or cause to be conducted, all of the
examinations of the operations of the Corporation and of its general books of
account, and shall cause to be conducted all of the independent audits by a
certified public accountant of the Corporation's operations and its general
books of account. The Audit Committee shall report to the Board of Directors
on at least an annual basis with any recommendations and suggestions it may
have for the Board's consideration. Such reports shall state whether the
Corporation is in a sound condition, whether adequate internal controls and
procedures are being maintained, and shall recommend to the Board such
changes in the manner of conduction the affairs of the Corporation as shall
be deemed advisable.
ARTICLE III
Officers
Section 1. In General
The Board of Directors may choose a Chairman of the Board from
among the directors. The Board of Directors shall elect a President, a
Treasurer, a Secretary, and may elect one or more Vice Presidents, Assistant
Secretaries, and Assistant Treasurers as the Board may from time to time deem
appropriate. All officers shall hold office only during the pleasure of the
Board or until their successors are chosen and qualify. Any two of the above
offices, except those of President and Vice President, may be held by the
same person, but no officer shall execute, acknowledge, or verify any
instrument in more than one capacity when such instrument is required to be
executed, acknowledged, or verified by any two or more officers. The Board
of Directors may from time to time appoint such other agents and employees
with such powers and duties as the Board may deem proper. In its discretion,
the Board of Directors may leave unfilled any offices except those of
President, Treasurer, and Secretary.
Section 2. Chairman of the Board
The Chairman of the Board, if one is elected, shall have the
responsibility for the implementation of the policies determined by the Board
of Directors and for the administration of the business affairs of the
Corporation. The Chairman shall preside over the meetings of the Board and
of the stockholders if present at the meeting. The Chairman shall be the
Chief Executive Officer of the Corporation if so designated by resolution of
the Board.
Section 3. President
The President shall have the responsibility for the active
management of the business and general supervision and direction of all of
the affairs of the Corporation. In the absence of a Chairman of the Board,
the President shall preside over the meetings of the Board and of the
stockholders if present at the meeting, and shall perform such other duties
as may be assigned by the Board of Directors or the Executive Committee. The
President shall have the authority on the Corporation's behalf to endorse
securities owned by the Corporation and to execute any documents requiring
the signature of an executive officer. The President shall perform such
other duties as the Board of Directors may direct and shall be the Chief
Executive Officer of the Corporation unless the Chairman of the Board is so
designated by resolution of the Board.
Section 4. Vice Presidents
The Vice Presidents, in the order of priority designated by the
Board of Directors, shall be vested with all the power and may perform all
the duties of the President in the latter's absence. They may perform such
other duties as may be prescribed by the Board of Directors, the Executive
Committee, or the President.
Section 5. Treasurer
The Treasurer shall have general supervision over the
Corporation's finances, and shall perform such other duties as may be
assigned by the Board of Directors or the President. Unless the Board
designates another officer, the Treasurer shall be the Chief Financial
Officer of the Corporation. If required by resolution of the Board, the
Treasurer shall furnish a bond (which may be a blanket bond) with such surety
and in such penalty for the faithful performance of duty as the Board of
Directors may from time to time require, the cost of such bond to be paid by
the Corporation.
Section 6. Secretary
The Secretary shall keep the minutes of the meetings of the
stockholders and of the Board of Directors and shall attend to the giving and
serving of all notices of the Corporation required by law or these Bylaws.
The Secretary shall maintain at all times in the principal office of the
Corporation at least one copy of the Bylaws with all amendments to date, and
shall make the same, together with the minutes of the meeting of the
stockholders, the annual statement of affairs of the Corporation and any
voting trust or other stockholders agreement on file at the office of the
Corporation, available for inspection by any officer, director or stockholder
during reasonable business hours. The Secretary shall perform such other
duties as may be assigned by the Board of Directors.
Section 7. Assistant Treasurer and Secretary
The Board of Directors may designate from time to time Assistant
Treasurers and Secretaries, who shall perform such duties as may from time to
time be assigned to them by the Board of Directors or the President.
Section 8. Compensation; Removal; Vacancies
The Board of Directors shall have power to fix the compensation
of all officers of the Corporation. It may authorize any committee or
officer, upon whom the power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers. The Board
of Directors shall have the power at any regular or special meeting to remove
any officer if, in the judgment of the Board, the best interests of the
Corporation will be served by such removal. The Board of Directors may
authorize any officer to remove subordinate officers. The Board of Directors
may authorize the Corporation's employment of an officer for a period in
excess of the term of the Board. The Board of Directors at any regular or
special meeting shall have power to fill a vacancy occurring in any office
for the unexpired portion of the term.
