As filed with the Securities and Exchange Commission on May 13, 1999
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MICROGRAFX, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1952080
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1303 Arapaho, Richardson, Texas 75081
(972) 234-1769
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive officers)
R. EDWIN PEARCE, ESQ.
General Counsel
MICROGRAFX, INC.
1303 Arapaho
Richardson, Texas 75081
(972) 234-1769
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
L. STEVEN LESHIN, ESQ.
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
(214) 855-4500
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Approximate date of commencement of proposed sale to the public: At such
time or times after the effective date of this Registration Statement as the
selling stockholders may determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reimbursement plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
- ------------------------------------------- ---------------- ------------------- ------------------ ---------------
Amount Proposed
Title of each class of to be Proposed maximum maximum aggregate Amount of
securities to be registered registered offering price per offering price* registration
unit fee*
- ------------------------------------------- ---------------- ------------------- ------------------ ---------------
Common stock, par value $.01 per share..... 579,700 (1)(2) $ 7.97(3) $ 4,620,209 $1,284.42
</TABLE>
(1) Represents 579,700 shares of common stock issuable upon conversion of a
Convertible Subordinated Debenture Due March 31, 2002, principal amount
$5,797,000.
(2) The number of shares of common stock issuable upon conversion of the
debenture is dependent upon the conversion ratio, which is subject to
adjustment, and accordingly the actual number of shares of common stock to
be issued upon such conversion and, consequently, offered for sale under
this Registration Statement, cannot be determined at this time. This
calculation is a reasonable estimation based on the initial conversion
ratio, which is subject to adjustment. This calculation is not intended to
constitute a prediction as to the future market price of our common stock
upon conversion of the debenture.
(3) The proposed maximum aggregate offering price has been estimated solely to
calculate the registration fee under Rule 457(c) of the Securities Act,
based upon the average of the highest and lowest price per share of common
stock on The Nasdaq National Market reported on May 11, 1999.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section said 8(a),
may determine.
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PROSPECTUS
MICROGRAFX, INC.
579,700 Common Shares
par value $.01 Per Share
-----------
o This prospectus relates to the public offering from time to time of up
to 579,700 shares of our common stock that will be owned by Intergraph
Corporation or its pledgees, donees, transferees and other successors
in-interest, referred to in this prospectus as the "selling
stockholders," if the selling stockholders convert all or part of a
convertible subordinated debenture, in the principal amount of
$5,797,000. We issued the debenture to Intergraph as consideration for
our acquisition of Intercap Graphics Systems, Inc., a subsidiary of
Intergraph. This prospectus also relates to an indeterminate number of
additional shares of our common stock that are issuable upon conversion
of the debenture if the conversion price is adjusted, as permitted in
the debenture.
o Our common stock is traded on The Nasdaq National Market under the
symbol "MGXI." On May 11, 1999, the average of the high and low price
for the common stock was $7.97.
o The shares of common stock offered by this prospectus are being sold by
the selling stockholders. The selling stockholders may sell the common
stock on The Nasdaq National Market or in privately negotiated
transactions, whenever they decide and at the price they set. The price
at which any of the shares of common stock and the commissions paid, if
any, may be privately negotiated, may be based on the prevailing market
prices, and may vary from transaction to transaction and as a result
are not currently known.
o We will not receive any proceeds from the sale of these shares. We will
pay all expenses of registration incurred in connection with this
offering. The selling stockholders will pay all selling and other
expenses that they incur.
o This investment involves a high degree of risk. You should carefully
consider the risk factors beginning on page 4 of this prospectus before
you decide to invest.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We
have not authorized anyone to provide you with information that is different.
The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is May 13, 1999.
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<CAPTION>
TABLE OF CONTENTS
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION...............................................................................2
FORWARD - LOOKING STATEMENTS......................................................................................3
SUMMARY OF OUR BUSINESS...........................................................................................3
RISK FACTORS......................................................................................................4
We have changed our business focus, which may adversely affect our future financial performance..............4
We experience significant competition for our products, which may reduce our sales...........................4
We must adapt to changes in distribution channels............................................................5
New product introductions may adversely affect our ability to sell our older products profitably.............5
We may not be successful in developing InterCAP's business...................................................5
Our success depends upon our ability to adapt to technological change........................................5
Our international operations are subject to a number of risks................................................5
There is potential fluctuation in our quarterly operating results due to seasonality in demand
for our products.............................................................................................5
Sales of upgrades generate lower profit margins..............................................................6
The internet is a new market and subject to rapid change and uncertainty.....................................6
The Year 2000 problem could adversely affect our future operations and results...............................6
Our stock price has been subject to significant volatility...................................................8
We are involved in litigation................................................................................8
USE OF PROCEEDS...................................................................................................9
PLAN OF DISTRIBUTION; SELLING STOCKHOLDERS........................................................................9
LEGAL MATTERS....................................................................................................11
EXPERTS..........................................................................................................11
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
o Government Filings. We file annual, quarterly and special reports,
proxy statements and other information with the SEC. Our SEC filings
are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the SEC located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. You may obtain information on the operation of the SEC's public
reference room in Washington, D.C. by calling the SEC at
1-800-SEC-0330.
