<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
MICROFIELD GRAPHICS, INC.
________________________________________________________________________________
(Name of Issuer)
COMMON STOCK
________________________________________________________________________________
(Title of Class of Securities)
59506W1
_______________________________________________________________
(CUSIP Number)
Jon D. Botsford, Steelcase Inc., 901-44th Street S.E., Grand Rapids, MI 49508,
(616) 246-9600
________________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
March 19, 1998
_______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO. 59506W1 PAGE 2 OF 9 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Steelcase Inc. 38-0819050
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Michigan
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 0
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
747,198
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 350,000
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,007,198
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
25.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP NO. 59506W1 Page 3
Item 1. Security and Issuer.
- ---------------------------
The title of the class of equity securities to which this statement relates
is Common Stock ("Common Stock"), of Microfield Graphics, Inc., an Oregon
corporation (the "Company"). The address of the Company's principal executive
offices is 7216 SW Durham Road, Portland, Oregon 97224.
Item 2. Identity and Background.
- -------------------------------
This statement is being filed by Steelcase Inc. ("Steelcase"), a Michigan
corporation. The principal business of Steelcase is the manufacture of office
furniture and related products. The principal business and office address of
Steelcase is 901-44th Street S.E., Grand Rapids, Michigan 49508.
Steelcase has not, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). Steelcase
has not, during the last five years, been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ---------------------------------------------------------
This statement is being filed to report that, on March 19, 1998, Steelcase
acquired 350,000 shares of Common Stock and a warrant for the purchase of
260,000 shares of Common Stock (the "Warrant") for an aggregate purchase price
of $2,012,500. The source of the funds used in making the purchase was the
working capital of Steelcase.
The Warrant grants Steelcase the right to purchase all, but not less than
all, of 260,000 shares of Common Stock for an exercise price of $6.75 per share,
or $1,755,000 in the aggregate. The Warrant may not be exercised before March
19, 1999, or after March 19, 2001. The Warrant is attached hereto as Exhibit 2
and is incorporated herein by reference.
Item 4. Purpose of Transaction.
- ------------------------------
Steelcase acquired the shares of Common Stock and the Warrant pursuant to
the Common Stock Purchase Agreement between the Company and Steelcase, dated
March 16, 1998 (the "Purchase Agreement"), in order to acquire an investment in
the Company and to facilitate the joint development of products by the Company
and Steelcase and to provide the Company with working capital. The Purchase
Agreement is attached hereto as Exhibit 1 and is incorporated herein by
reference.
<PAGE>
CUSIP NO. 59506W1 Page 4
Pursuant to the Purchase Agreement, the Company, Steelcase and certain
executive officers and directors of the Company (the "Company Executives")
entered into a Share Ownership, Voting and Right of First Refusal Agreement (the
"Voting Agreement") on March 19, 1998. The Voting Agreement is attached hereto
as Exhibit 3 and is incorporated herein by reference. Pursuant to the Voting
Agreement, Steelcase and the Company Executives will vote all of their shares of
Common Stock to elect certain individuals to the Board of Directors of the
Company, including one individual designated by Steelcase, the current Chief
Executive Officer of the Company or his successor and three independent
directors (including two current directors) as designated by the majority of the
directors then in office. With regard to matters other than the election of
directors, Steelcase has agreed to vote all shares of Common Stock that it may
own in excess of 610,000 shares in proportion to the votes of all outstanding
shares of Common Stock. Also pursuant to the Voting Agreement, Steelcase has a
right of first refusal for any proposed sale of shares of Common Stock by the
Company Executives and a right of first offer for any proposed issuance of
shares of Common Stock by the Company, subject to exceptions for certain
issuances. Under the Voting Agreement, Steelcase has also agreed that it will
not transfer any shares of Common Stock until March 19, 2000, to any transferees
other then affiliates of Steelcase. Unless otherwise terminated pursuant to its
terms and conditions, the Voting Agreement will remain in effect until the
earlier of (a) such time as Steelcase and any affiliates of Steelcase own less
than 5 percent or more than 50 percent of the outstanding shares of Common Stock
or (b) March 19, 2003.
Pursuant to the Purchase Agreement, the Company and Steelcase also entered
into a Registration Rights Agreement (the "Registration Agreement") on March 19,
1998. The Registration Agreement is attached hereto as Exhibit 4 and is
incorporated herein by reference. The Registration Agreement provides that upon
request by Steelcase at any time after March 19, 2000, the Company will effect,
subject to certain limitations, the registration under the Securities Act of
1933, as amended, of the Common Stock purchased by Steelcase pursuant to the
Purchase Agreement, including any shares acquired by exercise of the Warrant.
Under the Purchase Agreement, the Company and Steelcase have also agreed to
use good faith efforts to negotiate and execute a joint development agreement
whereby the Company's products and technology will be incorporated into certain
of Steelcase's products. In the event that such an agreement is successfully
negotiated and executed, it is currently anticipated that Steelcase may obtain
an additional warrant to acquire 350,000 shares of Common Stock. Other than the
possibility of obtaining such additional warrant or the exercise of the Warrant
currently held by Steelcase, Steelcase has no current plan or proposal to
acquire or dispose of additional Common Stock.
Other than as described above (including, without limitation, in connection
with the Purchase Agreement, the Voting Agreement and the Registration Agreement
described above), Steelcase does not have any current plans or proposals for (i)
any extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, (ii) any sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries, (iii) any change in the present board of directors or management
of the Company,
<PAGE>
CUSIP NO. 59506W1 Page 5
including any plans or proposals to change the number or term of directors or to
fill any existing vacancies on the Board, (iv) any material change in the
Company's present capitalization or dividend policy, (v) any other material
change in the Company's business or corporate structure, (vi) any changes in the
Company's Articles of Incorporation or Bylaws or other actions which are
intended to impede the acquisition of control of the Company by any person,
(vii) causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
(viii) a class of the Company's equity securities becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended, or (ix) any action similar to those
enumerated above.
Item 5. Interest in Securities of the Issuer.
- --------------------------------------------
The number of shares of Common Stock beneficially owned by Steelcase is
1,007,198, which includes the 350,000 shares acquired by Steelcase on March 19,
1998, the 260,000 shares which Steelcase will have the right to acquire pursuant
to the Warrant (the "Warrant Shares") beginning on March 19, 1999, 281,148
shares owned by the Company Executives and 116,050 shares subject to issuance
pursuant to options held by the Company Executives, all of which options are
presently exercisable. The shares beneficially owned by Steelcase represent
25.5% of the Common Stock outstanding, based on the representations and
warranties of the Company in the Purchase Agreement that 3,228,914 shares of
Common Stock were outstanding as of February 28, 1998, adjusted to reflect the
350,000 shares issued to Steelcase and to reflect the shares to be issued
pursuant to the Warrant and the options held by the Company Executives.
Pursuant to the Voting Agreement described in Item 4, Steelcase has shared
voting power over 747,198 shares of Common Stock. Steelcase disclaims any voting
power over the Warrant Shares. Subject to the Voting Agreement, Steelcase has
sole dispositive power over the 350,000 shares it acquired on March 19, 1998.
Steelcase disclaims any dispositive power over the Warrant Shares and the shares
presently held by or subject to issuance pursuant to options held by the Company
Executives.
The identity and background of the Company Executives are as follows:
Name: William P. Cargile
----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: Director, Microfield Graphics, Inc.
----------------------------
Principal Business and Address of Principal Employer: Manufacture of
-----------------------------------------------------
computer conferencing and telecommunications products, 7216 SW Durham Road,
Portland, Oregon 97224
Citizenship: United States
-----------
Name: John B. Conroy
----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: President and Chief Executive Officer,
----------------------------
Microfield Graphics, Inc.
<PAGE>
CUSIP NO. 59506W1 Page 6
Principal Business and Address of Principal Employer:
----------------------------------------------------
Manufacture of computer conferencing and telecommunications products,
7216 SW Durham Road, Portland, Oregon 97224
Citizenship: United States
-----------
Name: Scott McVay
----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: Vice President of Sales, Microfield
----------------------------
Graphics, Inc.
Principal Business and Address of Principal Employer:
----------------------------------------------------
Manufacture of computer conferencing and telecommunications products,
7216 SW Durham Road, Portland, Oregon 97224
Citizenship: United States
-----------
Name: Randall R. Reed
-----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: Chief Financial Officer, Microfield
----------------------------
Graphics, Inc.
Principal Business and Address of Principal Employer:
----------------------------------------------------
Manufacture of computer conferencing and telecommunications products,
7216 SW Durham Road, Portland, Oregon 97224
Citizenship: United States
-----------
Name: Michael Stansell
----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: Vice President of Operations, Microfield
----------------------------
Graphics, Inc.
Principal Business and Address of Principal Employer:
----------------------------------------------------
Manufacture of computer conferencing and telecommunications products,
7216 SW Durham Road, Portland, Oregon 97224
Citizenship: United States
-----------
Name: Peter Zinsli
----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: Director of International Marketing,
----------------------------
Microfield Graphics, Inc.
