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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ________
Commission file number 00-26810
LOGIC WORKS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2663477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
University Square at Princeton
111 Campus Drive
Princeton, NJ 08540
(Address and zip code of principal executive offices)
(609) 514-1177
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___.
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 11,941,000 common stock shares
outstanding at May 6, 1997.
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LOGIC WORKS, INC.
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1997 and
December 31, 1996 .................................................... 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1997 and 1996..................... ............ 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996..................... ................... 5
Notes to Condensed Consolidated Financial Statements ................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................ 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................................... 12
Item 2. Changes in Securities................................................. 12
Item 3. Defaults Upon Senior Securities ...................................... 12
Item 4. Submission of Matters to a Vote of Security Holders................... 12
Item 5. Other Information..................................................... 12
Item 6. Exhibits and Reports on Form 8-K...................................... 12
Signatures ........................................................... 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LOGIC WORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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Assets (unaudited) (audited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $22,131,000 $20,385,000
Marketable securities 9,959,000 8,109,000
Accounts receivable, net 8,106,000 10,182,000
Other current assets 3,636,000 3,675,000
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Total current assets 43,832,000 42,351,000
Property and equipment, net 3,877,000 3,760,000
Other assets 2,187,000 2,258,000
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Total assets $49,896,000 $48,369,000
======================================
Liabilities and stockholders' equity
Current Liabilities
Accounts payable $1,369,000 $2,394,000
Acrrued compensation 2,279,000 2,014,000
Deferred revenue 5,563,000 5,296,000
Income taxes payable 116,000 26,000
Other current liabilities 5,981,000 4,324,000
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Total current liabilities 15,308,000 14,054,000
Total stockholders' equity 34,588,000 34,315,000
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Total liabilities and stockholders' equity $49,896,000 $48,369,000
======================================
</TABLE>
See notes to condensed consolidated financial statements.
3
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LOGIC WORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenues
License fees $7,563,000 $7,431,000
Service fees 2,954,000 2,009,000
------------ ------------
Total revenues 10,517,000 9,440,000
Cost of licenses and services
Cost of licenses 721,000 446,000
Cost of services 822,000 1,054,000
------------ ------------
Total cost of licenses and services 1,543,000 1,500,000
Gross margin 8,974,000 7,940,000
Operating expenses
Sales and marketing 5,825,000 5,046,000
Research and development 1,722,000 1,262,000
General and administrative 1,411,000 1,348,000
------------ ------------
Total operating expenses 8,958,000 7,656,000
Operating income 16,000 284,000
Other income 217,000 258,000
------------ ------------
Income before taxes 233,000 542,000
Taxes 89,000 226,000
------------ ------------
Net income $144,000 $316,000
============ ============
Primary earnings per share $0.01 $0.02
============ ============
Fully diluted earnings per share $0.01 $0.02
============ ============
Weighted average shares outstanding
Primary 12,610,000 12,956,000
============ ============
Fully diluted 12,610,000 12,981,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
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LOGIC WORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months Ended
March 31,
-------------------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities
Net income $144,000 $316,000
Adjustment to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 412,000 167,000
Compensation element of common
stock, warrants and stock option grants 36,000 170,000
Changes in operating assets and liabilities:
Decrease (increase) in current assets and 2,139,000 (3,267,000)
other noncurrent assets
Increase (decrease) in accounts payable
and accrued liabilities 989,000 (376,000)
Increased in deferred revenue 266,000 301,000
-------------------------------------
Net cash provided by (used in) operating activities 3,986,000 (2,689,000)
Cash flows from investing activities
Purchase of property and equipment (453,000) (1,598,000)
Purchase of marketable securities (2,323,000) (8,719,000)
Proceeds from sale of marketable securities 473,000 12,787,000
Purchase of intangibles (29,000) (60,000)
-------------------------------------
Net cash provided by (used in) investment activities (2,332,000) 2,410,000
Cash flows from financing activities
Proceeds from the issuance of stock 233,000 936,000
Effect of foreign exchange rate on cash (141,000) (42,000)
Net increase in cash and cash equivalents 1,746,000 615,000
Cash and cash equivalents at beginning of period 20,385,000 19,628,000
-------------------------------------
Cash and cash equivalents at end of period $22,131,000 $20,243,000
=====================================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
LOGIC WORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Basis of Presentation
Logic Works, Inc. (the "Company") is a provider of client/server database
design, data warehouse and business process reengineering software and services.
