<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[x] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MACROMEDIA, INC.
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[MACROMEDIA LOGO]
June 29, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Macromedia, Inc. to be held at 600 Townsend Street, San
Francisco, California, on Thursday, July 30, 1998, at 1:00 p.m. P.D.T.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the
affairs of your Company by voting on the business to come before this
meeting. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
Returning the Proxy does not deprive you of your right to attend the meeting
and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
Elizabeth A. Nelson
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
<PAGE>
MACROMEDIA, INC.
600 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94103
___________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Macromedia, Inc. (the "Company") will be held at 600 Townsend Street, San
Francisco, California, on Thursday, July 30, 1998, at 1:00 p.m. P.D.T. for
the following purposes:
1. To elect directors of the Company, each to serve until the next
Annual Meeting of Stockholders and until his successor has been
elected and qualified or until his earlier resignation or removal.
The Company's Board of Directors intends to present the following
nominees for election as directors:
Stewart Alsop Donald L. Lucas
Robert K. Burgess James R. Von Ehr, II
John (Ian) Giffen William B. Welty
Mark D. Kvamme
2. To consider and vote upon a proposal to amend the Company's 1992
Equity Incentive Plan to increase the number of shares reserved
for issuance thereunder by 1,500,000 shares, from 11,800,000
shares to 13,300,000 shares.
3. To consider and vote upon a proposal to amend the Company's 1993
Directors Stock Option Plan to increase the number of shares
reserved for issuance thereunder by 400,000 shares, from 300,000
shares to 700,000 shares.
4. To consider and vote upon a proposal to amend the award formula
for non-employee directors in the Company's 1993 Directors Stock
Option Plan.
5. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors for the Company for the current fiscal year.
6. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Only stockholders of record at the close of business on June 15, 1998
are entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
Elizabeth A. Nelson
SENIOR VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
San Francisco, California
June 29, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
MACROMEDIA, INC.
600 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94103
___________
PROXY STATEMENT
___________
JUNE 29, 1998
The accompanying proxy is solicited on behalf of the Board of Directors
of Macromedia, Inc., a Delaware corporation (the "Company" or "Macromedia"),
for use at the Annual Meeting of Stockholders of the Company to be held at
600 Townsend Street, San Francisco, California, on Thursday, July 30, 1998 at
1:00 p.m. P.D.T. (the "Meeting"). Only holders of record of the Company's
Common Stock at the close of business on June 15, 1998 will be entitled to
vote at the Meeting. At the close of business on June 15, 1998 (the "Record
Date"), the Company had 39,402,244 shares of Common Stock outstanding and
entitled to vote. A majority of the shares outstanding on the Record Date
will constitute a quorum for the transaction of business. This Proxy
Statement and the accompanying form of proxy were first mailed to
stockholders on or about July 6, 1998. An annual report for the fiscal year
ended March 31, 1998 is enclosed with the Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the above record date. Shares of Common Stock may not be
voted cumulatively.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors. Proposals No. 2, 3, 4 and 5
require for approval the affirmative vote of the majority of shares of Common
Stock present in person or represented by proxy at the Meeting and entitled
to vote on such proposals. All votes will be tabulated by the inspector of
election appointed for the Meeting who will separately tabulate, for each
proposal, affirmative and negative votes, abstentions and broker non-votes.
Abstentions will be counted towards a quorum and will have the same effect as
negative votes with regard to Proposals No. 2, 3, 4 and 5. Broker non-votes
will also be counted towards a quorum but will not be counted for any purpose
in determining whether a proposal has been approved.
The expenses of soliciting proxies to be voted at the Meeting will be
paid by the Company. Following the original mailing of the proxies and other
soliciting materials, the Company and/or its agents may also solicit proxies
by mail, telephone, telegraph, electronic means or in person. Following the
original mailing of the proxies and other soliciting materials, the Company
will request that brokers, custodians, nominees and other record holders of
the Company's Common Stock forward copies of the proxy and other soliciting
materials to persons for whom they hold shares of Common Stock and request
authority for the exercise of proxies. In such cases, the Company, upon the
request of the record holders, will reimburse such holders for their
reasonable expenses.
<PAGE>
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to the Meeting or at the Meeting prior to
the vote pursuant to the proxy. A proxy may be revoked by a writing
delivered to the Company stating that the proxy is revoked, by a subsequent
proxy that is signed by the person who signed the earlier proxy and is
presented at the Meeting or by attendance at the Meeting and voting in
person. Please note, however, that if a stockholder's shares are held of
record by a broker, bank or other nominee and that stockholder wishes to vote
at the Meeting, the stockholder must bring to the Meeting a letter from the
broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Meeting, stockholders will elect directors to hold office until
the next Annual Meeting of Stockholders and until their respective successors
have been elected and qualified or until such directors' earlier resignation
or removal. Seven nominees will be elected at the Meeting to be the seven
directors of the Company. Shares represented by the accompanying proxy will
be voted for the election of the seven nominees recommended by the Company's
Board of Directors (the "Board") unless the proxy is marked in such a manner
as to withhold authority so to vote. In the election of directors, each
stockholder is entitled to one vote for each share of Common Stock held.
Shares of Common Stock may not be voted cumulatively. If any nominee for any
reason is unable to serve or for good cause will not serve, the proxies may
be voted for such substitute nominee as the proxy holder may determine. The
Company is not aware of any nominee who will be unable to or for good cause
will not serve as a director.
DIRECTORS/NOMINEES
The names of the nominees, and certain information about them as of June
15, 1998, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Stewart Alsop 46 Venture Partner of New nominee
Enterprise Associates;
Columnist for Fortune Magazine
Robert K. Burgess 40 Chief Executive Officer and 1996
President of the Company
John (Ian) Giffen (1) 40 Independent Consultant to 1997
software companies
Mark D. Kvamme 35 Chief Executive Officer and nominee
Chairman of the Board of CKS
Group, a marketing
communications company
Donald L. Lucas (1)(2) 68 Venture Capitalist 1992
James R. Von Ehr, II 48 President and Chief 1995
Executive Officer,
Zyvex Management
Corporation
William B. Welty (2)(3) 56 President and Chief Executive 1993
Officer of agincourt partners,
llc, an investment
management firm
</TABLE>
2
<PAGE>
___________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
Each of the director nominees listed above was elected to be a director
at the Company's Annual Meeting of Stockholders held on August 15, 1997,
except for Messrs. Alsop and Kvamme who are not currently directors of the
Company.
Mr. Alsop has been employed by New Enterprise Associates ("NEA"), a
venture capital firm, since June 1996. Mr. Alsop is also currently a
columnist for FORTUNE magazine. Prior to working for NEA, Mr. Alsop served
as Executive Vice President of InfoWorld Publishing Company, Inc., which
publishes INFOWORLD, a weekly newspaper for information technology
professionals. Mr. Alsop worked for InfoWorld Publishing from 1985 until he
joined NEA. Mr. Alsop also founded Industry Publishing Company, the
publisher of a fortnightly newsletter for computer industry insiders and
producer of the Agenda and Demo conferences for computer industry executives.
Before 1985, Mr. Alsop served in several executive editorial positions at
business and trade magazines, including, INC. Mr. Alsop received a Bachelor
of Science in English from Occidental College.
Mr. Burgess has been Chief Executive Officer, President and a director
of the Company since November 1996. Prior to joining the Company, Mr.
Burgess was Senior Vice President of Silicon Graphics, Inc., responsible for
the Silicon Interactive Strategic Business Unit. Prior to this position, he
was President of Alias/Wavefront, a wholly-owned independent software
subsidiary of Silicon Graphics, created from the 1995 merger of Alias
Research, Inc., and Wavefront Technologies, Inc. From 1992 to 1995, he was
President, Chief Executive Officer, Chief Operating Officer and a director of
Alias Research. Prior to joining Alias Research, Mr. Burgess held a number
of senior management positions at Silicon Graphics, including Vice President
of Marketing, Applications and Business Development (1991), Vice President of
Applications (1990) and President of Silicon Graphics Canada, Inc.,
(1984-90). A Canadian, Mr. Burgess earned a Bachelors degree in Commerce
from McMaster University.
Mr. Giffen has been a director of the Company since July 1997. Mr.
Giffen is currently serving as an independent consultant to software
companies, which he has done since October 1996. Mr. Giffen was a Vice
President of Helix Investments (Canada) Inc., a venture capital company, from
January 1997 through April 1998. Mr. Giffen has also held senior finance
positions with various technology-related companies, including serving as
Vice President, Finance and Chief Financial Officer of Algorithmics
Incorporated, a developer of risk management software, from February 1996
through September 1996, and Vice President, Finance and Chief Financial
Officer of Alias Research Inc., a developer of advanced graphics software,
from January 1992 until January 1996. Mr. Giffen holds a degree in Business
Administration from the University of Strathclyde (Scotland) and is a member
of the Canadian Institute of Chartered Accountants and the Institute of the
Chartered Accountants of Scotland.
Mr. Kvamme has been employed since 1989 by CKS Group, a marketing
communications company whose shares are traded on the Nasdaq National Market.
Mr. Kvamme currently serves as Chairman of the Board of Directors and Chief
Executive Officer of CKS Group. Prior to joining CKS Group, Mr. Kvamme
served as Vice President of Marketing of Pillar Corporation. From September
1986 to January 1989, Mr. Kvamme was International Marketing Manager for Wyse
Technology, Inc., a terminal and personal computer manufacturer. Before
joining Wyse, Mr. Kvamme founded and served as President and Chief Executive
Officer of International Solutions, Inc., a global distributor of hardware
and software products, from 1984 to 1986. While at Apple between 1980 and
1984, Mr. Kvamme held
3
<PAGE>
various management positions in international sales and marketing and in
product development, including serving as one of the initial managers of
Apple France. Mr. Kvamme holds a Bachelor of Arts degree in French Economics
and Literature from the University of California at Berkeley.
Mr. Lucas has been a director of the Company since March 1992. Mr.
Lucas served as a director of Authorware from July 1988 until the formation
of the Company in March 1992. Since 1967, Mr. Lucas has been actively
engaged in venture capital activities as a private individual. Mr. Lucas
holds a Bachelor of Arts degree in economics and a Master of Business
Administration from Stanford University. Mr. Lucas is also a director of
Cadence Design Systems, Inc., Coulter Pharmaceutical, Inc., Oracle Systems
Corporation, Transcend Services, Inc. (formerly Tri-Care, Inc.) and Tricord
Systems, Inc.
Mr. Von Ehr has been a director of the Company since January 1995. Mr.
Von Ehr is currently the president of Zyvex Management Corporation, a startup
research and development company working on molecular nanotechnology. From
January 1995 to July 1997, Mr. Von Ehr was a Vice President of the Company.
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 received 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. Welty has been a director of the Company since April 1993. Mr.
Welty served as a director of MacroMind and its successor,
Macromind/Paracomp, from April 1991 to March 1992. Since April 1997, Mr.
