SCHEDULE 14A INFORMATION
STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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Section 240.l4a-12
Micrografx, Inc.
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(Name of Registrant as Specified in Its Charter)
Not Applicable
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<PAGE>
MICROGRAFX, INC.
8144 WALNUT HILL LANE, SUITE 1050
DALLAS, TEXAS 75231
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 10, 2001
To the Shareholders of
Micrografx, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
Micrografx, Inc. (the "Company") will be held on the 10th day of January,
2001, at 10:00 a.m. (local time) at the Doubletree Hotel, 8250 North Central
Expressway, Dallas, Texas 75206 for the following purposes:
1. The election of three (3) 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. A proposal to approve an amendment to the Micrografx, Inc. 1995
Incentive and Non-statutory Stock Option Plan to increase
the number of shares available for issuance under the plan by an
additional 1,000,000 shares.
3. A proposal to approve an amendment to the Micrografx, Inc.
Employee Stock Purchase Plan to increase the number of shares
available for purchase under such plan from 1,300,000 to 2,000,000
shares.
4. The ratification of the appointment by the Board of Directors of
Ernst & Young L.L.P. as independent public accountants for
the Company for the fiscal year ending June 30, 2001;
5. The transacting of 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 November 13,
2000 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 you 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
John M. Carradine
Secretary
December 4, 2000
<PAGE>
MICROGRAFX, INC.
8144 WALNUT HILL LANE, SUITE 1050
DALLAS, TEXAS 75231
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 10, 2001
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 2000 Annual Meeting of Shareholders of Micrografx to be held on
January 10, 2001 (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 PROXY 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: 8144 Walnut Hill Lane, Suite 1050, Dallas, Texas 75231, 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 8144
Walnut Hill Lane, Suite 1050, Dallas, Texas 75231.
This Proxy Statement and accompanying form of proxy are being mailed to
the Company's shareholders on or about December 10, 2000. The Company's Annual
Report to Shareholders covering the Company's fiscal year ended June 30, 2000,
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
$4,000.00 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.
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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 three (3) 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. A proposal to approve an amendment to the Micrografx, Inc. 1995
Incentive and Non-statutory Stock Option Plan to increase
the number of shares available for issuance under the plan by
an additional 1,000,000 shares.
3. A proposal to approve an amendment to the Micrografx, Inc.
Employee Stock Purchase Plan to increase the number of shares
available for purchase under such plan from 1,300,000 to 2,000,000
shares.
4. The ratification of the appointment by the Board of Directors of
Ernst & Young L.L.P. as independent public accountants for
the Company for the fiscal year ending June 30, 2001;
5. 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 November 13, 2000 (the "Record Date").
On the Record Date, there were issued and outstanding 11,497,981 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 issued and outstanding shares of
Common Stock represented in person or by proxy at the Annual Meeting and
entitled to vote 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
present in person or represented by proxy at the meeting entitled to vote. 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
comprised of not less than five but not more than nine directors. The current
number of Directors stands at five. On September 5, 2000 the Company issued
1,120,000 shares of its Series A Convertible Preferred Stock ("Series A
Preferred Stock") in a private transaction. Pursuant to the terms of the Series
A Preferred Stock, the holders of such shares as a group have the right to elect
two members of the Board of Directors. The two directors elected by the Series A
Shareholders are James L. Hopkins and Russell E. Hogg. All other members of the
Board of Directors are elected by the holders of the Common Stock and will stand
for election at the Annual Meeting. They will each hold office until the next
annual election of directors by shareholders or, in the event of their
resignation from the Board, until their respective successors shall have been
duly elected and shall have qualified.
On June 30, 2000, the Board of Directors was comprised of Messrs.
