<PAGE>
As filed with the Securities and Exchange Commission on October 18, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MACROMEDIA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3155026
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 TOWNSEND STREET, SUITE 310W
SAN FRANCISCO, CALIFORNIA 94103
(Address of principal executive offices, including zip code)
1992 EQUITY INCENTIVE PLAN
1999 STOCK OPTION PLAN
NON-PLAN OPTION GRANTS
OPTIONS OF ESI SOFTWARE, INC. ASSUMED BY REGISTRANT
(Full title of the plan)
ELIZABETH A. NELSON
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
600 TOWNSEND STREET, SUITE 310W
SAN FRANCISCO, CALIFORNIA 94103
(415) 252-2000
(Name, address and telephone number, including area code, of agent for service)
COPIES TO:
Gordon K. Davidson, Esq.
Robert A. Freedman, Esq.
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Amount Proposed Maximum Proposed Maximum
Title of Securities to be to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share Price Registration Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001
par value per share 2,100,000(1) $28.7312(2) $60,335,520 $16,774
Common Stock, $0.001
par value per share 182,000(3) $40.8750(2) $7,439,250 $2,069
Common Stock, $0.001
par value per share 418,000(4) $50.2500(5) $21,004,500 $5,840
- ----------------
1 Represents shares added to the pool of shares available for issuance under
the Registrant's 1992 Equity Incentive Plan which are subject to options
granted but not exercised under the Registrant's 1992 Equity Incentive
Plan.
2 Estimated weighted average exercise price per share
3 Represents shares which are subject to options granted but not exercised
under the Registrant's 1999 Stock Option Plan.
4 Represents shares available for grant under the Registrant's 1999 Stock
Option Plan.
<PAGE>
Common Stock, $0.001
par value per share 275,000(6) $37.1614(2) $10,219,385 $2,841
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001
par value per share 115,010(7) $4.2592(2) $489,851 $137
- ---------------------------------------------------------------------------------------------------------------------
Total Fee
$27,661
</TABLE>
5 Estimated as of October 13, 1999, pursuant to Rule 457(c) solely for the
purpose of calculating the amount of the registration fee.
6 Represents shares subject to options granted but not exercised under
non-plan stock option grants.
7 Represents shares subject to outstanding options of ESI Software, Inc.
assumed by Registrant.
<PAGE>
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999 filed on June 17, 1999, which Annual
Report contains audited consolidated financial statements as
of March 31, 1999 and 1998 and for each of the years in the
three-year period ended March 31, 1999;
(b)(1) The Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 filed on August 13, 1999;
(b)(2) The Registrant's Current Report on Form 8-K filed on October
15, 1999; and
(c) The description of the Registrant's Common Stock contained in
the Registrant's registration statement on Form 8-A filed on
October 22, 1993, as amended on the Registrant's Form 8-A/A
filed on October 5, 1995, including any amendment or report
filed for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all securities registered
hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation
Law, the Registrant's Certificate of Incorporation includes a provision that
eliminates the personal liability of its directors to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit.
In addition, as permitted by Section 145 of the Delaware General Corporation
Law, the Bylaws of the Registrant provide that (i) the Registrant is required
to indemnify its directors and executive officers to the fullest extent
permitted by the Delaware General Corporation Law; (ii) the Registrant may,
in its discretion, indemnify other officers, employees and agents as set
forth in the Delaware General Corporation Law; (iii) upon receipt of an
undertaking to repay such advances, if indemnification is determined to be
unavailable, the Registrant is required to advance expenses, as incurred, to
its directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law in connection with a proceeding (except if a
determination is reasonably and promptly made by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding or, in certain circumstances, by independent legal counsel in a
written opinion that the facts known to the decision-making party demonstrate
clearly and convincingly that such person acted in bad faith or in a manner
that such person did not believe to be in or not opposed to the best
interests of the corporation); (iv) the rights conferred in the Bylaws are
not exclusive and the Registrant is authorized to enter into indemnification
agreements with its directors, officers, employees and agents; (v) the
Registrant
2
<PAGE>
may not retroactively amend the Bylaw provisions relating to indemnity; and
(vi) to the fullest extent permitted by the Delaware General Corporation Law,
a director or executive officer will be deemed to have acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Registrant, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that his or her
conduct was unlawful, if his or her action is based on the records or books
of account of the corporation or on information supplied to him or her by
officers of the corporation in the course of their duties or on the advice of
legal counsel for the corporation or on information or records given or
reports made to the corporation by independent certified public accountants
or appraisers or other experts.
The Registrant's policy is to enter into indemnification
agreements with each of its directors and executive officers. The
indemnification agreements provide that directors and executive officers will
be indemnified and held harmless to the fullest extent permitted by law
including against all expenses (including attorneys' fees), judgments, fines
and settlement amounts paid or reasonably incurred by them in any action,
suit or proceeding, including any derivative action by or in the right of the
Registrant, on account of their services as directors, officers, employees or
agents of the Registrant or as directors, officers, employees or agents of
any other company or enterprise when they are serving in such capacities at
the request of the Registrant. The Registrant will not be obligated pursuant
to the agreements to indemnify or advance expenses to an indemnified party
with respect to proceedings or claims (i) initiated by the indemnified party
and not by way of defense, except with respect to a proceeding authorized by
the Board of Directors and successful proceedings brought to enforce a right
to indemnification under the indemnification agreement, (ii) for any amounts
paid in settlement of a proceeding unless the Registrant consents to such
settlement; (iii) on account of any suit in which judgment is rendered
against the indemnified party for an accounting of profits made from the
purchase or sale by the indemnified party of securities of the Registrant
pursuant to the provisions of Section 16(b) of the Exchange Act and related
laws; (iv) on account of conduct by a director that is finally adjudged to
have been in bad faith or conduct that the director did not reasonably
believe to be in, or not opposed to, the best interests of the Registrant;
(v) on account of any criminal action or proceeding arising out of conduct
that the director had reasonable cause to believe was unlawful; or (vi) if a
final decision by a court having jurisdiction in the matter shall determine
that such indemnification is not lawful.
The indemnification agreements also provide for contribution in
certain situations in which the Registrant and a director or executive
officer are jointly liable but indemnification is unavailable, such
contribution to be based on the relative benefits received and the relative
fault of the Registrant and the director or executive officer. Contribution
is not allowed in connection with a Section 16(b) judgment, and adjudication
of bad faith or conduct that a director or executive officer did not
reasonably believe to be in, or not opposed to, the best interest of the
Registrant, or a proceeding arising out of conduct a director or executive
officer had reasonable cause to believe was unlawful.
The indemnification agreements require a director or executive
officer to reimburse the Registrant for all expenses advanced only to the
extent it is ultimately determined that the director or executive officer is
not entitled, under Delaware law, the Bylaws, an indemnification agreement or
otherwise to be indemnified for such expenses. The indemnification agreements
provide that they are not exclusive of any rights a director or executive
officer may have under the Certificate of Incorporation, Bylaws, other
agreements, any majority-in-interest vote of the stockholders or vote of
disinterested directors, Delaware law or otherwise.
The indemnification provision in the Bylaws, and the
indemnification agreements entered into between the Registrant and its
directors and executive officers, may be sufficiently broad to permit
indemnification of the Registrant's executive officers and directors for
liabilities arising under the Securities Act.
3
<PAGE>
As authorized by the Bylaws, the Registrant, with approval by
the Board, has purchased director and officer liability insurance.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
<TABLE>
<S> <C>
4.01 Registrant's Amended and Restated Certificate of
Incorporation (incorporated herein by reference to
Exhibit 4.01 to the Registrant's registration
statement on Form S-8 (File No. 33-89092) filed with
the Commission on February 3, 1995).
4.02 Certificate of Amendment of Registrant's Restated
Certificate of Incorporation (incorporated herein by
reference to the Registrant's registration statement
on Form 8-A/A filed with the Commission on October 5,
1995).
4.03 Registrant's Bylaws, as amended (incorporated herein
by reference to Exhibit 3.02 to the Registrant's
Registration Statement on Form S-1 (File No.
33-70624) declared effective by the Commission on
December 10, 1993 (the "Form S-1")).
4.04 Amendment to Registrant's Bylaws effective October
15, 1993 (incorporated herein by reference to Exhibit
3.03 to the Form S-1).
4.05 Registrant's 1992 Equity Incentive Plan, as amended.
4.06 Registrant's 1999 Stock Option Plan
4.07 Registrant's Form of Non-Plan Stock Option Grant
4.08 ESI Software, Inc. 1996 Equity Incentive Plan
5.01 Opinion of Fenwick & West LLP.
23.01 Consent of Fenwick & West LLP (included in Exhibit
5.01).
23.02 Consent of KPMG LLP, independent auditors.
24.01 Power of Attorney (see signature pages following Item 9).
</TABLE>
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing,
4
<PAGE>
any increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was registered)
and any deviation from the low or high end of the
estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) above do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions discussed in Item 6
hereof, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereby, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California,
on the 15th day of October, 1999.
MACROMEDIA, INC.