Principal Business and Address of Principal Employer:
----------------------------------------------------
Manufacture of computer conferencing and telecommunications products,
7216 SW Durham Road, Portland, Oregon 97224
Citizenship: United States
-----------
Name: Donald Zurstadt
----
Business Address: 7216 SW Durham Road, Portland, Oregon 97224
----------------
Present Principal Employment: Vice President of Engineering, Microfield
----------------------------
Graphics, Inc.
Principal Business and Address of Principal Employer:
----------------------------------------------------
Manufacture of computer conferencing and telecommunications products,
7216 SW Durham Road, Portland, Oregon 97224
Citizenship: United States
-----------
Based upon information provided to Steelcase, Steelcase believes that none
of the Company Executives has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) and
that none of the Company Executives has, during
<PAGE>
CUSIP NO. 59506W1 Page 7
the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
The following sale transactions involving Common Stock were effected by
Steelcase within the sixty days prior to the date of this Schedule 13D:
<TABLE>
<CAPTION>
Date of Number Price
Transaction of Shares Per Share
----------- --------- ---------
<S> <C> <C>
01/29/98 16,000 $4.3848
02/02/98 1,000 $4.1250
02/03/98 1,000 $4.0625
02/03/98 9,000 $4.0000
02/03/98 1,000 $4.0000
02/04/98 18,000 $4.0000
02/05/98 3,000 $4.0000
02/09/98 10,000 $3.8125
02/10/98 10,000 $3.8125
02/11/98 7,000 $3.8750
</TABLE>
All of the above transactions were effected through the NASDAQ SmallCap
Market.
No other person is known to have the right to receive, or the power to
direct the receipt of, dividends from, or the proceeds from the sale of, the
Common Stock owned by Steelcase.
Item 6. Contracts, Arrangements, Understandings or Relationships with
- ----------------------------------------------------------------------
Respect to Securities of the Issuer.
-----------------------------------
Descriptions of the Purchase Agreement, the Warrant, the Voting Agreement
and the Registration Agreement are included under Items 3 and 4 above.
Item 7. Material to be Filed as Exhibits.
- ----------------------------------------
The following exhibits are filed with this statement:
1. Common Stock Purchase Agreement between Microfield Graphics, Inc., and
Steelcase Inc., dated March 16, 1998.
2. Stock Purchase Warrant to Purchase Shares of Common Stock of
Microfield Graphics, Inc., No. 1998-W-1.
3. Share Ownership, Voting and Right of First Refusal Agreement, between
Microfield Graphics, Inc., Steelcase Inc. and John B. Conroy, Scott McVay,
Randall R. Reed, Michael Stansell, Peter Zinsli, Donald Zurstadt and William P.
Cargile, dated March 19, 1998.
4. Registration Rights Agreement between Microfield Graphics, Inc., and
Steelcase Inc., dated March 19, 1998.
<PAGE>
CUSIP NO. 59506W1 Page 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 30, 1998 STEELCASE INC.
By: /s/ Sheila C. Dayton
--------------------------------------
Sheila C. Dayton
Assistant General Counsel
and Assistant Secretary
<PAGE>
CUSIP NO. 59506W1 Page 9
Exhibit Index
-------------
Exhibit Description
- ------- -----------
1. Common Stock Purchase Agreement between Microfield Graphics, Inc., and
Steelcase Inc., dated March 16, 1998.
2. Stock Purchase Warrant to Purchase Shares of Common Stock of
Microfield Graphics, Inc., No. 1998-W-1.
3. Share Ownership, Voting and Right of First Refusal Agreement, between
Microfield Graphics, Inc., Steelcase Inc. and John B. Conroy, Scott
McVay, Randall R. Reed, Michael Stansell, Peter Zinsli, Donald
Zurstadt and William P. Cargile, dated March 19, 1998.
4. Registration Rights Agreement between Microfield Graphics, Inc., and
Steelcase Inc., dated March 19, 1998.
<PAGE>
Exhibit 1
COMMON STOCK PURCHASE AGREEMENT
between
MICROFIELD GRAPHICS, INC.
and
STEELCASE INC.
March 16, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Purchase and Sale of Stock........................................... 1
1.1 Sale and Issuance of Common Stock.............................. 1
1.2 Closing........................................................ 1
1.3 Further Covenants; Good Faith Negotiation...................... 1
2. Other Agreements..................................................... 1
2.1 Voting Agreement............................................... 1
2.2 Registration Rights Agreement.................................. 2
3. Representations and Warranties of the Company........................ 2
3.1 Organization, Good Standing and Qualification.................. 2
3.2 Authorization.................................................. 2
3.3 Capitalization................................................. 2
3.4 Valid Issuance of Common Stock................................. 2
3.5 Reservation of Warrant Shares.................................. 3
3.6 Absence of Conflicting Agreements; Consents.................... 3
3.7 Governmental Consents.......................................... 3
3.8 SEC and Other Reports.......................................... 3
3.9 Litigation..................................................... 3
3.10 No Finders..................................................... 4
3.11 Use of Proceeds................................................ 4
4. Representations and Warranties of Investor........................... 4
4.1 Organization, Good Standing and Qualification.................. 4
4.2 Authorization.................................................. 4
4.3 Absence of Conflicting Agreements; Consents.................... 4
4.4 Litigation..................................................... 5
4.5 Purchase Entirely for Own Account.............................. 5
4.6 Disclosure of Information...................................... 5
4.7 Investment Experience.......................................... 5
4.8 Accredited Investor............................................ 5
4.9 Restricted Securities.......................................... 5
4.10 Legends........................................................ 6
4.11 No Finders..................................................... 6
5. Conditions of Investor's Obligations at Closing...................... 6
5.1 Representations and Warranties................................. 6
5.2 Qualifications................................................. 6
5.3 Proceedings and Documents...................................... 7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.4 Board of Directors............................................. 7
5.5 Voting Agreement............................................... 7
5.6 Registration Rights Agreement.................................. 7
6. Conditions of the Company's Obligations at Closing................... 7
6.1 Representations and Warranties................................. 7
6.2 Qualifications................................................. 7
6.3 Proceedings and Documents...................................... 7
6.4 Payment of Purchase Price...................................... 8
6.5 Voting Agreement............................................... 8
6.6 Registration Rights Agreement.................................. 8
7. Miscellaneous........................................................ 8
7.1 Survival of Warranties......................................... 8
7.2 Successors and Assigns......................................... 8
7.3 Governing Law.................................................. 8
7.4 Counterparts................................................... 8
7.5 Titles and Subtitles........................................... 8
7.6 Notices........................................................ 8
7.7 Amendments and Waivers......................................... 9
7.8 Severability................................................... 9
7.9 Entire Agreement............................................... 9
Schedule 2 Executive Officers and Directors
EXHIBIT A Stock Purchase Warrant
EXHIBIT B Share Ownership, Voting and Right of First Refusal Agreement
EXHIBIT C Registration Rights Agreement
</TABLE>
ii
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT is made as of March 16, 1998, by and
among Microfield Graphics, Inc. d/b/a SoftBoard, an Oregon corporation (the
"Company"), and Steelcase Inc., a Michigan corporation ("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions of this Agreement, Investor agrees to purchase at the Closing, and
the Company agrees to sell and issue to Investor at the Closing, 350,000 shares
of the Company's Common Stock (the "Purchased Stock") and a warrant for the
purchase of 260,000 shares of the Company's Common Stock (the "Warrant Shares")
in the form attached as Exhibit A (the "Warrant") for an aggregate purchase
price of $2,012,500.
1.2 Closing. The purchase and sale of the Purchased Stock and
Warrant shall take place at the offices of Stoel Rives LLP, 900 SW Fifth Avenue,
Suite 2300, Portland, Oregon, at 10:00 A.M. on March 19, 1998, or at such other
time and place as the Company and Investor mutually agree upon orally or in
writing (which time and place are designated as the "Closing"). At the Closing,
the Company shall deliver to Investor a certificate representing the Purchased
Stock and the Warrant against payment of the purchase price therefor by wire
transfer.
1.3 Further Covenants; Good Faith Negotiation. It is the parties'
intention to enter into an agreement whereby the Company's product and
technology will be incorporated into Investor's products, the terms and
conditions of such agreement to be agreed upon by the parties. The Company and
Investor both agree to use good faith efforts to negotiate and execute such an
agreement.
2. Other Agreements.
2.1 Voting Agreement. The Investor, the Company, and the executive
officers and directors named in Schedule 2 shall enter into the Share Ownership,
Voting and Right of First Refusal Agreement, in the form attached as Exhibit B
(the "Voting Agreement"), that provides that (a) the signatories will vote for
the election of specific nominees to the Company's Board of Directors, (b) the
Investor will vote any additional shares of the Company's Common Stock acquired
by the Investor in a certain manner, (c) the executive officers and management
will agree to certain rights of first refusal on sales of the Company's Common
Stock owned by them, and (d) the Investor will not transfer any shares of the
Company's Common Stock for two years following the Closing, except under certain
circumstances described therein.