Section 9. Substitutes
The Board of Directors may, from time to time in the absence of
any one of its officers or at any other time, designate any other person or
persons on behalf of the Corporation to sign any contracts, deeds, notes, or
other instruments in the place or stead of any of such officers, and may
designate any person to fill any one of said offices, temporarily or for any
particular purpose; and any instruments so signed in accordance with a
resolution of the Board shall be the valid act of the Corporation as fully as
if executed by any regular officer.
ARTICLE IV
Resignation
Any director or officer may resign from office at any time. Such
resignation shall be made in writing and shall take effect from the time of
its receipt by the Corporation, unless some time be fixed in the resignation,
and then from that date. The acceptance of a resignation shall not be
required to make it effective.
ARTICLE V
Commercial Paper, Etc.
All bills, notes, checks, drafts, and commercial paper of all
kinds to be executed by the Corporation as maker, acceptor, endorser, or
otherwise, and all assignments and transfers of stock, contracts, or written
obligations of the Corporation, and all negotiable instruments, shall be made
in the name of the Corporation and shall be signed by any one or more of the
following officers as the Board of Directors may from time to time designate:
the Chairman of the Board, the President, any Vice President, or the
Treasurer, or such other person or persons as the Board of Directors or
Executive Committee may from time to time designate.
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall be the 12-month period
ending May 31 of each year.
ARTICLE VII
Seal
The seal of the Corporation shall be in the form of two
concentric circles inscribed with the name of the Corporation and the year
and State in which it is incorporated. The Secretary or Treasurer, or any
Assistant Secretary or Assistant Treasurer, shall have the right and power to
attest to the corporate seal. In lieu of affixing the corporate seal to any
document, it shall be sufficient to meet the requirements of any law, rule,
or regulation relating to a corporate seal to affix the word "(SEAL)"
adjacent to the signature of the person authorized to sign the document on
behalf of the Corporation.
ARTICLE VIII
Stock
Section 1. Issue
Each stockholder shall be entitled to a certificate or
certificates which shall represent and certify the number and class of shares
of stock owned in the Corporation. Each certificate shall be signed by the
Chairman of the Board, the President or any Vice President and be
countersigned by the Secretary or any Assistant Secretary or the Treasurer or
any Assistant Treasurer. The signatures of the Corporation's officers and
its corporate seal appearing on stock certificates may be facsimiles if each
such certificate is authenticated by the manual signature of an officer of a
duly authorized transfer agent. Stock certificates shall be in such form,
not inconsistent with law and the Charter, as shall be approved by the Board
of Directors. In case any officer of the Corporation who has signed any
certificate ceases to be an officer of the Corporation, whether by reason of
death, resignation, or otherwise, before such certificate is issued, then the
certificate may nevertheless be issued by the Corporation with the same
effect as if the officer had not ceased to be such officer as of the date of
such issuance.
Section 2. Transfers
The Board of Directors shall have power and authority to make all
such rules and regulations as the Board may deem expedient concerning the
issue, transfer, and registration of stock certificates. The Board of
Directors may appoint one or more transfer agents and/or registrars for its
outstanding stock, and their duties may be combined. No transfer of stock
shall be recognized or binding upon the Corporation until recorded on the
books of the Corporation, or, as the case may be, of its transfer agent
and/or of its registrar, upon surrender and cancellation of a certificate or
certificates for a like number of shares.
Section 3. Record Dates for Dividends and Stockholders' Meeting
The Board of Directors may fix a date not exceeding 90 days
preceding the date of any meeting of stockholders, any dividend payment date,
or any date for the allotment of rights, as a record date for the
determination of the stockholders entitled to notice of and to vote at such
meeting, or entitled to receive such dividends or rights, as the case may be,
and only stockholders of record on such date shall be entitled to notice of
and to vote at such meeting or to receive such dividends or rights, as the
case may be. In the case of a meeting of stockholders, the record date shall
be fixed not less than ten days prior to the date of the meeting.
Section 4. New Certificates
In case any certificate of stock is lost, stolen, mutilated, or
destroyed, the Board of Directors may authorize the issuance of a new
certificate in place thereof upon such indemnity to the Corporation against
loss and such other terms and conditions as it may deem advisable. The Board
of Directors may delegate such power to any officer or officers of the
Corporation or to any transfer agent or registrar of the Corporation; but the
Board of Directors, such officer or officers, or such transfer agent or
registrar may, in their discretion, refuse to issue such new certificate save
upon the order of some court having jurisdiction.