By: /s/ Elizabeth A. Nelson
--------------------------------------
Elizabeth A. Nelson
Senior Vice President, Chief
Financial Officer and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below and on the next page constitutes and appoints Robert K. Burgess
and Elizabeth A. Nelson, and each of them, his true and lawful attorneys-in-fact
and agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-8, and to
file the same with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on this page and
the next in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ Robert K. Burgess
- ------------------------------- Chief Executive Officer, President October 15, 1999
Robert K. Burgess and Chairman of the Board
PRINCIPAL FINANCIAL OFFICER
AND ACCOUNTING OFFICER:
/s/ Elizabeth A. Nelson
- ------------------------------- Senior Vice President, October 15, 1999
Elizabeth A. Nelson Chief Financial Officer and Secretary
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
ADDITIONAL DIRECTORS:
/s/ Stewart Alsop
- ------------------------------- Director October 15, 1999
Stewart Alsop
/s/ John (Ian) Giffen
- ------------------------------- Director October 15, 1999
John (Ian) Giffen
/s/ Mark D. Kvamme
- ------------------------------- Director October 15, 1999
Mark D. Kvamme
/s/ Donald L. Lucas
- ------------------------------- Director October 15, 1999
Donald L. Lucas
- ------------------------------- Director October __, 1999
Roger Siboni
/s/ William B. Welty
- ------------------------------- Director October 15, 1999
William B. Welty
</TABLE>
7
<PAGE>
EXHIBIT 4.05
1992 EQUITY INCENTIVE PLAN
<PAGE>
MACROMEDIA, INC.
1992 EQUITY INCENTIVE PLAN
As Adopted September 23, 1992
and Amended Through April 1, 1999
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 15,400,000 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 (a) are natural persons; (b) render bona fide services to the
Company; and (c) the services are not in connection with the offer and sale
of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company's securities. No
"Named Executive Officer" (as that term is defined in Item 402(a)(3) of
Regulation S-K promulgated under the Exchange Act) shall be eligible to
receive more than 1,800,000 Shares at any time during the term of this Plan
pursuant to the grant of Awards hereunder. A person may be granted more than
one Award under the Plan.
<PAGE>
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.
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, including, in the case of a NQSO
and subject to the limits in
<PAGE>
Section 11 on such transfers, whether the Option or an interest therein may
be transferred during the Participant's lifetime, all 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 by the Holder 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 Holder), stating the number of Shares
being purchased, the restrictions imposed on the Shares, if any, and such
representations and agreements regarding Holder's investment intent and
access to information, if any, as may be required or desirable by the Company
to comply with applicable securities laws, together with payment in full of
the Exercise Price for the number of Shares being purchased.
5.6 TERMINATION. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option shall always be
subject to the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then Holder may exercise such Holder'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
<PAGE>
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 the Holder 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 Holder from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 LIMITATIONS ON ISOS. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year
(under the Plan or under any other incentive stock option plan of the Company
or any Affiliate, Parent or Subsidiary of the Company) shall not exceed
$100,000. If the Fair Market Value of Shares on the date of grant with
respect to which ISOs are exercisable for the first time by a Participant
during any calendar year exceeds $100,000, the Options for the first $100,000
worth of Shares to become exercisable in such calendar year shall be ISOs and
the Options for the amount in excess of $100,000 that become exercisable in
that calendar year shall be NQSOs. In the event that the Code or the
regulations promulgated thereunder are amended after the Effective Date of
the Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be automatically
incorporated herein and shall apply to any Options granted after the
effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not,
without the written consent of Participant, impair any of Participant's
rights under any Option previously granted. Any outstanding ISO that is
modified, extended, renewed or otherwise altered shall be treated in
accordance with Section 424(h) 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
<PAGE>
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 Holder's execution and delivery of the Restricted Stock Purchase
Agreement and full payment for the Shares to the Company within thirty (30)
days from the date the Restricted Stock Purchase Agreement is delivered to
the person. If such person does not execute and deliver the Restricted Stock
Purchase Agreement along with full payment for the Shares to the Company
within thirty (30) days, then the offer shall terminate, unless otherwise
determined by the Committee.
6.2 PURCHASE PRICE. The Purchase Price of Shares sold
pursuant to a Restricted Stock Award shall be determined by the Committee and
shall be at least 85% of the Fair Market Value of the Shares when the
Restricted Stock Award is granted, except in the case of a sale to a Ten
Percent Stockholder, in which case the Purchase Price shall be 100% of the
Fair Market Value. Payment of the Purchase Price may be made in accordance
with Section 8 of the Plan.
6.3 RESTRICTIONS. Restricted Stock Awards shall be subject
to such restrictions as the Committee may impose. The Committee may provide
for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or part, based on length of service,
performance or such other factors or criteria as the Committee may determine.
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
to whom a Stock Bonus shall be granted, the number of Shares to be awarded to
the Participant, whether such Shares shall be Restricted Stock and all other
terms and conditions of the Stock Bonus. If the Stock Bonus is being earned
upon the satisfaction of performance goals pursuant to a Performance Stock
<PAGE>
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 Holder
shall be entitled to payment (whether in Shares, cash or otherwise) with
respect to the Stock Bonus only to the extent earned as of the date of
Termination in accordance with the Performance Stock Bonus Agreement, unless
the Committee shall determine otherwise.
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) in the case of exercise by the Participant, Participant's guardian
or legal representative or the authorized legal representative of
Participant's heirs or legatees after Participant's death, by
cancellation of indebtedness of the Company to the Participant;
(b) by surrender of Shares that either: (1) have been owned by Holder
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 Holder
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 Holders 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;
<PAGE>
(d) in the case of exercise by the Participant, Participant's guardian
or legal representative or the authorized legal representative of
Participant's heirs or legatees after Participant's death, 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 Holder and a
broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD DEALER") whereby Holder
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 Holder and an NASD
Dealer whereby Holder irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly to the
Company; or
(g) by any combination of the foregoing.
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
Holder 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;
<PAGE>
(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 Holder shall have any of the
rights of a stockholder with respect to any Shares until the Shares are
issued to the Holder. After Shares are issued to the Holder, the Holder
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 Holder 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 as the Restricted Stock; PROVIDED, FURTHER, that the Holder
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 Holder prior to such Holder's purchase of Shares
under the Plan, and to each Holder annually during the period such Holder has
Options outstanding; PROVIDED, HOWEVER, the Company shall not be required to
provide such financial statements to Holders who are also Participants and
whose services in connection with the Company assure them access to equivalent
information.
11. TRANSFERABILITY. Except as otherwise provided in this Section
11, no Award and no interest therein may be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will and
by the laws of descent and distribution and no Award may be made subject to
execution, attachment or similar process:
(a) ALL AWARDS OTHER THE NQSO'S. All Awards other than
NQSO's shall be exercisable: (i) during the Participant's lifetime, only by
(A) the Participant, or (B) the Participant's guardian or legal
representative; and (ii) after Participant's death, by the legal
representative of the Participant's heirs or legatees; and
(b) NQSOS. Unless otherwise restricted by the Committee, an
NQSO Option shall be exercisable: (i) during the Participant's lifetime only
by (A) the Participant, (B) the Participant's guardian or legal
representative, (C) a Family Member of the Participant who has acquired the
Option by Permitted Transfer; and (ii) after Participant's death, by the
legal representative of the Participant's heirs or legatees.
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 Holder
may propose to transfer to a third party, and/or (b) a right to repurchase a
portion of or all Shares held by a Holder following the related 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) the original Purchase Price under the Award,
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
<PAGE>
the Award Agreement), at the original Purchase Price under the Award,
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
Holder's Shares, the Committee may require the Holder to deposit all
certificates, together with stock powers or other instruments of transfer
approved by the Committee, appropriately endorsed in blank, with the Company
or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend
or legends referencing such restrictions to be placed on the certificates.
Any Participant who is permitted to execute a promissory note as partial or
full consideration for the purchase of Shares under the Plan shall be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to
the Company under the promissory note; PROVIDED, HOWEVER, that the Committee
may require or accept other or additional forms of collateral to secure the
payment of such obligation and, in any event, the Company shall have full
recourse against the Participant under the promissory note notwithstanding
any pledge of the Participant's Shares or other collateral. In connection
with any pledge of the Shares, Participant shall be required to execute and
deliver a written pledge agreement in such form as the Committee shall from
time to time approve. The Shares purchased with the promissory note may be
released from the pledge on a pro-rata 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 Holders, 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 Holder 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,
<PAGE>
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 Holders), (b) a dissolution or liquidation of the Company, (c)
the sale of substantially all of the assets of the Company, or (d) any other
transaction which qualifies as a "corporate transaction" under Section 424(a)
of the Code wherein the stockholders of the Company give up all of their
equity interest in the Company (EXCEPT for the acquisition, sale or transfer
of all or substantially all of the outstanding shares of the Company), any or
all outstanding Awards may be assumed or replaced by the successor
corporation, which assumption or replacement shall be binding on all Holders.
In the alternative, the successor corporation may substitute equivalent
Awards or provide substantially similar consideration to Holders 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 Holder, substantially similar
shares or other property subject repurchase restrictions no less favorable to
the Holder.