We have filed with the SEC a registration statement on Form S-3 to register
the shares of common stock to be offered. This prospectus is part of that
registration statement and, as permitted by the SEC's rules, does not contain
all the information included in the registration statement. For further
information with respect to us and our common stock, you should refer to the
registration statement and to the exhibits and schedules filed as part of that
registration statement, as well as the documents we have incorporated by
reference which are discussed below. You can review and copy the registration
statement, its exhibits and schedules, as well as the documents we have
incorporated by reference, at the public reference facilities maintained by the
SEC as described above. The registration statement, including its exhibits and
schedules, are also available on the SEC's web site, given above.
o Stock Market. Shares of our common stock are traded on The Nasdaq
National Market. Materials that are filed can be inspected at the
offices of the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
o Information Incorporated by Reference. The SEC allows us to
"incorporate by reference" the information we file with them, which
means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any further
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering has been
completed:
o Our Annual Report on Form 10-K for the year ended June 30, 1998, filed
with the SEC on September 23, 1998 and our amendments to our Annual
Report on Form 10-K/A filed with the SEC on September 30, 1998 and
November 25, 1998;
o Our Quarterly Reports on Form 10-Q for the quarters ended September 30,
1998, December 31, 1998 and March 31, 1999;
o The description of our common stock contained in our Form 8-A, dated
July 21, 1990, including any amendment or report filed for the purpose
of updating such description;
o Our proxy statement for the 1998 Annual Meeting of Stockholders, filed
with the SEC on September 30, 1998;
o Report on Form 8-K/A, filed with the SEC on November 25, 1998; and
o Report on Form 8-K, filed with the SEC on May 3, 1999.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Micrografx, Inc.
1303 Arapaho
Richardson, Texas 750081
Attention: General Counsel
(972) 234-1769
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
2
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FORWARD - LOOKING STATEMENTS
This prospectus contains a number of "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. Specifically, all
statements other than statements of historical facts included in this prospectus
regarding our financial position, business strategy and plans, and objectives of
management for future operations are forward-looking statements. These
forward-looking statements are based on the beliefs of management, as well as
assumptions made by and information currently available to management. When used
in this prospectus, the words "anticipate," "believe," "estimate," "expect," and
"intend," and words or phrases of similar import, as they relate to our business
or management, are intended to identify forward-looking statements. These
"cautionary statements" reflect our current view with respect to future events
and are subject to risks, uncertainties, and assumptions related to various
factors including, without limitation:
o changes in our product release schedule;
o acceptance or the lack of acceptance of our new iGrafx(TM) products,
being released in the second half of fiscal 1999;
o growth or the lack of growth in our enterprise solutions business;
o successful integration of our newly acquired company, InterCAP Graphics
Systems, Inc. into our business plans, as well as our plans and
expectations associated with our purchase of InterCAP;
o changes in distribution channels;
o changes in the market;
o new products and announcements from other companies;
o changes in technology; and
o competition from larger, more established competitors.
Although we believe that our expectations are reasonable, we cannot assure
you that our expectations will prove to be correct. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described in this prospectus as anticipated, believed,
estimated, expected, or intended. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.
SUMMARY OF OUR BUSINESS
We develop and market graphics software that serves to make complex
problems simple by making graphics intelligent so people can gain insight and
visualize solutions. We are focusing on graphics applications software products
for business use in four target categories: process management graphics,
corporate graphics, network documentation and technology licensing and
development applications, which are capable of managing all the graphic imagery
for the world's largest corporations. Our graphics solutions help people
visually communicate and analyze key corporate information, processes and ideas
to solve real-world problems. We also seek to leverage our strong technology
base by partnering with organizations to maximize the distribution and value of
our intellectual property.
Historically, in addition to our business graphics software, we have also
developed and marketed products for the personal creativity consumer market. We
have been one of the premier companies competing in this market with such
popular titles as Crayola(TM) Art Studio(TM), Hallmark Connections(TM) Card
Studio (TM), American Greetings(R), CreataCard(R) Plus (TM) and CreataCard(R)
Gold (TM), and Windows Draw(R). In light of recent consolidation in the consumer
software market, as well as extremely aggressive retail programs from
competitors, we have chosen to shift our resources to the more rapidly growing
enterprise graphics market and de-emphasize the personal creativity consumer
market.
As a result and in line with our objective to leverage our strong
technology base, we formed a strategic relationship with Cendant Software
Corporation effective June 30, 1998, through which we have licensed Cendant a
series of core personal creativity graphics technologies, information relating
to the customers who have purchased products based on the aforementioned
technologies, marketing information related to those products, and certain
associated intellectual property rights. Additionally, we have entered into a
combination of worldwide publishing and distribution agreements with Cendant for
two personal creativity software titles, Windows Draw(R) Print Studio(R) and
Micrografx SnapShot(R). The agreements with Cendant allow us to make significant
progress in de-emphasizing the consumer software market.