The Company was incorporated in Delaware in 1985 and operates in one industry
segment. The Company has subsidiaries in Australia, Canada, England, Germany and
France to further broaden its global market. The Company markets its products
worldwide primarily through direct and indirect sales and marketing channels.
The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
The accompanying condensed consolidated financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission and, accordingly, do not include all financial information and
footnotes required under generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments consisting of normal
recurring adjustments that the Company considers necessary for a fair
presentation of the financial position of the Company as of March 31, 1997 and
the results of the Company's operations for the three months ended March 31,
1997 and 1996, respectively, and its cash flows for the three months ended March
31, 1997 and 1996, respectively. This report on Form 10-Q should be read in
conjunction with the Company's audited financial statements for the year ended
December 31, 1996 and the notes therein, included in the Company's annual report
on Form 10K. Certain amounts have been reclassified to conform with current year
presentation. The results of operations for interim periods are not necessarily
indicative of the results of operations to be expected for the entire year.
2. Per Share Amounts
Primary and fully diluted net income per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding and
gives effect to certain adjustments. Shares used in computing primary net income
per share include common shares and common equivalent shares consisting of
outstanding stock options.
3. Legal Proceedings
A former employee instituted a lawsuit against the Company, in the United States
District Court for the Western District of Washington at Seattle, regarding
certain compensation issues outstanding at the time of his termination of
employment with the Company. Based upon consultation with legal counsel, and in
the opinion of management, this lawsuit will not have a material adverse effect
on the Company's business, financial condition, and/or results of operations.
The Company is not subject to any lawsuits or other claims brought in the
ordinary course of business, which, in the opinion of management, based upon
consultation with legal counsel, will have a material adverse effect on the
Company's business, financial condition, and/or results of operations.
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4. Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
options will be excluded. The Company expects no impact to primary earnings per
share for the first quarter ended March 31, 1997 and the Company expects an
increase of $0.01 to primary earnings per share for the first quarter ended
March 31, 1996. The impact of Statement 128 on the calculation of fully diluted
earnings per share for these quarters is not expected to be material.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Quarterly Report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed in "Business Considerations" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, which
has been filed with the Securities and Exchange Commission.
The Company is a leading provider of client/server database design and business
process modeling software. The Company's Windows-based products allow customers
to realize the benefits of client/server systems by enabling easy, rapid and
high-quality design, deployment and management of relational databases and
related applications.
Results of Operations
The following table sets forth certain operating data as a percentage of total
revenues for the periods indicated (subtotals not adjusted for rounding):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
-----------------------
<S> <C> <C>
Percentages of Revenues:
Revenues:
License fees 71.9% 78.7%
Services 28.1 21.3
-----------------------
Total revenues 100.0 100.0
-----------------------
Cost of revenues:
License fees 6.9 4.7
Services 7.8 11.2
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Total cost of revenues 14.7 15.9
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Gross margin 85.3 84.1
-----------------------
Operating expenses:
Sales and marketing 55.4 53.5
Research and development 16.4 13.4
General and administrative 13.4 14.3
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Total operating expenses 85.2 81.1
-----------------------
Operating income 0.1 3.0
Other income 2.1 2.7
-----------------------
Income before income taxes 2.2 5.7
Income taxes 0.8 2.4
-----------------------
Net income 1.4% 3.3%
=======================
</TABLE>
Total Revenues. Total revenues increased 11.4% to $10.5 million in the three
months ended March 31, 1997 from $9.4 million in the three months ended March
31, 1996. The Company's revenues are derived from two sources: license fees and
service fees. The Company derived approximately $2.3 million, or 22.0% and 24.3%
of its total revenues, from international customers in the three months ended
March 31, 1997 and 1996, respectively. The Company expects that international
revenues will continue to represent a significant percentage of total revenues.
