<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for use of the Commission only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to Section 240.l4a-11(c) or Section 240.l4a-
12
Micrografx, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Not Applicable
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth amount on which the
filing is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MICROGRAFX, INC.
1303 E. ARAPAHO ROAD
RICHARDSON, TEXAS 75081
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 4, 1997
To the Shareholders of
Micrografx, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of
Micrografx, Inc. (the "Company") will be held at the Omni Richardson Hotel, 701
E. Campbell Road, Richardson, Texas 75081, on the 4th day of November, 1997, at
10:00 a.m. (local time) for the following purposes:
1. To elect five (5) directors to hold office until the next annual election
of directors by shareholders or until their respective successors shall
have been duly elected and shall have qualified;
2. To consider and act upon a proposal to approve an amendment to the
Company's 1995 Incentive and Nonstatutory Stock Option Plan (the "Option
Plan") to increase the number of shares of Common Stock authorized and
reserved for issuance upon exercise of options granted under the Option
Plan from 1,500,000 shares to 2,600,000 shares;
3. To consider and act upon a proposal to approve an amendment to the
Company's Employee Stock Purchase Plan in order to increase the number of
shares of Common Stock authorized for issuance under such plan from 800,000
to 1,300,000 shares;
4. To consider and act upon a proposal to approve amendments to the Company's
1995 Director Stock Option Plan (the "1995 Director Plan") to (i) increase
the number of shares of Common Stock authorized and reserved for issuance
upon exercise of options granted under the 1995 Director Plan from 300,000
shares to 600,000 shares; (ii) increase the number of shares subject to
options annually granted under the 1995 Director Stock Option Plan to the
Company's non-employee directors from 7,500 to 10,000 option shares; (iii)
afford each non-employee director the right to elect to receive stock
options under the 1995 Director Plan in lieu of cash directors' fees; and
(iv) provide for the immediate vesting of all unexercisable options granted
under the 1995 Director Plan upon the occurrence of certain events
resulting in a change in control of the Company;
5. To ratify the appointment by the Board of Directors of Ernst & Young LLP as
independent public accountants for the Company for the fiscal year ending
June 30, 1998; and
6. To transact any and all other business that may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on September 12,
1997 as the record date (the "Record Date") for the determination of
shareholders entitled to receive notice of, and to vote at, such meeting or any
adjournments thereof. Only shareholders of record at the close of business on
the Record Date are entitled to receive notice of and to vote at such meeting.
The stock transfer books will be available for inspection at the meeting.
You are cordially invited to the meeting; however, regardless of whether
you expect to attend the meeting in person, you are urged to promptly sign, date
and mail the enclosed form of proxy so that your shares of stock may be
represented and voted at the meeting. Your proxy will be returned to you if you
should be present at the meeting and should request such return in the manner
provided for revocation of proxies on the initial page of the enclosed Proxy
Statement.
By Order of the Board of Directors
R. Edwin Pearce
Secretary
September 24, 1997
<PAGE>
MICROGRAFX, INC.
1303 E. ARAPAHO ROAD
RICHARDSON, TEXAS 75081
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 4, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
Micrografx, Inc., a Texas corporation (the "Company" or "Micrografx"), to be
voted at the 1997 Annual Meeting of Shareholders of Micrografx to be held on
November 4, 1997 (the "Annual Meeting"), at the time and place, and for the
purposes, set forth in the accompanying Notice of Annual Meeting, and at any
adjournment(s) of that meeting. WHEN PROXIES IN THE ACCOMPANYING FORM ARE
PROPERLY EXECUTED AND RECEIVED, THE SHARES REPRESENTED THEREBY WILL BE VOTED AT
THE ANNUAL MEETING IN ACCORDANCE WITH THE DIRECTIONS NOTED THEREON; IF NO
DIRECTION IS INDICATED, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS NAMED HEREIN AND IN FAVOR OF THE OTHER PROPOSALS SET FORTH IN THE
NOTICE OF ANNUAL MEETING, AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO
ANY OTHER MATTER THAT IS PROPERLY BROUGHT BEFORE THE MEETING.
Each shareholder of the Company giving a proxy has the unconditional right
to revoke his proxy at any time prior to its exercise either in person at the
Annual Meeting or by giving written notice to the Company addressed as follows:
1303 E. Arapaho Road, Richardson, Texas 75081, Attention: Chairman of the Board.
No revocation by written notice shall be effective unless and until such notice
has been received by the Chairman of the Board of the Company prior to the day
of the Annual Meeting or by the inspector(s) of elections at the Annual Meeting.
The principal executive offices of the Company are located at 1303 E.
Arapaho Road, Richardson, Texas 75081.
This Proxy Statement and accompanying form of proxy are being mailed to the
Company's shareholders on or about September 24, 1997. The Company's Annual
Report to Shareholders covering the Company's fiscal year ended June 30, 1997,
is being mailed to shareholders together with this Proxy Statement but does not
form any part of the materials for solicitation of proxies.
In addition to the solicitation of proxies by use of the mail and through
this Proxy Statement, directors, officers and regular employees of the Company
may solicit the return of proxies, either by mail, personal contact, telephone,
telecopy or telegraph. Officers and employees of the Company will not be
additionally compensated for their solicitation efforts but will be reimbursed
for any out-of-pocket expenses incurred. The Company has also retained
Corporate Investor Communications, Inc. to assist the Company in the
solicitation of proxies from shareholders and will pay such firm a fee of $3,750
for its services and will reimburse such firm for any of its out-of-pocket
expenses. Brokerage houses and other custodians, nominees and fiduciaries will
be requested, in connection with shares registered in their names, to forward
solicitation materials to the beneficial owners of such shares.
All costs of preparing, printing, assembling and mailing the Notice of
Annual Meeting, this Proxy Statement, the enclosed form of proxy and any
additional materials, as well as the cost of forwarding solicitation materials
to the beneficial owners of stock and all other costs of solicitation, will be
borne by the Company.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will be asked to consider
and act upon the following matters:
1. The election of five (5) directors to hold office until the next annual
election of directors by shareholders or until their respective successors
shall have been duly elected and shall have qualified;
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2. A proposal to approve amendments to the Company's 1995 Incentive and
Nonstatutory Stock Option Plan to increase the number of shares of Common
Stock authorized and reserved for issuance upon exercise of options granted
under the Option Plan from 1,500,000 shares to 2,600,000 shares;
3. A proposal to approve an amendment to the Company's Employee Stock Purchase
Plan in order to increase the number of shares of Common Stock authorized
for issuance under such plan from 800,000 to 1,300,000 shares;
4. A proposal to approve amendments to the Company's 1995 Director Stock
Option Plan (the "1995 Director Plan") to (i) increase the number of shares
of Common Stock authorized and reserved for issuance upon exercise of
options granted under the 1995 Director Plan from 300,000 shares to 600,000
shares; (ii) increase the number of shares subject to options annually
granted under the 1995 Director Plan to the Company's non-employee
directors from 7,500 to 10,000 option shares; (iii) afford each non-
employee director the right to elect to receive stock options under the
1995 Director Plan in lieu of cash directors' fees; and (iv) provide for
the immediate vesting of all unexercisable options granted under the 1995
Director Plan upon the occurrence of certain events resulting in a change
in control of the Company;
5. The ratification of the appointment by the Board of Directors of Ernst &
Young LLP as independent public accountants for the Company for the fiscal
year ending June 30, 1998; and
6. The transacting of any and all other business that may properly come before
the meeting or any adjournment(s) thereof.
QUORUM AND VOTING
The identity of shareholders entitled to receive notice of and to vote at
the Annual Meeting and the number of votes allotted to each shareholder were
determined as of the close of business on September 12, 1997 (the "Record
Date"). On the Record Date, there were issued and outstanding 10,950,143 shares
of common stock, par value $.01 per share (the "Common Stock").
Each shareholder as of the Record Date will be entitled to one vote per
share of Common Stock held on each matter acted upon at the meeting. Neither
the Articles of Incorporation nor the Bylaws of the Company provide for
cumulative voting rights. The presence, in person or by proxy, of the holders
of at least a majority of the issued and outstanding shares of Common Stock is
necessary to constitute a quorum to transact business at the Annual Meeting.
Abstentions may be specified on all matters proposed, other than the election of
directors. Abstentions and broker non-votes will be considered present at the
meeting and will be counted towards determining whether a quorum is present. A
broker non-vote occurs where a registered broker holding customer securities in
street name has not received voting instructions from the beneficial owner
regarding any "non-routine" matter as so designated by that broker's self-
regulatory organization.
Assuming the presence of a quorum, (i) the affirmative vote of the holders
of a plurality of the shares of Common Stock represented at the meeting is
required for the election of the directors; and (ii) the affirmative vote of the
holders of at least a majority of the shares of Common Stock voting in person or
by proxy at the Annual Meeting is required for the approval of all other
matters. Abstentions on a particular matter (other than the election of
directors) will not be counted as votes cast in the affirmative and will
therefore have the same effect as a vote against a particular matter because
each proposal (other than the election of directors) requires the affirmative
vote of a majority of the shares voting at the meeting. With regard to the
election of directors, votes may be cast in favor of or withheld from each
nominee; votes that are withheld will be excluded entirely from the vote and
will have no effect. Broker non-votes will have no impact on the outcome of the
voting on the election of directors or any other proposal.
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ELECTION OF DIRECTORS
(ITEM 1)
The Bylaws of the Company provide that the Board of Directors shall be
composed of not less than five but not more than nine directors. Unless
otherwise directed in the enclosed proxy, it is the intention of the persons
named in such proxy to nominate and to vote the shares represented by such proxy
for the election of the following named nominees for the offices of directors of
the Company to hold office until the next annual meeting of shareholders or
until their respective successors shall have been duly elected and shall have
qualified. Each of the nominees is presently a director of the Company.
<TABLE>
<CAPTION>
SERVED AS PRESENT OFFICE(S)
NOMINEE AGE DIRECTOR SINCE HELD IN MICROGRAFX
------- --- -------------- ------------------
<S> <C> <C> <C>
Russell E. Hogg................. 69 1997 Chairman of the Board of Directors
Sunnygables, 2 Salisbury Place
South Nyack, NY 10960
Douglas Richard................. 39 1997 President and Chief Executive Officer
1303 E. Arapaho Road
Richardson, Texas 75081
Seymour Merrin.................. 66 1990 Director
2275 E. Bayshore Road
Palo Alto, California 94303
Robert Kamerschen............... 61 1993 Director
One Univac Lane
Windsor, CT 06095-2668
Eugene P. Beard................. 62 1993 Director
1271 Avenue of the Americas
New York, NY 10020
</TABLE>
The following is a brief account of the business experience, during the
past five years, of each nominee for director of the Company.
Russell Hogg joined the Board and was elected Chairman in June 1997. Since
1989, he has served as Chairman and Chief Executive Officer of Hogg
International Associates, a global financial service company located in Nyack,
New York. From 1980 to 1989, Mr. Hogg was the Chief Executive Officer for
MasterCard International, Inc. Presently, Mr. Hogg is a consultant to the
National BlueCross Blue Shield board and is one of three outside voting members
of the Board's key committee. He currently serves as the Chairman of the
Institute for International Sport, sponsor in 1993 of the inaugural World
Scholar-Athlete Games. He has previously served as a board member for numerous
philanthropic and governmental organizations and corporations, including
Reichold Chemical Company.
Douglas Richard is the President and Chief Executive Officer of the
Company, having been elected to such office in February 1997. From April 1996
to February 1997, Mr. Richard served as the Vice President, Marketing, and
Executive Vice President of the Company. Prior to joining the Company, Mr.
