-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PytyyZ7vqBvTKQpzadbbJ35BkWCECHgCn0CAeEkwkLzVJ5Gk1jYqo7Z7zjnSlUrt 7CVSZay17oOTl5BozJh9tg== 0000819005-97-000008.txt : 19971021 0000819005-97-000008.hdr.sgml : 19971021 ACCESSION NUMBER: 0000819005-97-000008 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19971020 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIEHL GRAPHSOFT INC CENTRAL INDEX KEY: 0000819005 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 521407016 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-24318 FILM NUMBER: 97697922 BUSINESS ADDRESS: STREET 1: 10270 OLD COLUMBIA RD STREET 2: STE 100 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4102905114 10KSB 1 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
Additional Common Common Paid in Retained Shares Stock Capital Earnings Total 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
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 EX-3.1 2 ARTICLES OF INCORPORATION 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 EX-3.2 3 BYLAWS 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. EX-10.1 4 DIRECTORS COMPENSATION PLAN 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. EX-10.2 5 STOCK OPTION PLAN 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: ___________________ EX-11 6 COMPUTATION OF SHARES OUTSTANDING Exhibit 11
Statement of Computation of Shares Outstanding For the year ended May 31, 1997 1996 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
EX-21 7 SUBSIDIARY Exhibit 21 Subsidiary of Small Business Issuer Diehl Technologies, Inc. Incorporated in State of Delaware EX-23 8 CONSENT OF INDEPENDENT AUDITORS 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 EX-24 9 POWER OF ATTORNEY 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 EX-27 10 ART. 5 FDS FOR YEAR 10-KSB
5 1 YEAR MAY-31-1997 MAY-31-1997 247,359 6,686,705 331,135 0 162,828 7,728,962 784,971 465,816 8,857,028 309,524 0 0 0 31,407 8,237,232 8,857,028 6,022,714 6,022,714 1,650,903 3,911,062 400 0 0 840,732 294,728 546,004 0 0 0 546,004 .17 .17
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