<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended March 31, 1996; or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______ to _____.
COMMISSION FILE NO. 0 - 22688
MACROMEDIA, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94 - 3155026
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
600 TOWNSEND STREET, SAN FRANCISCO, CALIFORNIA 94103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 252-2000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE
$0.001 PER SHARE
(Title of Class)
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10 - K or any
amendment to this Form 10-K [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on May 31,
1996 ($42.625) as reported on the Nasdaq National Market, was approximately
$1,323,287,541. Shares of Common Stock held by each officer and director and by
certain persons who owned 5% or more of the Registrant's outstanding Common
Stock on that date have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of Friday, May 31, 1996, Registrant had outstanding 36,583,592 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1996 Annual Meeting of
Stockholders to be held at 1:30 PM, Thursday, July 25, 1996 at 600 Townsend
Street, San Francisco, 94103 are incorporated by reference in Part III.
<PAGE> 2
MACROMEDIA, INC.
1996 FORM 10-K
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
----
PART I
Item 1. Business 1
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 4A. Executive Officers of the Registrant 10
PART II
Item 5. Market for the Registrant's Common Equity and Related Stock Holder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 45
PART III
Item 10. Directors and Executive Officers of the Registrant 47
Item 11. Executive Compensation 47
Item 12. Security Ownership of Certain Beneficial Owners and Management 47
Item 13. Certain Relationships and Related Transactions 47
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 48
Signatures 51
Index to Exhibits
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Macromedia, Inc. ("Macromedia" or the "Company") is a supplier of integrated
software tools and services to the graphics, multimedia, and online publishing
communities. The Company develops, markets, and supports an integrated line of
graphics, multimedia, and online publishing software for both Windows and
Macintosh platforms (Windows 3.1, Windows 95, Windows NT, Macintosh, and Power
Macintosh). These authoring and production tools are used to create interactive
multimedia applications and printed materials for business communications, the
arts and entertainment, and education. Using Macromedia's products, developers
can create content for delivery over the full spectrum of digital formats:
print, video, film, the World Wide Web, intranets, CD-ROM, DVD (Digital Video
Disk), Enhanced CD, and interactive television.
The Macromedia Studios, each consisting of a suite of Macromedia products, meet
the needs of individuals involved in the development and delivery of multimedia
and graphics content by providing a complete, integrated set of tools.
Macromedia Studios are based on the Macromedia Open Architecture (MOA) which
lets users leverage their understanding of one application across an entire
product line. The Macromedia Information Exchange (MIX) enables one studio
application to present data to another studio application in the most
appropriate form, thus enhancing ease-of-use and productivity. The Macromedia
User Interface (MUI) delivers a consistent look and feel across all studio
applications and numerous third-party plug-ins. These core technologies provide
a framework for ensuring that the Macromedia Studios are well-integrated,
user-friendly tools for customers and that developers can "Author Once, Publish
Anywhere." These Studios include:
Director(R) Multimedia Studio(TM) - software tools for multimedia and the
Internet
FreeHand(TM) Graphics Studio(TM) - software tools for graphic design
Authorware(R) Interactive Studio(TM) - software authoring tools for interactive
information
Backstage(TM) Internet Studio(TM) - software tools for building Web sites
With Macromedia's Shockwave(TM) technology, existing and new users of the
Company's products are adapting and developing interactive content for use on
World Wide Web sites. Authorware, Director, and FreeHand files can be
translated or "shocked" for use on World Wide Web sites as well as corporate
intranets and other networks. With the acquisition of iband and its family of
visual Web-building environments, Backstage, the Company intends to provide a
complete, cross-platform Internet authoring studio. (The Backstage product line
is currently available for use in Windows. It is expected that as of September
1996, Backstage Designer Plus will be available for the Macintosh OS.)
To support its customers and distribution channels, Macromedia offers many
innovative programs and services through its Source & Center programs,
including:
o Macromedia International User Conference
o Worldwide Developer Program
o Authorized Training Program
o Macromedia Priority Access
o Made with Macromedia certification
o Macromedia Authorized Graphic Imaging Center (MAGIC) program
o Macromedia User Groups
o Online Forums
o Industry resources on the Macromedia Web site: http://www.macromedia.com
o Macromedia Consulting Group
o Xtras(TM) Developer Program
The Company sells its products worldwide through a variety of distribution
channels, including traditional software distributors, educational
distributors, value-added resellers ("VARs"), original equipment manufacturers
("OEMs"), hardware and software superstores, retail dealers, mail order, and
direct sales. The Company also enters into and maintains alliances with other
key players in multimedia, graphic arts, and publishing, as well as related
emerging industries.
1
<PAGE> 4
PRODUCTS
The Company's products are used by multimedia, graphic arts, Web, and learning
professionals working on their own or in organizations ranging from large
corporations to small companies, as well as in educational institutions.
MULTIMEDIA PRODUCTS
Authorware is designed for authoring and delivering interactive information and
is targeted to computer-based training specialists and educators, as well as
multimedia professionals. It provides an object-oriented, icon-based authoring
environment with hypertext and media capabilities, data measurement functions,
and media integration controls. Available for use on Windows or Macintosh,
Authorware's easy-to-use authoring environment lets subject matter experts
build applications such as interactive multimedia courseware, kiosks, and
publications, by placing icons on a flowline to combine and control text,
graphics, animation, sound, and video. Its use of icons instead of scripting to
define interactivity and control multimedia elements significantly shortens the
learning curve for non-programmers, increasing productivity and ease of
long-term maintenance. Authorware also automatically records, measures, and
reports student responses and other end user data. Authorware 3.0 is now
designed for use on corporate intranets.
Authorware Interactive Studio allows users to create interactive information
applications. The studio includes: Authorware 3.0, for authoring interactive
information on a variety of platforms, including corporate intranets; and the
Director Multimedia Studio, for complete multimedia application development.
Director is designed for developing interactive multimedia entertainment,
edutainment, and high-impact presentations, and is targeted at design,
graphics, animation, and video professionals who require a wide selection of
creative tools for their multimedia productions. Director 5.0 allows users to
quickly and easily import and integrate media elements such as 2D and 3D
graphics, animation, sound, and digital video from a wide variety of sources to
create stand-alone interactive applications. Director allows development of
multimedia content on Windows 95, Windows NT, Windows 3.1, and Macintosh OS and
delivery on those platforms, as well as on the Internet using Shockwave.
Director Multimedia Studio allows users to create dynamic multimedia. The
Studio includes: Director 5.0, for multimedia and the Internet; SoundEdit(TM)
16plus DECK II(TM) 2.5 (Macintosh), for audio production or Sound Forge XP
(Windows), a general-purpose sound editor purchased through a license agreement
from Sonic Foundry; Extreme 3D(TM), for 3D design and animations; and
Macromedia xRes(TM) 2.0, for high-resolution images.
SoundEdit 16 plus DECK II brings together two audio tools for a complete
digital audio package. SoundEdit 16 is the first software-only recording studio
that lets users create fine-tuned audio for everything from multimedia to music
to the Internet. DECK II features multitrack recording, macro-editing, and
complex audio arrangement capabilities. This software, combined in a single
package, provides a comprehensive audio solution for sound editing and
synchronization from the Macintosh desktop.
WEB DEVELOPMENT PRODUCTS
Backstage Designer Plus allows Windows users to create their own dynamic Web
sites without having to use HTML. Offering a WYSIWYG point-and- click authoring
environment, Backstage Designer is easy to use, and powerful enough for
professional use.
Backstage Internet Studio refers to two full-featured Windows-based packages
for developing mission-critical, Web-based business applications. Backstage
Desktop Studio, an advanced Web design, development, and management package,
combines a WYSIWYG authoring environment with customizable objects, a
project-level management system, and a browser-optimizing object server.
Objects include features such as database connectivity, forms-to-email,
discussion groups, and more. Backstage Enterprise Studio extends the features
and functionality of the Desktop Studio with client/server database
connectivity.
Shockwave is compression standard technology for playing multimedia and
graphics files created with Macromedia tools over the World Wide Web and
corporate intranets. Shockwave applications can be developed in Windows and on
the Macintosh and viewed on either platform, as well.
2
<PAGE> 5
GRAPHIC ARTS PRODUCTS
FreeHand is a design and illustration software package that offers a
comprehensive feature set and customizable working environment for graphic
designers, artists, and illustrators. Its open architecture provides access to
a range of third-party Xtras and its support for Adobe Photoshop filters
enables TIFF manipulation without leaving FreeHand. FreeHand's text environment
features text style sheets, copy fitting and column balancing, spelling
checker, hyphenation, tabs, text on a path, inline graphics, and more. Graphic
artists, designers, and illustrators can experiment with 100 levels of undo and
redo. FreeHand also features 500 fonts and 10,000 clip-art images. FreeHand 5.5
is currently available for the Macintosh and Power Macintosh and FreeHand 5.0
is available for use on Windows 95, NT, and 3.1.
The FreeHand Graphics Studio is a complete set of tools for graphic arts and
design. The studio includes: FreeHand, for graphic design, illustration, and
page layout; Extreme 3D, for 3D models, animations, and renderings; Macromedia
xRes, for hi-res image editing and compositing; and Fontographer, for modifying
existing fonts or creating new typefaces. This studio also contains clip art,
photography, 3D models, and fonts.
Extreme 3D features 3D modeling, animation, and rendering. Extreme 3D's
interface conforms to popular illustration, animation, and rendering standards
and offers functionality and integration with Macromedia xRes, FreeHand,
Director, and Authorware. With identical environments and file formats on
Windows and Macintosh, Extreme 3D allows transparent file exchange and supports
built-in distributed rendering across platforms.
Fontographer is software for creating and modifying fonts in Windows and on the
Macintosh. It is designed for graphic artists, type designers, and technical
professionals who want to modify their existing fonts or create new fonts from
scratch. Fontographer offers ease-of-use and precision drawing tools to serve
the type design needs of novices and professionals alike.
Macromedia xRes is cross-platform image editing and design software that lets
users create and edit high-resolution files quickly, without using extra RAM or
hardware. Macromedia xRes features a familiar Adobe Photoshop-style interface,
as well as Photoshop-compatible keyboard shortcuts and imaging conventions.
Other features include multiple undos, artistic brushes and textures, and
floating text objects. Macromedia xRes also supports such Web-ready formats as
GIF89a (interleaved with transparency), Progressive JPEG, and PNG.
PRODUCT DEVELOPMENT
Macromedia is focusing its product development efforts on creating the
Macromedia Studios, a completely integrated line of affordable, high-quality,
easy-to-use software tools for multimedia, graphic arts, and digital video
professionals. Its products are distinguished by five key design strategies:
1) Ease-of-Use -- Macromedia products are designed and documented for
ease-of-use in order to serve the needs of the largest number of
multimedia, graphic arts, and online publishing users. The Company's
products share similar user interface conventions to facilitate
learning multiple products.
2) Integration -- Macromedia offers a family of multimedia and graphic
arts tools that are designed to share data formats and user interface
conventions. This enables our tools to work well together and reduces
the learning curve from one application to the next.
3) Power/Performance -- Macromedia products combine comprehensive feature
sets with high performance to provide the power and efficiency
necessary for creative and business professionals' use.
4) Extensibility -- Macromedia products can be extended by third-party
developers through built-in scripting languages and published
Application Programmer Interfaces.
5) Author Once, Publish Anywhere -- Macromedia software provides the
means for interactive authoring and multimedia production, including
2D graphics, in Windows and on the Macintosh, as
3
<PAGE> 6
well as print output and playback of applications on the leading
personal computer, consumer player, online, and interactive television
platforms.
The Company's principal product development efforts include (i) utilizing its
core technology to develop a common graphical user interface across all
products on all platforms, (ii) developing enhanced, fully integrated versions
of its existing authoring and media creation tools, (iii) developing new
versions of its tools for graphic arts, multimedia, online publishing, sound
and video, (iv) integrating 3D technology into its authoring tools to meet the
anticipated future demand for 3D capabilities, (v) adapting its products to
support new operating systems, and (vi) developing players for delivery of
applications to new playback platforms, including the Internet. In addition,
the Company plans to continue developing, and from time to time acquiring,
basic software technologies that it considers critical to building multimedia,
graphic arts, Web development, and digital video software tools and
applications.
The Company believes that its future success will depend on its ability to
enhance its existing products and to develop and introduce new products on a
timely basis. New products and enhancements must keep pace with competitive
offerings, adapt to new hardware platforms and emerging industry standards, and
provide additional functionality. If Macromedia were unable to develop and
introduce such products in a timely manner, this inability would have an
adverse effect on the Company's results of operations. Macromedia currently has
a number of new product development efforts under way, including Authorware
4.0, FreeHand 7.0, and Director 6.0, which are scheduled to be released during
the current fiscal year. Any delay in these new products' availability could
have an adverse impact on the results of operations.
For fiscal 1996, 1995, and 1994, the Company's research and development
expenses were $20.0 million, $12.4 million, and $10.1 million respectively.
MARKETING
Macromedia generates awareness and demand for its products through public
relations activities, advertising, product reviews, and national and local
trade shows. The Company also uses direct mail to introduce and educate
customers about new products and enhancements, and to cross-sell additional
products to current customers. In addition, Macromedia sells its products by
distributing a variety of interactive multimedia demonstration materials and
videos directly to prospective customers, and then follows up through outbound
telemarketing.
To support users of its tools, the Company sponsors innovative programs and
services through its Source & Center programs. One of the more high-profile
events is the Macromedia International User Conference held in San Francisco
each fall. Macromedia also manages the Authorized Developer Program which
certifies third-party developers and refers prospective clients to them. In
addition, the Company provides incentives to third-party developers to use the
"Made with Macromedia" trademark on multimedia applications that have been
authored with the Company's products. In the last year, 670 U.S., 300 European,
and 225 Japanese titles displayed the logo. In return, the title developers
paid no license fees to Macromedia for their distribution of Macromedia's
player software. The Company has also certified more than 80 Authorized
Training Centers worldwide to provide third-party training in the use of its
products and since March 1995, 460 Authorized Graphic Imaging Centers have been
certified to provide the highest level of print service to Macromedia's graphic
arts customers.
The Company views the education market as a strategic opportunity to establish
product and brand preferences early in the careers of future professionals.
There are now 75 New Media Centers resulting from the Company's partnership
with educational institutions committed to developing curricula focused on
multimedia.
A key element of the Company's marketing strategy is to work with industry
leaders to develop the multimedia market and gain broad acceptance of
Macromedia products on all leading platforms. Many such arrangements have been
established by the Company, including:
o Agreements to develop industry-standard multimedia playback technology
(Macromedia Portable Players) for IBM's OS/2 Warp and Microware's OS/9
in addition to Windows and Macintosh operating systems, and for
interactive television set-top boxes from Online Media and Apple
Computer.
4
<PAGE> 7
o Shipment of the FreeHand Software Developers Kit, free of charge, to
third-party developers resulting in the development of Metatool Inc.'s
Kai's Power Tools; Vector Effects; Letraset; USA's Envelopes; Azalea
Software, Inc.'s Prepress Xtra and UPCTools; and Bullfrog Software
Engineering's Encompass.
o An agreement with Netscape Communications to bundle Shockwave with
various retail products, allowing users of the Netscape browser to
retrieve and play Macromedia Director animations and applications over
the Internet.
o An agreement with Microsoft to bundle Shockwave technology with the
Internet Explorer 3.0 and Windows 95.
o An agreement with America Online to distribute Macromedia Shockwave
with America Online 3.0.
o Through additional agreements with Sun Microsystems, Silicon Graphics,
Navisoft, CompuServe, and NetManage, Director and Shockwave technology
will be widely available for use on the Internet.
SALES AND DISTRIBUTION
A substantial majority of the Company's revenues is derived from the sale of
its products through a variety of distribution channels, including traditional
software distributors, educational distributors, VARs, OEMs, hardware and
software superstores, retail dealers, mail order, and direct sales. The Company
also enters into and maintains alliances with other key players in multimedia,
graphic arts, and online publishing, as well as related emerging industries.
Domestically, the Company's products are sold primarily through distributors,
VARs, and OEMs. Internationally, the Company's products are sold through
distributors. In fiscal 1996 and 1995 one distributor, Ingram Micro, Inc.,
accounted for 21% and 23%, respectively, of the Company's total revenues; in
fiscal 1994, another distributor, Merisel, Inc., accounted for 10% of the
Company's total revenues. Accordingly, the Company is dependent on the
continued viability and financial stability of these distributors. The
Company's resellers generally offer products of several different companies,
including in some cases products that are competitive with the Company's
products. There can be no assurance that the Company's resellers will continue
to purchase the Company's products or provide them with adequate levels of
support. In addition, the Company believes that certain distributors may be
reducing their inventory in the channel to better manage their internal working
capital, and that this could result in a one-time reduction in orders, as this
adjustment takes effect. The loss of, or a significant reduction in sales
volume to, a significant reseller could have a material adverse effect on the
Company's results of operations.
The Company's sales and distribution channels are targeted at the buying
patterns of the Company's two principal customer types: multimedia and graphic
arts professionals.
Software Distributors -- Macromedia sells and distributes its products
primarily through large national software distributors, such as Ingram Micro,
Inc., Merisel, Inc., MicroAge, and Tech Data Corporation which in turn
distribute the Company's products through large retail chains, mail order,
National corporate resellers and small independent dealers. The Company
supports this channel by referring mail order and retail dealer sales through
distributors. The Company's direct sales staff calls on large distributors and
retailers and assists them in the placement of orders and the management of
inventory of the Company's products. The Company receives monthly inventory and
sales reports from its distributors and major retailers to help monitor sales
through this channel. As is typical in the personal computer software industry,
the Company grants its distributors limited rights under a stock balancing
policy to return unsold inventories of the Company's products in exchange for
new purchases. In addition, the Company provides price protection to its
distributors in certain instances where it reduces the price of its products.
International Distributors -- With over 80 distributors in over 50 countries
around the world, international sales of Macromedia products accounted for 42%
of total revenues during the last fiscal year. In many cases, the distributor
has exclusive distribution rights to certain products or for certain platforms
in its country and, in certain cases, has the responsibility for preparing
"localized" versions of Macromedia's products in the language of the country.
The Company believes that the international markets for its products present a
5
<PAGE> 8
strategic opportunity and is committed to increasing its international sales to
50 percent of total sales. The Company continues to actively review its
international distribution arrangements.
Value Added Resellers -- Macromedia sells and distributes the Authorware
Interactive Studio and the Director Multimedia Studio through 170 VARs and
high-end dealers. The VARs are selected by Macromedia based on their knowledge
of the products and applications. During fiscal 1996, the standards for VAR
selection were reviewed and refined, resulting in fewer, more highly qualified
VARs. Many of the VARs have experience selling desktop computer-aided-design
software or desktop video editing systems. They are required to provide service
and training to their customers and to conduct seminars on the use of
Macromedia's products. The Authorware Interactive Studio for Windows and
Macintosh is distributed exclusively through the VAR network. The Director
Multimedia Studio for Windows and Macintosh is distributed through the VAR
network and through dealers on a non-exclusive basis.
Educational Market Distributors -- Macromedia sells its products to educational
institutions primarily through distributors such as Ingram Micro Inc., Douglas
Stewart, and Educational Technology Specialists, Inc. ("Edutech"), which
specialize in selling to the education market, e.g. bookstores, campus
resellers, educational mail order companies, and Macromedia education
value-added resellers (VARs). The Company offers substantial educational
discounts on (i) its individual products to seed the market, (ii) on ten-packs
of products to stimulate adoption by computer and multimedia laboratories, and,
through Edutech, (iii) for on-site licenses under which educational
institutions can obtain institution-wide licenses of a mix of Macromedia
products. Further discounts are available on training classes, materials, and
services. In addition, the Company currently offers Authorware Academic and
expects to offer Director Academic, educational versions of its multimedia
authoring products, at preferred educational pricing through a license
agreement with Prentice-Hall, the largest textbook publisher in higher
education.
OEM Distribution -- Macromedia actively maintains OEM relationships with many
hardware and software vendors that bundle Macromedia products with their own
complementary hardware or software products and pay the Company a per unit
royalty. In the last year alone, 12 new OEM agreements were signed. The Company
believes that OEM sales increase the brand recognition of its products and
expand its customer base. In addition, these OEM relationships give the Company
early access to new multimedia technologies being developed by OEMs and allow
Macromedia to quickly adapt its products for compatibility.
The companies with whom Macromedia has established OEM distribution
arrangements include:
ASCII Corporation
ATI Technology, Inc.
Chang Chung Co.
Creative Labs, Inc.
Darim System
Digital Equipment Corporation
Digital Vision
Eastman Kodak
Fujitsu Computer Products of America
Grass Valley Group, Inc.
High Technology
Intergraph Computer Systems, Inc.
International Thomson Publishing, Inc.
JVC Information Products of America
Korg U.S.A. Inc.
NEC Technologies, Inc.
Orchid Technology
Optibase Ltd.
Play Inc.
Power Computing, Inc.
Reveal Corporation
Roland Corporation US.
Samsung Electronics Company Ltd.
Telex Communications
VideoLogic, Ltd.
6
<PAGE> 9
Inside Sales - The Company offers product upgrades and services, including
membership in various authorized programs, directly to qualified third-parties
and end users. Direct sales, by selling to repeat customers in the Company's
installed base of registered users, complements Macromedia's indirect
distribution channel.
Technology Licensing - For certain large customers, the Company enters into
licensing agreements under which the customer has the right to reproduce and
use Macromedia software. For example, the Company has entered into licensing
agreements with Brederbund Software, Compuserve, Inc., Interaxx Television
Network, Inc., NetManage Inc., and Attachmate.
TECHNICAL SERVICES
The Technical Services department offers technical support, training, and
consulting, and is dedicated to increasing customer satisfaction by supporting
customers in their on-going relationship with the Company.
The Company offers product training for Authorware and Director. Its training
classes are led by professional instructors and provide customers with hands-on
learning experiences. Classes are offered in locations throughout the United
States and in various locations both in and outside the United States through
Macromedia's Authorized Training Centers. Training for FreeHand and
Macromedia's 3D graphics products is offered through third-party training
professionals using course materials developed by the Company.
The Company also offers strategic consulting to organizations through the
Macromedia Consulting Group. This group specializes in needs analysis, project
planning, application prototyping, technology assessments, and critical
short-term applications development assistance for developers and publishers.
The Company relies on third parties, as well as its own direct consulting
group, to provide training and consulting for large customers.
Macromedia provides customer support on a complimentary basis for a period of
90 days after the first technical support call from a customer. Thereafter,
the Company offers its customers a technical support plan called Priority
Access that provides the customer with access to a toll- free support line,
priority call queuing, priority response to mail, and facsimile support
inquiries, 24-hour voicemail messaging, and a quarterly mailing that includes
the TechNotes newsletter with product tips and techniques, and the Macromedia
"KnowledgeBase," a database of common technical support questions and answers.
The Company also offers sophisticated Developer Support and per-incident
support.
COMPETITION
Sales of the Company's Director, Freehand, and Authorware products have
generally represented and are expected to continue to represent a substantial
majority of the Company's total revenues. The Company expects that its revenues
will continue for the foreseeable future to be substantially dependent on these
products and that competition for these products will intensify in the future.
A decline in sales of any of these products, as a result of competition,
technological change, or other factors, would have a material adverse effect on
the Company's results of operations. To date, a majority of the Company's
revenues has been derived from its products for the Macintosh. Although sales
of the Company's products for Windows accounted for approximately one-third of
the Company's total revenues in fiscal 1996 and are expected to become an
increasingly important component of the Company's revenues, a leveling-off or
decline in the sales rate of multimedia-capable Macintosh computers or shifts
in mail-order or other distribution mechanisms for Macintosh products could have
a material adverse effect on the Company's results of operations.
The markets for the Company's products are highly competitive and characterized
by pressure to reduce prices, incorporate new features, and accelerate the
release of new product versions. A number of companies currently offer products
that compete directly or indirectly with one or more of the Company's products.
These companies include Adobe Systems Incorporated, Aimtech Corporation, Apple
Computer Incorporated, Asymetrix Corporation, Autodesk, Incorporated, Corel
Corporation ("Corel"), Microsoft Corporation, and Strata Incorporated. As the
Company competes with larger competitors such as Adobe, Corel, and Microsoft
across a broader range of product lines, the Company may face increasing
competition from such companies.
In addition, the Company's products compete to a certain extent with multimedia
authoring tools developed and used internally by developers of multimedia
applications. The Company's growth will depend in part on its ability to
persuade such potential customers to replace or augment their in-house tools
with the Company's products.
7
<PAGE> 10
The Company believes that the principal competitive factors in the graphic
arts, multimedia, and Web publishing tools categories are product features and
quality, price, ease-of-use, brand name recognition, access to distribution
channels, reliability, and quality of support services. The Company believes
that it competes favorably with respect to each of these factors. In the event
that price competition significantly increases, competitive pressures could
cause the Company to reduce the prices of its products, which would result in
reduced profit margins. Prolonged price competition would have an adverse
effect on the Company's operating results and financial condition. A variety of
other potential actions by the Company's competitors, including increased
promotion and accelerated introduction of new or enhanced products, could have
a material adverse effect on the results of operations.
Although the Company believes that its principal products have achieved market
acceptance, there can be no assurance that they will continue to do so.
Furthermore, there is a possibility that new personal and network computer
hardware platforms or new multimedia delivery systems may provide new entrants
with opportunities to make substantial inroads into the graphic arts,
multimedia, or Web publishing tools market segments.
PROPRIETARY RIGHTS AND LICENSES
The Company relies on a combination of copyright, trade secret, and trademark
laws, and employee third-party nondisclosure agreements, to protect its
intellectual property rights and products. The Company distributes its software
under a "shrink-wrap" license agreement and generally does not obtain signed
license agreements from its end users. The Company uses a hardware lock-out
device with respect to certain versions of its software that are sold
internationally but otherwise does not copy-protect its software. It may be
possible for unauthorized third parties to copy the Company's products or to
reverse engineer or obtain and use information that the Company regards as
proprietary. There can be no assurance that the Company's competitors will not
independently develop technologies that are substantially equivalent or
superior to the Company's technologies. Policing unauthorized use of the
Company's products is difficult, and while the Company is unable to determine
the extent to which software piracy of its products exists, software piracy can
be expected to be a persistent problem. In addition, the laws of certain
countries in which the Company's products are or may be distributed do not
protect the Company's products and intellectual rights to the same extent as
the laws of the United States. The Company is a member of the Business Software
Alliance ("BSA") and the Software Publishers Association ("SPA") and supports
their efforts to stop the unauthorized distribution of software.
The Company believes that its products, intellectual property, and other
proprietary rights do not infringe on the proprietary rights of third parties.