Richard served as President, and was the founder, of Visual Software, Inc., a
developer and marketer of three dimensional computer software for personal
computers, from the company's inception in 1991 until its acquisition by the
Company in April 1996. Prior to that, Mr. Richard was the founder in 1985 and
president of ITAL Computers, the largest CAD systems integrator in California at
that time.
Seymour Merrin has been a director of the Company since February 1990.
Since 1988, he has served as president of Merrin Information Services, Inc., an
information service that provides information and consulting to retail computer
software businesses.
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Robert Kamerschen has been a director of the Company since April 1993. He
has served as Chairman (since January 1989), Chief Executive Officer and a
director of ADVO, Inc., a company principally involved in direct mail
advertising, since November 1988. He is also a director of MECA Software, Inc.
and Cognizant, Inc.
Eugene P. Beard has been a director of the Company since July 1993. He has
served as a director (since 1982) and as Vice Chairman of Finance and Operations
(since September 1995) of The Interpublic Group of Companies, Inc., the world's
largest organization of global advertising and marketing companies, with which
he has been associated since 1980. He is also a director of All American
Communications and Brown Brothers 59 Wall Street Fund.
As of June 30, 1997, (i) there were no family relationships between any of
the officers and directors of the Company and (ii) there were no agreements
whereby any shareholder or group of shareholders is entitled to representation
on the Board of Directors of the Company.
The Board of Directors does not contemplate that any of the nominees for
director named above will refuse or be unable to accept election as a director
of the Company, or be unable to serve as director of the Company. Should any of
them become unavailable for nomination or election or refuse to be nominated or
to accept election as a director of the Company, then the persons named in the
enclosed form of proxy intend to vote the shares represented in such proxy for
the election of such other person or persons as may be nominated or designated
by management, unless they are directed in the proxy to do otherwise.
The Board of Directors has a standing Audit Committee chaired by Eugene P.
Beard. During the fiscal year ended June 30, 1997, the Audit Committee was
composed of Messrs. Beard, Robert Kamerschen and Robert S. Miller. Mr. Hogg
joined the Audit Committee in conjunction with his election as Chairman of the
Board in June 1997. The Audit Committee is responsible for consulting with the
independent public accountants for the Company with regard to the adequacy of
internal controls and the plan of audit, as well as reviewing the audit report
and management letter and matters concerning financial reporting, accounting and
audit procedures and policies generally. The Audit Committee held five meetings
during the fiscal year ended June 30, 1997. No member of the Audit Committee
attended fewer than 80% of the meetings. For the ensuing year, the Audit
Committee will be comprised of Messrs. Beard (Chairman), Kamerschen and Hogg.
The Board of Directors has a standing Executive Compensation and Stock
Option Committee chaired by Robert Kamerschen. During the fiscal year ended
June 30, 1997, the Executive Compensation and Stock Option Committee was
composed of Messrs. Eugene P. Beard, David Gergacz, Robert Kamerschen, Joe Kupke
(who resigned June 24, 1997), Seymour Merrin and Robert S. Miller. The
Committee is responsible for reviewing and determining matters on executive
compensation and administering the Company's Incentive and Nonstatutory Stock
Option Plan (the "Option Plan"). See "Report of Compensation and Stock Option
Committee on Executive Compensation." The Committee held six meetings during
the fiscal year ended June 30, 1997. No member of the Stock Option Committee
attended fewer than 75% of the meetings, except Mr. Gergacz attended 67% of such
meetings. Mr. Hogg was elected to this Committee in connection with his
election to the position of Chairman of the Board in June 1997. For the ensuing
year, the Committee will be comprised of Messrs. Kamerschen (Chairman), Beard
and Hogg.
The Board has a standing Nominating Committee, chaired by Mr. Hogg. During
the fiscal year ended June 30, 1997, the Nominating Committee was composed of
Messrs. Hogg, Beard and Kamerschen. The Nominating Committee is responsible for
selection for nomination of candidates to serve on the Company's Board of
Directors. The Nominating Committee held one meeting during the year ended June
30, 1997. No member of the Nominating Committee attended fewer than 100% of the
meetings. For the ensuing year, the Nominating Committee will be composed of
Messrs. Hogg (Chairman), Kamerschen and Beard. Because the Nominating Committee
was only recently established, no policy has been formulated as to whether
nominees recommended by shareholders will be considered.
The Board of Directors held thirteen meetings during the fiscal year ended
June 30, 1997. Various matters were approved during the last fiscal year by
unanimous written consent of the Board of Directors. During the fiscal year
ended June 30, 1997, no director attended fewer than 75% of the aggregate of (i)
the total number of meetings
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of the Board of Directors and (ii) the total number of meetings held by all
committees of the Board of Directors on which each director served, except Mr.
Gergacz attended 69% of such meetings.
During the fiscal year ended June 30, 1997, each director who was not an
employee of the Company (currently five persons) received an annual retainer of
$20,000 and a fee of $1,000 for each meeting of the Board of Directors and each
meeting of a committee of the Board of Directors attended. In addition, each
committee chairperson received an annual fee of $3,000. For the fiscal year
ending June 30,1998, each director who is not an employee of the Company will
receive an annual retainer of $20,000, a fee of $10,000 for attending all board
and committee meetings which may be held during the year, and the chairman of
each board committee will continue to receive an additional fee of $3,000. All
directors are reimbursed for travel and other expenses incurred in attending
such meetings. In connection with his election as Chairman of the Board in May
1997, Mr. Hogg will receive the following additional compensation for serving as
Chairman: (i) during the first year of service in such capacity, a consulting
fee of $1,500 per each day (8-10 hours) of work on Company business, with a
maximum cap of $50,000 for the year; (ii) a grant of non-statutory stock options
covering 30,000 shares with an exercise price of $6.00 per share, granted as of
Mr. Hogg's election in June 1997, pursuant to the Company's Option Plan, vesting
ratably over a period of four years from the date of grant; and (iii) additional
non-statutory stock option grants, each covering 5,000 shares, in each of the
next three years, vesting pursuant to the same schedule.
All directors, with the exception of Mr. Richard, are eligible to
participate in the 1995 Director Plan. The 1995 Director Plan provides that on
October 1 of each ensuing year each eligible director will be entitled to
receive an option for 7,500 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant. Each option
granted under the 1995 Director Plan becomes exercisable at the rate of 25% per
year commencing on the first anniversary of the date of grant. During the
fiscal year ended June 30, 1997, each eligible director (Messrs. Beard, Gergacz,
Kamerschen, Merrin and Miller) received a grant of options covering 7,500 shares
of Common Stock with an exercise price of $6.25 per share, representing the
closing price of the Company's stock as of October 1, 1996, pursuant to the
terms of the 1995 Director Plan. The 1995 Director Plan also provides that each
person who becomes a non-employee director is entitled to receive a non-
statutory stock option for 20,000 shares having an exercise price equal to fair
market value of the Company's Common Stock at the time his initial election to
the Board of Directors. In accordance with this provision, Mr. Hogg received a
grant of non-statutory stock options covering 20,000 shares, with an exercise
price of $6.00 per share, upon his election to the Company's Board of Directors
in June 1997.
Subject to shareholder approval of the Director Plan Amendment (as defined
below under "Proposal to Approve an Amendment to the Micrografx, Inc. 1995
Director Stock Option Plan") at the Annual Meeting, each non-employee director
will thereafter be entitled to receive non-statutory stock options for 10,000
shares of Common Stock (instead of 7,500 shares) beginning October 1, 1997 and
on each October 1 thereafter, at an exercise price equal to the fair market
value of the Common Stock on such date of grant. See "Proposal to Approve
Amendment to the Micrografx, Inc. 1995 Director Stock Option Plan" for this and
other provisions regarding the 1995 Director Plan.
In addition to the foregoing standard arrangements relating to director
compensation, Messrs. Merrin and Miller were appointed to a special board
committee in fiscal 1997, which committee was delegated responsibility for the
identification and retention of a new Chairman of the Board. Messrs. Merrin and
Miller were compensated additional director fees of approximately $13,500 and
$26,500, respectively, for services provided relating to their duties as members
of such committee and reimbursement of expenses incurred in the performance of
such duties.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Executive Compensation Committee is or has been an officer
or employee of the Company or any of its subsidiaries or had any relationship
requiring disclosure pursuant to Item 404 of SEC Regulation S-K. No member of
the Executive Compensation Committee served on the compensation committee, or as
a director, of another corporation, one of whose directors or executive officers
served on the Executive Compensation Committee of or whose executive officers
served on the Company's Board of Directors.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that, during the fiscal year ended June 30, 1997, all filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with, except for Form 4 filings that were belatedly filed
with respect to (i) Douglas Richard, and (ii) Joe Kupke, each reporting one
transaction.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" EACH OF THE INDIVIDUALS NOMINATED FOR
ELECTION AS A DIRECTOR.
PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES
SUBJECT TO THE MICROGRAFX 1995 INCENTIVE AND
NONSTATUTORY STOCK OPTION PLAN
(ITEM 2)
GENERAL
For several years, the Company has utilized stock options as a key part of
its overall compensation program for executive officers and all other employees
of the Company. The Board of Directors and the Executive Compensation and Stock
Option Committee believe it is important to have equity-based incentives
available to retain and attract quality personnel for the Company. See "Board
of Directors and Committees--Report of the Compensation and Stock Option
Committee on Executive Compensation." Accordingly, the Board of Directors has
approved, subject to shareholder approval, a proposal to amend the Company's
1995 Incentive and Nonstatutory Stock Option Plan (the "Option Plan") to
increase the number of shares of the Company's Common Stock available for
issuance under the Option Plan from 1,500,000 to 2,600,000 shares. The Board of
Directors increased the number of available shares under the Option Plan because
as of September 1, 1997, only 137,901 shares of Common Stock remained available
for grant under the plan.
If approved by the shareholders at the annual meeting, the first sentence
of Section II of the Option Plan will be amended to provide as follows:
"The aggregate number of Shares as to which Options may be granted from
time to time shall be two million six hundred thousand (2,600,000) Shares;
provided, however, that unless the Plan is administered by a Committee
comprised of Disinterested Persons, or by the Board of Directors comprised
of a majority of Disinterested Persons, the maximum number of Shares as to
which Options may be granted in any calendar year to a director who is also
an employee shall not exceed 33% of the aggregate number of Shares with
respect to which grants may be made under the Plan."
The remaining language of Section II will not be changed and the only
effect of the amendment will be to increase the number of shares of Common Stock
authorized and reserved for issuance upon the exercise of stock options granted
pursuant to the Option Plan.
The amendment is necessary in order to cover future grants of options to
purchase shares of Common Stock to officers and other employees. The amendment
will provide the Company with the ability to issue additional options and will
enable the Company to continue the purposes of the Option Plan by providing
additional incentives to attract and retain qualified and competent employees,
upon whose judgment the success of the Company is largely dependent. This would
be in keeping with the Company's overall compensation philosophy, which attempts
to place equity in the
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hands of Company employees in an effort to further instill shareholder
considerations and values in the actions of such employees and officers.
The Company intends to register the 1,100,000 additional shares of Common
Stock issuable under this amendment under the Securities Act, assuming the
stockholders approve the proposal to increase the number of available shares.
Shares purchased pursuant to the Option Plan after the effective date of such
registration could immediately be sold on the open market subject, in the case
of affiliates (as defined in Rule 144 under the Act), to compliance with the
provisions of Rule 144 other than the holding period requirement.
Since it is the Company's policy to grant options to all employees under
the Option Plan upon such employee joining the Company and to grant options to
other employees from time to time as determined by the Executive Compensation
and Stock Option Committee (the "Stock Option Committee") in its discretion, it
is not possible at this time to indicate the number, names or positions of
employees who will receive options or the number of shares for which options
will be granted to any employee under the Option Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
AMENDMENT OF THE MICROGRAFX, INC. 1995 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN.
