MACROMEDIA INC, DEF 14A, 2000-06-30

MACROMEDIA INC
DEF 14A, 2000-06-30
PREPACKAGED SOFTWARE

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<PAGE>
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12

MACROMEDIA, INC.
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>

Payment of Filing Fee (Check the appropriate box):

<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
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(1) Amount Previously Paid:
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[LOGO]

June 30, 2000

To Our Stockholders:

You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Macromedia, Inc. to be held at 600 Townsend Street, San Francisco,
California, on Friday, August 11, 2000, at 1:00 p.m. P.D.T.

The matters expected to be acted upon at the meeting are described in detail
in the following Notice of Annual Meeting of Stockholders and Proxy Statement.

It is important that you use this opportunity to take part in the affairs of
Macromedia by voting on the business to come before this meeting. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.

We look forward to seeing you at the meeting.

Sincerely,

[LOGO]

Elizabeth A. Nelson
CHIEF FINANCIAL OFFICER AND SECRETARY
<PAGE>
MACROMEDIA, INC.
600 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94103

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Our Stockholders:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Macromedia, Inc. (the "Company") will be held at 600 Townsend Street, San
Francisco, California, on Friday, August 11, 2000, at 1:00 p.m. P.D.T. for the
following purposes:

1. To elect directors of the Company, each to serve until the next Annual
Meeting of Stockholders and until his successor has been elected and
qualified or until his earlier resignation or removal. The Company's Board
of Directors intends to present the following nominees for election as
directors:

<TABLE>
<S> <C>
Robert K. Burgess Donald L. Lucas
John (Ian) Giffen Alan Ramadan
Mark D. Kvamme William B. Welty
</TABLE>

2. To consider and vote upon a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to increase the number of shares of
the Company's Common Stock authorized thereunder by 120,000,000 shares, from
80,000,000 shares to 200,000,000 shares.

3. To consider and vote upon a proposal to amend the Company's 1992 Equity
Incentive Plan to increase the number of shares reserved for issuance
thereunder by 2,200,000 shares, from 15,400,000 shares to 17,600,000 shares.

4. To consider and vote upon a proposal to amend the Company's 1993 Employee
Stock Purchase Plan to increase the number of shares reserved for issuance
thereunder by 350,000 shares, from 800,000 shares to 1,150,000 shares.

5. To ratify the selection of KPMG LLP as independent auditors for the Company
for the current fiscal year.

6. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.

Only stockholders of record at the close of business on June 19, 2000 are
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.

By Order of the Board of Directors

[LOGO]

Elizabeth A. Nelson
CHIEF FINANCIAL OFFICER AND SECRETARY

San Francisco, California
June 30, 2000

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
MACROMEDIA, INC.

600 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94103
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PROXY STATEMENT
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JUNE 30, 2000

The accompanying proxy is solicited on behalf of the Board of Directors of
Macromedia, Inc., a Delaware corporation (the "Company" or "Macromedia"), for
use at the Annual Meeting of Stockholders of the Company to be held at 600
Townsend Street, San Francisco, California, on Friday, August 11, 2000 at 1:00
p.m. P.D.T. (the "Meeting"). Only holders of record of the Company's Common
Stock at the close of business on June 19, 2000 will be entitled to vote at the
Meeting. At the close of business on June 19, 2000 (the "Record Date"), the
Company had 51,927,141 shares of Common Stock outstanding and entitled to vote.
A majority of the shares outstanding on the Record Date will constitute a quorum
for the transaction of business. This Proxy Statement and the accompanying form
of proxy were first mailed to stockholders on or about June 30, 2000. An Annual
Report on Form 10-K and an annual report to stockholders, in each case, for the
fiscal year ended March 31, 2000 are enclosed with this Proxy Statement.

VOTING RIGHTS AND SOLICITATION OF PROXIES

Holders of the Company's Common Stock are entitled to one vote for each
share held as of the above record date. Shares of Common Stock may not be voted
cumulatively.

Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors. Proposal No. 2 requires for
approval the affirmative vote of the majority of shares of Common Stock issued
and outstanding as of the Record Date. Proposals No. 3, 4 and 5 require for
approval the affirmative vote of the majority of shares of Common Stock present
in person or represented by proxy at the Meeting and entitled to vote on such
proposals. All votes will be tabulated by the inspector of election appointed
for the Meeting who will separately tabulate, for each proposal, affirmative and
negative votes, abstentions and broker non-votes. Abstentions will be counted
towards a quorum and will have the same effect as negative votes with regard to
Proposals No. 2, 3, 4 and 5. Broker non-votes will also be counted towards a
quorum and will have the same effect as negative votes with respect to Proposal
No. 2 but will not be counted for any purpose in determining whether any other
proposal has been approved.

The expenses of soliciting proxies to be voted at the Meeting will be paid
by the Company. Following the original mailing of the proxies and other
soliciting materials, the Company and/or its agents may also solicit proxies by
mail, telephone, telegraph, electronic means or in person. The Company has
retained a proxy solicitation firm, Corporate Investor Communications, to aid in
the solicitation process and will pay a fee of approximately $5,500 to such firm
for such services. Following the original mailing of the proxies and other
soliciting materials, the Company will request that brokers, custodians,
nominees and other record holders of the Company's Common Stock forward copies
of the proxy and other soliciting materials to persons for whom they hold shares
of Common Stock and request authority for the exercise of proxies. In such
cases, the Company, upon the request of the record holders, will reimburse such
holders for their reasonable expenses.

REVOCABILITY OF PROXIES

Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the vote
pursuant to the proxy. A proxy may be revoked by a writing delivered to the
Company stating that the proxy is revoked, by a subsequent proxy that is signed
by the person who signed the earlier proxy and is presented at the Meeting or by
attendance at the Meeting and voting in person. Please note, however, that if a
stockholder's shares are held of record by a broker, bank or other nominee and
that stockholder wishes to vote at the Meeting, the stockholder must bring to
the Meeting a letter from the broker, bank or other nominee confirming that
stockholder's beneficial ownership of the shares.
<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS

At the Meeting, stockholders will elect directors to hold office until the
next Annual Meeting of Stockholders and until their respective successors have
been elected and qualified or until such directors' earlier resignation or
removal. Six nominees will be elected at the Meeting to be the six directors of
the Company. Shares represented by the accompanying proxy will be voted for the
election of the six nominees recommended by the Company's Board unless the proxy
is marked in such a manner as to withhold authority so to vote. If any nominee
for any reason is unable to serve or for good cause will not serve, the proxies
may be voted for such substitute nominee as the proxy holder may determine. The
Company is not aware of any nominee who will be unable to or for good cause will
not serve as a director.

DIRECTORS/NOMINEES

The names of the nominees, and certain information about them as of June 19,
2000, are set forth below:

<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
-------------------------------------------------- -------- --------------------------------------------- --------
<S> <C> <C> <C>
Robert K. Burgess................................. 42 Chairman and Chief Executive Officer of the 1996
Company
John (Ian) Giffen (2)(3).......................... 42 Independent Consultant to software companies 1997
Mark D. Kvamme (2)(3)............................. 39 Partner at Sequoia Capital; Director of 1998
marchFirst, Inc.
Donald L. Lucas (1)(2)............................ 70 Venture Capitalist 1992
Alan Ramadan...................................... 42 President and Chief Executive Officer of 1999
Quokka Sports Inc.
William B. Welty (1).............................. 58 President and Chief Executive Officer of 1993
agincourt partners, llc
</TABLE>

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(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

(3) Member of the Nominating Committee.

Each of the director nominees listed above was elected to be a director at
the Company's Annual Meeting of Stockholders held on July 29, 1999, except for
Mr. Ramadan, who was appointed by unanimous written consent of the Board of
Directors on December 1, 1999.

Mr. Burgess has been Chief Executive Officer and a director of the Company
since November 1996 and has served as Chairman of the Board since July 1998.
Prior to joining the Company, Mr. Burgess was Senior Vice President of Silicon
Graphics, Inc., responsible for the Silicon Interactive Strategic Business Unit.
Prior to this position, he was President of Alias/Wavefront, a wholly-owned
independent software subsidiary of Silicon Graphics, created from the 1995
merger of Alias Research, Inc., and Wavefront Technologies, Inc. From 1992 to
1995, he was President, Chief Executive Officer, Chief Operating Officer and a
director of Alias Research. Prior to joining Alias Research, Mr. Burgess held a
number of senior management positions at Silicon Graphics, including Vice
President of Marketing, Applications and Business Development (1991), Vice
President of Applications (1990) and President of Silicon Graphics
Canada, Inc., (1984-90). A Canadian, Mr. Burgess earned a Bachelors degree in
Commerce from McMaster University. Mr. Burgess is also a director of Paraform
Technologies, Inc and Stan Lee Media, Inc.

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Mr. Giffen has been a director of the Company since July 1997. Mr. Giffen is
currently serving as an independent consultant to software and venture capital
companies, which he has done since October 1996. Mr. Giffen has also held senior
positions with various technology-related companies since 1986, including
serving as Vice President, Finance and Chief Financial Officer of Algorithmics
Incorporated, a developer of risk management software, from February 1996
through September 1996, and Vice President, Finance and Chief Financial Officer
of Alias Research Inc., a developer of advanced graphics software, from
January 1992 until January 1996. Mr. Giffen holds a degree in Business
Administration from the University of Strathclyde (Scotland) and is a member of
the Canadian Institute of Chartered Accountants and the Institute of the
Chartered Accountants of Scotland. Mr. Giffen is also a director of Delano
Technology Corporation.

Mr. Kvamme has been a director of the Company since July 1998. Mr. Kvamme
has been a partner at Sequoia Capital, a venture capital firm, since 1999. In
addition, Mr. Kvamme has been a director of marchFirst, Inc. since March 2000.
Prior to March 2000, Mr. Kvamme served as a Chairman of the Board and a director
of USWeb Corporation, a professional services firm that was acquired by
marchFirst in March 2000. In 1989, Mr. Kvamme became a Partner in CKS Group and
from 1991 until December 1998 served as the Chairman of its Board and its Chief
Executive Officer. USWeb Corporation acquired CKS Group in November 1998. Prior
to joining CKS Group, Mr. Kvamme held management and marketing positions at Wyse
Technology, Inc., a terminal and personal computer manufacturer, International
Solutions, Inc., a computer products distributor, and Apple Computer, a personal
computer manufacturer. Mr. Kvamme holds a Bachelor of Arts degree in French
Economics and Literature from the University of California at Berkeley.

Mr. Lucas has been a director of the Company since March 1992. Mr. Lucas
served as a director of Authorware from July 1988 until the formation of the
Company in March 1992. Since 1967, Mr. Lucas has been actively engaged in
venture capital activities as a private individual. Mr. Lucas holds a Bachelor
of Arts degree in economics and a Master of Business Administration from
Stanford University. Mr. Lucas is also a director of Cadence Design
Systems, Inc., Coulter Pharmaceutical, Inc., Oracle Systems Corporation, Preview
Systems, Inc., Transcend Services, Inc. and Tricord Systems, Inc.

Alan S. Ramadan has been a director of the Company since December 1999.
Mr. Ramadan has served as the President and Chief Executive Officer and as a
director of Quokka Sports Inc. since August 1996, when it was incorporated in
Delaware under the name Quokka Productions, Inc. Additionally, Mr. Ramadan
served as Managing Director of Quokka Sports Inc. from 1990 to August 1996,
during which period it was known as Ozware Developments Unit Trust and operated
in Australia. In January 1993, Mr. Ramadan joined Fluid Thinking, Pty. Ltd. in
Melbourne, Australia as that company's Chief Executive Officer until June 1995.
As Chief Executive Officer of Fluid Thinking, Pty. Ltd., Mr. Ramadan was
responsible for drawing together a team of specialists that, together with the
Technology Foundation, developed key technology used by oneAustralia in the
America's Cup challenge. Mr. Ramadan also founded Best Knowledge Systems, a
consulting company, and worked as a research scientist at BHP Steel and as a
computer scientist at Monash University in Melbourne, Australia. Mr. Ramadan
holds a B.S. in Computer Science and Applied Mathematics from Monash University
and is a 1995 graduate of the Stanford Business School's Executive Program for
Growing Companies.

Mr. Welty has been a director of the Company since April 1993. Mr. Welty
served as a director of MacroMind and its successor, Macromind/Paracomp, from
April 1991 to March 1992. Since April 1997, Mr. Welty has been President and
Chief Executive Officer of agincourt partners, llc, an investment management
firm. Since May 1997, Mr. Welty has also been Chief Executive Officer and
President of Action Technologies, Inc. From August 1988 to April 1997,
Mr. Welty was a general partner of Volpe, Welty and Company, a securities and
investment banking firm. Mr. Welty holds Bachelor of Science degrees in
industrial engineering and business administration from Iowa State University.