From time to time, however, the Company has received communications from third
parties asserting that features or content of certain of its products may
infringe intellectual property rights of such parties. To date, no such claim
has resulted in litigation or in the payment of any claims, and the Company
believes that the impact of any such known claims will be immaterial. However,
as the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that its
software increasingly will become the subject of claims that such software
infringes the rights of others. There can be no assurance that third parties
will not assert infringement claims against the Company in the future or that
any such assertion will result in costly litigation or require the Company to
obtain a license to intellectual property rights of third parties. There can be
no assurance that such licenses will be available on reasonable terms or at
all. The Company licenses certain software products from other companies to
create suites of multimedia products. There can be no assurance that upon the
expiration of these licenses, such licenses will be available on reasonable
terms or at all, or that similar products could be obtained to substitute into
the suites.
MANUFACTURING AND SHIPPING
The Company is dependent on a sole source, Stream, International ("Stream"),
for the manufacture and shipment of its finished products. The manufacture of
the Company's products consists of duplicating diskettes, pressing CD-ROMs,
printing manuals, and packaging and assembling finished products all of which
are in accordance with the Company's specifications and forecasts. The Company
currently
8
<PAGE> 11
performs quality assurance testing at its own facilities. Stream operates
multiple facilities that are capable of serving the Company's needs, and the
Company believes any alternative sources could not be implemented without undue
delay. To date, the Company has not experienced any material difficulties or
delays in the manufacture or assembly of its products or material returns due
to product defects.
EMPLOYEES
As of March 31, 1996, the Company had 396 full-time employees, including 45 in
North American sales, 26 in international sales, 77 in marketing, 191 in
development, quality assurance, and documentation, and 57 in finance and
administration. The employees and the Company are not parties to any collective
bargaining agreements, and the Company believes that its relations with its
employees are good.
ITEM 2. PROPERTIES
The Company's primary facility consists of approximately 95,489 square feet
located in a multi-story building in San Francisco, California. This space
houses a majority of the Company's United States operations. The facility is
leased pursuant to an agreement that expires August 31, 2005. Macromedia has
two options to renew for successive five-year terms at 95 percent of the then
current fair market value of the space. The Company also holds a right of first
refusal to certain space in a building located adjacent to the space it now
occupies. In addition, the Company currently leases 29,665 square feet in San
Mateo, California, and approximately 20,000 square feet in Richardson, Texas.
In March 1996, the Company entered into an agreement with a third party to
purchase a parcel of land in Redwood City, California, for $6,960,000. The
Company believes its facilities are adequate for current and near-term needs
and that additional space is available to provide for anticipated growth during
the life of the leases. The Company also leases space in Berkshire, England,
for its European operations and in Tokyo, Japan, for its Japanese operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a party
or of which any of its property is the subject.
9
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the Company's
current executive officers as of May 31, 1996:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John C. Colligan 41 Chairman, President, Chief Executive Officer, and Director
Richard B. Wood 47 Vice President of Operations, Chief Financial Officer, and Secretary
Norman Meyrowitz 36 Senior Vice President of Engineering
Philip Schiller 36 Vice President of Product Management
Susan Gordon Bird 36 Vice President of Worldwide Sales
Miles C. Walsh 44 Vice President of Corporate Marketing and Customer Support
Jim Funk 38 Vice President of Corporate Development
James Von Ehr 45 Vice President of Product Development/JAVA and Director
Kevin Crowder 41 Vice President of Product Integration and Director
Samantha Seals-Mason 28 Vice President of Digital Arts Products
Steve Kusmer 39 Vice President of Multimedia Products
</TABLE>
Mr. Colligan has been Chairman of the Company since February 1996 and a
director since March 1992. He has also been President of the Company since
December 1992 and Chief Executive Officer since January 1993. He was Chief
Operating Officer of the Company from March 1992 to December 1992. Mr. Colligan
was President, Chief Executive Officer and a director of Authorware from
December 1988 until its merger into the Company in March 1992. Prior to joining
Authorware, Mr. Colligan was employed by Apple Computer, Inc. in a variety of
positions from May 1983 until December 1988, most recently as Director of
Marketing and Sales for Higher Education. Mr. Colligan holds a Bachelor of
Science degree in international economics from Georgetown University and a
Master of Business Administration from Stanford University. Mr. Colligan is a
director of S3 Corporation and c/net.
Mr. Wood has been Vice President of Operations since June 1990 and has been
Chief Financial Officer and Secretary of the Company since March 1992. He was
Vice President of Finance and Operations, Chief Financial Officer, and Secretary
of MacroMind and its successor from July 1990 until the formation of the Company
in March 1992. From January 1990 to March 1990, Mr. Wood was employed by Altos
Computer Systems, Inc., a manufacturer of personal computers, as Chief Financial
Officer, and from September 1986 to December 1989, Mr. Wood was employed by
PIXAR, a graphics and imaging computer company, as Chief Financial Officer. Mr.
Wood holds a Bachelor of Science degree in business and economics and a Master
of Business Administration degree from the University of California, Berkeley
and is a Certified Public Accountant in the State of California.
Mr. Meyrowitz has been Senior Vice President of Engineering since February 1996
and manages Macromedia's engineering, quality assurance, and documentation
efforts for the Director Multimedia Studio, the FreeHand Graphics Studio, the
Backstage Internet Studio, the Authorware Interactive Studio, SoundEdit 16,
Deck II, xRes, Video, and Extreme 3D products, as well as cross-product
integration and engineering operations. From October 1994 to February 1996, he
was Vice President of Product Development, San Francisco, and from October 1993
to October 1994, he was Director of Strategic Technology. From May 1991 to
October 1993, he served as Director of System/User Software at GO Corporation.
From October 1981 to May 1991, he served various positions at Brown University;
in his last position, he was Co-Director of the university's Institute for
Research in Information and Scholarship (IRIS) where he managed and was the
principal architect of IRIS's Intermedia system. Mr. Meyrowitz graduated from
Brown in 1981 with a Bachelor of Science degree in computer science. He is a
member of the ACM and the IEEE Computer Society.
10
<PAGE> 13
Mr. Schiller has been Vice President of Product Management since April 1996. He
joined Macromedia as the Director of Product Management in December 1995. He is
responsible for product management for all Macromedia products. Mr. Schiller
was the Director of Marketing at FirePower Systems, Inc. of Menlo Park, CA. At
Apple Computer in Marlborough, MA and Cupertino, CA Mr. Schiller held a
variety of marketing positions over a six year period. His positions included
responsibilities in field marketing, channel marketing, multimedia marketing,
and product marketing. Mr. Schiller has also held marketing and programming
positions at Nolan, Norton & Company and Massachusetts General Hospital. He
graduated with a Bachelor of Science degree in biology from Boston College in
1982.
Ms. Gordon Bird has been Vice President of Worldwide Sales since January 1994.
She joined the Company as Vice President of North American Sales in April 1993.
From January 1989 to April 1993, Ms. Bird held various positions in sales at
Frame Technology, a desktop publishing company, most recently as Vice President
and General Manager of North American Sales and Operations. From June 1984 to
January 1989, she was National Sales Manager for Government, Education and
Major Resellers at Ashton-Tate, a database software company. Ms. Bird holds a
Bachelor of Science degree in education from Frostburg State University.
Mr. Walsh has been Vice President of Corporate Marketing and Customer Support
since June 1994. From July 1993 to May 1994, he held the position of Vice
President of Marketing for MiniStor Peripherals International Ltd., a PCMCIA
disk drive company. From June 1991 to April 1993, Mr. Walsh held the position
of Vice President at Conner Peripherals, Inc., a disk drive company. From April
1990 to May 1991, he held the position of Vice President of Marketing at
Evernet Systems, Inc., a Systems Integrator (acquired by Control Data). Prior
to Evernet, Mr. Walsh was the President of 2X Corporation, a direct mail and
catalog consulting company for the distribution channel. Mr. Walsh has a
Bachelor of Arts degree in history from Vanderbilt University.
Mr. Funk has been the Vice President of Corporate Development for Macromedia
since February 1996. Prior to joining Macromedia in February 1994, he was the
Manager of Market Development for the Personal Interactive Electronics Division
of Apple Computer. During his employment with Apple Computer starting in 1986,
he held several marketing management positions within the Apple U.S.A division,
focusing primarily on the company's higher education markets. He has also held
product marketing positions at Interactive Software of Mountain View,
California and Digital Research of Monterey, California. He holds a Bachelor of
Arts in Economics and an MBA from Stanford University.
Mr. Von Ehr has been a director and a Vice President of the Company since
January 1995. Mr. Von Ehr was Chairman of the Board, President, and Chief
Executive Officer of Altsys from December 1984, when he co-founded Altsys, until
January 1995. Prior to founding Altsys, Mr. Von Ehr was employed by Texas
Instruments, Incorporated from 1973, where he was Senior Member, Technical Staff
and Manager of Integrated Circuit Layout Graphics. Mr. Von Ehr holds a Bachelor
of Science degree in computer science from Michigan State University and a
Master of Science degree in computer science from the University of Texas at
Dallas.
Mr. Crowder has been a director of the Company since January 1995 and has been
the Vice President of Product Integration since July 1995. He was Vice
President, Macromedia Studios from January 1995 to July 1995. Mr. Crowder was
Vice President, Secretary, and a director of Altsys from December 1984, when he
co-founded Altsys, until January 1995. Prior to founding Altsys, Mr. Crowder
was employed by Texas Instruments, Incorporated from 1973, where he was a
Member of the Group Technical Staff in the Semiconductor Design Automation
Department. Mr. Crowder holds a Bachelor of Science degree in computer Science
from Texas A & M University and a Master of Science degree in mathematical
sciences from the University of Texas at Dallas.
Ms. Seals-Mason has been the Vice President of Digital Arts Products since
February 1996. From June 1995 to February 1996 she acted as Director of
FreeHand Engineering. Ms. Seals-Mason began her professional career at Altsys
Corporation in 1989, as one of the main engineers on FreeHand 3. She later
became Engineering Manager for FreeHand 4.0, and at the time of Macromedia's
acquisition of Altsys in January 1995, she managed the shipping of FreeHand
5.0. Ms. Seals-Mason graduated from the University of Kentucky with a Bachelor
of Science degree in mathematical sciences in 1989.
Mr. Kusmer rejoined the Company in May 1995 as Vice President of Multimedia
Products. From September 1992 to April 1995, Mr. Kusmer was Vice President of
Engineering of Aha! Software Corporation. From June 1991 to March 1992, he was
Vice President of Engineering of Authorware and from April 1992 to July 1992,
he was the Company's Vice President of Authorware Products following the
11
<PAGE> 14
merger of Authorware into the Company in March 1992. From June 1987 to May
1991, Mr. Kusmer was Section Manager of Software Publishing Corporation. Mr.
Kusmer holds a Bachelor of Science degree in electrical engineering from
Cornell University.
12
<PAGE> 15
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the Nasdaq Market under the
symbol MACR. The following table sets forth, for the periods indicated, the
high and low closing prices for the Company's common stock as reported by
Nasdaq. Prices have been retroactively adjusted to reflect the 2-for-1 stock
split that occurred on October 16, 1995.
Fiscal 1996 High Low
4th Quarter 53.00 32.75
3rd Quarter 62.50 24.375
2nd Quarter 30.50 21.44
1st Quarter 21.75 15.38
Fiscal 1995 High Low
4th Quarter 18.75 10.94
3rd Quarter 13.63 7.44
2nd Quarter 8.63 4.00
1st Quarter 7.63 4.03
The Company has not paid cash dividends and has no present plans to do
so. There were 423 stockholders of record as of April 30, 1996, excluding
stockholders whose stock is held in nominee or street name by brokers.
13
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FIVE-YEAR FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1996 1995 1994 1993 1992
-------- ------- ------- ------ -------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Total revenues . . . . . . . . $116,691 $55,892 $37,542 $31,462 $29,339
Total cost of revenues . . . . 19,600 9,618 6,478 6,411 6,529
Operating expenses . . . . . . 69,411 39,057 27,236 24,431 34,179
Operating income (loss) . . . 27,680 7,217 3,828 620 (11,369)
Net income (loss). . . . . . . 23,002 6,538 3,475 241 (11,378)
Net income per share . . . . . $ 0.59 $ 0.19 $ 0.12 $ 0.01 $ --
Shares used in computing
net income per share . . . . 39,044 34,414 30,018 25,146 --
</TABLE>
All income per share amounts reflect a two-for-one stock split which became
effective October 16, 1995.
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents, and
short-term investments . . . $116,662 $33,981 $27,172 $ 1,290 $ 1,608
Working capital . . . . . . . 119,060 33,273 28,217 827 66
Total assets . . . . . . . . . 155,122 52,430 38,503 12,270 15,073
Long-term liabilities . . . . 55 136 225 118 78
Total stockholders' equity . . 133,181 39,681 31,860 4,205 3,824
</TABLE>
14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
THE COMPANY completed three separate acquisitions in fiscal 1996, each of which
was accounted for as a pooling of interests. To effect the combinations,
Macromedia exchanged a total of 1,502,001 shares of its common stock and stock
options for all the common stock and stock options of the three separate
companies (see Note 2 of Notes to Consolidated Financial Statements).
A reclassification has been made to include co-op advertising in
revenues and in sales and marketing expenses for all periods presented, in
accordance with the implementation of accounting pronouncement Statement of
Position (SOP) 93-7. For fiscal years 1996, 1995, and 1994, the increases were
$6,914,000, $2,194,000, and $0, respectively. There was no effect on net
income.
o o o
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
TOTAL REVENUES (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 % change
-------- ------- --------
<S> <C> <C> <C>
Product revenue . . . . $112,577 $53,528 110%
Service revenue . . . . 4,114 2,364 74%
Total revenues . . . . $116,691 $55,892 109%
-------- -------
</TABLE>
THE COMPANY derives revenues primarily from software sales to domestic and
international distributors, VARs, OEMs, corporate accounts, and registered
users. Revenues are also derived from training and consulting services and
from contracts to provide maintenance to customers. The company's principal
products from which it derives substantially all of its revenues are:
Authorware, Director, Extreme 3D, Fontographer, FreeHand, xRes, SoundEdit16,
DECK II, and Backstage.
The growth in product revenue reflects ongoing strength across
Macromedia's principal products, which grew 113% resulting from strong market
growth and the continuing development of the Company's customer base, indirect
sales channels, and strategic partnerships. Service revenue increased by 74%
as a result of the Company's strategy to focus on high value-added consulting
and to offer additional service and support options.
15
<PAGE> 18
COST OF REVENUES (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 % change
------- ------ --------
<S> <C> <C> <C>
Cost of product revenue . . . . . . . . . $17,295 $8,125 113%
Cost of service revenue . . . . . . . . . 2,305 1,493 54%
------- ------ --------
Total cost of revenues . . . . . . . . . . $19,600 $9,618 104%
------- ------ --------
Percentage of total revenues . . . . . . . 17% 17%
</TABLE>
Cost of product revenue includes cost of goods sold, royalties, amortization of
acquired technology, localization costs, and reserves for inventory
obsolescence. Cost of product revenue remained constant as a percentage of
total revenues as the increase in cost attributable to bringing localization
in-house was offset by cost reduction programs.
Cost of service revenue includes consulting and technical support
personnel and related costs including travel and lodging associated with
providing services. These costs decreased as a percent of service revenue due
to an increased number of consulting projects and increased student to teacher
class ratios.
OPERATING EXPENSES (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 % change
------- ------ --------
<S> <C> <C> <C>
Sales and marketing . . . . . . . . . . . $41,387 $20,181 105%
Percentage of total revenues . . . . . . 35% 36%
------- -------
Research and development . . . . . . . . $20,033 $12,360 62%
Percentage of total revenues . . . . . . 17% 22%
General and administrative . . . . . . . $ 5,466 $ 3,491 57%
Percentage of total revenues . . . . . . 5% 6%
------- -------
Merger, relocation, and reorganization . $ 2,525 $ 3,025 (17%)
Percentage of total revenues . . . . . . 2% 5%
</TABLE>
Sales and marketing expenses increased in fiscal 1996, but declined as a
percentage of total revenues. The increase was due primarily to marketing and
promotional efforts associated with new product releases, management's
commitment to fund discretionary marketing, and an increase in cooperative
advertising. In addition, higher revenue also led to increases in certain
variable selling expenses.
16
<PAGE> 19
Research and development expenses increased in fiscal 1996, but
declined as a percentage of total revenues. The increase was due primarily to
additional headcount as a result of the increase of products under
development. The Company released ten major products in fiscal 1996 compared to
five in fiscal 1995.
General and administrative expenses increased in fiscal 1996, but
declined as a percentage of total revenues. The increase was due to additional
headcount and costs associated with building the infrastructure required to
support the growth of the Company.
Following the three acquisitions of Fauve Software, Inc. ("Fauve"), OSC,
Inc. ("OSC"), and iband, Inc. ("iband"), the Company recorded merger costs in
1996 which included transaction fees for financial and legal advisers and
relocation and reorganization expenses, which included approximately $1.4
million relating to the issue of 40,000 shares of the Company's common stock
for payment to certain entities and individuals to settle certain iband
obligations.
OTHER INCOME (EXPENSE) (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 % change
------ ---- --------
<S> <C> <C> <C>
Total other income, net . . . . . . . $4,101 $376 991%
Percentage of total revenues . . . . 4% 1% --
</TABLE>
Other income increased in fiscal 1996 due primarily to higher interest income
from higher cash balances that were generated from the Company's secondary
offering of common stock and normal operations.
PROVISIONS FOR INCOME TAXES (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 % change
------ ------ --------
<S> <C> <C> <C>
Provision for income taxes . . . . . $8,779 $1,055 732%
Percentage of total revenues . . . . 8% 2% --
</TABLE>
After using available net operating loss carryforwards, the Company's effective
tax rate for fiscal 1996 was 28%, compared to 14% in 1995. Tax expense for the
year was reduced by $4,555 as a result of a reduction in the valuation allowance
for deferred tax assets. As of March 31, 1996, the balance in the valuation
account is $3,612.
17
<PAGE> 20
NET INCOME (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 % change
------- ------ --------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . $23,002 $6,538 252%
Percentage of total revenues . . . . 20% 12% --
</TABLE>
The increase in net income was due primarily to higher revenues.
o o o
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO 1994
TOTAL REVENUES (IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 % change
------- ------- --------
<S> <C> <C> <C>
Product revenue . . . . . . . . . . . $53,528 $35,970 49%
Service revenue . . . . . . . . . . . 2,364 1,572 50%
------- -------
Total revenues . . . . . . . . . . . $55,892 $37,542 49%
======= =======
</TABLE>
THE GROWTH in product revenues reflected ongoing strength across Macromedia's
principal products, which grew 82% resulting from strong customer demand, new
product introductions, the Company's acquisition strategy, and the continuing
development of the Company's indirect sales channels and strategic
partnerships. Service revenues increased by 50% as a result of the Company's
strategy to focus on value-added consulting and to offer additional service and
support options.
COSTS OF REVENUES (IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 % change
------ ------ --------
<S> <C> <C> <C>
Cost of product revenue . . . . . . . $8,125 $5,601 45%
Cost of service revenue . . . . . . . 1,493 877 70%
------ ------ --------
Total cost of revenues . . . . . . . $9,618 $6,478 48%
====== ======
Percentage of total revenues . . . . 17% 17%
</TABLE>
18
<PAGE> 21
Cost of product revenue includes cost of goods sold, royalties, amortization of
acquired technology, localization costs, and reserves for inventory
obsolescence. The increase was attributable primarily to the cost of bringing
localization in-house.
Cost of service revenue includes consulting and technical support
personnel and related costs including travel and lodging associated with
providing services. These costs increased due to increased consulting projects
and training offered.
Operating Expenses (in thousands)
<TABLE>
<CAPTION>
1995 1994 % change
------- ------ --------
<S> <C> <C> <C>
Sales and marketing . . . . . . . . . . . $20,181 $14,587 38%
Percentage of total revenues . . . . . . 36% 39%
------- -------
Research and development . . . . . . . . $12,360 $10,106 22%
Percentage of total revenues . . . . . . 22% 27%
------- -------
General and administrative . . . . . . . $ 3,491 $ 3,009 16%
Percentage of total revenues . . . . . . 6% 8%
------- -------
Merger, relocation, and reorganization . $ 3,025 $ (476) 736%
Percentage of total revenues . . . . . . 5% (1%)
</TABLE>
Sales and marketing expenses increased in fiscal 1995, but declined as a
percentage of total revenues. The increase was due primarily to marketing and
promotional efforts associated with new product releases, the additional
staffing required to support these efforts, and the higher payroll and related
expenses as a result of the increased headcount due to the merger with Altsys
Corporation ("Altsys"). In addition, higher revenues also led to increases in
certain variable selling expenses.
Research and development expenses increased in fiscal 1995, but
declined as a percentage of total revenues. The increase was due primarily to
additional headcount as a result of the merger with Altsys. The Company
released five major products in fiscal 1995 compared to seven in fiscal 1994.
General and administrative expenses increased in fiscal 1995, but
declined as a percentage of total revenues. The increase was due to additional
headcount and costs associated with installing the systems required to support
the operations of a larger company.
19
<PAGE> 22
Following the merger with Altsys, the Company recorded merger costs in
1995 that included consultants' fees and professional fees for investment
bankers, attorneys, accountants, and financial printers. The Company incurred
costs in purchasing from Adobe Systems Incorporated ("Adobe") certain inventory
of the FreeHand product, the write-off of certain assets, personnel severance
costs, the cancellation and continuation of contractual obligations, and other
integration costs incident to the merger.
Other Income (Expense) (in thousands)
<TABLE>
<CAPTION>
1995 1994 % change
---- ---- --------
<S> <C> <C> <C>
Total other income (expense), net. . . . . . . $376 $(61) 716%
Percentage of total revenues . . . . . . . . . 1% --
</TABLE>
Other income increased in fiscal 1995 due primarily to the increase in interest
income from investments and higher cash balances.
Provision for Income Taxes (in thousands)
<TABLE>
<CAPTION>
1995 1994 % change
---- ---- --------
<S> <C> <C> <C>
Provision for income taxes . . . . . . . . . . $1,055 $292 261%
Percentage of total revenues . . . . . . . . . 2% 1%
</TABLE>
After using available net operating loss carryforwards, the Company's effective
tax rate for fiscal 1995 was 14%, compared to 8% in 1994.
Net Income (in thousands)
<TABLE>
<CAPTION>
1995 1994 % change
---- ---- --------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . $5,538 $3,475 88%
Percentage of total revenues . . . . . . . . . 12% 9%
</TABLE>
The increase in net income was due primarily to higher revenues.
* * *
20
<PAGE> 23
LIQUIDITY AND CAPITAL RESOURCES
FOR THE YEAR ended March 31, 1996, cash, cash equivalents, and short-term
investments increased by $82,631,000. Approximately $55,846,000 was from the
completion of the Company's secondary public offering, another $4,479,000 was
from the exercise of common stock options and warrants, and the balance was
primarily from operations and other activities. Cash provided by operating
activities was $33,166,000, an increase of $21,859,000 over the prior year.
The increase was primarily due to the increase in net income of $16,464,000 as
well as the tax benefit from employee stock plans of $8,827,000.
The Company's working capital increased by $85,787,000 from March 31,
1995 to $119,060,000 at March 31, 1996.
In addition to cash, cash equivalents, and short-term investments, the
Company has $15,000,000 available under an unsecured revolving line of credit.
The line of credit bears interest at the bank's prime rate and expires on July
15, 1997. As of March 31, 1996, the Company had no borrowings outstanding.
Of the $2,525,000 in merger-related expenses, $1,628,000 related to
noncash expenditure while $897,000 related to expected cash expenditure. As of
March 31, 1996, substantially all of the cash-related expenditure had been paid.
During the twelve-month period ended March 31, 1996, the Company spent
$9,537,000 on capital equipment, primarily for management information systems
and engineering equipment, and facilities expansion. The Company anticipates
spending $9,400,000 through the end of fiscal 1997.
In March 1996, the Company entered into an agreement with a third party
to purchase a parcel of land in Redwood City, California, for $6,960,000. As of
March 31, 1996, the Company made an initial deposit of approximately $350,000.
The balance, including related fees, was paid in full in May 1996.
Management believes that existing cash, cash equivalents, and short-term
investments, available bank borrowings and cash generated from operations will
be sufficient to meet the Company's cash and investment requirements through at
least fiscal 1997.
o o o
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Except for the historical information contained in this Form 10-K, the matters
discussed herein are forward looking statements. These statements concern
matters that involve risks and uncertainties, including but not limited to those
set forth below, that could cause actual results to differ materially from those
projected in the forward looking statements. In any event, the matters set
21
<PAGE> 24
forth below, as well as the matters set forth under "Business -- Sales and
Distribution," "-- Competition," "-- Proprietary Rights," and "-- Manufacturing
and Shipping" should be carefully considered when evaluating the Company's
business and prospects.
Macromedia has grown in substantial part from combinations with other
companies. In January 1995, Macromedia acquired Altsys, which developed the
FreeHand graphic design and illustration product whose revenues prior to that
date consisted primarily of royalties from Aldus Corporation, which had marketed
FreeHand until January 1995, and revenues from Fontographer. In August 1995,
the Company acquired Fauve, a developer of image editing software. In December
1995, the Company acquired OSC, a developer of digital audio production
software. In March 1996, the Company acquired iband, a developer of Internet
Web site development tools. There can be no assurance that sales of the
Company's existing products will either continue at historical rates or
increase, or that new products introduced by the Company, whether developed
internally or acquired, will achieve market acceptance. The Company's
historical rates of growth should not be taken as indicative of growth rates
that can be expected in the future.
The Company's quarterly operating results may vary significantly
depending on the timing of new product introductions and enhancements by the
Company. The Company's quarterly results of operations also may vary
significantly depending on the timing of product introductions by competitors,
changes in pricing, execution of technology licensing agreements, and the volume
and timing of orders received during the quarter, which are difficult to
forecast. The future operating results of the Company may fluctuate as a result
of these and other factors, including the Company's ability to continue to
develop innovative products, its product and customer mix, and the level of
competition. The Company's results of operations may also be affected by
seasonal trends. A significant portion of the Company's operating expenses are
relatively fixed, and planned expenditures are based primarily on sales
forecasts. As a result, if revenues do not meet the Company's forecasts,
operating results may be materially adversely affected. Although the Company
has been profitable each quarter since the quarter ended September 30, 1992,
there can be no assurance that the Company will be able to sustain profitability
in the future.
The markets for the Company's products are highly competitive and
characterized by pressure to reduce prices, incorporate new features, and
accelerate the release of new product versions. A number of companies currently
offer products that compete directly or indirectly with one or more of the
Company's products. These companies include Adobe, Aimtech Corporation, Apple
Computer, Inc., Asymetrix Corporation, Autodesk, Inc., Corel Corporation
("Corel"), Microsoft Corporation ("Microsoft"), and Strata Incorporated. As the
Company competes with larger competitors such as Adobe, Corel, and Microsoft
across a broader range of product lines, the Company may face increasing
competition from such companies.