ARTICLE IX
Notice
Section 1. Notice to Stockholders
Whenever by law or these Bylaws notice is required to be given to
any stockholder, such notice shall be in writing and may be given to each
stockholder by personal delivery or at the stockholder's residence or usual
place of business, or by mailing it, postage prepaid, and addressed to the
stockholder at the address appearing on the books of the Corporation or its
transfer agent. Such leaving or mailing of notice shall be deemed the time
of giving such notice.
Section 2. Notice to Directors and Officers
Whenever by law or these Bylaws notice is required to be given to
any director or officer, such notice may be given in any one of the following
ways: by personal delivery to such director or officer, by telephone
communication with such director or officer personally, or by telephone
facsimile transmission, by telegram, cablegram, radiogram, first class mail,
or by delivery service providing confirmation of delivery, addressed to such
director or officer at the address appearing on the books of the Corporation.
The time when such notice shall be consigned to a communication company for
delivery shall be deemed to be the time of the giving of such notice; if
mailed, such notice shall be deemed given 48 hours after the time it is
deposited in the mail, postage prepaid.
Section 3. Waiver of Notice
Notice to any stockholder or director of the time, place, and/or
purpose of any meeting of stockholders or directors required by these Bylaws
may be dispensed with if such stockholder shall either attend in person or by
proxy, or if such director shall attend in person, or if such absent
stockholder or director shall, in writing filed with the records of the
meeting either before or after the holding thereof, waive such notice.
ARTICLE X
Voting of Stock in Other Corporations
Any stock in other corporations, which may from time to time be
held by the Corporation, may be represented and voted at any meeting of
stockholders of such other corporations by the President or a Vice-President
or by proxy or proxies appointed by the President or a Vice-President, or
otherwise pursuant to authorization thereunto given by a resolution of the
Board of Directors adopted by a vote of a majority of the directors.
ARTICLE XI
Amendments
The Board of Directors, and not the stockholders, shall have the
exclusive power to make, alter, amend, or repeal the Bylaws of the
Corporation.
DIEHL GRAPHSOFT, INC.
BOARD COMPENSATION FOR OUTSIDE DIRECTORS
Annual Aggregate Amount: $5,000 - Amount to be prorated based on number of
days serving as a director during fiscal year of
Company.
Form of Compensation: 50% Cash
50% Common Stock
Valuation for Common Stock - Average of bid and ask price on May 31 of each
year or if service is terminated sooner, on date
immediately following termination date.
Payment: Cash - Last business day of each fiscal quarter with amount prorated
for partial quarter of service:
August 31 $625
November 30 $625
February 28 $625
May 31 $625
Common Stock: Stock Certificate to be issued within 60 days of
valuation date of May 31 or, if service is terminated
sooner, within 60 days of date following termination.
Fractional shares to be distributed in cash with stock
certificate. Value of stock of $2,500 will be prorated
for partial year of service.
DIEHL GRAPHSOFT, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
1. Establishment, Purpose, and Types of Awards
DIEHL GRAPHSOFT, INC. (the "Corporation"), which formerly established
the STOCK OPTION PLAN OF DIEHL GRAPHSOFT, INC., now finds it desirable to
amend and restate said plan to (i) expand the number of shares issuable
pursuant to options granted under the plan, (ii) expand the types of options
available for award under the plan, and (iii) otherwise modify the terms and
conditions of the plan, and does hereby establish the DIEHL GRAPHSOFT, INC.
AMENDED AND RESTATED STOCK OPTION PLAN (hereinafter referred to as the
"Plan").
The purpose of the Plan is to promote the long-term growth and
profitability of the Corporation (i) by providing employees and other key
people with incentives to improve stockholder value and to contribute to the
growth and financial success of the Corporation, and (ii) by enabling the
Corporation to attract, retain, and reward the best available persons for
positions of substantial responsibility.
The Plan permits the granting of nonqualified stock options and
incentive stock options qualifying under Section 422 of the Code, or any
combination of the foregoing (collectively, "Options").