<PAGE>
2.2 Registration Rights Agreement. The Company agrees to grant
Investor registration rights as set forth in the Registration Rights Agreement
attached as Exhibit C (the "Registration Rights Agreement").
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Investor that:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oregon and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.
3.2 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Voting Agreement and the
Registration Rights Agreement, the performance of all obligations of the Company
hereunder and thereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Purchased Stock and the Warrant Shares has
been taken or will be taken prior to the Closing, and this Agreement, the Voting
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Registration Rights Agreement may be limited by applicable federal or state
securities laws.
3.3 Capitalization. The authorized capital of the Company consists
of:
(a) Common Stock. Twenty-five million (25,000,000) shares of
Common Stock, 3,228,914 of which were issued and outstanding as of February 28,
1998.
(b) Preferred Stock. Ten million (10,000,000) shares of
undesignated Preferred Stock, none of which are issued or outstanding.
3.4 Valid Issuance of Common Stock. The Purchased Stock, the Warrant
and the Warrant Shares, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement, the Voting
Agreement and the Registration Rights Agreement and under applicable state and
federal securities laws.
2
<PAGE>
3.5 Reservation of Warrant Shares. The Warrant Shares have been duly
authorized and reserved and, when issued upon exercise of the Warrant in
accordance with its terms, will be validly issued, fully paid and nonassessable.
3.6 Absence of Conflicting Agreements; Consents. The execution and
delivery of this Agreement, the Voting Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby will not conflict in any material respect with or result in a material
breach of any terms or provisions of, or constitute a material default under (a)
the Articles of Incorporation or Bylaws of the Company; (b) any note, bond,
mortgage, indenture, license, lease, contract, commitment, agreement or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties may be bound; or (c) any statute, order, writ,
injunction, decree, rule or regulation applicable to the Company or any of its
properties. No consent, approval, authorization, declaration or other order of,
or registration or filing with, any court or regulatory authority or any third
person is required for the valid execution, delivery and performance of this
Agreement, the Voting Agreement or the Registration Rights Agreement by the
Company, or its consummation of the transactions contemplated hereby or thereby,
except such consents, approvals, authorizations, declarations, registrations or
filings that have already been obtained or made, or those disclosed by Investor
pursuant to this Agreement.
3.7 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement except if required, qualifications or filings
under the Securities Act and applicable Blue Sky laws, which qualifications and
filings will be obtained or made and will be effective within the period
required by law.
3.8 SEC and Other Reports. The Company has heretofore furnished
Investor with complete copies of all of registration statements, reports and
proxy statements, including amendments thereto, filed by the Company with the
Securities and Exchange Commission (the "SEC") since January 1, 1997 and prior
to the date of this Agreement (collectively the "SEC Documents"). None of the
SEC documents, as of the date filed, contain any untrue statement of any
material fact or omit to state a material fact necessary to make the statements
contained in them not misleading. The Company has also furnished Investor with a
copy of its year-end earnings release for 1997, including its income statement
and balance sheet, for the fiscal year ended January 3, 1998.
3.9 Litigation. There is no action, proceeding or suit pending, or,
to the Company's knowledge, threatened, that questions the validity of this
Agreement, the Voting Agreement or the Registration Rights Agreement or that
would prevent or materially hinder the consummation of the transactions
contemplated hereby or thereby.
3
<PAGE>
3.10 No Finders. The Company has not employed any broker, finder,
agent or investment banker, dealt with anyone purporting to act in that capacity
or agreed to pay any brokerage fee, finder's fee or commission with respect to
the transactions contemplated by this Agreement.
3.11 Use of Proceeds. The net proceeds to be received by the Company
from the sale of the Purchased Stock and Warrant Shares pursuant to this
Agreement shall be used by the Company for working capital and other general
corporate purposes and not for dividends, stock buybacks (except for repurchases
from employees at the original purchase price), or bonuses inconsistent with
prior practices for a period of one year from the date of Closing.
4. Representations and Warranties of Investor. Investor hereby
represents and warrants that:
4.1 Organization, Good Standing and Qualification. Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan and has all requisite corporate power and authority to
carry on its business as now conducted. Investor is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its business or properties.
4.2 Authorization. Investor has full corporate power and authority
to enter into this Agreement, the Voting Agreement and the Registration Rights
Agreement, and each such Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Registration Rights
Agreement may be limited by applicable federal or state securities laws.
4.3 Absence of Conflicting Agreements; Consents. The execution and
delivery of this Agreement, the Voting Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby will not conflict in any material respect with or result in a material
breach of any terms or provisions of, or constitute a material default under (a)
the Articles of Incorporation or Bylaws of Investor; (b) any note, bond,
mortgage, indenture, license, lease, contract, commitment, agreement or other
instrument or obligation to which Investor is a party or by which Investor or
any of its properties may be bound; or (c) any statute, order, writ, injunction,
decree, rule or regulation applicable to Investor or any of its properties. No
consent, approval, authorization, declaration or other order of, or registration
or filing with, any court or regulatory authority or any third person is
required for the valid execution, delivery and performance of this Agreement and
the Voting Agreement by Investor or its consummation of the transactions
contemplated hereby or thereby, except such
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consents, approvals, authorizations, declarations, registrations or filings that
have already been obtained or made, or those disclosed by the Company pursuant
to this Agreement.
4.4 Litigation. There is no action, proceeding or suit pending, or,
to Investor's knowledge, threatened, that questions the validity of this
Agreement, the Voting Agreement or the Registration Rights Agreement or that
would prevent or materially hinder the consummation of the transactions
contemplated hereby or thereby.
4.5 Purchase Entirely for Own Account. This Agreement is made with
Investor in reliance upon such Investor's representation to the Company, which
by Investor's execution of this Agreement Investor hereby confirms, that the
Purchased Stock, the Warrant and Warrant Shares (collectively, the "Securities")
will be acquired for investment for Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Investor further represents Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
4.6 Disclosure of Information. Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Purchased Stock and Warrant. Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Purchased Stock and
Warrant and the business, properties and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 3 of this Agreement or the right of Investor to rely
thereon.
4.7 Investment Experience. Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Purchased Stock and Warrant. Investor
also represents it has not been organized for the purpose of acquiring the
Purchased Stock and Warrant.
4.8 Accredited Investor. Investor is an "accredited investor" within
the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation
D, as presently in effect.
4.9 Restricted Securities. Investor understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, Investor
represents that it
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is familiar with SEC Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Act.
4.10 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS COVERING ANY SUCH TRANSACTION INVOLVING THESE SECURITIES OR (B) THE COMPANY
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES
(CONCURRED IN BY LEGAL COUNSEL FOR THE COMPANY) STATING THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION OR THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION."
(b) A legend stating that the Securities are subject to the
Voting Agreement.
4.11 No Finders. Investor has not employed any broker, finder, agent
or investment banker, dealt with anyone purporting to act in that capacity or
agreed to pay any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement.
5. Conditions of Investor's Obligations at Closing. The obligations of
Investor under subsection 1.1 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against Investor if it does not consent thereto:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
5.3 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto
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shall be reasonably satisfactory in form and substance to Investor, and it shall
have received all such counterpart original and certified or other copies of
such documents as it may reasonably request.
5.4 Board of Directors. At the Closing, Investor's nominee, James
Keane, shall be duly elected. The other initial directors of the Company shall
be John B. Conroy, Herb Shaw and William P. Cargile, and there shall be one
vacancy on the Board of Directors to be filled in accordance with the Voting
Agreement.
5.5 Voting Agreement. The Company, the Investor and the Company's
executive officers and directors named in Schedule 2 shall have entered into the
Voting Agreement.
5.6 Registration Rights Agreement. The Company and the Investor
shall have entered into the Registration Rights Agreement.
5.7 1997 Annual Report. The Company shall have provided Investor
with a copy of the Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998, which as of the date filed will not contain any untrue
statement of any material fact or omit or misstate a material fact necessary to
make the statements contained in it not misleading, and there shall not have
been a material adverse change in the Company's financial results from those
reported in the earnings release provided to Investor and referenced in Section
3.8 of this Agreement.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by Investor:
6.1 Representations and Warranties. The representations and
warranties of Investor contained in Section 4 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6.3 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and it shall have received all such counterpart
original and certified or other copies of such documents as it may reasonably
request.
7
<PAGE>
6.4 Payment of Purchase Price. Investor shall have delivered to the
Company at the Closing the purchase price for the Purchased Stock and Warrant.
6.5 Voting Agreement. The Company, the Investor and the Company's
executive officers and directors named in Schedule 2 shall have entered into the
Voting Agreement.
6.6 Registration Rights Agreement. The Company and the Investor
shall have entered into the Registration Rights Agreement.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Oregon, exclusive of choice of law rules.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission or nationally recognized overnight
courier service or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
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<PAGE>
7.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only by the written consent of the Company and Investor. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon the holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
any future holder of all such securities, and the Company.