22
<PAGE> 25
The developing multimedia market, Internet, and online services, and the
personal computer industry in general are characterized by rapidly changing
technology, resulting in short product life cycles and rapid price declines. The
Company must continuously update its existing products to keep them current with
changing technology and must develop new products to take advantage of new
technologies that could render the Company's existing products obsolete. The
Company's future prospects are highly dependent on its ability to increase
functionality of existing products in a timely manner and to develop new
products that address new technologies and achieve market acceptance. New
products and enhancements must keep pace with competitive offerings, adapt to
new platforms and emerging industry standards, and provide additional
functionality. There can be no assurance that the Company will be successful in
these efforts.
The Company has in the past experienced delays in the development of new
products and enhancement of existing products, and such delays may occur in the
future. If the Company were unable, due to resource constraints or technological
or other reasons, to develop and introduce such products in a timely manner,
this inability could have a material adverse effect on the Company's results of
operations.
For the twelve months ended March 31, 1996, the Company derived
approximately 42% of its total revenues from international sales. The Company
expects that international sales will continue to generate a significant
percentage of its total revenues, and the Company is seeking to increase
international sales to approximately half of its total revenues. The Company
relies on distributors for sales of its products in foreign countries and,
accordingly, is dependent on their ability to promote and support the Company's
products, and in some cases, to translate them into foreign languages.
International business is subject to a number of special risks, including
foreign government regulation; general geopolitical risks such as political and
economic instability, hostilities with neighboring countries and changes in
diplomatic and trade relationships; more prevalent software piracy; unexpected
changes in, or imposition of, regulatory requirements, tariffs, import and
export restrictions and other barriers and restrictions; longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse tax
consequences, the burdens of complying with a variety of foreign laws; and other
factors beyond the control of the Company. The revenues generated through
international sales are denominated in U.S. dollars, but the expenses are
denominated in the local currency in the countries in which the Company has
offices. As a result, the Company's operating results are subject to
fluctuations in foreign currency exchange rates. This impact to date has been
immaterial, and the Company has not had to engage in hedging activities to
protect it from foreign currency fluctuations.
* * *
23
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and 1995 (in thousands, except share data)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 28,829 $ 10,230
Short-term investments . . . . . . . . . . . . . . . . . . . 87,833 23,751
Accounts receivable, less allowance for returns and doubtful
accounts of $4,377 and $1,487, respectively. . . . . . . . 14,601 8,040
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 1,508 1,601
Prepaid expenses and other current assets. . . . . . . . . . 8,115 2,264
Total current assets . . . . . . . . . . . . . . . . . . 140,946 45,886
Property and equipment, net. . . . . . . . . . . . . . . . . . 12,219 5,809
Other long-term assets . . . . . . . . . . . . . . . . . . . . 1,957 735
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . $155,122 $ 52,430
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 11,364 $ 6,007
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . 8,956 3,492
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . 1,235 2,767
Other current liabilities. . . . . . . . . . . . . . . . . . 331 347
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . 21,886 12,613
Other long-term liabilities. . . . . . . . . . . . . . . . . . 55 136
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . $ 21,941 $ 12,749
======== ========
Stockholders' equity:
Common stock, par value $0.001 per share; 80,000,000
shares authorized; 36,413,211 and 31,00,608 shares
issued and outstanding, respectively . . . . . . . . . . . 36 16
Additional paid-in capital . . . . . . . . . . . . . . . . . 129,591 58,266
Deferred compensation. . . . . . . . . . . . . . . . . . . . (415) --
Retained earnings (accumulated deficit). . . . . . . . . . . 3,969 (18,601)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . 133,181 39,681
-------- --------
Total liabilities and stockholders' equity . . . . . . . $155,122 $ 52,430
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 27
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended March 31, 1996, 1995, and 1994 (in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Revenues:
Product revenue.............................. $112,577 $53,528 $35,970
Service revenue.............................. 4,114 2,364 1,572
-------- ------- -------
Total revenues........................... 116,691 55,892 37,542
-------- ------- -------
Cost of revenues:
Cost of product revenue...................... 17,295 8,125 5,601
Cost of service revenue...................... 2,305 1,493 877
-------- ------- -------
Total cost of revenues................... 19,600 9,618 6,478
-------- ------- -------
Gross profit............................. 97,091 46,274 31,064
Operating expenses:
Sales and marketing.......................... 41,387 20,181 14,597
Research and development..................... 20,033 12,360 10,106
General and administrative................... 5,466 3,491 3,009
Merger, relocation, and reorganization....... 2,525 3,025 (476)
-------- ------- -------
Total operating expenses................. 69,411 39,057 27,236
Operating income......................... 27,680 7,217 3,828
Other income (expense):
Interest and investment income, net.......... 4,307 1,135 196
Interest expense............................. (3) (6) (60)
Reserve on related party note receivable..... -- (507) (130)
Other........................................ (203) (246) (67)
-------- ------- -------
Total other income (expense)............. 4,101 376 (61)
-------- ------- -------
Income before taxes...................... 31,781 7,593 3,767
Provision for income taxes..................... 8,779 1,055 292
-------- ------- -------
Net income............................... $ 23.002 $ 6,538 $ 3,475
-------- ------- -------
Net income per share........................... $ 0.59 $ 0.19 $ 0.12
-------- ------- -------
Weighted average common shares outstanding..... 39,044 34,414 30,018
-------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 28
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended March 31, 1996, 1995, and 1994 (in thousands, except share data)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ------ ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
Balances as of March 31, 1993 ........................ 3,738,022 $4 16,564,808 $8 $ 31,092
Issuanc of common stock, net of offering
costs of $1,059 .................................. -- -- 4,375,000 2 23,354
Exercise of stock options .......................... -- -- 806,492 1 389
Conversion of preferred stock to common stock ...... (3,738,022) (4) 7,476,044 4 --
Repurchase of common stock ......................... -- -- (98,438) -- (125)
Dividends .......................................... -- -- -- -- --
Note receivable repayment .......................... -- -- -- -- --
Exercise of common stock warrants .................. -- -- 335,190 -- 670
Foreign currency translation adjustment ............ -- -- -- -- --
Net income ......................................... -- -- -- -- --
--------- --- ---------- --- --------
Balances as of March 31, 1994 ........................ -- -- 29,459,096 15 55,380
Exercise of stock options .......................... -- -- 1,398,302 1 1,037
Repurchase of common stock ......................... -- -- (31,500) -- (40)
Common stock issued under Employee Stock
Purchase Plan .................................... -- -- 83,640 -- 387
Tax benefit from employee stock plans .............. -- -- -- -- 526
Common stock issued under stock
appreciation rights .............................. -- -- 91,070 -- 976
Adjustment for change in Altsys Corporation
fiscal year-end .................................. -- -- -- -- --
Note receivable repayment .......................... -- -- -- -- --
Foreign currency translation adjustment ............ -- -- -- -- --
Net income ......................................... -- -- -- -- --
--------- --- ---------- --- --------
Balances as of March 31, 1995 ........................ -- -- 31,000,608 16 58,266
Exercise of stock options .......................... -- -- 1,461,806 1 3,467
Exercise of warrants ............................... -- -- 11,680 -- --
Common stock issued under Employee Stock
Purchase Plan .................................... -- -- 61,732 -- 1,011
Tax benefit from employee stock plans .............. -- -- -- -- 8,827
Sale of common stock in secondary offering
net of issuance costs of $435,000 ................ -- -- 2,442,676 2 55,844
Two-for-one common stock split ..................... -- -- -- 15 (15)
Adjustment for effect of poolings on
prior periods .................................... -- -- 1,434,709 2 1,776
Deferred compensation - iband ...................... -- -- -- -- 415
Net income ......................................... -- -- -- -- --
--------- --- ---------- --- --------
Balances as of March 31, 1996 ........................ -- $-- 36,413,211 $36 $129,591
========= === ========== === ========
</TABLE>
See accompanying notes to consolidated financial statements.
Chart continued on page 27
26
<PAGE> 29
<TABLE>
(Caption>
NOTES RETAINED FOREIGN
RECEIVABLE EARNINGS CURRENCY TOTAL
DEFERRED (FROM (ACCUMULATED TRANSLATION STOCKHOLDERS'
COMPENSATION STOCKHOLDERS DEFICIT ADJUSTMENTS EQUITY
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances as of March 31, 1993 ........................ $ -- $(115) $(26,708) $ (76) $ 4,205
Issuanc of common stock, net of offering
costs of $1,059 .................................. -- -- -- -- 23,356
Exercise of stock options .......................... -- -- -- -- 390
Conversion of preferred stock to common stock ...... -- -- -- -- --
Repurchase of common stock ......................... -- -- -- -- (125)
Dividends .......................................... -- -- (4) -- (4)
Note receivable repayment .......................... -- 26 -- -- 26
Exercise of common stock warrants .................. -- -- -- -- 670
Foreign currency translation adjustment ............ -- -- -- (133) (133)
Net income ......................................... -- -- 3,475 -- 3,475
----- ----- -------- ----- --------
Balances as of March 31, 1994 ........................ -- (89) (23,237) (209) 31,860
Exercise of stock options .......................... -- -- -- -- 1,038
Repurchase of common stock ......................... -- -- -- -- (40)
Common stock issued under Employee Stock
Purchase Plan .................................... -- -- -- -- 387
Tax benefit from employee stock plans .............. -- -- -- -- 526
Common stock issued under stock
appreciation rights .............................. -- -- -- -- 976
Adjustment for change in Altsys Corporation
fiscal year-end .................................. -- -- (1,902) -- (1,902)
Note receivable repayment .......................... -- 89 -- -- 89
Foreign currency translation adjustment ............ -- -- -- 209 209
Net income ......................................... -- -- 6,538 -- 6,538
----- ----- -------- ----- --------
Balances as of March 31, 1995 ........................ -- -- (18,601) -- 39,681
Exercise of stock options .......................... -- -- -- -- 3,468
Exercise of warrants ............................... -- -- -- -- --
Common stock issued under Employee Stock
Purchase Plan .................................... -- -- -- -- 1,011
Tax benefit from employee stock plans .............. -- -- -- -- 8,827
Sale of common stock in secondary offering
net of issuance costs of $435,000 ................ -- -- -- -- 55,846
Two-for-one common stock split ..................... -- -- -- -- --
Adjustment for effect of poolings on
prior periods .................................... -- -- (432) -- 1,346
Deferred compensation - iband ...................... (415) -- -- -- --
Net income ......................................... -- -- 23,002 -- 23,002
----- ----- -------- ----- --------
Balances as of March 31, 1996 ........................ $(415) $ -- $ 3,969 $ -- $133,181
===== ===== ======== ===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 30
MACROMEDIA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 1996, 1995, and 1994 (in thousands, except share data)
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 23,002 $ 6,538 $ 3,475
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .......................... 4,013 2,110 1,311
Tax benefit from employee stock plans .................. 8,827 526 --
Provision for merger-related cost ...................... 1,628 386 --
Reserve on related party note receivable ............... -- (507) (130)
Compensation expense on stock appreciation
rights ............................................... -- 976 --
Deferred income taxes .................................. (4,675) -- --
Changes in operating assets and liabilities,
net of effect of mergers:
Accounts receivable, net ............................. (6,561) (1,764) (371)
Inventory ............................................ 33 (1,139) 269
Prepaid expenses and other current assets ............ (2,011) (1,539) (37)
Accounts payable ..................................... 5,357 3,042 380
Accrued liabilities .................................. 5,464 1,805 234
Unearned revenue ..................................... (1,532) 1,433 (151)
Other current liabilities ............................ (298) (471) (661)
Other long-term liabilities .......................... (81) (89) (41)
--------- -------- --------
Net cash provided by operating activities .......... 33,166 11,307 4,278
Cash flows from investing activities:
Acquisition of property and equipment ....................... (9,537) (4,266) (1,410)
Purchase of short-term investments .......................... (248,741) (28,855) (17,690)
Maturities and sales of short-term investments .............. 184,659 16,857 --
Other long-term assets ...................................... (1,273) (13) (66)
--------- -------- --------
Net cash used in investing activities .............. (74,892) (10,277) (19,166)
--------- -------- --------
</TABLE>
Chart continued on page 29
28
<PAGE> 31
MACROMEDIA, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable................. $ -- $ -- $ 85
Repayments of notes payable................. -- -- (1,139)
Proceeds from secondary offering,
net of issuance costs..................... 55,846 -- --
Proceeds from issuance of common
stock and warrants........................ 4,479 1,425 1,061
Proceeds from initial public
offering, net of offering costs........... -- -- 23,356
Repayments of notes receivable
from stockholders......................... -- 89 26
Repurchase of common stock.................. -- (40) (125)
Other....................................... -- -- (52)
Net cash provided by
financing activities.......... 60,325 1,474 23,212
Foreign currency translation.................. -- 209 (133)
------- ------- -------
Increase in cash and cash equivalents......... 18,599 2,713 8,191
Cash and cash equivalents, beginning
of year..................................... 10,230 9,419 1,228
Adjustments for change in Altsys
Corporation fiscal year-end................. -- (1,902) --
------- ------- -------
Cash and cash equivalents, end of year........ $28,829 $10,230 $ 9,419
======= ======= =======
Supplemental disclosure of cash flow
information:
Interest paid............................... $ 3 $ 22 $ 80
------- ------- -------
Income taxes paid........................... $ 920 $ 449 $ 309
------- ------- -------
Supplemental noncash investing and
financing activities:
Common stock issued in exchange for
stock appreciation rights............... $ -- $ 976 $ --
------- ------- -------
</TABLE>
All convertible preferred stock was exchanged for 7,476,044 shares of common
stock upon the Company's initial public offering during the year ended
March 31, 1994.
See accompanying notes to consolidated financial statements.
29
<PAGE> 32
MACROMEDIA INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended March 31, 1996, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
MACROMEDIA, INC. (the Company) is a supplier of software tools and services to
the multi-media, graphic arts, Web publishing, and video communities. The
Company develops, markets, and supports an integrated line of multimedia and
digital arts software for Windows, Macintosh, and the World Wide Web. These
tools are used to create interactive multimedia applications and printed
materials for communication, education, and entertainment.
The Company sells its products worldwide through a variety of
distribution channels, including original equipment manufacturers (OEMs),
traditional software distributors, educational distributors, value-added
resellers (VARs), hardware and software superstores, retail dealers, mail
order, and direct sales.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries: Macromedia Europe Limited, located in
England, and Macromedia Japan KK, located in Japan, and the Company's
international branches.
All significant intercompany balances and transactions have been
eliminated in consolidation.
Foreign Currency Translation
In fiscal 1995, the Company changed its functional currency from the local
currency to the U.S. dollar. Translation gains or losses are reflected in net
income.
Prior to the change in fiscal 1995, local currencies were the
functional currency and assets and liabilities denominated in foreign
currencies were translated to U.S. dollars at the exchange rate on the balance
sheet date. Revenues, costs, and expenses were translated at average rates of
exchange prevailing during the year. Translation adjustments resulting from
this process are shown separately in stockholders' equity.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported accounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ materially from those estimates.
30
<PAGE> 33
MACROMEDIA, INC. AND SUBSIDIARIES
Concentration of Credit Risks
The Company derived approximately 77% of its 1996 revenues from the sale of
three products: Director, FreeHand, and Authorware. The Company expects that
its revenues will continue for the foreseeable future to be substantially
dependent on these products and that competition for those products will
intensify in the future. A decline in sales of any of these products, as a
result of competition, technological change, or other factors, would have a
material adverse effect on the Company's results of operations.
Financial instruments that potentially subject to Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base and
their dispersion across different industries and geographic areas. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral on sales.
Cash Equivalents and Short-term Investments
Cash equivalents consist of certificates of deposit and money market funds with
stated effective maturities of three months or less at the time of purchase.
Cash equivalents and all of the Company's short-term investments are classified
as "available-for-sale" under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 115. The securities are carried at fair value
which approximates cost.
The amortized cost of available-for-sale debt securities are adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in net investment income. Realized gains and losses,
and declines in value judged to be other than temporary on available-for-sale
securities are included in net investment income. The cost of securities sold
is based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in interest and
investment income, net.
Inventory
Inventory consists primarily of software media, hardware product components,
manuals, and related packaging materials. Inventory is recorded at the lower of
cost or market, determined on a first-in, first-out basis.
Property and Equipment
Property and equipment are recorded at cost. Depreciation of equipment,
furniture, and fixtures is provided over estimated useful lives ranging from
five to ten years using the straight-line method.
31
<PAGE> 34
MACROMEDIA, INC. AND SUBSIDIARIES
Leasehold improvements are amortized over the lesser of the lease term or the
estimated useful life of the related assets, generally five to nine years.
Revenue Recognition
Revenue from product sales is recognized upon shipment. Revenue from software
maintenance contracts is recognized on a straight-line basis over the term of
the contract, generally one year. Revenue from consulting, training, and other
services is generally recognized on the percentage of completion method.
The Company has entered into agreements whereby it licenses products to
OEMs or provides customers the right to multiple copies. These agreements
generally provide for nonrefundable fixed fees which are recognized at delivery
of the product master or the first copy. Per copy royalties in excess of the
fixed minimum amounts and refundable license fees are recognized as earned and
are no longer refundable.
The Company maintains an allowance for potential credit losses and an
allowance for anticipated returns on products sold to distributors and direct
customers.
In the years ended March 31, 1996 and 1995, one customer accounted for
21% and 23%, respectively, of consolidated revenue. Accounts receivable
relating to this customer were $3,934,000 as of March 31, 1996. In the year
ended March 31, 1994, another customer accounted for 10% of consolidated
revenues.
Software Development Costs
SFAS No. 86 "Accounting for the Costs of Computer Software to be Sold, Leased,
or Otherwise Marketed," governs accounting for software development costs. This
statement provides for capitalization of certain software development costs
once technological feasibility is established. The cost so capitalized is then
amortized on a straight-line basis over the estimated product life, or on the
ratio of current revenue to total projected product revenues, whichever is
greater. No such costs have ever been capitalized.
Advertising Costs
The Company adopted SOP 93-7, "Reporting on Advertising Costs," in fiscal year
1996. As the Company has historically expensed advertising costs as incurred,
the adoption of SOP 93-7 did not have a material impact on the accompanying
consolidated financial statements.
In accordance with SOP 93-7, a reclassification has been made to
include co-op advertising in revenues and in sales and marketing expenses for
all periods presented. The increases in these balances as a result of this
reclassification amounted to $6,914,000, $2,194,000, and $0 in fiscal 1996,
1995, and 1994, respectively.
32
<PAGE> 35
MACROMEDIA, INC. AND SUBSIDIARIES
Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109
requires the use of the asset and liability method of accounting for income
taxes.
Net Income Per Share
Net income per common and common equivalent share is computed using the weighted
average number of common shares outstanding, and common equivalent shares from
the exercise of stock options using the treasury stock method.
Future Adoption of New Accounting Standard
The Financial Accounting Standards Board recently issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This statement establishes financial
accounting and reporting standards for stock-based employee compensation plans,
including employee stock purchase plans and stock option plans. The Company
will adopt SFAs No. 123 effective April 1, 1996. Management plans to remain on
APB No. 25, "Accounting for Stock Issued to Employees," for purposes of
measurement of compensation expense. Therefore, adoption of SFAS No. 123 will
not have a material effect on the Company's consolidated results of operations.
Reclassification
Certain fiscal 1995 and 1994 amounts have been reclassified to conform to the
fiscal 1996 presentation.
* * *
2 BUSINESS COMBINATIONS
1996 Poolings of Interests
The company completed three separate acquisitions in fiscal 1996, as described
below, which were properly accounted for as poolings of interests. The impact
of the poolings on all periods prior to fiscal 1996 is immaterial both in the
aggregate, as well as individually, and, therefore, results for those periods
have not been restated. The accounts and operations of all three of the
acquired companies are included in the Company's consolidated financial
statements subsequent to their acquisition.
Fauve
On August 30, 1995, the Company issued 580,000 shares of its common stock in
exchange for all of the common stock of Fauve Software, Inc., the developer of
xRes, a full-featured image editing and composition application for Macintosh
and Windows, and Matisse, a full-color painting program for
33
<PAGE> 36
MACROMEDIA, INC. AND SUBSIDIARIES
Windows. The 1996 merger expenses of $400,000 associated with this acquisition
consisted principally of transaction fees for financial and legal advisers, and
relocation and reorganization expenses.
OSC
On December 2, 1995, the Company acquired the business and operations of OSC
pursuant to the exchange of all of the outstanding shares of OSC for 62,001
shares of the Company's common stock. OSC is the developer of DECK II, software
for professional quality multi-track music and sound production. The 1996
merger expenses of $225,000 related to this acquisition consisted principally
of transaction fees for financial and legal advisers, and relocation and
reorganization expenses.
iband
Effective March 14, 1996, the Company merged with iband, a developer of a
family of tools used to build dynamic Web sites on the Internet. The
transaction was accounted for as a pooling of interests; the Company exchanged
860,000 shares of common stock and stock options for all outstanding shares and
stock options of iband.
The 1996 merger expenses of $1,900,000 relating to costs incurred in
connection with the merger of the Company and iband, included transaction fees
for financial and legal advisers and relocation and reorganization expenses,
including approximately $1,400,000 relating to the issuance of an additional
40,000 shares of the Company's common stock for payment to certain entities and
individuals to settle certain iband obligations.
Merger with Altsys Corporation
On January 19, 1995, the Company issued approximately 4.3 million shares of its
common stock in exchange for all of the common stock of Altsys Corporation
(Altsys), a corporation that designs font editing and graphics design software
programs for business use. Upon consummation of the merger, the Company issued
approximately 45,000 shares of common stock in exchange for previously
outstanding Altsys stock appreciation rights. In addition, the Company assumed
Altsys stock options to purchase approximately 83,000 shares of the Company's
common stock subsequent to the merger (see Note 8).
The merger has been accounted for as a pooling of interests, and,
accordingly, the consolidated financial statements for periods prior to the
combination have been restated to include the results of operations, financial
position, and cash flows of Altsys.
34
<PAGE> 37
MACROMEDIA, INC. AND SUBSIDIARIES
Information concerning common stock, employee stock option plans, and per
share data has been restated on an equivalent stock basis. Prior to the
combination, Altsys' fiscal year ended on December 31. In recording the
business combination, Altsys' financial statements for the nine months ended
September 30, 1994 and the three months ended March 31, 1995, have been
combined with the Company's consolidated financial statements for the year
ended March 31, 1995. Altsys' financial statements for the year ended December
31, 1993 have been combined with the Company's consolidated financial
statements for the year ended March 31, 1994.
The retained earnings charge for Altsys' quarter ended December 31, 1994,
to conform year-ends included a charge of approximately $1.4 million for
compensation expense related to the stock appreciation rights and is summarized
below (in thousands):
<TABLE>
<S> <C>
Revenue........................................... $ 1,409
Expenses.......................................... $(3,311)
Net income........................................ $(1,902)
</TABLE>
The results of operations for the separate enterprises and the combined amounts
presented in the accompanying consolidated statements of income are summarized
below (in thousands):
<TABLE>
<CAPTION>
Nine-month
period ended Year ended
December 31, March 31,
1994 1994
------------ ----------
<S> <C> <C>
Revenue:
Macromedia, Inc. ............ $29,622 $30,132
Altsys Corporation........... 5,272 7,410
------------ ----------
Combined........................ $34,894 $37,542
============ ==========
Net income:
Macromedia, Inc. ............ $ 4,702 $ 3,120
Altsys Corporation........... 36 355
------------ ----------
Combined........................ $ 4,738 $ 3,485
============ ==========
</TABLE>
There were no significant transactions between the Company and Altsys prior to
the combination, which required elimination, and no adjustments were required
to conform to accounting policies.
35
<PAGE> 38
MACROMEDIA, INC. AND SUBSIDIARIES
The 1995 merger expense of $3,025,000 relates to costs incurred in
connection with the merger of the Company and Altsys. These costs consisted
principally of a finder's fee, transaction fees for advisers, financial
printing and other related charges, and the cancellation of a contractual
agreement.
* * *
3. CASH EQUIVALENTS AND SHORT TERM INVESTMENTS
CASH EQUIVALENTS and short-term investments amounted to $16,545,000 and
$87,833,000, respectively, as of March 31, 1996. As of March 31, 1995, cash
equivalents and short-term investments were $2,541,000 and $23,751,000,
respectively. Cash equivalents and short-term investments have been classified
as available-for-sale securities and as of March 31, 1996 and 1995 consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Corporate notes .............................. $ 7,553 $ 8,212
Corporate bonds .............................. 31,738 7,905
Commercial paper ............................. 38,942 3,951
United States government debt securities ..... 8,028 3,683
Money market funds ........................... 5,502 1,541
Certificate of deposit ....................... 12,615 1,000
-------- -------
$104,378 $26,292
======== =======
</TABLE>
Available-for-sale securities as of March 31, 1996 consisted of the following,
by contractual maturity (in thousands):
<TABLE>
<S> <C>
Due in one year or less.................................... $ 92,654
Due in one to three years.................................. 11,724
--------
$104,378
========
</TABLE>
* * *
36
<PAGE> 39
MACROMEDIA, INC. AND SUBSIDIARIES
4. PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT as of March 31, 1996 and 1995 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Computer equipment .............................. $13,163 $ 7,410
Officer equipment and furniture ................. 6,074 2,904
Leasehold improvements .......................... 1,237 623
20,474 10,937
Less accumulated depreciation and amortization .. 8,255 5,128
------- -------
Net fixed assets ................................ $12,219 $ 5,809
======= =======
</TABLE>
Depreciation and amortization expense for the years ended March 31, 1996, 1995,
and 1994, was $2,993,000, $1,603,000, and $1,127,000, respectively.
* * *
5. ACCRUED LIABILITIES
ACCRUED LIABILITIES as of March 31, 1996 and 1995 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accrued compensation ............................ $ 747 $ 504
Accrued fringe benefits ......................... 921 653
Accrued marketing development funds ............. 2,408 1,468
Income taxes payable ............................ 3,468 21
Other accrued expenses .......................... 1,412 846
------ ------
Total ......................................... $8,956 $3,492
====== ======
</TABLE>
* * *
6. LINE OF CREDIT
THE COMPANY has a $15,000,000 unsecured line of credit with a bank at the
bank's prime rate which expires on July 15, 1997. Certain financial covenants
under the agreement become effective when borrowings commence. As of March 31,
1996, no borrowings had been made on this line of credit.