2. Definitions
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean (i) any sale, exchange, or other
disposition of substantially all of the Corporation's assets; or (ii) any
merger, share exchange, consolidation, or other reorganization or business
combination in which the Corporation is not the surviving or continuing
corporation, or in which the Corporation's stockholders become entitled to
receive cash, securities of the Corporation other than voting common stock,
or securities of another issuer.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any regulations issued thereunder.
(d) "Common Stock" shall mean shares of common stock of the
Corporation, par value of $.01 per share.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Fair Market Value" of a share of the Corporation's Common Stock
for any purpose on a particular date shall be determined in a manner such as
the Committee shall in good faith determine to be appropriate; provided,
however, that if the Common Stock is publicly traded, then Fair Market Value
shall mean the average of the closing bid and asked prices, regular way, on
such date as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on a national
securities exchange or included for quotation on the NASDAQ-National Market,
or if the Common Stock is not so listed or admitted to trading or included
for quotation, the average of the high bid and low asked prices, regular way,
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal other automated quotations system that may then
be in use or, if the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices, regular way, as furnished by a
professional market maker making a market in the Common Stock as selected in
good faith by the Committee or by such other source or sources as shall be
selected in good faith by the Committee; and provided further, that in the
case of incentive stock options, the determination of Fair Market Value shall
be made by the Committee in good faith in conformance with the Treasury
Regulations under Section 422 of the Code. If, as the case may be, the
relevant date is not a trading day, the determination shall be made as of the
next preceding trading day. As used herein, the term "trading day" shall
mean a day on which public trading of securities occurs and is reported in
the principal consolidated reporting system referred to above, or if the
Common Stock is not listed or admitted to trading on a national securities
exchange or included for quotation on the NASDAQ-National Market, any day
other than a Saturday, a Sunday, or a day in which banking institutions in
the State of New York are closed.
(g) "Grant Agreement" shall mean a written agreement between the
Corporation and a grantee memorializing the terms and conditions of an Option
granted pursuant to the Plan.
(h) "Grant Date" shall mean the date on which the Committee formally
acts to grant an Option to a grantee or such other date as the Committee
shall so designate at the time of taking such formal action.
(i) "Option" shall mean a contractual right to purchase from the
Corporation a specified number of shares of Common Stock at a specified price.
(j) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation"
provided in Section 424(e) of the Code, or any successor thereto of similar
import.
(k) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the
Exchange Act on the effective date of the Plan, or any successor provision
prescribing conditions necessary to exempt the issuance of securities under
the Plan (and further transactions in such securities) from Section 16(b) of
the Exchange Act.
(l) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the
Code, or any successor thereto of similar import.
3. Administration
(a) Procedure. The Plan shall be administered by the Board. Members
of the Board who are either eligible for Options or have been granted Options
may vote on any matters affecting the administration of the Plan or the grant
of Options pursuant to the Plan, except that no such member shall act upon
the granting of an Option to himself or herself, but any such member may be
counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting of an Option to him
or her.
(b) Powers of the Board. The Board shall have all the powers vested
in it by the terms of the Plan, such powers to include authority, in its sole
and absolute discretion, to grant Options under the Plan, prescribe Grant
Agreements evidencing such Options, and establish programs for granting
Options. The Board shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to:
(i) determine the eligible persons to whom, and the time
or times at which Options shall be granted,
(ii) determine the types of Options to be granted,
(iii) determine the number of shares to be covered by
each Option,
(iv) impose such terms, limitations, restrictions and
conditions upon any such Option as the Board shall deem
appropriate,
(v) modify, extend, or renew outstanding Options, accept
the surrender of outstanding Options, and substitute new Options,
(vi) accelerate or otherwise change the time in which an
Option may be exercised and to waive or accelerate the lapse, in
whole or in part, of any restriction or condition with respect
to such Option, including, but not limited to, any restriction
or condition with respect to the exercisability of an Option
following termination of any grantee's employment, and,
(vii) to establish objectives and conditions, if any, for
earning Options and determining whether Options will be granted
after the end of a performance period.
The Board shall have full power and authority to administer and interpret the
Plan and to adopt such rules, regulations, agreements, guidelines, and
instruments for the administration of the Plan and for the conduct of its
business as the Board deems necessary or advisable and to interpret same, all
within the Board's sole and absolute discretion.
(c) Limited Liability. To the maximum extent permitted by law, no
member of the Board shall be liable for any action taken or decision made in
good faith relating to the Plan or any Option thereunder.
(d) Indemnification. To the maximum extent permitted by law, the
members of the Board shall be indemnified by the Corporation in respect of
all their activities under the Plan.