Effective August 31, 1998, we entered into an agreement that assigned our
distribution rights to American Greetings CreataCard Gold and CreataCard Plus to
The Learning Company. This assignment of rights to The Learning Company
concludes all contractual responsibilities and settles all contractual issues
between Micrografx and American Greetings Corporation. With this assignment, we
have completed our de-emphasis of the consumer marketplace in order to focus on
our business graphics software.
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In April, 1999, we acquired Annapolis, Md.-based InterCAP Graphics Systems,
Inc. for $12.15 million. InterCAP provides standards-based solutions for
publishing technical graphics on the Internet to aerospace, defense and
manufacturing industries.
InterCAP was instrumental in the development of WebCGM, the first vector
standard to earn a recommendation from the World Wide Web Consortium. InterCAP
also was a founder of the CGM Open consortium and is an innovator in
standards-based solutions development and consulting. By leveraging CGM, or
"Computer Graphics Metafile," the preferred graphics format standard in
manufacturing companies worldwide and server-based technologies, InterCAP
provides customers with a way to quickly create Web-based product information
and commerce solutions from existing engineering and technical data.
InterCAP's concentration in vertical markets complements our current
customer base and opens additional opportunities. In conjunction with Micrografx
Designer(R), the leading Windows-based technical graphics product, the InterCAP
product line helps create a cornerstone for us in the intelligent technical
illustration and Web-based technical publishing market. These complementary
products provide a tiered illustration solution supported by the strongest of
industry standards and leading-edge Web publishing solutions.
Our principal offices are located at 1303 Arapaho, Richardson, Texas, 75081
and our telephone number is (972) 234-1769.
RISK FACTORS
An investment in the common stock involves a high degree of risk. You
should carefully consider and evaluate all of the information in this
prospectus, including the risk factors set forth below, before investing.
We have changed our business focus, which may adversely affect our future
financial performance
During fiscal 1998 and in prior years, we have generated a significant
portion of our business from the personal creativity software market. Due to
aggressive competition and our belief that our products are well suited to
various high-growth corporate markets, we have chosen to pursue corporate
customers. Our future financial performance will depend on the successful
transition of internal resources away from our strength in the retail market
while moving toward solving problems currently experienced by corporations. In
order to accomplish our objective, we have hired employees with skills required
for our new direction and are training existing employees on how to make this
change, but we cannot assure you that our management's efforts will be
successful. In order to succeed, we will have to convince corporations that our
products are able to solve their problems, we will have to identify and develop
features which corporate customers desire, and we will have to ensure that we
have a sales force and customer support system sufficient in size and expertise
to service corporate customers. In light of the difficulties associated with the
transition of our business focus from consumer retail products to business
product sales to corporate accounts, we may confront unanticipated risks and
uncertainties. Therefore, we cannot assure you that our new business strategy
will be successful, and it is possible that our future results from operations
and financial condition will be adversely affected if we are unable to
effectively implement our new business focus.
We experience significant competition for our products, which may reduce our
sales
The personal computer graphics software market is highly competitive. Our
competitors include many independent applications software vendors, such as
Adobe Systems Incorporated, Corel Systems Corporation, Macromedia, Inc., and
Visio Corporation. The primary competitor for our process management and network
design products is Visio and the primary competitors for our corporate graphics
products are Adobe, Corel, and Macromedia.
Most of our existing competitors, as well as a number of potential
competitors, have larger technical staffs, more established and larger marketing
and sales organizations, and significantly greater financial resources than we
do. We cannot assure you that our competitors will not develop products that are
superior to our applications software products or that will achieve greater
market acceptance at our expense, possibly resulting in reduced sales of our
applications software products.
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We must adapt to changes in distribution channels
We are focusing on corporate customers and have de-emphasized our personal
creativity business. In doing so, we must adapt our relationships with the
distribution channels to match the change. While we do not anticipate a
significant change in the channels used, we must change our sales and marketing
programs to suit the corporate customers buying through those channels. Our
success depends in part on the ability to identify and respond to changes in the
distribution channels.
New product introductions may adversely affect our ability to sell our older
products profitably
Our future financial performance will depend in significant part upon the
successful development and introduction of new and enhanced versions of our
products and customer acceptance of these products. We cannot assure you that we
will be able to successfully develop and introduce new products. In addition,
the timing of new product introductions, which are updates of previously
released products, can have a significant impact on the profitability of the
older version of the product. To the extent that the distributors were unable to
sell the older version at the rate they anticipated when they purchased the
product, additional marketing expenditures are generally required to promote the
older version in order to reduce stocking levels in anticipation of the release
of the new version of the product, which adversely affects our profitability.
We may not be successful in developing InterCAP's business
In connection with our recent acquisition of InterCAP, we must integrate
InterCAP's products and business with our own. We cannot assure you that this
integration will be successful or that we will be able fully to develop and grow
InterCAP's business. Our inability to do so could adversely affect our
profitability and financial condition.
Our success depends upon our ability to adapt to technological change
The personal computer industry is subject to rapid technological change and
continuing development of new and enhanced operating environments. The success
of our products will depend to a large extent upon our ability to continue to
develop and introduce innovative and competitive products on a cost-effective
and timely basis, of which there can be no assurance.