3
<PAGE>
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES

The Board met seven (7) times, including telephone conference meetings,
during fiscal 2000 and acted by unanimous written consent six (6) times. No
incumbent director attended fewer than 75% of the aggregate of the total number
of meetings of the Board (held during the period for which he was a director)
and the total number of meetings held by all committees of the Board on which he
served (during the period that he served).

Standing committees of the Board include an Audit Committee, a Compensation
Committee and a Nominating Committee.

Messrs. Lucas, Giffen and Kvamme are the members of the Audit Committee,
which met five (5) times during fiscal 2000. The Audit Committee meets with the
Company's independent accountants to review the adequacy of the Company's
internal control systems and financial reporting procedures; reviews the general
scope of the Company's annual audit and the fees charged by the independent
accountants; reviews and monitors the performance of non-audit services by the
Company's auditors, reviews the fairness of any proposed transaction between the
Company and any officer, director or other affiliate of the Company, and after
such review, makes recommendations to the full Board; and performs such further
functions as may be required by any stock exchange or over-the-counter market
upon which the Company's Common Stock may be listed.

Messrs. Lucas and Welty are the members of the Compensation Committee, which
met one (1) time and acted by unanimous written consent twenty three (23) times
during fiscal 2000. The Compensation Committee recommends compensation for
officers and employees of the Company, grants options and stock awards under the
Company's employee benefit plans and reviews and recommends adoption of and
amendments to stock option and employee benefit plans.

Messrs. Giffen and Kvamme are the members of the Nominating Committee, which
did not meet during fiscal 2000. The Nominating Committee identifies and
recommends candidates for the Company's Board. The Nominating Committee does not
consider nominees for the Board recommended by the stockholders.

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS

4
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PROPOSAL NO. 2--APPROVAL OF AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
THEREUNDER FROM 80,000,000 SHARES TO 200,000,000 SHARES

Stockholders are being asked to approve an amendment to the Company's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") to increase the number of shares of Common Stock authorized for
issuance thereunder from 80,000,000 shares to 200,000,000 shares (an increase of
120,000,000 shares). As of June 19, 2000, approximately 51,927,141 shares of
Common Stock had been issued and were outstanding, approximately 13,743,233
shares of Common Stock had been reserved for future issuance under the Company's
employee stock option plans, director stock option plan, non-plan option
issuances and employee stock purchase plan (including 12,383,516 shares reserved
for issuance upon exercise of outstanding options) and approximately 39,000
shares of Common Stock had been reserved for future issuance upon exercise of
outstanding warrants. The Board of Directors (the "Board") has adopted
resolutions on June 23, 2000 by unanimous written consent setting forth (i) the
proposed amendment to the first paragraph of Article IV of the Certificate of
Incorporation, (ii) the advisability of the amendment, and (iii) a call for
submission of the amendment for approval by the Company's stockholders at the
Annual Meeting.

The following is the text of the first paragraph of Article IV of the
Certificate of Incorporation, as proposed to be amended:

The total number of shares of all classes of stock which the corporation
has authority to issue is Two Hundred Five Million (205,000,000) shares,
consisting of two classes: Two Hundred Million (200,000,000) shares of
Common Stock, $0.001 par value per share, and Five Million (5,000,000)
shares of Preferred Stock, $0.001 par value per share.

The proposed amendment will require the affirmative vote of a majority of
the shares of Common Stock issued and outstanding as of June 19, 2000. Upon
approval of the proposed amendment by the stockholders, the proposed amendment
will become effective only upon filing of the Certificate of Amendment of the
Certificate of Incorporation with the Secretary of State of the State of
Delaware.

PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT

The Board of Directors believes that the availability of additional
authorized but unissued shares will provide the Company with the flexibility to
issue its Common Stock for a variety of corporate purposes, such as to effect
future stock splits and stock dividends, to take advantage of future
opportunities to make strategic acquisitions, to raise equity capital, to adopt
additional employee benefit plans or to reserve additional shares for issuance
under such plans and under plans of any companies Macromedia may acquire in the
future. Increasing the number of shares of Common Stock authorized would give
the Company additional flexibility to maintain a reasonable stock price with
future stock splits and stock dividends. The Board of Directors believes that
the proposed increase in the number of shares of Common Stock authorized will
make sufficient shares available for use pursuant to the purposes described
herein. However, the Company has no immediate plans, understanding, agreements
or commitments, other than as permitted or required under the Company's employee
benefit plans and under outstanding options and warrants, to use additional
Common Stock proposed to be authorized for any purpose.

The sole stock split of the Company's Common Stock was effectuated on
October 15, 1995 on a 2-for-1 basis. In addition, during the fiscal year ended
March 31, 2000, the Company issued approximately 5,000,000 shares of Common
Stock and approximately 625,000 shares of Common Stock in connection with the
Company's acquisition of Andromedia, Inc and ESI Software, Inc., respectively.

Under the Certificate of Incorporation and under Delaware law, the Company's
stockholders do not have preemptive rights with respect to shares of Common
Stock that are issued by the Company. Should

5
<PAGE>
the Board of Directors elect to issue additional shares of Common Stock,
including such additional shares proposed to be authorized, existing
stockholders would not have any preferential rights to purchase such shares.
Therefore, if the Board elects to issue additional shares of Common Stock, such
issuance could have a dilutive effect on the earnings per share and voting power
and percentage of outstanding shares held by current stockholders. Upon adoption
of the proposed amendment by the stockholders and upon filing of the Certificate
of Amendment to the Certificate of Incorporation reflecting such amendment, no
additional action or authorization by the stockholders would be necessary for
the issuance of such additional shares authorized, unless otherwise required by
applicable law or the rules of the stock exchange or national securities
association trading system on which the Common Stock is then listed or quoted.
The Company reserves the right to seek further increases in authorized shares
from time to time in the future as considered appropriate by the Board.

The proposed amendment to increase the authorized number of shares of Common
Stock could, under certain circumstances, have an anti-takeover effect, although
this is not the intention of this proposal. For example, in the event of a
hostile attempt to take over control of the Company, it may be possible for the
Company to impede the attempt by issuing shares of Common Stock, thereby
increasing the potential cost to acquire control of the Company. The amendment,
therefore, may have the effect of discouraging unsolicited takeover attempts
and, thereby, potentially limiting the opportunity for the stockholders to
dispose of their shares at the higher price generally available in takeover
attempts or that may be available under a merger proposal. However, the Board is
not aware of any attempt to take control of the Company, and the Board has not
presented this proposal with the intent that it be utilized as a type of
anti-takeover device.

THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR
ISSUANCE THEREUNDER FROM 80,000,000 SHARES TO 200,000,000 SHARES

6
<PAGE>
PROPOSAL NO. 3--APPROVAL OF AMENDMENT TO THE 1992 EQUITY INCENTIVE PLAN

Stockholders are being asked to approve an amendment to the Company's 1992
Equity Incentive Plan (the "Equity Incentive Plan" or the "1992 Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
from 15,400,000 shares to 17,600,000 shares (an increase of 2,200,000 shares).
The Board of Directors of the Company (the "Board") approved the proposed
amendment described above on June 23, 2000, with such amendment to be effective
upon stockholder approval.

Management believes that this amendment is in the best interests of the
Company because of the need to provide options to attract and retain quality
employees and remain competitive in the industry.

Below is a summary of the principal provisions of the 1992 Plan, assuming
approval of the above amendment, which summary is qualified in its entirety by
reference to the full text of the Equity Incentive Plan.

1992 EQUITY INCENTIVE PLAN

EQUITY INCENTIVE PLAN HISTORY. The Board adopted and stockholders approved the
Equity Incentive Plan on September 23, 1992 to offer eligible persons an
opportunity to participate in the Company's future performance through awards of
stock options, restricted stock and stock bonuses. The 1992 Plan has since been
amended to increase the number of shares available for issuance thereunder. The
following describes each of the amendments made to the Equity Incentive Plan
since its initial adoption and approval. On October 15, 1993, the Board approved
an amendment to the 1992 Plan to place a limitation on the maximum number of
shares available for issuance to certain executive officers at any time under
the Plan, to make certain other amendments in the administration of the 1992
Plan and to increase the number of shares in the reserve available for issuance
under the 1992 Plan by 600,000 to 3,600,000 shares. Stockholders approved these
amendments on November 17, 1993. On May 24, 1994, the Board approved an
amendment to the 1992 Plan to increase the number of shares reserved for
issuance thereunder by 1,000,000 shares to 4,600,000 shares. Stockholders
approved the amendment on July 26, 1994. On October 25, 1994, the Board approved
an amendment to the 1992 Plan to increase the number of shares reserved for
issuance thereunder by 1,400,000 shares to 6,000,000 shares. Stockholders
approved the amendment on January 19, 1995. On May 24, 1995, the Board approved
an amendment to the 1992 Plan to increase the number of shares reserved for
issuance thereunder by 1,200,000 shares to 7,200,000 shares. Stockholders
approved the amendment on June 19, 1995. On April 29, 1996, the Board approved
an amendment to the 1992 Plan to increase the number of shares reserved for
issuance thereunder by 1,800,000 to 9,000,000. Stockholders approved the
amendment on May 31, 1996. On January 21, 1997, the Board approved an amendment
to the 1992 Plan to increase the number of shares reserved for issuance
thereunder by 1,800,000 shares to 10,800,000 shares. Stockholders approved the
amendment on March 3, 1997. On February 10, 1997, the Board adopted certain
technical amendments to the 1992 Plan to reflect the new Rule 16b-3 under the
Securities Exchange Act of 1934. On June 27, 1997, the Board approved an
amendment to the 1992 Plan to increase the number of shares reserved for
issuance thereunder by 1,000,000 shares to 11,800,000 shares. Stockholders
approved the amendment on August 15, 1997. On February 5, 1998, the Board
amended the 1992 Plan to expressly permit post-termination exercise periods of
greater length as the Board, in its sole discretion, may choose. On April 1,
1998, the Compensation Committee (the "Committee") approved an amendment to the
1992 Plan to increase the number of shares reserved for issuance thereunder by
1,500,000 shares to 13,300,000 shares, to be effective upon stockholder
approval. Stockholders approved the increase on July 30, 1998. On April 1, 1999,
following the SEC's release authorizing publicly traded companies to permit
their optionees to transfer their compensatory stock options to family members,
the Committee amended the 1992 Plan to permit such transfers. On April 1, 1999,
the Board approved an amendment to the 1992 Plan to increase the number of
shares reserved for issuance thereunder by 2,100,000 shares to 15,400,000
shares. Stockholders approved the amendment on July 29, 1999. On June 23, 2000,
the Board approved an amendment to the 1992 Plan to increase the minimum
exercise price of Non-Qualified Stock Options issuable under the 1992 Plan from

7
<PAGE>
85% of the fair market value at the time of the grant to 100% of the fair market
value. On June 23, 2000, the Board approved the proposed amendment to the 1992
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder from 15,400,000 shares to 17,600,000 shares. This proposed amendment
will become effective upon stockholder approval.

SHARES SUBJECT TO THE EQUITY INCENTIVE PLAN. An aggregate of 17,600,000 shares
(assuming approval of the proposed amendment) of the Company's Common Stock have
been reserved by the Board for issuance under the 1992 Plan. As of June 19,
2000, 2,557,713 shares remained available for grant under the 1992 Plan
(assuming approval of the proposed amendment). If any option granted pursuant to
the 1992 Plan expires or terminates for any reason without being exercised in
full, or any award terminates without being issued, the unexercised shares
released from such option and award will again become available for issuance
under the Plan. In addition, any shares issuable upon exercise of options
granted pursuant to the Authorware 1988 Stock Option Plan that expire or become
unexercisable for any reason without having been exercised in full also will
become available for distribution under the Equity Incentive Plan. The market
value of the Company's Common Stock as of June 19, 2000 was $108.00 per share.
As soon as practicable after the 2000 Annual Meeting of Stockholders of the
Company, the Company will (assuming approval of the proposed amendment) register
with the Securities and Exchange Commission on a registration statement on Form
S-8 the increased shares that may be issued under the 1992 Plan.

ADMINISTRATION. The Equity Incentive Plan is administered by the Committee, the
members of which are appointed by the Board. The Committee currently consists of
Donald L. Lucas and William B. Welty each of whom are "non-employee directors"
as that term is defined under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and "outside directors" as that term is defined pursuant
to Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").

Subject to the terms of the Equity Incentive Plan, the Committee determines the
persons who are to receive awards, the number of shares subject to each such
award and the terms and conditions of such awards. The Committee also has the
authority to construe and interpret any of the provisions of the Equity
Incentive Plan or any awards granted thereunder.