To date, the majority of the Company's international license fees and service
fees have been denominated in United States dollars and, accordingly, the
Company has not hedged its exposure to foreign currency fluctuations. The
Company anticipates that, in the future, an increasing proportion of the
Company's sales will be denominated in foreign currencies. In such event, an
increasingly significant portion of the Company's revenues will be subject to
the risks inherent in international
8
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operations. These risks include, but are not limited to, unexpected changes in
regulatory requirements, exchange rates, tariffs and other barriers, and
potentially adverse tax consequences. The Company may enter into hedging
transactions to mitigate the effects of exchange rate variations.
License Fees. License fees increased 1.8% to $7.6 million in the three months
ended March 31, 1997 from $7.4 million in the three months ended March 31, 1996.
License fees include revenues from software licensed either directly from the
Company or through Value Added Resellers, dealers or distributors, and from
third party software. The increase during this period resulted from continued
market acceptance of the Company's products, primarily ERwin, which was
stimulated by the Company's sales and marketing activities, including the
expansion of the Company's direct and indirect channels. In 1996, the Company
introduced ModelMart, which accounted for 10% and 4% of license fees for the
three months ended March 31, 1997 and 1996, respectively. ModelMart 2.0 was
released in January 1997 and the Company anticipates that this product will
account for a larger percentage of license fees in the future. The ERwin product
line accounted for 75% and 78% of the Company's license fees for the three
months ended March 31, 1997 and 1996 respectively. The remainder of the license
fees were received primarily from licenses of BPwin.
Cost of License Fees. Cost of license fees consists primarily of the costs of
product media, duplication, manuals, shipping and third party royalty costs for
software licensed to the Company's customers. The increase in the cost of
license fees is the result of the release of Universal Directory in March 1997
and the redesign of the packaging of all the Company's products to create a
unified brand image of the product suite . The Company may enter into, from time
to time, arrangements under which the Company will resell third party products,
resulting in additional costs of license fees. These amounts are immaterial in
the periods presented.
Service Fee Revenue. Service fee revenue increased by 47.0% to $3.0 million in
the three months ended March 31, 1997 from $2.0 million in the three months
ended March 31, 1996. Service fee revenue includes fees from software
maintenance agreements and training and consulting services. The growth in
service fee revenues during the periods presented was primarily the result of
increased maintenance fees as a result of a targeted effort from the sales force
to increase the renewal rate on maintenance agreements and of the increase in
ModelMart license revenue, for which all users in the workgroup are encouraged
to be under maintenance, and to a lesser extent increased consulting and
training services provided by the Company's Professional Services Group.
Cost of Services. Cost of services consists primarily of personnel and related
costs for training, consulting provided by the Professional Services Group,
customer technical support and payments to third party service providers. Cost
of services also reflects the costs associated with product media, duplication,
manuals, and shipping product upgrades to customers who have subscribed to the
Company's maintenance plans. The decrease in costs of service fees as a
percentage of service fees in the three months ended March 31, 1997 is the
result of a larger increase in maintenance fees which has a lower cost than
training and consulting services. Training and consulting fees generate lower
margins than maintenance fees because of the labor intensive nature of training
and consulting.
Sales and Marketing. Sales and marketing expenses increased 15.4% to $5.8
million in the three months ended March 31, 1997 from $5.0 million in the three
months ended March 31, 1996 and represented 55.4% and 53.5%, of total revenues
in each period, respectively. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses paid to sales and marketing personnel, as well
as travel and promotional expenses. Sales and marketing expenses increased due
primarily to substantial increases in personnel expenses from increased hiring,
increased advertising and promotional costs, and increased sales commissions.
The significant growth in the Company's sales and marketing expenses during the
three months ended March 31, 1997 reflects the expansion of its direct field
sales force and its European marketing staff. The increase in sales and
marketing expenses during the three months ended March 31, 1997 also reflects
increased advertising and promotional programs related to releases of extended
versions of ERwin, ModelMart and
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BPwin and releases of new products such as Universal Directory and TESTBytes. In
March 1997, the Company also hosted its first International User Conference in
New Orleans.