Welty has been President and Chief Executive Officer of agincourt partners,
llc, an investment management firm. Since May 1997, Mr. Welty has also been
Chief Executive Officer and President of Action Technologies, Inc. From
August 1988 to April 1997, Mr. Welty was a general partner of Volpe, Welty
and Company, a money management firm. Mr. Welty holds Bachelor of Science
degrees in industrial engineering and business administration from Iowa State
University.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board met five (5) times, including telephone conference meetings,
during fiscal 1998 and acted by unanimous written consent six (6) times. No
director attended fewer than 75% of the aggregate of the total number of
meetings of the Board (held during the period for which he was a director)
and the total number of meetings held by all committees of the Board on which
he served (during the period that he served).
Standing committees of the Board include an Audit Committee, a
Compensation Committee and a Nominating Committee.
Messrs. Lucas and Giffen and C. Richard Kramlich were the members of the
Audit Committee in fiscal 1998, which met seven (7) times during fiscal 1998.
The Audit Committee meets with the Company's independent accountants to
review the adequacy of the Company's internal control systems and financial
reporting procedures; reviews and approves the Company's financial
statements; reviews the general scope of the Company's annual audit and the
fees charged by the independent accountants; reviews and monitors the
performance of non-audit services by the Company's auditors, reviews the
fairness of any proposed transaction between the Company and any officer,
director or other affiliate of the Company, and after such review, makes
recommendations to the full Board; and performs such further functions as may
be required by any stock exchange or over-the-counter market upon which the
Company's Common Stock may be listed.
4
<PAGE>
At the end of fiscal 1998, the members of the Compensation Committee
were Mr. Welty (who has served since August 15, 1997, replacing John C. Laing
who served from the beginning of fiscal 1998) and L. John Doerr (who served
for the entire fiscal 1998). The Compensation Committee met four (4) times
and acted by unanimous written consent twenty-five (25) times during fiscal
1998. The Compensation Committee recommends compensation for officers and
employees of the Company, grants options and stock awards under the Company's
employee benefit plans and reviews and recommends adoption of and amendments
to stock option and employee benefit plans.
Messrs. Doerr, Welty and John C. Colligan were the members of the
Nominating Committee in fiscal 1998, which did not meet during fiscal 1998.
The Nominating Committee identifies and recommends candidates for the
Company's Board.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
5
<PAGE>
PROPOSAL NO. 2 -- APPROVAL OF AMENDMENT TO THE
1992 EQUITY INCENTIVE PLAN
Stockholders are being asked to approve an amendment to the Company's
1992 Equity Incentive Plan (the "Equity Incentive Plan" or the "1992 Plan")
to increase the number of shares of Common Stock reserved for issuance
thereunder from 11,800,000 shares to 13,300,000 shares (an increase of
1,500,000 shares). The Compensation Committee (the "Committee") of the Board
of Directors of the Company (the "Board") approved the proposed amendment
described above on April 1, 1998 to be effective upon stockholder approval.
Management believes that this amendment is in the best interests of the
Company because of the need to provide options to attract and retain quality
employees and remain competitive in the intensely competitive Silicon Valley
software industry.
Below is a summary of the principal provisions of the 1992 Plan,
assuming approval of the above amendment, which summary is qualified in its
entirety by reference to the full text of the Equity Incentive Plan.
1992 EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN HISTORY. The Board adopted and stockholders approved
the Equity Incentive Plan on September 23, 1992 to offer eligible persons an
opportunity to participate in the Company's future performance through awards
of stock options, restricted stock and stock bonuses. The 1992 Plan has
since been amended to increase the number of shares available for issuance
thereunder. The following describes each of the amendments made to the
Equity Incentive Plan since its initial adoption and approval. On October
15, 1993, the Board approved an amendment to the 1992 Plan to place a
limitation on the maximum number of shares available for issuance to certain
executive officers at any time under the Plan, to make certain other
amendments in the administration of the 1992 Plan and to increase the number
of shares in the reserve available for issuance under the 1992 Plan by
600,000 to 3,600,000 shares. Stockholders approved these amendments on
November 17, 1993. On May 24, 1994, the Board approved an amendment to the
1992 Plan to increase the number of shares reserved for issuance thereunder
by 1,000,000 shares to 4,600,000 shares. Stockholders approved the amendment
on July 26, 1994. On October 25, 1994, the Board approved an amendment to
the 1992 Plan to increase the number of shares reserved for issuance
thereunder by 1,400,000 shares to 6,000,000 shares. Stockholders approved
the amendment on January 19, 1995. On May 24, 1995, the Board approved an
amendment to the 1992 Plan to increase the number of shares reserved for
issuance thereunder by 1,200,000 shares to 7,200,000 shares. Stockholders
approved the amendment on June 19, 1995. On April 29, 1996, the Board
approved an amendment to the 1992 Plan to increase the number of shares
reserved for issuance thereunder by 1,800,000 to 9,000,000. Stockholders
approved the amendment on May 31, 1996. On January 21, 1997, the Board
approved an amendment to the 1992 Plan to increase the number of shares
reserved for issuance thereunder by 1,800,000 shares to 10,800,000 shares.
Stockholders approved the amendment on March 3, 1997. On February 10, 1997,
the Board adopted certain technical amendments to the 1992 Plan to reflect
the New Rule 16b-3. On June 27, 1997, the Board approved an amendment to the
1992 Plan to increase the number of shares reserved for issuance thereunder
by 1,000,000 shares to 11,800,000 shares. Stockholders approved the
amendment on August 15, 1997. On February 5, 1998, the Board amended the
1992 Plan to expressly permit post-termination exercise periods of greater
length as the Board, in its sole discretion, may choose. On April 1, 1998,
the Committee approved an amendment to the 1992 Plan to increase the number
of shares reserved for issuance thereunder by 1,500,000 shares to 13,300,000
shares, to be effective upon stockholder approval.
SHARES SUBJECT TO THE EQUITY INCENTIVE PLAN. An aggregate of 13,300,000
shares (assuming approval of the proposed amendment) of the Company's Common
Stock have been reserved by the Board for
6
<PAGE>
issuance under the 1992 Plan. As of June 23, 1998, 1,609,251 shares remained
available for grant under the 1992 Plan (assuming approval of the proposed
amendment). If any option granted pursuant to the 1992 Plan expires or
terminates for any reason without being exercised in full, or any award
terminates without being issued, the unexercised shares released from such
option and award will again become available for issuance under the Plan. In
addition, 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 Non-Statutory Stock Option Plan and the Paracomp,
Inc. 1989 Stock Option Plan that expire or become unexercisable for any
reason without having been exercised in full also will become available for
distribution under the Equity Incentive Plan. The market value of the
Company's Common Stock as of June 15, 1998 was $16.25 per share. As soon as
practicable after the 1998 Annual Meeting of Stockholders of the Company, the
Company will (assuming approval of the proposed amendment) register with the
Securities and Exchange Commission on a registration statement on Form S-8
the exercise of stock options to be granted under the 1992 Plan for 1,500,000
shares of the Company's Common Stock and the subsequent sale of such
securities.
ADMINISTRATION. The Equity Incentive Plan is administered by the Committee,
the members of which are appointed by the Board. At the end of fiscal 1998,
the Committee consisted of L. John Doerr (who served for the entire fiscal
1998) and William B. Welty (who has served since August 15, 1998 and replaced
John C. Laing who served for the remainder of fiscal 1998), all of whom are
"non-employee directors" as that term is defined under the Exchange Act, and
"outside directors" as that term is defined pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Subject to the terms of the Equity Incentive Plan, the Committee determines
the persons who are to receive awards, the number of shares subject to each
such award and the terms and conditions of such awards. The Committee also
has the authority to construe and interpret any of the provisions of the
Equity Incentive Plan or any awards granted thereunder.
ELIGIBILITY. Employees, officers, directors, independent contractors,
consultants, and advisors of the Company (and of any subsidiaries and
affiliates) whom the Board deems to have potential to contribute to the
future success of the Company (the "Participants") will be eligible to
receive stock options, restricted stock or stock bonuses under the Equity
Incentive Plan. No "Named Executive Officer" as that term is defined under
Item 402(a)(3) of Regulation S-K promulgated under the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act is eligible to
receive more than 1,800,000 shares of Common Stock at any time during the
1992 Plan. As of June 15, 1998, approximately 470 persons were eligible to
receive awards under the 1992 Plan, and 10,512,679 shares were subject to
outstanding options. Over the term of the 1992 Plan, the following Named
Executive Officers (as defined below) have been granted options to purchase
shares of Common Stock under the 1992 Plan as follows: Robert K. Burgess,
125,000 shares; John C. Colligan, 1,260,000 shares; Brian Allum, 400,000
shares; Norman K. Meyrowitz, 670,020 shares; Elizabeth A. Nelson, 213,055
shares; and Joseph D. Dunn, 535,700 shares. Over the term of the 1992 Plan,
current executive officers as a group have been granted options to purchase
4,403,775 shares, all current directors who are not executive officers as a
group have been granted options to purchase 235,000 shares, and all employees
as a group, other than executive officers, have been granted options to
purchase 14,803,206 shares.
STOCK OPTIONS. The Equity Incentive Plan permits the granting of options
that are intended to qualify either as Incentive Stock Options ("ISOs") or
Nonqualified Stock Options ("NQSOs").
ISOs may be granted only to employees. The option exercise price for each
ISO must be no less than 100% of the fair market value (as defined in the
1992 Plan) of a share at the time such option is granted. The option
exercise price for each NQSO must be no less than 85% of the fair market
value of a share at the time of grant. In the case of a 10% stockholder the
exercise price for an ISO or NQSO must be no
7
<PAGE>
less than 110% of the fair market value. Options are exercisable within the
times and upon the events determined by the Committee as set forth in the
optionee's option agreement.
The Equity Incentive Plan provides for the payment of the exercise price of
options by any of the following means, subject to the provisions of the
optionee's option agreement: (1) in cash (by check); (2) by surrender of
shares of the Company's Common Stock owned by the Participant for at least
six months and having a fair market value on the date of surrender equal to
the aggregate exercise price of the option; (3) where permitted by applicable
law and approved by the Committee, in its sole discretion, by tender of a
full recourse promissory note; (4) by cancellation of indebtedness of the
Company to the Participant; (5) by waiver of compensation due to or accrued
by the Participant for services rendered; (6) by tender of property; (7) by a
"same-day sale" commitment from the Participant and a NASD broker; (8) by a
"margin" commitment from the Participant and a NASD broker; or (9) by any
combination of the foregoing, when approved by the Committee in its sole
discretion.
RESTRICTED STOCK AWARDS. The Committee may grant Participants restricted
stock awards to purchase stock either in addition to, or in tandem with,
other awards under the Equity Incentive Plan, under such terms, conditions
and restrictions as the Committee may determine. The purchase price for such
awards must be no less than 85% of the fair market value of a share on the
date of the award (and 100% of the fair market value in the case of a 10%
stockholder), and can be paid for with the types of consideration described
under Stock Options above with the exception of a same-day sale or margin
commitment which are available only for options.
STOCK BONUS AWARDS. The Committee may grant Participants stock bonus awards
either in addition to, or in tandem with, other awards under the Equity
Incentive Plan, under such terms, conditions and restrictions as the
Committee may determine.
MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL. In the event of a merger,
consolidation, dissolution or liquidation of the Company, the sale of
substantially all the assets of the Company or any other similar corporate
transaction, the successor corporation may assume, replace or substitute
equivalent awards in exchange for those granted under the Equity Incentive
Plan or provide substantially similar consideration, shares or other property
subject to repurchase restrictions no less favorable to the Participants
under the Equity Incentive Plan. In the event that the successor corporation
does not assume or substitute the awards, the awards, including outstanding
options, shall expire on such transaction at the time and upon the conditions
as the Committee determines.
AMENDMENT OF THE EQUITY INCENTIVE PLAN. The Board may at any time terminate
or amend the Equity Incentive Plan, including amending any form of award
agreement or instrument to be executed pursuant to the Equity Incentive Plan.
TERM OF THE EQUITY INCENTIVE PLAN. The Equity Incentive Plan will terminate
on September 22, 2002, ten years from the date the Equity Incentive Plan was
adopted by the Board.
FEDERAL INCOME TAX INFORMATION
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPANTS UNDER THE
EQUITY INCENTIVE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL,
STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON HIS OR
HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT HAS BEEN AND IS ENCOURAGED TO
SEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE PLAN.
8
<PAGE>
INCENTIVE STOCK OPTIONS. A Participant will recognize no income upon grant
of an ISO and incur no tax on its exercise (unless the Participant is subject
to the alternative minimum tax ("AMT")). If the Participant holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for more than one year
after the date the option was exercised and for more than two years after the
date the option was granted, the Participant generally will realize capital
gain or loss (rather than ordinary income or loss) upon disposition of the
ISO Shares. This gain or loss will be equal to the difference between the
amount realized upon such disposition and the amount paid for the ISO Shares.
If the Participant disposes of ISO Shares prior to the expiration of either
required holding period described above (a "disqualifying disposition"), the
gain realized upon such disposition, up to the difference between the fair
market value of the ISO Shares on the date of exercise (or, if less, the
amount realized on a sale of such shares) and the option exercise price, will
be treated as ordinary income. Any additional gain will be long-term,
mid-term, or short-term capital gain, depending upon the amount of time the
ISO Shares were held by the Participant.
ALTERNATIVE MINIMUM TAX. The difference between the fair market value of the
ISO Shares on the date of exercise and the exercise price is an adjustment to
income for purposes of the AMT. The AMT (imposed to the extent it exceeds
the taxpayer's regular tax) is 26% of an individual taxpayer's alternative
minimum taxable income (28% in the case of alternative minimum taxable income
in excess of $175,000). Alternative minimum taxable income is determined by
adjusting regular taxable income for certain items, increasing that income by
certain tax preference items (including the difference between the fair
market value of the ISO Shares on the date of exercise and the exercise
price) and reducing this amount by the applicable exemption amount ($45,000
in case of a joint return, subject to reduction under certain circumstances).
If a disqualifying disposition of the ISO Shares occurs in the same calendar
year as exercise of the ISO, there is no AMT adjustment with respect to those
ISO Shares. Also, upon a sale of ISO Shares that is not a disqualifying
disposition, alternative minimum taxable income is reduced in the year of
sale by the excess of the fair market value of the ISO Shares at exercise
over the amount paid for the ISO Shares.
NONQUALIFIED STOCK OPTIONS. A Participant will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO the
Participant will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of
exercise and the Participant's exercise price. The included amount will be
treated as ordinary income by the Participant and may be subject to
withholding by the Company (either by payment in cash or withholding out of
the Participant's salary). Upon resale of the shares by the Participant, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss.
RESTRICTED STOCK AND STOCK BONUS AWARDS. Restricted stock and stock bonus
awards will generally be subject to tax at the time of receipt, unless there
are restrictions that enable the Participant to defer tax. At the time that
tax is incurred, the tax treatment will be similar to that discussed above
for NQSOs.
MAXIMUM TAX RATES. The maximum rate applicable to ordinary income is 39.6%.
Long term capital gain on stock held for more than eighteen months will be
taxed at a maximum rate of 20%. Mid-term capital gain on stock held for
eighteen months or less, but more than one year, will be taxed at a maximum
rate of 28%. Capital gains will continue to be offset by capital losses and
up to $3,000 of capital losses may be offset annually against ordinary income.
TAX TREATMENT OF THE COMPANY. The Company generally will be entitled to a
deduction in connection with the exercise of a NQSO by a Participant or the
receipt of restricted stock or stock bonuses by a Participant to the extent
that the Participant recognizes ordinary income and the Company properly
9
<PAGE>
reports the income received by the Participant in connection with the award.
The Company will be entitled to a deduction in connection with the
disposition of ISO Shares only to the extent that the Participant recognizes
ordinary income on a disqualifying disposition of the ISO Shares and the
Company properly reports the income received by the Participant in connection
with the award.
ERISA
The Equity Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
THE BOARD RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE 1992 EQUITY INCENTIVE PLAN
10
<PAGE>
PROPOSAL NO. 3 -- APPROVAL OF INCREASE IN
THE 1993 DIRECTORS STOCK OPTION PLAN
Stockholders are being asked to approve an amendment to the Company's
1993 Directors Stock Option Plan (the "Directors Plan") to increase the
number of shares of Common Stock reserved for issuance thereunder from
300,000 shares to 700,000 shares (an increase of 400,000 shares). The Board
of Directors of the Company (the "Board") approved the proposed amendment
described above and the amendment described in "Proposal No. 4 -- APPROVAL OF
NEW AWARD FORMULA IN THE 1993 DIRECTORS STOCK OPTION PLAN" on June 29, 1998
to be effective upon stockholder approval.
Attracting outstanding individuals to serve as outside directors of a
public company is a competitive advantage in today's marketplace. The
Company believes that this amendment is in the best interests of the
Company because of the need to provide options to attract and retain highly
qualified outside directors. The Company believes that there are substantial
benefits in aligning the interests of some of industry's most qualified
executives with those of the Company's stockholders.
Below is a summary of the principal provisions of the Directors Plan,
assuming approval of the above amendment, which summary is qualified in its
entirety by reference to the full text of the Directors Plan.
DIRECTORS PLAN HISTORY. The Board adopted and stockholders approved the
Directors Plan on October 15, 1993 to offer eligible directors an opportunity
to participate in the Company's future performance through awards of stock
options. On January 26, 1995, the Board amended the Directors Plan to change
the vesting provisions. On June 29, 1998, the Board approved amendments to
the Directors Plan to increase the number of shares reserved for issuance
thereunder by 400,000 shares to 700,000 shares and to change the award
formula, all to be effective upon stockholder approval.
SHARES SUBJECT TO THE DIRECTORS PLAN. The stock reserved for issuance under
the Directors Plan consists of shares of the Company's authorized but
unissued Common Stock. The aggregate number of shares that may be issued
pursuant to the Directors Plan is 700,000 shares (assuming approval of the
proposed amendment). In the event that any outstanding option under the
Directors Plan expires or is terminated for any reason, the shares of Common
Stock allocable to the unexercised portion of such option may again be
available for the grant of options under the Directors Plan. The number of
shares reserved for the Directors Plan is subject to proportional adjustment
to reflect stock splits, stock dividends and other similar events. The
market value of the Company's Common Stock as of June 15, 1998 was $16.25 per
share. As soon as practicable after the 1998 Annual Meeting of Stockholders
of the Company, the Company will (assuming approval of the proposed
amendment) register with the Securities and Exchange Commission on a
registration statement on Form S-8 the exercise of stock options to be
granted under the Directors Plan for 400,000 shares of the Company's Common
Stock and the subsequent sale of such securities.
ELIGIBILITY. Under the Directors Plan, the Company will automatically grant
options, in accordance with the formula set forth below, to each director of
the Company who is not an employee of the Company (or of any parent or
subsidiary of the Company) (the "Outside Directors"). The Directors Plan
also permits the Board to increase or decrease the number of option shares
that may be granted to an Outside Director. Pursuant to the Directors Plan,
as of June 15, 1998, six persons were in the class of persons eligible to
receive options, 256,458 shares were subject to outstanding options and
440,000 shares remained available for grant (assuming approval of the
proposed amendment). Over the term of the Directors Plan, the following
current directors have been granted options to purchase shares of Common
Stock under the Directors Plan as follows: L. John Doerr, C. Richard
Kramlich, Donald L. Lucas and William
11
<PAGE>
B. Welty have each received options to purchase 47,500 shares; John (Ian)
Giffen has received an option to purchase 20,000 shares.
ADMINISTRATION. The Directors Plan will be administered by the Board. The
interpretation of the Board of any of the provisions of the Directors Plan or
any option granted under the Directors Plan will be final and conclusive.
FORMULA FOR OPTION GRANTS. For the award formula for option grants, please
refer to "Proposal No. 4 -- APPROVAL OF NEW AWARD FORMULA IN THE 1993
DIRECTORS STOCK OPTION PLAN -- Formula for Option Grants."
The option exercise price will be the "fair market value" (as defined in
the Directors Plan) of the Common Stock of the Company as of the date of the
grant of the option. The option exercise price will be payable in cash (by
check) and in a number of other forms of consideration, including fully paid
shares of Common Stock that were obtained by the Outside Director in the open
public market or have been owned by the Outside Director for more than six
(6) months, by waiver of compensation due or accrued to the Outside Director
for services rendered, through a "same day sale," through a "margin
commitment" or through any combination of the foregoing.
MERGERS, CONSOLIDATION, CHANGE OF CONTROL. In the event of a merger,
consolidation in which there is a substantial change in the stockholders of
the Company, dissolution or liquidation of the Company, the sale of
substantially all the assets of the Company or any other similar corporate
transaction, the vesting of all options granted under the Directors Plan will
accelerate and become exercisable in full prior to the consummation of such
event.
AMENDMENT OF THE DIRECTORS PLAN. The Board, to the extent permitted by law,
may terminate or amend the Directors Plan; PROVIDED, HOWEVER, that the Board
may not, without stockholder approval, increase the total number of shares of
Common Stock available for issuance under the Directors Plan or change the
class of person eligible to receive options. No amendment of the Directors
Plan may adversely affect any then outstanding options or any unexercised
portions thereof without the written consent of the Outside Director.
TERM OF THE DIRECTORS PLAN. Options may be granted pursuant to the Directors
Plan from time to time until October 15, 2003, ten (10) years from the date
the Directors Plan was adopted by the Board, unless the Directors Plan is
terminated before then.
FEDERAL INCOME TAX INFORMATION. For the federal tax implications to the
Outside Directors and the Company for options granted under the Directors
Plan, please refer to the paragraphs entitled "NONQUALIFIED STOCK OPTIONS"
and "TAX TREATMENT OF THE COMPANY" above in "Proposal No. 2 -- APPROVAL OF
AMENDMENT OF THE 1992 EQUITY INCENTIVE PLAN -- Federal Income Tax Information."