ELIGIBILITY. Employees, officers, directors, independent contractors,
consultants, and advisors of the Company (and of any subsidiaries and
affiliates) whom the Board deems to have potential to contribute to the future
success of the Company (the "Participants") are eligible to receive stock
options, restricted stock or stock bonuses under the Equity Incentive Plan. No
"Named Executive Officer" as that term is defined under Item 402(a)(3) of
Regulation S-K promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act is eligible to receive more than
1,800,000 shares of Common Stock over the life of the 1992 Plan. As of June 19,
2000, approximately 1,180 persons were eligible to receive awards under the 1992
Plan, and 6,702,893 shares were subject to outstanding options. Over the term of
the 1992 Plan, the following Named Executive Officers (as defined above) have
been granted options to purchase shares of Common Stock under the 1992 Plan as
follows: Norman K. Meyrowitz, 745,020 shares; Brian Allum, 510,000 shares; Kevin
Lynch, 355,250; Elizabeth A. Nelson, 358,055 shares; Robert K. Burgess, 375,000
shares; and David R. Mendels, 298,133 shares. Over the term of the 1992 Plan,
current executive officers as a group have been granted options to purchase
2,936,458 shares, all current directors who are not executive officers as a
group have been granted options to purchase 95,000 shares, and all employees as
a group, other than executive officers, have been granted options to purchase
9,059,125 shares.

STOCK OPTIONS. The Equity Incentive Plan permits the granting of options that
are intended to qualify either as Incentive Stock Options ("ISOs") or
Nonqualified Stock Options ("NQSOs").

ISOs may be granted only to employees. The option exercise price for each option
granted under the Equity Incentive Plan must be no less than 100% of the fair
market value (as defined in the 1992 Plan) of a share at the time such option is
granted. In the case of a 10% stockholder the exercise price must be no less
than 110% of the fair market value. Options are exercisable within the times and
upon the events

8
<PAGE>
determined by the Committee as set forth in the optionee's option agreement. The
Committee may approve the transfer of NQSOs to family members of the
Participant.

The Equity Incentive Plan provides for the payment of the exercise price of
options by any of the following means, subject to the provisions of the
optionee's option agreement: (1) in cash (by check); (2) by surrender of shares
of the Company's Common Stock owned for at least six months and having a fair
market value on the date of surrender equal to the aggregate exercise price of
the option; (3) where permitted by applicable law and approved by the Committee,
in its sole discretion, by tender of a full recourse promissory note; (4) by
cancellation of indebtedness of the Company to the Participant; (5) by waiver of
compensation due to or accrued by the Participant for services rendered; (6) by
tender of property; (7) by a "same-day sale" commitment; (8) by a "margin"
commitment; or (9) by any combination of the foregoing, when approved by the
Committee in its sole discretion.

RESTRICTED STOCK AWARDS. The Committee may grant Participants restricted stock
awards to purchase stock either in addition to, or in tandem with, other awards
under the Equity Incentive Plan, under such terms, conditions and restrictions
as the Committee may determine. The purchase price for such awards must be no
less than 85% of the fair market value of a share on the date of the award (and
100% of the fair market value in the case of a 10% stockholder), and can be paid
for with the types of consideration described under Stock Options above with the
exception of a same-day sale or margin commitment which are available only for
options.

STOCK BONUS AWARDS. The Committee may grant Participants stock bonus awards
either in addition to, or in tandem with, other awards under the Equity
Incentive Plan, under such terms, conditions and restrictions as the Committee
may determine.

MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL. In the event of a merger,
consolidation, dissolution or liquidation of the Company, the sale of
substantially all the assets of the Company or any other similar corporate
transaction, the successor corporation may assume, replace or substitute
equivalent awards in exchange for those granted under the Equity Incentive Plan
or provide substantially similar consideration, shares or other property subject
to repurchase restrictions no less favorable to the Participants under the
Equity Incentive Plan. In the event that the successor corporation does not
assume or substitute the awards, the awards, including outstanding options,
shall expire on such transaction at the time and upon the conditions as the
Committee determines.

AMENDMENT OF THE EQUITY INCENTIVE PLAN. The Board may at any time terminate or
amend the Equity Incentive Plan, including amending any form of award agreement
or instrument to be executed pursuant to the Equity Incentive Plan.

TERM OF THE EQUITY INCENTIVE PLAN. The Equity Incentive Plan will terminate on
September 22, 2002, ten years from the date the Equity Incentive Plan was
adopted by the Board.

FEDERAL INCOME TAX INFORMATION

THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF THE
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPANTS UNDER THE EQUITY
INCENTIVE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE AND LOCAL
TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON HIS OR HER INDIVIDUAL
CIRCUMSTANCES. THIS SUMMARY DOES NOT ADDRESS THE TAX CONSEQUENCES TO FAMILY
MEMBERS TO WHOM AN OPTION IS TRANSFERRED OR TO THE PARTICIPANT THAT TRANSFERS
THE OPTION. EACH PARTICIPANT, AND FAMILY MEMBER WHO HOLDS AN OPTION HAS BEEN AND
IS ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX
CONSEQUENCES OF PARTICIPATION IN THE PLAN.

INCENTIVE STOCK OPTIONS. A Participant will recognize no income upon grant of an
ISO and incur no tax on its exercise (unless the Participant is subject to the
alternative minimum tax ("AMT")). If the Participant holds the stock acquired
upon exercise of an ISO (the "ISO Shares") for more than one year after the date

9
<PAGE>
the option was exercised and for more than two years after the date the option
was granted, the Participant generally will realize capital gain or loss (rather
than ordinary income or loss) upon disposition of the ISO Shares. This gain or
loss will be equal to the difference between the amount realized upon such
disposition and the amount paid for the ISO Shares.

If the Participant disposes of ISO Shares prior to the expiration of either
required holding period described above (a "disqualifying disposition"), the
gain realized upon such disposition, up to the difference between the fair
market value of the ISO Shares on the date of exercise (or, if less, the amount
realized on a sale of such shares) and the option exercise price, will be
treated as ordinary income. Any additional gain will be long-term or short-term
capital gain, depending upon the amount of time the ISO Shares were held by the
Participant.

ALTERNATIVE MINIMUM TAX. The difference between the fair market value of the ISO
Shares on the date of exercise and the exercise price is an adjustment to income
for purposes of the AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is 26% of an individual taxpayer's alternative minimum
taxable income (28% in the case of alternative minimum taxable income in excess
of $175,000). Alternative minimum taxable income is determined by adjusting
regular taxable income for certain items, increasing that income by certain tax
preference items (including the difference between the fair market value of the
ISO Shares on the date of exercise and the exercise price) and reducing this
amount by the applicable exemption amount ($45,000 in case of a joint return,
subject to reduction under certain circumstances). If a disqualifying
disposition of the ISO Shares occurs in the same calendar year as exercise of
the ISO, there is no AMT adjustment with respect to those ISO Shares. Also, upon
a sale of ISO Shares that is not a disqualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the fair
market value of the ISO Shares at exercise over the amount paid for the ISO
Shares.

NONQUALIFIED STOCK OPTIONS. A Participant will not recognize any taxable income
at the time a NQSO is granted. However, upon exercise of a NQSO the Participant
will include in income as compensation an amount equal to the difference between
the fair market value of the shares on the date of exercise and the
Participant's exercise price. The included amount will be treated as ordinary
income by the Participant and may be subject to withholding by the Company
(either by payment in cash or withholding out of the Participant's salary). Upon
resale of the shares by the Participant, any subsequent appreciation or
depreciation in the value of the shares will be treated as capital gain or loss.

RESTRICTED STOCK AND STOCK BONUS AWARDS. Restricted stock and stock bonus awards
will generally be subject to tax at the time of receipt, unless there are
restrictions that enable the Participant to defer tax. At the time that tax is
incurred, the tax treatment will be similar to that discussed above for NQSOs.

MAXIMUM TAX RATES. The maximum rate applicable to ordinary income is 39.6%. Long
term capital gain on stock held for more than twelve months will be taxed at a
maximum rate of 20%. Capital gains will continue to be offset by capital losses
and up to $3,000 of capital losses may be offset annually against ordinary
income.

TAX TREATMENT OF THE COMPANY. The Company generally will be entitled to a
deduction in connection with the exercise of a NQSO by a Participant or the
receipt of restricted stock or stock bonuses by a Participant to the extent that
the Participant recognizes ordinary income and the Company properly reports the
income received by the Participant in connection with the award. The Company
will be entitled to a deduction in connection with the disposition of ISO Shares
only to the extent that the Participant recognizes ordinary income on a
disqualifying disposition of the ISO Shares and the Company properly reports the
income received by the Participant in connection with the award.

ERISA

The Equity Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").

THE BOARD RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE 1992 EQUITY INCENTIVE PLAN

10
<PAGE>
PROPOSAL NO. 4--APPROVAL OF AMENDMENT TO THE
1993 EMPLOYEE STOCK PURCHASE PLAN

Stockholders are being asked to approve an amendment to the adoption of the
Company's 1993 Employee Stock Purchase Plan (the "Stock Purchase Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
from 800,000 shares to 1,150,000 shares (an increase of 350,000 shares). The
Board approved the proposed amendment described above on June 23, 2000.

Management believes that this amendment is in the best interests of the
Company because of the need to provide such benefits to attract and retain
quality employees and remain competitive in the software industry.

Below is a summary of the principal provisions of the Stock Purchase Plan,
assuming approval of the above amendment, which summary is qualified in its
entirety by reference to the full text of the Stock Purchase Plan.

1993 EMPLOYEE STOCK PURCHASE PLAN

STOCK PURCHASE PLAN HISTORY

The Board adopted the Stock Purchase Plan on October 15, 1993, and
thereafter it was approved by stockholders to offer eligible employees of the
Company ("Participating Employees") with a convenient means to acquire equity in
the Company through payroll deductions and to provide an incentive for continued
employment. On May 24, 1994, the Board approved an amendment to the Stock
Purchase Plan to change the dates of the periods during which payroll deductions
may accumulate and to make certain other changes to facilitate administration of
the Stock Purchase Plan. On January 31, 1996, the Board approved an amendment to
the Stock Purchase Plan to change the starting and ending dates of the periods
during which payroll deductions may accumulate by one day to facilitate
administration of the Stock Purchase Plan. On July 15, 1997, the Board adopted
certain technical amendments to the Stock Purchase Plan to reflect the new Rule
16b-3 under the Securities Exchange Act of 1934. These amendments did not
require stockholder approval. On July 15, 1997, the Board approved an amendment
to the Stock Purchase Plan to increase the number of shares reserved for
issuance thereunder by 400,000 to 800,000 shares from 400,000. Stockholders
approved the amendment on August 15, 1997. On June 23, 2000, the Board approved
an amendment to the Stock Purchase Plan to increase the maximum annual
contribution by Participating Employees permitted under the Stock Purchase Plan
from 10% of all W-2 compensation to 15% and to clarify the eligibility
provisions. This amendment did not require stockholder approval. On June 23,
2000, the Board approved the proposed amendment to the Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
from 800,000 shares to 1,150,000 shares. This proposed amendment will become
effective upon stockholder approval.

NUMBER OF SHARES SUBJECT TO STOCK PURCHASE PLAN

An aggregate of 1,150,000 shares (assuming approval of the proposed
amendment) of the Company's Common Stock have been reserved by the Board for
issuance under the Stock Purchase Plan. As soon as practicable after the 2000
Annual Meeting of Stockholders of the Company, the Company will (assuming
approval of the proposed amendment) register the additional shares with the
Securities and Exchange Commission on a registration statement on Form S-8 for
their purchase and subsequent resale.

ADMINISTRATION

The Stock Purchase Plan is administered by the Compensation Committee. The
interpretation or construction by the Committee of any provisions of the Stock
Purchase Plan or of any option granted under it will be final and binding on all
Participating Employees. The members of the Committee do not

11
<PAGE>
receive any compensation for administering the Stock Purchase Plan. The Company
bears all expenses in connection with administration of the Stock Purchase Plan.

ELIGIBILITY

All employees of the Company, or any subsidiary, are eligible to participate
in the Stock Purchase Plan except the following:

(a) employees who are not employed by the Company or any subsidiary on
the 15th day of the month before the beginning of an Offering Period
(as defined below);

(b) employees who are customarily employed for fewer than 20 hours per
week;

(d) employees who own or hold options to purchase stock or who, as a
result of participation in the Stock Purchase Plan, would own stock
or hold options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the
Company.