Douglas M. Richard (Mr. Richard was also President and Chief Executive Officer
of the Company), Russell E. Hogg, Robert Kamerschen, Seymour Merrin, and Avery
More. On August 30, 2000 Mr. Richard resigned from the Board of Directors and
James L. Hopkins was elected as his replacement, and was further elected
Chairman of the Board of Directors. On September 5, 2000 Messrs. Merrin,
Kamerschen, and More resigned their positions on the Board of Directors and its
committees. On October 16, 2000, James L. Hopkins was appointed to the
additional positions of President and Chief Executive Officer of the Company. On
October 30, 2000, George W. Macintyre and P. Michael Sullivan agreed to serve as
directors effective November 1, 2000. On November 17, 2000, John M. Carradine
was appointed to the Board of 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. As of June 30, 2000, there were no family
relationships between any of the officers and directors of the Company.
<TABLE>
<CAPTION>
SERVED AS
NOMINEE DIRECTOR
AGE SINCE PRESENT OFFICE(S) HELD IN MICROGRAFX
DIRECTORS ELECTED BY THE SERIES A PREFERRED SHAREHOLDERS
<S> <C> <C> <C>
James L. Hopkins 53 2000 President, Chief Executive Officer and
8144 Walnut Hill Lane Chairman of the Board of Directors
Suite 1050
Dallas, TX 75231
Russell E. Hogg 71 1997 Director
Sunnygables, 2 Salsbury Place
South Nyack, NY 10960
DIRECTORS TO STAND FOR ELECTION AT THE ANNUAL MEETING OF SHAREHOLDERS
George W. Macintyre 55 2000 Director
100 Congress Ave
Suite 600
Austin, TX 78701
</TABLE>
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<TABLE>
<S> <C> <C> <C>
P. Michael Sullivan 47 2000 Director
5009 Sail Creek Drive
Plano, Texas 75093
John M. Carradine 42 2000 Chief Financial Officer, Treasurer,
8144 Walnut Hill Lane Corporate Secretary, Director
Suite 1050
Dallas, TX 75231
</TABLE>
The following is a brief account of the business experience, during the
past five years, of each of the directors or nominee for director of the
Company.
James L. Hopkins has been elected as the Chief Executive Officer of the
Company effective October 15, 2000, and was elected a director and Chairman of
the Board of Directors of the Company on August 30, 2000. From September 1999 to
October 2000, Mr. Hopkins served as Managing Director of the Austin office of
Hoak, Breedlove, Wesneski, LLC, a private investment-banking firm headquartered
in Dallas, Texas. From May 1999 to September 1999 he served as Senior Vice
President of Finance and Strategic Planning and as a Director of 3dfx
Interactive, Inc. From January 1995 through May 1999. Mr. Hopkins served as a
Director and as Chief Financial Officer and Vice President of Strategic
Marketing of STB Systems, Inc.
Russell E. Hogg is the Chairman and CEO of Hogg International, a global
financial service company whose clients draw upon global expertise in the areas
of finance, strategic marketing and "back room" operations, located in Nyack,
New York. Mr. Hogg joined the Board of Directors and was elected to the position
of Chairman of the Board in May 1997. He resigned as Chairman of Board of
Directors of Micrografx Inc. on August 30, 2000. In the past, he served as a
consultant to the National Academy of Sciences sub-committee, which evaluated
and documented the shortcomings within the Internal Revenue Service
telecommunications and processing modernization project and as a board member
for several major corporations. Mr. Hogg is the Chairman of the Institute for
International Sports, sponsor in 1993 of the Inaugural World Scholar-Athlete
Games. From 1980 to 1989, Mr. Hogg was the Chief Executive Officer for
MasterCard.
George W. Macintyre is the President and Chief Executive Officer of
Adhesive Software Inc., an Austin, Texas-based software company focused on the
development of solutions for deploying and managing complex Web sites. He has
held this position since August 2000. From March 1998 to July 2000 he was Senior
Vice President of Corporate Strategy with Inprise/Borland, a provider of
Internet access infrastructure and application development tools. From February
1997 to December 1998, he was Executive Vice President at MCSB Technology
Corporation, a server performance enhancement software company. From February
1994 to January 1997 he was Vice President of Marketing and Business Development
at Open Connectivity Systems, Inc., a connectivity software company.