ERISA
The Directors Plan is not subject to any of the provisions of ERISA and
it is not qualified under Section 401(a) of the Code.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL
OF THE INCREASE IN THE 1993 DIRECTORS STOCK OPTION PLAN
12
<PAGE>
PROPOSAL NO. 4 -- APPROVAL OF
NEW AWARD FORMULA IN THE
1993 DIRECTORS STOCK OPTION PLAN
Stockholders are being asked to approve an amendment to the Company's
1993 Directors Stock Option Plan (the "Directors Plan") to change the award
formula. The Board of Directors of the Company (the "Board") approved the
proposed amendment described above and the amendment described in "Proposal
No. 3 --APPROVAL OF INCREASE IN THE 1993 DIRECTORS STOCK OPTION PLAN" on June
29, 1998 to be effective upon stockholder approval.
Attracting outstanding individuals to serve as outside directors of a
public company is a competitive advantage in today's market place. The
Company believes that this amendment is in the best interests of the Company
because of the need to provide options to attract and retain highly qualified
outside directors. The Company believes that there are substantial benefits
in aligning the interests of some of industry's most qualified executives
with those of the Company's stockholders.
Below is a description of the proposed amendment to the award formula.
Please see "Proposal No. 3 -- APPROVAL OF INCREASE IN THE 1993 DIRECTORS STOCK
OPTION PLAN" for a summary of the principal provisions of the Directors Plan,
which summary is qualified in its entirety by reference to the full text of
the Directors Plan.
FORMULA FOR OPTION GRANTS. Prior to the amendment of the Directors Plan by
this Proposal No. 4, non-employee directors have been compensated in the
following manner: Each non-employee director received an initial stock
option to purchase 20,000 shares of Common Stock as a result of his or her
appointment and was automatically granted an option to purchase 7,500 shares
upon completion of each full year of service on the Board of Directors. (Mr.
Lucas and Mr. Welty each received his initial stock option under the 1992
Equity Incentive Plan.) Stock options automatically granted at the end of
each full year of service on the Board of Directors for each non-employee
director were in the amounts of 10,000 shares in 1994, 15,000 shares in 1995
and 7,500 shares in each of 1996, 1997 and 1998. The initial stock options
granted to new non-employee directors generally vested and became exercisable
with respect to 12.5% of the shares six months after the director began
service as a director and at the rate of 2.0833% of the shares each month
thereafter. Stock options automatically granted at the end of each full year
of service vested and became exercisable with respect to 2.0833% of the
shares each month.
Assuming approval by the Company's stockholders of this Proposal No. 4,
each Outside Director will automatically be granted an option to purchase
50,000 shares of Common Stock on the date the Outside Director first becomes
a member of the Board (an "Initial Grant"). Each Outside Director
subsequently will automatically receive a new 50,000 share option grant on
the first day of the month following the full vesting of his prior option
grant, so long as he or she continuously remains a director of the Company (a
"Succeeding Grant"); provided that an Outside Director who is an Outside
Director on the date that this amendment is approved by the Company's
stockholders will automatically receive a Succeeding Grant in the amount of
50,000 shares less the number of unvested option shares then held by such
Outside Director. Notwithstanding the foregoing, the Board may increase or
decrease the number of shares that may be granted to any Outside Director.
Each Initial Grant and Succeeding Grant will have a term of ten (10)
years. Initial Grants will vest with respect to 16.67% of the shares six
months after the Outside Director begins service and at the rate of 2.7778%
of the shares each month thereafter, so long as the Outside Director
continuously remains a member of the Board or a consultant to the Company.
Succeeding Grants will vest at the rate of 2.7778% of the shares each
calendar month. Options will be exercisable only to the extent they are
vested.
13
<PAGE>
NEW PLAN BENEFITS
The following table sets forth the number of option shares that will be
granted to each of the director nominees who are or may become Outside
Directors, assuming that the proposed amendment is approved.
<TABLE>
<CAPTION>
NUMBER OF
NAME OPTION SHARES
---- -------------
<S> <C>
Stewart Alsop 50,000
John (Ian) Giffen 35,000
Mark D. Kvamme 50,000
Donald L. Lucas 32,656
James R. Von Ehr, II 50,000
William B. Welty 34,064
</TABLE>
The following provisions of the Directors Plan are unaffected by any proposal
submitted to the Company's stockholders in this proxy statement. The
Directors Plan permits the granting of options that are intended to qualify
as NQSO's. The option exercise price will be the "fair market value" (as
defined in the Directors Plan) of the Common Stock of the Company as of the
date of the grant of the option. The option exercise price will be payable
in cash (by check) and in a number of other forms of consideration, including
fully paid shares of Common Stock that were obtained by the Outside Director
in the open public market or have been owned by the Outside Director for more
than six (6) months, by waiver of compensation due or accrued to the Outside
Director for services rendered, through a "same day sale," through a "margin
commitment" or through any combination of the foregoing.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL
OF NEW AWARD FORMULA IN THE
1993 DIRECTORS STOCK OPTION PLAN
14
<PAGE>
PROPOSAL NO. 5 -- RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Company has selected KPMG Peat Marwick LLP as its independent
auditors to perform the audit of the Company's financial statements for
fiscal 1999, and the stockholders are being asked to ratify such selection.
Representatives of KPMG Peat Marwick LLP will be present at the Meeting, will
have the opportunity to make a statement at the Meeting if they desire to do
so and will be available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF KPMG PEAT MARWICK LLP
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 15, 1998, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director/nominee, (iii) each of the
Named Executive Officers of the Company (as defined below) and (iv) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1)
- ------------------------------------ ------------- ----------
<S> <C> <C>
The Capital Group Companies, Inc. (2)........... 3,951,400 10.0%
James R. Von Ehr, II (3)........................ 3,402,832 8.6
Capital Guardian Trust Company (4).............. 2,225,500 5.6
Geocapital LLC (5).............................. 2,174,000 5.5
Kevin F. Crowder (6)............................ 1,896,568 4.8
Robert K. Burgess (7)........................... 531,970 1.3
John C. Colligan (8)............................ 484,204 1.2
Norman K. Meyrowitz (9)......................... 252,454 *
Joseph D. Dunn (10)............................. 122,088 *
Brian Allum (11)................................ 100,000 *
Donald L. Lucas (12)............................ 43,014 *
Elizabeth A. Nelson (13)........................ 34,868 *
William B. Welty (14)........................... 30,157 *
John (Ian) Giffen (15).......................... 22,500 *
Stewart Alsop................................... 0 *
Mark D. Kvamme.................................. 0 *
All directors and executive officers
as a group (12 persons) (16).................... 5,024,087 12.8
</TABLE>
_____________
* Less than 1%
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Unless otherwise indicated below, the address for each person and entity
named in the table is: c/o Macromedia, Inc., 600 Townsend Street, San
Francisco, California 94103.
(2) In its Schedule 13G under the Exchange Act filed on June 8, 1998 (the
"Capital 13G"), The Capital Group Companies, Inc. ("Capital Group")
reported the following with respect to the Company's Common Stock: sole
voting power as to 2,207,100 shares, sole dispositive power as to 3,951,400
shares and no shared voting or shared dispositive power as to any shares.
Capital Group disclaimed beneficial ownership as to 3,951,400 shares of the
Company's Common Stock pursuant to Rule 13d-4 under the Exchange Act ("Rule
13d-4"). In Item 4 of the Capital 13G, Capital Group stated that it is the
parent holding company of a group of investment companies that hold
investment power and, in some cases, voting power over the Company's
securities reported in the
16
<PAGE>
Capital 13G. Capital Group stated that it does not itself have
investment power or voting power over any of the Company's securities
reported in the Capital 13G; however, Capital Group may be deemed to
"beneficially own" such securities by virtue of Rule 13d-3 under the
Exchange Act ("Rule 13d-3"). Capital Group's wholly owned subsidiaries,
which directly hold the Company's securities reported in the Capital 13G
for Capital Group, are: Capital Research and Management Company, which
holds less than five percent of the Company's outstanding securities and
is an Investment Adviser registered under Section 203 of the Investment
Advisers Act of 1940, and Capital Guardian Trust Company, which is
separately reported in this table because it holds more than five
percent of the Company's securities. Capital Group listed its principal
business office as 333 South Hope Street, Los Angeles, California 90071.
(3) Includes 523,274 shares held of record by Mr. Von Ehr's spouse to which
Mr. Von Ehr disclaims beneficial ownership.
(4) In Item 4 of the Capital 13G, Capital Guardian Trust Company stated that it
is a wholly owned subsidiary of Capital Group (described separately in
this table because by virtue of Rule 13d-3 it may be deemed to
"beneficially own" the Company's securities which are directly held by
its subsidiaries, including those held by Capital Guardian Trust
Company) and a bank as defined in Section 3(a)6 of the Exchange Act. In
the Capital 13G, Capital Guardian Trust Company reported the following
with respect to the Company's Common Stock: sole voting power as to
2,207,100 shares, sole dispositive power as to 2,225,500 shares and no
shared voting or shared dispositive power as to any shares. Capital
Guardian Trust Company disclaimed beneficial ownership as to 2,225,500
shares of the Company's Common Stock pursuant to Rule 13d-4. Capital
Guardian Trust Company listed its principal business office as 333 South
Hope Street, Los Angeles, California 90071.
(5) In its Schedule 13G under the Exchange Act filed on February 20, 1998 (the
"Geocapital 13G"), Geocapital LLC reported sole dispositive power as to
2,174,000 shares of the Company's Common Stock (the "Geocapital Shares")
and no shared dispositive or sole or shared voting power as to any
shares of the Company's Common Stock. Geocapital LLC listed its
principal business office as 767 Fifth Avenue, 45th Floor, New York, New
York 10153-4590. In Item 3 of the Geocapital 13G, Geocapital LLC
described itself as an investment adviser registered under Section 203
of the Investment Advisers Act of 1940.
(6) Represents shares held jointly by Mr. Crowder and his spouse. Mr. Crowder's
address is 1525 Winding Hollow Lane, Plano, Texas 75093.
(7) Includes 528,646 shares subject to options held by Mr. Burgess that are
exercisable within 60 days of June 15, 1998.
(8) Includes 447,204 shares subject to options held by Mr. Colligan that are
exercisable within 60 days of June 15, 1998.
(9) Includes 248,969 shares subject to options held by Mr. Meyrowitz that are
exercisable within 60 days of June 15, 1998.
(10) Represents shares subject to options held by Mr. Dunn that are exercisable
within 60 days of June 15, 1998.
(11) Represents shares subject to options held by Mr. Allum that are exercisable
within 60 days of June 15, 1998.
(12) Represents 6,297 shares held of record by the Donald L. Lucas & Lygia S.
Lucas Trust and 36,717 shares subject to options held by Mr. Lucas that are
exercisable within 60 days of June 15, 1998.
(13) Includes 32,546 shares subject to options held by Ms. Nelson that are
exercisable within 60 days of June 15, 1998.
17
<PAGE>
(14) Represents shares subject to options held by Mr. Welty that are exercisable
within 60 days of June 15, 1998.
(15) Represents shares subject to options held by Mr. Giffen that are
exercisable within 60 days of June 15, 1998.