An individual who provides services to the Company or to any designated
subsidiary of the Company as an independent contractor is not considered an
"employee" for the purposes of the Plan and will not be eligible to participate
in the Plan, except during such periods as the Company or the designated
subsidiary, as applicable, is required to withhold U.S. federal employment taxes
for the individual. This exclusion from participation applies even if the
individual is reclassified as an employee, rather than an independent
contractor, for any purpose other than U.S. federal employment tax withholding.

As of June 19, 2000, approximately 1,180 persons were eligible to
participate in the Stock Purchase Plan and 705,033 shares had been issued
pursuant to the Stock Purchase Plan. As of that date, 94,967 shares were
available for future issuance under the Stock Purchase Plan, not including the
proposed amendment to the Stock Purchase Plan to increase the shares available
for issuance thereunder. As of June 19, 2000, the closing price of the Company's
Common Stock on the Nasdaq National Market was $108.00 per share. Over the term
of the Stock Purchase Plan, each of the following "Named Executive Officers," as
that term is defined under Item 402(a)(3) of Regulation S-K promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), have purchased
shares of the Company's Common Stock, as follows: Mr. Burgess (7,495 shares),
Mr. Mendels (7,227 shares), Ms. Nelson (5,699 shares), Mr. Meyrowitz (5,361
shares), Mr. Allum (918 shares), and Mr. Lynch (327 shares), Current Executive
Officers as a group have purchased 28,260 shares, and all employees as a group,
other than executive officers, have purchased 676,733 shares.

Participating Employees participate in the Stock Purchase Plan through
payroll deductions. A Participating Employee sets the rate of such payroll
deductions, which may not be less than 2% nor more than 15% of the Participating
Employee's W-2 compensation, including, but not limited to, base salary, wages,
commissions, overtime, benefit premiums, bonuses and draws unreduced by the
amount by which the Participating Employee's salary is reduced pursuant to
Sections 125 or 401(k) of the Code, not to exceed $25,000 per year or such lower
limit as set by the Committee.

OFFERING PERIOD

Each offering of Common Stock under the Stock Purchase Plan is for a period
of six months (the "Offering Period"). Offering Periods commence on February 16
and August 16 of each year and end on August 15 and February 15, respectively,
of each year. The first day of each Offering Period is the "Offering Date" for
such Offering Period.

Participating Employees may elect to participate in any Offering Period by
enrolling as provided under the terms of the Stock Purchase Plan. Once enrolled,
a Participating Employee will automatically participate in each succeeding
Offering Period unless the Participating Employee withdraws from the

12
<PAGE>
Offering Period or the Stock Purchase Plan is terminated. After the rate of
payroll deductions for an Offering Period has been set by a Participating
Employee, that rate continues to be effective for the remainder of the Offering
Period (and for all subsequent Offering Periods in which the Participating
Employee is automatically enrolled) unless otherwise changed by the
Participating Employee. The Participating Employee may increase or lower the
rate of payroll deductions for any subsequent Offering Period, but may only
lower the rate of payroll deductions for an ongoing Offering Period. Not more
than one change may be made during a single Offering Period.

PURCHASE PRICE

The purchase price of shares that may be acquired in any Offering Period
under the Stock Purchase Plan is 85% of the lesser of (a) the fair market value
of the shares on the Offering Date or (b) the fair market value of the shares on
the last day of the Offering Period. The fair market value of a share of the
Company's Common Stock is deemed to be the average of the high and low prices of
the Company Stock on the applicable date as quoted on the Nasdaq National Market
and reported in the WALL STREET JOURNAL.

PURCHASE OF STOCK UNDER THE EMPLOYEE STOCK PURCHASE PLAN

The number of whole shares a Participating Employee will be able to purchase
in any Offering Period will be determined by dividing the total amount withheld
from the Participating Employee during the Offering Period pursuant to the Stock
Purchase Plan by the purchase price for each share determined as described
above. The purchase will take place automatically on the last day of the
Offering Period.

WITHDRAWAL

A Participating Employee may withdraw from an Offering Period. Upon
withdrawal, all accumulated payroll deductions will be returned to the withdrawn
Participating Employee, without interest. No further payroll deductions for the
purchase of shares will be made for succeeding Offering Periods unless and until
the Participating Employee enrolls in a new Offering Period in the same manner
as for initial participation in the Stock Purchase Plan.

AMENDMENT OF THE STOCK PURCHASE PLAN

The Board may at any time amend, terminate or extend the term of the Stock
Purchase Plan, except that any such termination cannot affect the terms of
shares previously granted under the Stock Purchase Plan, nor may any amendment
make any change in the terms of shares previously granted which would adversely
affect the right of any participant, nor may any amendment be made without
stockholder approval if such amendment would: (a) increase the number of shares
that may be issued under the Stock Purchase Plan; or (b) change the designation
of the employees (or class of employees) eligible for participation in the Stock
Purchase Plan.

TERM OF THE STOCK PURCHASE PLAN

The Stock Purchase Plan will continue until the earlier to occur of:
(i) termination of the Stock Purchase Plan by the Board; (ii) the issuance of
all the shares of Common Stock reserved for issuance under the Stock Purchase
Plan; or (iii) October 2003, ten years after the date the Stock Purchase Plan
was adopted by the Board.

FEDERAL INCOME TAX INFORMATION

THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPATING EMPLOYEES
UNDER THE STOCK PURCHASE PLAN. THE FEDERAL TAX LAWS MAY

13
<PAGE>
CHANGE AND THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPATING
EMPLOYEE WILL DEPEND UPON HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH
PARTICIPATING EMPLOYEE IS ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX
ADVISOR REGARDING THE TAX CONSEQUENCES OF PARTICIPATION IN THE STOCK PURCHASE
PLAN.

The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code. It is not subject
to any provisions of the Employees Retirement Income Security Act of 1974.

TAX TREATMENT OF THE PARTICIPATING EMPLOYEE. Participating employees will
not recognize income for federal income tax purposes either upon enrollment in
the Stock Purchase Plan or upon the purchase of shares. All tax consequences are
deferred until a Participating Employee sells the shares, disposes of shares by
gift or dies.

If shares are held for more than one year after the date of purchase and
more than two years from the beginning of the applicable Offering Period, or if
the Participating Employee dies while owning the shares, the Participating
Employee realizes ordinary income on a sale (or a disposition by way of gift or
upon death) to the extent of the lesser of (i) 15% of the fair market value of
the shares at the beginning of the Offering Period or (ii) the actual gain (the
amount by which the market value of the shares on the date of sale, gift or
death exceeds the purchase price). All additional gain upon the sale of shares
is treated as long-term capital gain. If the shares are sold and the sale price
is less than the purchase price, there is no ordinary income and the
Participating Employee has a long-term capital loss for the difference between
the sale price and the purchase price.

If the shares are sold or are otherwise disposed of including by way of gift
(but not death, bequest or inheritance) (in any case a "disqualifying
disposition") within either the one-year or the two-year holding periods
described above, the Participating Employee realizes ordinary income at the time
of sale or other disposition taxable to the extent that the fair market value of
the shares at the date of purchase is greater than the purchase price. This
excess will constitute ordinary income (not currently subject to withholding) in
the year of the sale or other disposition even if no gain is realized on the
sale or if a gratuitous transfer is made. The difference, if any, between the
proceeds of sale and the fair market value of the shares at the date of purchase
is a capital gain or loss. Capital gains continue to be offset by capital losses
and up to $3,000 of capital losses may be used annually against ordinary income.

TAX TREATMENT OF THE COMPANY. The Company will be entitled to a deduction
in connection with the disposition of shares acquired under the Stock Purchase
Plan only to the extent that the Participating Employee recognizes ordinary
income on a disqualifying disposition of the shares and the Company timely
reports such income to the Internal Revenue Service. The Company will treat any
transfer of record ownership of shares as a disposition, unless it is notified
to the contrary. In order to enable the Company to learn of disqualifying
dispositions and ascertain the amount of the deductions to which it is entitled,
Participating Employees are required to notify the Company in writing of the
date and terms of any disposition of shares purchased under the Stock Purchase
Plan.

THE BOARD RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE PLAN

14
<PAGE>
PROPOSAL NO. 5--RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS

The Company has selected KPMG LLP as its independent auditors to perform the
audit of the Company's financial statements for fiscal 2001, and the
stockholders are being asked to ratify such selection. Representatives of KPMG
LLP will be present at the Meeting, will have the opportunity to make a
statement at the Meeting if they desire to do so and will be available to
respond to appropriate questions.

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF KPMG LLP

15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of May 15, 2000, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) each director/nominee, (iii) each of the Named
Executive Officers of the Company (as defined below) and (iv) all directors and
executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
------------------------------------ ----------------------- ----------------
<S> <C> <C>
Putnam Investments, Inc.(2)................................ 5,326,630 10.4%
James R. Von Ehr, II(3).................................... 2,864,424 5.6%
Robert K. Burgess(4)....................................... 629,111 1.2%
Norman K. Meyrowitz(5)..................................... 248,554 *
Kevin Lynch(6)............................................. 166,599 *
Brian Allum(7)............................................. 121,001 *
Elizabeth A. Nelson(8)..................................... 110,494 *
David R. Mendels(9)........................................ 52,378 *
John (Ian) Giffen(10)...................................... 46,944 *
Donald L. Lucas(11)........................................ 43,911 *
Mark D. Kvamme(12)......................................... 26,910 *
Alan Ramadan(13)........................................... 7,292 *
William B. Welty(14)....................................... 6,295 *
All directors and executive officers as a group (12
persons)(15)............................................. 1,502,259 2.9%
</TABLE>

------------------------

* Less than 1%

1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Unless otherwise indicated below, the address for each person and entity
named in the table is: c/o Macromedia, Inc., 600 Townsend Street, San
Francisco, California 94103.

(2) In Amendment No. 1 to its Schedule 13G under the Exchange Act filed
February 17, 2000, Putnam Investments, Inc. reported shared voting power as
to 126,676 shares of the Company's Common Stock and shares dispositive power
as to 5,326,530 shares. Also on Amendment No. 1 to the same Schedule 13G,
Putnam Investment Management, Inc. reported shared dispositive power as to
4,752,287 shares; The Putnam Advisory Company, Inc. reported shared voting
power as to 126,676 shares and shared dispositive power as to 574,343
shares; and Marsh & McLennan Companies, Inc., a holding company, reported no
voting or dispositive power. These entities listed their principal business
address as One Post Office Square, Boston, Massachusetts 02109, except
Marsh & McLennan Companies, Inc., which listed its principal business
address as 1166 Avenue of the Americas, New York, New York 10036.

(3) Includes 433,274 shares held of record by Mr. Von Ehr's spouse to which
Mr. Von Ehr disclaims beneficial ownership. Mr. Von Ehr's principal business
address is Zyvex LLC, 1321 N. Plano Road, Richardson, TX 75081.

(4) Includes 546,616 shares subject to options held by Mr. Burgess that are
exercisable within 60 days of May 15, 2000.

(5) Includes 246,470 shares subject to options held by Mr. Meyrowitz that are
exercisable within 60 days of May 15, 2000.

(6) Includes 166,272 shares subject to options held by Mr. Lynch that are
exercisable within 60 days of May 15, 2000.

(7) Includes 120,083 shares subject to options held by Mr. Allum that are
exercisable within 60 days of May 15, 2000.

(8) Includes 92,955 shares subject to options held by Ms. Nelson that are
exercisable within 60 days of May 15, 2000.

(9) Includes 47,912 shares subject to options held by Mr. Mendels that are
exercisable within 60 days of May 15, 2000.

(10) Represents 46,944 shares subject to options held by Mr. Giffen that are
exercisable within 60 days of May 15, 2000.

(11) Represents 4,297 shares held of record by the Donald L. Lucas & Lygia S.
Lucas Trust and 39,614 shares subject to options held by Mr. Lucas that are
exercisable within 60 days of May 15, 2000.

(12) Represents 26,910 shares subject to options held by Mr. Kvamme that are
exercisable within 60 days of May 15, 2000.

(13) Represents 7,292 shares subject to options held by Mr. Ramadan that are
exercisable within 60 days of May 15, 2000.

(14) Represents 6,295 shares subject to options held by Mr. Welty that are
exercisable within 60 days of May 15, 2000.

(15) Includes 1,393,197 subject to options that are exercisable within 60 days
of May 15, 2000.