P. Michael Sullivan has been an independent investor, businessman and
financial and management consultant since September 1997. From January 1997 to
September 1997 he was Chief Financial Officer of ErgoBilt, Inc., a developer,
manufacturer and marketer of customized ergonomic products for businesses and
home offices. From September 1996 to January 1997, Mr. Sullivan was a financial
consultant to ErgoBilt, Inc. From 1978 to September 1996 Mr. Sullivan was Vice
President, Chief Financial Officer, Secretary and Treasurer for USDATA
Corporation, a software, systems and consulting company for information systems
that supervise, monitor and control manufacturing and other automated processes.
Mr. Sullivan is a certified public accountant in the state of Texas.
John M. Carradine was named the Company's Chief Financial Officer and
Treasurer in October 1998. In October 1999, Mr. Carradine was also named
Corporate Secretary of the Company. Prior to his appointment at Micrografx, Mr.
Carradine was the Chief Financial Officer and Treasurer of Intellicall, Inc., a
telecommunications company, where he held various financial positions for eight
years. From 1983 to 1990, Mr. Carradine was with
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Computer Language Research, Inc., a data-services and software company where
he served as Treasurer. Mr. Carradine is a licensed CPA in the state of Texas.
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
each 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 currently chaired
by Russell E. Hogg. During the fiscal year ending June 30, 2000, the Audit
Committee was composed of Messrs. Avery More, as Chairman, and Robert Kamerschen
and Russell E. Hogg. 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 six meetings
during the fiscal year ending June 30, 2000. No member of the Audit Committee
attended fewer than 100% of the meetings. For the fiscal year ending June 30,
2001, the Committee will be comprised of Messrs. Hogg, Macintyre, and Sullivan,
with Mr. Hogg having been elected as Chairman of the Committee.
The Board of Directors has a standing Executive Compensation and Stock
Option Committee currently chaired by Russell E. Hogg. During the fiscal year
ended June 30, 2000, the Stock Option Committee was composed of Messrs. Avery
More , Russell Hogg, and Robert Kamerschen, as Chairman. The Committee is
responsible for reviewing and determining matters of executive compensation and
administering the Company's Incentive and Non-statutory Stock Option Plan (the
"Stock Option Plan"). The Committee held four meetings during the fiscal year
ended June 30, 2000. No member of the Committee attended fewer than 100% of the
meetings. For the fiscal year ending June 30, 2001, the Committee will be
comprised of Messrs. Hogg, Macintyre and Sullivan.
The Board of Directors has a standing Nominating Committee, chaired by
Mr. Hogg. During the fiscal year ended June 30, 2000, the Nominating Committee
was composed of Messrs. Hogg and Kamerschen. The Nominating Committee is
responsible for selection for nomination of candidates to serve on the Company's
Board of Directors. In recommending candidates to the Board, the Nominating
Committee seeks persons of proven judgment and experience. The Nominating
Committee held no meetings during the year ended June 30, 2000. For the fiscal
year ending June 30, 2001, the Nominating Committee will be composed of Messrs.
Macintyre (Chairman) and Hogg.
The Board of Directors held seven meetings during the fiscal year ended
June 30, 2000. Various matters were also approved during the last fiscal year by
unanimous written consent of the Board of Directors. During the fiscal year
ended June 30, 2000, no director attended fewer than 100% of the aggregate of
(i) the total number of meetings 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.
During the fiscal year ended June 30, 2000, each director who is not an
employee of the Company received an annual retainer of $20,000 and a fee of
$10,000 for attending all board and committee meetings held during the year. In
addition, each committee chairperson received an annual 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, the Company agreed to pay Mr. Hogg the following additional compensation
for serving as Chairman: (i) during each year of service in such capacity, a
consulting fee of $1,500 per each day 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
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non-statutory stock option grants, each covering 5,000 shares, in each of the
years 1998 and 1999, and for the year 2000 vesting over a period of four (4)
years from the date of grant.