(e) Effect of Board's Decision. All actions taken and decisions and
determinations made by the Board on all matters relating to the Plan pursuant
to the powers vested in it hereunder shall be in the Board's sole and
absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in
the Plan, and any other employee of the Corporation, and their respective
successors in interest.
4. Shares Available for the Plan
Subject to adjustments as provided in Section 9 of the Plan, the shares
of stock that may be delivered or purchased with respect to Options granted
under the Plan, including with respect to incentive stock options intended to
qualify under Section 422 of the Code, shall not exceed an aggregate of
300,000 shares of Common Stock of the Corporation. The Corporation shall
reserve said number of shares for Options under the Plan, subject to
adjustments as provided in Section 9 of the Plan. If any Option, or portion
of an Option, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered, or
canceled as to any shares without the delivery of shares of Common Stock or
other consideration, the shares subject to such Option shall thereafter be
shares with respect to which further Options may be granted under the Plan.
5. Participation
Participation in the Plan shall be open to all employees, directors,
officers, and other key contributors (including independent contractors,
consultants, and advisors) of the Corporation, or of any Parent or Subsidiary
of the Corporation, as may be selected by the Board from time to time.
Notwithstanding the foregoing, participation in the Plan with respect to
awards of incentive stock options shall be limited to employees of the
Corporation or of any Parent or Subsidiary of the Corporation.
6. Stock Options
Subject to the other applicable provisions of the Plan, the Board may
from time to time grant to eligible participants awards of nonqualified stock
options or incentive stock options as that term is defined in Section 422 of
the Code. The Options granted shall be subject to the following terms and
conditions.
(a) Grant of Option. The grant of an Option shall be evidenced by a
Grant Agreement, executed by the Corporation and the grantee, stating the
number of shares of Common Stock subject to the Option evidenced thereby and
the terms and conditions of such Option, in such form as the Board may from
time to time determine.
(b) Price. The price per share payable upon the exercise of each
Option ("exercise price") shall be determined by the Board; provided,
however, that in no event shall the exercise price be less than 100% of the
Fair Market Value of the shares determined as of the date the stock option is
granted.
(c) Payment. Options may be exercised in whole or in part by payment
of the exercise price of the shares to be acquired in accordance with the
provisions of the Grant Agreement, and/or such rules and regulations as the
Board may have prescribed, and/or such determinations, orders, or decisions
as the Board may have made. Payment must be made in cash (or cash
equivalents acceptable to the Board).
If the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board, subject to such limitations as it may determine, may
authorize payment of the exercise price, in whole or in part, by delivery of
a properly executed exercise notice, together with irrevocable instructions,
to: (i) a brokerage firm approved by the Corporation to deliver promptly to
the Corporation the aggregate amount of sale or loan proceeds to pay the
exercise price and any withholding tax obligations that may arise in
connection with the exercise, and (ii) the Corporation to deliver the
certificates for such purchased shares directly to such brokerage firm.
(d) Terms of Options. The term during which each Option may be
exercised shall be determined by the Board; provided, however, that in no
event shall an Option be exercisable more than 10 years from the date it is
granted. Prior to the exercise of the Option and delivery of the share
certificates represented thereby, the grantee shall have none of the rights
of a stockholder with respect to any shares represented by an outstanding
Option.
(e) Restrictions on Incentive Stock Options. Incentive stock options
granted under the Plan shall comply in all respects with Code Section 422
and, as such, shall meet the following additional requirements:
(i) Grant Date. An incentive stock option must be granted
within 10 years of the earlier of the Plan's adoption by the Board of
Directors or approval by the Corporation's shareholders.
(ii) Exercise Price and Term. The exercise price of an
incentive stock option shall not be less than 100% of the Fair Market
Value of the shares on the date the stock option is granted. Also, the
exercise price of any incentive stock option granted to a grantee who
owns (within the meaning of Section 422(b)(6) of the Code, after the
application of the attribution rules in Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of
shares of the Corporation or its Parent or Subsidiary corporations
(within the meaning of Sections 422 and 424 of the Code) shall be not
less than 110% of the Fair Market Value of the Common Stock on the
grant date and the term of such stock option shall not exceed 5 years.