7.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.9 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[Signature Page to Follow]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY:
MICROFIELD GRAPHICS, INC.
By: /s/ John B. Conroy
----------------------------------------
John B. Conroy
President and Chief Executive Officer
Address: 7216 SW Durham Road
Portland, OR 97224
INVESTOR:
STEELCASE INC.
By: /s/ James P. Hackett
----------------------------------------
James P. Hackett
President and Chief Executive Officer
Address: 901 - 44th Street, S.E.
Grand Rapids, MI 49508
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SCHEDULE 2
Executive Officers and Directors
John B. Conroy
Scott McVay
Randall R. Reed
Michael Stansell
Peter Zinsli
Donald Zurstadt
William P. Cargile
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<PAGE>
Exhibit 2
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT IS BY ITS TERMS NONTRANSFERABLE AND THE COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SUCH ACT OR LAWS OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE
ISSUER STATING THAT SUCH REGISTRATION IS NOT REQUIRED.
No. 1998-W-1 WARRANT TO PURCHASE 260,000
SHARES OF COMMON STOCK
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF MICROFIELD GRAPHICS, INC.
For value received, Microfield Graphics, Inc., an Oregon corporation (the
"Company"), grants to Steelcase Inc. (the "Holder") the right, subject to the
terms of this Warrant, to purchase at any time during the period commencing on
the "Initial Exercise Date" (as defined below), and ending on the "Expiration
Date" (as defined below), 260,000 fully paid and nonassessable shares of Common
Stock of the Company at the "Exercise Price" (as defined below). This Warrant is
nontransferable (except as provided in Section 8.1) and may be exercised for
all, but not less than all, 260,000 shares in a single exercise. The number of
shares that may be purchased are subject to adjustment under the terms of this
Warrant.
Section 1. Definitions. As used in this Warrant, unless the context otherwise
requires:
"Exercise Amount" means 260,000 shares (adjusted as necessary in accordance
with Section 7).
"Exercise Price" means $6.75 per share.
"Common Stock" means the Common Stock of the Company.
"Company" has the meaning specified in the introductory paragraph.
"Exercise Date" means any date when this Warrant is exercised in the manner
indicated in Sections 2.1 and 2.2.
"Expiration Date" means 12:00 midnight (Portland time) on March 19, 2001.
<PAGE>
"Holder" has the meaning specified in the introductory paragraph.
"Initial Exercise Date" means March 19, 1999.
"Person" means an individual, corporation, partnership, trust, joint
venture or other form of business entity.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and all rules and regulations promulgated thereunder, or any act, rules or
regulations which replace the Securities Act or any such rules and regulations.
"Warrant Shares" means the shares of Common Stock issued or issuable upon
exercise of this Warrant, adjusted as necessary in accordance with Section 7.
Section 2. Duration and Exercise of Warrant.
2.1 Exercise Period. Subject to the provisions hereof, this Warrant
may be exercised at any time during the period commencing on the Initial
Exercise Date and ending on the Expiration date for the Exercise Amount. After
the Expiration Date, this Warrant shall become void and all rights to purchase
Warrant Shares hereunder shall thereupon cease.
2.2 Methods of Exercise. This Warrant may be exercised by the Holder
for the Exercise Amount by (i) surrendering this Warrant to the Secretary of the
Company, (ii) payment of any applicable consideration, and (iii) executing and
delivering to the Secretary of the Company the attached Exercise Form, which
must select one of the following exercise methods, to be at the Holder's option:
2.2.1 Exercise for Cash. If the Holder elects to exercise the
Warrant for cash, the Holder shall tender to the Company payment in full by
cash, check, or wire transfer of the Exercise Price for the Warrant Shares.
2.2.2 Same Day Sale Exercise. In lieu of exercising this Warrant by
payment of cash, when permitted by law and applicable regulations (including
Nasdaq and NASD rules), the Holder may pay the Exercise Price through a "same
day sale" commitment from the Holder and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD Dealer") whereby the Holder
irrevocably elects to exercise the Warrant and to sell a portion of the Warrant
Shares so purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Warrant Shares to forward the Exercise
Price directly to the Company.
2.3 Certificates. As soon as practicable after exercise of this Warrant,
certificates for Warrant Shares shall be delivered to the Holder.
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<PAGE>
2.4 Effective Date of Exercise. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above. The person entitled to receive the
Warrant Shares shall be treated for all purposes as the holder of record of such
shares as of the close of business on the date the Holder is deemed to have
exercised this Warrant.
2.5 Securities Act Compliance. Unless the issuance of the Warrant shares
shall have been registered under the Securities Act, as a condition of its
delivery of certificates for the Warrant Shares, the Company may require the
Holder to deliver to the Company, in writing, representations regarding the
Holder's sophistication, investment intent, acquisition for its own account and
such other matters as are reasonable and customary for purchasers of securities
in an unregistered private offering. The Company may place conspicuously upon
each certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Holder:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
LAW, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING THESE SECURITIES OR (B) THE COMPANY
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES
(CONCURRED IN BY LEGAL COUNSEL FOR THE COMPANY) STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION OR THE COMPANY OTHERWISE SATISFIES
ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
2.6 Taxes. The Company shall pay any tax and other governmental charges
which may be payable in respect of the issuance of the Warrant Shares, provided,
however, that in no case will the Company pay any taxes relating to income to
the Holder resulting from the issuance or exercise of this Warrant.
2.7 Voting Agreement. Upon exercise of this Warrant, Holder acknowledges
that all Common Stock issued under the Warrant shall be subject to the terms and
conditions of that certain Share Ownership, Voting and Right of First Refusal
Agreement dated as of March 19, 1998 between the Company, the Holder and certain
officers and directors of the Company.
Section 3. Warrant Shares.
3.1 Validity and Reservation. The Company covenants that all Warrant
Shares issued upon exercise of this Warrant will be validly issued, fully paid,
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale (except
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<PAGE>
encumbrances or restrictions arising under federal or state securities laws),
and not subject to preemptive rights. The Company agrees that, as long as this
Warrant may be exercised, the Company will have duly authorized and reserved for
issuance upon exercise of this Warrant a sufficient number of shares of Common
Stock or other shares of capital stock of the Company as are from time to time
issuable upon exercise of this Warrant and from time to time will take all steps
necessary to amend its Articles of Incorporation to provide sufficient reserves
of Common Stock issuable upon exercise of this Warrant. Issuance of this Warrant
shall constitute full authority to the Company's officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for Common Stock upon the exercise of this Warrant.
Section 4. Fractional Shares.
No fractional Warrant Shares shall be issued upon the exercise of this
Warrant, and the number of Warrant Shares to be issued shall be rounded to the
nearest whole number.
Section 5. Limited Rights of Warrant Holder.
The Holder shall not, solely by virtue of being the Holder of this Warrant,
have any of the rights of a stockholder of the Company, either at law or equity,
until this Warrant shall have been exercised.
Section 6. Loss of Warrant.
Upon receipt by the Company of satisfactory evidence of the loss, theft,
destruction or mutilation of this Warrant and either (in the case of loss, theft
or destruction) reasonable indemnification and a bond satisfactory to the
Company if requested by the Company or (in the case of mutilation) the surrender
of this Warrant for cancellation, the Company will execute and deliver to the
Holder, without charge, a new warrant of like denomination.
Section 7. Certain Adjustments.
7.1 Adjustment of Warrant Shares. The number, class and Exercise Price
per share of securities for which this Warrant may be exercised are subject to
adjustment from time to time upon the happening of certain events as hereinafter
provided:
(a) Recapitalization. If the outstanding shares of the Company's
Common Stock are divided into a greater number of shares, the number of shares
of Common Stock purchasable upon the exercise of this Warrant shall be
proportionately increased and the Exercise Price per share shall be
proportionately reduced. Conversely, if the outstanding shares of Common Stock
are combined into a smaller number of shares of Common Stock, the number of
shares of Common Stock purchasable upon the exercise of this Warrant shall be
proportionately reduced and the Exercise Price per share shall be
proportionately increased. The
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<PAGE>
increases and reductions provided for in this Section 7.1(a) shall be made with
the intent and, as nearly as practicable, the effect that neither the percentage
of the total equity of the Company obtainable on exercise of this Warrant nor
the aggregate price payable for such percentage shall be affected by any event
described in this Section 7.1(a).
(b) Merger or Reorganization, Etc. In the event of any change in the
Common Stock through merger, consolidation, reclassification, reorganization,
partial or complete liquidation or other change in the capital structure of the
Company (not including the issuance of additional shares of capital stock other
than by stock dividend or stock split), then, the Holder of this Warrant will
have the right thereafter to receive upon the exercise of this Warrant the kind
and amount of shares of stock or other securities or property to which it would
have been entitled if, immediately before the merger, consolidation,
reclassification, reorganization, recapitalization or other change in the
capital structure, it had held the number of shares of Common Stock obtainable
upon the exercise of this Warrant.