Our international operations are subject to a number of risks
We anticipate that international net revenues will continue to account for
a significant portion of our total net revenues. As a result, a significant
portion of our net revenues are subject to the risks inherent in international
operations. These risks include:
o unexpected changes in regulatory requirements;
o exchange rates;
o tariffs and other barriers;
o difficulties in staffing and managing foreign subsidiary operations;
and
o potentially adverse tax consequences.
Our revenue generated from our Asia Pacific sales offices has declined more
than 30 percent from fiscal 1997 to fiscal 1998 and we expect an additional
decline in sales for fiscal 1999. This decline resulted from the economic
uncertainty and recession in Japan, which resulted in a significant decline in
the retail sector of the Japanese economy. We have announced that we will no
longer concentrate our efforts on the retail distribution channel, its strength
historically, but will focus on corporate customers in keeping with our overall
strategy. We cannot assure you that this strategy will be successful.
There is potential fluctuation in our quarterly operating results due to
seasonality in demand for our products
Historically, our results of operations are subject to significant
quarterly variations. Causes of these variations include:
o seasonality of the retail software market;
o delays in the introduction of new or enhanced versions of our
products;
o timing and cost of new product upgrades and introductions;
o reduced distribution channel sales preceding the introduction of
updated products, and
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o large distribution channel sales following the introduction of new or
updated products.
Historically, as is typical in the retail software industry, we have
experienced some seasonal variations in demand, with sales declining somewhat in
the summer months and increasing somewhat during the fourth and first calendar
quarters. We expect the seasonality to decline somewhat as we change our focus
from serving the retail market to selling to corporate customers.
Sales of upgrades generate lower profit margins
Product upgrades, which enable users to upgrade from earlier versions of
our products, or from competitor's products, typically have lower prices than
new products, resulting in lower gross profit margins. We plan to continue
upgrading successful products in the future.
The internet is a new market and subject to rapid change and uncertainty
We provide products for use in the Internet market. The Internet market is
rapidly evolving and is characterized by an increasing number of market
entrants. As is typical in the case of a new and evolving industry, demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty. Critical issues concerning the commercial use of the
Internet, including security, reliability, cost, ease of use and access, and
quality of service remain unresolved and may affect the growth of Internet use,
together with the software standards and electronic media employed in such
markets.
The Year 2000 problem could adversely affect our future operations and results
We are aware of and are addressing a broad range of issues associated with
the programming code in existing computer systems as the Year 2000 approaches.
The Year 2000 issue is complex, as many computer systems will be affected in
some way by the rollover of the two-digit year value to 00. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Year 2000 issue creates risk for us from unforeseen problems
in our own infrastructure and systems, our own products and from third parties
with which we deal on financial and other transactions worldwide. Failures of
the our and/or third parties' computer systems could have a material impact on
our ability to conduct our business.
We began an infrastructure and systems review of Year 2000 readiness for
our United States operations in May of 1998, with the objectives of:
o Inventorying all computer, network and telephony-related hardware and
software;
o Assessing, through both research and testing, whether or not the equipment
and software are Year 2000 compliant;
o Developing plans for upgrading hardware and software to Year 2000 compliant
status, decommissioning non-compliant hardware that cannot be upgraded to a
compliant state, and replacing software that cannot be upgraded to Year
2000 compliance.
As of February 1, 1999 all mission critical systems and applications in the
data center had been reviewed and plans for upgrade, decommissioning or
replacement have been developed for systems and applications that are not Year
2000 compliant. Software upgrades and replacement are scheduled to be completed
by June 30, 1999.
Workstations, desktop and laptop computers used in the development of our
products and in conducting our business are largely newer machines that are
reported by their manufacturers to be Year 2000 compliant. A small number of
machines have been identified which, due to age or obsolescence, cannot be
brought into compliance. We plan to decommission and/or replace these machines
during the year.
The principal software operating on our computers is licensed under
corporate maintenance agreements with major vendors that have reported either
that their software is currently Year 2000 compliant or that Year 2000 compliant
upgrades will be available during calendar year 1999. It is our intent to apply
and verify these upgrades as they become available.
Non-compliant hardware is scheduled to be upgraded, decommissioned, or
replaced before, or together with, our move to our new headquarters in September
of 1999.
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The inventory, review, upgrade, replacement and decommissioning plans
described herein refer specifically to mission critical corporate standard
technology and components. Special purpose hardware, such as may be found in
some areas of development and quality assurance, and personal productivity tools
that are not covered by corporate standards, are not covered in this plan
because the hardware is not directly used in the running of our business or
development of products.
Our foreign subsidiaries and contractors access mission critical
applications through the services of our wide area network. With regard to
centrally administered applications and systems software, our foreign operations
are at an equal state of Year 2000 readiness with ours. The state of our foreign
operations with respect to hardware Year 2000 readiness has not yet been
assessed. These operations represent a small percentage of our hardware assets,
and formal review of their Year 2000 readiness status began in March, 1999.