Research and Development. Research and development expenses increased 36.5% to
$1.7 million in the three months ended March 31, 1997 from $1.3 million in the
three months ended March 31, 1996 and represented 16.4% and 13.4% of total
revenues, respectively. Research and development expenses consist primarily of
software engineering personnel costs, costs of third party equipment and
software for development purposes and costs of outside consultants hired by the
Company to assist in its product development efforts. Research and development
expenses are generally charged to operations as they are incurred and have not
been capitalized since capitalizable costs have not been material. The increase
in research and development expenses during the periods presented was the result
of the Company's ongoing development of extended versions of ERwin, BPwin,
TESTBytes and ModelMart, as well as ongoing development of new products such as
Universal Directory, which began shipping in March 1997 and the continuation of
its quality control and quality assurance programs.
General and Administrative. General and administrative expenses increased 4.7%
to $1.4 million for the three months ended March 31, 1997 from $1.3 million for
the three months ended March 31, 1996 and represented 13.4% and 14.3% of total
revenues, respectively. General and administrative expenses consist primarily of
salaries of administrative, executive and financial personnel, provision for
doubtful accounts, and professional fees. The increase in general and
administrative expenses related primarily to the overall expansion of the
Company's operations and facilities and an increase in provisions for doubtful
accounts.
Income Taxes. The Company provides for income taxes at an effective tax rate of
38%. These effective tax rates were based on estimated annual federal and state
statutory rates.
10
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Liquidity and Capital Resources
At March 31, 1997, the Company had cash and cash equivalents of $22,131,000 and
marketable securities of $9,959,000.
Net cash provided by (used in) operating activities was $3,986,000 and
$(2,689,000) for the three months ended March 31, 1997 and 1996, respectively.
The increase in cash provided by operating activities is primarily related to an
increase in deferred revenue, a decrease in accounts receivable and an increase
in other liabilities.
Net cash and cash equivalents used in investing activities increased $4,742,000
in the first three months of 1997 as compared to the same period in 1996. This
increase in investing activities is the result of purchases of marketable
securities and purchases of property, plant and equipment resulting from the
growing headcount and improving the Company's information systems.
Net cash provided by financing activities decreased by $703,000 in the first
three months of 1997 compared to the same period in 1996 as a result of the
decrease in the exercising of employee stock options .
The Company believes that its existing cash balances together with cash flow
from operations will be sufficient to meet its cash requirements for at least
the next twelve months.
"LOGIC WORKS," "ERwin," "TESTBytes," "BPwin," "OOwin," and "RPTwin" are
registered trademarks of the Company. "ModelMart," "Universal Directory,"
"Universal Modeling Architecture (UMA)," "Logic Works" with logo and the phrase
"Making Database Design Easier in a Client/Server World" are trademarks of the
Company. This filing on Form 10-Q also includes trademarks and tradenames of
companies other than Logic Works, Inc.
11
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
A former employee instituted a lawsuit against the Company, in
the United States District Court for the Western District of
Washington at Seattle, regarding certain compensation issues
outstanding at the time of his termination of employment with
the Company. Based upon consultation with legal counsel, and
in the opinion of management, this lawsuit will not have a
material adverse effect on the Company's business, financial
condition, and/or results of operations.
The Company is not subject to any lawsuits or other claims
brought in the ordinary course of business, which, in the
opinion of management, based upon consultation with legal
counsel, will have a material adverse effect on the Company's
business, financial condition, and/or results of operations.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
See attached press release.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.10 Separation, Waiver and Release Agreement, dated April
1, 1997, between Registrant and Frank Cicio, Jr.
11. Statement regarding computation of per share
earnings.
27. Statement regarding financial data schedule.
b) Reports on Form 8-K
No Reports on Form 8-K
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LOGIC WORKS, INC.