(c) Adjustment for Dividends or Distributions of Stock or Other
Securities or Property. In case the Company shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Warrant Shares (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (i) securities of the Company or (ii) assets (excluding cash
dividends paid or payable solely out of retained earnings), then, in each such
case, upon exercise of this Warrant at any time after the consummation,
effective date or record date of such dividend or other distribution, the Holder
shall receive, in addition to the Warrant Shares (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been entitled upon such
date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 7.
(d) Other Impairments. If any event shall occur as to which the
provisions of Section 7.1(a)-(c) are not strictly applicable but are covered by
the essential intent and principles of such sections, then, in each such case,
the Company will appoint the firm of independent certified public accountants of
recognized national standing with the largest U.S. revenues for the prior year
(but not the Company's regular auditors), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section 7.1, necessary to preserve the rights
represented by this Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this Warrant and shall make the
adjustments described therein.
7.2 Notice of Adjustment. Whenever an event occurs requiring any
adjustment to be made pursuant to Section 7.1, the Company shall promptly file
with its Secretary or an assistant secretary at its principal office and with
its stock transfer agent, if any, a certificate
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<PAGE>
of its President or Chief Financial Officer specifying such adjustment, setting
forth in reasonable detail the acts requiring such adjustment, and stating such
other facts as shall be necessary to show the manner and figures used to compute
such adjustment. Such certificate shall be made available at all reasonable
times for inspection by the Holder. Promptly (but in no event more than 30 days)
after each such adjustment, the Company shall give a copy of such certificate by
certified mail to the Holder.
Section 8. Miscellaneous.
8.1 Assignment. This Warrant may not be transferred or assigned by the
Holder, except to a wholly-owned subsidiary of the Holder.
8.2 Notice. All notices required or permitted under this Warrant shall be
given in writing and shall be deemed effectively given (a) upon personal
delivery to the party to be notified, (b) three days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address for such party, (c) one day
after deposit with a nationally recognized air courier service such as DHL or
Federal Express, or (d) on the date of facsimile transmission, with confirmed
transmission.
If to the Company:
-----------------
Microfield Graphics, Inc.
7216 SW Durham Road
Portland, Oregon 97224
ATTN: John B. Conroy, President
and Chief Executive Officer
Fax: (503) 620-4090
If to the Holder:
----------------
Steelcase Inc.
901-44th Street S.E.
Grand Rapids, MI 49508
ATTN: James P. Hackett, President and Chief Executive Officer
Fax: (616) 247-2374
or such other address as such party may designate by 10 days' advance written
notice to the other party.
8.3 Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of Oregon, exclusive of
choice of law rules.
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<PAGE>
8.4 No Impairment. The Company will not, by amendment of its Articles of
Incorporation or Bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock issuable upon the
exercise of this Warrant above the amount payable therefore upon such exercise
and (b) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
Warrant Shares upon exercise of this Warrant.
8.5 Notices of Record Date. After the Initial Exercise Date, in case:
8.5.1 the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any securities or to receive any other right; or
8.5.2 of any consolidation or merger of the Company with or into
another corporation, any capital reorganization of the Company, any
reclassification of the capital stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
8.5.3 of any voluntary dissolution, liquidation or winding-up of the
Company; or
8.5.4 of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to
the Holder of this Warrant a notice specifying, as the case may be, (i) the date
on which a record is to be taken for the purpose of such dividend, distribution
or right, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation, winding-up,
redemption or conversion is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such stock or securities
as at the time are receivable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days before the consummation of the applicable event.
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8.6 No Inconsistent Agreements. The Company will not on or after the date
of this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holder of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holder hereunder
do not in any way conflict with the rights granted to holders of the Company's
securities under any other agreements, except rights that have been waived.
8.7 Saturdays, Sundays and Holidays. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall automatically be
extended until 5:00 p.m. Pacific Time the next business day.
8.8 Headings. The headings herein are for convenience only and shall not
control or affect the meaning or construction of this Warrant.
Dated as of: March 19, 1998.
MICROFIELD GRAPHICS, INC.
By: /s/ John B. Conroy
--------------------------
John B. Conroy, President
and Chief Executive Officer
8
<PAGE>
EXERCISE FORM
-------------
(To Be Executed by the Warrant Holder
to Exercise the Warrant)
To: MICROFIELD GRAPHICS, INC.
1. The undersigned hereby irrevocably elects to exercise the right to purchase
represented by Warrant No. 1998-W-1 for 260,000 shares of Common Stock, and
to purchase 260,000 shares of Common Stock provided for in the Warrant as
follows [check one]:
[ ] Exercise for Cash: Pursuant to Section 2.2.1 of the Warrant, the
Holder hereby elects to exercise the Warrant for cash and tenders payment
herewith (or has made a wire transfer) to the order of Microfield Graphics, Inc.
in the amount of $____________.
[ ] Same Day Sale Exercise: Pursuant to Section 2.2.2 of the Warrant, the
Holder hereby elects to exercise the Warrant on a cashless basis.
2. The undersigned requests that certificates for such shares of Common Stock
be issued and delivered as follows:
Name:
---------------------------
Address:
------------------------
Deliver to:
---------------------
Address:
------------------------
3. In connection with the exercise of the Warrant, the undersigned hereby
represents and warrants to you as follows:
(a) Purchase Entirely for Own Account. The Common Stock will be acquired
for investment for the undersigned's own account and not with a view to the
resale or distribution of any part thereof, and the undersigned has no
intention of selling, granting any participation in, or otherwise
distributing the same.
(b) Restricted Securities. The undersigned understands the Common Stock may
not be sold, transferred, or otherwise disposed of without registration
under the Securities Act or an exemption therefrom and, in the absence of
an effective registration statement covering the Common Stock or an
available exemption from registration under the Securities Act, the Common
Stock must be held indefinitely.
<PAGE>
(c) Investment Experience. The undersigned is experienced in evaluating
and investing in companies in the development stage, can bear the
economic risk of an investment in the Common Stock, and has enough
knowledge and experience in financial and business matters to evaluate
the merits and risks of the investment in the Common Stock.
(d) Qualifications as an Accredited Investor. The undersigned is a
corporation that was not formed for the specific purpose of acquiring
the securities of the Company and has total assets in excess of
$5,000,000.
(e) Opportunity to Review Documents and Ask Questions. The Company has
made available to the undersigned all documents and information
requested by the undersigned relating to an investment in the Company.
In addition, the undersigned has had adequate opportunity to ask
questions and to receive answers from the management of the Company
covering the terms and conditions of the offering and the Company's
business, management, and financial affairs.
4. The undersigned understands, agrees, and recognizes that:
(a) No federal or state agency has made any finding or determination as to
the fairness of the investment or any recommendation or endorsement of
the Common Stock.
(b) All certificates evidencing the Common Stock shall bear a legend
substantially similar to the legend set forth in Section 2.5 of the
Warrant regarding resale restrictions.
(c) All shares of Common Stock issued upon exercise of this Warrant shall
be subject to the Voting Agreement referenced in Section 2.7 of the
Warrant and all certificates shall also bear a legend stating that the
Common Stock issued is subject to the Voting Agreement.
5. The undersigned is a resident of the state of ________________________.
Dated: _____________, 19___.
STEELCASE INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
Note: Signature must correspond with the
name as written upon the face of the
Warrant in every particular, without
alteration or enlargement or any change
whatsoever.
<PAGE>
Exhibit 3
Share Ownership, Voting
And Right of First Refusal Agreement
This SHARE OWNERSHIP, VOTING AND RIGHT OF FIRST REFUSAL AGREEMENT (the
"Agreement") is entered into as of March 19, 1998 by and between Microfield
Graphics, Inc., an Oregon corporation (the "Company"), and Steelcase Inc., a
Michigan corporation ("Steelcase") and the executive officers and directors of
the Company listed in Schedule A (the "Executives").
RECITALS
--------
A. Steelcase proposes to acquire, pursuant to a Common Stock Purchase
Agreement dated as of March 16, 1998, shares of the Company's Common Stock (the
"Common Stock").
B. Steelcase, Company and the Executives agree to limitations on transfer
and voting of shares of Common Stock owned by each of them, on the terms set
forth herein.
AGREEMENT
---------
For good and valuable consideration including the promises contained
herein, the parties agree as follows:
1. Definitions. The following terms and phrases used in this Agreement
shall have the meanings given in this Section 1:
"Affiliate," in the case of Steelcase, means any other person or
entity, directly or indirectly, controlled by or under direct or indirect common
control with Steelcase; and in the case of any Executive, means any member of
the Executive's immediate family or a trust for the benefit of such family
member. For the purposes of this definition, "control" means the power to direct
the management and policies of such person or entity, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
Affiliates shall not mean employees of Steelcase acting in their individual
capacities.