DESCRIPTION OF THE COMPANY'S STOCK OPTION PLAN
A summary of the principal provisions of the Option Plan is set forth
below:
Purposes. The Option Plan provides for the issuance of incentive stock
options and nonstatutory stock options to key employees of the Company,
including employees who also serve as officers or directors of the Company, and
provides for the reservation of 1,500,000 shares of Common Stock for issuance
upon exercise of options granted under the Option Plan (2,600,000 shares if the
proposed amendment is approved). The purpose of the Option Plan is to attract
and retain key employees and provide additional incentive for key employees to
promote the success of the Company.
Terms and Conditions of Options. The Option Plan provides that the
exercise price for each incentive stock option granted under the Option Plan may
not be less than the fair market value of the Common Stock on the date of the
grant, unless the optionee owns greater than 10% of the total combined voting
power of all classes of capital stock of the Company, in which case the exercise
price may not be less than 110% of the fair market value of the Common Stock on
the date of the grant. The exercise price for each nonstatutory stock option
may be any price determined by the Board of Directors but, pursuant to the
policy adopted by the Board of Directors, shall not be less than 85% of the fair
market value of the shares of Common Stock on the date of the option grant. The
exercise price is payable upon exercise of an option and in such form as
determined by the Board of Directors or the Stock Option Committee, if the Board
has delegated its authority to such Committee.
Options granted under the Option Plan are exercisable in such amounts, at
such intervals and upon such terms as the Board of Directors or the Stock Option
Committee, if the Board has delegated its authority to such Committee, shall
provide in such option, subject to certain limitations defined in the Option
Plan. In general, each option will terminate not more than 10 years from the
date of grant, or such earlier time as specified in the applicable stock option
agreement, except that if the option is intended as an incentive stock option,
such option shall terminate not more than five years from the date of grant.
The Board of Directors, or the Stock Option Committee appointed by the
Board of Directors, has authority to administer and interpret the Option Plan
and has authority to select which employees are eligible employees and which of
the eligible employees should receive options, and determines at the time the
option is granted the number of shares granted under each option, the purchase
price, the option period and the other terms and conditions relating to the
grant. The Option Plan is administered by the Stock Option Committee of the
Board of Directors of the Company, consisting as of the date hereof of Messrs.
Eugene P. Beard, David S. Gergacz, Robert Kamerschen, Seymour Merrin and Robert
S. Miller.
7
<PAGE>
If a participant's employment is terminated for any reason other than
death, a permanent and total disability or cause (as defined), then that
participant's right to exercise any previously granted option terminates 30 days
after such termination. If a participant's employment is terminated due to a
permanent and total disability, then that participant may exercise all rights
that have accrued to him under the Option Plan as of the date of the disability
within a period of 90 days after the date of such disability or such earlier
date as prescribed in the applicable stock option agreement. If a participant
dies, then such participant's survivors or legal representatives may exercise
the rights that have accrued to such participant as of the date of death within
a period of 90 days after the date of death or such earlier date as prescribed
in the applicable stock option agreement. If a participant's employment is
terminated for cause, then the participant's right to exercise any previously
granted option is also terminated as of the last date of employment. Shares
subject to an option that expires or is terminated will again be available for
grant under the Option Plan.
No participant shall have any rights as a shareholder unless and until his
option has been exercised and shares have been issued to or registered in the
Company's share register in the name of the participant.
An option shall not be transferable by a participant other than by will or
by laws of descent and distribution. During a participant's lifetime, an option
may be exercised only by the participant. No option or stock appreciation right
may be assigned, pledged or hypothecated in any way (whether by operation of law
or otherwise) nor be subject to execution, attachment or similar process.
To prevent dilution of the rights of a holder granted under the Option
Plan, the Option Plan provides for adjustment of the number of shares upon which
options may be granted, of the number of shares subject to outstanding options
and of the exercise price in the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, exchange of
shares of Common Stock or other change in capital structure of the Company. The
Option Plan also confers authority on the Board of Directors to cancel,
effective upon written notice, all outstanding options that remain unexercised
in the event of any such transaction. The Option Plan further provides that all
outstanding options that remain unexercised shall terminate and become null and
void upon the dissolution or liquidation of the Company or the sale, lease,
exchange or other disposition of all or substantially all of the property and
assets of the Company. The Option Plan permits the Board to accelerate the date
on which any options may be exercised.
Stock Appreciation Rights. The Option Plan provides that stock
appreciation rights (a "SAR") may be granted to a participant with respect to an
option. A SAR that is granted with respect to an incentive stock option must be
granted at the same time as the respective incentive stock option.
A SAR is an obligation on the part of the Company to pay to a participant
an amount in cash equal to the spread as of the date the SAR is exercised,
subject to any taxes which are required to be withheld by the Company. The
"Spread" is the amount equal to the product of (a) the excess of (i) the fair
market value per share over (ii) the option price per share of the option,
multiplied by (b) the number of shares with respect to which the SAR is
exercised. With respect to an incentive stock option, the Spread shall in no
event exceed the amount permitted to be treated as the Spread under the
applicable Treasury Regulations or other legal authority with respect to
incentive stock options. A SAR may be exercised at such times and to the extent
that the option to which it relates may be exercised.
If SARs are granted and become subject to exercise, there will be a charge
to the Company's income to reflect the difference between the fair market value
of the stock subject to the related option and the exercise price of each
option.
Amendments. The Option Plan may be amended by (i) the shareholders of the
Company or (ii) the Board of Directors so long as all such amendments are
approved by the shareholders except shareholder approval is not required for
certain non-material amendments. The Board of Directors' authority to amend the
Option Plan may not be delegated to a committee. No amendment shall affect any
previously granted option or previously executed stock option agreement unless
such amendment so expressly provides and the affected participant consents in
writing.
Termination. The Option Plan will terminate by its terms in May 2004. The
Option Plan may be terminated sooner by vote of the shareholders, provided that
any such termination will not affect any option outstanding at the date of such
termination.
8
<PAGE>
Federal Income Tax Consequences. The grant of an option or SAR will not be
a taxable event to the recipient optionee. Upon the exercise of a nonstatutory
stock option, an optionee will recognize ordinary income at the time of exercise
equal to the excess of the then fair market value of the shares of Common Stock
received over the exercise price. An optionee who exercises a SAR will
recognize ordinary income equal to the cash received. The taxable income
recognized upon exercise of a nonstatutory stock option or a SAR will be treated
as compensation income subject to withholding, and the Company will be entitled
to deduct an amount equal to the ordinary income an optionee recognizes as a
compensation expense.
When Common Stock received upon exercise of a nonstatutory stock option
subsequently is sold or exchanged in a taxable transaction, the holder thereof
generally will recognize a capital gain (or loss) in the amount by which the
amount realized exceeds (or is less than) the fair market value of the Common
Stock on the date of exercise; the character of such gain or loss as long or
short-term capital gain or loss will depend upon the holding period of the
shares following exercise.
Neither the grant nor exercise of an incentive stock option will be taxable
to the optionee, and the Company will not be entitled to any deductions with
respect thereto. However, to qualify for this favorable tax treatment of
incentive stock options, the optionee may not dispose of the shares of Common
Stock acquired upon the exercise of an incentive stock option until after the
later of two years following the date of grant or one year following the date of
exercise of the incentive stock option. Upon any subsequent taxable disposition
of shares of Common Stock received upon exercise of a qualifying incentive stock
option, the optionee generally will recognize long- or short-term capital gain
or loss measured by the difference between the amount realized and the exercise
price of the option.
If an option does not qualify for favorable incentive stock option
treatment as described above because of a failure to satisfy the holding period
requirements, the optionee will recognize ordinary income in the year of the
disqualifying disposition equal to the excess of the lower of (i) the amount
realized or (ii) the excess of the fair market value of the Common Stock at the
time of exercise over the exercise price, and the Company will be entitled to a
deduction of that amount in that year, if the amount realized exceeds the fair
market value of the Common Stock on the date the incentive stock option was
exercised, the excess will be taxable as long- or short-term capital gain,
depending on the optionee's holding period for the transferred shares.
Notwithstanding the favorable tax treatment of incentive stock options for
regular tax purposes, as described above, for alternative minimum tax purposes,
an incentive stock option is treated in the same manner as a nonstatutory stock
option. Accordingly, an optionee who is subject to the alternative minimum tax
must include an alternative minimum taxable income, for the year in which an
incentive stock option is exercised, the excess of the fair market value of the
shares of Common Stock received over the exercise price.
PROPOSAL TO INCREASE NUMBER OF AUTHORIZED SHARES UNDER THE
MICROGRAFX, INC. EMPLOYEE STOCK PURCHASE PLAN
(ITEM 3)
The Board of Directors has amended the Micrografx, Inc. Employee Stock
Purchase Plan (the "Stock Purchase Plan") in order to increase the number of
shares of Common Stock available for issuance thereunder from 800,000 to
1,300,000. The Board of Directors increased the number of available shares
under the Stock Purchase Plan because as of September 1, 1997, only 103,429
shares of Common Stock remained available for purchase by the Company's
employees. By increasing the number of shares available under the Stock
Purchase Plan, the Board of Directors believes that the Stock Purchase Plan will
continue to be a useful stock-related benefit program for attracting and
retaining employees and providing additional incentive for all employees to
promote the success of the Company, thereby continuing the purpose of the Stock
Purchase Plan.
The Company intends to register the 500,000 additional shares of Common
Stock issuable under the Stock Purchase Plan under the Securities Act, assuming
the shareholders approve the proposal to increase the number of available
shares. Shares purchased pursuant to the Stock Purchase Plan after the
effective date of such registration could immediately be sold in the open market
subject, in the case of affiliates (as defined in Rule 144 under the 1933 Act),
to compliance with the provisions of Rule 144 other than the holding period
requirement.
9
<PAGE>
The proposed amendment requires the approval of the shareholders of the
Company pursuant to the terms of the Stock Purchase Plan. Assuming the presence
of a quorum, the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present and voting at the Annual Meeting in
person or by proxy is necessary to approve the above described amendment to the
Stock Purchase Plan. Proxies will be voted for or against such approval in
accordance with the specifications marked thereon and, if no specifications are
made, will be voted in favor of such approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE AMENDMENT TO THE MICROGRAFX, INC. EMPLOYEE STOCK PURCHASE PLAN TO
INCREASE THE AUTHORIZED SHARES AVAILABLE FOR ISSUANCE THEREUNDER.
DESCRIPTION OF THE COMPANY'S STOCK PURCHASE PLAN
A summary of the principal provisions of the Stock Purchase Plan is set
forth below.
The Stock Purchase Plan was adopted by the Board of Directors of the
Company on June 19, 1991, and was approved by the shareholders of the Company on
July 26, 1991. The Stock Purchase Plan provides the Company's employees
(including officers) with the opportunity to purchase shares of Common Stock
from the Company through payroll deductions. On June 24, 1994 the Board of
Directors amended the Stock Purchase Plan in order to increase the number of
shares of Common Stock available for issuance thereunder from 300,000 to
500,000, and on September 28, 1994, the shareholders of the Company approved the
increase. On July 21, 1995, the Board of Directors amended the Stock Purchase
Plan in order to increase the number of shares of Common Stock available for
issuance thereunder from 500,000 to 800,000, and on November 9, 1995, the
shareholders of the Company approved the increase. The Board of Directors has
again amended the Stock Purchase Plan, increasing the number of shares of Common
Stock available for issuance thereunder from 800,000 to 1,300,000, subject to
approval of the Company's stockholders.
