-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, On83rCaPUoQkVm4kIx0dIW4SyQSEkbYrfq21aXNyaquTYtnwqr0cnqnoxLWOk9S5 74O28GwdegztqSkDQxIOow== 0000950131-98-002138.txt : 19980331 0000950131-98-002138.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950131-98-002138 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980330 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MICROFIELD GRAPHICS INC /OR CENTRAL INDEX KEY: 0000944947 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930935149 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-49773 FILM NUMBER: 98578014 BUSINESS ADDRESS: STREET 1: 9216 SW DURHAM RD CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036204000 MAIL ADDRESS: STREET 1: MICRFIELD GRAPHICS INC /OR STREET 2: 9216 SW DURHAM RD CITY: PORTLAND STATE: OR ZIP: 97224 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STEELCASE INC CENTRAL INDEX KEY: 0001050825 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE FURNITURE (NO WOOD) [2522] IRS NUMBER: 380819050 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 901 44TH ST CITY: GRAND RAPIDS STATE: MI ZIP: 49508 BUSINESS PHONE: 6162472710 MAIL ADDRESS: STREET 1: 901 44TH ST CITY: GRAND RAPIDS STATE: MI ZIP: 49508 SC 13D 1 SCHEDULE 13D 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). 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! 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. 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, 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. 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 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:
Date of Number Price Transaction of Shares Per Share ----------- --------- --------- 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
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. 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 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. EX-99.1 2 COMMON STOCK PURCHASE AGREEMENT Exhibit 1 COMMON STOCK PURCHASE AGREEMENT between MICROFIELD GRAPHICS, INC. and STEELCASE INC. March 16, 1998 TABLE OF CONTENTS
Page 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
i
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
ii 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. 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 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 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 4 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 5 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 6 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 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. 8 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] 9 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 10 SCHEDULE 2 Executive Officers and Directors John B. Conroy Scott McVay Randall R. Reed Michael Stansell Peter Zinsli Donald Zurstadt William P. Cargile 11 EX-99.2 3 STOCK PURCHASE WARRANT 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. "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. 2 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 3 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 4 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 5 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. 6 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. 7 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 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. (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. EX-99.3 4 SHARE OWNERSHIP. VOTING AND RIGHT OF 1ST REFUSAL 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. "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 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 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 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 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 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 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 SCHEDULE A Executives John B. Conroy Scott McVay Randall R. Reed Michael Stansell Peter Zinsli Donald Zurstadt William P. Cargile 9 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 EX-99.4 5 REGISTRATION RIGHTS AGREEMENT 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. 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 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 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. 4 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 5 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. 6 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. 7 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 8 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. 9 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 10 -----END PRIVACY-ENHANCED MESSAGE-----