* * *
37
<PAGE> 40
MACROMEDIA, INC. AND SUBSIDIARIES
7. INCOME TAXES
THE COMPONENTS of the provision for income taxes for the years ended March 31,
1996, 1995, and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ----
<S> <C> <C> <C>
Current:
Federal............................ $ 3,519 $ 199 $201
State.............................. 765 100 41
Foreign............................ 343 230 50
------- ------ ----
Total current................ 4,627 529 292
Deferred:
Federal............................ (3,197) -- --
State.............................. (1,478) -- --
======= ====== ====
Total deferred............... (4,675) -- --
Add charge in lieu of taxes
attributable to employee stock
plans.............................. 8,827 526 --
Total........................ $ 8,779 $1,055 $292
======= ====== ====
</TABLE>
The provision for income taxes differs from the expected tax expense amount
computed by applying the statutory federal income tax rate of 35% to income
before income taxes for the year ended March 31, 1996, and 34% for the years
ended March 31, 1995 and 1994, as a result of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Computed tax at statutory rate....... $11,123 $ 2,582 $ 1,280
State taxes.......................... 497 485 41
Foreign Taxes........................ -- 230 50
Pre-acquisition taxes of Altsys...... -- 184 (49)
Nondeductible acquisition costs...... 768 -- --
Change in beginning of year
valuation allowance on deferred
tax assets......................... (4,555) (2,582) (1,124)
Alternative minimum tax.............. -- 156 94
Other................................ 946 -- --
------- ------- -------
Total........................ $ 8,779 $ 1,055 $ 292
======= ======= =======
</TABLE>
38
<PAGE> 41
MACROMEDIA, INC. AND SUBSIDIARIES
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets as of March 31, 1996 and 1995, is presented as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Reserves, accruals, and other....................... $4,027 $ 2,100
Net operating loss carryforward (federal)........... 1,392 5,780
Net operating loss carryforward (state)............. -- 167
Credit for increasing research activities........... 2,180 2,150
Other credits....................................... 688 355
------ -------
Total deferred tax assets........................ 8,287 10,552
Less valuation allowance............................ 3,612 10,552
------ -------
Net deferred tax assets.......................... $4,675 $ --
====== =======
</TABLE>
As of March 31, 1996, the Company has available federal net operating loss
carryforwards of approximately $4,000,000. The Company also has unused research
credit carryforwards of approximately $1,600,000 and $600,000 for federal and
California purposes, respectively. If not utilized, net operating loss
carryforwards and the credit carryforwards will expire in fiscal years 2004
through 2011.
Approximately $3,300,000 of the valuation allowance for deferred tax
assets is attributable to employee stock plans, the benefit from which will be
allocated to paid-in capital rather than current earnings when subsequently
recognized. The Company's ability to utilize the loss carryforwards and the
research credit carryforwards are subject to certain limitations pursuant to
the ownership change rules of Internal Revenue Code, Section 382.
* * *
8. STOCKHOLDERS' EQUITY
Stock Split
EFFECTIVE OCTOBER 16, 1995, the Company completed a 2-for-1 stock split of its
common stock which was effected in the form of a stock dividend. In this
report, all per share amounts and number of shares have been retroactively
restated to reflect the stock split.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of convertible preferred
stock with a par value of $0.001 per share.
39
<PAGE> 42
MACROMEDIA, INC. AND SUBSIDIARIES
Stock Warrants
The following summarizes stock warrant activity for the years ended
March 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Number Exercise price
of shares per share
--------- --------------
<S> <C> <C>
Warrants outstanding as of March 31, 1993................. 407,220 $1.08-12.50
Exercised.............................................. (335,190) 1.08- 5.00
Canceled............................................... (54,530) 2.24-12.50
-------- -----------
Warrants outstanding as of March 31, 1994................. 17,500 5.74
Exercised.............................................. -- --
Canceled............................................... -- --
-------- -----------
Warrants outstanding as of March 31, 1995................. 17,500 5.74
Exercised.............................................. (11,680) 5.74
Canceled............................................... (5,820) 5.74
Warrants outstanding as of March 31, 1996................. -- --
-------- -----------
</TABLE>
Stock Option Plans/Stock Appreciation Rights
As of March 31, 1996, there are stock options outstanding in connection with
the following stock option plans:
(i) MacroMind 1989 Incentive and Nonstatutory Stock Option Plans
(ii) Paracomp 1989 Stock Option Plan
(iii) Authorware 1988 Stock Option Plan
(iv) 1992 Equity Incentive Plan (EIP)
(v) 1993 Employee Stock Purchase Plan
(vi) 1993 Directors Stock Option Plan
The options outstanding under the plans indicated at (i) through (iii) (Prior
Plans) above were assumed as a result of the Company being the successor
company resulting from merger activities.
The EIP provides for the grant of incentive and nonqualified stock
options, restricted stock, and stock bonuses. The total number of shares
reserved pursuant to the EIP as of March 31, 1996, was 7,200,000 shares. Any
shares issuable upon exercise of options granted pursuant to the Prior Plans
that expire or become unexercisable for any reason without having been
exercised in full shall no longer be available for distribution under the Prior
Plans, but shall be available for distribution under the EIP.
The 1993 Employee Stock Purchase Plan and the 1993 Directors Stock
Option Plan have reserved 400,000 and 300,000 shares of common stock,
respectively, for issuance under those plans.
40
<PAGE> 43
MACROMEDIA, INC. AND SUBSIDIARIES
In connection with the Altsys and iband acquisitions, all of the outstanding
options to purchase Altsys and iband common stock were converted into options
to purchase the Company's common stock. All of the Company's options converted
from Altsys options were exercised as of March 31, 1995.
Options granted normally vest over four years from the date of grant.
The options expire 10 years from the date of grant and are normally canceled
three months after an employee's termination.
Incentive options are granted at a price equal to the lowest fair
market value during the month of grant, as determined by the Board of
Directors. Nonqualified options must be granted at a price not less than 85% of
fair market value on the date of grant, as determined by the Board of
Directors.
The following summarizes activity in the stock option plans for the
years ended March 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Number Exercise price
of shares per share
---------- ---------------
<S> <C> <C>
Options outstanding as of March 31, 1993 ........... 4,301,092 $0.20- 1.44
Granted .......................................... 1,935,212 0.75- 9.63
Exercised ........................................ (806,492) 0.20- 3.50
Canceled ......................................... (549,884) 0.20- 9.50
---------- -----------
Options outstanding as of March 31, 1994 ........... 4,879,928 0.20- 9.63
Granted .......................................... 3,330,794 4.75-16.50
Exercised ........................................ (1,398,302) 0.20-10.94
Canceled ......................................... (1,067,256) 0.22-10.94
---------- -----------
Options outstanding as of March 31, 1995 ........... 5,745,164 0.20-16.50
Granted .......................................... 2,426,215 0.31-41.31
Exercised ........................................ (1,461,806) 0.20-36.88
Canceled ......................................... (346,547) 0.34-40.00
Options outstanding as of March 31, 1996 ........... 6,363,026 0.20-41.31
---------- -----------
</TABLE>
As of March 31, 1996, options to purchase 1,869,848 shares of common stock were
exercisable under the plans.
The Company has recorded deferred compensation of $415,000 for the
difference between the grant price and the deemed fair value of the common
stock underlying the options issued in connection with the iband acquisition in
March 1996. This amount is to be amortized over the vesting period of the
individual options, generally four years.
* * *
41
<PAGE> 44
MACROMEDIA, INC. AND SUBSIDIARIES
9. COMMITMENTS AND CONTINGENCIES
Royalties
THE COMPANY has entered into agreements with third parties that provide for
royalty payments based on a per unit wholesale price of certain products.
Leases
The Company leases office space and certain equipment under operating leases,
certain of which contain renewal and purchase options.
Future minimum payments under operating leases with an initial term of
more than one year are summarized as follows (in thousands):
<TABLE>
<S> <C>
1997.................................. $ 2,041
1998.................................. 2,034
1999.................................. 2,085
2000.................................. 2,060
2001.................................. 1,705
Thereafter............................ 1,279
-------
Total minimum lease payments..... $11,204
=======
</TABLE>
Rent expense was $1,774,000, $1,131,000, and $961,000 for the years ended March
31, 1996, 1995, and 1994, respectively.
Litigation
The Company is also subject to various legal matters that arise in the normal
course of business. In the opinion of management, any liability resulting from
the disposition of such matters would not have a material adverse effect on the
financial position of the Company.
* * *
10. EMPLOYEE BENEFITS
THE COMPANY maintains a profit sharing salary deferral 401(k) defined
contribution benefit plan that covers all employees who have attained 21 years
of age and completed at least 1,000 hours of service. This plan allows
employees to defer up to 15% of their pretax salary in certain investments at
the discretion of the employee. Employer contributions are made at the
discretion of the Company's Board of Directors. Employer contributions made to
the plan during the years ended March 31, 1996, 1995, and 1994, were $291,000,
$0, and $150,000, respectively.
42
<PAGE> 45
MACROMEDIA, INC. AND SUBSIDIARIES
11. LAND ACQUISITION AGREEMENT
IN MARCH 1996, the Company entered into an Agreement of Purchase and Sale (the
Agreement) with a third party to purchase a parcel of land in Redwood City,
California, for $6,960,000. As of March 31, 1996, the Company had made an
initial deposit of approximately $350,000 in connection with the Agreement. The
Company intends to construct a building on this land parcel that will be
occupied by certain of its research and development employees. Construction
of the building is expected to begin in June 1996.
* * *
12. INFORMATION BY GEOGRAPHIC AREA
THE COMPANY'S OPERATIONS outside the United States consist of sales offices of
wholly owned subsidiaries in Japan, the United Kingdom, and a branch in
Australia. Domestic operations are responsible for the design and development
of all products, as well as shipping to meet worldwide customer commitments.
The foreign sales offices receive a commission on export sales within the
territory. Accordingly, for financial statement purposes, it is not meaningful
to segregate operating profit (loss) for the foreign sales offices. The
distribution of net revenues and identifiable assets by geographic areas for
the years ended March 31, 1996, 1995, and 1994, follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net revenues:
United States........................... $ 67,560 $37,367 $28,739
Europe.................................. 28,089 8,696 3,212
Pacific Rim............................. 21,042 9,829 5,591
-------- ------- -------
Total net revenues.................. $116,691 $55,892 $37,542
======== ======= =======
Identifiable assets:
United States........................... $154,166 $54,900 $39,479
Europe.................................. 470 278 141
Pacific Rim............................. 1,479 228 36
Eliminations............................ (993) (2,976) (1,153)
-------- ------- -------
Total assets........................ $155,122 $52,430 $38,503
======== ======= =======
</TABLE>
* * *
43
<PAGE> 46
Quarterly Results of Operations
(unaudited)
SUMMARIZED QUARTERLY FINANCIAL INFORMATION for fiscal years 1996 and 1995 is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended Fiscal
-------------------------------------------------- Year
Fiscal Year June 30 September 30 December 31 March 31 Totals
- ----------- ------- ------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C>
1996:
Total revenues ..................... $23,857 $27,301 $30,926 $34,607 $116,691
Gross profit ....................... 19,632 22,626 25,651 29,182 97,091
Operating income ................... 5,231 6,725 8,800 6,924 27,680
Net income ......................... 4,423 5,417 7,152 6,010 23,002
Net income per share(a) ............ 0.13 0.15 0.18 0.15 0.59
1995:
Total revenues ..................... $10,339 $12,245 $12,310 $20,998 $ 55,892
Gross profit ....................... 8,614 10,213 10,199 17,248 46,274
Operating income ................... 1,256 2,202 2,024 1,735 7,217
Net income ......................... 1,019 1,884 1,835 1,800 6,538
Net income per share(a) ............ 0.03 0.06 0.05 0.05 0.19
- ----------
</TABLE>
(a) See Note 1 of notes to consolidated financial statements for an explanation
of the determination of the number of shares used in computing net income
per share.
44
<PAGE> 47
Independent Auditors' Report
The Board of Directors
Macromedia, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Macromedia, Inc.
and subsidiaries as of March 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended March 31, 1996. In connection with our audits of
the consolidated financial statements, we have also audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits. We did not audit the financial statements of Altsys Corporation, a
company acquired by Macromedia, Inc. in a business combination accounted for as
a pooling of interests as described in Note 2 to the consolidated financial
statements, which statements reflect total revenues constituting 9 percent and
20 percent in fiscal 1995 and 1994, respectively, of the related consolidated
totals. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Altsys Corporation, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Macromedia, Inc. and subsidiaries
as of March 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the years in the three-year period ended March 31, 1996,
in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Palo Alto, California
April 16, 1996
45
<PAGE> 48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not Applicable.
46
<PAGE> 49
PART III
Certain information required by Part III is omitted from this Report since the
Company plans to file with the Securities and Exchange Commission the
definitive proxy statement for its 1996 Annual Meeting of Stockholders (the
"Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is
incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference to the section in the Company's Proxy Statement
entitled "Proposal No. 1 - Election of Directors."
The information concerning the Company's executive officers required by this
Item is incorporated by reference herein to Part I, Item 4A, entitled
"Executives Officers of the Registrant." on page 10 of this Report.
The information concerning compliance with Section 16 of the Securities
Exchange Act of 1934 is incorporated by reference to the section in the
Company's proxy statement entitled "Compliance under Section 16(a) of the
Securities Exchange Act of 1934."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
sections in the Company's Proxy Statement entitled "Executive Compensation,"
"Compensation of Directors," "Employment Agreements," and "Compensation
Committee Interlocks and Insider Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this Item is incorporated by reference to the
section in the Company's Proxy Statement entitled "Security Ownership of
Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
section in the Company's Proxy Statement entitled "Certain Transactions."
47
<PAGE> 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements. The following Consolidated Financial Statements
of Macromedia, Inc. are incorporated by reference from Part II, Item 8
of this 10K:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets - March 31, 1996 and 1995 24
Consolidated Statements of Income - Fiscal Years Ended March 31, 1996, 1995, and 1994 25
Consolidated Statements of Stockholders' Equity - Three Year Period Ended March 31, 1996 26
Consolidated Statements of Cash Flows - Fiscal Years Ended March 31, 1996, 1995, and 1994 28
Notes to Consolidated Financial Statements 30
Report of KPMG Peat Marwick LLP 45
</TABLE>
2. Financial Statement Schedule. The following financial statement
schedules of Macromedia, Inc. for the fiscal years ended March 31, 1996,
1995 and 1994 is filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements of Macromedia,
Inc.
<TABLE>
<CAPTION>
Schedule Page
-------- ----
<S> <C> <C>
II Valuation and Qualifying Accounts 52
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or Notes
thereto.
3. Exhibits
Exhibit
Number Exhibit Title
-------- -------------
2.01 Agreement and Plan of Reorganization by and among the
Registrant, Authorware, Inc. and MacroMind/Paracomp, Inc.,
dated as of February 28, 1992, and certain exhibits thereto.
(Incorporated herein by reference to exhibit 2.01 to the
Registrant's registration statement on Form S-1 (File number
33-70624) declared effective by the Commission on December 10,
1993 (The "Form S-1")).
2.02 Agreement and Plan of Reorganization among MacroMind, Inc.,
Paracomp, Inc. and Certain Shareholders of Paracomp, Inc.
dated August 21, 1991, as amended October 11, 1991 and certain
exhibits thereto. (Incorporated herein by reference to exhibit
2.02 to the Form S-1).
2.03 Agreement and Plan of Reorganization dated October 26, 1994
between the Registrant and Altsys Corporation. (Incorporated
herein by reference to exhibit 2.03 to the Registrant's
registration statement on Form S-4 (File number 33-87264)
declared effective by the Commission on December 14, 1994 (The
"Altsys S-4")).
2.04 Agreement of Merger and Articles of Merger dated January 20,
1995 entered into by the Registrant and Altsys Corporation.
(Incorporated herein by reference to exhibit 2.04 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1994 (the "December 31, 1994 10-Q")).
2.05 Agreement and Plan of Reorganization dated as of August 30,
1995, by and between Macromedia and Fauve and related
documents. (Incorporated herein by reference to exhibit 2.01
to the Registrant's Current Report on Form 8-K dated August
31, 1995 (the "Fauve 8-K")).
2.06 Agreement of Merger dated as of August 30, 1995, by and
between Macromedia and Fauve. (Incorporated herein by
reference to exhibit 2.02 to the Fauve 8-K.)
3.01 Registrant's Certificate of Incorporation, as amended.
(Incorporated herein by reference to exhibit 4.01 to the
Registrant's registration statement on Form S-8 (File number
33-89092) declared effective by the Commission on February 3,
1995 (The "February 1995 S-8")).
48
<PAGE> 51
3.02 Certificate of Amendment of Registrant's Amended and Restated
Certificate of Incorporation. (Incorporated herein by
reference to exhibit 3.02 to the Registrant's Amendment No. 1
to registration statement on Form 8-A filed on October 5, 1995
(the "First 8-A Amendment")).
3.03 Registrant's Bylaws. (Incorporated herein by reference to
exhibit 3.02 to the Form S-1).
3.04 Amendment to Registrant's Bylaws effective October 15, 1993.
(Incorporated herein by reference to exhibit 3.03 to the Form
S- 1).
4.01 Investor Rights Agreement, dated as of March 31, 1992, as
amended April 1, 1992, between the Registrant and various
investors. (Incorporated herein by reference to exhibit 4.01
to the Form S-1).
4.02 Amendment to the Investor Rights Agreement affective January
20, 1995. (Incorporated herein by reference to exhibit 4.02 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 (the "March 31,1995 10-K")).
4.03 Amendment Number Three to Investor Rights Agreement effective
July 12, 1995. (Incorporated herein by reference to exhibit
4.03 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 (the "June 30, 1995 10-Q")).
4.04 Amendment Number Four to Investor Rights Agreement effective
August 31, 1995. (Incorporated herein by reference to exhibit
4.04 to the First 8-A Amendment.)
4.05 Amendment No. Five to the Registration Rights Agreement
(Incorporated herein by reference to exhibit 4.06 to Form S-3
(File number 333-644), declared effective February 8, 1996).
4.06 Amendment Number Six to Investor Rights Agreement, effective
March 14, 1996.
10.01* 1989 Paracomp Stock Option Plan. (Incorporated herein by
reference to exhibit 10.01 to the Form S-1).
10.02* 1989 MacroMind Incentive Stock Option Plan and 1989
Nonstatutory Stock Option Plan as amended March 1992.
(Incorporated herein by reference to exhibit 10.02 to the Form
S-1).
10.03* 1988 Authorware Stock Option Plan as amended and restated
February 1992. (Incorporated herein by reference to exhibit
10.03 to the Form S-1).
10.04* 1992 Equity Incentive Plan and related documents, as amended
to date.
10.05* 1993 Directors Stock Option Plan and related documents, as
amended to date. (Incorporated herein by reference to exhibit
10.05 to the June 30, 1995 10-Q).
10.06* 1993 Employee Stock Purchase Plan.
10.07* Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
(Incorporated herein by reference to exhibit 10.08 to the Form
S-1).
10.08* Employment Agreement between the Registrant and John C.
Colligan dated December 9, 1988. (Incorporated herein by
reference to exhibit 10.09 to the Form S-1).
10.09* Employment and Noncompetition Agreement with Kevin F. Crowder.
(Incorporated herein by reference to exhibit 10.12 to the
December 31, 1994 10-Q).
10.10* Employment and Noncompetition Agreement with James R. Von Ehr
II. (Incorporated herein by reference to exhibit 10.13 to the
December 31, 1994 10-Q).
10.11 Escrow Agreement among the Registrant and James R. Von Ehr II,
Gayla J. Von Ehr and Kevin F. Crowder. (Incorporated herein by
reference to exhibit 10.11 to the December 31, 1994 10-Q).
10.12 Lease Agreement by and between Registrant and Toda
Development, Inc. dated June 27, 1991 as amended.
(Incorporated herein by reference to exhibit 10.07 to the Form
S-1).
10.13 Third amendment to Lease Agreement by and between Registrant
and Toda Development, Inc. dated November 7, 1994 and fourth
amendment to Lease Agreement by and between Registrant and
Toda Development, Inc. dated April 6, 1995. (Incorporated
herein by reference to exhibit 10.14 to the March 31, 1995
10-K).
10.14 Fifth Amendment to lease Agreement by and between Registrant
and Toda Development, Inc. dated August 31, 1995 and sixth
amendment to lease Agreement by and between Registrant and
Toda Development, Inc. dated October 31, 1995. (Incorporated
herein by reference to exhibit 10.18 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1995).
10.15 Seventh Amendment to Lease Agreement by and between Registrant
and Toda Development, Inc. dated December 15, 1995 and Eight
Amendment to Lease Agreement by and between Registrant and Toda
Development, Inc. dated January 25, 1996 and Ninth Amendment to
Lease Agreement by and between Registrant and Toda Development,
Inc. dated February 21, 1996 and Tenth Amendment to Lease
Agreement by and between Registrant and Toda Development, Inc.
dated April 30, 1996 and Eleventh Amendment to
<PAGE> 52
Lease Agreement by and between Registrant and Toda Development,
Inc. dated June 13, 1996.
10.16 Termination and License Agreement by and between Altsys
Corporation and Aldus Corporation, dated October 24, 1994
(Incorporated herein by reference to exhibit 10.11 to the
Altsys S-4).
10.17 Letter Agreement between the Registrant and Michael Solomon
(Incorporated herein by reference to exhibit 10.12 to the
Altsys S-4).
10.18 Line of Credit Agreement by and between Registrant and
Imperial Bank dated August 2, 1995. (Incorporated herein by
reference to exhibit 10.17 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995).
10.19** Distribution Agreement by and between the Registrant and
Ingram Micro, Inc. dated March 28, 1996.
11.01 Statement regarding computation of per share earnings.
21.01 List of Registrant's subsidiaries.
23.01 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.02 Consent of Arthur Andersen LLP, Independent Auditors.
24.01 Power of Attorney (see page 51 of this Form 10-K).
27.01 Financial Data Schedule.
______________________
* Represents a management contract or compensatory plan or arrangement
** Confidential treatment has been requested with respect to certain portions
of this agreement. Such portions have been redacted and marked with a double
asterisk. The non-redacted version of this agreement has been sent to the
Securities and Exchange Commission pursuant to an application for
confidential treatment.
(b) Reports on Form 8-K: In March 1996, the Company filed a report on Form 8-K
dated March 14, 1996, related to its acquisition of iband, Inc. pursuant
to Item 5 under Form 8-K. No financial statements were required to be
filed with the Form 8-K.
With the exception of the information incorporated by reference to the Proxy
Statement in Items 10, 11, 12 and 13 of Part III, the Proxy Statement is not
deemed to be filed as part of this Report.
50
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MACROMEDIA, INC.
By: /s/ John C. Colligan
----------------------------------
John C. Colligan
President, Chief Executive Officer
Dated: June 26, 1996
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John C. Colligan and Richard B. Wood, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on Form
10-K, and to file same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ John C. Colligan Chairman of the Board of Directors, June 26, 1996
- --------------------------- President, and Chief Executive Officer
John C. Colligan
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Richard B. Wood Vice President of Operations, June 26, 1996
- --------------------------- Chief Financial Officer, and Secretary
Richard B. Wood
DIRECTORS:
/s/ L. John Doerr Director June 26, 1996
- ---------------------------
L. John Doerr
/s/ C. Richard Kramlich Director June 26, 1996
- ---------------------------
C. Richard Kramlich
/s/ John C. Laing Director June 26, 1996
- ---------------------------
John C. Laing
/s/ Donald L. Lucas Director June 26, 1996
- ---------------------------
Donald L. Lucas
/s/ William B. Welty Director June 26, 1996
- ---------------------------
William B. Welty
/s/ James R. Von Ehr II Director June 26, 1996
- ---------------------------
James R. Von Ehr II
/s/ Kevin F. Crowder Director June 26, 1996
- ---------------------------
Kevin F. Crowder
</TABLE>
51
<PAGE> 54
Macromedia, Inc.
Schedule II
Valuation and Qualifying Accounts
For the years ended March 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions of Period
- ------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year Ended March 31, 1996 $ 399 $ 740 $ 204 $ 935
------ ------ ------ ------
Year Ended March 31, 1995 $ 321 $ 243 $ 165 $ 399
------ ------ ------ ------
Year Ended March 31, 1994 $ 274 $ 528 $ 481 $ 321
------ ------ ------ ------
Allowance for Returns
Year Ended March 31, 1996 $1,088 $8,923 $6,569 $3,442
------ ------ ------ ------
Year Ended March 31, 1995 $ 639 $3,791 $3,342 $1,088
------ ------ ------ ------
Year Ended March 31, 1994 $ 170 $1,963 $1,494 $ 639
------ ------ ------ ------
</TABLE>
52
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
4.06 Amendment Number Six to Investor Rights Agreement 54
10.04* 1992 Equity Incentive Plan and related documents, as amended to date 59
10.06* 1993 Employee Stock Purchase Plan 72
10.15 Seventh Amendment to Lease Agreement by and between Registrant and Toda
Development, Inc. dated December 15, 1995 and Eight Amendment to Lease
Agreement by and between Registrant and Toda Development, Inc. dated
January 25, 1996 and Ninth Amendment to Lease Agreement by and between
Registrant and Toda Development, Inc. dated February 21, 1996 and Tenth
Amendment to Lease Agreement by and between Registrant and Toda
Development, Inc. dated April 30, 1996 and Eleventh Amendment to Lease
Agreement by and between Registrant and Toda Development, Inc. dated
June 13, 1996 78
10.19**Distribution Agreement by and between the Registrant and
Ingram Micro, Inc. 97
11.01 Statement regarding computation of per share earnings 110
21.01 List of Registrant's subsidiaries 111
23.01 Consent of KPMG Peat Marwick LLP, Independent Auditors 112
23.02 Consent of Arthur Andersen LLP, Independent Auditors 113
27.01 Financial Data Schedule 114
</TABLE>
- ------------------
*Represents a management contract or compensatory plan or arrangement
**Confidential treatment has been requested with respect to certain portions of
this agreement. Such portions have been redacted and marked with a double
asterisk. The non-redacted version of this agreement has been sent to the
Securities and Exchange Commission pursuant to an application for confidential
treatment.
53
<PAGE> 1
AMENDMENT NUMBER SIX TO INVESTOR RIGHTS AGREEMENT
The undersigned hereby consents and agrees to this Amendment (this
"Amendment") of that certain Investor Rights Agreement, dated as of March 31,
1992 and amended as of April 1, 1992, January 20, 1995, July 12, 1995, August
30, 1995 and December 2, 1995 (the "Agreement"), among Macromedia, Inc., a
Delaware corporation formerly named MMAW Consolidation Corp. (the "Company"),
and the Investors listed on Schedule A thereto, James R. Von Ehr, II, Kevin F.
Crowder, Frederick Krueger, Richard Krueger, Josh Rosen, Mats Myrberg and John
Dalton. The undersigned is currently a "Holder" as defined in the Agreement.