Under the Stock Purchase Plan, the Company initiates offerings having a
duration of 24 months and commencing on each May 15 and November 15, unless
otherwise specified by the Board of Directors, that permit the participating
employees to accumulate funds for the purchase of Common Stock from the Company
through payroll deductions during the offering period. Each offering period is
composed of four six-month exercise periods. The Board of Directors has the
power to alter the duration of an offering period with respect to future
offerings if announced at least 15 days prior to the scheduled beginning of the
first offering period to be affected.
The price at which participating employees purchase shares under the Stock
Purchase Plan is eighty-five percent (85%) of the fair market value per share of
Common Stock at either the beginning of the offering period or at the end of
each six-month exercise period, whichever is lower. The funds used to purchase
the shares are accumulated by payroll deductions over each offering period. The
deductions may not be greater than ten percent (10%) of a participant's
compensation. Compensation for purposes of the Stock Purchase Plan includes
salary, commissions, bonuses, and royalties but excludes overtime, shift
premiums or other compensation. All payroll deductions of a participant are
credited to his or her account under the Stock Purchase Plan and are deposited
with the general funds of the Company. Such funds may be used for any corporate
purpose. No charges for administrative or other costs may be made by the
Company against the payroll deductions.
On the first day of an offering period (the "Enrollment Date"), the
participant is granted an option to purchase on each exercise date during such
offering period up to the number of whole shares of the Common Stock determined
by dividing the participant's payroll deductions accumulated during such
offering period and prior to such exercise date by the applicable purchase price
per share. However, the number of shares subject to purchase during such
offering period shall in no event exceed the number of shares of Common Stock
determined by dividing $75,000 by the fair market value of a share of the Common
Stock as of the Enrollment Date. The number of shares subject to such option
shall be reduced, if necessary, to maintain the limitations with respect to a
participant's ownership of stock and/or options to purchase stock possessing 5%
or more of the total combined voting power or value of all classes of stock of
the Company or any subsidiary, and to restrict a participant's right to purchase
stock under the Stock Purchase Plan to $25,000 in fair market value of such
stock (determined at the time the option is granted) for each calendar year in
which such option is outstanding at any time. Unless the employee's
participation is discontinued, his option for the purchase of shares will be
exercised automatically at the end of each six month exercise period
10
<PAGE>
within the offering period at the applicable price. To the extent an employee's
payroll deductions exceed that amount required to purchase the shares subject to
option, such excess amount shall be held in such participant's account for the
next exercise period, unless such participant has withdrawn from the offering
period or unless such offering period has terminated with such exercise date, in
which case such amount shall be returned to the employee without interest.
Any employee who is customarily employed for at least 20 hours per week and
more than five months per calendar year by the Company or its subsidiaries is
eligible to participate in offerings under the Stock Purchase Plan. Employees
become participants in the Stock Purchase Plan by delivering to the Company a
subscription agreement authorizing payroll deductions within the specified
period of time prior to the commencement of each offering period. No employee is
permitted to purchase shares under the Stock Purchase Plan if such employee owns
5% or more of the total combined voting power or value of all classes of shares
of stock of the Company (including shares that may be purchased under the Stock
Purchase Plan or pursuant to any other options). In addition, no employee is
entitled to purchase more than $25,000 worth of shares (based on the fair market
value of the shares at the time the option is granted) in any calendar year.
Withdrawal from the Stock Purchase Plan. A participant may terminate his
or her interest in a given offering, or in a given exercise period, by
withdrawing all, but not less than all, of the accumulated payroll deductions
credited to such participant's account at any time prior to the end of the
offering period. The withdrawal of accumulated payroll deductions automatically
terminates the employee's interest in that offering, or exercise period, as the
case may be. As soon as practicable after such withdrawal, the payroll
deductions credited to a participant's account are returned to the participant
without interest.
A participant's withdrawal from an offering does not have any effect upon
such participant's eligibility to participate in subsequent offerings under the
Stock Purchase Plan. Similarly, a participant's withdrawal from a six-month
exercise period does not have any effect upon such participant's eligibility to
participate in subsequent exercise periods within the same offering period.
Termination of Employment. Termination of a participant's employment for
any reason, including retirement or death or the failure to remain in the
continuous employ of the Company for at least 20 hours per week (except for
certain leaves of absence), cancels his or her participation in the Stock
Purchase Plan immediately. In such event, the payroll deductions credited to
the participant's account will be returned to the participant, or in the case of
death, to the person or persons entitled thereto, without interest.
Capital Changes. In the event of changes in the Common Stock of the
Company due to stock dividends or other changes in capitalization, or in the
event of any merger, sale or any other reorganization, appropriate adjustments
will be made by the Company to the shares subject to purchase and to the price
per share.
Nonassignability. No rights or accumulated payroll deductions of an
employee under the Stock Purchase Plan may be pledged, assigned or transferred
for any reason, and any such attempt may be treated by the Company as an
election to withdraw from the Stock Purchase Plan.
Amendment and Termination of the Stock Purchase Plan. The Board of
Directors of the Company may at any time amend or terminate the Stock Purchase
Plan, except that such termination cannot affect options previously granted nor
may any amendment make any change in an existing option that adversely affects
the rights of any participant. No amendment may be made to the Stock Purchase
Plan without prior approval of the shareholders of the Company if such amendment
would increase the number of shares that may be issued under the Stock Purchase
Plan, permit payroll deductions at a rate in excess of 10% of a participant's
compensation, change the designation of the employees eligible for participation
in the Stock Purchase Plan or constitute an amendment for which shareholder
approval is required in order to comply with Rule 16b-3, or any successor rule.
Tax Information. The Stock Purchase Plan and the right of participants to
make purchases thereunder is intended to qualify under the provisions of
Sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant at the time of grant of the option or purchase of
shares. Upon disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period.
If the shares have been held by the participant for more than two years after
the date of option grant and one year from the date of option exercise, the
lesser of (a) the excess of the fair market value of the shares at the time of
such disposition
11
<PAGE>
over the option price, or (b) the excess of the fair market value of the shares
at the time the option was granted over the option price (which option price
will be computed as of the grant date) will be treated as ordinary income, and
any further gain will be treated as long-term capital gain. If the shares are
disposed of before the expiration of these holding periods, the excess of the
fair market value of the shares on the exercise date over the option price will
be treated as ordinary income, and any further gain or loss on such disposition
will be long- or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
reported by participants upon disposition of shares prior to the expiration of
the holding period described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Stock Purchase Plan. Reference should be made to the applicable provisions
of the Code. In addition, the summary does not discuss the tax consequences of
a participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
The Stock Purchase Plan is administered by the Board of Directors or a
committee appointed by the Board. Directors of the Company who are eligible
employees are permitted to participate in the Stock Purchase Plan; provided,
however, that (i) directors who are eligible to participate in the Stock
Purchase Plan may not vote on any matter affecting the administration or the
grant of any option pursuant to the Stock Purchase Plan, and (ii) if a committee
is established to administer the Stock Purchase Plan, no committee member will
be eligible to participate in the Stock Purchase Plan.
Purchases Under the Stock Purchase Plan. The following table sets forth
certain information regarding shares purchased under the Stock Purchase Plan
during the year ended June 30,1997 by (i) the Company's Chief Executive Officer,
(ii) the Company's former Chief Executive Officer, (iii) each of the Company's
current and former executive officers named in the Summary Compensation Table
under "Executive Compensation," (iv) all current executive officers as a group,
and (v) each nominee for election as a director.
<TABLE>
<CAPTION>
Shares Purchased Under the
Stock Purchase Plan during
Name of Individual or Group Year End June 30, 1997/(1)/
- ----------------------------- ---------------------------
<S> <C>
Douglas Richard............................. ---
J. Paul Grayson/(2)/........................ ---
Jeffrey Lewis............................... 1,547
Larry Morris................................ 2,016
Grant Wickes................................ 3,567
Herman DeLatte/(3)/......................... 74
John Dearborn............................... 3,383
</TABLE>
_______________________
(1) Outside directors are excluded from participation in the Stock Purchase
Plan.
(2) Mr. Grayson was excluded from participation in the Stock Purchase Plan
because he holds more than 5% of the Company's stock.
(3) Resigned February 1, 1997.
12
<PAGE>
PROPOSAL TO APPROVE AN AMENDMENT TO
THE MICROGRAFX, INC. 1995 DIRECTOR STOCK OPTION PLAN
(ITEM 4)
The Board of Directors has adopted amendments to the 1995 Director Plan to
(i) increase the number of shares of Common Stock authorized and reserved for
issuance upon exercise of options granted under the 1995 Director Plan from
300,000 shares to 600,000 shares; (ii) to increase the annual grant of options
to Eligible Directors (as defined below) from 7,500 to 10,000 shares of Common
Stock; (iii) afford each Eligible Director the right to elect to receive
additional stock options under the 1995 Director Plan in lieu of cash directors'
fees; and (iv) to provide for the immediate vesting of all unexercisable options
granted under the 1995 Director Plan upon the occurrence of certain events
resulting in a change in control of the Company (collectively, the "Director
Plan Amendment").
Specifically, as approved by the shareholders at the Company's 1995 Annual
Meeting and amended at the Company's 1996 Annual Meeting, the Company has
reserved 300,000 shares for issuance pursuant to the 1995 Director Plan, which
plan provides for annual grants to the Company's nonemployee directors of
options to purchase 7,500 shares of Common Stock and an initial grant of 20,000
shares upon first election to the Company's Board of Directors. The Director
Plan Amendment provides for an increase in the number of shares subject to the
annual option grants to the Company's nonemployee directors from 7,500 to 10,000
shares effective as of October 1, 1997. The Director Plan Amendment also adds
provisions designed to afford each nonemployee director the right to elect to
receive additional stock options under the 1995 Director Plan in lieu of cash
directors' fees at the rate of $2.00 in option value (using present value of the
grant at the date of grant under the Black-Scholes option pricing model) for
each $1.00 of cash directors' fees which the nonemployee director agrees to
accept in the form of non-statutory stock options in lieu of cash. To
accommodate these amendments and the increase in option grants, the Director
Plan Amendment calls for an increase in the number of shares reserved for
issuance under this plan from 300,000 to 600,000 shares. As of September 1,
1997, 200,920 shares remained available for grant under this Plan. The Director
Plan Amendment also calls for immediate vesting of all unexercisable options
granted under the 1995 Director Plan upon the occurrence of certain events
resulting in a change in control of the Company. The remaining provisions of
the 1995 Director Plan will not be changed by the proposed amendments.
The Board of Directors believes that the effect of the Director Plan
Amendment will be to enhance the 1995 Director Plan as a useful stock-related
benefit program for attracting and retaining non-employee directors and to
provide additional incentive to promote the success of the Company, thereby
continuing the purpose of the 1995 Director Plan. By increasing the amount of
the annual stock option grant, the 1995 Director Plan will be a more attractive
benefit program for non-employee directors. The proposed feature allowing
nonemployee directors to substitute non-statutory options for cash fees will
have the potential for reducing the cash cost to the Company associated with
compensation of its non-employee directors. Because stock options received
under this feature are in lieu of cash fees, the Director Plan Amendment
provides that such options (unlike the annual grants) will not expire upon
termination of a non-employee director's board service, but will continue in
effect for a term of five years from the date of grant. The 1995 Director Plan
will require that each nonemployee director must make a semi-annual irrevocable
election prior to March 1 and October 1 (the "Option Election Dates") of each
year to participate in this feature for the six month period following each
Option Election Date. Options granted in lieu of cash fees will have a fair
market value equal to the fair market value of the Company's Common Stock on the
Option Election Date of each semi-annual period in question, will be
exercisable in increments of 25% per year and will have a term of five years.