All non-employee directors are eligible to participate in the Company's
1995 Director Option Plan (the "1995 Director Plan"). The 1995 Director Plan
provides that on each October 1, after the completion of one year of service,
each eligible non-employee director will be entitled to receive an option for
10,000 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, 2000, Mr. Hogg was the only eligible director to receive a grant of options
covering 10,000 shares of Common Stock with an exercise price of $1.91 per
share, representing the closing price of the Company's stock as of October 2,
2000, pursuant to the terms of the 1995 Director Plan.
The shareholders at the 1997 Annual Meeting approved a proposal to
grant non-employee directors the ability to substitute non-statutory options for
cash fees that reduced the cash cost to the Company associated with compensation
of its non-employee directors. The proposal provided that such options (unlike
the annual grants) would not expire upon termination of a non-employee
director's board service, but would continue in effect for a term of five years
from the date of grant. The plan requires that each non-employee director must
make a semi-annual irrevocable election prior to April 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 are granted at the rate of $2.00 in option value (using present value
of the grant at date of grant under the Black-Scholes option pricing model) for
each $1.00 of cash director's fees which would otherwise be paid, and have an
exercise price equal to the fair market value of the Company's Common Stock on
the Option Election Date of each semi-annual period in question, exercisable in
increments of 25% per year for a term of five years. During fiscal year 2000,
under the stock-in-lieu of compensation provisions, Mr. More received options to
purchase 10,030 shares with an exercise price of $5.50. The amendment also
provided 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.
AUDIT COMMITTEE REPORT
The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached to this Proxy Statement as Appendix A.
The Audit Committee has (i) reviewed and discussed the Fiscal Year 2000 audited
financial statements with management of the Company; (ii) received the written
disclosures and the letter from the independent accountants, Ernst & Young,
L.L.P., but has not yet discussed the letter with them. The entire Board of
Directors recommended that the audited financial statements for the year ended
June 30, 2000 be included in the Company's Annual Report on Form 10-K, because
there was only one member on the Audit Committee at such time. The Audit
Committee has not discussed with the independent auditors the matters to be
discussed by SAS61 relating to the year-end financial statements. Messrs. Hogg,
Macintyre, and Sullivan are the current members of the Audit Committee and are
all independent as defined in Rule 4200(a)(15) of the National Association of
Securities Dealers listing standards.
The foregoing report has been furnished by the current members of the Audit
Committee, Messrs. Hogg, Macintyre, and Sullivan.
SECTION 16(A) 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
beneficial owners 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
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reporting persons that no Forms 5 were required for those persons, the Company
believes that, during the fiscal year ended June 30, 2000, all filing
requirements applicable to its officers, directors, and greater than ten-percent
beneficial owners have been met.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" EACH OF THE INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
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PROPOSAL TO AMEND THE MICROGRAFX 1995 INCENTIVE AND
NON-STATUTORY STOCK OPTION PLAN
(ITEM 2)
GENERAL
The Company utilizes 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 Non-statutory 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 3,700,000 to 4,700,000 shares. The Board of Directors
increased the number of available shares under the Option Plan because as of
September 30, 2000, only 348,211 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 four million seven hundred thousand (4,700,000)
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 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 1,000,000 additional shares of
Common Stock issuable under this amendment under the Securities Act, assuming
the shareholders 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 at the time such employee joins 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.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE AMENDMENT OF THE MICROGRAFX, INC.
1995 INCENTIVE AND NON-STATUTORY 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 non-statutory stock options to key employees of the Company,
including employees who also serve as officers or directors of the Company, and
initially provided for the reservation of 1,500,000 shares of Common Stock for
issuance upon exercise of options granted under the Option Plan (a cumulative
total of 4,700,000 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 non-statutory 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.