Dated: May 15 , 1997 By: /s/GREGORY A. PETERS
------------------------
Gregory A. Peters
Acting Chief Executive Officer, Acting President
(Principal Executive Officer)
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
13
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Item 5 Attachment
LOGIC WORKS ANNOUNCES PROFITABLE FIRST QUARTER RESULTS
AND MANAGEMENT CHANGES
PRINCETON, N.J., April 22, 1997 - Logic Works, Inc. (NASDAQ: LGWX), a leading
provider of client/server database design, data warehouse and business process
reengineering software solutions, today reported revenues of $10.5 million and
net income of $0.1 million, or $0.01 per share for the first quarter ended March
31, 1997. This compares to revenues of $9.4 million and net income of $0.3
million, or $0.02 per share for the first quarter ended March 31, 1996.
"We are pleased with our progress during the first quarter as evidenced by these
results," said Benjamin Cohen, Chairman of the Board. "The strength of our
product offerings continued to secure significant orders from very important
customers including ADP Dealer Services, National Semiconductor, Ameritech, Bell
Atlantic and others. Our technology lead should be further enhanced with the
release of Logic Works ERwin 3.0 in our second quarter."
New products shipped during the quarter included Logic Works ModelMart 2.0 and
Logic Works Universal Directory 1.0. ModelMart has significantly increased the
strategic adoption of Logic Works products by enterprise accounts. The number of
sites using ModelMart increased 25% during the quarter to approximately 250
customers.
"Logic Works is financially stronger today than at any time in our history,"
said Greg Peters, Executive Vice President and Chief Financial Officer. "Over
the last two quarters, we have increased our cash position by 20% to a record
$32.1 million. In addition, deferred revenue has grown 64% in the past year to
$5.6 million. This positions us to achieve increased profitability throughout
this year."
Logic Works also announced several key management changes designed to enhance
strategic and operating performance. Benjamin Cohen will continue to serve as
Chairman of the Board and Gregory A. Peters, Chief Financial Officer of the
Company, has been appointed as Acting Chief Executive Officer and President. The
Board of Directors of the Company has initiated a formal search process to
identify and hire a new Chief Executive Officer and President. The search is
expected to take three to six months.
In commenting on the importance of these steps for the Company, Dr. Cohen
stated, "We have built a great foundation for success and this move is the next
logical step for the Company. The Board of Directors and I will work together to
attract and hire the right individual to lead us into the next century."
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About Logic Works
Logic Works is a leading provider of client/server, database warehouse and
business process re-engineering software solutions with over 45,000 users
worldwide. Logic Works' tools are adaptable to a wide variety of leading
technologies, providing an open and extensible solution. Logic Works is
headquartered in Princeton, New Jersey, with Federal government offices in
Vienna, Va., and international offices in the United Kingdom, Germany, and
Australia. Logic Works also has key distributors in the Far East and 42
countries worldwide.
This press release contains forward-looking statements. All forward-looking
statements involve risks and uncertainties, including, without limitation, the
risks detailed in the Company's filings and reports with the Securities and
Exchange Commission. Such statements are only predictions and actual events or
results may differ materially.
15
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
10.10 Separation, Waiver and Release Agreement, dated April 1, 1997, between
Registrant and Frank Cicio, Jr. 17
11 Statement re: Computation of Per Share Earnings 24
27 Statement re: Financial Data Schedule 25
</TABLE>
16
Exhibit 10.10
April 1, 1997
PERSONAL AND CONFIDENTIAL
Mr. Frank C. Cicio, Jr.
7 Aldgate Court
Princeton, NJ 08540
Re: Separation, Waiver and Release Agreement
Dear Frank:
This Letter Agreement sets forth the understanding reached
concerning your separation from Logic Works, Inc. and the settlement of all
matters known or unknown which may exist between you and Logic Works, Inc.,
including its subsidiaries and affiliated corporations and their respective
successors, assigns, representatives, agents, shareholders, officers, directors
and employees (collectively the "Company").
The Company and you have agreed that your separation from your
position as Executive Vice President of Sales and Marketing was effective as of
November 15, 1996. In order to accept this Agreement, you must return one fully
executed original Agreement to me within twenty-one days from its receipt.