The principal costs incurred in addressing Year 2000 issues to date have
been managerial and administrative. All essential third-party software is on
maintenance agreements, and hardware expenses have already been accounted for in
either normal retirement/replacement plans or in the planned expenses for the
infrastructure of the new headquarters building.
A small number of internally developed applications are not currently Year
2000 compliant, and the cost of remediation will not be material to our
operating results.
Each of our product divisions has completed a Year 2000 assessment of its
currently offered products. While this assessment included internal testing of
the Year 2000 capabilities of these products, we have not had, and have no plans
to have, our products tested by an independent third party. We believe that the
vast majority of our currently offered products are Year 2000 compliant, and
expect virtually all of our remaining currently offered products to become
compliant by early 1999 through new releases. In any event, we expect that all
of our currently offered products will be Year 2000 compliant before the end of
1999. Because Year 2000 compliance is generally integrated into our normal
product development activities, we have not incurred and do not expect to incur
any significant incremental expenses in addressing this issue in our product
lines.
We believe that a small number of our customers that receive product
support from us are operating product versions that may not be Year 2000
compliant or products that we have replaced or intend to replace with
comparable, Year 2000 compliant products. We believe that the vast majorities of
such customers are migrating and will continue to migrate to compliant versions
and products through new releases, which we are strongly encouraging. In
addition, some of our former customers may be operating non-compliant versions
of products in respect of which our agreed-upon product support and warranty
periods have expired. We have not undertaken an assessment of whether these
former customers are taking appropriate steps to address any related Year 2000
issues. We do not expect customers who purchase or migrate to current versions
of these products to experience any Year 2000 failures caused by those products.
In addition, we believe that our licenses and other agreements contain customary
and appropriate limitations on our obligations with respect to any Year 2000
failures that may be caused by our current or former products. However, we
cannot assure you that our expectations and beliefs as to these and related
matters will prove to be accurate. Moreover, we are aware of a growing number of
lawsuits against software vendors and other IT firms involving Year 2000 issues.
In addition, regardless of whether our products are Year 2000 compliant, they
operate on IT systems consisting of third-party hardware and software, some of
which may not be fully Year 2000 compliant. In light of these factors, we cannot
assure you that customers or former customers will not bring claims or
proceedings against us seeking compensation for losses associated with Year
2000-related failures.
We have begun a Year 2000 assessment of our material third party supplier
relationships. The assessment is being conducted through formal communications
with those suppliers, testing of supplier equipment, systems or interfaces, and
a review of the Year 2000 information made publicly available by those
suppliers. We plan to substantially complete the assessment of these third
parties by mid-1999 and, promptly upon discovery of any readiness issues that
are material to us, begin efforts to obtain adequate readiness assurances from
these relevant third parties. We cannot assure you that we will receive all
information necessary to fully evaluate the Year 2000 readiness of all material
suppliers. In addition, we rely in various ways, both domestically and
internationally, on governments, utilities, communications service providers,
financial institutions and other third parties to conduct normal business
operations. We cannot assure you that suppliers and other third parties upon
which we are reliant will not suffer business interruptions caused by Year 2000
issues. Such interruptions could have a material adverse effect on our business,
financial condition and results of operations.
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Other aspects of the Year 2000 issue may pose additional risks to us. Some
commentators predict that normal purchasing patterns and trends in the software
industry may be affected by customers replacing or upgrading applications or
systems to address Year 2000 issues. We have not experienced any discernable
trend indicating a recent or impending material reduction in demand for the our
products. However, we cannot assure you that Year 2000 issues will not affect
future customer purchasing patterns, possibly resulting in lower demand for our
products. Commentators have also predicted that a significant amount of
litigation may arise out of Year 2000 compliance issues. Although some potential
litigation scenarios have been described above, we cannot estimate the
probability of our actual involvement in any lawsuits of this nature and the
range of potential outcomes at this time. A material adverse outcome in a Year
2000 lawsuit, as is the case with any lawsuit, could have a material adverse
effect on our business, financial condition, and results of operations.
Although we believe that our Year 2000 readiness efforts are designed to
appropriately identify and address those Year 2000 issues that are within our
control, we cannot assure you that our efforts will be fully effective or that
Year 2000 issues will not have a material adverse effect on our business,
financial condition, or results of operations. The novelty and complexity of the
issues presented, the proposed solutions therefore, and our dependence on the
preparedness of third parties, are among the factors that could cause efforts to
be less than fully effective. In addition, Year 2000 issues present many risks
that are simply beyond our control, for example, the collateral effects of Year
2000 issues on the economy in general and on our business partners and customers
in particular. In light of these factors, we believe that it is not possible to
specifically describe our most reasonably likely "worst case" Year 2000 scenario
or to quantify the related potential consequences. However, the risks and the
potential consequences described above represent management's best judgment of
these matters based on currently available information. Except as described
above, we have not established "contingency plans" to address potential
consequences of the Year 2000 issues. We intend to continue to evaluate both
existing and newly identified Year 2000 risks and to develop and implement
further responsive measures as we deem appropriate.