Russell Hogg, George Macintyre, and Michael Sullivan.
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.
9
<PAGE>
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, only
the participant may exercise an option. 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, re-capitalization, 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 required withholding taxes. 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.
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
non-statutory 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 non-statutory 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 non-statutory 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
10
<PAGE>
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
non-statutory stock option. Accordingly, an optionee who is subject to the
alternative minimum tax must include in 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.
11
<PAGE>
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 1,300,000 to
2,000,000 shares. The Board of Directors increased the number of available
shares under the Stock Purchase Plan because as of September 30, 2000, only
179,126 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 700,000 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.
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. On October 21, 1997, 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 800,000
to 1,300,000, and on November 4, 1997, 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 1,300,000 to 2,000,000 shares subject to approval of the
Company's stockholders.
12
<PAGE>
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 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.
13
<PAGE>
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 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 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
14
<PAGE>
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, 2000 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.
Shares
Purchased
during
Year End
Name of Individual or Group June 30, 2000
--------------------------- -------------
Kenneth Carraher 5,473
15
<PAGE>
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 4)
The Board of Directors has appointed Ernst & Young L.L.P., 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, 2001. Representatives 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 and Young L.L.P. 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 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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE RATIFICATION OF ERNST AND YOUNG AS INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 2001.
16
<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 September 30, 2000
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:
<TABLE>
<CAPTION>
COMMON STOCK PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED COMMON STOCK(1)
<S> <C> <C>
The Lake Fund 2,092,400 18.20%
Roemer Visscherplein 19
2106 AG Heemstede
The Netherlands
Douglas M. Richard 186,382(2) 1.57%
Russell E. Hogg 41,250(3) *
Kenneth Carraher 148,672(4) 1.25%
John Carradine 25,504(5) *
James L. Hopkins - *
P. Michael Sullivan - *
George W. Macintyre - *
All executive officers and directors as a group 401,808(6) 3.38%
</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 11,497,981 shares outstanding
as of September 30, 2000, 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, 2000, are based upon the sum of 11,497,981 shares plus the
number of shares subject to options that are presently exercisable or
exercisable within 60 days of September 30, 2000, held by each of them
respectively, as indicated in the following notes.
(2) Consists of 61,732 held and 124,650 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, over which she
has sole voting and investment power.
(3) Consists of 41,250 shares subject to stock options that are presently
exercisable or that are exercisable within the next 60 days.
(4) Consists of 86,203 shares held directly by Mr. Carraher and 62,469 shares
subject to stock options that are presently exercisable or that are
exercisable within the next 60 days.
(5) Consists of 25,504 shares subject to stock options that are presently
exercisable or that are exercisable within the next 60 days.
(6) Includes 253,873 shares subject to stock options that are presently
exercisable or that are exercisable within the next 60 days.
17
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the compensation
of the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers (and one former executive officer for whom
disclosure would have been required but for the fact that he was not serving as
such at the end of the most recently completed fiscal year), during fiscal years
ended June 30, 2000, 1999 and 1998.
<TABLE>
<CAPTION>
Annual Compensation Long Term
----------------------- Compensation
Awards
---------------
Year Options/
Name Ending Salary Variable SARs All Other
Principal Position June 30 ($)(1) Comp. ($) (#)(2) Comp. (3)
------------------------- -------- ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Douglas M. Richard 2000 $270,508 $13,125 175,000 $4,372
Chief Executive 1999 250,000 78,338 43,300 4,142
Officer(4) 1998 217,398 11,131 80,000 3,211
------------------------- -------- ------------ ------------ --------------- ------------
Kenneth Carraher
President of 2000 $205,539 $20,813 85,000 $5,434
Enterprise Process 1999 129,231 49,244 8,000 4,025
Management Solutions 1998 107,962 30,162 68,469 3,437
------------------------- -------- ------------ ------------ --------------- ------------
John M. Carradine 2000 $178,385 $7,031 67,700 $4,080
Chief Financial Officer 1999 -- -- -- --
and Corporate Secretary 1998 -- -- -- --
------------------------- -------- ------------ ------------ --------------- ------------
Frank Childers
Former Executive Vice 2000 $99,171 $43,750 -- $3,573
President of Global 1999 151,390 61,593 80,600 1,566
Sales and Marketing 1998 -- -- -- --
------------------------- -------- ------------ ------------ --------------- ------------
</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, 2000.