This Agreement represents the amicable resolution of all
matters, disputes, causes of action, claims, contentions and differences between
you and the Company and embodies the full and final compromise of all matters
which have, or could have, been raised with regard to your employment and
termination from the Company.
Information regarding your options with respect to your 401(k)
balance will be provided to you under separate cover. You have agreed to submit
all reimbursable business expenses no later than
17
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December 31, 1996. Such expenses will be reimbursed in accordance with the
Company's business expense policy.
The Company shall, upon exercise of any options, deliver the
stock certificates to you within ten (10) days. In addition, you shall have
ninety (90) days from August 31, 1997, in which to exercise all options to which
are now vested as well as any options you are permitted to purchase pursuant to
this Agreement. Further, the Company has accelerated the vesting on a previously
unvested option to purchase 45,000 shares of Common Stock to November 15, 1996.
This option has an exercise price of $0.20 per share.
As you have been made aware, all of your employee benefits
ceased at the close of business on November 15, 1996. You may continue group
medical coverage for you and your eligible dependents at your own expense
pursuant to the Consolidated Omnibus Budget Reconciliation Act ("COBRA").
The Company, at its expense, will reimburse you for
out-placement benefits. The cost of such services shall not exceed $12,000. In
addition, the Company shall authorize the executive search firms with which it
regularly does business to assist you in seeking new employment.
It is further agreed that you will direct all reference
requests to the Human Resources Department at the Company's headquarters in
Princeton, New Jersey. Provided that the Company receives a written release from
you it will respond to any written reference request by indicating: the dates of
your employment; position title; and if expressly released, your level of
compensation. Moreover, it is expressly agreed that reference requests directed
to Company employees other than the Human Resources Department in Princeton, New
Jersey are not covered by this Agreement and the Company bears no liability for
statements made by such employees.
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You warrant and represent that you have been compensated in
full for your employment at the Company and, therefore, have no claims for
unpaid wages or bonuses past, present or future; that the payments set forth
above fully satisfy all claims of any kind or description and that you hereby
waive any right to additional payments and benefits of any kind, with the
exception of any vested benefits you may have under the Company's existing
benefit plans and those benefits expressly described herein which extend beyond
the date of your termination. Your rights relative to any vested benefits are
subject to the terms and conditions contained in such plans. You fully recognize
and agree that the payments set forth herein exceed that to which you are
entitled by Company policy and such payments are made in full and complete
satisfaction of any and all claims of any kind against the Company, arising from
your employment and/or separation from employment with the Company.
In exchange for the Company providing you with the
above-referenced termination benefits, which are more than you would otherwise
be entitled under Company policy, you hereby waive all claims against the
Company and release and discharge the Company from liability for any claims or
damages that you may have against it as of the date of this Agreement, whether
known or unknown to you including, but not limited to, any claims arising out of
your employment relationship with and termination from the Company, or any
alleged violations of any federal, state or local fair employment practices law,
including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1866, the Civil Rights Act of 1991, the Age Discrimination in Employment Act as
amended by the Older Worker Benefit Protection Act, the Americans with
Disabilities Act, the Employee Retirement and Income Security Act of 1974, the
New Jersey Law Against Discrimination or any other employee relations statute,
rule, executive order, law or ordinance, tort, express or implied contract,
public policy, or other obligations, including claims for physical or emotional
distress or injuries or any other duty or obligation of any kind or description
including costs, expenses or attorneys' fees.
In consideration for your entering into this Agreement, the
Company agrees to waive all claims against you and release and discharge you
from liability from any claims or damages that the
19
<PAGE>
Company may have against you as of the date of this Agreement, whether known or
unknown to the Company.
By entering into this Agreement, the Company does not admit,
and denies, any liability or wrongdoing, or violation of any law, statute,
order, regulation or policy. It is expressly understood and agreed that this
Agreement is being entered into solely for the purpose of amicably resolving all
matters, controversies, disputes, causes of action, claims, contentions and
differences of any kind whatsoever which have been or could have been alleged
against the Company. You acknowledge that the payments made hereunder are not
part of a group exit incentive or other employment termination program offered
to a group or class of employees.