(iii) Maximum Grant. The aggregate Fair Market Value
(determined as of the Grant Date) of shares of Common Stock with
respect to which all incentive stock options first become exercisable
by any grantee in any calendar year under this or any other plan of the
Corporation and its Parent and Subsidiary corporations may not exceed
$100,000 or such other amount as may be permitted from time to time
under Section 422 of the Code. To the extent that such aggregate Fair
Market Value shall exceed $100,000, or other applicable amount, such
stock options shall be treated as nonqualified stock options. In such
case, the Corporation may designate the shares of Common Stock that are
to be treated as stock acquired pursuant to the exercise of an
incentive stock option by issuing a separate certificate for such
shares and identifying the certificate as incentive stock option shares
in the stock transfer records of the Corporation.
(iv) Grantee. Incentive stock options shall only be issued to
employees of the Corporation, or of a Parent or Subsidiary of the
Corporation.
(v) Designation. No Option shall be an incentive stock option
unless so designated by the Board at the time of grant or in the Grant
Agreement evidencing such Option.
(f) Other Terms and Conditions. Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Board
shall determine appropriate from time to time.
7. Withholding of Taxes
The Corporation may require, as a condition to the exercise of any
Option granted under the Plan, that the grantee pay to the Corporation in
cash any federal, state, or local taxes of any kind required by law to be
withheld with respect to such exercise. The Corporation, to the extent
permitted or required by law, shall have the right to deduct from any payment
of any kind (including salary or bonus) otherwise due to a grantee any
federal, state, or local taxes of any kind required by law to be withheld
with respect to any exercise of an Option granted under the Plan, or to
retain or sell without notice a sufficient number of the shares to be issued
to such grantee to cover any such taxes.
8. Transferability
No Option granted under the Plan shall be transferable by a grantee
otherwise than by will or the laws of descent and distribution. An Option
may be exercised during the lifetime of the grantee, only by the grantee or,
during the period the grantee is under a legal disability, by the grantee's
guardian or legal representative.
9. Adjustments, Business Combinations, and Liquidations
In the event of a reclassification, recapitalization, stock split,
stock dividend, combination of shares, or other similar event, the maximum
number and kind of shares reserved for issuance or with respect to which
Options may be granted under the Plan as provided in Section 4 shall be
adjusted to reflect such event, and the Board shall make such adjustments as
it deems appropriate and equitable in the number, kind, and price of shares
covered by outstanding Options made under the Plan, and in any other matters
which relate to Options and which are affected by the changes in the Common
Stock referred to above.
In the event of any proposed Change in Control, the Board shall take
such action as it deems appropriate and equitable to effectuate the purposes
of this Plan and to protect the grantees of Options, which action may
include, but without limitation, any one or more of the following:
(i) acceleration or change of the exercise dates of any Option;
(ii) arrangements with grantees for the payment of appropriate consideration
to them for the cancellation and surrender of any Option; and (iii) in any
case where equity securities other than Common Stock of the Corporation are
proposed to be delivered in exchange for or with respect to Common Stock of
the Corporation, arrangements providing that any Option shall become one or
more options with respect to such other equity securities. Notwithstanding
the foregoing, unless the holder of an Option that was granted under the
Stock Option Plan Of Diehl Graphsoft, Inc. prior to the date that this
amendment and restatement of the Plan becomes effective consents to a
different course of action with respect to his outstanding Option, then upon
a Change in Control such holder shall be entitled to receive, for the
exercise price stated in the Option, that number of shares or other
securities or property of the corporation resulting from such Change in
Control to which each share of Common Stock deliverable upon exercise of the
Option would have been entitled, upon such Change in Control, had the holder
of such Option exercised his right to purchase and had said share of Common
Stock been issued and outstanding, and had such holder been the holder of
record of such share at the time of such event.
The Board is authorized to make adjustments in the terms and conditions
of, and the criteria included in, Options in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
the preceding two paragraphs of this Section 9) affecting the Corporation, or
the financial statements of the Corporation or any Subsidiary, or of changes
in applicable laws, regulations, or accounting principles, whenever the Board
determines that such adjustments are appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan. With respect to any Option that was granted under
the Stock Option Plan Of Diehl Graphsoft, Inc. prior to the date that this
amendment and restatement of the Plan becomes effective, in the event that
the Corporation shall at any time prior to the exercise of such Option make
any distribution of its assets to holders of its Common Stock by liquidating
or partial liquidating dividend or by way of return of capital, or other than
as a dividend payable out of earnings or any surplus legally available for
dividends under the laws of the State of Maryland, then the holder of such
Option who thereafter exercises the same after the date of record for the
determination of those holders of Common Stock entitled to such distribution
of assets shall be entitled to receive for the exercise price, in addition to
each share of Common Stock, the amount of such assets (or at the option of
the Corporation a sum equal to the value thereof at the time of such
distribution to holders of Common Stock as such value is determined by the
Board in good faith) which would have been payable to such holder had he been
the holder of record of such share of Common Stock receivable upon exercise
of such Option on the record date for the determination of those entitled to
such distribution.