(3) All other compensation includes company contributions in fiscal 2000
in the following amounts to match amounts deferred pursuant to the
Company's 401(k) Savings Plan: Mr. Richard $4,372, Mr. Carraher $5,434,
Mr. Carradine $4,080 and Mr. Childers
$3,573.
(4) Mr. Richard was Chief Executive Officer and President of Micrografx, Inc.
at June 30, 2000. At the date of this filing, Mr. Richard is no longer
acting in that capacity and has assumed the role of Chief Executive
Officer of Image2Web Inc., a wholly owned subsidiary of Micrografx, Inc.
18
<PAGE>
GRANTS OF OPTIONS
The following table sets forth details regarding stock options granted
to the named executive officers listed in the Summary Compensation Table during
the fiscal year 2000. In addition, there are shown the "option spreads" that
would exist for the respective options granted based upon assumed rates of
annual compound stock appreciation of 5% and 10% from the date the options were
granted over the full option term. The Company granted no SARs in fiscal year
2000.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
% OF TOTAL
OPTIONS/
OPTIONS/ SARS POTENTIAL REALIZABLE VALUE
SARS GRANTED TO EXERCISE OR AT ASSUMED ANNUAL RATES OF
GRANTED (1) EMPLOYEES IN BASE PRICE EXPIRATION STOCK PRICE APPRECIATION
NAME (#) FISCAL YEAR ($/SH) DATE FOR OPTION TERM (2)
----------------------------
5% ($) 10% ($)
--------------------- ------------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Doug Richard 175,000 11.95% $ 4.63 3/8/10 $509,012 $1,289,935
Ken Carraher 85,000 5.81% $ 4.63 3/8/10 $247,234 $ 626,540
John Carradine 67,700 4.62% $ 4.63 3/8/10 $196,915 $ 499,021
Frank Childers -- -- -- -- -- --
</TABLE>
All of the options granted to executives were granted under the Company's 1995
Incentive and Non-statutory Stock Option Plan.
(1) 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.
(2) Options vest generally in increments of 25% annually. The options have a
term of ten 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.
19
<PAGE>
EXERCISES OF OPTIONS
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during fiscal year 2000
and unexercised options held as of June 30, 2000. No SARs were exercised by the
named executive officers during fiscal year 2000.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
NUMBER OF SHARES FY-END (#) FY-END ($)
ACQUIRED ON EXERCISE EXERCISABLE/ EXERCISABLE/
NAME (#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---------------------- ---------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Doug Richard -- -- 107,159/254,141 --/--
Kenneth Carraher -- -- 50,469/111,000 --/--
John Carradine -- -- 12,752/105,956 --/--
Frank Childers -- -- --/-- --/--
</TABLE>
(1) Values are stated based upon the closing price of $2.31 per share of the
Company's common stock on the NASDAQ/NMS on June 30, 2000, the last trading
day of fiscal 2000.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL PROVISIONS
The Company has entered into agreements providing for contractual
benefits and compensation with John Carradine, Ken Carraher, and Douglas
Richard. The agreements provide for severance to such individuals equal to six
(6) months base salary in the event of their severance from the Company without
cause in the case of Mr. Carradine and Mr. Carraher, and (12) months base salary
in the event of his severance in the case of Mr. Richard. These Agreements
expire two years after the date of a Change in Control, and require payment to
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 variable compensation 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 Mr. Carradine's and Mr. Carraher's 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 (12) months and the acceleration and/or immediate vesting of
all stock options and restricted stock awards then outstanding.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the 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 Compensation Committee served on the compensation committee, or as a
director, of another corporation, one of whose directors or executive officers
served on the Compensation Committee of or whose executive officers served on
the Company's Board of Directors.