It is understood and agreed that at the execution of this
Agreement you will return to the Company all Company property including, but not
limited to, laptop computers, files, papers, memoranda, letters, handbooks,
manuals, computer files, Company databases, publications, facsimile or other
communications that were written, authorized, signed, received, created or
transmitted during or prior to your employment. Such things and documents are
and remain the property of the Company and, as such, are to be returned to a
Company representative at a mutually convenient time prior to January 8, 1997.
You agree that you will not disclose or cause to be disclosed for any purpose
whatsoever, any confidential information or confidential documents or
confidential operations of the Company, including but not limited to computer
files, systems, Company databases, client lists, product development data,
financial information about clients, including any current and prior
transactions, deals, and trades on which you have worked or have been involved
during the course of your employment, unless such matters are then widely known
to the public.
The parties represent that they are not currently involved,
directly or indirectly in any legal or administrative proceedings against one
another, and except for the purpose of seeking enforcement of the terms of this
Agreement, you stipulate and agree that you will not file or institute or cause
to have filed or instituted any civil action, complaint, charge, arbitration or
other proceedings of any nature or
20
<PAGE>
description against the Company before any judicial, administrative, arbitral or
other forum based upon or arising out of any claims, whether asserted or
unasserted, that you may have against the Company as of the date of this
Agreement.
In addition, you agree that you will not voluntarily
participate or assist in any judicial, administrative, arbitral or other
proceedings of any nature or description against the Company brought by or on
behalf of any administrative agencies, employees or former employees other than
pursuant to a subpoena or court order. If you are served with a legal demand or
otherwise contacted and requested to appear or participate in any judicial,
administrative, arbitral or other proceedings of any nature or description
against the Company, you will provide the Company ten (10) days' written notice
prior to the time to appear or otherwise respond to any demand to appear or
participate, so that the Company may protect its rights hereunder. Such notice
shall be provided in writing to the Company within ten (10) days of service on
you of such subpoena, court order or request and shall be delivered personally
or sent by registered or certified mail, return receipt requested, to Winston &
Strawn 200 Park Avenue, New York, New York 10166-4193, Attention: William P.
Perkins, Esq. and to Logic Works, Inc., University Square at Princeton, 111
Campus Drive, Princeton, New Jersey 08540, Attention: Gregory A. Peters,
Executive Vice President and Chief Financial Officer. If the demand requires
disclosure less than ten (10) days after receipt of notice, you may appear,
provided you notify both Messrs. Perkins and Peters immediately, after receipt
of notice. In any appearance, unless or until ordered by a court otherwise, you
may only state that you have entered into an agreement settling your claims and
that you are bound by the confidentiality provisions of that agreement from
testifying further.
It is further agreed that all settlement discussions and
matters leading up to and including this Agreement are strictly confidential.
The parties further agree that neither they nor their representatives will
disclose any information regarding the existence or the terms of this Agreement,
and the facts and circumstances underlying the allegations leading to such
Agreement; provided, however, that this paragraph shall not limit in any way the
Company's right to disclose the terms, amount, and existence of
21
<PAGE>
this Agreement to its officers or agents for the purpose of complying with and
effectuating the terms of this Agreement, or appropriate regulatory authorities
or as otherwise required by law. This paragraph shall not limit you from
disclosing the terms, amount, and fact of this Agreement to your attorney, tax
preparer or immediate family members and as is otherwise required by law. You
further agree that you will cooperate fully with the Company in connection with
any existing or future litigation involving the Company, whether administrative,
civil, or criminal in nature, in which, and to the extent, the Company deems
your cooperation necessary.
We mutually agree that neither party to this Agreement, nor
their representative, will publicly disparage or criticize the other. You
expressly agree that neither you nor your representative will publicly or
privately disparage or criticize the Company and you expressly agree that you
will not publicly, by way of press release or otherwise, or privately disparage
any of the Company's products, services, branches, subsidiaries, divisions,
affiliates, related companies, or current or former officers, directors,
trustees, employees, agents administrators, representatives or fiduciaries.