"Beneficial owner" of Shares means a person who has or shares with
respect to such shares (1) voting power, which includes the power to vote, or to
direct the voting of, such Shares or (2) investment power, which includes the
power to dispose, or to direct the disposition of, such Shares. "Beneficial
ownership" shall be determined in accordance with the foregoing definition.
Notwithstanding the foregoing, no Executive shall be deemed to be the beneficial
owner of Shares where his power to vote or direct the voting is solely as a
result of his appointment as proxy by another shareholder that is not an
Affiliate of the Executive.
<PAGE>
"Business day" shall have the meaning given in Rule 14d-1(c) under the
Exchange Act.
"Closing" means the closing of the purchase by Steelcase pursuant to
the Stock Purchase Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executives" shall have the meaning given in the preamble of this
Agreement.
"Executive's Shares" means all Shares beneficially owned by each
Executive, including Shares acquired after the date of this Agreement.
"Group" shall have the meaning given in Rule 13d-5(b) under the
Exchange Act.
"Independent Director" for purposes of this Agreement shall mean any
director who is not also employed by the Company. Initially, the Independent
Directors shall be the Independent Directors listed on Schedule 3.3.
"Lien" shall have the meaning given in Section 2 of this Agreement.
"Proposed Transferee" shall have the meaning given in Section 6 of
this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean issued and outstanding shares of Common Stock of
the Company and any other class or series of capital stock that at any time
gives the holder the right to vote for the election of directors.
"Steelcase Shares" means all Shares beneficially owned by Steelcase,
including Shares acquired after the date of this Agreement.
"The Company" shall have the meaning given in the preamble of this
Agreement.
"Threshold Amount" shall have the meaning given in Section 3 of this
Agreement.
"Transfer" shall mean any sale, contract to sell, exchange,
assignment, gift or other disposition (other than a pledge or encumbrance to
secure a loan), whether voluntary or involuntary, because of any act or
occurrence.
2. Representations.
2
<PAGE>
2.1 Steelcase. Steelcase represents and warrants that as of the date
of this Agreement (a) it beneficially owns all the Shares purchased under the
Stock Purchase Agreement; (b) except as permitted by this Agreement or the Stock
Purchase Agreement, the Steelcase Shares are not subject to any lien, charge,
pledge, security interest, adverse claim, obligation to sell or otherwise
dispose or other encumbrance of any kind or nature whatsoever and however
arising ("Lien"); and (c) neither the execution and delivery of this Agreement
nor the observance or performance of its terms by Steelcase violates, or creates
any Lien with respect to the Steelcase Shares, pursuant to any statute,
ordinance, regulation, order, judgment or decree applicable to Steelcase or the
Steelcase Shares or any agreements to which Steelcase or the Steelcase Shares
are bound.
2.2 Executives. Each Executive represents and warrants that as of the
date of this Agreement (a) except as permitted by this Agreement or the Stock
Purchase Agreement, the Executive's Shares are not subject to any Lien (as
defined above); and (b) neither the execution and delivery of this Agreement nor
the observance or performance of its terms by the Executive violates, or creates
any Lien with respect to the Executive's Shares, pursuant to any statute,
ordinance, regulation, order, judgment or decree applicable to the Executive or
the Executive's Shares or any agreements to which the Executive or the
Executive's Shares are bound.
3. Voting of Shares Generally.
3.1 Steelcase Shares Below Threshold Amount. Any Shares beneficially
owned by Steelcase up to and including 610,000 Shares (as adjusted for any stock
split, combination or stock dividend) (the "Threshold Amount") may be voted by
Steelcase in its discretion without restriction except as set forth in Section
3.3.
3.2 Steelcase Shares Above Threshold Amount. With respect to all
matters submitted to shareholders of the Company for a vote (other than
elections of directors), all Shares beneficially owned by Steelcase in excess of
the Threshold Amount shall be voted in proportion to the votes of all
outstanding Shares actually cast including Shares up to and including the
Threshold Amount, but not including abstentions or Shares beneficially owned by
Steelcase in excess of the Threshold Amount.
3.3 Director Elections. Steelcase and each Executive shall vote all of
its or his Shares, including Shares in excess of the Threshold Amount, to elect
the director-nominees listed in Schedule 3.3 (or their respective successors
selected in the manner described in Schedule 3.3); provided, however, that any
party may vote its or his Shares against any such director-nominee if grounds
exist to terminate the director-nominee "for cause" and such party provides a
notification to the Company of the grounds for such conclusion. If any director-
nominee listed in Schedule 3.3 is not elected as a result of the proviso in the
preceding sentence, his successor shall be selected in the manner described in
Schedule 3.3.
3
<PAGE>
3.4 Affiliates. Each party agrees that the voting provisions set forth
in this Agreement shall apply to Shares transferred by such party to its or his
Affiliates and that prior to any such transfer such Affiliates shall have agreed
in writing to be bound by the provisions of this Section 3.
4. Restrictions on Transfer.
4.1 Executives. Each Executive shall not transfer any of his Shares in
a private sale (excluding market transactions), except in accordance with
Section 6 of this Agreement.
4.2 Steelcase. Steelcase shall not transfer any Shares until the
second anniversary of the Closing, other than to a Steelcase Affiliate.
Notwithstanding the foregoing, the obligations set forth in this Agreement shall
continue to be applicable to (a) any Steelcase Affiliate who is a transferee of
Steelcase's Shares, and (b) any transferee after the second anniversary of the
Closing if such transferee obtained the Shares from Steelcase in a private sale
(excluding market transactions) and, in each case, the transferee shall have
agreed in writing to be bound by the provisions of this Agreement affecting the
transferred Shares.
5. Acquisition of New Shares. Each party agrees that any Shares acquired
by such party, whether by purchase or otherwise, shall be subject to the terms
of this Agreement.
6. Right of First Refusal.
6.1 Proposed Transfers. If any Executive proposes to sell any of such
Executive's Shares to any person or group (a "Proposed Transferee") in one or a
series of related transactions in a private sale (excluding market
transactions), no such sale shall be completed unless the Executive first gives
Steelcase a written notice of such proposed sale. Upon receipt of such notice,
Steelcase shall have the right to purchase all the Executive's Shares offered to
the Proposed Transferee upon substantially the same terms and conditions offered
to the Proposed Transferee. Steelcase must respond to such notice with an offer
to buy the Executive's Shares within ten business days after receipt of the
notice, after which time the Executive may sell to the Proposed Transferee on
the specified terms. If the Executive has not consummated the sale to the
Proposed Transferee within 90 days after the date of giving the required notice
to Steelcase, the proposed sale shall again be subject to this Section 6.1 and
another notice to Steelcase is required.
6.2 Transfers Not Subject to Rights of First Refusal. This Section 6
shall not apply to any transfer (a) by an Executive to any Affiliate provided,
however, that with respect to a transfer of any Shares permitted pursuant to
this clause, the obligations set forth in this Agreement shall continue to be
applicable to the transferee of such Shares and provided further that the
transferee of such Shares shall have agreed in writing to be bound by the
provisions of this Agreement affecting the transferred Shares; or (b) pursuant
to a business combination that is approved by the Company's Board of Directors
including a majority of the Independent Directors.
4
<PAGE>
7. Right of First Offer. If the Company proposes to sell, for cash, any
Shares to any person or group (including in a public offering), the Company
shall first make an offering of such Shares to Steelcase in accordance with the
following provisions:
7.1 Notice. The Company shall deliver a notice by confirmed
facsimile transmission, certified mail, or a nationally recognized overnight
courier service ("Notice") to Steelcase stating (a) the Company's bona fide
intention to offer such Shares, (b) the number of such Shares to be offered
(including any Shares to be offered for the account of any shareholder), and (c)
the price and a summary of the terms, if any, upon which the Company proposes to
offer such Shares.
7.2 Election to Purchase. By written notification received by the
Company within 20 calendar days after receipt of the Notice, Steelcase may elect
to purchase or obtain, at the price and on the terms specified in the Notice
all, but not less than all, of the Shares specified in the Notice.
7.3 If Steelcase declines to purchase such Shares, the Company may,
during the 270 day period following the expiration of the election period, offer
the Shares to any person or persons (including in a public offering) at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not sell the Shares within such
period, the right provided hereunder shall be deemed to be revived, and such
Shares shall not be offered unless first reoffered to Steelcase in accordance
with this Section.
7.4 The right of first offer in this Section 7 shall not be
applicable to (a) Shares issuable or issued to employees, consultants or
directors of the Company directly or pursuant to a stock incentive plan or
restricted stock plan approved by the Company's Board of Directors, (b) Shares
issued or issuable upon conversion of any convertible securities, (c) securities
issued or issuable to banks or equipment lessors, provided such issuances are
for other than primarily equity financing purposes and are not for more than 5
percent of the outstanding Shares of the Company, and (d) securities issued in
connection with business combinations approved by the Company's Board of
Directors including a majority of the Independent Directors.
