-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FqFPlyJpJfdayNMKInSrKwyf19L+cN68kjNYTJmNq4tdDyiFVfH8ihoouBWfGZtU GjjCSAVw3at8uJHXE9V2sA== 0000950149-96-000782.txt : 19960629 0000950149-96-000782.hdr.sgml : 19960629 ACCESSION NUMBER: 0000950149-96-000782 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960627 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MACROMEDIA INC CENTRAL INDEX KEY: 0000913949 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943155026 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22688 FILM NUMBER: 96586883 BUSINESS ADDRESS: STREET 1: 600 TOWNSEND ST STREET 2: STE 310 W CITY: SAN FRANCISCO STATE: CA ZIP: 94103 BUSINESS PHONE: 4152522000 MAIL ADDRESS: STREET 1: 600 TOWNSEND ST STREET 2: STE 310W CITY: SAN FRANCISCO STATE: CA ZIP: 94103 10-K 1 FORM 10-K FOR THE FISCAL YEAR ENDED 3-31-96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10 - K (X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 31, 1996; or ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______ to _____. COMMISSION FILE NO. 0 - 22688 MACROMEDIA, INC. (Exact name of Registrant as specified in its charter) DELAWARE 94 - 3155026 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 600 TOWNSEND STREET, SAN FRANCISCO, CALIFORNIA 94103 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 252-2000 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.001 PER SHARE (Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10 - K or any amendment to this Form 10-K [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on May 31, 1996 ($42.625) as reported on the Nasdaq National Market, was approximately $1,323,287,541. Shares of Common Stock held by each officer and director and by certain persons who owned 5% or more of the Registrant's outstanding Common Stock on that date have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of Friday, May 31, 1996, Registrant had outstanding 36,583,592 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for Registrant's 1996 Annual Meeting of Stockholders to be held at 1:30 PM, Thursday, July 25, 1996 at 600 Townsend Street, San Francisco, 94103 are incorporated by reference in Part III. 2 MACROMEDIA, INC. 1996 FORM 10-K TABLE OF CONTENTS PAGE ---- PART I Item 1. Business 1 Item 2. Properties 9 Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 4A. Executive Officers of the Registrant 10 PART II Item 5. Market for the Registrant's Common Equity and Related Stock Holder Matters 13 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 8. Financial Statements and Supplementary Data 24 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 45 PART III Item 10. Directors and Executive Officers of the Registrant 47 Item 11. Executive Compensation 47 Item 12. Security Ownership of Certain Beneficial Owners and Management 47 Item 13. Certain Relationships and Related Transactions 47 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 48 Signatures 51 Index to Exhibits
3 PART I ITEM 1. BUSINESS GENERAL Macromedia, Inc. ("Macromedia" or the "Company") is a supplier of integrated software tools and services to the graphics, multimedia, and online publishing communities. The Company develops, markets, and supports an integrated line of graphics, multimedia, and online publishing software for both Windows and Macintosh platforms (Windows 3.1, Windows 95, Windows NT, Macintosh, and Power Macintosh). These authoring and production tools are used to create interactive multimedia applications and printed materials for business communications, the arts and entertainment, and education. Using Macromedia's products, developers can create content for delivery over the full spectrum of digital formats: print, video, film, the World Wide Web, intranets, CD-ROM, DVD (Digital Video Disk), Enhanced CD, and interactive television. The Macromedia Studios, each consisting of a suite of Macromedia products, meet the needs of individuals involved in the development and delivery of multimedia and graphics content by providing a complete, integrated set of tools. Macromedia Studios are based on the Macromedia Open Architecture (MOA) which lets users leverage their understanding of one application across an entire product line. The Macromedia Information Exchange (MIX) enables one studio application to present data to another studio application in the most appropriate form, thus enhancing ease-of-use and productivity. The Macromedia User Interface (MUI) delivers a consistent look and feel across all studio applications and numerous third-party plug-ins. These core technologies provide a framework for ensuring that the Macromedia Studios are well-integrated, user-friendly tools for customers and that developers can "Author Once, Publish Anywhere." These Studios include: Director(R) Multimedia Studio(TM) - software tools for multimedia and the Internet FreeHand(TM) Graphics Studio(TM) - software tools for graphic design Authorware(R) Interactive