16
<PAGE>
EXECUTIVE OFFICERS

The names of the executive officers of the Company, and certain information
about them as of June 19, 2000, are set forth below:

<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------------ -------- ------------------------------------------
<S> <C> <C>
Robert K. Burgess(1)...................... 42 Chairman and Chief Executive Officer
Brian J. Allum............................ 42 Chief Operating Officer--Office of the
President
Stephen A. Elop........................... 36 Senior Vice President and General
Manager, eBusiness Solutions
Kevin M. Lynch............................ 33 President, Macromedia Products--Office
of the President
David R. Mendels.......................... 34 Senior Vice President, Business
Development and Corporate Marketing
Norman K. Meyrowitz....................... 40 President, Macromedia Ventures
Elizabeth A. Nelson....................... 39 Chief Financial Officer and
Secretary--Office of the President
</TABLE>

(1) Additional information with respect to Mr. Burgess is set forth herein under
"Proposal No. 1--Election of Directors."

Mr. Allum has been Chief Operating Officer since August 1999 and is
responsible for all of the day-to-day operating functions of the Company,
including product development, worldwide sales and operations, technical
support, business development, marketing and public relations. Mr. Allum joined
Macromedia in July 1997 as Senior Vice President of Worldwide Field Operations.
From May 1996 until he joined Macromedia, Mr. Allum was President of
Alias/Wavefront, a wholly-owned independent software subsidiary of Silicon
Graphics, created from the 1995 merger of Alias Research, Inc. and Wavefront
Technologies, Inc., and Vice President/General Manager of Silicon Graphics.
Prior to this position, he was Vice President of Field Operations at
Alias/Wavefront. From 1991 to 1995, he was Vice President of Field Operations of
Alias Research. Prior to joining Alias Research, Mr. Allum held a variety of
senior management and sales positions at Silicon Graphics Canada (1985-1991) and
Digital Equipment Corporation (1981-1985). Mr. Allum graduated from Queens
University with a Bachelors degree in Commerce.

Mr. Elop has been Senior Vice President and General Manager of eBusiness
Solutions since December 1999 and is responsible for Macromedia's new range of
solutions targeting content management, real-time personalization, and Web site
analysis. Prior to taking this role, Elop served as Macromedia's Senior Vice
President, Web, beginning in March 1998. From 1994 to 1998, Mr. Elop was Senior
Vice President, Systems/CIO for Boston Chicken, Inc. From 1992 to 1994,
Mr. Elop was a Director in Lotus Development Corporation's Consulting Services
Group, with responsibility for Canada and the U.S. mid-west. Mr. Elop joined
Lotus as part of the acquisition of Soma, Inc., a Canadian software development
and management consultancy. Mr. Elop earned a Bachelor of Computer Engineering
and Management degree from McMaster University in 1986.

Mr. Lynch has been President of Macromedia Products since June 2000. Prior
to this role, Mr. Lynch served as Macromedia's General Manager of Web Publishing
beginning February 1998. Mr. Lynch joined Macromedia in August 1996 and has been
instrumental in forming Macromedia's Web strategy and developing Macromedia's
award-winning family of software. Prior to joining Macromedia, Mr. Lynch was
with General Magic from 1992 to 1996, where he was Director of its mobile
operating system and applications teams. Prior to General Magic, Mr. Lynch
managed the Core Technology Group at Frame Technology, where he led the
development of FrameMaker across platforms. In 1984, Mr. Lynch began at his
first start-up, as Vice President of Product Development, to develop and ship
some of the first

17
<PAGE>
Macintosh applications, including a graphical adventure game in 1984, a 3D
graphics package in 1985, and a desktop publishing application in 1987, which
introduced user interface elements in common use today.

Mr. Mendels has been Senior Vice President of Business Development and
Corporate Marketing at Macromedia since January 2000 and is responsible for
Macromedia's brand, communications, and strategic relationships. Over the last
eight years, Mr. Mendels has played a major role in the development of
Macromedia's product and business strategies, holding numerous sales, marketing,
and general management positions. From March 1998 to January 2000, Mr. Mendels
served as general manager of the Web Publishing business unit and from December
1997 to March 1998, served as general manager of Macromedia's graphics business.
Instrumental in setting up Macromedia Japan KK, Mr. Mendels resided in Japan
from April 1994 to December 1995, where he led Macromedia's field operations and
sales and marketing efforts. From April 1992 to April 1994, Mr. Mendels was
Manager, International Marketing and Latin America Sales, where he was
responsible for Latin America Sales and Asia Pacific Marketing at Macromedia.
Mr. Mendels holds a Master's degree in Japanese Studies at the University of
California at Berkeley and a Bachelors degree in Asian Studies from Wesleyan
University.

Mr. Meyrowitz has been President of Macromedia Ventures since August 1999
and is responsible for managing Macromedia's venture investments in web
infrastructure and the rich-media, broadband, multi-device Internet. Prior to
that he was President of Macromedia Products from April 1998. Prior to that he
was Chief Technology Officer beginning in February 1996, and Senior Vice
President and General Manager of Macromedia's Internet and Multimedia Authoring
Business from January 1997. From October 1994 to February 1996, he was Vice
President of Product Development, and from October 1993 to October 1994, he was
Director of Strategic Technology. From May 1991 to October 1993, he served as
Director of System/User Software at GO Corporation. From October 1981 to May
1991, he served in various positions at Brown University; in his last position,
he was Co-Director of the university's Institute for Research in Information and
Scholarship (IRIS) where he managed and was the principal architect of the IRIS
Intermedia system. Mr. Meyrowitz graduated from Brown in 1981 with a Sc. B.
degree in Computer Science.

Ms. Nelson has been Chief Financial Officer and Secretary of Macromedia
since February 1998. Ms. Nelson joined Macromedia in July 1996 as Vice
President, Corporate Development, and was responsible for managing mergers and
acquisitions and strategic planning. From 1988 to July 1996, Ms. Nelson worked
at Hewlett-Packard, where she held positions in both Corporate Development and
Financial Reporting and Analysis. From 1982 to 1986, she was a consultant with
Robert Nathan Associates, an economic consulting firm, in Washington, D.C.
Ms. Nelson holds an M.B.A. in Finance with Distinction from the Wharton School
at the University of Pennsylvania and a B.S. degree in Foreign Service from
Georgetown University.

18
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to or earned or paid
for services rendered in all capacities to the Company and its subsidiaries
during each of fiscal 1998, 1999 and 2000 by (i) the Company's chief executive
officer and (ii) the Company's five other most highly compensated executive
officers who were serving as executive officers at the end of fiscal 2000
(together, the "Named Executive Officers"). This information includes the dollar
values of base salaries and bonus awards, the number of shares subject to stock
options granted and certain other compensation, whether paid or deferred.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -----------------------
COMPENSATION SECURITIES
------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
--------------------------------- -------- -------- -------- ------------- ----------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ # $
-------- -------- ------------- ----------------------- ----------------
<CAPTION>
MACR(2) SHWV(3)
---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert K. Burgess................ 2000 $200,000 $684,167 -- 250,000 3,500,000(5) $1,000
Chairman and 1999 200,000 508,985 -- 125,000 -- 2,000
Chief Executive Officer 1998 300,055 185,195 -- 1,000,000(4) -- --
Brian Allum(6)................... 2000 200,000 466,052 -- 110,000 210,000 1,000
Chief Operating Officer 1999 200,000 309,779 $357,131(8) -- -- 1,000
1998 155,759 415,064(7) 209,996(8) 400,000 -- 2,000
Norman K. Meyrowitz.............. 2000 200,000 292,084 81,863(9) -- 100,000 1,000
President, Macromedia Ventures 1999 200,000 300,037 -- 75,000 -- 1,000
1998 193,804 163,750 -- 570,200(10) -- 1,000
Elizabeth A. Nelson(11).......... 2000 162,500 281,563 -- 70,000 210,000 1,000
Chief Financial Officer and 1999 150,000 225,028 -- 193,055 -- 1,000
Secretary 1998 144,220 64,344 -- 95,000(12) -- 1,000
Kevin Lynch...................... 2000 150,000 243,817 -- 100,000 700,000 1,000
President, Macromedia Products 1999 150,000 176,711 -- 150,000 -- 1,000
1998 150,000 42,868 -- 105,250(13) -- 1,000
David R. Mendels(14)............. 2000 150,000 243,817 -- 90,000 210,000 1,000
Senior Vice President, Business 1999 150,000 181,347 -- 111,653 -- 1,000
Development and Corporate 1998 150,000 46,932 -- 64,000(15) -- 1,000
Marketing
</TABLE>

------------------------------

(1) Represents the Company's 401(k) plan contributions.

(2) Options to purchase shares of Macromedia Common Stock.

(3) Options to purchase shares of Shockwave.com Common Stock. Shockwave.com is a
privately held, majority-owned subsidiary of Macromedia.

(4) Represents repricing of an option for 1,000,000 shares granted in fiscal
1997.

(5) In connection with the recruitment of a new Chief Executive Officer of
Shockwave.com, Mr. Burgess has surrendered 1,050,000 shares of Common Stock
of Shockwave issued to him upon his exercise on April 17, 2000 of his
Shockwave stock options, reducing the number of shares of Common Stock of
Shockwave held by Mr. Burgess from 3,500,000 to 2,450,000. The 1,050,000
shares were surrendered by Mr. Burgess at the original price paid by him.

(6) Mr. Allum joined the Company in July 1997.

(7) Represents $140,259 in bonus earned, plus a one-time signing bonus of
$150,000 grossed up to cover taxes to $274,805.

(8) Represents relocation expenses.

(9) Represents reimbursement for the purchase of an automobile.

(10) Represents new option grants of 350,000 shares in fiscal 1998 and a
repricing of 220,200 option shares granted prior to fiscal 1998.

(11) Ms. Nelson became Chief Financial Officer in February 1998.

(12) Represents new option grants of 70,000 shares in fiscal 1998 and a
repricing of 25,000 option shares granted prior to fiscal 1998.

(13) Represents new option grants of 30,000 shares in fiscal 1998 and a
repricing of 75,250 option shares granted prior to fiscal 1998.

(14) Mr. Mendels became Senior Vice President of Business Development and
Corporate Marketing in January 2000.

(15) Represents new option grants of 60,000 shares in fiscal 1998 and a
repricing of 4,000 option shares granted prior to fiscal 1998.

19
<PAGE>
The following table sets forth further information regarding individual
grants of stock options during fiscal 2000 to each of the Named Executive
Officers. In accordance with the rules of the Securities and Exchange Commission
(the "SEC"), the table sets forth the hypothetical gains or "option spreads"
that would exist for the options at the end of their respective ten-year terms
based on assumed annualized rates of compound stock price appreciation of 5% and
10% from the dates the options were granted to the end of the respective option
terms. Actual gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock and overall market conditions. There
can be no assurance that the potential realizable values shown in this table
will be achieved.

OPTION GRANTS IN FISCAL 2000

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER PERCENT OF VALUE
OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES
UNDERLYING GRANTED PER SHARE OF STOCK PRICE
OPTIONS TO EXERCISE APPRECIATION
GRANTED EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM(3)
NAME TYPE (#)(1) FISCAL 2000(1) ($/SH)(2) DATE 5%($) 10%($)
------------------------------ -------- ---------- -------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert K. Burgess............. Macr 250,000 3.7% $28.00 8/10/2009 $4,402,262 $11,156,197
Shwv 3,500,000(4) 23.5 0.50 2/14/2010 1,100,566 2,789,049
Brian Allum................... Macr 110,000 1.6 28.00 8/10/2009 1,936,995 4,908,727
Shwv 210,000 1.4 0.50 2/14/2010 66,034 167,343
Norman K. Meyrowitz........... Macr -- -- -- -- -- --
Shwv 100,000 0.7 0.50 2/14/2010 31,445 79,687
Elizabeth A. Nelson........... Macr 70,000 1.0 28.00 8/10/2009 1,232,633 3,123,735
Shwv 210,000 1.4 0.50 2/14/2010 66,034 167,343
Kevin Lynch................... Macr 100,000 1.5 28.00 8/10/2009 1,760,905 4,462,479
Shwv 700,000 4.7 0.50 2/14/2010 220,113 557,810
David R. Mendels.............. Macr 90,000 1.3 28.00 8/10/2009 1,584,815 4,016,231
Shwv 210,000 1.4 0.50 2/14/2010 66,034 167,343
</TABLE>

------------------------------

(1) The percentages were calculated without giving effect to options issued by
Andromedia and assumed by Macromedia.

(2) Macromedia stock options were awarded to the Named Executives with an
exercise price equal to the fair market value of the Company's Common Stock
on the date of grant. Macromedia stock options granted to new employees
become exercisable, so long as the employee continues to provide services to
the Company, as to 25% of the shares at the end of the first year and as to
2.0833% per month thereafter. Macromedia stock options granted to existing
employees become exercisable with respect to 2.0833% of the shares for each
full month that the optionee renders services to the Company. Macromedia
stock options expire ten years from the date of grant or at the time of the
optionee's termination of employment. Shockwave stock options were awarded
to the Named Executives with an exercise price equal to the fair market
value of the Common Stock of Shockwave.com on the date of grant. The
Shockwave stock options granted to the Named Executives became exercisable
on the date of grant and expire the earlier of ten years from the date of
grant and the time of the optionee's termination of employment. In addition,
the shares of Common Stock of Shockwave issued to the Named Executives upon
exercise of unvested options are subject to repurchase by Shockwave in the
event of termination of employment of such Named Executive.