8. Term and Termination. This Agreement shall become effective upon
execution and shall continue in full force and effect until the earlier of (a)
such time as Steelcase or any Steelcase Affiliate beneficially owns less than 5
percent of the outstanding Shares of the Company for a period continuing for
more than one year, (b) the fifth anniversary of the Closing, or (c) the date
upon which Steelcase and/or its Affiliates beneficially own more than 50 percent
of the outstanding Shares of the Company. Except as otherwise expressly provided
in this Agreement, the obligations and restrictions set forth in this Agreement
shall not apply to any person who acquires beneficial ownership of Shares
pursuant to a transfer permitted by this Agreement.
5
<PAGE>
9. Specific Performance. The parties to this Agreement acknowledge and
agree that it is impossible to measure in money the damages that will accrue to
a party or to their successors, heirs, personal representatives or assigns by
reason of a failure to perform any of the obligations under this Agreement and
agree that the terms of this Agreement shall be specifically enforceable, and
appropriate injunctive relief may be applied for and granted in connection with
the enforcement of this Agreement. If any party to this Agreement or his or its
successors, heirs, personal representatives or assigns institutes any action or
proceeding to enforce specifically any provision of this Agreement, any person
against whom such action or proceeding is brought waives the claim or defense
that such party has an adequate remedy at law, and such person shall not offer
in any such action or proceeding the claim or defense that such remedy at law
exists. Such equitable remedies shall, however, be cumulative and not exclusive
and shall be in addition to any other remedies that any party may have under
this Agreement or otherwise.
10. Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
or documents as any other party may reasonably request from time to time in
order to carry out the intent and purposes of this Agreement. No party to this
Agreement shall voluntarily undertake any course of action inconsistent with
satisfaction of the requirements applicable to them set forth in such
instruments and documents, and each party shall promptly do all such acts and
take all such measures as may be appropriate to enable him or it to perform as
early as practicable the obligations herein and therein required to be performed
by them.
11. Governing Law. This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the state of
Oregon, exclusive of choice of law rules.
12. Amendment. This Agreement, other than Sections 6 and 7, may be
amended, or its terms waived, only by an instrument in writing signed by
Steelcase, the Executives and the Company. The provisions of Section 6 may be
amended, or its terms waived, only by an instrument in writing signed by
Steelcase and the Executive selling Shares. The provisions of Section 7 may be
amended, or its terms waived, only by an instrument in writing signed by
Steelcase and the Company.
13. Severability. If any provision of this Agreement is held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions of this Agreement shall not be affected thereby.
14. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors,
assigns, administrators, executors and other legal representatives.
6
<PAGE>
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
16. No Third Party Beneficiaries. This Agreement is entered into solely
for the benefit of the parties hereto and nothing in this Agreement shall confer
rights or benefits on any third party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MICROFIELD GRAPHICS, INC.
/s/ John B. Conroy
------------------------------------------
John B. Conroy
President and Chief Executive Officer
STEELCASE INC.
/s/ James P. Hackett
-------------------------------------------
James P. Hackett
President and Chief Executive Officer
7
<PAGE>
EXECUTIVES:
/s/ John B. Conroy
-------------------------------
John B. Conroy
/s/ Scott McVay
-------------------------------
Scott McVay
/s/ Randall R. Reed
-------------------------------
Randall R. Reed
/s/ Michael Stansell
-------------------------------
Michael Stansell
/s/ Peter Zinsli
-------------------------------
Peter Zinsli
/s/ Donald Zurstadt
-------------------------------
Donald Zurstadt
/s/ William P. Cargile
-------------------------------
William P. Cargile
8
<PAGE>
SCHEDULE A
Executives
John B. Conroy
Scott McVay
Randall R. Reed
Michael Stansell
Peter Zinsli
Donald Zurstadt
William P. Cargile
9
<PAGE>
SCHEDULE 3.3
Director-Nominees
John B. Conroy (or the successor Chief Executive Officer of the Company)
William P. Cargile (or his successor selected as described below)
Herb Shaw (or his successor selected as described below)
James P. Keane (or a successor designated in writing by Steelcase)
One other director-nominee acceptable to the majority of the directors then in
office.
If Mr. Cargile or Mr. Shaw are no longer serving as directors, the parties
shall vote for an independent, outside director-nominee acceptable to the
majority of the directors then in office as a successor.
Messrs. Cargile, Keane and Shaw shall be considered the initial "Independent
Directors" for purposes of the Share Ownership, Voting and Right of First
Refusal Agreement.
10
<PAGE>
Exhibit 4
REGISTRATION RIGHTS AGREEMENT
This Agreement, dated March 19, 1998, is between Microfield Graphics,
Inc. (the "Company") and Steelcase Inc. (the "Investor"). Section 8 contains an
index of all defined terms.
RECITALS
A. The Company and the Investor are parties to a Common Stock Purchase
Agreement ("Purchase Agreement") dated March 16, 1998, pursuant to which the
Investor is purchasing shares of Common Stock from the Company.
B. The Investor has requested, and the Company is willing to grant to the
Investor, registration rights, all on the terms and conditions of this
Agreement.
AGREEMENT
The parties agree as follows:
1. Request for Registration.
1.1 Request and Notice. If the Company shall receive, at any time after
March 19, 2000, a written request from the Investor (a "Notice") that the
Company file a registration statement under the Securities Act of 1933, as
amended (the "1933 Act"), then the Company shall, subject to the limitations of
this Agreement, use all reasonable efforts to effect as soon as practicable, and
in any event within 90 days of the receipt of such request, the registration
under the 1933 Act of all Registrable Securities which the Investor shall have
specified in the Notice. Any written request from the Investor pursuant to
this Section 1.1 shall state that the request is being made pursuant to this
Section 1.1. The Company is obligated to effect only two such registrations
pursuant to this Section 1.1.
1.2 Shares Included. The Investor shall include in such registration at
least 200,000 shares of the Registerable Securities then held by it, or all of
the remaining Registrable Securities then held by the Investor if less.
1.3 Underwriting. If the Investor intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to Section 1.1. In
such event, the Investor shall (together with the Company as provided in Section
2.5) enter into an underwriting agreement in customary form with the underwriter
or underwriters selected for such underwriting by the Investor and reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
1, if the underwriter advises the Investor in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Investor agrees to limit the number of shares of Registrable Securities that may
be included in the underwriting.
<PAGE>
1.4 Deferral. Notwithstanding the foregoing, (a) the Company shall not be
obligated to effect a registration pursuant to Section 1.1 during the period
starting with the date 60 days prior to the Company's good faith estimated date
of filing of, and ending on the date 90 days following the effective date of, a
registration statement pertaining to an underwritten public offering of
securities for the account of the Company (the "Preclusion Period"), provided,
however, that the Company is at all times during such period diligently pursuing
such registration, and further provided that the Company notifies the Investor
at least 20 days before the beginning of the Preclusion Period and (b) if the
Company shall furnish to the Investor a certificate signed by the President or
Chief Financial Officer of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company for the Company to comply with such request and it is therefore
essential to defer the filing of the registration statement relating thereto,
the Company shall have the right to defer such filing for a period of not more
than 180 days after receipt of the Investor Notice; provided, however, that the
Company may not exercise this right more than once in any 12-month period.
1.5 Required Registration. The Company may, by giving written notice to
the Investor, require that all shares of Registrable Securities then held by the
Investor be registered on Form S-3 or a comparable form under the 1993 Act.
After giving such notice, the Company shall promptly undertake to prepare and
file with the SEC a Form S-3 or comparable registration statement with respect
to all the Investor's Registrable Securities and use its best efforts to cause
such registration to become effective and shall refrain from terminating such
registration statement until the Investor has sold all of its Registrable
Securities registered under such registration statement. The Investor shall
furnish to the Company such information regarding the Investor, the Registrable
Securities held by it, and the intended method of distribution (if any), as
shall be reasonably required to effect the registration pursuant to this Section
1.5. If a registration pursuant to this Section 1.5 becomes effective, all
further obligations of the Company to make any registrations under this
Agreement shall automatically terminate.
1.6 Company Registration. If (but without any obligation to do so) the
Company proposes to register any of its stock or other securities under the Act
in connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan or a registration on any form that does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give the Investor written notice of such
registration. Upon the written request of the Investor given within ten (10)
days after mailing of such notice by the Company in accordance with Section 7.5,
the Company shall, subject to the provisions of Section 4.4, include in the
registration statement all of the Registrable Securities that the Investor has
requested to be registered.
2
<PAGE>
2. Obligations of the Company.
Whenever required under Sections 1.1 or whenever it elects under
Section 1.5 of this Agreement to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:
2.1 Registration Statement. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use commercially
reasonably efforts to cause such registration statement to become effective, and
keep such registration statement effective for up to nine months (or, if
earlier, until the Investor has sold the Registrable Securities held by it).