You acknowledge that a breach of any of the covenants
contained herein would cause great damage and injury to the Company and that
such provisions provide a material element of the Company's consideration for an
inducement to enter into this Agreement. Accordingly, it is expressly understood
and agreed that if the Company establishes in a proceeding, brought to enforce
the terms of this Agreement, that there is a material breach by you, i.e.,
filing a claim which is covered by this Agreement; participating voluntarily in
an action against the Company; or breaching either the confidentiality or public
statements clauses herein, then the Company may, in addition to pursuing any
other remedies that it may have in law or in equity, obtain an injunction
against you from any court having jurisdiction over this matter, restraining any
further violation of this Agreement. Your breach of any provision of this
Agreement, the Company's pursuit of its rights hereunder, if any, by you shall
not affect this Agreement, which shall remain in full force and effect.
22
<PAGE>
You acknowledge that you have afforded at least 21 days to
consider the terms of this Agreement and that you were advised to consult with
an attorney not connected with the Company regarding this agreement and that you
are entering into this Agreement freely, knowingly and voluntarily with a full
understanding of its terms. You also acknowledge that you have seven days from
the date of execution of this Agreement to revoke it by notifying me in writing.
The terms of this Agreement, including all facts,
circumstances, statements, and documents relating thereto, shall not be used as
a precedent in further proceedings involving any or all of the parties hereto,
nor shall the parties seek to have the terms of this Agreement admitted in any
forum in any litigation for any purpose other than to secure enforcement of the
terms and conditions of this Agreement, except as otherwise provided by law or
as otherwise set forth in the foregoing paragraphs.
This Agreement may not be changed or altered, except by a
writing signed by the Company and you. This Agreement is entered into in the
State of New Jersey and the laws of the State of New Jersey, without regard to
its conflicts of law provisions, will apply to any dispute concerning it. If any
clause of this Agreement should ever be determined to be unenforceable, it is
agreed that this will not affect the enforceability of any other clause or the
remainder of this Agreement. This Agreement contains the entire agreement
between the parties and supersedes any and all prior agreements or
understandings, whether written or oral between you and the Company.
Very truly yours,
/s/GREGORY A. PETERS
--------------------
Gregory A. Peters
Executive Vice President
Chief Financial Officer
AGREED AND ACCEPTED:
BY: /s/FRANK C. CICIO, JR. April 1, 1997
- ----------------------------------- -----------------------
Frank C. Cicio, Jr. Date
23
Exhibit 11
LOGIC WORKS, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Primary
Net income $144,000 $316,000
============================
Weighted average number of common shares outstanding 11,757,000 11,095,000
Weighted average stock options outstanding 853,000 1,861,000
----------------------------
Weighted average number of common shares outstanding as adjusted 12,610,000 12,956,000
Net income per share $0.01 $0.02
============================
Fully Diluted
Net income $144,000 $316,000
============================
Weighted average number of common shares outstanding 11,757,000 11,095,000
Weighted average stock options outstanding 853,000 1,886,000
----------------------------
Weighted average number of common shares outstanding as adjusted 12,610,000 12,981,000
============================
Net income per share $0.01 $0.02
============================
</TABLE>
24
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> $22,131,000
<SECURITIES> 9,959,000
<RECEIVABLES> 10,010,000
<ALLOWANCES> 1,903,000
<INVENTORY> 0
<CURRENT-ASSETS> 43,832,000
<PP&E> 6,809,000
<DEPRECIATION> 2,892,000
<TOTAL-ASSETS> 49,896,000
<CURRENT-LIABILITIES> 15,308,000
<BONDS> 0
0
0
<COMMON> 119,000
<OTHER-SE> 34,469,000
<TOTAL-LIABILITY-AND-EQUITY> 49,896,000
<SALES> 7,563,000
<TOTAL-REVENUES> 10,517,000
<CGS> 721,000
<TOTAL-COSTS> 1,543,000
<OTHER-EXPENSES> 8,958,000
<LOSS-PROVISION> 165,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 233,000
<INCOME-TAX> 89,000
<INCOME-CONTINUING> 144,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,000
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