(3) The 5% and 10% assumed rates of annual compound stock price appreciation are
prescribed by rules of the SEC and do not represent the Company's estimate
or projection of future Common Stock prices.

(4) In connection with the recruitment of a new Chief Executive Officer of
Shockwave.com, Mr. Burgess has surrendered 1,050,000 shares of Common Stock
of Shockwave issued to him upon his exercise on April 17, 2000 of his
Shockwave stock options, reducing the number of shares of Common Stock of
Shockwave held by Mr. Burgess from 3,500,000 to 2,450,000. The 1,050,000
shares were surrendered by Mr. Burgess at the original price paid by him.

20
<PAGE>
The following table sets forth certain information concerning the exercise
of stock options during fiscal 2000 by each of the Named Executive Officers and
the number and value at March 31, 2000 of unexercised options held by said
individuals.

AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND
MARCH 31, 2000 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE END(#) AT FISCAL YEAR-END(2)($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME TYPE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ -------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert K. Burgess....... Macr 405,000 $16,519,944 509,480(3) 325,520 $40,145,164 $22,819,263
Shwv -- -- 3,500,000(4) -- -- --
Brian Allum............. Macr 131,000 5,914,273 127,750 211,250 9,894,713 15,859,376
Shwv -- -- 210,000 -- -- --
Norman K. Meyrowitz..... Macr 194,800 9,217,519 245,112 200,108 20,051,539 16,058,061
Shwv -- -- 100,000 -- -- --
Elizabeth A. Nelson..... Macr 64,601 2,449,893 66,863 189,091 4,783,924 13,749,949
Shwv -- -- 210,000 -- -- --
Kevin Lynch............. Macr 55,000 2,889,537 129,590 170,660 9,605,922 12,088,846
Shwv -- -- 700,000 -- -- --
David R. Mendels........ Macr 53,952 2,532,666 64,774 149,152 4,790,830 10,622,479
Shwv -- -- 210,000 -- -- --
</TABLE>

------------------------------

(1) "Value Realized" represents the fair market value of the shares underlying
the option on the date of exercise less the aggregate exercise price.

(2) The values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized. The values are based,
with respect to options exercisable for shares of Macromedia's Common Stock,
on the positive spread between the respective exercise prices of outstanding
stock options and the closing price of Macromedia's Common Stock on
March 31, 2000 ($90.3125 per share) and, with respect to options exercisable
for Shockwave.com's Common Stock, on the spread between the exercise prices
of outstanding stock options and the fair market value on March 31, 2000
determined by the Board of Directors ($0.50 per share).

(3) Includes 1,176 shares of Common Stock of Macromedia issuable upon exercise
of options transferred by Mr. Burgess to certain trusts held for the benefit
of his children.

COMPENSATION OF DIRECTORS

Each non-employee director is reimbursed for actual business expenses
incurred in attending each Board meeting. No cash compensation is paid to
non-employee directors. In any calendar year, there are approximately four
meetings of the Board held per year.

In addition, under the Company's 1993 Directors Stock Option Plan, each
director of the Company who is not an employee of the Company (or of any parent
or subsidiary of the Company) ("Outside Director") receives automatic grants of
stock options. Each Outside Director who first becomes a member of the Board is
automatically granted an option to purchase 50,000 shares of Common Stock on the
date the Outside Director first becomes a member of the Board (an "Initial
Grant"). Each Outside Director subsequently automatically receives a new 50,000
share option grant on the first day of the month following the full vesting of
his or her prior option grant, so long as he or she continuously remains a
director of the Company (a "Succeeding Grant"). Notwithstanding the foregoing,
the Board may increase or decrease the number of option shares that may be
granted to an Outside Director under the Directors Plan.

21
<PAGE>
EMPLOYMENT AGREEMENTS

ROBERT K. BURGESS EMPLOYMENT AGREEMENT

The Company entered into an employment agreement with Mr. Burgess in
August 1996. The employment agreement specified that Mr. Burgess' annual base
salary be $300,000, and that he would have the opportunity to earn an annual
target bonus of $200,000, if he met 100% of the objectives established by the
Board and up to a maximum annual bonus of $480,000, if he had exceeded 100% of
certain objectives. In fiscal 1999, Mr. Burgess volunteered to reduce his annual
base salary from $300,000 to $200,000, and increase his target variable
compensation from $200,000 to $300,000 based upon 100% achievement of the
Company's financial plan, with the variable compensation to be proportionally
adjusted in accordance with the Company's earnings performance. In fiscal 2000,
the Compensation Committee increased the target variable compensation for
Mr. Burgess from $300,000 to $400,000. In addition, in 1996, in accordance with
his employment agreement, Mr. Burgess was granted a non-plan stock option grant
for 1,000,000 shares of the Company's Common Stock which vests, so long as
Mr. Burgess continues to provide services to the Company, as to 25% of the
shares at the end of twelve months of employment and monthly thereafter for the
next three years.

The Company made a recourse loan to Mr. Burgess for $2,000,000 at an
interest rate of 6% per year to refinance his residence. The principal and
accrued interest on the loan, which is secured by his residence, is payable in
full three years from the date of the loan, or if earlier, his termination of
employment or the sale of such residence. Mr. Burgess has since repaid the loan
entirely.

Upon termination for other than cause or constructive termination,
Mr. Burgess will continue to receive his salary and bonus at the target plan for
a period of twelve months. In addition, Mr. Burgess will be entitled to continue
vesting in his options for the greater of (i) twenty-four months, reduced by the
number of months from the grant date to his date of termination or (ii) twelve
months. In the event Mr. Burgess is constructively terminated as president or
voluntarily terminates within 180 days following a change in control, he will
continue to receive his salary and bonus for twelve months, and Mr. Burgess'
options will immediately become exercisable and vest as if he had remained
employed for an additional twenty-four months, and will remain exercisable for
twenty-four months following the later of his termination of employment as
President or the date of his option acceleration.

BRIAN ALLUM EMPLOYMENT AGREEMENT

The Company entered into an employment agreement with Brian Allum, who is
Chief Operating Officer of the Company, in July 1997. Pursuant to his employment
agreement, Mr. Allum's base salary is $200,000 and he is eligible to earn an
annual target bonus of $200,000 per year if he meets 100% of the objectives
established each year by the Board and up to a maximum annual bonus of $600,000
per year, if he exceeds 100% of certain specified objectives. Mr. Allum was
guaranteed base salary and bonus compensation of $400,000 for his first year of
employment. Mr. Allum received a payment of $150,000, net of taxes, as a signing
bonus and to cover his miscellaneous relocation expenses. In addition,
Mr. Allum was granted an option for 400,000 shares of the Company's Common Stock
under the Company's 1992 Equity Incentive Plan, which vests and becomes
exercisable, for so long as Mr. Allum continues to provide services to the
Company, as to 25% of the shares at the end of twelve months of employment and
monthly thereafter for the next three years.

The Company made a recourse loan to Mr. Allum for up to $2,400,000 for the
purchase of his primary residence and improvements to it. No interest accrued on
the loan to Mr. Allum during the first two years through July 15, 1999 (the
"Initial Period") and the Company agreed to provide Mr. Allum with a tax
gross-up of the resulting taxable benefits. After the Initial Period, interest
has been accruing at an annually compounded rate of 6.65% per year. The
principal and accrued interest on the loan, which is secured by Mr. Allum's
residence, is payable in full on the earliest of (a) seven years from the date
of the loan; (b) 180

22
<PAGE>
days after the termination of Mr. Allum's employment with the Company for any
reason; or (c) immediately upon the sale of Mr. Allum's house. During the
Initial Period, the Company also agreed to pay the property taxes and property
insurance with respect to Mr. Allum's California residence, with a tax gross-up
of the resulting taxable benefits, and the cost of repairs, maintenance and
other one-time incremental expenses associated with his Canadian residence
incurred as a result of the Company's desire to have Mr. Allum rapidly relocate
to California. In addition, during the Initial Period, the Company has agreed
that it will, upon Mr. Allum's request, repurchase the California residence at
Mr. Allum's cost, plus the cost of any improvements made thereto.

Upon termination other than for cause or a voluntary termination, Mr. Allum
will continue to receive his base salary and health and life insurance benefits
for a period of twelve months and the Company shall reimburse Mr. Allum for his
relocation costs in moving back to Canada. In the event of a change in control
of the Company, the vesting of all of Mr. Allum's options will immediately be
accelerated by eighteen months.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board (the "Committee") makes all
decisions involving the compensation of executive officers of the Company. The
Committee consists of the following non-employee directors: Donald L. Lucas and
William B. Welty.

23
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE

This Report of the Compensation Committee is required by the SEC and shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.

TO THE BOARD OF DIRECTORS:

Final decisions regarding executive compensation and stock option grants to
executives are made by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of two independent non-employee
Directors, neither of whom have any interlocking relationships as defined by the
SEC. Although Robert K. Burgess (the Company's Chairman and Chief Executive
Officer) and Elizabeth A. Nelson (the Company's Chief Financial Officer),
attended the meetings of the Committee, they do not participate in deliberations
that relate to their own compensation.

GENERAL COMPENSATION POLICY

The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the Chief
Executive Officer ("CEO") and other executive officers and employees of the
Company at or about the beginning of each fiscal year. The Committee administers
the Company's incentive and equity plans, including the 1992 Equity Incentive
Plan (the "1992 Plan"), the Executive Incentive Plan (the "Incentive Plan"), the
1999 Stock Option Plan (the "1999 Stock Plan"), the Andromedia 1999 Stock Plan
and the 1993 Employee Stock Purchase Plan.

The Committee's philosophy in compensating executive officers, including the
CEO, is to relate compensation to corporate performance. Consistent with this
philosophy, the incentive component of the compensation of the executive
officers of the Company is contingent on corporate profits and sales performance
(including revenue and product sell-through performance measurements). Long-term
equity incentives for executive officers are effected through the granting of
stock options. Stock options generally have value for the executive only if the
price of the Company's stock increases above the fair market value on the grant
date and the executive remains in the Company's employ for the period required
for the shares to vest.

The base salaries, incentive compensation and stock option grants of the
executive officers are determined in part by the Committee informally reviewing
data on prevailing compensation practices in technology companies with whom the
Company competes for executive talent and by their evaluating such information
in connection with the Company's corporate goals. Subject to the limitations
regarding available data, the Committee compared the compensation of the
Company's executive officers with the compensation practices of comparable
companies to determine base salary, target bonuses and target total cash
compensation. In addition to their base salaries, the Company's executive
officers, including the CEO, are each eligible to receive a quarterly cash bonus
under the Incentive Plan and are eligible to participate in the 1992 Plan.

In preparing the performance graph for this Proxy Statement, the Company
used the Hambrecht & Quist Stock Index as its published line of business index.
The compensation practices of most of the companies in the Hambrecht & Quist
Stock Index were not reviewed by the Company when the Committee reviewed the
compensation information described above because such companies were determined
not to be competitive with the Company for executive talent.

24
<PAGE>
FISCAL 2000 EXECUTIVE COMPENSATION

BASE COMPENSATION. The Committee reviewed the recommendations and
performance and market data outlined above and established a base salary level
for each executive officer, including the CEO.

INCENTIVE COMPENSATION. Under the Incentive Plan, cash bonuses are awarded
only if the Company meets predetermined objectives set by the Board at the
beginning of the year. For fiscal 2000, the objectives used by the Company as
the basis for incentive compensation for the CEO and other executives were based
on a combination of revenue, predictability of results, channel sell-through
performance, and profitability. The target amount of bonus and the actual amount
of bonus are determined by the Committee, in its discretion. For fiscal 2000,
executive bonuses ranged from $171,043 to $684,167.