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 Holders specifying the terms and conditions
of such termination.
18.3 OTHER TREATMENT OF AWARDS. Subject to any greater
rights granted to Holders 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
<PAGE>
grant a new Option rather than assuming an existing option, such new Option
may be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. The Plan shall become
effective on the date that it is adopted by the Board (the "EFFECTIVE DATE").
The Plan shall be approved by the stockholders of the Company (excluding
Shares issued pursuant to this Plan), consistent with applicable laws, within
twelve months before or after the Effective Date. Upon the Effective Date,
the Board may grant Awards pursuant to the Plan; PROVIDED, HOWEVER, that: (a)
no Option may be exercised prior to initial stockholder approval of the Plan;
(b) no Option granted pursuant to an increase in the number of Shares
approved by the Board shall be exercised prior to the time such increase has
been approved by the stockholders of the Company; and (c) in the event that
stockholder approval is not obtained within the time period provided herein,
all Awards granted hereunder shall be canceled, any Shares issued pursuant to
any Award shall be canceled and any purchase of Shares hereunder shall be
rescinded.
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.
<PAGE>
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"COMPANY" means Macromedia, Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the
Code, as determined by the Committee.
"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.
"FAMILY MEMBER" includes any of the following:
(a) child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
of the Participant, including any such person with such relationship to the
Participant by adoption;
(b) any person (other than a tenant or employee) sharing the
Participant's household;
<PAGE>
(c) a trust in which the persons in (a) and (b) have more than
fifty percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or the
Participant control the management of assets; or
(e) any other entity in which the persons in (a) and (b) or
the Participant own more than fifty percent of the voting interest.
"HOLDER" means the following person to the extent such person
has or controls an interest in an Award at the time in question: (a) the
Participant; (b) the Participant's guardian or legal representative; (c) a
Family Member who is a transferee of an Award from the Participant in a
Permitted Transfer, and (d) the authorized legal representative of such
person's heirs or legatees after such person's death.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5.
"OUTSIDE DIRECTOR" shall mean any director who is not (i) a
current employee of the Company or any Parent, Subsidiary or Affiliate of the
Company, (ii) a former employee of the Company or any Parent, Subsidiary or
Affiliate of the Company who is receiving compensation for prior services
(other than benefits under a tax-qualified pension plan), (iii) a current or
former officer of the Company or any Parent, Subsidiary or Affiliate of the
Company or (iv) currently receiving compensation for personal services in any
capacity, other than as a director, from the Company or any Parent,
Subsidiary or Affiliate of the Company; provided, however, that at such time
as the term "Outside Director", as used in Section 162(m) is defined in
regulations promulgated under Section 162(m) of the Code, "Outside Director"
shall have the meaning set forth in such regulations, as amended from time to
time and as interpreted by the Internal Revenue Service.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under the Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under the
Plan.
"PERMITTED TRANSFER" means, as authorized by this Plan and the
Committee in an NQSO Option, any transfer effected by the Participant during
the Participant's lifetime of an interest in such Option but only such
transfers which are by gift or domestic relations order. A Permitted
Transfer does not include any transfer for value and neither of the following
are transfers for value: (a) a transfer of under a domestic relations order
in settlement of marital property rights or (b) a transfer to an entity in
which more than fifty percent of the voting interests are owned by Family
Members or the Participant in exchange for an interest in that entity.
"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.
<PAGE>
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock, $0.001 par
value, reserved for issuance under the Plan, as adjusted pursuant to Sections
2 and 15, and any successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time
of granting of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of the Plan
with respect to a Participant, that the Participant has ceased to provide
services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military leave, or any other leave of
absence approved by the Committee, PROVIDED, that such leave is for a period
of not more than ninety (90) days, or reinstatement upon the expiration of
such leave is guaranteed by contract or statute. The Committee shall have
sole discretion to determine whether a Participant has ceased to provide
services and the effective date on which the Participant ceased to provide
services (the "TERMINATION DATE").
<PAGE>
EXHIBIT 4.06
1999 STOCK OPTION PLAN
<PAGE>
MACROMEDIA, INC.
1999 STOCK OPTION PLAN
As Adopted September 22, 1999
1. PURPOSE. The purpose of this 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 and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options. Capitalized terms not defined
in the text are defined in Section 21, if they are not otherwise defined in
other sections of this Plan.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and
16, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 600,000 Shares. Subject to Sections 2.2 and
16, Shares that are subject to: (a) issuance upon exercise of an Option but
cease to be subject to such Option for any reason other than exercise of such
Option; and (b) an Option granted hereunder but are forfeited or are
repurchased by the Company at the original issue price because the Shares are
Unvested Shares at the time of the Participant's Termination, will again be
available for grant and issuance in connection with future Options under this
Plan. At all times the Company shall reserve and keep available a sufficient
number of Shares as shall be required to satisfy the requirements of all
outstanding Options granted under this Plan.
2.2 ADJUSTMENT OF SHARES. If 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 this Plan, and (b) the Exercise
Prices of and number of Shares subject to outstanding Options, will 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 will not be issued but will
either be paid in cash at the Fair Market Value of such fraction of a Share
or will be rounded up to the nearest whole 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. Options may be granted to employees, officers,
consultants, independent contractors and advisers of the Company or any
Parent or Subsidiary of the Company; PROVIDED such consultants, contractors
and advisers (a) are natural persons; (b) render bona fide services; and (c)
the services are not in connection with the offer and sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company's securities. A person may be granted more
than one Option under this Plan. Options awarded to Insiders or other
individuals who are officers of the Company may not exceed in the aggregate
forty percent (40%) of all Shares that are reserved for grant under this Plan
and employees who are not officers of the Company, or any Parent or
Subsidiary of the Company must receive at least sixty percent (60%) of all
Shares that are reserved for grant under this Plan.
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. This Plan will be administered by
the Committee or by the Board acting as the Committee. Subject to the
general purposes, terms and conditions of this Plan,
<PAGE>
and to the direction of the Board, the Committee will have full power to
implement and carry out this Plan. Without limitation, the Committee will
have the authority to:
(a) construe and interpret this Plan, any Stock Option Agreement and
any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan or any Option;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares subject to Options;
(f) determine whether Options will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Options under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting, exercisability and payment of Options;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Option or any Stock Option
Agreement;
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the
Committee with respect to any Option will be made in its sole discretion at
the time of grant of the Option or, unless in contravention of any express
term of this Plan or Option, at any later time, and such determination will
be final and binding on the Company and on all persons having an interest in
any Option under this Plan. The Committee may delegate to one or more
officers of the Company, each of whom are a member of the Board, the
authority to grant an Option under this Plan to Participants who are not
Insiders.
5. OPTIONS. Only nonqualified stock options that do not qualify
as incentive stock options within the meaning of Code Section 422(b) may be
granted under this Plan. The Committee may grant Options to eligible persons
and will determine (i) the number of Shares subject to the Option, (ii) the
Exercise Price of the Option, (iii) the period during which the Option may be
exercised, and (iv) all other terms and conditions of the Option and subject
to the limits in Section 9, for such transfers whether the Option or any
interest therein may be transferred during the Participant's lifetime,
subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under this
Plan will be evidenced by a Stock Option Agreement. The Stock Option
Agreement will be in such form and contain such provisions (which need not be
the same for each Participant) as the Committee may from time to time
approve, and which will comply with and be subject to the terms and
conditions of this Plan.
5.2 DATE OF GRANT. The date of grant of an Option will be
the date on which the Committee makes the determination to grant the Option,
unless a later date is otherwise specified by the
<PAGE>
Committee. The Stock Option Agreement and a copy of this Plan will be
delivered to the Participant within a reasonable time after the granting of
the Option.
5.3 EXERCISE PERIOD AND EXPIRATION DATE. Options will be
exercisable within the times or upon the occurrence of events determined by
the Committee as set forth in the Stock Option Agreement governing such
Option; PROVIDED, HOWEVER, that no Option will be exercisable after the
expiration of ten (10) years from the date the Option is granted. The
Committee also may provide for Options to become exercisable at one time or
from time to time, periodically or otherwise, in such number of Shares or
percentage of Shares as the Committee determines.
5.4 EXERCISE PRICE. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less
than Fair Market Value of the Shares on the date of grant. Payment for the
Shares purchased must be made in accordance with Section 6 of this 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 purchased under such Exercise
Agreement, if any, and such representations and agreements regarding Holder's
investment intent and access to information and other matters, if any, as may
be required or desirable by the Company to comply with applicable securities
laws, together with payment in full of the Exercise Price for the number of
Shares being purchased.
5.6 TERMINATION. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Holder may exercise such Holder'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 or longer time period not
exceeding five (5) years as may be determined by the Committee,
but in any event, no later than the expiration date of the
Options.