Because options granted under the 1995 Director Plan are exercisable in
increments of 25% per year, the possibility exists that the benefits afforded by
the options will not be realized by the Company's nonemployee directors if the
Company were to be acquired prior to the complete vesting of such options. To
enhance the attractiveness of the 1995 Director Plan as a useful stock-related
benefit program, the Director Plan Amendments encompasses the addition of a
provision to the 1995 Director Plan providing for the acceleration of the
vesting schedule and, thus, immediate exercisability of all unexercisable
options granted under the 1995 Director Plan in the event of a change in control
of the Company. A change of control is defined to mean the merger or
consolidation of the Company into or with another corporation or other entity,
or in the event that all or a material part of the assets of the Company are
acquired by any other person or entity, or a reorganization in which the Company
is not the surviving company, or any liquidation of the Company. While such
provisions have the potential of increasing the cost of a potential merger
13
<PAGE>
or sale, the Board of Directors believes that enhancement of the 1995 Director
Plan as an attractive stock-based compensation plan for attracting and retaining
nonemployee directors is important to the ability of the Company to retain
leadership and participation of nonemployee directors on which the success of
the Company is dependent. The Board of Directors is not currently aware of any
prospective change in control.
The Company has previously registered 300,000 shares of Common Stock
issuable pursuant to the 1995 Director Plan under the Securities Act of 1933, as
amended (the "Securities Act"), and if the Director Plan Amendment is approved,
the Company intends to register the additional 300,000 shares of Common Stock
that will become issuable pursuant to the 1995 Director Plan under the
Securities Act.
The Director Plan Amendment requires the approval of the shareholders of
the Company pursuant to the terms of the 1995 Director Plan. Assuming the
presence of a quorum, the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock voting at the meeting in person or by proxy
is necessary to adopt the Director Plan Amendment. Proxies will be voted for or
against such approval in accordance with the specifications marked thereon and,
if no specification is made, will be voted in favor of such approval.
Effective May 1, 1997, upon the Board of Directors' adoption of the
Director Plan Amendment, options were granted to the following persons or groups
in lieu of cash directors fees, and, if the Director Plan Amendment is approved,
each of the following persons will receive additional options as follows:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1995 Director Stock Option Plan
-------------------------------
Name Dollar Value $/(1)/ Number of Options
---- ------------------- -----------------
<S> <C> <C>
Douglas Richard/(2)/............................ $ --- ---
J. Paul Grayson/(2)/............................ $ --- ---
Jeffrey Lewis/(2)/.............................. $ --- ---
Larry Morris/(2)/............................... $ --- ---
Grant Wickes/(2)/............................... $ --- ---
Herman DeLatte/(2)/............................. $ --- ---
John Dearborn/(2)/.............................. $ --- ---
Russell E. Hogg................................. $ --- 10,000 /(3)/
Eugene P. Beard................................. $ 22,000 16,790 /(3)/
David S. Gergacz/(4)/........................... $ --- 10,000 /(3)/
Robert Kamerschen............................... $ 22,000 16,790 /(3)/
Seymour Merrin.................................. $ --- 10,000 /(3)/
Robert S. Miller/(4)/........................... $ --- 10,000 /(3)/
Executive Group/(2)/............................ $ --- ---
Non-Executive Director Group.................... $ 44,000 73,580 /(3)/
Non-Executive Officer Employee Group/(2)/....... $ --- ---
</TABLE>
____________________________________
14
<PAGE>
(1) In the case of Messrs. Beard and Kamerschen, the only nonemployee directors
making the election to receive options in lieu of cash director fees for
the period July 1, 1997 through November 4, 1997, the amount shown
represents the value of options received in lieu of cash directors' fees,
using present value of the grant at the date of grant under the Black-
Scholes pricing model. If the Director Plan Amendment is not approved at
the Annual Meeting, the options will be canceled and Messrs. Beard and
Kamerschen will receive a cash amount of $11,000 which had been substituted
by such options. No dollar value has been ascribed to the options to be
automatically granted under the plan on October 1, 1997.
(2) Ineligible to participate in 1995 Director Plan.
(3) Represents options for 10,000 shares granted effective as of October 1,
1997 to each of the Company's nonemployee directors pursuant to the annual
automatic grant feature of the 1995 Director Plan and, in the case of
Messrs. Beard and Kamerschen, additional options for 6,790 shares granted
to Messrs. Beard and Kamerschen in lieu of cash directors fees for the
period July 1, 1997 through November 4, 1997, in each case to be granted if
the Director Plan Amendment is approved. If the amendment is not approved
at the Annual Meeting, a grant of options for 7,500 shares will be made to
each of the nonemployee directors effective as of October 1, 1997 pursuant
to the 1995 Director Plan, and Messrs. Beard and Kamerschen will receive
cash director fees of $11,000 instead of the options granted in lieu
thereof.
(4) Messrs. Gergacz and Miller are not standing for re-election to the Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE PROPOSED AMENDMENT TO THE MICROGRAFX, INC. 1995 DIRECTOR STOCK OPTION
PLAN.
A summary of the principal provisions of the 1995 Director Plan, as amended
by the Board of Directors for consideration by shareholders at the Annual
Meeting, is set forth below.
Purposes. The purpose of the 1995 Director Plan is to encourage ownership
in the Company by nonemployee directors of the Company whose continued services
are considered essential to the Company's future progress and to provide them
with a further incentive to remain as directors of the Company. Accordingly,
the 1995 Director Plan provides that the Company shall grant to members of its
Board of Directors that are not employees of the Company (each, an "Optionee")
the option (each, an "Option") to purchase shares of the Company's Common Stock,
described below under "Terms, Conditions and Form of Options."
Administration. The Board of Directors of the Company supervises and
administers the 1995 Director Plan. However, grants of Options under the 1995
Director Plan and the amount and nature of the awards to be granted are
effective automatically in accordance with the terms and provisions of the 1995
Director Plan without further action by the Board of Directors. All questions
of interpretation of the 1995 Director Plan or of any Options issued under it
shall be determined by the Board of Directors and such determination shall be
final and binding upon all persons having an interest in the 1995 Director Plan.
Participation in the Plan. Members of the Board of Directors who are not
employees of the Company or any subsidiary of the Company are eligible to
participate in the 1995 Director Plan ("Eligible Directors"). As of the date of
this Proxy Statement, all of the Company's directors (seven in number), with the
exception of Douglas Richard, are Eligible Directors.
Shares Subject to the Plan. The 1995 Director Plan provides that the
maximum number of shares that may be issued under the plan is 300,000 shares of
Common Stock, subject to adjustment as provided in the plan for stock splits,
recapitalizations and other events resulting in an adjustment of the Company's
outstanding Common Stock. See "Changes in Common Stock." If the Director Plan
Amendment is approved at the Annual Meeting, the maximum number of shares that
may be assumed under the Plan will be increased to 600,000 shares of Common
Stock, subject to the adjustments described under "Changes in Common Stock." If
any outstanding Option under the 1995 Director Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such Option shall again become available for grant
pursuant to the 1995 Director Plan.
15
<PAGE>
All Options granted under the 1995 Director Plan are intended to be
nonstatutory Options not entitled to special tax treatment under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
Terms, Conditions and Form of Options. Each Option granted under the 1995
Director Plan is to be evidenced by a written agreement in such form as the
Board of Directors shall from time to time approve, which agreements shall
comply with and be subject to the following terms and conditions:
Option Grants
i) Upon approval of the 1995 Director Plan at the 1995 Annual Meeting,
each Eligible Director was granted an Option for a number of shares of
Common Stock that was equal to the difference between 23,000 and the
number of shares of Common Stock subject to outstanding Options
granted under the Company's Stock Option Plan held by the Eligible
Director in question, with a grant date ("Date of Grant") of July 21,
1995, which was the date the 1995 Director Plan was adopted by the
Board of Directors (the "Effective Date"). Based upon this formula,
each Eligible Director received an Option having an exercise price of
$8.375 covering 3,000 shares, except Eugene Beard, who received an
Option having an exercise price of $8.375 covering 11,000 shares.
ii) On each October 1, the Board of Directors shall grant each person who
is an Eligible Director on such Date of Grant an Option for 7,500
shares of Common Stock. If the Director Plan Amendment is approved at
the Annual Meeting, such annual grant of Options will be increased to
10,000 shares of Common Stock, beginning with the October 1, 1997 Date
of Grant.
iii) In addition to the above Options, each person who becomes an Eligible
Director subsequent to the Effective Date shall be granted an Option,
with a Date of Grant five business days after he becomes an Eligible
Director, for 20,000 shares of Common Stock.
iv) If the Director Plan Amendment is approved at the Annual Meeting, on
each March 1 and October 1, beginning October 1, 1997, the Board of
Directors shall grant to each Eligible Director who has irrevocably
elected in writing to receive all or part of his annual director fees
in the form of Options (in lieu of cash) for the ensuing semi-annual
period an Option for a number of shares derived at the rate of $2.00
in option value (using present value of the grant at the date of grant
under the Black-Scholes option pricing model) for each $1.00 of
directors' fees which the Eligible Director has elected to receive in
the form of Options in lieu of cash. Elections to receive such Options
may be made semi-annually prior to March 1 and October 1 of each year.
Option Exercise Price. The exercise price per share for each Option shall
equal the last reported sale price per share of Common Stock on the NASDAQ
National Market System (or, if the Company is traded on another nationally
recognized securities exchange on the Date of Grant, the reported closing sales
price per share of the Common Stock by such exchange) on the Date of Grant (or,
if no such price is reported on such Date of Grant, such price as reported on
the nearest preceding day). In the case of Options received in lieu of cash
director fees, the Date of Grant shall be the applicable Option Election Date.
Options Non-Transferable. Each Option granted under the 1995 Director Plan
by its terms is not transferable by the Optionee otherwise than by will, or by
the laws of descent and distribution, and shall be exercised during the lifetime
of the Optionee only by him. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
Exercise Period. Each Option granted under the 1995 Director Plan becomes
exercisable, in whole or in part, and cumulatively, in 25% increments on each
anniversary of the Date of Grant, and, if not previously exercised or expired,
shall automatically expire on the earlier of (i) the date on which the Optionee
no longer is an Eligible Director except by reason of becoming an employee of
the Company or death, and in the case of the death of an Eligible Director, the
person to whom his rights under the Option are transferred by will, or by laws
of descent and distribution, shall have the same rights hereunder as the
Eligible Director but only until the first anniversary of the Eligible
Director's date of death, and (ii) the fifth anniversary of the Date of Grant;
provided, however, if the Director
16
<PAGE>
Plan Amendment is approved at the Annual Meeting, Options received in lieu of
cash directors' fees will not expire until the fifth anniversary of the Date of
Grant, irrespective of continued service on the Company's Board of Directors.
Exercise Procedure. Options may be exercised only by written notice to the
Company at its principal office accompanied by payment in cash of the full
consideration for the shares to be exercised.
Effective Date. The 1995 Director Plan became effective on July 21, 1995.
An amendment to the 1995 Director Plan was adopted by the shareholders of the
Company on November 7, 1996 which increased the annual option grants from 3,000
to 7,500 shares. The Board of Directors has approved the Directors Plan
Amendment, subject to approval by the shareholders at the 1997 Annual Meeting.
To this end, the shareholders are to act upon the Director Plan Amendment at
this Annual Meeting.
No right to Continue as Director; No Shareholders' Rights for Options. The
1995 Director Plan provides that neither the 1995 Director Plan, nor the
granting of an Option nor any other action taken pursuant to the 1995 Director
Plan, shall constitute or be evidence of any agreement or understanding, express
or implied, that the Company will retain a director for any period of time. The
1995 Director Plan further provides that an Optionee shall have no rights as a
shareholder with respect to the shares covered by his Option until the date of
the issuance to him of a stock certificate therefor, and no adjustment will be
made for dividends or other rights (except as provided below under "Changes in
Common Stock") for which the record date is prior to the date such certificate
is issued.