In the event the Corporation dissolves and liquidates (other than
pursuant to a plan of merger or reorganization), then notwithstanding any
restrictions on exercise set forth in this Plan or any Grant Agreement,
(i) each grantee shall have the right to exercise his Option at any time
after the commencement of the proceedings for such liquidation and
dissolution up to ten (10) days prior to the effective date of such
liquidation and dissolution; and (ii) the Board may make arrangements with
the grantees for the payment of appropriate consideration to them for the
cancellation and surrender of any Option that is so canceled or surrendered
at any time up to ten (10) days prior to the effective date of such
liquidation and dissolution. The Board may establish a different period (and
different conditions) for such exercise, cancellation, or surrender to avoid
subjecting the grantee to liability under Section 16(b) of the Exchange Act.
Any Option not so exercised, canceled, or surrendered shall terminate on the
last day for exercise prior to such effective date. The Corporation shall
give to each grantee written notice of the commencement of any proceedings
for such liquidation and dissolution of the Corporation and the grantee's
rights with respect to his outstanding Option.
10. Termination and Modification of the Plan
The Board, without further approval of the stockholders, may modify or
terminate the Plan or any portion thereof at any time, except that no
modification shall become effective without prior approval of the
stockholders of the Corporation if stockholder approval is necessary to
comply with any tax or regulatory requirement or rule of any exchange or
NASDAQ System upon which the Common Stock is listed or quoted; including for
this purpose stockholder approval that is required to enable the Board to
grant incentive stock options pursuant to the Plan.
The Board shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the
Corporation or that may be authorized or made desirable by such laws. The
Board may amend or modify the grant of any outstanding Option in any manner
to the extent that the Board would have had the authority to make such Option
as so modified or amended.
11. Fractional Shares
The Corporation shall not be required to issue fractional shares of
Common Stock upon exercise of any Options granted under the Plan. If, by
reason of any change made in the number of shares purchasable upon the
exercise of Options pursuant to the provisions of Section 9 of the Plan, a
grantee of an Option would be entitled to purchase a fractional interest in a
share of Common Stock, such grantee shall only be entitled to receive from
the Corporation an amount in cash equal to the current market value of such
fractional interest.
12. Non-Guarantee of Employment
Nothing in the Plan or in any Grant Agreement thereunder shall confer
any right on an employee to continue in the employ of the Corporation or
shall interfere in any way with the right of the Corporation to terminate an
employee at any time.
13. Termination of Employment
For purposes of maintaining a grantee's continuous status as an
employee and accrual of rights under any Option, transfer of an employee
among the Corporation and the Corporation's Parent or Subsidiaries shall not
be considered a termination of employment.
14. Written Agreement
Each Grant Agreement entered into between the Corporation and a grantee
with respect to an Option granted under the Plan shall incorporate the terms
of this Plan and shall contain such provisions, consistent with the
provisions of the Plan, as may be established by the Board.
15. Non-Uniform Determinations
The Board's determinations under the Plan (including without limitation
determinations of the persons to receive Options, the form, amount, and
timing of such Options, the terms and provisions of such Options, and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options
under the Plan, whether or not such persons are similarly situated.
16. Compliance with Securities Law
Common Stock shall not be issued with respect to an Option granted
under the Plan unless the exercise of such Option and the issuance and
delivery of share certificates for such Common Stock pursuant thereto shall
comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any national securities
exchange or NASDAQ System upon which the Common Stock may then be listed or
quoted, and shall be further subject to the approval of counsel for the
Corporation with respect to such compliance to the extent such approval is
sought by the Board. All certificates for Common Stock delivered under the
Plan pursuant to any Option or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Board may deem advisable
under the Plan or the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange or NASDAQ System upon
which such securities are then listed or quoted, and any applicable Federal
or state laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
17. No Limit on Other Compensation Arrangements
Nothing contained in the Plan shall prevent the Corporation or its
Parent or Subsidiary corporations from adopting or continuing in effect other
compensation arrangements (whether such arrangements be generally applicable
or applicable only in specific cases) as the Board in its discretion
determines desirable, including without limitation the granting of stock
options, stock awards, stock appreciation rights, or phantom stock units
otherwise than under the Plan.