(b) If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after
a Termination other than for cause or because of Participant's
Disability), then Holder's Options may be exercised only to the
extent that such Options would have been exercisable by Holder on
the Termination Date and must be exercised by the Holder no later
than twelve (12) months after the Termination Date (or such
shorter or longer time period not exceeding five (5) years as may
be determined by the Committee) 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 the minimum number will not prevent a Holder from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 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 a Participant, impair any of such
Participant's rights under any Option previously granted. 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
<PAGE>
Section 5.4 of this Plan for Options granted on the date the action is taken
to reduce the Exercise Price; and provided, further, that the Exercise Price
shall not be reduced below the par value of the Shares.
6. PAYMENT FOR SHARE PURCHASES.
6.1 PAYMENT. Payment for Shares purchased on exercise of an
Option may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) in case of exercise by the Participant, Participant's guardian or
legal representative or the authorized legal representative of
Participant's heirs or legatees after Participant's death, by
cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares that either: (1) have been owned by Holder
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 Holder
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 a Holder who is not an
employee 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; and provided, further, that the
portion of the Exercise Price equal to the par value of the Shares
must be paid in cash;
(d) in the case of exercise by the Participant, Participant's guardian
or legal representative or the authorized legal representative of
Participant's heirs or legatees after Participant's death, by
waiver of compensation due or accrued to the 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 the Holder and a
broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD DEALER") whereby the Holder
irrevocably elects to exercise the 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
<PAGE>
(2) through a "margin" commitment from the Holder and a NASD
Dealer whereby the Holder irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the
NASD Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the
Company; or
(g) by any combination of the foregoing.
6.2 LOAN GUARANTEES. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
7. WITHHOLDING TAXES.
7.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued
on exercise of Options granted under this Plan, the Company may require the
Holder 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. If a payment in satisfaction of
an Option is to be made in cash, such payment will be net of an amount
sufficient to satisfy federal, state, and local withholding tax requirements.
7.2 STOCK WITHHOLDING. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting
of any Option that is subject to tax withholding and the Participant is
obligated to pay the Company the amount required to be withheld, the
Committee may in its sole discretion 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. All elections by
a Holder to have Shares withheld for this purpose will be made in accordance
with the requirements established by the Committee and be in writing in a
form acceptable to the Committee
8. PRIVILEGES OF STOCK OWNERSHIP.
8.1 VOTING AND DIVIDENDS. No Holder will have any of the
rights of a stockholder with respect to any Shares until the Shares are
issued to the Holder. After Shares are issued to the Holder, the Holder will
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, however,
that if the Shares are Unvested Shares, any new, additional or different
securities the Holder may become entitled to receive with respect to the
Shares by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company will be subject to the same
restrictions as the Unvested Shares; provided, further that the Holder will
have no right to retain such dividends or distributions with respect to
Shares that are repurchased at the Holder's original Exercise Price pursuant
to Section 10.
8.2 FINANCIAL STATEMENTS. The Company will provide
financial statements to each Holder prior to such Holder's purchase of Shares
under this Plan, and to each Holder annually during the period such Holder
has Options outstanding; PROVIDED, HOWEVER, that the Company will not be
required to provide such financial statements to Holders whose services in
connection with the Company assure them access to equivalent information.
<PAGE>
9. TRANSFERABILITY. Unless otherwise restricted by the Committee,
an Option shall be exercisable: (i) during the Participant's lifetime only
by (A) the Participant, (B) the Participant's guardian or legal
representative, (c) a Family Member of the Participant who has acquired the
Option by Permitted Transfer; and (ii) after Participant's death, by the
legal representative of the Participant's heirs or legatees.
10. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Stock Option
Agreement a right to repurchase at the Holder's Exercise Price a portion of
or all Unvested Shares held by a Holder following such Participant's
Termination at any time within ninety (90) days after the later of
Participant's Termination Date and the date Holder purchases Shares under
this Plan, for cash and/or cancellation of purchase money indebtedness.
11. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will 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 or quoted.
12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Holder's Shares, the Committee may require the Holder to deposit all
certificates representing the Shares, 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 Holder who is permitted to execute a promissory note
as partial or full consideration for the purchase of Shares under this Plan
will be required to pledge and deposit with the Company all or part of the
Shares so purchased as collateral to secure the payment of Holder'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 will
have full recourse against the Holder under the promissory note
notwithstanding any pledge of the Holder's Shares or other collateral. In
connection with any pledge of the Shares, Holder will be required to execute
and deliver a written pledge agreement in such form as the Committee will
from time to time approve. The Shares purchased with the promissory note may
be released from the pledge on a pro rata basis as the promissory note is
paid.
13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the
respective Holders, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any
time buy from a Holder an Option previously granted with payment in cash,
Shares or other consideration, based on such terms and conditions as the
Committee and the Holder may agree.
14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Option will
not be effective unless such Option 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 or quoted, as they are in
effect on the date of grant of the Option and also on the date of exercise or
other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under
this 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 will 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
<PAGE>
exchange or automated quotation system, and the Company will have no
liability for any inability or failure to do so.
15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any
way the right of the Company or any Parent or Subsidiary of the Company to
terminate Participant's employment or other relationship at any time, with or
without cause.
16. CORPORATE TRANSACTIONS.
16.1 ASSUMPTION OR REPLACEMENT OF OPTIONS 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 or their relative stock holdings and the
Options granted under this Plan are assumed, converted or replaced by the
successor corporation, which assumption will be binding on all Participants),
(b) a dissolution or liquidation of the Company, (c) the sale of
substantially all of the assets of the Company, or (d) any other transaction
which qualifies as a "corporate transaction" under Section 424(a) of the Code
wherein the stockholders of the Company give up all of their equity interest
in the Company (EXCEPT for the acquisition, sale or transfer of all or
substantially all of the outstanding shares of the Company), any or all
outstanding Options may be assumed or replaced by the successor corporation,
which assumption or replacement shall be binding on all Holders. In the
alternative, the successor corporation may substitute equivalent Options or
provide substantially similar considerations to Holders as was provided to
stockholders (after taking into account the existing provisions of the
Options). The successor corporation may also issue, in place of Unvested
Shares of the Company held by Holder, substantially similar shares or other
property subject to repurchase restrictions no less favorable to the Holder.
16.2 OTHER TREATMENT OF OPTIONS. Subject to any greater
rights granted to Participants under the foregoing provisions of this Section
16, in the event of the occurrence of any transaction described in Section
16.1, any outstanding Options will be treated as provided in the applicable
agreement or plan of merger, consolidation, dissolution, liquidation, or sale
of assets.
16.3 ASSUMPTION OF OPTIONS BY THE COMPANY. The Company, from
time to time, also may substitute or assume outstanding options granted by
another company, whether in connection with an acquisition of such other
company or otherwise, by either; (a) granting an Option under this Plan in
substitution of such other company's option; or (b) assuming such option as
if it had been granted under this Plan if the terms of such assumed option
could be applied to an Option granted under this Plan. Such substitution or
assumption will be permissible if the holder of the substituted or assumed
option would have been eligible to be granted an Option under this Plan if
the other company had applied the rules of this Plan to such grant. In the
event the Company assumes an option granted by another company, the terms and
conditions of such Option will 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.
17. ADOPTION. This Plan will become effective on the date that it
is adopted by the Board (the "EFFECTIVE DATE").
<PAGE>
18. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the Effective
Date. This Plan and all agreements thereunder shall be governed by and
construed in accordance with the laws of the State of California.
19. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Stock Option Agreement or instrument to be executed
pursuant to this Plan.
20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
by the Board, nor any provision of this Plan will 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 otherwise than under this Plan, and
such arrangements may be either generally applicable or applicable only in
specific cases.
21. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"BOARD" means the Board of Directors of the Company.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means Macromedia, Inc., a corporation organized under
the laws 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 sales price on the NASDAQ National
Market 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, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in THE WALL STREET JOURNAL; or
(c) if such Common Stock is publicly traded but is not quoted on the
NASDAQ National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in THE WALL
STREET JOURNAL;
(d) if none of the foregoing is applicable, by the Board of Directors
of the Company in good faith.
<PAGE>
"FAMILY MEMBER" includes any of the following:
(a) child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
of the Participant, including any such person with such relationship to the
Participant by adoption;
(b) any person (other than a tenant or employee) sharing the
Participant's household;
(c) a trust in which the persons in (a) and (b) have more
than fifty percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or the
Participant control the management of assets; or
(e) any other entity in which the persons in (a) and (b) or
the Participant own more than fifty percent of the voting interest.
"HOLDER" means the following person: (a) the Participant; (b) the
Participant's guardian or legal representative; (c) a Family Member of the
Participant in a Permitted Transfer, and (d) the authorized legal representative
of such person's heirs or legatees after such person's death.
"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.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if 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 Option under this
Plan.
"PERMITTED TRANSFER" means, as authorized by this Plan and the
Committee in an NQSO Option, any transfer effected by the Participant during
the Participant's lifetime of an interest in such Option but only such
transfers which are by gift or domestic relations order. A Permitted
Transfer does not include any transfer for value and neither of the following
are transfers for value: (a) a transfer of under a domestic relations order
in settlement of marital property rights or (b) a transfer to an entity in
which more than fifty percent of the voting interests are owned by Family
Members or the Participant in exchange for an interest in that entity.