Changes in Common Stock. The 1995 Director Plan provides that if the
outstanding shares of Common Stock of the Company are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock or other securities, an appropriate and proportionate adjustment will be
made in (i) the maximum number and kind of shares reserved for issuance under
the 1995 Director Plan, (ii) the number and kind of shares or other securities
subject to then outstanding Options under the 1995 Director Plan and (iii) the
price for each share subject to any then outstanding Options under the 1995
Director Plan, without changing the aggregate purchase price as to which such
Options remain exercisable. No fractional shares will be issued under the 1995
Director Plan on account of any such adjustments.
The 1995 Director Plan also provides that in the event that the Company is
merged or consolidated into or with another corporation (in which consolidation
or merger the shareholders of the Company receive distributions of cash or
securities of another issuer as a result thereof), or in the event that all or
substantially all of the assets of the Company are acquired by any other person
or entity, the Board of Directors, or the board of directors of any corporation
assuming the obligations of the Company, shall, as to outstanding Options,
either (i) provide that such Options shall be assumed, or equivalent Options
shall be substituted, by the acquiring or successor corporation (or an affiliate
thereof), or (ii) upon written notice to the Optionees, provide that all
unexercised Options will terminate immediately prior to the consummation of such
merger, consolidation, acquisition, reorganization or liquidation unless
exercised by the Optionee within a specified number of days following the date
of such notice. If the Director Plan Amendment is approved at the Annual
Meeting, all unexercisable options will immediate vest and become exercisable
immediately prior to the occurrence of such a merger, consolidation, acquisition
or liquidation, as described above.
Amendment of the Plan. The Board of Directors may suspend or discontinue
the 1995 Director Plan or revise or amend it in any respect whatsoever;
provided, however, that without approval of the shareholders of the Company no
revision or amendment shall increase the number of shares that may be issued
under the 1995 Director Plan (except as provided above under "Changes in Common
Stock"), change the designation of the class of directors eligible to receive
Options under the 1995 Director Plan, materially increase the benefits accruing
to participants under the 1995 Director Plan or extend the term of the 1995
Director Plan. The 1995 Director Plan may not be amended more than once in any
six-month period, other than to comport with changes in the Internal Revenue
Code ("Code"), the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder.
Certain Federal Income Tax Consequences. The following discussion of the
federal income tax consequences of participation in the 1995 Director Plan is
only a summary, does not purport to be complete and does not cover,
17
<PAGE>
among other things, state and local tax treatment of participation in the 1995
Director Plan. Furthermore, differences in individual Optionees' financial
situations may cause federal, state and local income tax consequences of
participation in the 1995 Director Plan to vary.
All Options are intended to be non-statutory options not entitled for the
special tax treatment under Section 422 of the Code. As such, an Optionee will
not recognize any income upon the grant of an Option. Upon exercise of an
Option, the amount by which the fair market value of the shares at the time of
exercise exceeds the exercise price must be treated as ordinary income received
by the Optionee. Thus, an Optionee would be subject to taxation at the time an
Option is exercised.
The Company generally will be entitled to deduct the amount that the
Optionee is required to treat as ordinary income in the Company's taxable year
that ends with or within the taxable year in which the Optionee recognizes such
income, to the extent such amount constitutes an ordinary and necessary business
expense and is not disallowed under section 162(m).
Upon a taxable disposition of shares of Common Stock acquired through the
exercise of an Option, any amount received by the Optionee in excess of the sum
of (i) the exercise price and (ii) any amount includable in income with respect
to the exercise of such Option, will generally be treated as long-term or short-
term capital gain, depending upon the holding period of the shares. To qualify
for long-term capital gain or loss treatment, with certain exceptions, shares of
Common Stock must have been held for more than 18 months as a capital asset.
The maximum federal income tax rate applicable to individuals for long-term
capital gain is currently 20%. If, upon disposition, the Optionee receives an
amount that is less than the fair market value of the shares on the exercise
date, the loss will generally be treated as a long or short-term capital loss,
depending upon the holding period of the shares.
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 5)
The Board of Directors has appointed Ernst & Young LLP, independent public
accountants, to be the principal independent auditors of the Company and to
audit its consolidated financial statements for the fiscal year ending June 30,
1998. Ernst & Young LLP served as the Company's independent public accountants
for the fiscal year ended June 30, 1997, and has reported on the Company's
consolidated financial statements. Representatives of the firm will be present
at the Annual Meeting with the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders.
Although shareholder ratification is not required for the selection of
Ernst & Young LLP, since the Board of Directors has the responsibility for the
selection of the Company's independent auditors and such ratification will not
obligate the Company to continue the services of such firm, the Board of
Directors is submitting the selection for ratification with a view towards
soliciting the shareholders' opinion thereon, which may be taken into
consideration in future deliberations. If the appointment is not ratified, the
Board of Directors must then determine whether to appoint other auditors before
the end of the current fiscal year, and in such case, shareholders' opinions
would be taken into consideration.
The independent accountants of the Company for the years ended June 30,
1995 and 1996 were Arthur Andersen LLP. Arthur Andersen LLP resigned as the
independent auditors on January 14, 1997. None of the reports of Arthur
Andersen LLP on the financial statements for either of fiscal 1995 or 1996
contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope, or accounting principles, except that
financial statements of Visual Software, Inc. ("Visual"), a company acquired
during fiscal 1996 in a transaction accounted for as a pooling of interests,
were audited by other auditors in 1994 and 1995. Such statements of Visual
reflected total assets and revenues of 6% and 3%, respectively, in 1995 and 1%
and 1%, respectively, in 1994.
In connection with the audits of the Company's financial statements for
each of the two most recent fiscal years ended June 30,1996 and 1995,
respectively, and any subsequent interim periods through the date of the
resignation of Arthur Andersen LLP, there were no disagreements between the
Company and Arthur Andersen LLP on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
18
<PAGE>
which if not resolved to the satisfaction of Arthur Andersen LLP would have
caused Arthur Andersen LLP to make reference to the subject matter of the
disagreement in their report.
The following reportable event occurred in the interim period subsequent to
June 30, 1996 and preceding the date of Arthur Andersen LLP's resignation.
Arthur Andersen LLP advised the Company that information had come to its
attention that, if further investigated and unless resolved to the accountants'
satisfaction, may have prevented it from rendering an unqualified audit report
on the Company's financial statements for the fiscal year ending June 30, 1997.
The information related to the judgmental assessment of the timing of revenue to
be recognized on the Company's Hallmark software product in the quarter ended
September 30, 1996. Due to the limited nature of Arthur Andersen LLP's
involvement in the quarter ended September 30,1996, it is unknown whether this
matter would have caused reference to be made in an audit report in fiscal 1997.
This matter was discussed with the Audit Committee in connection with its
quarterly meeting in October 1996 who concurred with management's judgment. The
Company authorized Arthur Andersen LLP to respond fully to the inquiries of
Ernst & Young LLP concerning this issue. The Company recognized revenue in the
quarter ended September 30,1996 on the Hallmark product of approximately $3.0
million. At September 30, 1996, distributors had approximately $1.9 million of
the Hallmark product in inventory and the Company had a revenue reserve relating
to sales of Hallmark product of approximately $900,000. All shipments of
Hallmark product as of September 30, 1996 were based on orders received and
requested for shipment on or prior to September 30, 1996. Subsequent channel
sell-through data for the quarter ended December 31, 1996 reflects that
approximately $1.2 million of Hallmark product which had been shipped as of
September 30, 1996 sold through the distributor channel and approximately
$700,000 remained in the distributor channel. The Hallmark product revenue
reserve was reduced by the Company from $900,000 at September 30, 1996 to
$700,000 at December 31, 1996, indicating the Company's judgmental assessment of
the timing of the revenue recognition was reasonable. However, Arthur Andersen
LLP resigned prior to reviewing any such information.
The Company consulted Ernst & Young LLP in September 1996 on the
application of accounting principles regarding the interpretation of the SEC's
Staff Accounting Bulletin No. 96. The issue related to the ability of the
Company to establish a stock buy back plan and thus reacquire treasury stock
without violating pooling-of-interests accounting rules related to the merger
with Visual Software in April 1996. The Company consulted with Arthur Andersen
LLP regarding the issues and obtained a summary of their views. Ernst & Young
LLP expressed the view, consistent with Arthur Andersen LLP, that a new stock
repurchase plan could not be implemented until a period of at least six months
has elapsed since the rescission of the previous stock reacquisition plan. The
Company has not initiated any stock repurchase plan.
In January 1997, Ernst & Young LLP was engaged as principal accountants for
the Company, among other things, to audit the financial statements of the
Company for fiscal 1997. The selection of Ernst & Young LLP was made by the
Board of Directors. Prior to its engagement, the Company did not consult with
Ernst & Young LLP on either the application of accounting principles to a
completed or proposed specific transaction, or the type of audit opinion that
might be rendered on the Company's financial statements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF
THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1998.
19
<PAGE>
PRINCIPAL SHAREHOLDERS AND
STOCK OWNERSHIP OF MANAGEMENT
The following table and notes thereto set forth certain information with
respect to beneficial ownership of the Company's Common Stock as of June 30,
1997 by (i) each person known by the Company to own beneficially more than 5% of
the presently outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each of the Company's current and former
executive officers named in the Summary Compensation Table, and (iv) the present
directors and executive officers of the Company as a group. The address of each
person listed below is 1303 E. Arapaho Road, Richardson, Texas 75081 (except the
addresses of Messrs. Hogg, Merrin, Kamerschen and Beard are as shown under
"Election of Directors").
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED COMMON STOCK/(1)/
- ---- ------------- ------------------
<S> <C> <C>
Qualivest Capital Management....................... 606,400 5.53%
Investa Capital Management......................... 733,000 6.69
Douglas Richard.................................... 80,344/(2)/ *
J. Paul Grayson.................................... 514,290/(3)/ 4.70
Russell E. Hogg.................................... -- *
Eugene P. Beard.................................... 89,500/(4)/ *
Seymour Merrin..................................... 7,000/(5)/ *
Robert Kamerschen.................................. 26,500/(6)/ *
Robert S. Miller................................... 14,150/(7)/ *
David S. Gergacz................................... 16,500/(8)/ *
Herman DeLatte (resigned 2/1/97)................... 57,721 *
Jeffrey Lewis...................................... 1,547 *
Larry Morris....................................... 12,016/(9)/ *
Grant Wickes....................................... 22,345/(10)/ *
John E. Dearborn................................... 25,356/(11)/ *
All executive officers and
directors as a group (13 persons)................ 358,637/(12)/ 3.24
</TABLE>
_________________________________
* Represents less than 1% of the outstanding Common Stock.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to the shares of Common Stock
shown as beneficially owned by them. Beneficial ownership as reported in
the above table has been determined in accordance with Rule 13d-3 of the
Exchange Act. The percentages are based upon 10,950,143 shares outstanding
as of September 12, 1997, except for certain parties who hold presently
exercisable options to purchase shares. The percentages for those parties
who hold options that are presently exercisable or exercisable within 60
days of June 30, 1997, are based upon the sum of 10,950,143 shares plus the
number of shares subject to options that are presently exercisable or
exercisable within 60 days of June 30, 1997, held by each of them
respectively, as indicated in the following notes.
20
<PAGE>
(2) Consists of 80,344 shares held directly (20,000 of which are restricted
stock with a restriction that expires on November 26, 1999) and 10,000
shares subject to stock options that are presently exercisable or that are
exercisable within the next 60 days. Does not include 3,290 shares held by
Mr. Richard's spouse, as to which Mr. Richard disclaims beneficial
ownership.