Our stock price has been subject to significant volatility
The market price of our common stock has been, and in the future will
likely be, very volatile. The stock price has been affected by the following
factors, among others:
o the announcement of new products or technological innovations by us and by
our competitors;
o quarter-to-quarter variations in our anticipated or actual results of
operations; and
o general conditions in high technology industries.
The stock market occasionally experiences extreme price and volume
fluctuations, which affects the market prices particularly for many high
technology companies like us, and which are often unrelated to the operating
performance of the specific companies.
We are involved in litigation
We are party to various legal proceedings arising from the normal course of
business activities, none of which, in management's opinion, is expected to have
a material adverse impact on our results of operations or our financial
position.
8
<PAGE>
USE OF PROCEEDS
The selling stockholders are selling all of the common stock covered by
this prospectus for their own account. Accordingly, we will not receive any
proceeds from the resale of such common stock.
PLAN OF DISTRIBUTION; SELLING STOCKHOLDERS
This prospectus relates to 579,700 shares of common stock that may be
offered and sold from time to time by the selling stockholders. It also relates
to an indeterminate number of additional shares of our common stock that is
issuable upon conversion of the debenture if the conversion price is adjusted,
as permitted by the debenture. Set forth below is information, as of the date of
this prospectus, regarding the beneficial ownership of the shares by the selling
stockholders. The number of shares shown as beneficially owned by the selling
stockholders represents all of the shares to be issued upon full conversion of
the debenture. The information regarding the selling stockholders' beneficial
ownership after this offering assumes that all shares of common stock offered by
the selling stockholders through this prospectus are actually sold. The
presentation is based on 11,126,606 shares of our common stock outstanding as of
May 11, 1999.
<TABLE>
<CAPTION>
Number of Shares Number of Common Stock
of Common Stock Shares of Beneficially Owned
Beneficially Owned Common Stock After Offering
Prior to Offering Offered
<S> <C> <C> <C>
- ------------------------------- -------------------- ------------- -------------------
Selling stockholders Number Percent
- ------------------------------- -------------------- ------------- ------- ---------
Intergraph Corporation 579,700(1) 579,700(1) -- -- *
One Madison Industrial Park
Huntsville, AL 35894
- -------------------------------
* Indicates less than 1%.
</TABLE>
(1) The shares of common stock beneficially owned by the selling stockholders
will be acquired upon the conversion of all, or part of the principal
amount of a convertible subordinated debenture issued to Intergraph in
connection with our acquisition of InterCAP, a former subsidiary of
Intergraph. The selling stockholders may at any time convert all or a part
of the debenture in integral multiples of $500,000. We may convert all, or
a part of the debenture in integral multiples of $500,000 if the price of
our common stock is 120% of the conversion price. The initial conversion
price is $10.00, so we may convert the debenture if our stock is trading at
$12.00 per share. The conversion price is subject to adjustment, however,
so the price at which we may convert the debenture may vary. The number of
shares covered by the debenture is also subject to adjustment in the event
of a stock split, recapitalization or similar transaction. The terms of the
acquisition require that we file the registration statement of which this
prospectus forms a part.
The selling stockholders have not, nor within the past three years have the
selling stockholders had, any position, office or other material relationship
with or any of our predecessors or affiliates.
We anticipate that the selling stockholders may sell all or a portion of
the shares offered by this prospectus from time to time on The Nasdaq National
Market, at fixed prices, at market prices prevailing at the time of sale or at
prices reasonably related to the market price, at negotiated prices, or by a
combination of these methods of sale through:
o ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o sales to one or more brokers or dealers as principal, and the resale by
those brokers or dealers for their account, including resales to other
brokers and dealers;
o block trades in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal in order to facilitate the transaction; or
o privately negotiated transactions with purchasers.
9
<PAGE>
We are not aware as of the date of this prospectus of any agreements
between the selling stockholders and any broker-dealers with respect to the sale
of the shares offered by this prospectus. In connection with distributions of
the shares or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers. In connection with these transactions:
o broker-dealers may engage in short sales of the shares covered by this
prospectus in the course of hedging the positions they assume with selling
stockholders;
o the selling stockholders may sell shares of our common stock short and
deliver the shares to close out its short positions;
o the selling stockholders may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the shares
covered by this prospectus, which the broker-dealer may resell according to
this prospectus; and
o the selling stockholders may pledge the shares registered covered by this
prospectus to a broker or dealer and upon a default, the broker or dealer
may effect sales of the pledged shares according to this prospectus.
The selling stockholders and any broker, dealer or other agent executing
sell orders on behalf of the selling stockholders may be considered to be
"underwriters" within the meaning of the Securities Act, in which event
commissions received by any such broker, dealer or agent and profit on any
resale of the shares may be considered to be underwriting commissions under the
Securities Act. Such commissions received by a broker, dealer or agent may be in
excess of customary compensation.