"PLAN" means this Macromedia, Inc. 1999 Stock Option Plan, as
amended from time to time.
"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 reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 16, and
any successor security.
<PAGE>
"STOCK OPTION AGREEMENT" means, with respect to each Option,
the signed written agreement between the Company and the Participant setting
forth the terms and conditions of the Option.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if 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 this Plan
with respect to a Participant, that the Participant has for any reason ceased
to provide services as an employee, officer, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the
Company except for 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 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute The Committee will 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").
"UNVESTED SHARES" means "Unvested Shares" as defined in the
Option Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Option
Agreement.
<PAGE>
EXHIBIT 4.07
FORM OF NON-PLAN STOCK OPTION GRANT
<PAGE>
MACROMEDIA, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered into
as of the Date of Grant set forth below (the "DATE OF GRANT") by and between
Macromedia, Inc., a Delaware corporation (the "COMPANY"), and the Optionee
named below ("OPTIONEE"). Capitalized terms not defined herein shall have the
meanings ascribed to them in the Company's 1992 Equity Incentive Plan (the
"PLAN"), as amended through April 1, 1999.
OPTIONEE:
SOCIAL SECURITY NUMBER:
TOTAL OPTION SHARES:
EXERCISE PRICE PER SHARE:
DATE OF GRANT:
VESTING START DATE:
EXPIRATION DATE:
(unless terminated earlier pursuant to Section 3 below)
1. GRANT OF OPTION. The Company hereby grants to Optionee an
option (the "OPTION") to purchase the total number of shares of Common Stock
at $0.001 par value, of the Company set forth above as Total Option Shares
(the "SHARES") at the Exercise Price Per Share set forth above (the "EXERCISE
PRICE"), subject to all of the terms and conditions of this Agreement. This
Option does not meet the incentive Stock Option requirements of Section
422(b) of the Internal Revenue Code and is intended to be a "nonqualified
stock option".
2. VESTING AND EXERCISE PERIOD.
2.1 VESTING AND EXERCISE PERIODS OF OPTION. Provided
Optionee continues to provide services to the Company or any Subsidiary,
Parent or Affiliate of the Company throughout the specified period, the
Option shall become exercisable as to 25% of the Total Option Shares on the
date twelve months after the Vesting Start Date specified above and shall be
exercisable as to an additional 2.0833% of the Total Option Shares at the end
of each full succeeding month thereafter until this Option is exercisable
with respect to 100% of the Shares.
2.2 EXPIRATION. The Option shall expire on the
earlier of Expiration Date set forth above or the last day of the applicable
post-termination exercise period set forth in Section 3.1 and 3.2 below and
must be exercised, if at all, on or before such date.
3. Termination. The following provisions shall govern the
exercise of the Option in the event Optionee is Terminated.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH OR
DISABILITY. If Optionee is Terminated for any reason, except death or
Disability, notwithstanding any other provision in this Agreement to the
contrary, the Option, to the extent that it would have been exercisable on
Optionee's Termination Date pursuant to Section 2.1 of this Agreement, may be
exercised by the Holder no later than ninety (90) days after the Termination
Date, but in any event no later than the Expiration Date.
<PAGE>
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If
Optionee is Terminated because of his of her death or Disability of Optionee,
the Option, to the extent that it is exercisable on Optionee's Termination
Date, may be exercised by the Holder no later than twelve (12) months after
the Termination Date, but in any event no later than the Expiration Date.
3.3 NO OBLIGATION TO EMPLOY. Nothing in this
Agreement shall confer on Optionee 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 Optionee's employment or
other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this
Option, the Holder must deliver to the Company an executed stock option
exercise agreement in the form attached hereto as EXHIBIT A, or in such other
form as may be approved by the Company from time to time (the "EXERCISE
AGREEMENT"), which shall set forth, INTER ALIA, Holder's election to exercise
the Option, the number of Shares being purchased, any restrictions imposed on
the Shares and any representations, warranties and agreements regarding
Holder's investment intent and access to information as may be required by
the Company to comply with applicable securities laws. If someone other than
Optionee exercises the Option, then such person must submit documentation
reasonably acceptable to the Company that such person has the right to
exercise the Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not be
exercised unless such exercise is in compliance with all applicable federal
and state securities laws, as they are in effect on the date of exercise. The
Option may not be exercised as to fewer than 100 Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be
accompanied by full payment of the Exercise Price for the Shares being
purchased in cash (by check), or where permitted by law:
(a) in case of exercise by the Optionee, by cancellation of
indebtedness of the Company to the Optionee;
(b) by surrender of shares of the Company's Common Stock that either:
(1) have been owned by the Holder 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 the Holder in the open public
market; and (3) are clear of all liens, claims, encumbrances or
security interests;
(c) in case of exercise by the Optionee, by waiver of compensation
due or accrued to Optionee for services rendered;
(d) provided that a public market for the Company's stock exists, (1)
through a "same day sale" commitment from the Holder and a
broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD DEALER") whereby the Holder
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 Optionee and a NASD Dealer
whereby Optionee irrevocably elects to
<PAGE>
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
(e) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the
Shares upon exercise of the Option, Optionee must pay or provide for any
applicable federal or state withholding obligations of the Company. If the
Committee permits, Optionee may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a
Fair Market Value equal to the minimum amount of taxes required to be
withheld. In such case, the Company shall issue the net number of Shares to
the Holder by deducting the Shares retained from the Shares issuable upon
exercise.
4.5 ISSUANCE OF SHARES. Upon the exercise of the
Option in accordance with this Section 4, the Company shall issue the Shares
registered in the name of the Holder and shall deliver certificates
representing the Shares with the appropriate legends affixed thereto.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the
Option and the issuance and transfer of Shares shall be subject to compliance
by the Company and the Holder with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock
exchange on which the Company's Common Stock may be listed at the time of
such issuance or transfer. Optionee understands that the Company is under no
obligation to register or qualify the Shares with the Securities and Exchange
Commission, any state securities commission or any stock exchange to effect
such compliance.
7. TRANSFERABILITY OF OPTION. The Option shall be
exercisable: (a) during the Optionee's lifetime only by (i) Optionee, (ii)
the Optionee's guardian or legal representative, (iii) a Family Member of the
Optionee who has acquired the Option by Permitted Transfer; and (b) after
Optionee's death, by the legal representative of the Optionee's heirs or
legatees. For purposes of this Agreement "Holder" means one of the above
persons to the extent such person has or controls an interest in the Option
at the time in question.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of
the Date of Grant of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES.
8.1 EXERCISE OF NON-QUALIFIED STOCK OPTION. Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price. The Company will
be required to withhold from Optionee's compensation or collect from Optionee
and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.
8.2 DISPOSITION OF SHARES. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of the Option, any gain realized on disposition of
the Shares will be treated as long term capital gain for federal and
California income tax purposes.
<PAGE>
9. PRIVILEGES OF STOCK OWNERSHIP. The Holder shall not have
any of the rights of a stockholder with respect to any Shares until the
Holder exercises the Option and pays the Exercise Price and is issued the
Shares following such exercise.
10. INTERPRETATION. Any dispute regarding the interpretation
of this Agreement shall be submitted by Optionee or the Company to the
Committee for review. The resolution of such a dispute by the Committee shall
be final and binding on the Company, the Optionee and the Holder an anyone
else with an interest in the Option.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties and supersede all prior undertakings and agreements
with respect to the subject matter hereof.
12. NOTICES. Any notice required to be given or delivered to
the Company under the terms of this Agreement shall be in writing and
addressed to the Corporate Secretary of the Company at its principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated above
or to such other address as such party may designate in writing from time to
time to the Company. All notices shall be deemed to have been given or
delivered upon: personal delivery; three (3) days after deposit in the United
States mail by certified or registered mail (return receipt requested); one
(1) business day after deposit with any return receipt express courier
(prepaid); or one (1) business day after transmission by facsimile.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding
upon Optionee and Optionee's heirs, executors, administrators, legal
representatives, successors and assigns and the Holder and the Holder's
heirs, executors, administrators, legal representatives, successors and
assigns.
14. GOVERNING LAW. This Agreement 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.
15. ACCEPTANCE. Optionee hereby acknowledges receipt of a copy
this Agreement. Optionee has read and understands the terms and provisions
thereof, and accepts the Option subject to all the terms and conditions of
this Agreement. Optionee acknowledges that there may be adverse tax
consequences upon exercise of the Option or disposition of the Shares and
that Optionee should consult a tax adviser prior to such exercise or
disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Optionee has
executed this Agreement in duplicate as of the Date of Grant.
MACROMEDIA, INC. OPTIONEE
By:
-------------------------- --------------------------
Betsy Nelson (Signature)
Senior Vice President and
Chief Financial Officer
<PAGE>
Exhibit A
---------
<PAGE>
MACROMEDIA, INC. STOCK OPTION EXERCISE AGREEMENT FORM
Your Full Name:___________________________ Social Security Number:_____________
Street Address: ________________________________________________________________
City, State, Zip Code/Postal Code, Country:_____________________________________
EXERCISE INSTRUCTIONS:
This shall constitute my irrevocable direction and authorization to exercise
my option to purchase the number of shares listed below of the common stock
of Macromedia, Inc. pursuant to the terms and conditions of my option
agreement. If I am selling stock in connection with this exercise, I
understand that I need to give my broker the authorization to sell the shares.