18. No Trust or Fund Created
Neither the Plan nor any Option shall create or be construed to create
a trust or separate fund of any kind or a fiduciary relationship between the
Corporation and a grantee or any other person. To the extent that any
grantee or other person acquires a right to receive payments from the
Corporation pursuant to an award under this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Corporation.
19. Governing Law
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations,
determinations, or decisions made by the Board relating to the Plan or such
Grant Agreements, and the rights of any and all persons having or claiming to
have any interest therein or thereunder, shall be determined exclusively in
accordance with applicable federal laws and the laws of the State of
Maryland, without regard to its conflict of laws rules and principles.
20. Plan Subject to Charter and By-Laws
This Plan is subject to the Charter and By-Laws of the Corporation, as
they may be amended from time to time.
21. Effective Date; Termination Date
The Plan, as herein amended and restated, is effective as of the date
on which the Plan is adopted by the Board, subject to approval of the
stockholders within twelve (12) months before or after such date. All
Options granted under the Stock Option Plan Of Diehl Graphsoft, Inc. prior to
the date that this amendment and restatement of the Plan becomes effective
shall be and remain subject to the terms and provisions of the Stock Option
Plan Of Diehl Graphsoft, Inc. as in effect at the time of such grant. No
Option shall be granted under the Plan after the close of business on the day
immediately preceding the tenth anniversary of the effective date of the
Plan. Subject to other applicable provisions of the Plan, all Options made
under the Plan prior to such termination of the Plan shall remain in effect
until such Options have been satisfied or terminated in accordance with the
Plan and the terms of such Options.
Date Approved by the Board: _________________________
Date Approved by the Shareholders: ___________________
Exhibit 11
<TABLE>
<CAPTION>
Statement of Computation of Shares Outstanding
For the year ended May 31,
1997 1996
<S> <C> <C>
Average outstanding shares 3,140,739 3,050,693
Dilutive effect of stock options and warrants 23,809 -
Weighted average number of shares outstanding 3,164,548 3,050,693
</TABLE>
Exhibit 21
Subsidiary of Small Business Issuer
Diehl Technologies, Inc.
Incorporated in State of Delaware
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-31587) pertaining to the Amended and Restated Stock Option
Plan of Diehl Graphsoft, Inc. of our report dated August 15, 1997, with
respect to the financial statements of Diehl Graphsoft, Inc. included in the
Annual Report (Form 10-KSB) for the year ended May 31, 1997.
/s/ Ernst & Young LLP
Vienna, Virginia
August 15, 1997
Exhibit 24
DIEHL GRAPHSOFT, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director(s) of
Diehl Graphsoft, Inc., incorporated in the State of Maryland, hereby
constitute and appoint Richard Diehl and Joseph Schmelzle, and either of
them, the true and lawful agents and attorneys-in-fact of the undersigned
with full power and authority in either said agent and attorney-in-fact, to
sign for the undersigned and in their respective names as Directors of Diehl
Graphsoft, Inc., the Annual Report on Form 10-KSB, and any and all further
amendments to said report, hereby ratifying and confirming all acts taken by
such agent and attorney-in-fact, as herein authorized.
Dated as of: August 29, 1997
/s/ Richard Diehl /s/ Richard Hug
Richard Diehl Richard Hug
/s/ Joseph Schmelzle /s/ Frederic Unger
Joseph Schmelzle Frederic Unger
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 247,359
<SECURITIES> 6,686,705
<RECEIVABLES> 331,135
<ALLOWANCES> 0
<INVENTORY> 162,828
<CURRENT-ASSETS> 7,728,962
<PP&E> 784,971
<DEPRECIATION> 465,816
<TOTAL-ASSETS> 8,857,028
<CURRENT-LIABILITIES> 309,524
<BONDS> 0
0
0
<COMMON> 31,407
<OTHER-SE> 8,237,232
<TOTAL-LIABILITY-AND-EQUITY> 8,857,028
<SALES> 6,022,714
<TOTAL-REVENUES> 6,022,714
<CGS> 1,650,903
<TOTAL-COSTS> 3,911,062
<OTHER-EXPENSES> 400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 840,732
<INCOME-TAX> 294,728
<INCOME-CONTINUING> 546,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,004
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