(16) Includes 1,568,827 shares subject to options that are exercisable within
60 days of June 15, 1998.
18
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to or
earned or paid for services rendered in all capacities to the Company
and its subsidiaries during each of fiscal 1996, 1997 and 1998 by (i)
each person serving as the Company's chief executive officer or acting
in a similar capacity during fiscal 1998, (ii) the Company's four most
highly compensated executive officers who were serving as executive
officers at the end of fiscal 1998 and (iii) one additional individual
who would have been among the four most highly compensated executive
officers of the Company at the end of fiscal 1998, but for the fact that
he was no longer serving as an executive officer of the Company as of
March 31, 1998 (together, the "Named Executive Officers"). This
information includes the dollar values of base salaries and bonus
awards, the number of shares subject to stock options granted and
certain other compensation, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------- OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION ($) OPTIONS(#) ($)(1)
- --------------------------- ----- ----------- -------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert K. Burgess (2).............. 1998 $300,055 $185,195 -- 1,000,000(3) --
Chief Executive Officer and 1997 125,110 83,333 $100,000(4) 1,000,000 --
President
Brian Allum (5).................... 1998 155,759 415,064(6) 209,996(7) 400,000 $2,000
Senior Vice President,
Worldwide Field Operations
Norman K. Meyrowitz................ 1998 193,804 163,750 -- 570,200(8) 1,000
President, Macromedia 1997 175,151 -- -- 115,000 1,000
Products 1996 142,933 84,885 -- 75,200 1,000
Joseph D. Dunn..................... 1998 154,999 56,368 -- 240,000(9) 1,000
Senior Vice President, 1997 71,317 -- -- 0 1,250
Products and Technology 1996 143,083 96,600 -- 0 750
Elizabeth A. Nelson (10)........... 1998 144,220 64,344 -- 95,000(11) 1,000
Senior Vice President, Chief 1997 85,612 20,000 -- 25,000 2,000
Financial Officer and Secretary
John C. Colligan................... 1998 250,058 -- -- 100,000 1,000
Chairman of the Board 1997 250,084 -- -- 50,000 1,000
1996 191,664 174,375 -- 50,000 1,000
</TABLE>
__________________________
(1) Represents the Company's 401(k) plan contributions.
(2) Mr. Burgess joined the Company in November 1996 as Chief Executive
Offer and President.
(3) Represents repricing of an option for 1,000,000 shares granted in
fiscal 1997.
(4) Represents relocation expenses.
(5) Mr. Allum joined the Company in July 1997.
19
<PAGE>
(6) Represents $140,259 in bonus earned, plus a one-time signing bonus of
$150,000 grossed up to cover taxes to $274,805.
(7) Represents relocation expenses.
(8) Represents new option grants of 350,000 shares and a repricing of
220,200 option shares granted prior to fiscal 1998.
(9) Represents new option grants of 200,000 shares and a repricing of
40,000 option shares granted prior to fiscal 1998.
(10) Ms. Nelson joined the Company in July 1996 and became Chief Financial
Officer in February 1998.
(11) Represents new option grants of 70,000 shares and a repricing of
25,000 option shares granted prior to fiscal 1998.
20
<PAGE>
The following table sets forth further information regarding individual
grants of stock options during fiscal 1998 to each of the Named Executive
Officers. In accordance with the rules of the Securities and Exchange
Commission (the "SEC"), the table sets forth the hypothetical gains or
"option spreads" that would exist for the options at the end of their
respective ten-year terms based on assumed annualized rates of compound stock
price appreciation of 5% and 10% from the dates the options were granted to
the end of the respective option terms. Actual gains, if any, on option
exercises are dependent on the future performance of the Company's Common
Stock and overall market conditions. There can be no assurance that the
potential realizable values shown in this table will be achieved. The table
also shows the value to one executive officer of an option granted with an
exercise price below fair market value; all other options were granted with
exercise prices equal to fair market value on the dates of grant.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED PER SHARE AT ASSUMED ANNUAL RATES
UNDERLYING TO PER SHARE MARKET OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE PRICE ON FOR OPTION TERM(2)
GRANTED IN PRICE GRANT DATE EXPIRATION ---------------------------------------
NAME (#)(1) FISCAL 1998 ($/SH)(1) ($/SH) DATE 0%($) 5%($) 10%($)
- ---- ------------ ----------- --------- ---------- ----------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert K. Burgess 1,000,000(3) 19.0 $7.781 $7.781 07/12/06 -- $4,289,885(4) $10,566,191(4)
Brian Allum 400,000 7.6 7.781 7.781 07/15/07 -- 1,957,372 4,960,364
Norman K. Meyrowitz 150,000 2.9 8.875 8.875 11/12/07 -- 837,216 2,121,670
200,000 3.8 7.781 7.781 07/15/07 -- 978,686 2,480,182
200(5) 0.0 7.50 7.50 04/25/05 -- 716(6) 1,715(6)
20,000(5) 0.4 7.50 7.50 06/27/05 -- 71,618(6) 171,538(6)
30,000(5) 0.6 7.50 7.50 02/28/05 -- 107,427(6) 257,307(6)
25,000(5) 0.5 7.50 7.50 02/20/06 -- 76,331(7) 177,884(7)
15,000(5) 0.3 7.50 7.50 07/12/06 -- 45,799(7) 106,731(7)
100,000(5) 1.9 7.50 7.50 10/30/06 -- 413,496(4) 1,018,461(4)
30,000(5) 0.6 7.50 7.50 10/10/05 -- 91,598(7) 213,461(7)
Joseph D. Dunn 100,000 1.9 7.781 7.781 07/15/07 -- 489,343 1,240,091
100,000 1.9 8.875 8.875 11/12/07 -- 558,144 1,414,446
40,000(5) 0.8 7.50 7.50 01/11/05 -- 143,237(6) 343,077(6)
Elizabeth A. Nelson 50,000 1.0 8.875 8.875 11/12/07 -- 279,072 707,223
20,000 0.4 7.781 7.781 07/15/07 -- 97,869 248,018
25,000(5) 0.5 7.50 7.50 07/12/06 -- 103,374(4) 254,615(4)
John C. Colligan 100,000 1.9 7.50 7.50 05/06/07 -- 471,671 1,195,307
</TABLE>
__________________________
(1) Stock options are generally awarded with an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant.
Options granted to new employees become exercisable, so long as the
employee continues to provide services to the Company, as to 25% of the
shares at the end of the first year and as to 2.0833% per month thereafter.
Options granted to existing employees become exercisable with respect to
2.0833% of the shares for each full month that the optionee renders
services to the Company. Options expire ten years from the date of grant
or at the time of the optionee's termination of employment.
21
<PAGE>
(2) The 5% and 10% assumed rates of annual compound stock price appreciation
are prescribed by rules of the SEC and do not represent the Company's
estimate or projection of future Common Stock prices.
(3) Represents repricing of an option granted in fiscal 1997.
(4) Appreciation was calculated over the nine-year term remaining after this
option was repriced, rather than the total ten-year term.
(5) Represents repricing of an option granted prior to fiscal 1998.
(6) Appreciation was calculated over the eight-year term remaining after this
option was repriced, rather than the total ten-year term.
(7) Appreciation was calculated over the seven-year term remaining after this
option was repriced, rather than the total ten-year term.
22
<PAGE>
The following table sets forth certain information concerning the exercise
of stock options during fiscal 1998 by each of the Named Executive Officers
and the number and value at March 31, 1998 of unexercised options held by
said individuals.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND
MARCH 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END(2)($)
ACQUIRED ON REALIZED ------------------------------ ---------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert K. Burgess ................ -- -- 416,667 583,333 $2,955,836 $4,138,164
John C. Colligan ................. -- -- 530,120 144,792 5,531,754 633,075
Norman K. Meyrowitz .............. -- -- 189,444 445,576 1,582,284 3,098,405
Joseph D. Dunn ................... 37,562 $363,299 89,010 204,586 1,650,785 1,374,035
Brian Allum ...................... -- -- -- 400,000 0 2,837,600
Elizabeth A. Nelson .............. -- -- 13,055 81,945 91,616 543,638
</TABLE>
__________________________
(1) "Value Realized" represents the fair market value of the shares underlying
the option on the date of exercise less the aggregate exercise price.
(2) These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized, and are based on the
positive spread between the respective exercise prices of outstanding stock
options and the closing price of the Company's Common Stock on March 31,
1998 ($14.875 per share).
23
<PAGE>
COMPENSATION OF DIRECTORS
Each non-employee director is reimbursed for actual business expenses
incurred in attending each Board meeting. No cash compensation is paid to
non-employee Directors. In any calendar year, there are approximately four
meetings of the Board held per year.
Under the Company's Directors Plan, each Outside Director receives
automatic grants of stock options. Assuming the Company's stockholders
approve Proposal No. 4 to amend the award formula in the Directors Plan, the
Company's Outside Directors will receive stock option grants in the following
manner: Each Outside Director who first becomes a member of the Board will
automatically be granted an option to purchase 50,000 shares of Common Stock
on the date the Outside Director first becomes a member of the Board (an
"Initial Grant"). Each Outside Director subsequently will automatically
receive a new 50,000 share option grant on the first day of the month
following the full vesting of his prior option grant, so long as he or she
continuously remains a director of the Company (a "Succeeding Grant");
provided that an Outside Director who is an Outside Director on the date that
this amendment is approved by the Company's stockholders will automatically
receive a Succeeding Grant in the amount of 50,000 shares less the number of
unvested option shares then held by such Outside Director. Notwithstanding
the foregoing, the Board may increase or decrease the number of option shares
that may be granted to an Outside Director under the Directors Plan.
Prior to the amendment of the Directors Plan by Proposal No. 4,
non-employee directors have been compensated in the following manner: Each
non-employee director received an initial stock option to purchase 20,000
shares of Common Stock as a result of his or her appointment and was
automatically granted an option to purchase 7,500 shares upon completion of
each full year of service on the Board of Directors. (Mr. Lucas and Mr.
Welty each received his initial stock option under the 1992 Equity Incentive
Plan.) Stock options automatically granted at the end of each full year of
service on the Board of Directors for each non-employee director were in the
amounts of 10,000 shares in 1994, 15,000 shares in 1995 and 7,500 shares in
each of 1996, 1997 and 1998. The initial stock options granted to new
non-employee directors generally vested and became exercisable with respect
to 12.5% of the shares six months after the director began service as a
director and at the rate of 2.0833% of the shares each month thereafter.
Stock options automatically granted at the end of each full year of service
vested and became exercisable with respect to 2.0833% of the shares each
month.