(3) Includes 103,328 shares owned by The J. Paul Grayson Foundation, a
charitable foundation, over which Mr. Grayson shares voting and investment
power. Also includes 10,752 shares held by Mr. Grayson's children and 210
shares held by Mr. Grayson's spouse. Does not include 33,250 shares held by
the James Paul Grayson Irrevocable Trust for the benefit of Mr. Grayson's
children, over which Mr. Grayson has no voting or investment power. Mr.
Grayson disclaims beneficial ownership of such shares.
(4) Includes 75,000 shares held on his behalf by Westport Asset Fund of which
Mr. Beard is a director. Mr. Beard has 14,500 shares subject to stock
options that are presently exercisable or that are exercisable within the
next 60 days.
(5) Consists of 1,500 shares held directly by Mr. Merrin and 5,500 shares
subject to stock options that are presently exercisable or that are
exercisable within the next 60 days.
(6) Consists of 6,000 shares held directly by Mr. Kamerschen and 20,500 shares
subject to stock options that are presently exercisable or that are
exercisable within the next 60 days.
(7) Consists of 10,500 shares subject to stock options that are presently
exercisable or that are exercisable within the next 60 days and 3,650
shares held by the Robert Miller Associates Pension Fund over which Mr.
Miller shares voting and investment power.
(8) Consists of 16,500 shares subject to stock options that are presently
exercisable or that are exercisable within the next 60 days.
(9) Consists of 12,016 shares held directly by Mr. Morris.
(10) Consists of 10,626 shares held directly by Mr. Wickes and 11,719 shares
subject to stock options that are presently exercisable or that are
exercisable within the next 60 days.
(11) Consists of 13,106 shares held directly by Mr. Dearborn and 12,250 shares
subject to stock options that are presently exercisable or that are
exercisable within the next 60 days.
(12) Includes 125,719 shares subject to stock options that are presently
exercisable or that are exercisable within the next 60 days.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the
compensation of (i) the Company's Chief Executive Officer, (ii) the Company's
former Chief Executive Officer, (iii) each of the four other most highly
compensated executive officers serving at the end of the Company's last fiscal
year, and (iv) an additional former executive officer for whom disclosure is
required under SEC Rules.
21
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ------ -------
OTHER
YEAR ANNUAL RESTRICTED OPTIONS/ ALL OTHER
NAME AND ENDING SALARY BONUS COMPENSATION STOCK SARS LTIP COMPENSATION
PRINCIPAL POSITION 6/30 $)(1) ($) ($) ($) (2) (#) (2) ($) ($) (3)
- --------------------------- -------- ------- -------- ---------------- ------------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas Richard............... 1997 163,577 $39,706 $28,303/(4)/ 20,000 23,000 --- $ 1,059
Chief Executive Officer 1996 30,000 50,000 --- --- --- --- ---
1995 --- --- --- --- --- --- ---
J. Paul Grayson............... 1997 21,154 112,000 --- --- --- --- 105,370/(5)/
Former Chief Executive Officer 1996 22,126 --- --- --- 40,000 --- 4,300
1995 21,509 --- --- --- --- --- ---
Jeffrey Lewis................. 1997 08,692 11,229 79,737/(6)/ --- 6,200 --- 715
Managing Director, Pacific Rim 1996 --- --- --- --- --- --- ---
1995 --- --- --- --- --- --- ---
Larry Morris.................. 1997 71,462 --- 3,541/(7)/ --- 100,000 --- 1,008
Chief Financial Officer 1996 --- --- --- --- --- --- ---
1995 --- --- --- --- --- --- ---
Grant D. Wickes............... 1997 37,577 27,306 --- --- 14,000 --- 3,883
Vice President, 1996 29,481 38,588 --- --- --- --- 2,796
Intercontinental Sales 1995 04,961 17,754 --- --- 20,000 --- 1,841
Herman DeLatte 1997 56,508 19,976 --- --- --- --- 336,209/(8)/
Former Chief 1996 38,340 91,943 --- --- 20,000 --- 21,505
Operating Officer 1995 19,066 86,430 --- --- 20,000 --- 21,505
John E. Dearborn........... 1997 42,188 21,366 --- -- 20,000 --- ---
Executive Vice President, 1996 17,692 51,608 --- --- 20,000 --- 3,168
Sales and Marketing 1995 95,242 42,900 --- --- --- --- 1,838
</TABLE>
_______________________________________________
(1) Includes amounts of base salary deferred at the election of the
executive pursuant to the Company's 401(k) Savings Plan, a defined
contribution plan.
(2) The Stock Option Plan authorizes the issuance of SARs but no SARs were
issued by the Company as of June 30, 1996.
(3) All Other Compensation includes the following (i) Company
contributions in fiscal 1997 in the following amounts to match amounts
deferred pursuant to the Company's 401(k) Savings Plan: Mr. Richards
$1,059, Mr. Grayson $2,370, Mr. Lewis $715, Mr. Morris $1,008, and Mr.
Wickes $3,883.
(4) Represents $28,303 of reimbursed relocation allowance.
(5) Includes one half of $206,000 severance payment paid in fiscal 1997.
The balance was paid July 1, 1997. Mr. Grayson resigned December 31,
1996.
(6) Represents $64,425 of ex-patriot expenses paid for residing abroad and
$15,312 of reimbursed relocation allowance.
(7) Relocation allowance.
(8) Includes car allowance of $10,209 and $326,000 of severance payment
(660,000 Dutch guilders converted to dollars at current exchange
rates). Mr. DeLatte resigned February 1, 1997.
22
<PAGE>
(9) Mr. Wickes became an executive officer in May 1994.
GRANTS OF OPTIONS AND STOCK APPRECIATION RIGHTS ("SARS")
The following table sets forth details regarding stock options granted
to the named executive officers listed in the Summary Compensation Table
during the fiscal 1997. In addition, there are shown the "option spreads"
that would exist for the respective options granted based upon assumed
rates of annual compound stock appreciation of 5% and 10% from the date the
options were granted over the full option term. The Company granted no SARs
in fiscal 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS/ EXERCISE POTENTIAL REALIZABLE VALUE
OPTIONS/ SARS OR AT ASSUMED ANNUAL RATE
SARS GRANTED TO BASE OF STOCK PRICE APPRECIATION
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM (2)(3)
----------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------- --------- ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Paul Grayson.............. --- --- --- --- --- ---
Douglas Richard............. 23,000 2.57% $6.25 10-2-01 39,715 87,761
Jeffrey Lewis................ 6,200 .69% $6.25 10-2-01 10,706 23,657
Larry Morris................. 100,000 11.17% $6.25 10-2-01 172,676 381,569
Grant Wickes................. 14,000 1.56% $6.25 10-2-01 24,175 53,420
Herman DeLatte............... --- --- --- --- --- ---
John E. Dearborn............. 20,000 2.23% $6.25 10-2-01 34,535 76,314
</TABLE>
____________________________________
(1) All of the options granted to executives were granted under the
Company's Option Plan.
(2) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent upon the
future performance of the Company's Common Stock, overall market
conditions and the executive's continued employment with the Company.
The amounts represented in this table may not necessarily be achieved.
(3) Options vest generally in increments of 25% annually. The options have
a term of five years, unless they are exercised or expire upon certain
circumstances set forth in the Stock Option Plan, including
retirement, termination in the event of a change in control, death or
disability.
EXERCISES OF OPTIONS AND SARS
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during fiscal 1997, and
unexercised options held as of June 30, 1996. No SARs were exercised by the
named executive officers during fiscal 1997.
23
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER VALUE OF
OF NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON AT FY-END (#) AT FY-END ($)
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZE ($) UNEXERCISABLE UNEXERCISABLE(1)
- ----------------- --------- ----------- -------------- -----------------
<S> <C> <C> <C> <C>
Douglas Richard..... 0 $ 0.00 0/63,000 $ 0.00/$83,000
J. Paul Grayson..... 0 $ 0.00 0 $ 0
Jeffrey Lewis....... 0 $ 0.00 0/ 6,200 $0.00/$ 6,200
Larry Morris........ 0 $ 0.00 0/100,000 $0.00/$100,000
Grant Wickes........ 1,125 $5,391 0/41,812 $0.00/$ 21,773
Herman DeLatte...... 0 $ 0.00 0 $ 0
John Dearborn....... 0 $ 0.00 7,250/5,000 $ 6,000/$3,750
</TABLE>
________________________________________________
(1) Values are stated based upon the closing price of $7.25 per share of the
Company's common stock on the NASDAQ/NMS on June 30, 1997, the last trading
day of fiscal 1997.
OPTION REPRICING
The following table sets forth information with respect to both the named
executive officers and all other executive officers as of June 30, 1997,
concerning options which have been repriced from June 29, 1990 (the date the
Company became a publicly-held company) through and including June 30, 1997. No
SARs were repriced by the Company during that period.
<TABLE>
<CAPTION>
OPTION/SAR REPRICINGS
---------------------
Exercise Length of
Number Market Price Price at Original
of of Stock at Time New Option Term
Options/ Time of of Exercise Remaining at
Date of SARs Repricing Repricing Price Date of
Name Repricing Repriced(#) ($) ($) ($) Repricing
- ----------------- --------- ----------- ------------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Richard............. 2/12/97 40,000 $4.50 $16.00 20,000 @ 4 years, 73 days
$4.50 4 years, 73 days
20,000 @
$6.00
J. Paul Grayson............. N/A 0 N/A N/A N/A N/A
Larry Morris................ --- --- --- --- --- ---
Jeffrey Lewis............... --- --- --- --- --- ---
Grant Wickes................ 4/1/94 1,000 $6.50 $ 7.75 $6.50 4 years, 175 days
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Herman DeLatte 4/1/94 60,000 $6.50 $ 9.00 $6.50 2 years, 198 days
4/1/94 2,500 $6.50 $ 8.00 $6.50 3 years, 135 days
John E. Dearborn 4/1/94 4,500 $6.50 $11.50 $6.50 1 year, 272 days
</TABLE>
See "Report on Stock Option Repricing" contained in "Report of the
Compensation and Stock Option Committee on Executive Compensation."
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL PROVISIONS
The Company has entered into agreements with John E. Dearborn, Robert
Gutekunst, Jeffrey Lewis, Larry Morris, R. Edwin Pearce, Douglas Richard and
Grant D. Wickes, which agreements provide for such officer's continued
employment by the Company upon the occurrence of a Change in Control. These
Agreements expire two years after the date of a Change in Control and require
the Company to pay such officers, if their employment is terminated by (i) the
Company without cause or (ii) such officer, as a result of a reduction in his
respective base salary, potential earnings under a performance based bonus plan,
any material employee benefit, or in the nature or scope of his respective
duties, a sum equal to (i) one and one-half times Mr. Richard's highest base
annual salary with the Company and (ii) one times Messrs. Dearborn's,
Gutekunst's, Lewis', Morris', Pearce's and Wickes' highest base annual salary
with the Company. Additionally, in the event such officer's employment with the
Company is terminated under the circumstances described above following a Change
in Control, they would also be entitled to the continuation of medical, dental,
disability and life insurance benefits for a period of twelve months and the
acceleration and/or immediate vesting of all stock options and restricted stock
awards then outstanding. The Company also agreed to pay the moving and related
expenses of Douglas Richard's relocation from Los Angeles, California to Dallas,
Texas, and paid $28,303 in fiscal years 1997 and 1996.
COMPENSATION OF DIRECTORS
For information on compensation paid to directors of the Company during
fiscal 1997, see "Election of Directors."
25
<PAGE>
CERTAIN TRANSACTIONS
The Company entered into an agreement with Gregory A. Peters, former Chief
Financial Officer and Treasurer, with respect to his voluntary resignation from
the Company effective September 30, 1996. Under the terms of the severance
agreement, Mr. Peters was paid his base salary and pro rata bonus through
September 30, 1996, in consideration for assisting in the transition of the new
Chief Financial Officer, and may thereafter provide continued consulting
services to the Company on terms mutually agreed to, including compensation.