STOCK OPTIONS. In fiscal 2000, stock options to purchase shares of Common
Stock of the Company (the "Macromedia Options") were granted to certain
executive officers as incentives for them to become employees or to aid in the
retention of executive officers and to align their interests with those of the
stockholders. Macromedia Options typically have been granted to executive
officers when the executive first joins the Company, in connection with a
significant change in responsibilities and, occasionally, to achieve equity
within a peer group. The Committee may, however, grant additional Macromedia
Options to executives for other reasons. The number of shares subject to each
Macromedia Option granted is within the discretion of the Committee and is based
on anticipated future contribution and ability to impact corporate and/or
business unit results, past performance or consistency within the executive's
peer group. In fiscal 2000, the Committee considered these factors, as well as
the number of Macromedia Options held by such executive officers as of the date
of grant that remained unvested. In the discretion of the Committee, executive
officers may also be granted Macromedia Options under the 1992 Plan or the 1999
Plan (within the limitations on grants to executive under the 1999 Plan) to
provide greater incentives to continue their employment with the Company and to
strive to increase the value of the Company's Common Stock. The Macromedia
Options generally become exercisable over a four-year period and are granted at
a price that is equal to the fair market value of the Company's Common Stock on
the date of grant.

In addition, in fiscal 2000, stock options to purchase shares of Common
Stock of Shockwave.com (the "Shockwave Options"), a privately held,
majority-owned subsidiary of the Company, were granted to executive officers to
aid in the retention of executive officers and to recognize their contribution
to the growth of Shockwave.com business. The Shockwave Options issued to the
executive officers became exercisable upon grant and were granted at a price
that was equal to the value deemed to be the fair market value of the Common
Stock of Shockwave.com on the date of such grant. Any shares of Common Stock of
Shockwave.com issued to an executive officer upon exercise of unvested Shockwave
Options are subject to repurchase upon termination of employment of such
executive officer.

COMPANY PERFORMANCE AND CEO COMPENSATION. For the fiscal year 2000, Robert
K. Burgess, the President and CEO of the Company, received a base salary of
$200,000 and was eligible to earn a target bonus of $400,000 based on attainment
of 100% of the Macromedia Executive Bonus Plan objectives, with a total bonus
potential of in excess of that based on proportional achievement above the
objectives. In addition, in fiscal 2000, the Company granted him a non-qualified
stock option of 250,000 shares of Common Stock of the Company and 3,500,000
shares of Common Stock of Shockwave.com. In connection with the recruitment of a
new Chief Executive Officer of Shockwave.com, Mr. Burgess has subsequently
surrendered 1,050,000 shares of Common Stock of Shockwave issued to him upon his
exercise on April 17, 2000 of his Shockwave stock options, reducing the number
of shares of Common Stock of Shockwave held by Mr. Burgess from 3,500,000 to
2,450,000. The 1,050,000 shares were surrendered by Mr. Burgess at the original
price paid by him. For fiscal 2001, Mr. Burgess will receive a base salary of
$200,000 with a target bonus of $400,000 based on attainment of 100% of the
Macromedia Executive Bonus Plan objectives, with his bonus to be proportionally
adjusted for his performance.

25
<PAGE>
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986. The
Company intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986 for fiscal 2001. The 1992 Plan is already in
compliance with Section 162(m) by limiting stock awards to named executive
officers. The 1999 Plan is not in compliance with Section 162(m). The Company
does not expect cash compensation for fiscal 2001 to be in excess of $1,000,000
or consequently affected by the requirements of Section 162(m).

COMPENSATION COMMITTEE

DONALD L. LUCAS

WILLIAM B. WELTY

26
<PAGE>
COMPANY STOCK PRICE PERFORMANCE

The stock price performance graph below is required by the SEC and shall not
be deemed to be incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act, or
under the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
soliciting material or filed under such acts.

The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from March 31, 1995 through and including March 31,
2000 with the cumulative total return on The Nasdaq (US only) Stock Market and
the Chase Hambrecht & Quist Technology Index (assuming the investment of $100 in
the Company's Common Stock and in each of the indexes on March 31, 1995 and
reinvestment of all dividends). Unless otherwise specified, all dates refer to
the last day of each month presented.

COMPANY STOCK PRICE PERFORMANCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
MACROMEDIA CHASE H&Q TECHNOLOGY NASDAQ STOCK MARKET (U.S.)
<S> <C> <C> <C>
Mar-95 100.00 100.00 100.00
Mar-96 253.33 136.10 135.79
Mar-97 53.70 158.18 150.95
Mar-98 88.15 235.58 228.88
Mar-99 268.52 329.59 309.19
Mar-00 535.19 762.42 574.68
</TABLE>

* $100 INVESTED ON 3/31/95 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31.

DATA FOR MACROMEDIA, INC.
COMMON STOCK PRICE PERFORMANCE GRAPH
QUARTERLY DATA SERIES

SCALED PRICES: STOCK AND INDEX PRICES SCALED TO 100 AS OF MARCH 31, 1995.

<TABLE>
<CAPTION>
CHASE H&Q
DATE MACR TECHNOLOGY INDEX NASDAQ
------ -------- ---------------- --------
<S> <C> <C> <C>
Mar-95 100.00 100.00 100.00
Mar-96 253.33 136.10 135.79
Mar-97 53.70 158.18 150.95
Mar-98 88.15 235.58 228.88
Mar-99 268.52 329.59 309.19
Mar-00 535.19 762.42 574.68
</TABLE>

27
<PAGE>
CERTAIN TRANSACTIONS

From April 1, 1999 to the present, there have been no (and there are no
currently proposed) transactions in which the amount involved exceeded $60,000
to which the Company or any of its subsidiaries was (or is to be) a party and in
which any executive officer, director, 5% beneficial owner of the Company's
Common Stock or member of the immediate family of any of the foregoing persons
had (or will have) a direct or indirect material interest, except as set forth
below and under "Executive Compensation" and "Employment Agreements."

The Company entered into a consulting agreement with John (Ian) Giffen, a
director of the Company, in February 1998, pursuant to which Mr. Giffen agreed
to advise the Company's Chief Financial Officer, senior finance staff and
investment relations staff in certain areas and work on special projects for the
Company. In consideration for these services, which are beyond his duties as a
director of the Company, Mr. Giffen was granted a stock option for 75,000 shares
of the Company's Common Stock and received $8,334 per month. His stock option
vests and becomes exercisable at the rate of 2.78% per month. Upon a change of
control of the Company that occurs while Mr. Giffen is providing services to the
Company, his stock option for 75,000 shares becomes immediately vested and
exercisable as to all shares. The consulting agreement had a term of two years
and was terminable only for cause. Effective March 31, 2000, the consulting
agreement was amended to extend the term thereof and to reduce the services to
be provided by Mr. Giffen and the compensation from $8,344 per month to $4,167
per month.

The Company and Shockwave.com, Inc., a majority-owned subsidiary of the
Company, entered into a Series B Preferred Stock Purchase Agreement, dated
December 1, 1999, with various investors, including affiliates of Sequoia
Capital (collectively, the "Sequoia Affiliates") of which Mark Kvamme, a
director of the Company, is a partner. Pursuant to the Series B Stock Purchase
Agreement, Shockwave.com, Inc. issued and sold in a private placement
18,187,4000 shares of its Series B Preferred Stock, par value $0.001 per share,
to the investors parties thereto, including 13,599,400 shares to the Sequoia
Affiliates, at a purchase price of $2.50 per share. In connection with the
private placement, the Company, Shockwave.com and the investors, including the
Sequoia Affiliates, entered into an Investors' Rights Agreement, dated December
1, 1999, and a Voting Agreement, dated December 1, 1999, providing for customary
registration and voting rights and protective provisions.

The Company made a recourse loan to Mr. Elop, a Senior Vice President and
General Manager of eBusiness Solutions, for $1,000,000 in principal amount on
April 24, 1998 for the purchase of his primary residence. Pursuant to the
Secured Full Recourse Promissory Note issued by Mr. Elop to the Company in
connection with the loan, the interest on the loan will accrete at the rate of
5.51%, compounded annually. The principal and accreted interest on the loan,
which is secured by Mr. Elop's residence, is payable in full on the earliest of
(a) three years from the date of the loan; (b) 180 days after the termination of
Mr. Elop's employment with the Company for any reason; (c) immediately upon the
sale of Mr. Elop's house or (d) upon certain events of bankruptcy relating to
Mr. Elop. The principal amount of, and the accreted interest on, the loan was
fully paid by Mr. Elop on June 1, 2000.

The Company made a recourse loan to Kevin Lynch, the President of Macromedia
Products, for $349,300 in principal amount on April 17, 2000, in connection with
Mr. Lynch's exercise of options to purchase shares of Common Stock of
Shockwave.com, Inc., a majority-owned subsidiary of the Company. Pursuant to the
Secured Full Recourse Promissory Note issued by Mr. Lynch to the Company in
connection with the loan, the interest on the loan will accrete at the rate of
6.60%, compounded semi-annually. The principal and accreted interest on the
loan, which is secured, pursuant to a Stock Pledge Agreement, dated April 17,
2000, between the Company and Mr. Lynch, by the shares of Common Stock of
Shockwave.com issued upon exercise of Mr. Lynch's options, is payable in full on
the earliest of (a) the termination of Mr. Lynch's employment with the Company
for any reason, (b) the transfer by Mr. Lynch (other than to the Company) of any
shares of Common Stock of Shockwave.com secured in connection with the loan or
(c) upon certain events of bankruptcy relating to Mr. Lynch.

28
<PAGE>
STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the Company's 2001
annual meeting of stockholders must be received by the Company at its principal
executive offices no later than March 2, 2001 in order to be included in the
Company's proxy statement and form of proxy relating to that meeting.
Stockholders wishing to bring a proposal before the 2001 annual meeting of
stockholders (but not include it in the Company proxy materials) must provide
written notice of such proposal to the Secretary of the Company at the principal
executive offices of the Company by May 16, 2001.

SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16 of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of the Company's Common Stock to
file initial reports of ownership and reports of changes in ownership with the
SEC and the Nasdaq National Market. Such persons are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms that they file.

Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements were met.

OTHER BUSINESS

The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the Notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.

29
<PAGE>
APPENDIX A

MACROMEDIA, INC.
1992 EQUITY INCENTIVE PLAN
AS ADOPTED SEPTEMBER 23, 1992
AND AMENDED THROUGH JUNE 23, 2000

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 17,400,000 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.

30
<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;

(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 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.

31
<PAGE>
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 100% of the
Fair Market Value of the Shares on the date of grant; provided that 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 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.

32
<PAGE>
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 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.

33
<PAGE>
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 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.

34
<PAGE>
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;

(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.

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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 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 Participant 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.

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

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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 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.

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17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted under
the Plan shall confer or be deemed to confer on any Participant any right to
continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.

18. CORPORATE TRANSACTIONS.

18.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. In the event of
(a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all 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 grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

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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.

"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.

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"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;

(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

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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.

"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").

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APPENDIX B

MACROMEDIA, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
As Adopted October 15, 1993
and Amended Through June 23, 2000

1. ESTABLISHMENT OF PLAN. Macromedia, Inc. (the "COMPANY") proposes to
grant options for purchase of the Company's Common Stock to eligible employees
of the Company and its Subsidiaries (as hereinafter defined) pursuant to this
Employee Stock Purchase Plan (this "PLAN"). For purposes of this Plan, "Parent
Corporation" and "Subsidiary" (collectively, "SUBSIDIARIES") shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"CODE"). The Company intends the Plan to qualify as an "employee stock purchase
plan" under Section 423 of the Code (including any amendments to or replacements
of such section), and the Plan shall be so construed. Any term not expressly
defined in the Plan but defined for purposes of Section 423 of the Code shall
have the same definition herein. A total of 1,150,000 shares of the Company's
Common Stock is reserved for issuance under the Plan. Such number shall be
subject to adjustments effected in accordance with Section 14 of the Plan.

2. PURPOSE. The purpose of the Plan is to provide employees of the Company
and Subsidiaries designated by the Board of Directors of the Company (the
"BOARD") as eligible to participate in the Plan with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Subsidiaries, and to provide an incentive for continued employment.

3. ADMINISTRATION. This Plan may be administered by the Board or a
committee appointed by the Board (the "COMMITTEE"). As used in this Plan,
references to the "Committee" shall mean either such committee or the Board if
no committee has been established. Subject to the provisions of the Plan and the
limitations of Section 423 of the Code or any successor provision in the Code,
all questions of interpretation or application of the Plan shall be determined
by the Board and its decisions shall be final and binding upon all participants.
Members of the Board shall receive no compensation for their services in
connection with the administration of the Plan, other than standard fees as
established from time to time by the Board for services rendered by Board
members serving on Board committees. All expenses incurred in connection with
the administration of the Plan shall be paid by the Company.

4. ELIGIBILITY. Any employee of the Company or the Subsidiaries is eligible
to participate in an Offering Period (as hereinafter defined) under the Plan
except the following:

(a) employees who are not employed by the Company or Subsidiaries on the
fifteenth (15th) day of the month before the beginning of such Offering
Period;

(b) employees who are customarily employed for less than 20 hours per
week;

(d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock or who, as a result of being granted an
option under the Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing 5 percent or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries.