<TABLE>
<CAPTION>
Grant # Grant Date Option Type Option Price Shares Exercised
- ------ ---------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
___________________ __________ NQ / ISO ____________ ________________
___________________ __________ NQ / ISO ____________ ________________
___________________ __________ NQ / ISO ____________ ________________
___________________ __________ NQ / ISO ____________ ________________
</TABLE>
EXERCISE TYPE (SELECT ONE FOR ALL GRANTS LISTED ABOVE):
___________ Exercise and sell all of the above shares (same day sale).
___________ Exercise and hold the shares - cash purchase. Contact HR for
instructions.
___________ Other - please attach grant agreement and instructions.
Depending on the terms of your stock option agreement, there may be other
methods that you may use to purchase the shares. Please refer to your grant
agreement for those other methods.
Entire Agreement. The plan under which your option was granted and
----------------
the agreement between you and Macromedia, Inc. that evidences your stock
option are incorporated herein by reference. This Exercise Agreement, the
plan under which your option was granted and your grant agreement constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of Macromedia, Inc. and you with respect to the
subject matter hereof, and is governed by California law except for that body
of law pertaining to conflict of laws.
_____________________________ _______________________________________________
Date Signature
<PAGE>
STOCK OPTION EXERCISE SUPPLEMENT
Does not apply to international employees (please skip to account information
section)
- --------------------------------------------------------------------------------
NQ (NON-QUALIFIED) EXERCISES:
I understand that Macromedia, Inc. is required to withhold Federal (27%),
state (6% in California) and Medicare (1.45%) taxes. I have specified below if
I desire additional withholding. I acknowledge that I will also be subject to
6.2% social security and 0.5% California SDI taxes up to the calendar year
maximum.
Please withhold the following from my NQ exercise (complete only if you want
more taxes withheld than described above):
_________% Federal and _________ State OR $_________ Federal $_________ State
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ISO (INCENTIVE STOCK OPTION) EXERCISES:
Please withhold the following for my ISO exercise (please check one):
______ Withhold ______% Federal ______% State OR ______ Do not withhold taxes
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION - PLEASE COMPLETE IF YOU ARE USING A BROKER OTHER THAN BT
ALEX. BROWN:
I understand further that if I choose a broker other than BT Alex. Brown, it
is my responsibility to see that Macromedia, Inc. is notified when the trade
has occurred. Unless we are told when the shares are sold, you will not
receive your proceeds.
- --------------------------------------------------------------------------------
Account Name: __________________________________________________________________
Name of Brokerage Firm: ________________________________________________________
Address of Brokerage Firm: _____________________________________________________
_____________________________________________________
Phone: ________________ Fax: _______________ Contact Name: ___________________
Account No.: ____________________ DTC No. ______________________
- --------------------------------------------------------------------------------
Tax Consequences. YOU UNDERSTAND THAT YOU MAY SUFFER ADVERSE TAX
----------------
CONSEQUENCES AS A RESULT OF YOUR PURCHASE OR DISPOSITION OF THE SHARES. YOU
REPRESENT THAT YOU HAVE CONSULTED WITH ANY TAX CONSULTANT(S) YOU DEEM
ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND
THAT YOU ARE NOT RELYING ON MACROMEDIA, INC. FOR ANY TAX ADVICE.
_____________________________ _______________________________________________
Date Signature
<PAGE>
EXHIBIT 4.08
ESI SOFTWARE, INC. 1996 EQUITY INCENTIVE PLAN
<PAGE>
ESI SOFTWARE, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED OCTOBER 30, 1996
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to
purchase restricted stock.
(b) The Company, by means of the Plan, seeks to retain the services
of persons who are now Employees or Directors of or Consultants to the
Company or its Affiliates, to secure and retain the services of new
Employees, Directors and Consultants, and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated pursuant to
subsection 3(c), be either (i) Options granted pursuant to Section 6,
including Incentive Stock Options and Nonstatutory Stock Options, or (ii)
stock bonuses or rights to purchase restricted stock granted pursuant to
Section 7. All Options shall be separately designated Incentive Stock
Options or Nonstatutory Stock Options at the time of grant, and in such form
as issued pursuant to Section 6, and a separate certificate or certificates
will be issued for shares purchased on exercise of each type of Option.
Further the Company intends that Stock Awards issued under the Plan shall
comply with the provisions of Rule 701 promulgated by the Securities and
Exchange Commission under the Securities Act and are also intended to be
exempt from the securities qualification requirements of the California
Corporations Code pursuant to Section 25102(o) of that code.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "COMPANY" means ESI Software, Inc., a California corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who
are not compensated by the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT"
means that the service of an individual to the Company, whether as an
Employee, Director or Consultant, is not interrupted or terminated. The
Board or the chief executive officer of the Company may determine, in that
party's sole
<PAGE>
discretion, whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board or the chief executive officer of the Company,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between the Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange
Act, as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as
a Director nor payment of a director's fee by the Company shall be sufficient
to constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company determined as follows and in each case in a
manner consistent with Section 260.140.50 of Title 10 of the California Code
of Regulations:
(i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Company's common stock) on the last market
trading day prior to the day of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable.
(ii) In the absence of such markets for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(n) "LISTING DATE" means the first date upon which any security of
the Company is listed (or approved for listing) upon notice of issuance on
any securities exchange, or designated (or approved for designation) upon
notice of issuance as a national market security on an interdealer quotation
system if such securities exchange or interdealer quotation system has been
certified in accordance with the provisions of Section 25100(o) of the
California Corporate Securities Law of 1968.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not
a current Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the Company or
its parent or subsidiary for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee
director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
<PAGE>
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(v) "PLAN" means this 1996 Equity Incentive Plan.
(w) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company at the time
discretion is being exercised regarding the Plan.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(y) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus and any right to purchase restricted stock.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be subject
to the terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; whether a Stock Award will be an Incentive
Stock Option, a Nonstatutory Stock Option, a stock bonus, a right to purchase
restricted stock, or a combination of the foregoing; the provisions of each
Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award shall be
granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations
for its administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 13.
<PAGE>
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests
of the Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a
committee of the Board composed of not fewer than two (2) members (the
"Committee"), all of the members of which Committee may be, in the discretion
of the Board, Non-Employee Directors and/or Outside Directors. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee of
two (2) or more Outside Directors any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to the Board
shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration
of the Plan. Additionally, prior to the Listing Date, and notwithstanding
anything to the contrary contained herein, the Board may delegate
administration of the Plan to any person or persons and the term "Committee"
shall apply to any person or persons to whom such authority has been
delegated. Notwithstanding anything in this Section 3 to the contrary, the
Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Stock Awards to eligible persons who (1) are
not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at
the time of recognition of income resulting from such Stock Award, or (ii)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate forty-three million nine hundred
ninety-seven thousand one hundred forty-three (43,997,143) shares of the
Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in
full, the stock not acquired under such Stock Award shall revert to and again
become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Stock Awards other than Incentive Stock Options may be granted only to
Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Option or an
award to purchase restricted stock if, at the time of grant, such person owns
(or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or of any of its Affiliates unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair Market
Value of such stock at the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant, or in the case
of a restricted stock purchase award, the purchase price is at least one
hundred percent (100%) of the Fair Market Value of such stock at the date of
grant.
(c) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than three hundred thousand (300,000) shares of the Company's
common stock in any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, shall not apply
until (i) the earliest of: (A) the first material
<PAGE>
modification of the Plan (including any increase to the number of shares
reserved for issuance under the Plan in accordance with Section 4); (B) the
issuance of all of the shares of common stock reserved for issuance under the
Plan; (C) the expiration of the Plan; or (D) the first meeting of
shareholders at which directors are to be elected that occurs after the close
of the third calendar year following the calendar year in which occurred the
first registration of an equity security under section 12 of the Exchange
Act; or (ii) such other date required by Section 162(m) of the Code and the
rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted; the exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the Option on
the date the Option is granted. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of
the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is exercised, or
(ii) at the discretion of the Board or the Committee, at the time of the
grant of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of
other common stock of the Company) with the person to whom the Option is
granted or to whom the Option is transferred pursuant to subsection 6(d), or
(C) in any other form of legal consideration that may be acceptable to the
Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Option shall not be transferable except by
will or by the laws of descent and distribution, and shall be exercisable
during the lifetime of the person to whom the Option is granted only by such
person. The person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a
third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to
that period, and may be exercised with respect to some or all of the shares
allotted to such period and/or any prior period as to which the Option became
vested but was not fully exercised. The Option may be subject to such other
terms and conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem
<PAGE>
appropriate. The vesting provisions of individual Options may vary but in
each case will provide for vesting of at least twenty percent (20%) per year
of the total number of shares subject to the Option. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three
(3) months following the termination of the Optionee's Continuous Status as
an Employee, Director or Consultant (or such longer or shorter period, which
shall not be less than thirty (30) days, specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option
shall terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise
of the Option following the termination of the Optionee's Continuous Status
as an Employee, Director, or Consultant (other than upon the Optionee's death
or disability) would result in liability under Section 16(b) of the Exchange
Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the Option Agreement, or (ii) the tenth
(10th) day after the last date on which such exercise would result in such
liability under Section 16(b) of the Exchange Act. Finally, an Optionee's
Option Agreement may also provide that if the exercise of the Option
following the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (other than upon the Optionee's death or disability)
would be prohibited at any time solely because the issuance of shares would
violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of
the Option set forth in the first paragraph of this subsection 6(f), or (ii)
the expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such
registration requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer or
shorter period, which in no event shall be less than six (6) months,
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option Agreement after the
termination of, the Optionee's Continuous Status as an Employee, Director or
Consultant, the Option may be exercised (to the extent the Optionee was
entitled to exercise the Option as of the date of death) by the Optionee's
estate, by a person who acquired the right to exercise the Option by bequest
or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period
ending on the earlier of (i) the date eighteen (18) months following the date
of death (or such longer or shorter period, which in no event shall be less
than six (6) months, specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement.