2.2 Amendments. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
2.3 Prospectus. Furnish to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by it.
2.4 Blue Sky. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such states or jurisdictions as shall be reasonably requested by the
Investor, provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
2.5 Underwriting. In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
2.6 Notification. Notify the Investor, at any time when a prospectus
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, either (a) includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing or (b) to the
Company's knowledge, fails to comply with the 1933 Act or any other applicable
federal or state securities laws.
2.7 Listing. List the Registrable Securities being registered on any
national securities exchange on which a class of the Company's equity securities
are listed or qualify the Registrable Securities being registered for inclusion
on the Nasdaq Stock Market if the Company does not have a class of equity
securities listed on a national securities exchange.
3
<PAGE>
3. Expenses.
3.1 Registration Expenses. All expenses (other than underwriting
expenses, discounts and commissions relating to Registrable Securities and fees
and disbursements of counsel for the Investor), including without limitation,
all registration, filing, and qualification fees, printing and accounting fees
and legal fees and expenses of the Company' counsel incurred in connection with
a registration pursuant to Section 1.1 or Section 1.5 shall be borne by the
Company.
3.2 Underwriting Expenses. All underwriting expenses, discounts and
commissions relating to the Registrable Securities shall be borne by the
Investor.
3.3 Deemed Amendment. Notwithstanding any other provision of this Section
3, the provisions of this Section 3 shall be deemed amended to incorporate and
comply with the provisions of any applicable state securities laws, regulations,
and administrative policies.
3.4 Withdrawn Registration. The Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.1 if the
registration request is subsequently withdrawn at any time at the request of the
Investor (in which case the Investor shall bear such expenses), unless the
Investor agrees to forfeit its right to a demand registration pursuant to
Section 1.1. Notwithstanding the foregoing, however, if the Investor's request
for such withdrawal is preceded by and a consequence of a material adverse
disclosure made by the Company after the date of the Investor Notice but before
the effective date of the resulting registration statement, then the Investor
shall not be required to bear such expenses and shall not forfeit its right to
demand one registration pursuant to Section 1.1 as a consequence of such
withdrawal request.
4. Certain Requirements.
4.1 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required under applicable federal and
state securities laws and regulations to effect the registration of its
Registrable Securities.
4.2 Delay of Registration. So long as the Company has given any notice
required by this Agreement, the Investor shall not have any right to take any
action to restrain or otherwise delay any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
4.3 Limits on Registrations. The Company shall not be obligated to
register any Registrable Securities under this Agreement at any time after March
19, 2005. This Agreement shall automatically expire on March 19, 2005.
Termination of this Agreement shall not affect any obligations to register
pursuant to a demand received prior to the termination of this Agreement.
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4.4 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 1.6 to include any of the Investor's securities in
such underwriting unless it accepts the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold (other than by
the Company) that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders).
5. Indemnification.
If any Registrable Securities are included in a registration statement
under this Agreement:
5.1 By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless the Investor, the officers and directors of the
Investor, any underwriter (as defined in the 1933 Act) for the Investor and each
person, if any, who controls the Investor or underwriter within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the 1933 Act, the 1934 Act, or any other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions, or violations (collectively a "Violation"): (a)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (b) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(c) any violation or alleged violation by the Company, or any of the Company'
officers, directors, employees or affiliates of the 1933 Act, the 1934 Act, or
any rule or regulation promulgated under the 1933 Act, the 1934 Act, or any
state or other federal securities law. The Company will reimburse the Investor
and each such officer or director, or underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section 5.1
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the
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extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any the Investor, underwriter or
controlling person.
5.2 By the Investor. To the extent permitted by law, the Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the 1933 Act and each agent and any
underwriter for the Company, against any losses, claims, damages, or liabilities
(joint or several) to which the Company or any such director, officer,
controlling person, agent, or underwriter or controlling person, may become
subject, under the 1933 Act, the 1934 Act, or any other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by the Investor expressly for
use in connection with such registration; and the Investor will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent, or underwriter or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 5.2 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Investor, which consent shall not be unreasonably withheld.
5.3 Procedure. Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, reasonably satisfactory to the
indemnifying party, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
conflicts of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the indemnified party under this Section 5 except to the extent the indemnifying
party is prejudiced as a result thereof; and the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 5.
5.4 Survival. The obligations of each party under this Section 5 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement.
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6. Reports, Assignment and Stand-off.
6.1 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Investor the benefits of Rule 144 promulgated under the 1933
Act and any other rule or regulation of the SEC that may at any time permit the
Investor to sell securities of the Company to the public without registration,
the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) Furnish to the Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Investor
of any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
6.2 Assignment. The Investor's rights under this Agreement may not be
assigned by the Investor without the prior written consent of the Company,
except to any other person or entity, directly or indirectly, controlled by or
under direct or indirect common control with Investor (the "Investor
Affiliate"), provided that such Investor Affiliate acquires at least 50,000
shares of the Investor's Registrable Securities. Subject to the foregoing, the
terms and conditions of this Agreement shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the parties. "Control"
means the power to direct the management and policies of such person or entity,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise. Investor Affiliate shall not mean employees of Investor
acting in their individual capacities.
6.3 "Market Stand-off" Agreement. The Investor hereby agrees that it shall
not, to the extent requested by the Company and an underwriter of Common Stock
(or other securities) of the Company, sell or otherwise transfer or dispose
(other than to donees who agree to be similarly bound) any Registrable
Securities during the period requested by such underwriter (not to exceed 180
days following the effective date of a registration statement of the Company
filed under the 1933 Act); provided, however, that all officers and directors of
the Company also enter into similar agreements.
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7. Miscellaneous.
7.1 No Third Party Benefits. Nothing in this Agreement, express or implied,
is intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.2 Governing Law. This Agreement and all transactions contemplated hereby,
shall be governed, construed and enforced in accordance with the laws of the
State of Oregon, without reference to its choice of law provisions.
7.3 Counterparts. This Agreement may be executed in several counterparts
each of which shall be deemed to be an original, and all of which when taken
together shall constitute one single agreement between the parties.
7.4 Headings. The headings and subheadings used in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
this Agreement.
7.5 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given (a) upon personal delivery to the
party notified, (b) three days after deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address for such party, (c) one day after deposit with a
nationally recognized air courier service such as DHL or Federal Express for
next day delivery, or (d) on the date of facsimile transmission, with confirmed
transmission, provided that notice is also given under clauses (a), (b) or (c),
above. Addresses for notices are on the signature page hereof, or such other
address as such party may designate by ten days' advance written notice to the
other party in accordance with this Section 7.5.
7.6 Amendment; Waivers. No amendment or modification of this Agreement
shall be effective unless it is set forth in a writing which refers to the
particular provision(s) so amended or modified and is executed by authorized
representatives of both parties. No failure or delay by either party in
exercising any right, power or remedy will operate as a waiver of any such
right, power or remedy and any waiver as to a breach of any particular provision
will not be deemed to be a waiver of any future breach of that same provision.
7.7 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.8 Entire Agreement. This Agreement contains the entire understanding of
the parties regarding the subject matter of this Agreement and supersedes any
other agreements
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among the parties regarding such subject matter, each of which is hereby
terminated and of no further force or effect.
8. Definitions.
The following terms are defined as follows or in the indicated
sections of this Agreement:
"1933 Act" shall have the meaning set forth in Section 1.1;
"1934 Act" shall have the meaning set forth in Section 5.1;
"Purchase Agreement" shall have the meaning set forth in Recital A;
"Common Stock" means the common stock of the Company;
"The Investor" means Steelcase Inc., a Michigan corporation;
"Notice" shall have the meaning set forth in Section 1.1;
"The Investor Affiliate" shall have the meaning set forth in Section
6.2;
"The Company" means Microfield Graphics, Inc., an Oregon corporation;
"Register," "registration," and "registered" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act of 1933, as amended, and the declaration or
ordering of effectiveness of such registration statement or document;
"Registrable Securities" means (a) the Common Stock issuable or issued
pursuant to the Purchase Agreement, (b) the Common Stock issuable or issued upon
exercise of the Warrant, and (c) any stock issued in connection with the Common
Stock described in (a) or (b) of this provision;
"SEC" means the Securities and Exchange Commission;
"Violation" shall have the meaning set forth in Section 5.1; and
"Warrant" means Warrant No. 1998-W-1 issued to the Investor for the
purchase of 260,000 shares of the Company's Common Stock, of even date hereof.
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The parties have executed this Agreement as of the date first written
above.
MICROFIELD GRAPHICS, INC.
By: /s/ John B. Conroy
---------------------------------
John B. Conroy, President and
Chief Executive Officer
Mailing Address: 7216 SW Durham Road
Portland, OR 97224
Attention: John B. Conroy, President and
Chief Executive Officer
Fax: 503/620-4090
STEELCASE INC.
By: /s/ James P. Hackett
---------------------------------
James P. Hackett, President and
Chief Executive Officer
Mailing Address: 901-44th Street S.E.
Grand Rapids, MI 49508
Attention: James P. Hackett, President and
Chief Executive Officer
Fax: 616/247-2374
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