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COMPENSATION OF DIRECTORS
For information on compensation paid to directors of the Company during
Fiscal Year 2000, see Item 1 "Election of Directors."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a severance agreement with R. Edwin Pearce, former
General Counsel and Secretary, whereby he resigned his position with the Company
effective September 30, 1999. Under the terms of the severance agreement, Mr.
Pearce was paid the sum of $83,464, representing his base salary and bonuses
through March 31, 2000. The vesting schedule of outstanding stock options
covering 62,247 shares owned by Mr. Pearce was accelerated. The agreement
further provided an extension of the expiration dates so that these options
would expire unless exercised by October 1, 2000. As a further consideration of
the severance agreement, Mr. Pearce agreed to not compete with or solicit
customers of the Company for a period of two (2) years, nor to hire employees of
the Company for a one (1) year period.
REPORT OF EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
During the Fiscal year ending June 30, 2000, the Executive Compensation
and Stock Option Committee of the Board of Directors (the "Committee") was
composed of certain of the Company's non-employee directors, Messrs. Russell E.
Hogg, Robert Kamerschen, and Avery More. The Committee is now composed of
Messrs. Hogg (Chairman), Macintyre, and Sullivan. The Committee is responsible
for setting the salary of the President and Chief Executive Officer of the
Company, recommending to the full Board 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 approved by the Committee, and are reviewed by the Board
of Directors.
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, periodic variable compensation, 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 management and stock-based compensation arrangements are
beneficial in aligning management 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 and Change in Control
Provisions" for certain 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 year 2000.
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RELATIONSHIP OF COMPANY PERFORMANCE TO EXECUTIVE COMPENSATION
Compensation paid to the Company's named executive officers in fiscal
year 2000, as reflected in the Summary Compensation Table, consisted primarily
of base salary, variable compensation, and stock option grants.
The Company utilizes periodic competitive pay analyses of software
companies compiled by an independent nationally recognized compensation and
benefits consulting firm (the "Independent Consultant"), and 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 variable compensation 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, variable compensation, 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, the Company's operating
performance, and the attainment of financial and strategic objectives had an
important effect on compensation earned for fiscal year 2000 by several of the
Company's named executive officers under their variable compensation plans.
Under these plans, if corporate operating performance failed to meet minimum
objectives, or if various individual performance goals were not satisfied, no
variable compensation would be payable. If corporate operating goals were
satisfied, performance criteria would then determine the amount of the
additional compensation earned. The amount of any variable compensation earned
is equivalent to the degree that individual performance objectives are
satisfied. The Committee subjectively determined that various criteria for
fiscal year 2000 satisfied the goals (described above) established for certain
key executive officers and variable compensation was thus paid to these
executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Hopkins will receive an annual salary, common stock, and stock
options and is eligible to receive a performance bonus. The Committee's general
approach in setting Mr. Hopkin'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. Hopkin's compensation with the
performance of the Company, while seeking to keep his compensation competitive
with that provided by comparable companies.
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE:
Russell E. Hogg P. Michael Sullivan
George W. Macintyre
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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 June 30, 1995 through
June 30, 2000.
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, 2001, 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," "Audit Committtee Report" 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 of 1933, as amended (the "1933 Act") or the Securities
Exchange Act of 1945 (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 1933 Act or the
Exchange Act.
By Order of the Board of Directors
John M. Carradine
Secretary
Date: December 4, 2000
Dallas, Texas
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APPENDIX A
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF MICROGRAFX, INC.