If, at the time of death, the Optionee was not entitled to
<PAGE>
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all of the
shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased shall be subject to a repurchase right in favor
of the Company, with the repurchase price to be equal to the original
purchase price of the stock, or to any other restriction the Board determines
to be appropriate; PROVIDED, HOWEVER, that (i) the right to repurchase at the
original purchase price shall lapse at a minimum rate of twenty percent (20%)
per year over five (5) years from the date the Option was granted, and (ii)
such right shall be exercisable only within (A) the ninety (90) day period
following the termination of employment or the relationship as a Director or
Consultant, or (B) such longer period as may be agreed to by the Company and
the Optionee (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code (regarding "qualified small business stock")),
and (iii) such right shall be exercisable only for cash or cancellation of
purchase money indebtedness for the shares. Should the right of repurchase
be assigned by the Company, the assignee shall pay the Company cash equal to
the difference between the original purchase price and the stock's Fair
Market Value if the original purchase price is less than the stock's Fair
Market Value.
(j) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, or prior
to the occurrence of an event constituting a "Change in Control" as defined
in subsection 12(b) of the Plan, to repurchase all or any part of the vested
shares exercised pursuant to the Option; PROVIDED, HOWEVER, that (i) such
repurchase right shall be exercisable only within (A) the ninety (90) day
period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), (ii) such repurchase right shall be exercisable for less
than all of the vested shares only with the Optionee's consent, and (iii)
such right shall be exercisable only for cash or cancellation of purchase
money indebtedness for the shares at a repurchase price equal to the greater
of (A) the stock's Fair Market Value at the time of such termination or (B)
the original purchase price paid for such shares by the Optionee.
(k) RIGHT OF FIRST REFUSAL. The Option may, but need not, include
a provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the
Optionee of the intent to transfer all or any part of the shares exercised
pursuant to the Option.
(l) RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options hereunder,
the Board or Committee shall have the authority (but not an obligation) to
include as part of any Option Agreement a provision entitling the Optionee to
a further Option (a "Re-Load Option") in the event the Optionee exercises the
Option evidenced by the Option agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this Plan and
the terms and conditions of the Option Agreement. Any such Re-Load Option
(i) shall be for a number of shares equal to the number of shares surrendered
as part or all of the exercise price of such Option; (ii) shall have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (iii) shall have an
exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load
Option which is granted to a 10% shareholder (as described in subsection
5(b)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
<PAGE>
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the
time of the grant of the original Option; PROVIDED, HOWEVER, that the
designation of any Re-Load Option as an Incentive Stock Option shall be
subject to the one hundred thousand dollar ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subsection 12(e) of
the Plan and in Section 422(d) of the Code. There shall be no Re-Load
Options on a Re-Load Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and the limits on the
grants of Options under subsection 5(c) and shall be subject to such other
terms and conditions as the Board or Committee may determine which are not
inconsistent with the express provisions of the Plan regarding the terms of
Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall
the purchase price be less than eighty-five percent (85%) of the stock's Fair
Market Value on the date such award is made. Notwithstanding the foregoing,
the Board or the Committee may determine that eligible participants in the
Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(b) TRANSFERABILITY. Rights under a stock bonus or restricted
stock purchase agreement shall be transferable by the grantee only upon such
terms and conditions as are set forth in the applicable Stock Award
Agreement, as the Board or the Committee shall determine in its discretion,
so long as stock awarded under such Stock Award Agreement remains subject to
the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant
to a stock purchase agreement shall be paid either: (i) in cash at the time
of purchase; (ii) at the discretion of the Board or the Committee, according
to a deferred payment or other arrangement with the person to whom the stock
is sold; or (iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in its discretion. Notwithstanding
the foregoing, the Board or the Committee to which administration of the Plan
has been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee. The applicable agreement shall provide (i) that the right to
repurchase at the original purchase price (or, in the case of a stock bonus,
Fair Market Value on the grant date) shall lapse at a minimum rate of twenty
percent (20%) per year over five (5) years from the date the Stock Award was
granted, and (ii) such right shall be exercisable only (A) within the ninety
(90) day period following the termination of employment or the relationship
as a Director or Consultant, or (B) such longer period as may be agreed to by
the Company and the holder of the Stock Award (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")), and (iii) such right shall be exercisable
only for cash or cancellation of purchase money indebtedness for the shares.
Should the right of repurchase be assigned by the Company, the assignee shall
pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the original purchase price is
less than the stock's Fair Market Value.
<PAGE>
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or
all of the shares of stock held by that person which have not vested as of
the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.
(f) RIGHT OF REPURCHASE. The stock bonus or restricted stock
purchase agreement may, but need not, include a provision whereby the Company
may elect, prior to the Listing Date, or prior to the occurrence of an event
constituting a "Change in Control" as defined in subsection 12(b) of the
Plan, to repurchase all or any part of the vested shares received pursuant to
the stock bonus or restricted stock purchase agreement; PROVIDED, HOWEVER,
that (i) such repurchase right shall be exercisable only within (A) the
ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, or (B) such longer period as may be
agreed to by the Company and the grantee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")), (ii) such repurchase right shall be
exercisable for less than all of the vested shares only with the grantee's
consent, and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares at a repurchase
price equal to the greater of (A) the stock's Fair Market Value at the time
of such termination or (B) the original purchase price paid for such shares
by the grantee (or in the case of a stock bonus, Fair Market Value on the
grant date).
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect,
at any time and from time to time, (i) the repricing of any outstanding
Options under the Plan and/or (ii) with the consent of the affected holders
of Options, the cancellation of any outstanding Options under the Plan and
the grant in substitution therefor of new Options under the Plan covering the
same or different numbers of shares of stock, but having an exercise price
per share not less than eighty-five percent (85%) of the Fair Market Value
(one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option) or, in the case of a 10% shareholder (as described in
subsection 5(b)), not less than one hundred ten percent (110%) of the Fair
Market Value) per share of stock on the new grant date. Notwithstanding the
foregoing, the Board or the Committee may grant an Option with an exercise
price lower than that set forth above if such Option is granted as part of a
transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall
be deemed to be a cancellation of the original Option and the grant of a
substitute Option; in the event of such repricing, both the original and the
substituted Options shall be counted against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The
provisions of this subsection 8(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may
be required to issue and sell shares of stock upon exercise of the Stock
Award; provided, however, that this undertaking shall not require the Company
to register under the Securities Act either the Plan, any Stock Award or any
stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful
<PAGE>
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. MISCELLANEOUS.
(a) Subject to any applicable provisions of the California
Corporate Securities Law of 1968 and related regulations relied upon as a
condition of issuing securities pursuant to the Plan, the Board shall have
the power to accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will
vest pursuant to subsection 6(e) or 7(d), notwithstanding the provisions in
the Stock Award stating the time at which it may first be exercised or the
time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to
whom a Stock Award is transferred under subsection 6(d) or 7(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such
person has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.
(c) Throughout the term of any Stock Award, the Company shall
deliver to the holder of such Stock Award, not later than one hundred twenty
(120) days after the close of each of the Company's fiscal years during the
term of such Stock Award, a balance sheet and an income statement. This
subsection shall not apply (i) after the Listing Date, or (ii) when issuance
is limited to key employees whose duties in connection with the Company
assure them access to equivalent information. The Company shall comply with
other information delivery requirements as applicable, including, but not
limited to, Rule 428 of the Securities Act.
(d) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without cause the right of the Company's
Board of Directors and/or the Company's shareholders to remove any Director
as provided in the Company's By-Laws and the provisions of the California
Corporations Code, or the right to terminate the relationship of any
Consultant subject to the terms of such Consultant's agreement with the
Company or Affiliate.
(e) To the extent that the aggregate Fair Market Value (determined
at the time of grant) of stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed
such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(b), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters, and that such person is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
Stock Award for such person's own account and not with any present intention
of selling or otherwise distributing the stock.