This Amendment is contingent upon the closing of the merger of Iband, Inc., a
California corporation ("Iband"), with and into the Company (the "Merger") and
will be deemed given as of the date of the consummation of the Merger.
References to Sections and capitalized terms in this Amendment that are not
otherwise defined herein will have the meaning ascribed to them in the
Agreement.
1. S-3 Registration of Iband Shares and Aspen Shares
(a) After the date hereof, Anthony Wood and Stephen Shannon
(referred to herein as the "Iband Shareholders") may request in writing that the
Company effect a registration on Form S-3 for the resale by such Iband
Shareholder of all or any of the shares of Macromedia Common Stock that the
Company issues to such Iband Shareholder upon consummation of the Merger (the
shares of Macromedia Common Stock to be issued to the Iband Shareholders or
either of them upon the Merger are referred to as the "Iband Shares"), and any
related qualification or compliance with respect to all or a part of the Iband
Shares owned by such Iband Shareholder. Upon receipt of such request, the
Company will:
(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to the other Iband Shareholder(s);
and
(ii) file a registration statement on Form S-3 as provided above
within 30 days after receipt of such request and, as soon as practicable, effect
such registration (and all such qualifications and compliances as may be so
requested) as would permit the sale and distribution of all or such portion of
such Iband Shareholder's Iband Shares as are specified in such request, together
with all or a portion of the Iband Shares of the other Iband Shareholder joining
in such request as are specified in a written request given within 15 days after
receipt of such written notice from the Company; provided, however:
(A) that the Iband Shareholder(s) will sell Iband Shares
pursuant to such registration only during an "Iband Permitted Window" (as
defined below), only in "brokers' transactions" (as defined in Rule 144 under
the Act) and only during the two-year period commencing with the effective date
of the Merger; there will be no more than three "Iband Permitted Windows" under
the registration statement, and there will be at least a 90-day interval between
any two Iband Permitted Windows;
(B) no Iband Shareholder will sell any Iband Shares, and no
Iband Permitted Window will commence, until after the publication of the first
quarterly financial statements of the Company that include at least 30 days of
combined operating results of the Company and Iband;
(C) no Iband Shareholder will sell pursuant to such
registration, within 12 months after the date on which the Merger is
consummated, 50% or more of the Iband Shares issued to such Iband Shareholder;
(D) that, if the Company furnishes to the Iband
Shareholder(s) a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of
54
<PAGE> 2
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such Form S-3 registration to be effected at such time (or,
in the case a "Notice of Resale" (as defined below) has been given, that it
would be seriously detrimental to the Company and its stockholders for the Iband
Permitted Window to commence at such time) due to the existence of a material
development or potential material development involving the Company which the
Company would be obligated to disclose in the prospectus contained in the Form
S-3 registration statement, which disclosure would in the good faith judgment of
the Board of Directors of the Company be premature or otherwise inadvisable at
such time and would have a material adverse affect upon the Company and its
stockholders, the Company will have the right to defer the filing of the Form
S-3 registration statement (or the commencement of the Iband Permitted Window,
as the case may be) for a period of not more than 90 days after receipt of the
request of the Iband Shareholder under this Section 1 (or after receipt of the
Notice of Resale, as the case may be); provided, however, that the Company will
not utilize this right more than once in any twelve month period; and provided
further, however, that the Company will defer the filing of the Form S-3
registration statement (or the commencement of the Iband Permitted Window as the
case may be) for the minimum time reasonably necessary in the good faith
judgment of the Board of Directors; and
(E) that the Company will not be required to effect any
such registration, qualification or compliance in any particular jurisdiction in
which the Company would thereby be required to qualify to do business or to
execute a general consent to service of process.
For the purposes of this Section 1, a "Iband Permitted Window" is a period of 30
consecutive calendar days commencing upon the Company's written notification to
the Iband Shareholder in response to a Notice of Resale that the prospectus
contained in the S-3 registration statement is available for resale. In order to
cause an Iband Permitted Window to commence, an Iband Shareholder must first
give written notice to the Company of such Iband shareholder's present intention
to sell some or all of such Iband Shareholder's Iband Shares pursuant to such
registration (a "Notice of Resale"). Upon receipt of such Notice of Resale, the
Company will give written notice to the Iband Shareholder as soon as
practicable, but in no event more than five business days after such receipt,
that the prospectus contained in the registration statement is current (it may
be necessary for the Company during this period to supplement the prospectus or
make an appropriate filing under the 1934 Act so as to cause the prospectus to
become current) and that the Iband Permitted Window will commence on the date of
such notice by the Company or that the Company is required under the Act and the
regulations thereunder to amend the registration statement in order to cause the
prospectus to be current (unless a certificate of the President is delivered as
provided in (ii)(D) above). In the event that the Company determines an
amendment is necessary as provided above, it will file and cause the amendment
to become effective as soon as practicable; whereupon it will notify the Iband
shareholder that the Iband Permitted Window will then commence.
(b) After the date hereof, Aspen Ventures West II, L.P., Novus
Ventures, and John R. Disbrow (referred to herein as the "Aspen Shareholders")
may request in writing that the Company effect a registration on Form S-3 for
the resale by such Aspen Shareholder of all or any of the shares of Macromedia
Common Stock that the Company issues to such Aspen Shareholder upon consummation
of the Merger and the execution of a certain Settlement and Release Agreement
effective upon the consummation of the Merger (the shares of Macromedia Common
Stock to be issued to the Aspen Shareholders or either of them are referred to
as the "Aspen Shares"), and any related qualification or compliance with respect
to all or a part of the Aspen Shares owned by such Aspen Shareholder. Upon
receipt of such request, the Company will:
(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to the other Aspen Shareholder(s);
and
(ii) file a registration statement on Form S-3 as provided above
within 30 days after receipt of such request and, as soon as practicable, effect
such registration (and all such qualifications and compliances as may be so
requested) as would permit the sale and distribution of all or such portion of
such Aspen Shareholder's Aspen Shares as are specified in such request, together
with all or a portion of the Aspen Shares of the other Aspen Shareholder joining
in such request as are
55
<PAGE> 3
specified in a written request given within 15 days after receipt of such
written notice from the Company; provided, however:
(A) that the Aspen Shareholder(s) will sell Aspen Shares
pursuant to such registration only during an "Aspen Permitted Window" (as
defined below), only in "brokers' transactions" (as defined in Rule 144 under
the Act) and only during the two-year period commencing with the effective date
of the Merger; there will be no more than three "Aspen Permitted Windows" under
the registration statement, and there will be at least a 90-day interval between
any two Aspen Permitted Windows;
(B) that, if the Company furnishes to the Aspen
Shareholder(s) a certificate signed by the President 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 and its stockholders for such Form
S-3 registration to be effected at such time (or, in the case a "Notice of
Resale" (as defined below) has been given, that it would be seriously
detrimental to the Company and its stockholders for the Aspen Permitted Window
to commence at such time) due to the existence of a material development or
potential material development involving the Company which the Company would be
obligated to disclose in the prospectus contained in the Form S-3 registration
statement, which disclosure would in the good faith judgment of the Board of
Directors of the Company be premature or otherwise inadvisable at such time and
would have a material adverse affect upon the Company and its stockholders, the
Company will have the right to defer the filing of the Form S-3 registration
statement (or the commencement of the Aspen Permitted Window, as the case may
be) for a period of not more than 90 days after receipt of the request of the
Aspen Shareholder under this Section 1 (or after receipt of the Notice of
Resale, as the case may be); provided, however, that the Company will not
utilize this right more than once in any twelve month period; and provided
further, however, that the Company will defer the filing of the Form S-3
registration statement (or the commencement of the Aspen Permitted Window as the
case may be) for the minimum time reasonably necessary in the good faith
judgment of the Board of Directors; and
(C) that the Company will not be required to effect any
such registration, qualification or compliance in any particular jurisdiction in
which the Company would thereby be required to qualify to do business or to
execute a general consent to service of process.
For the purposes of this Section 1, an "Aspen Permitted Window" is a period of
30 consecutive calendar days commencing upon the Company's written notification
to the Aspen Shareholder in response to a Notice of Resale that the prospectus
contained in the S-3 registration statement is available for resale. In order to
cause an Aspen Permitted Window to commence, an Aspen Shareholder must first
give written notice to the Company of such Aspen Shareholder's present intention
to sell some or all of such Aspen Shareholder's Aspen Shares pursuant to such
registration (a "Notice of Resale"). Upon receipt of such Notice of Resale, the
Company will give written notice to the Aspen Shareholder as soon as
practicable, but in no event more than five business days after such receipt,
that the prospectus contained in the registration statement is current (it may
be necessary for the Company during this period to supplement the prospectus or
make an appropriate filing under the 1934 Act so as to cause the prospectus to
become current) and that the Aspen Permitted Window will commence on the date of
such notice by the Company or that the Company is required under the Act and the
regulations thereunder to amend the registration statement in order to cause the
prospectus to be current (unless a certificate of the President is delivered as
provided in (ii)(D) above). In the event that the Company determines an
amendment is necessary as provided above, it will file and cause the amendment
to become effective as soon as practicable; whereupon it will notify the Aspen
Shareholder that the Aspen Permitted Window will then commence.
(c) All expenses incurred in connection with such registration, and
any related qualification or compliance, including, without limitation, all
registration, filing, qualification, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the Iband and Aspen Shareholders (the fees of
such counsel not to exceed $20,000) shall be borne by the Company.
56
<PAGE> 4
(d) A registration effective pursuant to this Section 1 will not be
counted as a demand for registration under Section 1.2 of the Agreement and will
not trigger any registration or notice rights under Section 1.3 or 1.12 of the
Agreement.
(e) Paragraphs (b), (c), (d) and (f) of Section 1.4 of the Agreement
will apply to a registration under this Section 1, provided that the term
"Holder" will, for the purposes hereof be deemed to refer only to the Iband and
Aspen Shareholders.
(f) It will be a condition precedent to the obligations of the
Company to register pursuant to this Section 1 any Iband or Aspen Shares of any
Iband or Aspen Shareholders that such Iband or Aspen Shareholders furnish to the
Company for inclusion in the S-3 registration statement such information
regarding such Iband or Aspen Shareholder and the Iband or Aspen Shares held by
such Iband or Aspen Shareholder as will be required to effect the registration
of such Iband or Aspen Shareholders of Iband or Aspen Shares; provided, however
that no Iband or Aspen Shareholders will be required to make any representations
or warranties or agreements with the Company except as to such matters.
2. Amendment of Definitions of "Registrable Securities" and "Holders."
For purposes of Sections 1.9, 1.10, 1.11(a), (c) and (d), 1.13, 1.14, 1.15
(provided that the market stand-off provided for in Section 1.15 will apply to
the Iband or Aspen Shares only if the Iband or Aspen Shareholders are permitted
to include their Iband or Aspen Shares in the applicable registration without
limitation) 1.16 and 3.1 through 3.9 (except that, notwithstanding anything to
the contrary in Section 3.9, no amendment to the Agreement that materially
changes this Amendment may be made without the written consent of the Iband
Shareholder(s) holding at least a majority of the Iband Shares and the Aspen
Shareholder(s) holding at least a majority of the Aspen Shares) of the Agreement
(specifically excluding the other Sections of this Agreement), (a) the term
"Registrable Securities" will be deemed to include the Iband and Aspen Shares
and (b) the term "Holders" will be deemed to include the Iband and Aspen
Shareholders so long as such individuals hold Iband or Aspen Shares. The
provisions of Section 1.2, 1.3, 1.5, 1.6, 1.7, 1.8, 1.11(b), 1.12, 2.1, 2.2,
2.3, 2.4, 2.5, 2.6, 2.7 and 2.8 will not apply to the Iband or Aspen
Shareholders or any of their Iband or Aspen Shares. The provisions of Section
1.4 will apply to the Iband and Aspen Shareholders and their shares of
Macromedia Common Stock only to the extent explicitly provided for in Section 1
of this Amendment.
3. Effectiveness of Amendment. As provided in Section 3.9 of the
Agreement, this Amendment shall be binding upon each holder of any Registrable
Securities then outstanding, any future holder of such Registrable Securities
and the Company. This Amendment shall be effective when (a) the written consent
of Macromedia and the holders of a majority of the Registrable Securities
currently outstanding is obtained, and (b) the Merger has been consummated as
evidenced by the filing of the Agreement of Merger, the Articles of Merger and
such other certificates and agreements as may be required by the Secretaries of
State of the States of Delaware and California. This Consent shall be void and
have no effect if the Agreement and Plan of Reorganization dated as of March 13,
1996 is terminated in accordance with its terms before the Merger is
consummated.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
57
<PAGE> 5
6. Counterparts. This Amendment 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.
MACROMEDIA, INC. HOLDER OF REGISTRABLE SECURITIES
By: /s/ John C. Colligan --------------------------------
John C. Colligan, President Authorized Signature
and Chief Executive Officer
--------------------------------
Printed Name
--------------------------------
Authorized Signature
--------------------------------
Printed Name
ACCEPTANCE BY THE IBAND SHAREHOLDERS
Agreed to and Accepted:
/s/ Anthony Wood
Anthony Wood
/s/ Stephen Shannon
Stephen Shannon
ACCEPTANCE BY THE ASPEN SHAREHOLDERS
/s/Aspen Ventures West II, L.P /s/ John R. Disbrow
Aspen Ventures West II, L.P. John R. Disbrow
By: ________________________________
Its: _______________________________
/s/ Novus Ventures
Novus Ventures
By: ________________________________
Its: _______________________________
58
<PAGE> 1
MACROMEDIA, INC.
1992 EQUITY INCENTIVE PLAN
As Adopted September 23, 1992
and amended through April 29, 1996
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
24.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the
total number of Shares reserved and available for grant and issuance pursuant to
the Plan shall be 9,000,0001 Shares. Any Shares issuable upon exercise of
options granted pursuant to the Authorware 1988 Stock Option Plan, the
Macromind, Inc. 1989 Incentive Stock Option Plan and 1989 Nonstatutory Stock
Option Plan, and the Paracomp, Inc. 1989 Stock Option Plan (the "Prior Plans")
that expire or become unexercisable for any reason without having been exercised
in full, shall no longer be available for distribution under the Prior Plans,
but shall be available for distribution under this Plan. Subject to Sections 2.2
and 18, Shares shall again be available for grant and issuance in connection
with future Awards under the Plan that: (a) are subject to issuance upon
exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option, (b) are subject to an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price, or (c) are subject to an Award that otherwise terminates without
Shares being issued.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards shall be
proportionately adjusted, subject to any required action by the Board or the
stockholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee; and provided, further, that the
Exercise Price of any Option may not be decreased to below the par value of the
Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisers of the Company or any Parent, Subsidiary or Affiliate of the
Company; provided such consultants, contractors and advisers render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. No "Named Executive Officer" (as that term is
defined in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act)
shall be eligible to receive more than 1,800,000 Shares at any time during the
term of this Plan pursuant to the grant of Awards hereunder. A person may be
granted more than one Award under the Plan.
4. ADMINISTRATION.
- --------
(1) Reflects a two-for-one stock dividend effective October 1995.
59
<PAGE> 2
4.1 Committee Authority. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe and interpret the Plan, any Award Agreement and any other
agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating to the
Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination,
in tandem, in replacement of, or as alternatives to, other Awards
under the Plan or any other incentive or compensation plan of the
Company or any Parent, Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of the Plan.
4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award shall be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of the Plan
or Award, at any later time, and such determination shall be final and binding
on the Company and all persons having an interest in any Award under the Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under the Plan to Participants who are not Insiders of the
Company.
60
<PAGE> 3
4.3 Exchange Act Requirements. If two or more members of the Board
are Outside Directors, the Committee shall be comprised of at least two members
of the Board, all of whom are Outside Directors and Disinterested Persons. The
Company will take appropriate steps to comply with the disinterested
administration requirements of Section 16(b) of the Exchange Act, which shall
consist of the appointment by the Board of a Committee consisting of not less
than two members of the Board, each of whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under the Plan shall
be evidenced by an Award Agreement which shall expressly identify the Option as
an ISO or NQSO ("Stock Option Agreement"), and be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
shall from time to time approve, and which shall comply with and be subject to
the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
5.3 Exercise Period. Options shall be exercisable within the times
or upon the events determined by the Committee as set forth in the Stock Option
Agreement; provided, however, that no Option shall be exercisable after the
expiration of one hundred twenty (120) months from the date the Option is
granted, and provided further that no Option granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Stockholder") shall be exercisable after the expiration of
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 Exercise Price. The Exercise Price shall be determined by the
Committee when the Option is granted and may be not less than 85% of the Fair
Market Value of the Shares on the date of grant; provided that (i) the Exercise
Price of an ISO shall be not less than 100% of the Fair Market Value of the
Shares on the date of grant and (ii) the Exercise Price of any Option granted to
a Ten Percent Stockholder shall not be less than 110% of the Fair Market Value
of the Shares on the date of grant. Payment for the Shares purchased may be made
in accordance with Section 8 of the Plan.
5.5 Method of Exercise. Options may be exercised only by delivery
to the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent and access to information,
if any, as may be required or desirable by the Company to comply with applicable
securities laws, together with payment in full of the Exercise Price for the
number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option shall always be subject to the
following:
(a) If the Participant is Terminated for any reason except death or
Disability, then Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than ninety (90)
days after the Termination Date (or such shorter time period as
may
61
<PAGE> 4
be specified in the Stock Option Agreement), but in any event, no
later than the expiration date of the Options.
(b) If the Participant is terminated because of death or Disability
(or the participant dies within three months of such termination),
then Participant's Options may be exercised only to the extent
that such Options would have been exercisable by Participant on
the Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee) no
later than twelve (12) months after the Termination Date (or such
shorter time period as may be specified in the Stock Option
Agreement), but in any event no later than the expiration date of
the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
the Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000. If
the Fair Market Value of Shares on the date of grant with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
62
<PAGE> 5
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price; provided,
further, that the Exercise Price shall not be reduced below the par value of the
Shares, if any.
5.10 No Disqualification. Notwithstanding any other provision in
the Plan, no term of the Plan relating to ISOs shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that shall be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of Restricted Stock shall be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer shall terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to
a Restricted Stock Award shall be determined by the Committee and shall be at
least 85% of the Fair Market Value of the Shares when the Restricted Stock Award
is granted, except in the case of a sale to a Ten Percent Stockholder, in which
case the Purchase Price shall be 100% of the Fair Market Value. Payment of the
Purchase Price may be made in accordance with Section 8 of the Plan.
6.3 Restrictions. Restricted Stock Awards shall be subject to such
restrictions as the Committee may impose. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or part, based on length of service, performance or such
other factors or criteria as the Committee may determine.
63
<PAGE> 6
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent, Subsidiary or
Affiliate of the Company pursuant to an Award Agreement (the "Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. A Stock Bonus may
be awarded upon satisfaction of such performance goals as are set out in advance
in Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent, Subsidiary or Affiliate
and/or individual performance factors or upon such other criteria as the
Committee may determine.
7.2 Terms of Stock Bonuses. The Committee shall determine the
number of Shares to be awarded to the Participant and whether such Shares shall
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, including Restricted Stock, or a combination thereof, either in a
lump sum payment or in installments, all as the Committee shall determine.
7.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
64
<PAGE> 7
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to the Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of Shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such Shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are not
employees of the Company shall not be entitled to purchase Shares
with a promissory note unless the note is adequately secured by
collateral other than the Shares; provided, further, that the
portion of the Purchase Price equal to the par value of the
Shares, if any, must be paid in cash;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) by tender of property;
(f) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby Participant
irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly
to the Company; or
(2) through a "margin" commitment from Participant and an NASD
Dealer whereby Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the exercise price directly to the Company;
or
(g) by any combination of the foregoing.
65
<PAGE> 8
8.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under the Plan by authorizing a guarantee by the Company of
a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, then except as provided below, the election shall be
irrevocable as to the particular Shares as to which the election
is made;
(c) all elections shall be subject to the consent or disapproval of
the Committee;
(d) if the Participant is an Insider and if the Company is subject to
Section 16(b) of the Exchange Act: (1) the election may not be
made within six (6) months of the date of grant of the Award,
except as otherwise permitted by SEC Rule 16b-3(e) under the
Exchange Act, and (2) either (A) the election to use stock
withholding must be irrevocably made at least six (6) months
prior to the Tax Date (although such election may be revoked at
any time at least six (6) months prior to the Tax Date) or (B)
the exercise of the Option or election to use stock withholding
must be made in the ten (10) day period beginning on the third
day following the release of the Company's quarterly or annual
summary statement of sales or earnings; provided, that, prior to
the date the Company elects to comply with the requirements of
Rule 16b-3, as amended effective May 1, 1992, the provisions of
former Rule 16b-3(e) of the Exchange Act shall apply with
respect to any such elections; and
(e) in the event that the Tax Date is deferred until six (6) months
after the delivery of Shares under Section 83(b) of the Code, the
Participant shall receive the full number of Shares with respect
to which the exercise occurs, but such Participant shall be
unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant shall have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
shall be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become
66
<PAGE> 9
entitled to receive with respect to such Shares by virtue of a stock dividend,
stock split or any other change in the corporate or capital structure of the
Company shall be subject to the same restrictions as the Restricted Stock;
provided, further, that the Participant shall have no right to retain such
dividends or distributions with respect to Shares that are repurchased at the
Participant's original Purchase Price pursuant to Section 12.
10.2 Financial Statements. The Company shall provide financial
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Options outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of the
Participant an Award shall be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash or cancellation of purchase money indebtedness,
at: (A) with respect to Shares that are "Vested" (as defined in the Award
Agreement), the higher of: (l) Participant's original Purchase Price, or (2) the
Fair Market Value of such Shares on Participant's Termination Date, provided,
such right of repurchase terminates when the Company's securities become
publicly traded; or (B) with respect to Shares that are not "Vested" (as defined
in the Award Agreement), at the Participant's original Purchase Price, provided,
that the right to repurchase at the original Purchase Price lapses at the rate
of at least 20% per year over 5 years from the date the Shares were purchased,
and if the right to repurchase is assignable, the assignee must pay the Company,
upon assignment of the right to repurchase, cash equal to the excess of the Fair
Market Value of the Shares over the original Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates, together with stock powers or other instruments of transfer
approved by the Committee, appropriately endorsed in blank, with the Company or
an agent designated by the Company to hold in escrow until such restrictions
have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any Participant
who is permitted to execute a promissory note as partial or full consideration
for the purchase of Shares under the Plan shall be required to pledge and
deposit with the Company all or part of the Shares so purchased as collateral to
secure the payment of Participant's obligation to the Company under the
promissory note; provided, however, that the Committee may require or accept
other or additional forms of collateral to secure the payment of such obligation
and, in any event, the Company shall have full recourse against the Participant
under the promissory note notwithstanding any pledge of the Participant's Shares
or other collateral. In connection with any pledge of the Shares, Participant
shall be required to execute and deliver a written pledge agreement in such form
as the Committee shall from time to time approve. The Shares purchased with the
promissory note may be released from the pledge on a prorata basis as the
promissory note is paid.
67
<PAGE> 10
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed, as they are in effect on the date of grant of the
Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
shall have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all Participants),
(b) a dissolution or liquidation of the Company, (c) the sale of substantially
all of the assets of the Company, or (d) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
stockholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be assumed
or replaced by the successor corporation, which assumption or replacement shall
be binding on all Participants. In the alternative, the successor corporation
may substitute equivalent Awards or provide substantially similar consideration
to Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject repurchase restrictions
no less favorable to the Participant.
18.2 Expiration of Options. In the event such successor
corporation, if any, refuses to assume or substitute the Options, as provided
above, pursuant to a transaction described in Subsection 18.1(a) above, such
Options shall expire on such transaction at such time and on such conditions as
the Board shall determine. In the event such successor corporation, if any,
refuses to assume or substitute the Options as provided above, pursuant to a
transaction described in Subsections 18.1(b), (c) or (d) above, or there is no
successor corporation, and if the Company ceases to exist as a separate
corporate entity, then, notwithstanding any contrary terms in the Award
Agreement, the Options shall expire on a date at least twenty (20) days after
the Board gives written notice to Participants specifying the terms and
conditions of such termination.
68
<PAGE> 11
18.3 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.4 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. The Plan shall become effective
on the date that it is adopted by the Board (the "Effective Date"). The Plan
shall be approved by the stockholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve months
before or after the Effective Date. Upon the Effective Date, the Board may grant
Awards pursuant to the Plan; provided, however, that: (a) no Option may be
exercised prior to initial stockholder approval of the Plan; (b) no Option
granted pursuant to an increase in the number of Shares approved by the Board
shall be exercised prior to the time such increase has been approved by the
stockholders of the Company; and (c) in the event that stockholder approval is
not obtained within the time period provided herein, all Awards granted
hereunder shall be canceled, any Shares issued pursuant to any Award shall be
canceled and any purchase of Shares hereunder shall be rescinded. After the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 (or its successor), as amended, with
respect to stockholder approval.
20. TERM OF PLAN. The Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of stockholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
of the stockholders of the Company, amend the Plan in any manner that requires
such stockholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board, the submission of the Plan to the stockholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. GOVERNING LAW. The Plan and all agreements, documents and
instruments entered into pursuant to the Plan shall be governed by and construed
in accordance with the internal laws of the State of California, excluding that
body of law pertaining to conflict of laws.
24. DEFINITIONS. As used in the Plan, the following terms shall have
the following meanings:
69
<PAGE> 12
"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"Award" means any award under the Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"Company" means Macromedia, Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the SEC under Section 16(b) of the Exchange
Act, as such rule is amended from time to time and as interpreted by the SEC.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the NASDAQ National Market
System, its last reported sale price on the NASDAQ National Market
System or, if no such reported sale takes place on such date, the
average of the closing bid and asked prices;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price or, if
no such reported sale takes place on such date, the average of the
closing bid and asked prices on the principal national securities
exchange on which the Common Stock is listed or admitted to
trading;
(c) if such Common Stock is publicly traded but is not quoted on the
NASDAQ National Market System nor listed or admitted to trading on
a national securities exchange, the average of the closing bid and
asked prices on such date, as reported by The Wall Street Journal,
for the over-the-counter market; or
70
<PAGE> 13
(d) if none of the foregoing is applicable, by the Board of Directors
of the Company in good faith.
"Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"Option" means an award of an option to purchase Shares pursuant
to Section 5.
"Outside Director" shall mean any director who is not (i) a
current employee of the Company or any Parent, Subsidiary or Affiliate of the
Company, (ii) a former employee of the Company or any Parent, Subsidiary or
Affiliate of the Company who is receiving compensation for prior services (other
than benefits under a tax-qualified pension plan), (iii) a current or former
officer of the Company or any Parent, Subsidiary or Affiliate of the Company or
(iv) currently receiving compensation for personal services in any capacity,
other than as a director, from the Company or any Parent, Subsidiary or
Affiliate of the Company; provided, however, that at such time as the term
"Outside Director", as used in Section 162(m) is defined in regulations
promulgated under Section 162(m) of the Code, "Outside Director" shall have the
meaning set forth in such regulations, as amended from time to time and as
interpreted by the Internal Revenue Service.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under the Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under the Plan.