PURPOSE:
The Audit Committee will make such examinations as are necessary to
monitor the corporate financial reporting and the internal and external audits
of Micrografx, Inc. and its subsidiaries (the "Company"), to provide to the
Board of Directors (the "Board") the results of its examinations and
recommendations derived therefrom, to outline to the Board improvements made, or
to be made, in internal accounting controls, to nominate independent auditors,
and to provide to the Board such additional information and materials as it may
deem necessary to make the Board aware of significant financial matters that
require Board attention.
In addition, the Audit Committee will undertake those specific duties
and responsibilities listed below and such other duties as the Board shall from
time to time prescribe.
MEMBERSHIP:
The Audit Committee will consist of at least three (3) members of the
Board, all to be independent directors in accordance with Rule 4460 (d) of the
National Association of Securities Dealers ("NASD"). All directors must be able
to read and understand financial statements, including the Company's balance
sheet, income statement, and cash flow, (be financially literate or shall become
financially literate within a reasonable period of time after appointment to the
committee). At least one of the directors must have past employment experience
in finance or accounting, requisite professional certification in accounting, or
other comparable experience or background, including a current or past position
as a chief executive or financial officer or other senior officer with financial
oversight responsibilities. The members of the Audit Committee will be appointed
by and will serve at the discretion of the Board.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
1. Reviewing on a continuing basis, the adequacy of the Company's system
of internal controls.
2. Reviewing on a continuing basis, the activities, organizational
structure, and qualifications of the Company's internal audit function.
3. Reviewing the independent auditor's proposed audit scope and approach.
4. Conducting a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements
provided to management by the independent auditors.
5. Reviewing the performance of the independent auditors.
6. Recommending the appointment of independent auditors to the Board.
7. Reviewing fee arrangements with the independent auditors.
8. Reviewing before release, the audited financial statements and
Management's Discussion and Analysis in the Company's annul report on
Form 10-K.
9. Reviewing before release, the unaudited quarterly operating
results in the Company's quarterly earnings release and the
Company's Quarterly Report on Form 10-Q. The chair of the
committee may represent the entire committee for the purposes
of this review.
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10. Overseeing compliance with SEC requirements for disclosure of auditor's
services and audit committee members and activities.
11. Reviewing management's monitoring of compliance with Company's
Standards of Business Conduct and with the Foreign Corrupt Practices
Act.
12. Reviewing, in conjunction with counsel, any legal matters that could
have a significant impact on the Company's financial statements.
13. Providing oversight and review of the Company's asset
management policies, including an annual review of the
company's investment policies and performance for cash and
short-term investments.
14. If necessary, instituting special investigations and, if appropriate,
hiring special counsel or experts to assist.
15. Reviewing related party transactions for potential conflicts of
interest; and
16. Performing other oversight functions as requested by the full Board.
In addition to the above responsibilities, the Audit Committee
will undertake such other duties as the Board delegates to it, and will
report, as least annually, to the Board regarding the Committee's
examinations and recommendations.
MEETINGS:
The Audit Committee will meet at least two times each year.
The Audit Committee may establish its own schedule, which it will
provide to the Board in advance. Any action that may be taken by the
Audit Committee at a meeting of such committee, may be taken without a
meeting if a consent in writing setting forth the actions so taken
shall be signed by all of the members of the Audit Committee.
The Audit Committtee will meet separately with the Chief
Executive Officer and separately with the Chief Financial Officer of
the Company at least annually to review the financial affairs of the
Company. The Audit Committee will meet the independent auditors of the
Company, at such times as it deems appropriate, to review the
independent auditor's examination and management report.
REPORTS:
The Audit Committee will record is summaries of
recommendations to the Board in written form, which will be
incorporated as a part of the minutes of the Board meeting at which
those recommendations are presented.
MINUTES:
The Audit Committee will maintain written minutes of its
meetings, which minutes will be filed with the minutes of the meetings of the
Board.
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