<PAGE>
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered
under a then currently effective registration statement under the Securities
Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may,
upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order
to comply with applicable securities laws, including, but not limited to,
legends restricting the transfer of the stock.
(g) To the extent provided by the terms of a Stock Award Agreement,
the person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination
of such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the
Stock Award; or (3) delivering to the Company owned and unencumbered shares
of the common stock of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s)
and number of securities and price per share of stock subject to such
outstanding Stock Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company".)
(b) In the event of any (1) merger or consolidation in which the
Corporation is not the surviving corporation, (2) a reverse merger in which
the Corporation is the surviving corporation but the shares of the
Corporation's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, (3) any other capital reorganization in which
none of the owners of the Company's Series A or Series B preferred stock
prior to such capital reorganization remains an owner of such preferred stock
after such capital reorganization and such capital reorganization involves at
least fifty percent (50%) or more of the Corporation's shares entitled to
vote (and in each case the beneficial ownership of more than fifty percent
(50%) of the shares of the Corporation entitled to vote after such merger,
consolidation, or other capital reorganization is held by persons who did not
hold beneficial ownership, directly or indirectly, of such shares prior to
such merger, consolidation, or other capital reorganization), (4) a
transaction or group of related transactions involving the sale of all or
substantially all of the Corporation's assets, or (5) a dissolution,
liquidation or sale of all or substantially all of the assets of the Company
(any of which five categories of transactions shall be defined as a "Change
in Control") then: (i) any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration
paid to the shareholders in the transaction described in this subsection
12(b)) for those outstanding under the Plan, or (ii) in the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, the vesting of such Stock Awards (and, if applicable, the time during
which such Stock Awards may be exercised) shall be accelerated prior to such
event and accelerated Options terminated if not exercised after such
acceleration and at or prior to such event. The provisions of this
subsection 12(b) shall not
<PAGE>
prohibit the Board or the Committee from providing for further provisions
addressing the treatment of a Stock Award upon the occurrence of a Change in
Control and setting forth such additional provisions in such Stock Award
agreement; provided however, that such additional provisions shall not be
directly in conflict with the provisions of this subsection 12(b).
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
shareholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
shareholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires shareholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment
to the Plan for shareholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m)
of the Code and the regulations promulgated thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible
Employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the
terms of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on October 29, 2006, which
shall be within ten (10) years from the date the Plan is adopted by the Board
or approved by the shareholders of the Company, whichever is earlier. No
Stock Awards may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the written consent of the person to whom the Stock Award
was granted.
<PAGE>
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised and no shares of the
Company's common stock subject to other Stock Awards shall be sold, disposed,
or otherwise transferred unless and until the Plan has been approved by the
shareholders of the Company, which approval shall be within twelve (12)
months before or after the date the Plan is adopted by the Board.
<PAGE>
EXHIBIT 5.01
OPINION OF FENWICK & WEST LLP
<PAGE>
October 18, 1999
Macromedia, Inc.
600 Townsend Street
San Francisco, CA 94103
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form
S-8 (the "REGISTRATION STATEMENT") to be filed by you with the Securities and
Exchange Commission (the "COMMISSION") on or about October 18, 1999 in
connection with the registration under the Securities Act of 1933, as
amended, of an aggregate of 3,090,010 shares of your Common Stock (the
"STOCK") to be sold by you pursuant to (a) options for up to 2,100,000 shares
of Stock outstanding under your 1992 Equity Incentive Plan (the "1992 PLAN");
(b) options for up to 182,000 shares of Stock outstanding under your 1999
Stock Option Plan (the "1999 PLAN"); (c) options for up to 418,000 shares of
Stock to be granted by you under the 1999 Plan; (d) options for 275,000
shares of Stock outstanding that were granted outside of your option plans
(the "Non-Plan Options"); and (e) options for up to 115,010 shares of Stock
subject to issuance by you upon the exercise of outstanding stock options of
ESI Software, Inc. ("ESI") under ESI's 1996 Equity Incentive Plan (the "ESI
Plan") that have been assumed by you (the "Assumed Options"), pursuant to the
Agreement and Plan of Reorganization dated as of July 8, 1999, as amended,
among you, ESI and Dynamo Acquisition Corp., your wholly-owned subsidiary
(the "Merger Agreement").
In rendering this opinion, we have examined the following:
(1) the 1992 Plan and the forms of Stock Option Grant, Exercise
Agreement and related documents used by you in connection with
such plan;
(2) the 1999 Plan and the forms of Stock Option Grant, Exercise
Agreement and related documents used by you in connection with
such plan;
(3) the ESI Plan and the related stock option agreements;
(4) the stock option agreements governing the Non-Plan Options;
(5) the Registration Statement, together with the Exhibits filed
as a part thereof;
(6) the Prospectuses prepared in connection with the Registration
Statement;
(7) the Merger Agreement;
(8) the minutes (including draft minutes) of meetings and actions
by written consent of the stockholders and Board of Directors
that are contained in your minute books in our possession;
(9) a Management Certificate addressed to us and dated of even
date herewith executed by the Company containing certain
factual representations;
(10) your registration statement on Form 8-A (File Number 00022688)
filed with the Commission on October 22, 1993, as amended on
Form 8-A/A filed with the Commission on October 5, 1999; and
(11) the stock records that you have provided to us (consisting of
a verification letter from your transfer agent dated October
14, 1999 verifying the number of your issued and outstanding
shares of capital stock and a list of option holders
respecting your capital stock that was prepared by you and
dated October 15, 1999.
<PAGE>
We have also confirmed the continued effectiveness of your
registration under the Securities Exchange Act of 1934, as amended, by
telephone call to the offices of the Commission, and have confirmed your
eligibility to use Form S-8.
In our examination of documents for purposes of this opinion, we
have assumed, and express no opinion as to, the genuineness of all signatures
on original documents, the authenticity and completeness of all documents
submitted to us as originals, the conformity to originals and completeness of
all documents submitted to us as copies, the lack of any undisclosed
termination, modification, waiver or amendment to any document reviewed by us
and the due authorization and execution and delivery of all documents where
due authorization and execution and delivery are prerequisites to the
effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied
solely upon our examination of the documents referred to above and have
assumed the current accuracy and completeness of the information obtained
from public officials and records included in the documents referred to
above. We have made no independent investigations or other attempts to verify
the accuracy of any of such information or to determine the existence or
non-existence of any other factual matters; HOWEVER, we are not aware of any
facts that would lead us to believe that the opinion expressed herein is not
accurate.
We are admitted to practice law in the State of California, and we
express no opinion herein with respect to the application or effect of the
laws of any jurisdiction other than the existing laws of the United States of
America and the State of California and (without reference to case law or
secondary sources) the existing Delaware General Corporation Law.
Based upon the foregoing, it is our opinion that (a) the up to
2,100,000 shares of Stock to be issued and sold by you pursuant to the stock
options granted under the 1992 Plan, when issued and sold in accordance with
the manner referred to in the relevant Prospectus associated with the
Registration Statement, the 1992 Plan and accompanying stock option
agreements; (b) the up to 182,000 shares of Stock to be issued and sold by
you pursuant to the stock options granted under the 1999 Plan, when issued
and sold in accordance with the manner referred to in the relevant Prospectus
associated with the Registration Statement, the 1999 Plan and accompanying
stock option agreements; (c) the up to 418,000 shares of Stock to be issued
and sold by you pursuant to the stock options to be granted under the 1999
Plan, when issued and sold in accordance with the manner referred to in the
relevant Prospectus associated with the Registration Statement, the 1999 Plan
and accompanying stock option agreements; (d) the up to 275,000 shares of
Stock to be issued and sold by you pursuant to the Non-Plan Options, when
issued and sold in accordance with the manner referred to in the relevant
Prospectus associated with the Registration Statement and the stock option
agreements governing the Non-Plan Options; and (e) the up to 115,010 shares
of Stock to be issued and sold by you upon the exercise of the Assumed
Options, when issued and sold in accordance with the manner referred to in
the relevant Prospectus associated with the Registration Statement, the ESI
Plan and the stock option agreements entered into thereunder will be validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us, if any,
in the Registration Statement, the Prospectus constituting a part thereof and
any amendments thereto.
This opinion speaks only as of its date and is intended solely for
your use as an exhibit to the Registration Statement for the purpose of the
above sale of the Stock and is not to be relied upon for any other purpose.
Very truly yours,
/s/ FENWICK & WEST LLP
<PAGE>
EXHIBIT 23.02
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Macromedia, Inc.
We consent to incorporation herein by reference in this registration
statement on Form S-8 of our reports dated April 30, 1999, relating to the
consolidated balance sheets of Macromedia, Inc. and subsidiaries as of March
31, 1999 and 1998, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
March 31,1999, and the related consolidated financial statement schedule,
which reports appear in the March 31, 1999 Annual Report on Form 10-K of
Macromedia, Inc.
/s/ KPMG
San Francisco, California
October 15, 1999