We will provide information as to whether underwriters who may be selected
by the selling stockholders, or any other broker-dealer, is acting as principal
or agent for the selling stockholders, the compensation to be received by
underwriters who may be selected by the selling stockholders, or any
broker-dealer, acting as principal or agent for the selling stockholders and the
compensation to be received by other broker-dealers, will, to the extent
required, be provided in a supplement to this prospectus. Any dealer or broker
participating in any distribution of the shares may be required to deliver a
copy of this prospectus, including the prospectus supplement, if any, to any
person who purchases any of the shares from or through such dealer or broker.
All costs, fees and expenses of registration incurred in connection with
the offering will be borne by us. All selling and other expenses incurred by the
selling stockholders will be borne by the selling stockholders.
The selling stockholders will be subject to applicable provisions of the
Exchange Act and its rules and regulations, including without limitation, Rule
102 under Regulation M. These provisions may limit the timing of purchases and
sales of any of the common stock by the selling stockholders. Rule 102 under
Regulation M provides, with some exceptions, that it is unlawful for the selling
stockholders or their affiliated purchasers to, directly or indirectly, bid for
or purchase or attempt to induce any person to bid for or purchase, for an
account in which the selling stockholders or affiliated purchasers have a
beneficial interest in any securities that are the subject of the distribution
during the applicable restricted period under Regulation M. All of the above may
affect the marketability of the common stock. To the extent required by law, we
may require the selling stockholders, and their brokers if applicable, to
provide a letter that acknowledges compliance with Regulation M under the
Exchange Act before authorizing the transfer of the selling stockholders'
shares.
We have agreed to indemnify the selling stockholders from any losses or
damages arising from any misstatement of a material fact contained in, or any
omission of material facts from, the registration statement of which this
prospectus forms a part. However, we have no obligation to indemnify the selling
stockholders for losses or damages caused by any information the selling
stockholders have provided us in writing for use in the registration statement;
and the selling stockholders must indemnify us for any losses or damages arising
from information provided by the selling stockholders in writing to us for use
in the registration statement. The selling stockholders may agree to indemnify a
number of persons, including broker-dealers or agents that participate in
transactions involving sales of the shares against some types of liabilities,
including liabilities arising under the Securities Act.
In addition, our charter documents provide that our board of directors has
the discretion to indemnify officers, directors, employees, and others acting on
behalf of our company to the fullest extent permissible by law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of our company,
we have been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
10
<PAGE>
LEGAL MATTERS
The validity of the shares being offered by will be passed upon by Jenkens
& Gilchrist, a Professional Corporation, Dallas, Texas.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules included in our Annual Report on Form 10-K
for the year ended June 30, 1998, as set forth in their report, which is
incorporated in this prospectus by reference. Our consolidated financial
statements and schedules are incorporated by reference in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
11
<PAGE>
II-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
the distribution of the securities covered by this Registration Statement. All
of the expenses will be borne by the Company except as otherwise indicated.
SEC Registration Fee........................................$1,284.42
Printing and Engraving Fees and Expenses............................*
Legal Fees and Expenses ............................................*
Accounting Fees and Expenses........................................*
Miscellaneous.......................................................*
Total........................................................$ *
* To be provided by amendment.
Item 15. Indemnification of Directors and Officers
Section 2.02-1 of the Texas Business Corporation Act (the "TBCA") permits
indemnification of directors, officers, employees, agents and persons acting on
behalf of a corporation in certain capacities under certain conditions and
subject to certain limitations. Article XI of the Articles of Incorporation, as
amended, of the Registrant provides for the indemnification of directors,
officers and other authorized representatives of the Registrant to the maximum
extent permitted by the TBCA. Section 2.02-1 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or complete action, suit or proceeding, whether civil,
criminal, administrative or investigative, any appeal in such action, suit or
proceeding and any inquiry or investigation that could lead to such an action,
suit or proceeding, by reason of the fact that he is or was a director, officer
or agent of the corporation if serving at the request of the corporation.
Depending on the character of the proceeding, a corporation may indemnify
against expenses (including attorneys' fees), judgments, penalties (including
excise and similar taxes), fines settlements and expenses reasonably incurred in
connection with the proceeding if the person indemnified acted in good faith and
in a manner he reasonably believed to be in or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. If,
however, the indemnified person is found liable to the corporation, the
indemnification is limited to reasonable expenses actually incurred by such
person in connection with the proceeding. No indemnification shall be made if
such person is found liable for willful or intentional misconduct in the
performance of his duty to the corporation. Section 2.02-1 further provides
that, to the extent a director or officer of a corporation has been successful
in the defense of any action, suit or proceeding referred to above, or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Article XI of the Registrant's Articles of Incorporation, as amended,
permits the Registrant to purchase insurance on behalf of any such person
against any liability asserted against and/or incurred by him in any such
capacity, or arising out of his status as such, whether or not the Registrant
would have the power to indemnify him against such liability otherwise.