EMPLOYMENT AGREEMENTS
JOHN C. COLLIGAN EMPLOYMENT AGREEMENT
In November 1996, Mr. Colligan resigned from his position as President
and Chief Executive Officer of the Company, but remains as Chairman of the
Board. The Company has an employment agreement with Mr. Colligan, which
terminates upon Mr. Colligan's death and is terminable by either the Company
or Mr. Colligan at any time upon written notice. The agreement was
originally entered into on December 9, 1988 between Mr. Colligan and
Authorware. Upon termination of Mr. Colligan's employment, except for
certain reasons, the Company is obligated to pay Mr. Colligan severance pay
equal to his then base salary for six months at regular payment date
intervals. In addition, during the next succeeding six months, the Company
is obligated to pay Mr. Colligan severance pay equal to his then base salary
or, if Mr. Colligan is then employed in a new position at a lesser base
salary, the difference between such salary and his base salary at the
Company. In connection with such agreement, Mr. Colligan was granted options
to purchase an aggregate of 395,088 shares of the Company's Common Stock at
an exercise price of $0.48.
24
<PAGE>
ROBERT K. BURGESS EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Mr. Burgess in
August 1996. The employment agreement specified that Mr. Burgess' annual base
salary be $300,000, and that he would have the opportunity to earn an annual
target bonus of $200,000, if he met 100% of the objectives established by the
Board and up to a maximum annual bonus of $480,000, if he had exceeded 100%
of certain objectives. For Fiscal 1999, Mr. Burgess volunteered to reduce his
annual base salary from $300,000 to $200,000, and increase his target
variable compensation from $200,000 to $300,000 based upon 100% achievement
of the Company's financial plan, with the variable compensation to be
proportionally adjusted in accordance with the Company's earnings
performance. In accordance with his employment agreement, Mr. Burgess was
granted a non-plan stock option grant for 1,000,000 shares of the Company's
Common Stock which vests, so long as Mr. Burgess continues to provide
services to the Company, as to 25% of the shares at the end of twelve months
of employment and monthly thereafter for the next three years.
The Company made a recourse loan to Mr. Burgess for $2,000,000 at an
interest rate of 6% per year to refinance his residence. The principal and
accrued interest on the loan, which is secured by his residence, is payable
in full three years from the date of the loan, or if earlier, his termination
of employment or the sale of such residence. On July 1, 1997, Mr. Burgess
reduced the balance owing under this loan by $620,000 and Mr. Burgess has
advised the Company that he intends to repay the loan entirely before July
30, 1998.
Upon termination for other than cause or constructive termination, Mr.
Burgess will continue to receive his salary and bonus at the target plan for
a period of twelve months. In addition, Mr. Burgess will be entitled to
continue vesting in his options for the greater of (i) twenty-four months,
reduced by the number of months from the grant date to his date of
termination or (ii) twelve months. In the event Mr. Burgess is
constructively terminated as president or voluntarily terminates within 180
days following a change in control, he will continue to receive his salary
and bonus for twelve months, and Mr. Burgess' options will immediately become
exercisable and vest as if he had remained employed for an additional
twenty-four months, and will remain exercisable for twenty-four months
following the later of his termination of employment as President or the date
of his option acceleration.
BRIAN ALLUM EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with Brian Allum, who
is Senior Vice President of Worldwide Field Operations for the Company, in
July 1997. Pursuant to his employment agreement, Mr. Allum's base salary is
$200,000 and he is eligible to earn an annual target bonus of $200,000 per
year if he meets 100% of the objectives established each year by the Board
and up to a maximum annual bonus of $400,000 per year, if he exceeds 100% of
certain specified objectives. Mr. Allum was guaranteed base salary and bonus
compensation of $400,000 for his first year of employment. Mr. Allum
received a payment of $150,000, net of taxes, as a signing bonus and to cover
his miscellaneous relocation expenses. If Mr. Allum voluntarily terminates
employment with the Company within one year, he will be obligated to repay
the Company this amount, reduced pro rata for the number of months he
remained employed by the Company. In addition, Mr. Allum was granted an
option for 400,000 shares of the Company's Common Stock under the Company's
1992 Equity Incentive Plan, which vests and becomes exercisable, for so long
as Mr. Allum continues to provide services to the Company, as to 25% of the
shares at the end of twelve months of employment and monthly thereafter for
the next three years.
The Company made a recourse loan to Mr. Allum for up to $2,400,000 for
the purchase of his primary residence and improvements to it. No interest
accrues on the loan to Mr. Allum during the first two years through July 15,
1999 (the "Initial Period") and the Company agreed to provide Mr. Allum with
a tax gross-up of the resulting taxable benefits. After the Initial Period,
interest will accrue at an annually compounded rate of 6.65% per year. The
principal and accrued interest on the loan, which is secured by Mr. Allum's
residence, is payable in full on the earliest of (a) seven years from the
date of the
25
<PAGE>
loan; (b) 180 days after the termination of Mr. Allum's employment with the
Company for any reason; or (c) immediately upon the sale of Mr. Allum's
house. During the Initial Period, the Company also agreed to pay the
property taxes and property insurance with respect to Mr. Allum's California
residence, with a tax gross-up of the resulting taxable benefits, and the
cost of repairs, maintenance and other one time incremental expenses
associated with his Canadian residence incurred as a result of the Company's
desire to have Mr. Allum rapidly relocate to California. In addition, during
the Initial Period the Company has agreed that it will, upon Mr. Allum's
request, repurchase the California residence at Mr. Allum's cost, plus the
cost of any improvements made thereto.
Upon termination other than for cause or a voluntary termination, Mr.
Allum will continue to receive his base salary and health and life insurance
benefits for a period of twelve months and the Company shall reimburse Mr.
Allum for his relocation costs in moving back to Canada. In the event of a
change in control of the Company, the vesting of all of Mr. Allum's options
will immediately be accelerated by eighteen months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board (the "Committee") makes all
decisions involving the compensation of executive officers of the Company.
At the end of fiscal 1998, the Committee consisted of the following
non-employee directors: L. John Doerr (who served for the entire fiscal
1998) and William B. Welty (who has served since August 15, 1997 and replaced
John C. Laing who served from the beginning of fiscal 1998).
26
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed soliciting material or filed under such acts.
To the Board of Directors:
Final decisions regarding executive compensation and stock option grants
to executives are made by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee is composed of two independent
non-employee Directors, neither of whom have any interlocking relationships
as defined by the SEC. Although Robert K. Burgess (the Company's Chief
Executive Officer and President) and Elizabeth A. Nelson (the Company's Chief
Financial Officer), attended the meetings of the Committee, they do not
participate in deliberations that relate to their own compensation.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the
Chief Executive Officer ("CEO") and other executive officers and employees of
the Company at or about the beginning of each fiscal year. The Committee
administers the Company's incentive and equity plans, including the 1992
Equity Incentive Plan (the "1992 Plan"), the Executive Incentive Plan (the
"Incentive Plan") and the 1993 Employee Stock Purchase Plan.
The Committee's philosophy in compensating executive officers, including
the CEO, is to relate compensation to corporate performance. Consistent with
this philosophy, the incentive component of the compensation of the executive
officers of the Company is contingent on corporate profits and sales
performance (including revenue and product sell-through performance
measurements). Long-term equity incentives for executive officers are
effected through the granting of stock options under the 1992 Plan. Stock
options generally have value for the executive only if the price of the
Company's stock increases above the fair market value on the grant date and
the executive remains in the Company's employ for the period required for the
shares to vest.
The base salaries, incentive compensation and stock option grants of the
executive officers are determined in part by the Committee informally
reviewing data on prevailing compensation practices in technology companies
with whom the Company competes for executive talent and by their evaluating
such information in connection with the Company's corporate goals. Subject
to the limitations regarding available data, the Committee compared the
compensation of the Company's executive officers with the compensation
practices of comparable companies to determine base salary, target bonuses
and target total cash compensation. In addition to their base salaries, the
Company's executive officers, including the CEO, are each eligible to receive
a quarterly cash bonus under the Incentive Plan and are entitled to
participate in the 1992 Plan.
In preparing the performance graph for this Proxy Statement, the Company
used the Hambrecht & Quist Stock Index as its published line of business
index. The compensation practices of most of the companies in the Hambrecht &
Quist Stock Index were not reviewed by the Company when the Committee
reviewed the compensation information described above because such companies
were determined not to be competitive with the Company for executive talent.
27
<PAGE>
FISCAL 1998 EXECUTIVE COMPENSATION
BASE COMPENSATION. The Committee reviewed the recommendations and
performance and market data outlined above and established a base salary
level for each executive officer, including the CEO.
INCENTIVE COMPENSATION. Under the Incentive Plan, cash bonuses are
awarded only if the Company meets predetermined objectives set by the Board
at the beginning of the year. For fiscal 1998, the objectives used by the
Company as the basis for incentive compensation for the CEO and other
executives were based on a combination of revenue, predictability of results,
channel sell-through performance, and profitability. The target amount of
bonus and the actual amount of bonus are determined by the Committee, in its
discretion. For fiscal 1998, executive incentive bonuses ranged from no
bonus to $163,750. One executive received a starting bonus and incentive
bonus amounts which together equaled $415,064.
STOCK OPTIONS. In fiscal 1998 stock options were granted to certain
executive officers as incentives for them to become employees or to aid in
the retention of executive officers and to align their interests with those
of the stockholders. Stock options typically have been granted to executive
officers when the executive first joins the Company, in connection with a
significant change in responsibilities and, occasionally, to achieve equity
within a peer group. The Committee may, however, grant additional stock
options to executives for other reasons. The number of shares subject to
each stock option granted is within the discretion of the Committee and is
based on anticipated future contribution and ability to impact corporate
and/or business unit results, past performance or consistency within the
executive's peer group. In fiscal 1998, the Committee considered these
factors, as well as the number of options held by such executive officers as
of the date of grant that remained unvested. In the discretion of the
Committee, executive officers may also be granted stock options under the
1992 Plan to provide greater incentives to continue their employment with the
Company and to strive to increase the value of the Company's Common Stock.
The stock options generally become exercisable over a four-year period and
are granted at a price that is equal to the fair market value of the
Company's Common Stock on the date of grant.
FISCAL 1998 OPTION REPRICING PROGRAM. In order to respond to the
substantial increase in competitive attempts to recruit employees essential
to the Company's success, the Company elected to reprice stock options in
fiscal 1998. Competition for skilled engineers and other key employees in
the software industry is intense and the use of significant stock options for
retention and motivation of such personnel is pervasive in the high
technology industries. The Company believes that stock options are a critical
component of the compensation offered by the Company to promote long-term
retention of key employees, motivate high levels of performance and recognize
employee contributions to the success of the Company. In light of a
substantial decline in the market price of the Company's Common Stock, the
Company believed that the large numbers of outstanding stock options with an
exercise price in excess of the actual market price were no longer an
effective tool to encourage employee retention or to motivate high levels of
performance. As a result, on May 6, 1997, the Company approved an option
repricing program applicable to all employees, including executive officers,
except the Chief Executive Officer. The repricing reset vesting by one year
for all repriced options granted before July 1996 which were not repriced in
1996 and generally required a one-year "blackout" period during which the
repriced options were not exercisable. Subsequently on July 15, 1998 the
stock options of the CEO were repriced as described below in "Company
Performance and CEO Compensation."
28
<PAGE>
The following table sets forth certain information concerning the
repricing of stock options held by executive officers of the Company from
December 1993 (when the Company became a reporting company pursuant to
Section 13(a) of the Securities Exchange Act of 1934, as amended) through
June 1998.