"Plan" means this Macromedia, Inc. 1992 Equity Incentive Plan, as
amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock, $0.001 par
value, reserved for issuance under the Plan, as adjusted pursuant to Sections 2
and 15, and any successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"Termination" or "Terminated" means, for purposes of the Plan with
respect to a Participant, that the Participant has ceased to provide services as
an employee, director, consultant, independent contractor or adviser, to the
Company or a Parent, Subsidiary or Affiliate of the Company, except in the case
of sick leave, military leave, or any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more than ninety
(90) days, or reinstatement upon the expiration of such leave is guaranteed by
contract or statute. The Committee shall have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "Termination Date").
71
<PAGE> 1
MACROMEDIA, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
Adopted by the Board of Directors on October 15, 1993
and Amended Through January 31, 1996
1. ESTABLISHMENT OF PLAN. Macromedia, Inc. (the "Company") proposes to
grant options for purchase of the Company's Common Stock to eligible employees
of the Company and its Subsidiaries (as hereinafter defined) pursuant to this
Employee Stock Purchase Plan (this "Plan"). For purposes of this Plan, "Parent
Corporation" and "Subsidiary" (collectively, "Subsidiaries") shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company intends the Plan to qualify as an "employee stock purchase
plan" under Section 423 of the Code (including any amendments to or replacements
of such section), and the Plan shall be so construed. Any term not expressly
defined in the Plan but defined for purposes of Section 423 of the Code shall
have the same definition herein. A total of 200,000 shares of the Company's
Common Stock is reserved for issuance under the Plan. Such number shall be
subject to adjustments effected in accordance with Section 14 of the Plan.
2. PURPOSE. The purpose of the Plan is to provide employees of the
Company and Subsidiaries designated by the Board of Directors of the Company
(the "Board") as eligible to participate in the Plan with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Subsidiaries, and to provide an incentive for continued employment.
3. ADMINISTRATION. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). If, at the time the Company
registers under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), a majority of the Board is not comprised of Disinterested Persons as
defined in Rule 16b-3(d) promulgated under the Exchange Act, the Board shall
appoint a committee consisting of at least two (2) members of the Board, each of
whom is a Disinterested Person. As used in this Plan, references to the
"Committee" shall mean either such committee or the Board if no committee has
been established. After registration of the Company under the Exchange Act,
Board members who are not Disinterested Persons may not vote on any matters
affecting the administration of this Plan, but any such member may be counted
for determining the existence of a quorum at any meeting of the Board. Subject
to the provisions of the Plan and the limitations of Section 423 of the Code or
any successor provision in the Code, all questions of interpretation or
application of the Plan shall be determined by the Board and its decisions shall
be final and binding upon all participants. Members of the Board shall receive
no compensation for their services in connection with the administration of the
Plan, other than standard fees as established from time to time by the Board for
services rendered by Board members serving on Board committees. All expenses
incurred in connection with the administration of the Plan shall be paid by the
Company.
4. ELIGIBILITY. Any employee of the Company or the Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under the
Plan except the following:
(a) employees who are not employed by the Company or Subsidiaries on
the fifteenth (15th) day of the month before the beginning of such Offering
Period;
(b) employees who are customarily employed for less than 20 hours
per week;
(c) employees who are customarily employed for less than 5 months in
a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock or who, as a result of being granted an option
under the Plan with respect to such Offering Period, would own stock or hold
options to purchase stock possessing 5 percent or more of the total combined
voting power or value of all classes of stock of the Company or any of its
Subsidiaries.
5. OFFERING DATES. The Offering Periods of the Plan (the "Offering
Period") shall be of 6 months duration commencing February 16 and August 16 of
each year and ending on August 15 and February 15 respectively, during which
payroll deductions of the participant are accumulated under this Plan. The first
day of each Offering Period is referred to as the "Offering Date". The last
business day of each Offering Period is referred to as the "Purchase Date". The
Board shall have the power to change the duration of Offering Periods with
respect to future offerings without
72
<PAGE> 2
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be affected.
6. PARTICIPATION IN THE PLAN. Eligible employees may become
participants in an Offering Period under the Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company's or Subsidiary's (whichever employs such employee)
treasury department (the "Treasury Department") not later than the 15th day of
the month before such Offering Date unless a later time for filing the
subscription agreement authorizing payroll deductions is set by the Board for
all eligible employees with respect to a given Offering Period. An eligible
employee who does not deliver a subscription agreement to the Treasury
Department by such date after becoming eligible to participate in such Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in the Plan by filing a subscription
agreement with the Treasury Department not later than the 15th day of the month
preceding a subsequent Offering Date. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws from the Plan or terminates further
participation in the Offering Period as set forth in Section 11 below. Such
participant is not required to file any additional subscription agreement in
order to continue participation in the Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
the Plan with respect to an Offering Period will constitute the grant (as of the
Offering Date) by the Company to such employee of an option to purchase on the
Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing the amount accumulated in such employee's payroll
deduction account during such Offering Period by the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Offering Date (the "Entry Price") or (ii) eighty-five percent (85%) of
the fair market value of a share of the Company's Common Stock on the Purchase
Date; provided, however, that the number of shares of the Company's Common Stock
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (a) the maximum number of shares set by the Board pursuant to Section 10(c)
below with respect to the applicable Offering Period, or (b) 200% of the number
of shares determined by using 85% of the fair market value of a share of the
Company's Common Stock on the Offering Date as the denominator. Fair market
value of a share of the Company's Common Stock shall be determined as provided
in Section 8 hereof.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be 85 percent of the
lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of the Plan, the term "fair market value" on a
given date shall mean the fair market value of the Company's Common Stock as
determined by the Committee from time to time in good faith. If a public market
exists for the shares, the fair market value shall be the average of the last
reported bid and asked prices for the Common Stock of the Company on the last
trading day prior to the date of determination, or, in the event the Common
Stock of the Company is listed on the NASDAQ National Market System, the fair
market value shall be the average of the high and low prices of the Common Stock
on the determination date as quoted on the NASDAQ National Market System and
reported in The Wall Street Journal.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE
OF SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent increments not
less than 2 percent nor greater than 10 percent, not to exceed $25,000 per year
or such lower limit set by the Committee. Compensation shall mean all W-2
compensation, including, but not limited to base salary, wages, commissions,
overtime, shift premiums and bonuses, plus draws against commissions; provided,
however, that for purposes of determining a participant's compensation, any
election by such participant to reduce his or her regular cash remuneration
under Sections 125 or 401(k) of the Code shall be treated as if the participant
did not make such election. Payroll deductions shall commence on the first
payday following the Offering Date and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in the Plan.
73
<PAGE> 3
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than 15 days after
the Treasury Department's receipt of the authorization and shall continue for
the remainder of the Offering Period unless changed as described below. Such
change in the rate of payroll deductions may be made at any time during an
Offering Period, but not more than one change may be made effective during any
Offering Period. A participant may increase or decrease the rate of payroll
deductions for any subsequent Offering Period by filing with the Treasury
Department a new authorization for payroll deductions not later than the 15th
day of the month before the beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to
his or her account under the Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(d) On each Purchase Date, so long as the Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under the Plan and have all payroll
deductions accumulated in the account maintained on behalf of the participant as
of that date returned to the participant, the Company shall apply the funds then
in the participant's account to the purchase of whole shares of Common Stock
reserved under the option granted to such participant with respect to the
Offering Period to the extent that such option is exercisable on the Purchase
Date. The purchase price per share shall be as specified in Section 8 of the
Plan. Any cash remaining in a participant's account after such purchase of
shares shall be carried forward, without interest, into the next Offering
Period; provided, however, that any cash remaining in such participant's account
on a Purchase Date due to the limitations of Sections 10(a) and 10(d) shall be
returned to the participant as soon as practicable after the end of the Offering
Period, without interest. No Common Stock shall be purchased on a Purchase Date
on behalf of any employee whose participation in the Plan has terminated prior
to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company
shall arrange the delivery to each participant of a certificate representing the
shares purchased upon exercise of his option.
(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised. Shares to be delivered to a participant
under the Plan will be registered in the name of the participant or in the name
of the participant and his or her spouse.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No employee shall be entitled to purchase stock under the Plan
at a rate which, when aggregated with his or her rights to purchase stock under
all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in the Plan.
(b) No more than 200% of the number of shares determined by using
85% of the fair market value of a share of the Company's Common Stock on the
Offering Date as the denominator may be purchased by a participant on any single
Purchase Date.
(c) No employee shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty days prior to the commencement of any Offering Period, the Board may, in
its sole discretion, set a maximum number of shares which may be purchased by
any employee at any single Purchase Date (hereinafter the "Maximum Share
Amount"). In no event shall the Maximum Share Amount exceed the amounts
permitted under Section 10(b) above. If a new Maximum Share Amount is set, then
all participants must be notified of such Maximum Share Amount not less than
fifteen days prior to the commencement of the next Offering Period. Once the
Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Offering Periods unless revised by the Board as
set forth above.
74
<PAGE> 4
(d) If the number of shares to be purchased on a Purchase Date by
all employees participating in the Plan exceeds the number of shares then
available for issuance under the Plan, the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Board shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares to
be purchased under a participant's option to each participant affected thereby.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under the
Plan by signing and delivering to the Treasury Department notice on a form
provided for such purpose. Such withdrawal may be elected at any time at least
15 days prior to the end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in the Plan shall terminate. In the event a participant
voluntarily elects to withdraw from the Plan, he or she may not resume his or
her participation in the Plan during the same Offering Period, but he or she may
participate in any Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
the Plan.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee, immediately terminates his or her
participation in the Plan. In such event, the payroll deductions credited to the
participant's account will be returned to him or her or, in the case of his or
her death, to his or her legal representative, without interest. For purposes of
this Section 12, an employee will not be deemed to have terminated employment or
failed to remain in the continuous employ of the Company in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in the Plan is terminated by withdrawal, termination of employment or otherwise,
or in the event the Plan is terminated by the Board, the Company shall promptly
deliver to the participant all payroll deductions credited to his account. No
interest shall accrue on the payroll deductions of a participant in the Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of
75
<PAGE> 5
assets, the Board shall notify the participant that the option shall be fully
exercisable for a period of twenty (20) days from the date of such notice, and
the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect.
16. REPORTS. Individual accounts will be maintained for each
participant in the Plan. Each participant shall receive promptly after the end
of each Offering Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Offering Period.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two years from the
Offering Date or within one year from the Purchase Date on which such shares
were purchased (the "Notice Period"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to the Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to the Plan so that the Plan qualifies
as an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company or the Board, be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in the Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. This Plan shall become effective on the
date that it is adopted by the Board of the Company. This Plan shall be approved
by the stockholders of the Company, in any manner permitted by applicable
corporate law, within twelve months before or after the date this Plan is
adopted by the Board. No purchase of shares pursuant to the Plan shall occur
prior to such stockholder approval. Thereafter, no later than twelve (12) months
after the Company becomes subject to Section 16(b) of the Exchange Act, the
Company will comply with the requirements of Rule 16b-3 with respect to
stockholder approval. The Plan shall continue until the earlier to occur of
termination by the Board, issuance of all of the shares of Common Stock reserved
for issuance under the Plan, or one (1) year from the adoption of the Plan by
the Board (unless extended by the Board for a period of up to ten (10) years
from the adoption date.)
76
<PAGE> 6
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
an Offering Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time
amend, terminate or the extend the term of the Plan, except that any such
termination cannot affect options previously granted under the Plan, nor may any
amendment make any change in an option previously granted which would adversely
affect the right of any participant, nor may any amendment be made without
approval of the stockholders of the Company obtained in accordance with Section
21 hereof within 12 months of the adoption of such amendment (or earlier if
required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under the
Plan;
(b) change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(c) constitute an amendment for which stockholder approval is
required in order to comply with Rule 16b-3 (or any successor rule) of the
Exchange Act.
77
<PAGE> 1
SEVENTH AMENDMENT TO LEASE
THIS SEVENTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into as of the date below written by and between TODA DEVELOPMENT, INC., a
California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware
corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain lease dated June 27,
1991 for certain premises on the third floor of the building commonly known as
600 Townsend Street, San Francisco, California, as amended by that certain First
Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August
9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth
Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated
August 31, 1995, and the Sixth Amendment to Lease dated October 31, 1995
(collectively, the "Lease"). Tenant's predecessor-in-interest under the Lease
was Macromind, Inc.
B. Landlord and Tenant desire to amend the Lease as set forth below.
AGREEMENT
Landlord and Tenant hereby agree as follows:
1. ADDITIONAL PREMISES. Commencing as of June 1, 1996 (the "Additional
Premises Rental Commencement Date") the Premises shall include that portion of
the third floor of the Building comprising approximately 2,884 rentable square
feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The
total rentable square footage of the Premises, including the Additional
Premises, shall be approximately 74,850 as shown on EXHIBIT B.
2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession
of the Additional Premises as of June 1, 1996. If Landlord is unable to deliver
possession of the premises as of June 1, 1996, Landlord shall not be liable for
any damage caused for failing to deliver possession, and this Amendment shall
not be void or voidable. The Additional Premises Rental Commencement Date shall
be delayed until Landlord delivers possession of the Additional Premises to
Tenant. In the event that the Additional Premises are delivered on other than
June 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery
date.
3. RENTAL. Commencing upon the Additional Premises Rental Commencement
Date, monthly Base Rental under the Lease shall be as follows:
78
<PAGE> 2
<TABLE>
<CAPTION>
Period Rental
------ ------
<S> <C>
6/1/96 - 8/31/96 $ 108,532.50
9/1/96 - 8/31/97 $ 114,520.50
9/1/97 - 12/31/2001 $ 122,005.50
</TABLE>
Notwithstanding the Base Rent set forth above, Landlord shall forbear from
demanding the payment of $4,181.80 of Base Rental for each of the first three
months following the Additional Premises Rental Commencement Date (the
"Suspended Base Rent") provided that Tenant is not in default under this Lease.
In the event this Lease terminates at any time as a result of Tenant's default,
Tenant shall immediately pay Landlord an amount equal to the Suspended Rent.
4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide
Tenant with an additional Tenant Improvement Allowance in the amount of $86,520.
Said allowance shall be paid and used for the Additional Premises in accordance
with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor
and architect (both subject to Landlord's reasonable approval) for tenant
improvement work in the Additional Premises. All costs of design and
construction shall be included within the above Allowance.
5. TENANT'S PARTICIPATION. Commencing as of the Additional Premises
Rental Commencement Date, Tenant's Participation for purposes of paragraph 6
shall be determined using a numerator of 74,850 rentable square feet. The base
year shall be 1996 for the Additional Rental payable by Tenant with respect to
the Additional Premises.
6. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the
Additional Premises in its "as is" condition. Tenant shall be responsible for
all demolition of and improvements to the Additional Premises and shall comply
with the terms of the Lease with respect to all work undertaken by Tenant to the
Additional Premises, including, without limitation, paragraphs 8 and 9 thereof.
7. UTILITIES. Paragraph 4 of the Lease shall apply with respect to
utilities for the Additional Premises.
8. CONDITION PRECEDENT. The parties acknowledge that the Additional
Premises are currently occupied by another tenant (the "Existing Tenant") and
that it will be necessary for Landlord to relocate the Existing Tenant by May 1,
1996 in order for Landlord to deliver the Additional Premises to Tenant by June
1, 1996. In the event that the Existing Tenant does not vacate the Additional
Premises by May 1, 1996 on such terms as are acceptable to Landlord in its sole
discretion, this Amendment shall be null and void and the parties shall have no
liability of any nature to each other with respect to this Amendment except that
Landlord shall return the security deposit paid by Tenant in accordance with
paragraph 10 below.
9. PARKING. Tenant shall have the right to two (2) additional parking
spaces in the Building Garage for a total of 50 spaces. The initial charge shall
be $80 per month per space for the additional
79
<PAGE> 3
stalls for the calendar year 1996. Commencing January 1, 1997, during the
initial term of the Lease the charge shall increase on January 1st each year by
an amount not to exceed 5% of the rate then in effect. The charge during the
option period shall be the Fair Market Value. Notwithstanding the foregoing, if
the garage becomes full Tenant shall be entitled only to one parking space per
1,500 square feet of rentable space leased hereunder.
10. SECURITY DEPOSIT. The Security Deposit shall be increased by
$4,181.80, which sum shall be paid by Tenant upon execution of this Seventh
Amendment and held in accordance with paragraph 5 of the Lease.
11. MISCELLANEOUS. Except as amended herein, the Lease shall remain in
full force and effect. Defined terms in the Lease shall have the same meaning in
this Seventh Amendment unless otherwise defined herein. This Seventh Amendment
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Seventh Amendment shall become binding upon Landlord and
Tenant only when fully executed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Seventh Amendment to
Lease as of the 15th day of December, 1995.
LANDLORD:
TODA DEVELOPMENT, INC.,
a California corporation
By: _____________________________
Its: ________________________
TENANT:
MACROMEDIA, INC.,
a Delaware corporation
By: _____________________________
Its:_________________________
80
<PAGE> 4
EIGHTH AMENDMENT TO LEASE
THIS EIGHTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into as of the date below written by and between TODA DEVELOPMENT, INC., a
California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware
corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain lease dated June 27,
1991 for certain premises on the third floor of the building commonly known as
600 Townsend Street, San Francisco, California, as amended by that certain First
Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August
9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth
Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated
August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, and the
Seventh Amendment to Lease dated December 15, 1995 (collectively, the "Lease").
Tenant's predecessor-in-interest under the Lease was Macromind, Inc.
B. Landlord and Tenant desire to amend the Lease as set forth below.
AGREEMENT
Landlord and Tenant hereby agree as follows:
1. ADDITIONAL PREMISES. Commencing as of April 1, 1996 (the "Additional
Premises Rental Commencement Date") the Premises shall include that portion of
the ground floor of the Building comprising approximately 3,720 rentable square
feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The
total rentable square footage of the Premises, including the Additional
Premises, shall be approximately 78,570 as shown on EXHIBIT B.
2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession
of the Additional Premises as of April 1, 1996. If Landlord is unable to deliver
possession of the premises as of April 1, 1996, Landlord shall not be liable for
any damage caused for failing to deliver possession, and this Amendment shall
not be void or voidable. The Additional Premises Rental Commencement Date shall
be delayed until Landlord delivers possession of the Additional Premises to
Tenant. In the event that the Additional Premises are delivered on other than
April 1, 1996, Landlord and Tenant shall execute a letter confirming the
delivery date.
3. RENTAL. Commencing upon the Additional Premises Rental
81
<PAGE> 5
Commencement Date, monthly Base Rental under the Lease shall be as follows:
<TABLE>
<CAPTION>
Period Rental
------ ------
<S> <C>
4/1/96 - 5/31/96 $ 109,744.70
6/1/96 - 8/31/96 $ 113,926.50
9/1/96 - 8/31/97 $ 120,212.10
9/1/97 - 12/31/2001 $ 128,069.10
</TABLE>
The foregoing Base Rent shall be proportionately reduced in the event that the
Seventh Amendment is null and void in accordance with paragraph 8 thereof.
Notwithstanding the Base Rent set forth above, Landlord shall forbear from
demanding the payment of $5,394 of Base Rental for each of the first three
months following the Additional Premises Rental Commencement Date (the
"Suspended Base Rent") provided that Tenant is not in default under this Lease.
In the event this Lease terminates at any time as a result of Tenant's default,
Tenant shall immediately pay Landlord an amount equal to the Suspended Rent.
4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide
Tenant with an additional Tenant Improvement Allowance in the amount of
$111,600. Said allowance shall be paid and used for the Additional Premises in
accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own
contractor and architect (both subject to Landlord's reasonable approval) for
tenant improvement work in the Additional Premises. All costs of design and
construction shall be included within the above Allowance.
5. TENANT'S PARTICIPATION. Commencing as of the Additional Premises
Rental Commencement Date, Tenant's Participation for purposes of paragraph 6
shall be determined using a numerator of 78,570 rentable square feet. The base
year shall be 1996 for the Additional Rental payable by Tenant with respect to
the Additional Premises.
6. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the
Additional Premises in its "as is" condition. Tenant shall be responsible for
all demolition of and improvements to the Additional Premises and shall comply
with the terms of the Lease with respect to all work undertaken by Tenant to the
Additional Premises, including, without limitation, paragraphs 8 and 9 thereof.
7. UTILITIES. Paragraph 4 of the Lease shall apply with respect to
utilities for the Additional Premises.
8. PARKING. Tenant shall have the right to two (2) additional parking
spaces in the Building Garage for a total of 52 spaces. The initial charge shall
be $80 per month per space for the additional stalls for the calendar year 1996.
Commencing January 1, 1997, during the initial term of the Lease the charge
shall increase on January 1st each year by an amount not to exceed 5% of the
rate then in effect. The charge during the option period shall be the Fair
Market Value. Notwithstanding the foregoing, if the garage becomes full Tenant
shall be entitled only to one parking space per 1,500 square feet of rentable
space leased hereunder.
82
<PAGE> 6
9. SECURITY DEPOSIT. The Security Deposit shall be increased by
$5,394, which sum shall be paid by Tenant upon execution of this Eighth
Amendment and held in accordance with paragraph 5 of the Lease.
10. MISCELLANEOUS. Except as amended herein, the Lease shall remain in
full force and effect. Defined terms in the Lease shall have the same meaning in
this Eighth Amendment unless otherwise defined herein. This Eighth Amendment
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Eighth Amendment shall become binding upon Landlord and
Tenant only when fully executed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Eighth Amendment to
Lease as of the 25th day of January, 1996.
LANDLORD:
TODA DEVELOPMENT, INC.,
a California corporation
By: _____________________________
Its: ________________________
TENANT:
MACROMEDIA, INC.,
a Delaware corporation
By: _____________________________
Its:_________________________
83
<PAGE> 7
NINTH AMENDMENT TO LEASE
THIS NINTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into as of the date below written by and between TODA DEVELOPMENT, INC., a
California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware
corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain lease dated June 27,
1991 for certain premises on the third floor of the building commonly known as
600 Townsend Street, San Francisco, California, as amended by that certain First
Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August
9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth
Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated
August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, the
Seventh Amendment to Lease dated December 15, 1995, and the Eighth Amendment to
Lease dated January 25, 1996 (collectively, the "Lease"). Tenant's
predecessor-in-interest under the Lease was Macromind, Inc.
B. Landlord and Tenant desire to amend the Lease as set forth below.
AGREEMENT
Landlord and Tenant hereby agree as follows:
1. ADDITIONAL PREMISES. Commencing as of May 1, 1996 (the "Additional
Premises Rental Commencement Date") the Premises shall include that portion of
the fourth floor of the Building comprising approximately 8,605 rentable square
feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The
total rentable square footage of the Premises, including the Additional
Premises, shall be approximately 87,175 as shown on EXHIBIT B.
2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession
of the Additional Premises as of May 1, 1996. If Landlord is unable to deliver
possession of the premises as of May 1, 1996, Landlord shall not be liable for
any damage caused for failing to deliver possession, and this Amendment shall
not be void or voidable. The Additional Premises Rental Commencement Date shall
be delayed until Landlord delivers possession of the Additional Premises to
Tenant. In the event that the Additional Premises are delivered on other than
May 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery
date.
3. TERM. The Termination Date of the Lease is hereby
84
<PAGE> 8
changed to December 31, 2005. Tenant shall continue to have two (2) options to
renew this Lease on the terms and conditions set forth on Rider 10 upon
expiration of the revised Termination Date.
4. RENTAL. Commencing upon the Additional Premises Rental Commencement
Date, monthly Base Rental under the Lease shall be as follows:
<TABLE>
<CAPTION>
Period Rental
------ ------
<S> <C>
5/1/96 - 5/31/96 $ 122,221.95
6/1/96 - 8/31/96 $ 126,403.75
9/1/96 - 8/31/97 $ 133,377.75
9/1/97 - 12/31/01 $ 142,095.25
1/1/02 - 12/31/03 $ 156,915.00
1/1/04 - 12/31/05 $ 169,991.25
</TABLE>
The foregoing Base Rent shall be proportionately reduced in the event that the
Seventh Amendment is null and void in accordance with paragraph 8 thereof.
Notwithstanding the Base Rent set forth above, Landlord shall forbear from
demanding the payment of $12,477.25 of Base Rental for each of the first three
months following the Additional Premises Rental Commencement Date (the
"Suspended Base Rent") provided that Tenant is not in default under this Lease.
In the event this Lease terminates at any time as a result of Tenant's default,
Tenant shall immediately pay Landlord an amount equal to the Suspended Rent.
5. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide
Tenant with an additional Tenant Improvement Allowance in the amount of
$258,150. Said allowance shall be paid and used for the Additional Premises in
accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own
contractor and architect (both subject to Landlord's reasonable approval) for
tenant improvement work in the Additional Premises. All costs of design and
construction shall be included within the above Allowance.
6. TENANT'S PARTICIPATION. Commencing as of the Additional Premises
Rental Commencement Date, Tenant's Participation for purposes of paragraph 6
shall be determined using a numerator of 87,175 rentable square feet. The base
year shall be 1996 for the Additional Rental payable by Tenant with respect to
the Additional Premises.
7. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the
Additional Premises in its "as is" condition. Tenant shall be responsible for
all demolition of and improvements to the Additional Premises and shall comply
with the terms of the Lease with respect to all work undertaken by Tenant to the
Additional Premises, including, without limitation, paragraphs 8 and 9 thereof.
8. UTILITIES. Paragraph 4 of the Lease shall apply with respect to
utilities for the Additional Premises.
9. PARKING. Tenant shall have the right to six (6) additional parking
spaces in the Building Garage for a total of 58 spaces. The initial charge shall
be $80 per month per space for the additional
85
<PAGE> 9
stalls for the calendar year 1996. Commencing January 1, 1997, during the
initial term of the Lease the charge shall increase on January 1st each year by
an amount not to exceed 5% of the rate then in effect. The charge during the
option period shall be the Fair Market Value. Notwithstanding the foregoing, if
the garage becomes full Tenant shall be entitled only to one parking space per
1,500 square feet of rentable space leased hereunder.
10. SECURITY DEPOSIT. The Security Deposit shall be increased by
$12,477.25 which sum shall be paid by Tenant upon execution of this Ninth
Amendment and held in accordance with paragraph 5 of the Lease.