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An individual who provides services to the Company, or any designated
Subsidiary, as an independent contractor shall not be considered an "employee"
for purposes of this Section 4 or this Plan, and shall not be eligible to
participate in this Plan, except during such periods as the Company or the
designated Subsidiary, as applicable, is required to withhold U.S. federal
employment taxes for the individual. This exclusion from participation shall
apply even if the individual is reclassified as an employee, rather than an
independent contractor, for any purpose other than U.S. federal employment tax
withholding.

5. OFFERING DATES. The Offering Periods of the Plan (the "OFFERING PERIOD")
shall be of 6 months duration commencing February 16 and August 16 of each year
and ending on August 15 and February 15 respectively, during which payroll
deductions of the participant are accumulated under this Plan. The first day of
each Offering Period is referred to as the "Offering Date". The last business
day of each Offering Period is referred to as the "Purchase Date". The Board
shall have the power to change the duration of Offering Periods with respect to
future offerings without stockholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected.

6. PARTICIPATION IN THE PLAN. Eligible employees may become participants in
an Offering Period under the Plan on the first Offering Date after satisfying
the eligibility requirements by delivering a subscription agreement to the
Company's or Subsidiary's (whichever employs such employee) treasury department
(the "TREASURY DEPARTMENT") not later than the 15th day of the month before such
Offering Date unless a later time for filing the subscription agreement
authorizing payroll deductions is set by the Board for all eligible employees
with respect to a given Offering Period. An eligible employee who does not
deliver a subscription agreement to the Treasury Department by such date after
becoming eligible to participate in such Offering Period shall not participate
in that Offering Period or any subsequent Offering Period unless such employee
enrolls in the Plan by filing a subscription agreement with the Treasury
Department not later than the 15th day of the month preceding a subsequent
Offering Date. Once an employee becomes a participant in an Offering Period,
such employee will automatically participate in the Offering Period commencing
immediately following the last day of the prior Offering Period unless the
employee withdraws from the Plan or terminates further participation in the
Offering Period as set forth in Section 11 below. Such participant is not
required to file any additional subscription agreement in order to continue
participation in the Plan.

7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in the
Plan with respect to an Offering Period will constitute the grant (as of the
Offering Date) by the Company to such employee of an option to purchase on the
Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing the amount accumulated in such employee's payroll
deduction account during such Offering Period by the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Offering Date (the "ENTRY PRICE") or (ii) eighty-five percent (85%) of
the fair market value of a share of the Company's Common Stock on the Purchase
Date; provided, however, that the number of shares of the Company's Common Stock
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (a) the maximum number of shares set by the Board pursuant to Section 10(c)
below with respect to the applicable Offering Period, or (b) 200% of the number
of shares determined by using 85% of the fair market value of a share of the
Company's Common Stock on the Offering Date as the denominator. Fair market
value of a share of the Company's Common Stock shall be determined as provided
in Section 8 hereof.

8. PURCHASE PRICE. The purchase price per share at which a share of Common
Stock will be sold in any Offering Period shall be 85 percent of the lesser of:

(a) The fair market value on the Offering Date; or

(b) The fair market value on the Purchase Date.

For purposes of the Plan, the term "fair market value" on a given date shall
mean the fair market value of the Company's Common Stock as determined by the
Committee from time to time in good faith.

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If a public market exists for the shares, the fair market value shall be the
average of the last reported bid and asked prices for the Common Stock of the
Company on the last trading day prior to the date of determination, or, in the
event the Common Stock of the Company is listed on the NASDAQ National Market
System, the fair market value shall be the average of the high and low prices of
the Common Stock on the determination date as quoted on the NASDAQ National
Market System and reported in THE WALL STREET JOURNAL.

9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.

(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent increments not less
than 2 percent nor greater than 15 percent, not to exceed $25,000 per year or
such lower limit set by the Committee. Compensation shall mean all W-2
compensation, including, but not limited to base salary, wages, commissions,
overtime, shift premiums and bonuses, plus draws against commissions; provided,
however, that for purposes of determining a participant's compensation, any
election by such participant to reduce his or her regular cash remuneration
under Sections 125 or 401(k) of the Code shall be treated as if the participant
did not make such election. Payroll deductions shall commence on the first
payday following the Offering Date and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in the Plan.

(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department
a new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than 15 days after
the Treasury Department's receipt of the authorization and shall continue for
the remainder of the Offering Period unless changed as described below. Such
change in the rate of payroll deductions may be made at any time during an
Offering Period, but not more than one change may be made effective during any
Offering Period. A participant may increase or decrease the rate of payroll
deductions for any subsequent Offering Period by filing with the Treasury
Department a new authorization for payroll deductions not later than the 15th
day of the month before the beginning of such Offering Period.

(c) All payroll deductions made for a participant are credited to his or
her account under the Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

(d) On each Purchase Date, so long as the Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under the Plan and have all payroll
deductions accumulated in the account maintained on behalf of the participant as
of that date returned to the participant, the Company shall apply the funds then
in the participant's account to the purchase of whole shares of Common Stock
reserved under the option granted to such participant with respect to the
Offering Period to the extent that such option is exercisable on the Purchase
Date. The purchase price per share shall be as specified in Section 8 of the
Plan. Any cash remaining in a participant's account after such purchase of
shares shall be carried forward, without interest, into the next Offering
Period; provided, however, that any cash remaining in such participant's account
on a Purchase Date due to the limitations of Sections 10(a) and 10(d) shall be
returned to the participant as soon as practicable after the end of the Offering
Period, without interest. No Common Stock shall be purchased on a Purchase Date
on behalf of any employee whose participation in the Plan has terminated prior
to such Purchase Date.

(e) As promptly as practicable after the Purchase Date, the Company
shall arrange the delivery to each participant of a certificate representing
the shares purchased upon exercise of his option.

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(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised. Shares to be delivered to a participant
under the Plan will be registered in the name of the participant or in the name
of the participant and his or her spouse.

10. LIMITATIONS ON SHARES TO BE PURCHASED.

(a) No employee shall be entitled to purchase stock under the Plan at a
rate which, when aggregated with his or her rights to purchase stock under
all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in the Plan.

(b) No more than 200% of the number of shares determined by using 85% of
the fair market value of a share of the Company's Common Stock on the
Offering Date as the denominator may be purchased by a participant on any single
Purchase Date.

(c) No employee shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty days prior to the commencement of any Offering Period, the Board may, in
its sole discretion, set a maximum number of shares which may be purchased by
any employee at any single Purchase Date (hereinafter the "MAXIMUM SHARE
AMOUNT"). In no event shall the Maximum Share Amount exceed the amounts
permitted under Section 10(b) above. If a new Maximum Share Amount is set, then
all participants must be notified of such Maximum Share Amount not less than
fifteen days prior to the commencement of the next Offering Period. Once the
Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Offering Periods unless revised by the Board as
set forth above.

(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in the Plan exceeds the number of shares then
available for issuance under the Plan, the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Board shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares to
be purchased under a participant's option to each participant affected thereby.

11. WITHDRAWAL.

(a) Each participant may withdraw from an Offering Period under the Plan
by signing and delivering to the Treasury Department notice on a form
provided for such purpose. Such withdrawal may be elected at any time at least
15 days prior to the end of an Offering Period.

(b) Upon withdrawal from the Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant, without interest, and his or
her interest in the Plan shall terminate. In the event a participant voluntarily
elects to withdraw from the Plan, he or she may not resume his or her
participation in the Plan during the same Offering Period, but he or she may
participate in any Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
the Plan.

12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment for
any reason, including retirement, death or the failure of a participant to
remain an eligible employee, immediately terminates his or her participation in
the Plan. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of his or her death, to
his or her legal representative, without interest. For purposes of this Section
12, an employee will not be deemed to have terminated employment or failed to
remain in the continuous employ of the Company in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more

45
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than ninety (90) days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.

13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest in
the Plan is terminated by withdrawal, termination of employment or otherwise, or
in the event the Plan is terminated by the Board, the Company shall promptly
deliver to the participant all payroll deductions credited to his account. No
interest shall accrue on the payroll deductions of a participant in the Plan.

14. CAPITAL CHANGES. Subject to any required action by the stockholders of
the Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "RESERVES"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.

In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.

The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, or
in the event of the Company being consolidated with or merged into any other
corporation.

15. NONASSIGNABILITY. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 22 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect.

16. REPORTS. Individual accounts will be maintained for each participant in
the Plan. Each participant shall receive promptly after the end of each Offering
Period a report of his or her account setting forth the total payroll deductions
accumulated, the number of shares purchased, the per share price thereof and the
remaining cash balance, if any, carried forward to the next Offering Period.

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<PAGE>
17. NOTICE OF DISPOSITION. Each participant shall notify the Company if the
participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two years from the
Offering Date or within one year from the Purchase Date on which such shares
were purchased (the "NOTICE PERIOD"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to the Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.

18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.

19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to the Plan so that the Plan qualifies as an
"employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company or the Board, be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in the Plan.

20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

21. TERM; STOCKHOLDER APPROVAL. This Plan shall become effective on the date
that it is adopted by the Board of the Company. This Plan shall be approved by
the stockholders of the Company, in any manner permitted by applicable corporate
law, within twelve months before or after the date this Plan is adopted by the
Board. No purchase of shares pursuant to the Plan shall occur prior to such
stockholder approval. The Plan shall continue until the earlier to occur of
termination by the Board, issuance of all of the shares of Common Stock reserved
for issuance under the Plan, or one (1) year from the adoption of the Plan by
the Board (unless extended by the Board for a period of up to ten (10) years
from the adoption date.)

22. DESIGNATION OF BENEFICIARY.

(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to a Purchase Date.

(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
or cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares
shall not be issued with respect to an option unless the exercise of such option
and the issuance and delivery of such shares pursuant thereto shall comply with
all applicable provisions of law, domestic or foreign, including, without

47
<PAGE>
limitation, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.

25. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend,
terminate or the extend the term of the Plan, except that any such termination
cannot affect options previously granted under the Plan, nor may any amendment
make any change in an option previously granted which would adversely affect the
right of any participant, nor may any amendment be made without approval of the
stockholders of the Company obtained in accordance with Section 21 hereof within
12 months of the adoption of such amendment (or earlier if required by Section
21) if such amendment would:

(a) increase the number of shares that may be issued under the Plan; or

(b) change the designation of the employees (or class of employees)
eligible for participation in the Plan.

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<PAGE>

PROXY

MACROMEDIA, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 11, 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Robert K. Burgess and Elizabeth A.
Nelson, or either of them, each with power of substitution,to represent the
undersigned at the Annual Meeting of Stockholders of Macromedia, Inc. (the
"Company") to be held at 600 Townsend Street, San Francisco, California 94103
on August 11, 2000, at 1:00 p.m. P.D.T., and any adjournment or postponement
thereof, and to vote the number of shares the undersigned would be entitled
to vote if personally present at the meeting on the following matters:

SEE REVERSE SIDE

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<PAGE>

Please mark
your choices
like this /X/

WITHHELD
FOR ALL FOR
1. ELECTION OF DIRECTORS / / / /

NOMINEES: ROBERT K. BURGESS DONALD L. LUCAS
JOHN (IAN) GIFFEN ALAN RAMADAN
MARK D. KVAMME WILLIAM B. WELTY

Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:

------------------------------------------------------------

FOR AGAINST ABSTAIN
2. AMENDMENT TO THE COMPANY'S CERTIFICATE OF / / / / / /
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK

3. AMENDMENT TO THE COMPANY'S 1992 EQUITY / / / / / /
INCENTIVE PLAN

4. AMENDMENT TO THE COMPANY'S 1993 EMPLOYEE / / / / / /
STOCK PURCHASE PLAN

5. RATIFICATION OF SELECTION OF KPMG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS / / / / / /

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR ELECTION AND
FOR PROPOSALS 2, 3, 4 AND 5.

THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. IN THE ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR THE COMPANY'S NOMINEES FOR ELECTION AND FOR PROPOSALS
2, 3, 4 AND 5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF TO THE EXTENT AUTHORIZED BY RULE 14a-4(c) PROMULGATED BY
THE SECURITIES AND EXCHANGE COMMISSION. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY.

SIGNATURES(S) DATED: , 2000
---------------------------------------- --------------
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares are held of record in the names of two or more persons or in the name
of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by
a corporation, the proxy should be executed by the president or vice
president and the secretary or assistant secretary. Executors,
administrators, or other fiduciaries who execute the above proxy for a
deceased stockholder should give their full title. Please date the proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED, POSTAGE PAID ENVELOPE SO THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING.

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