<TABLE>
<CAPTION>
PER SHARE
NUMBER OF MARKET PER SHARE LENGTH OF
SECURITIES PRICE OF EXERCISE PER SHARE ORIGINAL
UNDERLYING STOCK AT PRICE AT NEW OPTION TERM
OPTIONS TIME OF TIME OF EXERCISE REMAINING
DATE OF REPRICED REPRICING REPRICING PRICE AT DATE OF
NAME AND POSITION REPRISING (#) ($/$b) ($/$b) ($/$b) REPRICING
- ----------------- --------- ---------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert K. Burgess....... July 15, 1997 1,000,000 $ 7.781 $15.00 $ 7.781 9 Years
Chief Executive Officer
and President
Joseph D. Dunn.......... May 6, 1997 40,000 7.50 10.9375 7.500 8 Years
Vice President
Norman Mcyrowitz........ May 6, 1997 200 7.50 16.0310 7.50 8 Years
Vice President May 6, 1997 20,000 7.50 20.2500 7.50 8 Years
May 6, 1997 30,000 7.50 24.3750 7.50 8 Years
May 6, 1997 25,000 7.50 32.5000 7.50 7 Years
May 6, 1997 15,000 7.50 14.8750 7.50 7 Years
May 6, 1997 100,000 7.50 16.3750 7.50 9 Years
May 6, 1997 30,000 7.50 24.3750 7.50 7 Years
Phillip Schiller........ July 25, 1996 40,000 14.875 40.00 14.875 9 Years
Vice President July 25, 1996 25,000 14.875 36.250 14.875 10 Years
Elizabeth A. Nelson..... May 6, 1997 25,000 7.50 14.875 7.50 9 Years
Senior Vice President,
Chief Financial Officer
and Secretary
John C. Parsons......... May 6, 1997 200,000 7.50 8.4375 7.50 10 Years
Chief Financial Officer,
Secretary and Vice
President
</TABLE>
COMPANY PERFORMANCE AND CEO COMPENSATION. For fiscal 1998, Robert K.
Burgess, the President and CEO of the Company, received a base salary of
$300,000 and was eligible to earn a target bonus of $200,000 based on
attainment of 100% of the Macromedia Executive Bonus Plan objectives, with a
total bonus potential of $480,000 per year based on attainment of specified
hurdles in excess of 100% of the Executive Bonus Plan objectives. For fiscal
1998, Mr. Burgess received a bonus of $185,195. In addition, in July 1997,
the Company repriced the option granted to Mr. Burgess in July 1996 for
1,000,000 shares of the Company's Common Stock, in a manner consistent with
the repricing of options held by all other employees of the Company,
including a ten-month "blackout" period during which his option was not
exercisable. For fiscal 1999, Mr. Burgess volunteered to reduce his base
salary from $300,000 to $200,000, and increase his target variable
compensation from $200,000 to $300,000 based upon 100% achievement of the
Company's financial plan, with the variable compensation to be proportionally
adjusted in accordance with the Company's performance.
29
<PAGE>
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE OF
1986. In July 1997, the Company repriced an option held by Mr. Burgess.
This option repricing did not meet the requirements of Section 162(m) of the
Internal Revenue Code of 1986 because the option was not originally granted
under the 1992 Plan. The Company intends to comply with the requirements of
Section 162(m) of the Internal Revenue Code of 1986 for fiscal 1999. The
1992 Plan is already in compliance with Section 162(m) by limiting stock
awards to named executive officers. The Company does not expect cash
compensation for fiscal 1999 to be in excess of $1,000,000 for any individual
or consequently affected by the requirements of Section 162(m).
COMPENSATION COMMITTEE
L. JOHN DOERR
WILLIAM B. WELTY (FROM AUGUST 15, 1997)
JOHN C. LAING (FROM APRIL 1, 1997 TO
AUGUST 15, 1997)
30
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the SEC and shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed soliciting material or filed under such acts.
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from the date of the Company's initial public
offering (December 13, 1993) to March 31, 1998 with the cumulative total
return on The Nasdaq (US only) Stock Market and the Hambrecht & Quist
Technology Index (assuming the investment of $100 in the Company's Common
Stock and in each of the indexes on the date of the Company's initial public
offering, and reinvestment of all dividends). Unless otherwise specified,
all dates refer to the last day of each month presented.
[GRAPH]
31
<PAGE>
QUARTERLY DATA SERIES
SCALED PRICES: Stock and index prices scaled
to 100 as of December 13, 1993
<TABLE>
<CAPTION>
DATES Macromedia Inc. H&Q Technology Nasdaq Stock Market-U.S.
- ----- --------------- -------------- ------------------------
<S> <C> <C> <C>
12/13/93 100.00 100.00 100.00
Dec-93 139.58 102.32 102.12
Mar-94 125.00 106.09 97.82
Jun-94 72.92 97.06 93.25
Sep-94 129.17 110.68 100.97
Dec-94 212.50 122.91 99.82
Mar-95 281.25 137.64 108.82
Jun-95 360.42 171.70 124.47
Sep-95 476.04 194.04 139.47
Dec-95 870.83 183.78 141.17
Mar-96 712.50 187.32 147.75
Jun-96 364.58 200.66 159.81
Sep-96 345.83 213.01 165.50
Dec-96 300.00 228.42 173.63
Mar-97 151.03 217.72 164.22
Jun-97 143.75 262.06 194.33
Sep-97 201.03 317.59 227.20
Dec-97 138.53 267.79 213.11
Mar-98 247.92 324.25 249.25
</TABLE>
32
<PAGE>
CERTAIN TRANSACTIONS
From April 1, 1997 to the present, there have been no (and there are no
currently proposed) transactions in which the amount involved exceeded
$60,000 to which the Company or any of its subsidiaries was (or is to be) a
party and in which any executive officer, director, 5% beneficial owner of
the Company's Common Stock or member of the immediate family of any of the
foregoing persons had (or will have) a direct or indirect material interest,
except as set forth below and under "Executive Compensation" and "Employment
Agreements."
When the Company acquired Altsys Corporation ("Altsys") in January 1995,
the Company assumed a lease from Altsys entered into with Renner Plaza
Properties, Inc. ("RPP") with respect to its use of the office space occupied
by it located in Richardson, Texas. RPP is wholly owned by Mr. Von Ehr, a
director of the Company, and his wife, Gayla J. Von Ehr. The Company is
currently paying approximately $17,500 per month in rental fees to RPP.
The Company entered into a consulting agreement with John (Ian) Giffen,
a director of the Company, in February 1998, pursuant to which Mr. Giffen
agreed to advise the Company's Chief Financial Officer, senior finance staff
and investment relations staff in certain areas and work on special projects
for the Company, for a minimum of one week per month. To accomplish these
services, Mr. Giffen agreed to spend approximately three days per month on
site at the Company in San Francisco. In consideration for these services
which are beyond his duties as a director of the Company, Mr. Giffen was
granted a stock option for 75,000 shares of the Company's Common Stock and
receives $8,334 per month. His stock option vests and becomes exercisable at
the rate of 2.78% per month. Upon a change of control of the Company that
occurs while Mr. Giffen is providing services to the Company, his stock
option for 75,000 shares becomes immediately vested and exercisable as to all
shares. The consulting agreement has a term of three years and is terminable
only for just cause.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company at its
principal executive offices no later than February 28, 1999 in order to be
included in the Company's proxy statement and form of proxy relating to that
meeting.
33
<PAGE>
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of the Company's Common Stock to
file initial reports of ownership and reports of changes in ownership with
the SEC and the Nasdaq National Market. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and
directors, the Company believes that all Section 16(a) filing requirements
were met, except that a Form 3 was filed late for Joseph D. Dunn who became
an executive officer of the Company in January 1998 and a Form 5 reporting a
stock option grant was filed late for John C. Colligan.
OTHER BUSINESS
The Board does not presently intend to bring any other business before
the Meeting, and, so far as is known to the Board, no matters are to be
brought before the Meeting except as specified in the Notice of the Meeting.
As to any business that may properly come before the Meeting, however, it is
intended that proxies, in the form enclosed, will be voted in respect thereof
in accordance with the judgment of the persons voting such proxies.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
MACROMEDIA, INC.
1993 DIRECTORS STOCK OPTION PLAN
As Adopted October 15, 1993
and Amended Through June 29, 1998
1. PURPOSE. This Stock Option Plan (this "PLAN") is established to
provide equity incentives for nonemployee members of the Board of Directors of
Macromedia, Inc. (the "COMPANY") who are described in Section 6.1 below, by
granting such persons options to purchase shares of stock of the Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall be amended
effective on the date that such amendment is adopted by the Board of Directors
(the "BOARD") of the Company. This amendment shall be approved by the
stockholders of the Company, consistent with applicable laws, within twelve
months after the date that it is adopted by the Board. After adoption of this
amendment by the Board, options ("OPTIONS") may be granted under this Plan
provided that, in the event that stockholder approval is not obtained within the
time period provided herein, this Plan, and all Options granted hereunder, shall
terminate. No Option that is issued as a result of any increase in the number
of shares authorized to be issued under this Plan shall be exercised prior to
the time such increase has been approved by the stockholders of the Company and
all such Options granted pursuant to such increase shall similarly terminate if
such stockholder approval is not obtained.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
nonqualified stock options ("NQSOS"). The shares of stock that may be purchased
upon exercise of Options granted under this Plan (the "SHARES") are shares of
the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is 700,000 Shares, subject to
adjustment as provided in this Plan. If any Option is terminated for any reason
without being exercised in whole or in part, the Shares thereby released from
such Option shall be available for purchase under other Options subsequently
granted under this Plan. At all times during the term of this Plan, the Company
shall reserve and keep available such number of Shares as shall be required to
satisfy the requirements of outstanding Options under this Plan.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "COMMITTEE"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
<PAGE>
Macromedia, Inc.
1993 Directors Stock Option Plan
As Amended Through June 29, 1998
Page 2
6. ELIGIBILITY AND AWARD FORMULA.
6.1 ELIGIBILITY. Options may be granted only to directors of the
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 18 below (each
an "OPTIONEE").
6.2 INITIAL GRANT. Each Optionee who becomes a member of the Board
for the first time after the effective date of this amendment will automatically
be granted an Option for 50,000 Shares (the "INITIAL GRANT") on the date such
Optionee first joins the Board.
6.3 SUCCEEDING GRANTS. If, after the effective date of this
amendment, on the third anniversary date of joining the Board, the Optionee
is still a member of the Board, the Optionee will automatically be granted an
Option for 50,000 Shares (a "SUCCEEDING GRANT"). Upon the third anniversary
date of the date of grant of each Succeeding Grant, if the Optionee is still
a member of the Board, the Optionee will automatically be granted an Option
for 50,000 Shares (also, a "SUCCEEDING GRANT"). Each Optionee who is a
member of the Board immediately prior to the effective date of this amendment
will be granted a Succeeding Grant upon the date on which this amendment is
approved by the Company's stockholders, PROVIDED THAT this Succeeding Grant
only shall be an Option for the number of Shares equal to 50,000 less the
number of unvested option shares held by the Optionee on the date this
amendment is approved by the Company's stockholders and thereafter each such
Optionee shall receive Succeeding Grants in accordance with the preceding
sentence of this Section 6.3.