11. RIGHT OF FIRST REFUSAL. Provided an event of default by Tenant has
not occurred either at the time of exercise of this right or at the time of
taking possession of additional space, Tenant shall have an ongoing right of
first refusal during the term of this Lease to lease the remainder of the fourth
floor as such space becomes available. Such right of first refusal shall be
exercised only by compliance with the terms of this paragraph. Landlord shall
not enter into a lease with any third party tenant for any portion of such space
which becomes available during the term of this Lease without first offering
such space to Tenant as follows. Landlord shall provide Tenant with a ten (10)
day right of first refusal to lease such space by notifying Tenant in writing of
Landlord's intention to lease such space. Tenant shall have the right to lease
such space on the following terms and conditions:
(a) Base rental shall be as follows:
<TABLE>
<CAPTION>
Rental per
Period Rentable Square Foot
------ --------------------
<S> <C>
through- 8/31/96 $1.45
9/1/96 - 8/31/97 $1.53
9/1/97 - 12/31/01 $1.63
1/1/02 - 12/31/03 $1.80
1/1/04 - 12/31/05 $1.95
</TABLE>
(b) There shall be no rental waiver or forbearance.
(c) Tenant's Participation for purposes of paragraph 6 shall be
determined using the total number of rentable square feet leased by
Tenant as the numerator. The security deposit shall be increased by an
amount equal to $1.95 times the number of additional rentable square
feet taken by Tenant.
(d) Tenant shall take the space in its "as is" condition. Tenant
shall be responsible at its expense for all demolition of and
improvements to such premises and shall comply with the terms of the
Lease with respect to all work undertaken by Tenant on such premises,
including, without limitation, paragraphs 8 and 9 thereof.
86
<PAGE> 10
(e) Landlord shall provide Tenant with an additional Tenant
Improvement Allowance in the following amounts: (i) Thirty Dollars
($30) per rentable square foot with respect to the area marked on
EXHIBIT C attached hereto; and (ii) Ten Dollars ($10) per rentable
square foot with respect to the remainder of the available fourth floor
premises. Said allowance shall be paid and used in accordance with
paragraph 8 and Rider 5.C of the Lease. Tenant may use its own
contractor and architect (both subject to Landlord's reasonable
approval) for tenant improvement work in such premises. All costs of
design and construction shall be included within the above allowance.
(f) Paragraph 4 of the Lease shall apply with respect to utilities
for such Premises.
(g) All other terms of this Lease shall apply with respect thereto,
including, without limitation, the revised Termination Date.
If within ten (10) days of the date of such notice Landlord has received written
notice from Tenant of its election to lease such space on the foregoing terms
and conditions, Landlord and Tenant shall within thirty (30) days enter into a
lease amendment setting forth said terms. If Tenant fails to respond to said
notice within said ten (10) day period, or, after Tenant giving written notice
of its exercise of its right to take the space, if Landlord and Tenant do not
enter into said lease amendment within said thirty (30) day period for any
reason other than Landlord's fault, Tenant's rights under this paragraph shall
be deemed to have been waived, and Landlord shall be free to lease the space to
anyone without any further obligation to Tenant. As used herein, "third-party
tenant" excludes other parties then in possession of any portion of the premises
subject to this right of first refusal which may desire to expand its premises
or extend or renegotiate its lease or rental agreement or any other tenant in
the Building. Nothing contained herein shall require Landlord to lease to Tenant
any portion of the floor which would leave Landlord with any remaining portion
of the floor which was not commercially and economically rentable to third
parties. Should Tenant decline to take any space offered it pursuant to this
paragraph, this right of first refusal shall lapse and become void thereafter.
12. WESTERN STAFF SERVICES SPACE. The parties acknowledge that Landlord
currently leases the premises on the third floor marked on EXHIBIT D attached
hereto (the "WSS Premises") to Western Staff Services, Inc. ("WSS") and that WSS
has the right to terminate its lease upon 270 days notice to Landlord. In the
event that WSS exercises such right and Landlord notifies Tenant in writing that
Landlord desires to lease the WSS Premises to Tenant ("Landlord's Notice"),
Tenant shall lease the WSS space from Landlord on the following terms and
conditions:
(a) Commencing as of sixty (60) days after the date Landlord's
lease with WSS terminates, the Premises shall include the WSS Premises.
87
<PAGE> 11
(b) Base rental shall be as follows:
<TABLE>
<CAPTION>
Rental per
Period Rentable Square Foot
------ --------------------
<S> <C>
through- 8/31/96 $1.45
9/1/96 - 8/31/97 $1.53
9/1/97 - 12/31/01 $1.63
1/1/02 - 12/31/03 $1.80
1/1/04 - 12/31/05 $1.95
(j) There shall be no rental waiver or forbearance.
</TABLE>
(c) Tenant's Participation for purposes of paragraph 6 shall be
determined using the total number of rentable square feet leased by
Tenant as the numerator. The security deposit shall be increased by an
amount equal to $1.95 times the number of additional rentable square
feet taken by Tenant.
(d) Tenant shall take the space in its "as is" condition. Tenant
shall be responsible at its expense for all demolition of and
improvements to such premises and shall comply with the terms of this
Lease with respect to all work undertaken by Tenant on such premises,
including, without limitation, paragraphs 8 and 9 thereof.
(e) Tenant may use its own contractor and architect (both subject
to Landlord's reasonable approval) for tenant improvement work in such
premises. All costs of design and construction shall be paid by Tenant.
Landlord shall have no responsibility to provide any additional Tenant
Improvement Allowance.
(f) Paragraph 4 of the Lease shall apply with respect to utilities
for such Premises.
(g) All other terms of this Lease shall apply with respect thereto,
including, without limitation, the termination date.
Landlord and Tenant shall acknowledge in writing that the Premises
include the WSS Premises on the terms and conditions set forth above within ten
(10) days of the date of Landlord's Notice. Tenant's failure to timely execute
and deliver such acknowledgment shall constitute a default hereunder.
88
<PAGE> 12
13. MISCELLANEOUS. Except as amended herein, the Lease shall remain in
full force and effect. Defined terms in the Lease shall have the same meaning in
this Ninth Amendment unless otherwise defined herein. This Ninth Amendment
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Ninth Amendment shall become binding upon Landlord and
Tenant only when fully executed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Ninth Amendment to
Lease as of the 21st day of February, 1996.
LANDLORD:
TODA DEVELOPMENT, INC.,
a California corporation
By: _____________________________
Its: ________________________
TENANT:
MACROMEDIA, INC.,
a Delaware corporation
By: _____________________________
Its:_________________________
89
<PAGE> 13
TENTH AMENDMENT TO LEASE
THIS TENTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into as of the date below written by and between TODA DEVELOPMENT, INC., a
California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware
corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain lease dated June 27,
1991 for certain premises on the third floor of the building commonly known as
600 Townsend Street, San Francisco, California, as amended by that certain First
Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August
9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth
Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated
August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, the
Seventh Amendment to Lease dated December 15, 1995, the Eighth Amendment to
Lease dated January 25, 1996, and the Ninth Amendment to Lease dated February
21, 1996 (collectively, the "Lease"). Tenant's predecessor-in-interest under the
Lease was Macromind, Inc.
B. Landlord and Tenant desire to amend the Lease as set forth below.
AGREEMENT
Landlord and Tenant hereby agree as follows:
1. ADDITIONAL PREMISES. Commencing as of May 1, 1996 (the "Additional
Premises Rental Commencement Date") the Premises shall include that portion of
the second floor of the Building comprising approximately 1,733 rentable square
feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The
total rentable square footage of the Premises, including the Additional
Premises, shall be approximately 88,908 as shown on EXHIBIT B.
2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession
of the Additional Premises as of May 1, 1996. If Landlord is unable to deliver
possession of the premises as of May 1, 1996, Landlord shall not be liable for
any damage caused for failing to deliver possession, and this Amendment shall
not be void or voidable. The Additional Premises Rental Commencement Date shall
be delayed until Landlord delivers possession of the Additional Premises to
Tenant. In the event that the Additional Premises are delivered on other than
May 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery
date.
90
<PAGE> 14
3. RENTAL. Commencing upon the Additional Premises Rental Commencement
Date, monthly Base Rental under the Lease shall be as follows:
<TABLE>
<CAPTION>
Period Rental
------ ------
<S> <C>
5/1/96 - 5/31/96 $ 124,734.80
6/1/96 - 8/31/96 $ 128,916.60
9/1/96 - 8/31/97 $ 136,029.24
9/1/97 - 12/31/01 $ 144,920.04
1/1/02 - 12/31/03 $ 160,034.40
1/1/04 - 12/31/05 $ 173,370.60
</TABLE>
4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide
Tenant with an additional Tenant Improvement Allowance in the amount of $51,990.
Said allowance shall be paid and used for the Additional Premises in accordance
with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor
and architect (both subject to Landlord's reasonable approval) for tenant
improvement work in the Additional Premises. All costs of design and
construction shall be included within the above Allowance.
4. TENANT'S PARTICIPATION. Commencing as of the Additional Premises
Rental Commencement Date, Tenant's Participation for purposes of paragraph 6
shall be determined using a numerator of 88,908 rentable square feet. The base
year shall be 1996 for the Additional Rental payable by Tenant with respect to
the Additional Premises.
5. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the
Additional Premises in its "as is" condition. Tenant shall be responsible for
all demolition of and improvements to the Additional Premises and shall comply
with the terms of the Lease with respect to all work undertaken by Tenant to the
Additional Premises, including, without limitation, paragraphs 8 and 9 thereof.
6. RESTORATION OF ADDITIONAL PREMISES. The parties acknowledge that the
Additional Premises are currently Building common area and that Landlord intends
to again utilize such space as common area upon expiration of this Lease. Upon
the expiration or termination of this Lease for any reason, Tenant shall at its
sole cost and expense promptly remove any alterations, additions, fixtures or
improvements to the Additional Premises made by Tenant and restore the
Additional Premises as common area in the condition existing as of the date
hereof, including, without limitation all finishes and details. Such restoration
removal shall be completed prior to the expiration or termination of this Lease.
7. EXCLUSIVE ELEVATOR ACCESS TO ADDITIONAL PREMISES. Tenant shall have
the right at its sole cost and expense to install card reading devices in the
Building elevators which require a pass card to access the second floor of the
Building, provided that the installation and utilization of such devices does
not adversely affect the elevator service to other floors. Tenant shall provide
Landlord with such pass cards so that Landlord at all times has access to the
second floor. Tenant at its expense shall maintain such devices in good
91
<PAGE> 15
operating condition and repair. Upon expiration or termination of this Lease for
any reason, Tenant at its expense shall remove such devices, repair any damage
caused by such removal and restore the elevators to the condition existing as of
the date hereof. Tenant shall comply with all applicable codes in connection
with the installation and operation of such devices. Tenant shall be responsible
for all additional security it may desire for the second floor and Landlord
shall have no responsibility for the same.
8. UTILITIES. Paragraph 4 of the Lease shall apply with respect to
utilities for the Additional Premises.
9. SECURITY DEPOSIT. The Security Deposit shall be increased by
$3,379.35 which sum shall be paid by Tenant upon execution of this Tenth
Amendment and held in accordance with paragraph 5 of the Lease.
10. MISCELLANEOUS. Except as amended herein, the Lease shall remain in
full force and effect. Defined terms in the Lease shall have the same meaning in
this Tenth Amendment unless otherwise defined herein. This Tenth Amendment
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Tenth Amendment shall become binding upon Landlord and
Tenant only when fully executed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Tenth Amendment to
Lease as of the 30th day of April, 1996.
LANDLORD: TENANT:
TODA DEVELOPMENT, INC., MACROMEDIA, INC.,
a California corporation a Delaware corporation
By: _________________________ By: _________________________
Its: ____________________ Its:_____________________
92
<PAGE> 16
ELEVENTH AMENDMENT TO LEASE
THIS ELEVENTH AMENDMENT TO LEASE (the "Amendment") is made and entered
into as of the date below written by and between TODA DEVELOPMENT, INC., a
California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware
corporation ("Tenant").
RECITALS
A. Landlord and Tenant are parties to that certain lease dated June 27,
1991 for certain premises on the third floor of the building commonly known as
600 Townsend Street, San Francisco, California, as amended by that certain First
Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August
9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth
Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated
August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, the
Seventh Amendment to Lease dated December 15, 1995, the Eighth Amendment to
Lease dated January 25, 1996, the Ninth Amendment to Lease dated February 21,
1996 and the Tenth Amendment to Lease dated April 30, 1996 (collectively, the
"Lease"). Tenant's predecessor-in-interest under the Lease was Macromind, Inc.
B. Landlord and Tenant desire to amend the Lease as set forth below.
AGREEMENT
Landlord and Tenant hereby agree as follows:
1. ADDITIONAL PREMISES. Commencing as of July 1, 1996 (the "Additional
Premises Rental Commencement Date") the Premises shall include that portion of
the fourth floor of the Building comprising approximately 6,581 rentable square
feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The
total rentable square footage of the Premises, including the Additional
Premises, shall be approximately 95,489 as shown on EXHIBIT B.
2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession
of the Additional Premises as of July 1, 1996. If Landlord is unable to deliver
possession of the Additional Premises as of July 1, 1996, Landlord shall not be
liable for any damage caused for failing to deliver possession, and this
Amendment shall not be void or voidable. The Additional Premises Rental
Commencement Date shall be delayed until Landlord delivers possession of the
Additional Premises to Tenant. In the event that the Additional Premises are
delivered on
93
<PAGE> 17
other than July 1, 1996, Landlord and Tenant shall execute a letter confirming
the delivery date.
3. RENTAL. Commencing upon the Additional Premises Rental Commencement
Date, monthly Base Rental under the Lease shall be as follows:
<TABLE>
<CAPTION>
Period Rental
------ ------
<S> <C>
7/1/96 - 8/31/96 $ 138,459.05
9/1/96 - 8/31/97 $ 146,098.17
9/1/97 - 12/31/01 $ 155,647.07
1/1/02 - 12/31/03 $ 171,880.20
1/1/04 - 12/31/05 $ 186,203.55
</TABLE>
4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide
Tenant with an additional Tenant Improvement Allowance in the amount of
$117,510. Said allowance shall be paid and used for the Additional Premises in
accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own
contractor and architect (both subject to Landlord's reasonable approval) for
tenant improvement work in the Additional Premises. All costs of design and
construction shall be included within the above Allowance.
4. TENANT'S PARTICIPATION. Commencing as of the Additional Premises
Rental Commencement Date, Tenant's Participation for purposes of paragraph 6
shall be determined using a numerator of 95,489 rentable square feet. The base
year shall be 1996 for the Additional Rental payable by Tenant with respect to
the Additional Premises.
5. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the
Additional Premises in its "as is" condition. Tenant shall be responsible for
all demolition of and improvements to the Additional Premises and shall comply
with the terms of the Lease with respect to all work undertaken by Tenant to the
Additional Premises, including, without limitation, paragraphs 8 and 9 thereof.
6. RESTORATION OF ADDITIONAL PREMISES. The parties acknowledge that a
portion of the Additional Premises are currently Building common area and that
Landlord intends to again utilize such space as common area upon expiration of
this Lease. Upon the expiration or termination of this Lease for any reason,
Tenant shall at its sole cost and expense promptly remove any alterations,
additions, fixtures or improvements to the Additional Premises made by Tenant
and restore that portion of the Additional Premises which is currently common
area in the condition existing as of the date hereof, including, without
limitation all finishes and details. Such restoration removal shall be completed
prior to the expiration or termination of this Lease.
94
<PAGE> 18
7. CONDITION PRECEDENT; PAYMENT OF RELOCATION EXPENSES. The parties
acknowledge that the entry to the premises leased by Design/Sense, an existing
tenant, is from that portion of the Additional Premises that is currently a
corridor and that it will be necessary for Design/Sense to relocate the entrance
to its premises. In the event that Design/Sense does not agree to such
relocation on such terms as are acceptable to Landlord in its sole discretion by
June 1, 1996, this Amendment shall be null and void and the parties shall have
no liability of any nature to each other with respect to this Amendment except
that Landlord shall return the security deposit paid by Tenant in accordance
with paragraph 10 below. Tenant shall pay Landlord upon demand, as additional
rental under this Lease, an amount equal to the following: (i) all costs of any
nature incurred in connection with the relocation of the Design/Sense entryway
and the construction of a new entryway in accordance with the space plan
attached as EXHIBIT C, including, without limitation, architect and other
professional fees, permit fees, and all costs of construction; and (ii) all
out-of-pocket costs of any nature incurred by Design/Sense in the event that
Design/Sense temporarily closes its business in connection with the construction
of the new entryway.
8. UTILITIES. Paragraph 4 of the Lease shall apply with respect to
utilities for the Additional Premises.
9. SECURITY DEPOSIT. The Security Deposit shall be increased by
$12,832.95 which sum shall be paid by Tenant upon execution of this Eleventh
Amendment and held in accordance with paragraph 5 of the Lease.
10. PARKING. Tenant shall have the right to four (4) additional parking
spaces in the Building Garage for a total of 62 spaces. The initial charge shall
be $80 per month per space for the additional stalls for the calendar year 1996.
The charge shall increase 5% over the rate then in effect on each anniversary of
the Additional Premises Rental Commencement Date during the initial term of the
Lease. The charge during the option period shall be the Fair Market Value.
Notwithstanding the foregoing, if the garage becomes full Tenant shall be
entitled only to one parking space per 1,500 square feet of rentable space
leased hereunder.
11. MISCELLANEOUS. Except as amended herein, the Lease shall remain in
full force and effect. Defined terms in the Lease shall have the same meaning in
this Eleventh Amendment unless otherwise defined herein. This Eleventh Amendment
constitutes the entire agreement between the parties with respect to the subject
matter hereof. This Eleventh Amendment shall become binding upon Landlord and
Tenant only when fully executed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Eleventh Amendment
to Lease as of the 13th day of June, 1996.
95
<PAGE> 19
LANDLORD: TENANT:
TODA DEVELOPMENT, INC., MACROMEDIA, INC.,
a California corporation a Delaware corporation
By: _________________________ By: _________________________
Its: ____________________ Its:_____________________
96
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
MACROMEDIA
DOMESTIC DISTRIBUTION AGREEMENT
This Agreement between Macromedia, Inc., a Delaware corporation with principal
offices at 600 Townsend St., San Francisco, California 94103 ("Macromedia") and
Ingram Micro, Inc. ("Distributor"), a California corporation, whose address is
1600 E. St. Andrew Place, P.O. Box 25125, Santa Ana, CA 92799-5125, shall be
effective as of the date of execution by Macromedia ("Effective Date").
In consideration of the representations, warranties, covenants and agreements
set forth herein and intending to be mutually bound, the parties hereto agree as
follows:
1. DEFINITIONS Capitalized terms shall have the meaning set forth in Exhibit A,
attached hereto and incorporated herein by this reference.
2. DISTRIBUTION RIGHTS
2.1 During the term of this Agreement, Macromedia grants to Distributor
the non-exclusive right and license to distribute the Products to Resellers
located in the Territory, as defined on Exhibit A hereto. Pursuant to the terms
hereof, Macromedia shall sell to Distributor, and Distributor shall purchase
from Macromedia, the Products set forth on Exhibit B hereto ordered by
Distributor at the Purchase Prices and upon the Payment Terms described below.
2.2 Macromedia reserves the right at any time to discontinue the
production or distribution of any of its Products, to modify the design of or
upgrade its Products or any part of its Products and to change its service,
warranty, or other policies, upon thirty (30) days written notice to
Distributor. In accordance with Section 4, Stock Balancing, Distributor may
return, at Macromedia's expense, all or any portion of its own and its
customers' inventory of any modified, upgraded or discontinued Product.
2.3 Macromedia also reserves the right to add products to or delete
products from Exhibit B upon thirty (30) days written notice to Distributor.
3. PRICE
3.1 The current Products, Discounts, and Suggested List Prices are set
forth on Exhibit B hereto. Macromedia reserves the right to change Exhibit B
upon thirty (30) days written notice to Distributor.
3.2 In the event the Purchase Price of any Product is reduced through a
reduction in the Suggested List Price of such Product, Macromedia will credit to
Distributor an amount equal to the product of (a) the difference between the new
Purchase Price and the former Purchase Price for such Product, and (b) the
number of units of such Product then in Distributor's and its customers'
Inventory plus (c) the number of units sold to Resellers thirty (30) days prior
to the reduction provided that (i) the Resellers are entitled to price
protection, and (ii) Distributor can provide evidence, within thirty (30) days
of notification by Macromedia, that price production has been claimed by the
Resellers for such units. In the event that Macromedia should raise the
Suggested List Price of any Product, Macromedia will honor each order made or
mailed by Distributor before such price change becomes effective at the Purchase
Price in effect when such order was made or mailed.
3.3 Payments to Macromedia with respect to all products received by
Distributor shall be made by Distributor in US dollars, free of withholding,
within thirty (30) days of the date of Macromedia 's invoice. Such payment must
be a certified check if any preceding check is returned to Macromedia for
insufficient funds.
3.4 Macromedia's prices do not include any foreign, federal, state or
local sales, use, value added or other taxes, customs duties, or similar tariffs
and fees which Macromedia may be required to pay or collect upon the delivery of
the Products or upon collection of the price. Should any tax or levy be made,
Distributor agrees to pay such tax or levy and indemnify Macromedia for any
claim for such tax or levy demanded. Distributor covenants to Macromedia that
all Products acquired hereunder will be for redistribution in the ordinary
course of Distributor's business, and Distributor agrees to provide Macromedia
with appropriate resale certificate numbers and other documentation satisfactory
for the applicable taxing authorities to substantiate any claim of exemption
from any such taxes or fees.
3.5 Notwithstanding any other provision in this Agreement to the
contrary, Distributor shall not be deemed in default if it withholds any
specific amount to Macromedia because of a legitimate dispute between the
parties as to that specific amount, pending the resolution of the disputed
amount.
4. STOCK BALANCING Distributor may return Products to Macromedia, including 100%
of modified, upgraded or discontinued Products, as follows: (a) Returns shall be
made each quarter, at one time in the month immediately following the end of the
quarter; (b) except as may be
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 97
<PAGE> 2
agreed by the parties, from time-to-time, returns shall not exceed 20% of the
previous quarter's purchases; and (c) returns shall be accepted on a
dollar-for-dollar reorder basis, as follows: Distributor shall request a Return
Merchandise Authorization ("RMA") number, offering offsetting purchase order(s)
with a total value equal to or greater than the aggregate purchase price of the
Products to be returned. The offsetting purchase order(s) may include one or
more orders already placed and not yet shipped, provided such orders were placed
in the same month as the RMA request. Upon receipt of the purchase order(s),
Macromedia shall issue the RMA number, which must accompany the return shipment.
Macromedia agrees not to ship against the offered purchase order(s) until it has
approved the RMA. To be eligible for return, Products must be new, unused and in
their original, sealed packaging. However, no return will be authorized by
Macromedia if, at the time of the requested return, Distributor is in default or
breach of any provision of this Agreement, including failure to comply with any
applicable credit terms or delinquency in any payment to Macromedia, subject to
Distributor's right of withhold under section 3.5.
5. ORDERS AND SHIPPING
5.1 Upon receipt of an order by Distributor, Macromedia shall use
reasonable efforts to deliver such order to Distributor within ten (10) days of
the date of such order. Orders shall be shipped F.O.B. Macromedia in accordance
with the Ingram Micro Inc. Vendor Routing Guide, as set forth in Exhibit E,
which may be amended by Distributor from time to time. Distributor shall use its
best efforts in placing orders at least four (4) weeks in advance of the
requested ship date. Macromedia requests that orders be placed at least four (4)
weeks in advance of the requested date for shipment but in no event shall any
order be placed more than ninety (90) days in advance of the requested ship
date. All risk of loss or damage to the Products will pass to Distributor upon
delivery by Macromedia to the carrier, freight forwarder, or Distributor,
whichever occurs first. Macromedia shall ship orders to Distributor at least as
promptly as Macromedia ships any other orders received at or about the same
time. Should orders for Products exceed Macromedia's available inventory,
Macromedia may allocate its available inventory and make deliveries on a basis
Macromedia deems equitable, in its sole discretion, and without liability to
Distributor on account of the method of allocation chosen or its implementation.
In any event, Macromedia will not be liable for any damages, direct,
consequential, special or otherwise, to Distributor or to any other person for
failure to deliver or for any delay or error in delivery of Products.
5.2 Distributor shall be required to place an initial order, and
purchase a the quarterly amounts set forth in Exhibit C. All orders for Products
shall be subject to the criteria set forth in Exhibit C.
5.3 Macromedia reserves the right to cancel any orders placed by
Distributor and accepted by Macromedia or to refuse or delay shipment thereof,
if Distributor (i) fails to make any payment as provided in this Agreement or
under the terms of payment set forth in any invoice or otherwise agreed to by
Macromedia and Distributor, (ii) fails to meet reasonable credit or financial
requirements established by Macromedia, including any limitations on allowable
credit, or (iii) otherwise fails to comply with the terms and conditions of this
Agreement. No such cancellation, refusal or delay will be deemed a termination
(unless Macromedia so advises Distributor) or breach of this Agreement by
Macromedia.
6. ADVERTISING AND PROMOTION
6.1 Distributor shall be entitled to participate in Macromedia's
Development Fund ("MDF") Program in accordance with the terms and conditions set
forth in Exhibit D attached hereto and made a part hereof. Macromedia shall be
entitled to either cancel or change the terms and conditions of the MDF Program
on thirty (30) days written notice.
6.2 Macromedia agrees to provide reasonable training and sales
collateral materials as needed, and to provide sales training for Distributor's
staff, at times mutually agreed upon by Macromedia. In addition, Macromedia
agrees to provide reasonable units of each Macromedia Product for in-house
training, resources library and technical support use; such units, as well as
any "NFR" units (i.e., Products that may not be resold to end users), may not be
redistributed for any reason, except for special promotional "NFR" units that
are offered to Distributor in exchange for Distributor's purchase of specified
Products.
Distribution of such Product units in violation of the foregoing will constitute
a material breach of this Agreement. When a new Product or new version is
released, units of the new Product or new version will also be provided by
Macromedia to Distributor.
6.3 Distributor will provide Macromedia within seven business (7) days
after the end of each calendar month, a written or electronic report and
computer media data files (in a format, style and manner approved by Macromedia)
showing, for such month, (i) Distributor's shipments of each the Products with
the ship-to address,
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 98
<PAGE> 3
Reseller or VAR name, and the quantity and type of Product sold, and ii)
Distributor's current inventory levels for each of the Products. Non-standard,
subsection (i), point of sale (POS) data will be subject to a separate
non-disclosure agreement attached hereto as Exhibit F.
7. ADVANCE NOTICE In the event that Macromedia shall sell any additional Product
not set forth on Exhibit B which is offered by Macromedia through comparable
wholesale distributors. Macromedia shall make reasonable efforts to notify
Distributor not less than thirty (30) days in advance of such event and, in any
event, at least as quickly as Macromedia notifies any other Distributor.