Item 16. Exhibits
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated herein by reference to a prior
filing of the Company under the Securities Act or the Exchange Act as indicated
in parenthesis:
EXHIBIT NUMBER DESCRIPTION
--------------- -----------------------------------------------------------
2.1 Agreement and Plan of Merger dated as of April 15 1999 by
and among Micrografx, Inc., InterCAP Acquisition, Inc.,
InterCAP Graphics Systems, Inc. and Intergraph Corporation
(incorporated by reference to Exhibit 2.1 to the
Registrant's Form 8-K, filed on May 3, 1999)
3.1 Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Registrant's Registration Statement on
Form S-1, File No. 33-34842)
3.2 Amendment to Articles of Incorporation, (incorporated by
reference to Exhibit 3.2 to the Registrant's Annual Report
on Form 10-K for the period ended March 31, 1993
4.1 Specimen Certificate for the Common Stock (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-1, File No. 33-34842, as amended).
4.2 Subordinated Convertible Debenture, dated as of April 16,
1999 between Micrografx, Inc. and Intergraph Corporation
(incorporated by reference to Exhibit 10.1 to the
Registrant's Form 8-K, filed on May 3, 1999)
5.1 Opinion of Jenkens & Gilchrist, a Professional Corporation,
regarding legality of shares being registered
*23.1 Consent of Ernst & Young LLP
*23.2 Consent of Arthur Anderson L.L.P.
23.3 Consent of Jenkens & Gilchrist, a Professional Corporation
(included in Exhibit 5.1 hereto)
24.1 Powers of attorney (included in the signature page of this
Registration Statement).
(b) Financial Statement Schedules:
Not Applicable.
* To be filed by amendment
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
<PAGE>
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the provisions set forth in Item 15, or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all requirements for filing a Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Richardson, State of Texas, on May 13, 1999.
MICROGRAFX, INC.
By: /s/ Douglas M. Richard
-----------------------
Douglas M. Richard (Principal Executive Officer)
By: /s/ John M. Carradine
-----------------------
John M. Carradine (Principal Financial Officer)
By: /s/ Darryl Halbert
-----------------------
Darryl Halbert (Principal Accounting Officer)
Each individual whose signature appears below hereby designates and
appoints R. Edwin Pearce, as such person's true and lawful attorney-in-fact and
agent (the "Attorney-in-Fact") with full power of substitution and
resubstitution, for such person and in such person's name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as the Attorney-in-Fact deems
appropriate, and any registration statement relating to the same offering filed
pursuant to Rule 462(b) under the Securities Act of 1933 and requests to
accelerate the effectiveness of such registration statements, and to file each
such amendment with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
Attorney-in-Fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that such Attorney-in-Fact or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
their capacities and on the dates indicated.
- ----------------------------- ----------------------- ------------------------
SIGNATURE TITLE DATE
- ----------------------------- ----------------------- ------------------------
/s/ Russell Hogg Chairman of the Board May 13, 1999
- --------------------------
Russell Hogg
/s/ Douglas M. Richard Director May 13, 1999
- --------------------------
Douglas M. Richard
/s/ Eugene P. Beard Director May 13, 1999
- --------------------------
Eugene P. Beard
/s/ Robert Kamersham Director May 13, 1999
- --------------------------
Robert Kamersham
/s/ Seymour Merrin Director May 13, 1999
- --------------------------
Seymour Merrin
/s/ Avery More Director May 13, 1999
- --------------------------
Avery More
<PAGE>
Exhibit 5.1
[LETTERHEAD OF JENKENS & GILCHRIST]
May 13, 1999
Micrografx, Inc.
1303 Arapaho Road
Richardson, Texas 75081
Re: Micrografx, Inc. Common Stock
Gentlemen:
We have acted as counsel to Micrografx, Inc. (the "Company"), a Texas
corporation, in connection with the registration of 579,900 shares of common
stock, par value $0.01 per share, of the Company (the "Common Stock") pursuant
to a Registration Statement on Form S-3 (the "Registration Statement"), filed
with the Securities and Exchange Commission under the Securities Act of 1933 on
May 13, 1999.
In connection therewith, we have examined and relied upon the original,
or copies, certified to our satisfaction, of (i) Articles of Incorporation (the
"Articles") of the Company; (ii) minutes and records of the corporate
proceedings of the Company with respect to the issuance of the Common Stock and
related matters; (iii) the Registration Statement and exhibits thereto, and (iv)
such other documents and instruments as we have deemed necessary for the
expression of opinions herein contained. In making the foregoing examinations,
we have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals, and the conformity to original documents
of all documents submitted to us as certified or photostatic copies. As to
various questions of fact material to this opinion and as to the content and
form of the Articles, minutes, records, resolutions and other documents or
writings of the Company, we have relied, to the extent we deem reasonably
appropriate, upon representations or certificates of officers or directors of
the Company and upon documents, records and instruments furnished to us by the
Company, without independent check or verification of their accuracy.
Based upon the foregoing examination, we are of the opinion that the
Common Stock to be issued as described in the Registration Statement, has been
duly authorized for issuance and upon issuance, the Common Stock will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name as it appears under the
caption "Legal Matters" in the Prospectus forming a part of the Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, and the rules and regulations of the Securities and
Exchange Commission issued thereunder.
Sincerely,
JENKENS & GILCHRIST,
a Professional Corporation
By: /s/ L. Steven Leshin
------------------------------
L. Steven Leshin, for the Firm
<PAGE>