6.4 MAXIMUM SHARES; MODIFICATION OF AWARD FORMULA. The maximum
number of Shares that may be issued to any one director under this Plan is
120,000. No grant will be made, however, if such grant will cause the number of
Shares issued or subject to outstanding Options under this Plan to exceed the
number specified in Section 4 above. Notwithstanding the foregoing, in its sole
discretion, the Board may increase or decrease the amount of any automatic grant
under Sections 6.2 or 6.3 that may be made to any Optionee.
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 FORM OF OPTION GRANT. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant ("GRANT") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan. Except as provided in Section 7.4, Options shall have
a term of ten (10) years.
7.2 VESTING. The date an Optionee becomes a member of the Board for
the first time, as to the first Option granted to a future Optionee, and the
date a succeeding Option is granted, for an Option described in Section 6.3
above, is referred to in this Plan as the "START DATE" for such Option. Each
Initial Grant granted under the Plan will vest as to
<PAGE>
Macromedia, Inc.
1993 Directors Stock Option Plan
As Amended Through June 29, 1998
Page 3
16.67% of the shares subject to it on the date six months after the initial
Grant's start date and shall vest as to an additional 2.7778% of the Shares
each calendar month thereafter, so long as the Optionee continuously remains
a director of the Company. Each Succeeding Grant will vest as to 2.7778% of
the Shares each calendar month, so long as the Optionee continuously remains
a director of the Company.
7.3 EXERCISE PRICE. The exercise price of an Option shall be the
Fair Market Value (as defined in Section 18.4) of the Shares, at the time that
the Option is granted.
7.4 TERMINATION OF OPTION. Except as provided below in this Section,
this Option shall terminate and may not be exercised if Optionee ceases to be a
member of the Board. The date on which Optionee ceases to be a member of the
Board shall be referred to as the "TERMINATION DATE."
(a) TERMINATION GENERALLY. If Optionee ceases to be a member of
the Board for any reason except death or disability, this Option, to the extent
(and only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee within six (6) months after the
Termination Date, but in no event later than the expiration date.
(b) DEATH OR DISABILITY. If Optionee ceases to be a member of
the Board because of the death of Optionee or the disability of Optionee within
the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended, this Option, to the extent (and only to the extent) that it would have
been exercisable by Optionee on the Termination Date, may be exercised by
Optionee (or Optionee's legal representative) within twelve (12) months after
the Termination Date, but in no event later than the expiration date.
8. EXERCISE OF OPTIONS.
8.1 NOTICE. Options may be exercised only by delivery to the Company
of an exercise agreement in a form approved by the Committee, stating the number
of Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required 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.
8.2 PAYMENT. Payment for the Shares may be made (a) in cash or by
check; (b) by surrender of shares of Common Stock of the Company that have been
owned by Optionee for more than six (6) months (and which have been paid for
within the meaning of Securities and Exchange Commission 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 were obtained by the
Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by waiver of compensation due or accrued to
Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (a "NASD DEALER") whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the Shares so
<PAGE>
Macromedia, Inc.
1993 Directors Stock Option Plan
As Amended Through June 29, 1998
Page 4
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; (e) provided that a public market for the Company's stock exists,
through a "margin" commitment from the Optionee and a NASD Dealer whereby the
Optionee 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 (f) by any combination of the foregoing.
8.3 WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise
of an Option, the Optionee shall pay or make adequate provision for any federal
or state withholding obligations of the Company, if applicable.
8.4 LIMITATIONS ON EXERCISE. Notwithstanding the exercise periods
set forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable until such time as the
Plan or, in the case of Options granted pursuant to an amendment to the number
of shares that may be issued pursuant to the Plan, the amendment has been
approved by the stockholders of the Company in accordance with Section 16
hereof.
(b) An Option shall not be exercisable unless such exercise is
in compliance with the Securities Act of 1933, as amended (the "1933 SECURITIES
ACT"), and all applicable state securities laws, as they are in effect on the
date of exercise.
(c) 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 the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or by the Optionee's
guardian or legal representative, unless otherwise permitted by the Committee.
No Option may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise, except as provided in this Plan. The Company shall
provide to each Optionee a copy of the annual financial statements of the
Company, at such time after the close of each fiscal year of the Company as they
are released by the Company to its stockholders.
<PAGE>
Macromedia, Inc.
1993 Directors Stock Option Plan
As Amended Through June 29, 1998
Page 5
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Board or
stockholders of the Company and compliance with applicable securities laws;
provided, however, that no certificate or scrip representing fractional shares
shall be issued upon exercise of any Option and any resulting fractions of a
Share shall be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue as a director
of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the 1933 Securities Act, any required approval by the Commissioner of
Corporations of the State of California, compliance with all other applicable
state securities laws and compliance with the requirements of any stock exchange
or national market system on which the Shares may be listed. The Company shall
be under no obligation to register the Shares with the Securities and Exchange
Commission or to effect compliance with the registration or qualification
requirement of any state securities laws, stock exchange or national market
system.
14. RESTRICTIONS ON SHARES. The Company may reserve to itself or its
assignee(s) in the Grant, a right to repurchase any or all unvested shares held
by an Optionee upon the Optionee's termination of service with the Company for
any reason at the Optionee's original exercise price. Such repurchase rights
shall lapse in accordance with the exercise period set forth in Section 7.2
above.
15. ASSUMPTION OF OPTIONS BY SUCCESSORS. In the event of a dissolution or
liquidation of the Company, a merger in which the Company is not the surviving
corporation, the sale of substantially all of the assets of the Company, or any
other transaction which qualifies as a "corporate transaction" under Section 424
of the Revenue Code wherein the Stockholders of the Company give up all of their
equity interest in the Company (except for the acquisition of all or
substantially all of the outstanding shares of the Company the vesting of all
options granted pursuant to the Plan will accelerate and the options will become
exercisable in full prior to the consummation of such event at such times and on
such conditions as the Committee determines.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan but not the terms of any outstanding option;
provided, however, that the Committee shall not, without the approval of the
stockholders of the Company, increase the total number of Shares available under
this Plan (except by operation of the provisions of Sections 4 and 11 above) or
change the class of persons eligible to receive Options. Further,
<PAGE>
Macromedia, Inc.
1993 Directors Stock Option Plan
As Amended Through June 29, 1998
Page 6
the provisions in Sections 6 and 7 of this Plan shall not be amended more than
once every six (6) months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act or
the rules thereunder. In any case, no amendment of this Plan may adversely
affect any then outstanding Options or any unexercised portions thereof without
the written consent of the Optionee.
17. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the date this Plan is adopted by
the Board of Directors.
18. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
18.1 "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 the Option, 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.
18.2 "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 Option, 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.
18.3 "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.
18.4 "FAIR MARKET VALUE" shall mean the fair market value of the
Shares 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 option grant date as quoted on the NASDAQ National Market System
and reported in THE WALL STREET JOURNAL.
<PAGE>
MACROMEDIA, INC.
1992 EQUITY INCENTIVE PLAN
As Adopted September 23, 1992
and Amended Through April 1, 1998
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 13,300,000 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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 2
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.
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.
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 3
4.3 COMPLIANCE WITH CODE SECTION 162(m). 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.
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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 4
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 be specified in
the Stock Option Agreement or such longer time period, not exceeding
five (5) years, after the Termination Date as may be determined by the
Committee and specified in the Stock Option Agreement, with any
exercise beyond three (3) months after the Termination Date deemed to
be an NQSO), 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 or such longer time period,
not exceeding five (5) years, after the Termination Date as may be
determined by the Committee and specified in the Stock Option
Agreement, with any exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section
22(e)(3) of the Code, or (ii) twelve (12) months after the Termination
Date when the Termination is for Participant's death or disability,
within the meaning of Section 22(e)(3) of the Code, deemed to be an
NQSO), 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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 5
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) 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.
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 6
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.
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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 7
(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.
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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 8
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.
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 the election shall be irrevocable as to the particular
Shares as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of the
Committee.
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 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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 9
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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 10
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.
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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 11
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.
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
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 12
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.
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.
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:
"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.
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 13
"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.
"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
(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.
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 14
"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)
<PAGE>
Macromedia, Inc.
1992 Equity Incentive Plan
(As Amended Through April 1, 1998)
Page 15
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").
<PAGE>
MACROMEDIA, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby appoints Robert K. Burgess and Elizabeth A. Nelson, or
either of them, each with power of substitution, to represent the undersigned
at the Annual Meeting of Stockholders of Macromedia, Inc. (the "Company") to
be held at 600 Townsend Street, San Francisco, California 94103 on July 30,
1998, at 1:00 p.m. P.D.T., and any adjournment or postponement thereof, and
to vote the number of shares the undersigned would be entitled to vote if
personally present at the meeting on the following matters:
___________
SEE REVERSE
SIDE
___________
<PAGE>
<TABLE>
<S><C>
/X/ PLEASE MARK YOUR CHOICES LIKE THIS
-------------- ---------------
ACCOUNT NUMBER COMMON
- -----------------------------------------------------------------------------
1. ELECTION OF DIRECTORS / / FOR / / WITHHELD
FOR ALL
Nominees: Stewart Alsop Donald L. Lucas
Robert K. Burgess James R. Von Ehr, II
John (Ian) Giffen William B. Welty
Mark D. Kvamme
Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name on the space
provided below:
2. AMENDMENT TO THE / / FOR / / AGAINST / / ABSTAIN
COMPANY'S 1992 EQUITY
INCENTIVE PLAN
3. INCREASE IN THE COMPANY'S / / FOR / / AGAINST / / ABSTAIN
1993 DIRECTORS STOCK
OPTION PLAN
4. NEW AWARD FORMULA IN THE / / FOR / / AGAINST / / ABSTAIN
COMPANY'S 1993 DIRECTORS
STOCK OPTION PLAN
5. RATIFICATION OF SELECTION / / FOR / / AGAINST / / ABSTAIN
OF KPMG PEAT MARWICK LLP
AS THE COMPANY'S
INDEPENDENT AUDITORS
The Board of Directors recommends a vote FOR all nominees for election and
FOR Proposals 2, 3, 4 and 5.
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. IN THE ABSENCE OF DIRECTION,
THIS PROXY WILL BE VOTED FOR THE COMPANY'S NOMINEES FOR ELECTION AND FOR
PROPOSALS 2, 3, 4 and 5. In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the meeting or any
adjournment thereof to the extent authorized by by Rule 14a-4(c) promulgated
by the Securities and Exchange Commission.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated: ___________________________, 1998
____________________________________________________________
____________________________________________________________
Signature(s)
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares are held of record in the names of two or more persons or in the name
of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by
a corporation, the proxy should be executed by the president or vice
president and the secretary or assistant secretary. Executors,
administrators, or other fiduciaries who execute the above proxy for a
deceased stockholder should give their full title. Please date the proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED, POSTAGE PAID ENVELOPE SO THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
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