8. NOTICE Any notices hereunder to be given by either party to the other shall
be in writing and sent by certified mail to each party's address as set forth
above, with a courtesy copy to the General Counsel, and sent to the attention of
the Senior Buyer or Product Manager as applicable if sent to Distributor, and to
the attention of the Account Manager Distributor Sales, if sent to Macromedia.
9. DEFECTIVE PRODUCTS
9.1 Distributor will accept and will require its Resellers to accept
the return of any Product by an enduser due to the enduser's failure to agree to
the terms of the Enduser License accompanying such Products, provided that the
disk package of such Product is returned unopened. Distributor may also return
any opened units of defective Product which have been returned by endusers in
accordance with the warranty set forth in the Enduser License accompanying the
Product. Transportation charges for the return of such Products shall be borne
by Macromedia. Such returns must be accompanied by a purchase order for
replacement Products equal in value to the purchase price paid by Distributor
for the returned Products. The offsetting purchase order(s) may include one or
more orders already placed and not yet shipped, provided such orders were placed
in the same month as the RMA request.
9.2 Macromedia provides a limited warranty to end users of the
Products. Distributor will make no other warranty on Macromedia's behalf. EXCEPT
FOR SUCH WARRANTY, THE PRODUCTS ARE PROVIDED WITHOUT WARRANTY OF ANY KIND,
EITHER EXPRESS OR IMPLIED. MACROMEDIA DOES NOT WARRANT THAT THE FUNCTIONS
CONTAINED IN THE PRODUCTS WILL BE UNINTERRUPTED OR ERROR FREE. MACROMEDIA
DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS, EITHER EXPRESS OR IMPLIED,
INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
10. INDEMNIFICATION
10.1 Indemnification of Distributor.
Macromedia agrees that, if notified promptly in writing and given sole control
of the defense and all related settlement negotiations, and if Distributor
cooperates and provides reasonable assistance, Macromedia will defend
Distributor against any claim based on an allegation that (i) a Product supplied
hereunder infringes a copyright, trademark, or state trade secret right within
the Territory, (ii) a Product supplied hereunder caused property damage or the
death of or a personal injury to, any person, arising out of or resulting in any
way from any defect in a Product, (iii) Macromedia violated any United States
law, statute or ordinance or any United States governmental or administrative
order, rule or regulation with regard to the Product or its manufacture,
possession, use or sale or (iv) arises from Macromedia's acts, omissions or
misrepresentations with respect to the Products to the extent that Macromedia
would have been found liable by a court if the claim had been made directly
against Macromedia. Macromedia will pay any resulting costs, damages and
attorneys' fees finally awarded by a court with respect to any such claims.
Distributor agrees that, if the Products in the inventory of Distributor, or the
operation thereof, become, or in Macromedia's opinion are likely to become, the
subject of such a claim, Distributor will permit Macromedia, at Macromedia's
option and expense, to, among other things, procure the right for Distributor to
continue marketing and using such Products, or to replace or modify them so that
they become noninfringing. If neither of the foregoing alternatives is available
on terms that Macromedia in its sole discretion deems reasonable, Distributor
will return such Products on written request from Macromedia. Macromedia will
grant Distributor a credit equal to the price paid by Distributor for such
returned Products, as adjusted for discounts, returns and credits actually
given, provided that such returned Products are in an undamaged condition.
Macromedia will have no obligation to Distributor with respect to infringement
of patents, copyrights, trademarks or trade secrets or other proprietary rights
beyond that stated in this Section 10.1
10.2 Indemnification of Macromedia
Distributor agrees to indemnify and hold harmless Macromedia, its affiliates,
employees and agents, against any and all claims and liabilities (including
reasonable attorney's fees and costs of litigation) arising from
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 99
<PAGE> 4
Distributor's acts, omissions or misrepresentations, regardless of the form of
action.
11. TERM AND TERMINATION
11.1 Unless this Agreement is terminated as provided below, the rights
and obligations of Distributor and Macromedia hereunder shall be effective for a
term of one year from the effective date and will automatically renew, for
additional one-year terms, upon each anniversary of the effective date.
11.2 Either party hereto may terminate this Agreement upon (a) thirty
(30) days written notice to the other following any material breach or omission
by the other with respect to any term, representation, warranty, condition, or
covenant hereof and (b) the failure of such other party to cure such breach or
omission prior to the expiration of such thirty (30) day period, provided that
in the event Distributor defaults in any payment due Macromedia such notice
period prior to termination will be reduced to ten (10) days.
11.3 Distributor or Macromedia may terminate this Agreement at will, at
any time during the term of this Agreement, with or without cause, by written
notice given to the other party not less than ninety (90) days prior to the
effective date of such termination.
11.4 Upon termination or expiration of this Agreement, Distributor
shall submit to Macromedia within ten (10) days after the effective date of
termination or expiration, a list of all Products in Distributor's inventory. If
Macromedia terminates this Agreement in accordance with Section 11.3 or if
Distributor terminates this Agreement in accordance with Section 11.2,
Macromedia shall repurchase all such Products, if they are in new and original
condition. If Distributor terminates this Agreement in accordance with Section
11.3 or if Macromedia terminates this Agreement in accordance with Section 11.2,
Macromedia may, at its option, repurchase any such Products, if they are in new
and original condition. In such case, Macromedia will pay Distributor the actual
price Distributor paid for such Products, subtracting any amounts then owing to
Macromedia.
11.5 In the event Macromedia issues a notice of termination due to
Distributor's breach of this Agreement, Macromedia will be entitled to reject
all or part of any orders received from Distributor after notice but prior to
the effective date of termination. In the event a notice of termination is
issued by either party, Macromedia may limit monthly shipments to Distributor
during the notice period to Distributor's average monthly shipments from
Macromedia during the twelve (12) months prior to the date of notice of
termination. Notwithstanding any credit terms made available to Distributor
prior to the date of a termination notice, any Products shipped thereafter will
be paid for by certified or cashier's check prior to shipment. The due dates of
all outstanding invoices to Distributor for the Products will be accelerated
automatically so they become due and payable on the effective date of
termination, even if longer terms had been provided previously. All orders or
portions thereof remaining unshipped as of the effective date of termination
will automatically be canceled and any unused MDF will be forfeited.
11.6 DISTRIBUTOR AND MACROMEDIA EACH WAIVE ANY RIGHT IT MAY HAVE TO
RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION OR EXPIRATION OF THIS
AGREEMENT IN ACCORDANCE WITH ITS TERMS.
11.7 The termination or expiration of this Agreement shall not affect
any rights of either party with respect to any breach of this Agreement, any
rights under Section 10 (Indemnification) hereof or Distributor's rights to
market and promote Distributor's inventory of Products as provided in Section
11..4 above. In addition the following Sections shall survive any termination of
this Agreement: 3.3, 3.4, 4, 9.1, 9.2, 11.6, 12, 13, 14.6 and 14.8.
12. LIMITATION OF LIABILITY
12.1 NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT OR
OTHERWISE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR TO AN END-USER UNDER
ANY THEORY FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING DAMAGES FOR LOSS OF BUSINESS OR LOSS OF PROFITS) OR THE COST OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, EVEN IF THAT PARTY OR ITS
REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
12.2 No action arising out of or related to this Agreement, regardless
of form, may be brought by Distributor more than one (1) year after the cause of
action has accrued.
13. TRADEMARKS, TRADE NAMES AND COPYRIGHTS
13.1 During the term of this Agreement, Distributor is authorized by
Macromedia to use the trademarks Macromedia uses for the Products solely in
connection with Distributor's advertisement, promotion and distribution of the
Products. Distributor's use of such trademarks and logos will be in accordance
with
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 100
<PAGE> 5
Macromedia's policies in effect from time to time, including but not limited to
trademark usage policies.
13.2 As both a covenant by Distributor and a condition of Macromedia's
authorization of Distributor's distribution, Distributor will include on each
copy of any materials that it creates regarding or referring to the Products all
trademark, copyright and other notices of proprietary rights included by
Macromedia on the Products or requested to be so included by Macromedia from
time to time. Distributor agrees not to alter, erase, deface or obscure any such
notice on anything provided by Macromedia.
13.3 Distributor has paid no consideration for the use of Macromedia's
trademarks, logos, copyrights, trade secrets, trade names or designations, and
nothing contained in this Agreement will give Distributor any interest in any of
them. Distributor acknowledges that Macromedia owns and retains all copyrights
and other proprietary rights in all the Products, and agrees that it will not at
any time during or after this Agreement assert or claim any interest in or do
anything that may adversely affect the validity or enforceability of any
trademark, trade name, trade secret, copyright or logo belonging to or licensed
to Macromedia (including, without limitation, any act, or assistance to any act,
which may infringe or lead to the infringement of any copyright in the Products)
or attempt to grant any right therein. Distributor agrees not to attach any
additional trademarks, logos, trade designations or other legends to any Product
without the prior written consent of Macromedia. Distributor further agrees not
to affix any Macromedia trademark, logo or trade name to any non-Macromedia
product.
13.4 Except to the extent permitted pursuant to Section 11.4 hereof,
upon expiration or termination of this Agreement, Distributor will forthwith
cease all display, advertising and use of all Macromedia names, marks, logos and
designations and will not thereafter use, advertise or display any name, make or
logo which is, or any part of which is, similar to or confusing with any such
designation associated with any Product.
13.5 Distributor agrees to cooperate without charge in Macromedia's
efforts to protect its proprietary rights. Distributor agrees to notify
Macromedia of any breach of Macromedia's proprietary rights that comes to
Distributor's attention.
14. OTHER TERMS AND PROVISIONS
14.1 Product Discontinuation Macromedia shall provide Distributor with
thirty (30) days written notice prior to discontinuation of any Product.
Distributor may return such discontinued Products in accordance with Section 4
hereof.
14.2 During the term of this Agreement, Macromedia shall carry
insurance coverage for product liability/completed operations with minimum
limits of one million dollars ($1,000,000). Within ten (10) days of the full
execution of this Agreement, Macromedia shall provide Distributor with a
Certificate of Insurance evincing such insurance coverage including (a) a broad
form vendor's endorsement naming Distributor as an additional insured and (b) to
the extent permitted by applicable law, a mandatory thirty (30) day notice of
cancellation to Distributor.
14.3 This Agreement and the Exhibits A through E attached hereto
contain all the Agreements, understanding, representations, conditions,
warranties and covenants, and constitutes the sole and entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior communications or agreements, written or oral. This Agreement may not be
released or modified except by the mutual written consent of both Distributor
and Macromedia as attested to by an instrument signed by an officer of each of
them.
14.4 Macromedia and Distributor are each independent entities and
neither party shall be, nor represent itself to be, a franchisor, franchisee,
joint venturer, partner, master, servant, principal, agent or legal
representative of the other party for any purpose whatsoever.
14.5 If any provision of this Agreement is declared invalid or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect.
14.6 All terms, conditions, or provisions which may appear as
preprinted language or otherwise be inserted within any purchase order,
confirmation or invoice for any Product shall be of no force (unless mutually
agreed upon by both parties) and effect notwithstanding the execution of such
purchase order or other document subsequent to the date of this Agreement.
14.7 The rights and liabilities of the parties hereto will bind and
inure to the benefit of their respective assignees, successors, executors and
administrators, as the case may be; provided, that, as the license from
Macromedia hereunder is personal to Distributor, Distributor may not sublicense,
assign or transfer any of its rights, privileges or obligations hereunder either
in whole or in part, without the prior written consent of Macromedia. Nor shall
an
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 101
<PAGE> 6
assignment or transfer of the Agreement and the licenses granted herein be
affected by operation of law, such as for example, by merger, consolidation,
sale of the business or assets, or by acquisition of a majority of the voting
stock of Distributor by a third party, without the prior written consent of
Macromedia. Macromedia, in a like manner, shall not assign nor transfer the
Agreement without the prior written consent of Distributor. However, Macromedia
may assign this Agreement, without prior consent of Distributor, to a third
party through merger, acquisition or purchase of all or substantially all of the
assets of Macromedia. Any attempted assignment in violation of the provisions of
this Section 14.5 will be void.
14.8 In the event any litigation is brought by either party in
connection with this Agreement, the prevailing party in such litigation will be
entitled to recover from the other party all the costs, attorney's fees and
other expenses incurred by such prevailing party in the litigation.
14.9 Waiver by either Distributor or Macromedia of one or more terms,
conditions, or defaults of this Agreement shall not constitute a waiver of the
remaining terms and conditions or of any future defaults of this Agreements.
14.10 The validity, interpretation and performance of this Agreement
shall be controlled by and construed under the laws of the State of California
excluding that body of laws controlling conflict of laws.
MACROMEDIA, INC.
By:
-------------------------------------
Name: /s/ Richard B. Wood
-------------------------------------
Title: V.P. Operations and CFO
-------------------------------------
Date: March 28, 1996
-------------------------------------
DISTRIBUTOR
By:
-------------------------------------
Name: /s/ Sanat K. Dutta
-------------------------------------
Title: Executive Vice President
-------------------------------------
Date: March 21, 1996
-------------------------------------
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 102
<PAGE> 7
Exhibit A
For the purpose of this Agreement, the following terms shall have the meanings
set forth below:
1. "Discounts" shall mean the discounts set forth in Exhibit B
from the Suggested List Price of such Product.
2. "Distributor" shall mean Distributor and any parent,
subsidiary or affiliated corporations it may have during the term hereof, and
any person or entity purchasing Products from Macromedia for sale to Retailers.
3. "Intellectual Rights" shall mean any rights relating to any
trademark, trade name, service mark, copyright, trade secret, invention,
industrial model, patent, process, technology, know-how or design.
4. "Inventory" shall mean at any time all units of Product (a) in
Distributor's inventory, (b) ordered by Distributor but not yet received by
Distributor at such time, or (c) returned by Resellers to Distributor within 180
days of such time.
5. "Payment Terms" relating to any Product shall mean "net 30",
defined as requiring payment to arrive in Macromedia's account by the 30th
calendar day after Macromedia ships the Product.
6. "Purchase Price" of any Product shall mean the difference
between (a) the applicable Suggested List Price, and (b) the product of the
applicable Discount and Suggested List Price of such Product.
7. "Resellers" shall mean persons or entities who purchase
Products from Distributor and resell Product to end-users.
8 "Return Price" for any unit of Product shall mean the amount
originally billed Distributor for such unit less any rebates or amounts under
Section 2.2 with respect to such unit actually paid or credited by Macromedia to
Distributor.
9. "Suggested List Price" of any Product shall mean the retail
sales price of such Product as suggested by Macromedia to retailers and set
forth in Exhibit B.
10. "Territory" means the United States, Canada and all of Latin
America, with the exceptions of Mexico, Brazil and Chile.
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 103
<PAGE> 8
Exhibit B
Products and Prices
MACROMEDIA DISTRIBUTOR-COMMERCIAL PRICING
<TABLE>
<CAPTION>
REGULAR PROGRAM
MACROMEDIA DESCRIPTION SRP DISTRIBUTOR DISCOUNT
SKU COST* RATE
<S> <C> <C> <C> <C>
ACM10D01 Action 1.0 Mac $ 199 * * * *
ACW30D01 Action 3.0 Windows $ 199 * * * *
ACW30D11 Action! Bundle 3.0 Windows $ 299 * * * *
DRM40D02 Director 4.0 Mac/PowerMac $1,199 * * * *
DRM40D15 Director 4.0 Mac 10-pak $9,999 * * * *
DRW40D02 Director 4.0 Windows $1,199 * * * *
DRW40D15 Director 4.0 Windows 10-pak $9,999 * * * *
DRD40D01 Director 4.0 Multi-Platform $1,999 * * * *
DRM40D08 Director 4.0 upgrade Mac $ 349 * * * *
DRW40D11 Director 4.0 upgrade Win $ 349 * * * *
MMM15D02 Macromodel 1.5 Mac with Renderman $ 199 * * * *
MMW15D01 Macromodel 1.5 Win with Renderman $ 199 * * * *
SSM10D01 SoundEdit 16 $ 379 * * * *
FHM50D01 FreeHand 5.0 Mac/PowerMac $ 599 * * * *
FHM50D09 FreeHand 5.0 Upgrade Mac/PowerMac $ 149 * * * *
FHM50D11 FreeHand 5.0 Competitive Upgrade $ 149 * * * *
Mac/PowerMac
FHM50D05 FreeHand 5.0 Mac/PowerMac 5-pak $2,399 * * * *
FHW50D01 FreeHand 5.0 Win $ 599 * * * *
FHW50D09 FreeHand 5.0 Upgrade Win $ 149 * * * *
FHW50D11 FreeHand 5.0 Competitive Upgrade Win $ 149 * * * *
FHW50D05 FreeHand 5.0 Win 5-pak $2,399 * * * *
FTM41D01 Fontographer 4.1 Mac $ 499 * * * *
FTW35D01 Fontographer 3.5 Win $ 499 * * * *
WWMMPD50 Graphic Design Studio Mac $ 999 * * * *
WWWMPD50 Graphic Design Studio Win $ 999 * * * *
</TABLE>
<TABLE>
<CAPTION>
TIER I VAR
MACROMEDIA DESCRIPTION SRP VAR PROGRAM
SKU COST*
<S> <C> <C> <C> <C>
APM20D01 Authorware Pro 3.0 Mac TIER I $4,995 * * * *
APW20D01 Authorware Pro 3.0 Win TIER I $4,995 * * * *
</TABLE>
<TABLE>
<CAPTION>
TIER II VAR/PRP PROGRAM:
MACROMEDIA DESCRIPTION SRP PRP PROGRAM
SKU COST*
<S> <C> <C> <C> <C>
APW30D01 Authorware 3.0 Win TIER II $4,995 * * * *
APM30D01 Authorware 3.0 Mac TIER II $4,995 * * * *
DRM40D02 Director 4.0 Mac/PowerMac $1,199 * * * *
DRW40D02 Director 4.0 Windows CD Rom $1,199 * * * *
DRD40D01 Director 4.0 Multi-Platform $1,999 * * * *
WWMMPD04 Director Multimedia Studio Mac/PowerMac $1,999 * * * *
WWWMPD03 Director Multimedia Studio Windows $1,999 * * * *
SSM10D01 SoundEdit 16 $ 379 * * * *
</TABLE>
- ----------------
** Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 104
<PAGE> 9
Exhibit C
Minimum Orders
Quarterly Minimum Purchase Commitment
Within two weeks after the start of each calendar quarter, Macromedia shall
provide, and the parties shall agree upon, sell-through and purchase
requirements for that quarter.
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 105
<PAGE> 10
Exhibit D
Macromedia Marketing Funds Program
Macromedia Marketing Funds consist of Marketing Development Funds and
Cooperative Marketing Funds, are accrued as a percentage of Distributor's total
purchases (not including Authorware(R) products) and are utilized as follows:
Marketing Development Funds ("MDF") are accrued at Macromedia as a percentage of
Distributor's total purchases at the rate of two per cent (2%) of each invoice
and reimbursed to Distributor, as a credit to its account with Macromedia, as
follows: Distributor must first contact Macromedia for prior approval of
contemplated marketing expenditures. After approval and expenditure, Distributor
shall request reimbursement by invoice to Macromedia, providing proof of
performance, and requesting a credit to its account. Once Macromedia has
verified Distributor's request, it will debit Distributor's MDF account and
confirm a credit to Distributor's account receivable, in the form of a credit
memo. Distributor may deduct the amount of its MDF claim from payments to
Macromedia, only after receipt of the credit memo.
MDF claims for credit, along with an invoice and supporting documentation of
performance, must be submitted to Distributor's Macromedia Sales Representative,
within three (3) months of performance, by mail or by fax, in order to be
considered.
Cooperative Marketing Funds are accrued separately, as a percentage of
Distributor's total purchases, at the rate of one per cent (1%) of each invoice.
Cooperative Marketing Funds shall be retained by Macromedia and shall be
utilized by Macromedia, within its sole discretion, for cooperative marketing
efforts.
The following is an example of Distributor's invoice to Macromedia for MDF
credits:
<TABLE>
<CAPTION>
Product Quantity Unit Cost Extended Cost
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Director 4.0 ** $** $**
Total $**
MDF Claim at 2% $**
</TABLE>
** Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 106
<PAGE> 11
Exhibit E
(Attach Ingram Micro, Inc. Vendor Routing Guide)
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 107
<PAGE> 12
Exhibit F
PROPRIETARY INFORMATION
NON-DISCLOSURE AGREEMENT
This Agreement is made this __day of ____, 1995 by and between Ingram Micro
Inc., a California corporation with its business at 1600 East St. Andrew Place,
Santa Ana, CA 92799-5125 ("Ingram"), and Macromedia, Inc., a California
corporation, with its business at 600 Townsend Street, San Francisco, California
94103 ("Vendor") .
WHEREAS Ingram has compiled and organized certain information relating to its
sales which is proprietary and confidential, known as the "non-standard,
subsection (i), point of sale (POS) data" component of its "Systems Sales Out
Report" ("Proprietary Information"); and
WHEREAS Ingram agrees to disclose Proprietary Information to Vendor for the
limited purpose set out herein; and
WHEREAS Vendor desires to inspect such Proprietary Information so Vendor may
monitor sales through distribution;
NOW, THEREFORE, in consideration of the mutual promises set out herein, the
parties hereby agree as follows:
1. Except as authorized herein, Vendor agrees not to communicate, disclose, or
otherwise make available all or any part of the Proprietary Information to any
third party, including, but not limited to Vendor's parent, subsidiaries, or
affiliated companies.
2. Vendor agrees not to use, or permit others to use, the Proprietary
Information, other than for the purpose of monitoring sales through
distribution. Vendor agrees to make no more than five (5) copies of the
Proprietary Information unless otherwise agreed in writing between the parties;
and Vendor agrees to limit distribution of and access to the Proprietary
Information to those of Vendor's personnel who require access to Proprietary
Information for the foregoing purpose. Vendor agrees not to directly contact,
for the purpose of soliciting, or selling Product directly to any customer or
dealer listed in the Proprietary Information.
3. Vendor and Ingram mutually agree that all copies of the Proprietary
Information and all written descriptions, extractions, or summaries thereof,
whether made by Vendor or Ingram, shall be the property of Ingram, and shall,
upon expiration of this Agreement or Ingram's request, be immediately returned
to Ingram.
4. Vendor and Ingram mutually agree that Ingram's public disclosure of the
Proprietary Information, except pursuant to a confidential disclosure agreement,
to any party will release Vendor from the obligation of confidentiality with
respect to that portion of the Proprietary Information actually disclosed by
Ingram.
5. Upon termination of this Agreement by either party for any reason, Vendor
shall return all Proprietary Information to Ingram within thirty (30) days,
irrespective of format. For purposes of enforcing this provision, Vendor's
return obligation shall survive the termination of this Agreement.
6. The rights, promises, duties, and obligations set out herein, and the
validity, interpretation, performance, and legal effect of the whole Agreement
shall be governed and determined by the laws of the State of California. In the
event that any provision is found invalid or unenforceable pursuant to
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 108
<PAGE> 13
statutory or Judicial decree, such provision shall be construed only to the
maximum extent permitted by law, and the remainder of the Agreement shall be
valid and enforceable in accordance with its terms.
INGRAM MICRO INC. MACROMEDIA, INC.
By: ____________________________ By: _______________________________
Sanat K. Dutta Name: _____________________________
Executive Vice President Title: ____________________________
Date: ___________________________ Date: _____________________________
Domestic Distribution Agreement March 15, 1996
Form 403 Ingram Micro (3/15/96) 109
<PAGE> 1
Exhibit 11.01
Macromedia, Inc.
Computation of Net Income Per Share
For the years ended March 31, 1996, 1995 and 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, 1996 March 31, 1995 March 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Net income $23,002 $ 6,538 $ 3,475
======= ======= =======
Weighted average number of shares outstanding:
Common 34,899 30,362 26,068
Number of common stock equivalents
as a result of warrants outstanding -- 6 6
Number of common stock equivalents
as a result of stock options outstanding 4,145 4,046 3,944
======= ======= =======
Total 39,044 34,414 30,018
======= ======= =======
Net income per common stock and
common stock equivalent share $ 0.59 $ 0.19 $ 0.12
======= ======= =======
</TABLE>
All income per share amounts and number of shares have been retroactively stated
to reflect a two-for-one stock split which became effective October 16, 1995.
110
<PAGE> 1
Exhibit 21.01
LIST OF REGISTRANT'S SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OWNED BY
NAME Country of Organization Macromedia, Inc.
---- ----------------------- ----------------
<S> <C> <C>
Macromedia Europe Limited England 100%
Macromedia KK Japan 100%
</TABLE>
111
<PAGE> 1
Consent of Independent Auditors
The Board of Directors
Macromedia, Inc. and Subsidiaries
We consent to the use of our report included herein in the registration
statements (Nos. 33-74202, 33-84208, 33-89092, 33-96188 and 333-3406) on Form
S-8 of Macromedia, Inc. and subsidiaries.
As indicated in our report, we did not audit the financial statements of Altsys
Corporation, a company acquired by Macromedia, Inc. in a business combination
accounted for as a pooling of interests, for the nine months ended September 30,
1994 and for the year ended December 31, 1993. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for Altsys Corporation for such periods,
is based solely on the report of the other auditors.
KPMG Peat Marwick LLP
Palo Alto, California
June 19, 1996
112
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report on
the financial statements of Altsys Corporation dated November 28, 1994,
incorporated by reference in this Form 10-K, which is incorporated by reference
into the previously filed registration statements on Form S-8 (Nos. 33-74202,
33-84208, 33-89092) of Macromedia, Inc. and subsidiaries. It should be noted
that we have audited the financial statements of Altsys Corporation for the year
ended December 31, 1993, and the nine-month period ended September 30, 1994. We
have not audited any financial statements subsequent to September 30, 1994, or
performed any audit procedures subsequent to the date of our report.
Arthur Andersen LLP
Dallas, Texas
June 18, 1996
113
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 28,829
<SECURITIES> 87,833
<RECEIVABLES> 18,978
<ALLOWANCES> 4,377
<INVENTORY> 1,508
<CURRENT-ASSETS> 140,946
<PP&E> 20,474
<DEPRECIATION> 8,255
<TOTAL-ASSETS> 155,122
<CURRENT-LIABILITIES> 21,886
<BONDS> 0
0
0
<COMMON> 36
<OTHER-SE> 133,145
<TOTAL-LIABILITY-AND-EQUITY> 155,122
<SALES> 112,577
<TOTAL-REVENUES> 116,691
<CGS> 17,295
<TOTAL-COSTS> 19,600
<OTHER-EXPENSES> 69,411
<LOSS-PROVISION> 740
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 31,781
<INCOME-TAX> 8,779
<INCOME-CONTINUING> 23,002
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,002
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