The Company entered into a severance agreement with Herman DeLatte, former
Senior Vice President/General Manager, Europe whereby he resigned his positions
with the Company effective February 1, 1997. Under the terms of the severance
agreement, Mr. DeLatte became eligible to receive severance benefits in the
aggregate amount of 660,000 Dutch guilders ($326,000 at current exchange rates)
paid upon exercise of the severance agreement, and may thereafter provide
continued transitional assistance to the Company on terms mutually agreed,
including compensation.
The Company entered into an agreement with J. Paul Grayson, former Chairman
of the Board and Chief Executive Officer, whereby he resigned his position with
the Company effective December 31, 1996. Under the terms of the agreement, Mr.
Grayson became eligible to receive severance benefits in the aggregate amount of
$206,000 payable in two installments on April 25, 1997 and on July 1, 1997.
During fiscal 1996, the Company made loans to the following officers and
directors of the Company: J. Paul Grayson, Herman DeLatte and Gregory A.
Peters, each in the principal amount of $357,000, and Robert S. Miller in the
principal amount of $86,000. The loans bore interest at the rate of 8.75% and
were made for the purpose of financing the purchase of Common Stock of the
Company. Each loan was refinanced during fiscal 1996 through bank loans that
were guaranteed by the Company, each bearing interest at the bank's prime rate
(8.25% at June 30, 1996) plus 0.5%. As of June 30, 1996, the Company had
guaranteed $1,157,000 of such loans. Subsequent to June 30, 1996, the loans
were repaid or other collateral was substituted for the Company's guarantee,
thereby relieving the Company of all liability on its guarantee of such loans.
During fiscal 1997, the Company loaned Seymour Merrin the principal amount of
$99,149 at an interest rate of 8.75%, which has been repaid to the Company.
REPORT OF THE COMPENSATION AND
STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION
The Company has a combined Executive Compensation and Stock Option
Committee of the Board of Directors (the "Committee") which is composed of all
of the Company's non-employee directors, Messrs. Eugene P. Beard, David S.
Gergacz, Robert Kamerschen, Seymour Merrin and Robert S. Miller. The Committee
is responsible for setting the salary of the President and Chief Executive
Officer of the Company, recommending to the full Board of Directors compensation
arrangements for the President and Chief Executive Officer and advising the
President and Chief Executive Officer on compensation for other key executives.
All recommendations relating to awards of stock options and restricted stock to
the Company's executive officers are reviewed by, and subject to the approval of
the Committee.
COMPENSATION POLICIES
The Company's executive compensation policies, endorsed by the Committee,
are designed to provide competitive levels of compensation that integrate pay
with the Company's performance goals, reward above-average corporate
performance, recognize individual initiative and achievements and assist the
Company in attracting and retaining qualified executives. The orientation of
executive compensation policies toward Company and divisional performance has
been accomplished by the utilization of various performance criteria.
Compensation is individually set for each executive officer from among a
set of components. The primary components of compensation currently being
utilized are salary, performance bonuses, stock option grants and, in a limited
number of cases, restricted stock grants. In determining compensation for each
executive officer and the Chief Executive Officer, the Committee does not
attribute a specific basis for each component, but rather the Committee's
determination focuses on the total compensation package. The Committee believes
that stock ownership by
26
<PAGE>
management and stock-based compensation arrangements are beneficial in aligning
management's and shareholders' interests in the enhancement of shareholder
value. Therefore, the Company has utilized stock-based compensation arrangements
in the Company's compensation packages for most of its executive officers.
The Company also has adopted certain broad-based employee benefit plans in
which executive officers are eligible to participate. In addition, the Company
has entered into employment and/or change in control agreements with various key
executives. See "Employment Contracts" for the named executive officers as
described in this Proxy Statement.
The Committee has not yet had to consider the possible effect on the
Company's compensation policies of the treatment, under the federal Revenue
Reconciliation Act of 1993, of annual compensation exceeding $1 million paid to
any individual executive officer as no individual executive officer received
annual compensation exceeding $1 million in fiscal 1997.
RELATIONSHIP OF COMPANY PERFORMANCE TO EXECUTIVE COMPENSATION
Compensation paid to the Company's named executive officers in fiscal 1997,
as reflected in the Summary Compensation Table, consisted primarily of base
salary, performance bonuses and stock option grants.
The Company utilizes an annual competitive pay analysis of software
companies compiled by an independent nationally recognized compensation and
benefits consulting firm (the "Independent Consultant"), as well as measurements
of both corporate and individual performance in setting combined compensation
for its executive officers. The software companies compiled by the independent
consultant include some, but not all of the companies contained in the Media
General Peer Group SIC Code 7372 Index (see "Stock Performance Graph"). The
Company utilized the competitive pay analysis to determine combined compensation
levels for its executive officers. The Committee believes that the compensation
paid to the Company's executive officers and Chief Executive Officer falls
within the median of the companies represented in the competitive pay analysis
utilized. The amount of the performance bonus earned by some executive officers
is based on measures of corporate performance, such as target versus actual
consolidated quarterly earnings, annual sales and pre-tax income of the business
unit for which the executive officer is responsible. Subjective considerations
of individual performance are also considered in establishing base salaries and,
to various extents, performance bonuses, including the executive officer's
initiative and contribution to overall corporate performance, the executive
officer's managerial performance and the executive officer's successful
accomplishment of any special projects. In determining the number of stock
option grants to make to the executive officers (other than the Company's Chief
Executive Officer), the Committee takes into account the number of stock options
and restricted stock awards presently held by each individual, as well as the
exercise price of such stock options.
Individual performance and experience, as well as the Company's operating
performance and the attainment of financial and strategic objectives had an
important effect on compensation earned for fiscal 1997 by several of the
Company's named executive officers under their performance bonus plans. Under
these plans, if various goals were not satisfied, no performance bonus would be
payable. If various goals were satisfied, performance criteria would then
determine the amount of the bonus earned. When corporate goals are satisfied,
performance bonuses were earned by the Company's executive officers. The amount
of any performance bonus earned is equivalent to the number of performance goals
satisfied, such that the more goals that are satisfied by an executive officer,
the larger the performance bonus earned. The Committee subjectively determined
that various criteria for fiscal 1997 satisfied the goals (described above)
established for certain key executive officers and bonuses were thus paid to
these executive officers.
REPORT ON STOCK OPTION REPRICING
During Fiscal 1997, the Stock Option Committee repriced certain options
held by Douglas Richard, President and Chief Executive Officer. The Stock
Option Committee believed that before such repricing, the exercise price for
such options was so significantly above the market value of the underlying
Common Stock that such options did not represent a meaningful incentive to Mr.
Richard. The new exercise price for such options was the fair market value of
the Common Stock for 20,000 shares on the date of the repricing and $6.00 for
20,000 additional shares, representing $1.50 over fair market value at the date
of repricing.
27
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Richard receives an annual salary and is eligible to receive a
performance bonus. The Committee's general approach in setting Mr. Richard's
annual compensation is to set compensation levels in accordance with the
policies set forth in this report. Specifically, the Committee's objective is
to correlate Mr. Richard's compensation with the performance of the Company,
while seeking to keep his compensation competitive with that provided by
comparable companies.
COMPENSATION COMMITTEE: STOCK OPTION COMMITTEE:
Eugene P. Beard Eugene P. Beard
Robert Kamerschen Robert Kamerschen
Seymour Merrin Seymour Merrin
Robert S. Miller Robert S. Miller
David S. Gergacz David S. Gergacz
STOCK PERFORMANCE GRAPH
The graph below compares the five-year cumulative return of the Company's
Common Stock with the Media General Peer Group SIC Code 7372 Index (Prepackaged
Software Companies) and the NASDAQ-NMS Index from July 1, 1992 to June 30, 1997.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
June 1992 June 1993 June 1994 June 1995 June 1996 June 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MICROGRAFX 100.00 $ 35.94 $ 40.63 $ 62.34 $ 91.41 $ 45.31
INDUSTRY 100.00 $ 132.26 $ 145.01 $ 246.64 $ 322.24 $ 450.06
BROAD MARKET 100.00 $ 122.76 $ 134.61 $ 157.68 $ 198.73 $ 239.40
</TABLE>
(Assumes $100 invested on July 1, 1992 and that dividends are reinvested.)
Upon request and without charge, the Company will provide shareholders with
a list of the companies included in the Media General Peer Group SIC Code 7372
Index.
28
<PAGE>
OTHER BUSINESS
Management knows of no business other than that previously disclosed herein
that will be brought before the meeting. If, however, any other matters are
properly presented, it is the intention of the persons named in the accompanying
form of proxy, if authorized to do so by the proxy, to vote the shares covered
by such proxy as in their discretion they may deem advisable.
PROPOSALS OF SHAREHOLDERS
All proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders of Micrografx must be received by Micrografx at its
principal executive offices on or before June 1, 1998, for inclusion in the
Company's Proxy Statement relating to that meeting.
GENERAL
The information contained in this Proxy Statement in the sections entitled
"Report of Compensation Committee and Stock Option Committee on Executive
Compensation" and "Stock Performance Graph" shall not be deemed incorporated by
reference by any general statement incorporating by reference any information
contained in this Proxy Statement into any filing under the Securities Act or
the Exchange Act, except to the extent that the Company specifically
incorporates by reference the information contained in such sections, and shall
not otherwise be deemed filed under the Securities Act or the Exchange Act.
By Order of the Board of Directors
R. Edwin Pearce
Secretary
September 24, 1997
Richardson, Texas
29
<PAGE>
- --------------------------------------------------------------------------------
PROXY PROXY
MICROGRAFX, INC.
1303 E. ARAPAHO ROAD
RICHARDSON, TEXAS 75081
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Russell E. Hogg and R. Edwin Pearce, and
each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and vote, as designated below, all of
the shares of the common stock of Micrografx, Inc. (the "Company"), held of
record by the undersigned on September 12, 1997, at the Annual Meeting of
Shareholders of the Company to be held on November 4, 1997, and any
adjournment(s) thereof.
1. PROPOSAL TO ELECT AS DIRECTORS OF THE COMPANY THE FOLLOWING PERSONS TO
HOLD OFFICE UNTIL THE NEXT ANNUAL ELECTION OF DIRECTORS BY SHAREHOLDERS OR
UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
Eugene P. Beard Robert Kamerschen Douglas Richard
Russell E. Hogg Seymour Merrin
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
(To be dated and signed on reserve side.)
- -------------------------------------------------------------------------------
<PAGE>
MICROGRAFX, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
[ ]
All
1. Election of Directors (see reverse) For Withhold Except
____________________________________________ [_] [_] [_]
(Except Nominee(s) written above)
2. Proposal to approve and adopt the amendment For Against Abstain
to the Micrografx, Inc. 1995 Incentive and
Nonstatutory Stock Option Plan. [_] [_] [_]
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1, FOR
PROPOSALS 2, 3, 4 AND 5, AND THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT
TO ANY MATTERS REFERRED TO IN PROPOSAL 6.
3. Proposal to approve and adopt the amendment
to the Micrografx, Inc. Employee Stock Purchase For Against Abstain
Plan.
[_] [_] [_]
4. Proposal to approve and adopt the amendments For Against Abstain
to the Micrografx, Inc. 1995 Director Stock
Option Plan. [_] [_] [_]
5. Proposal to ratify the appointment by the
Board of Directors of Ernst & Young LLP as For Against Abstain
independent public accountants for the Company
for the fiscal year ending June 30, 1998. [_] [_] [_]
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: ___________________________________________________________________, 1997
________________________________________________________________________________
Signature
________________________________________________________________________________
Signature, If Held Jointly
Please execute this proxy as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