Studio(TM) - software authoring tools for interactive information Backstage(TM) Internet Studio(TM) - software tools for building Web sites With Macromedia's Shockwave(TM) technology, existing and new users of the Company's products are adapting and developing interactive content for use on World Wide Web sites. Authorware, Director, and FreeHand files can be translated or "shocked" for use on World Wide Web sites as well as corporate intranets and other networks. With the acquisition of iband and its family of visual Web-building environments, Backstage, the Company intends to provide a complete, cross-platform Internet authoring studio. (The Backstage product line is currently available for use in Windows. It is expected that as of September 1996, Backstage Designer Plus will be available for the Macintosh OS.) To support its customers and distribution channels, Macromedia offers many innovative programs and services through its Source & Center programs, including: o Macromedia International User Conference o Worldwide Developer Program o Authorized Training Program o Macromedia Priority Access o Made with Macromedia certification o Macromedia Authorized Graphic Imaging Center (MAGIC) program o Macromedia User Groups o Online Forums o Industry resources on the Macromedia Web site: http://www.macromedia.com o Macromedia Consulting Group o Xtras(TM) Developer Program The Company sells its products worldwide through a variety of distribution channels, including traditional software distributors, educational distributors, value-added resellers ("VARs"), original equipment manufacturers ("OEMs"), hardware and software superstores, retail dealers, mail order, and direct sales. The Company also enters into and maintains alliances with other key players in multimedia, graphic arts, and publishing, as well as related emerging industries. 1 4 PRODUCTS The Company's products are used by multimedia, graphic arts, Web, and learning professionals working on their own or in organizations ranging from large corporations to small companies, as well as in educational institutions. MULTIMEDIA PRODUCTS Authorware is designed for authoring and delivering interactive information and is targeted to computer-based training specialists and educators, as well as multimedia professionals. It provides an object-oriented, icon-based authoring environment with hypertext and media capabilities, data measurement functions, and media integration controls. Available for use on Windows or Macintosh, Authorware's easy-to-use authoring environment lets subject matter experts build applications such as interactive multimedia courseware, kiosks, and publications, by placing icons on a flowline to combine and control text, graphics, animation, sound, and video. Its use of icons instead of scripting to define interactivity and control multimedia elements significantly shortens the learning curve for non-programmers, increasing productivity and ease of long-term maintenance. Authorware also automatically records, measures, and reports student responses and other end user data. Authorware 3.0 is now designed for use on corporate intranets. Authorware Interactive Studio allows users to create interactive information applications. The studio includes: Authorware 3.0, for authoring interactive information on a variety of platforms, including corporate intranets; and the Director Multimedia Studio, for complete multimedia application development. Director is designed for developing interactive multimedia entertainment, edutainment, and high-impact presentations, and is targeted at design, graphics, animation, and video professionals who require a wide selection of creative tools for their multimedia productions. Director 5.0 allows users to quickly and easily import and integrate media elements such as 2D and 3D graphics, animation, sound, and digital video from a wide variety of sources to create stand-alone interactive applications. Director allows development of multimedia content on Windows 95, Windows NT, Windows 3.1, and Macintosh OS and delivery on those platforms, as well as on the Internet using Shockwave. Director Multimedia Studio allows users to create dynamic multimedia. The Studio includes: Director 5.0, for multimedia and the Internet; SoundEdit(TM) 16plus DECK II(TM) 2.5 (Macintosh), for audio production or Sound Forge XP (Windows), a general-purpose sound editor purchased through a license agreement from Sonic Foundry; Extreme 3D(TM), for 3D design and animations; and Macromedia xRes(TM) 2.0, for high-resolution images. SoundEdit 16 plus DECK II brings together two audio tools for a complete digital audio package. SoundEdit 16 is the first software-only recording studio that lets users create fine-tuned audio for everything from multimedia to music to the Internet. DECK II features multitrack recording, macro-editing, and complex audio arrangement capabilities. This software, combined in a single package, provides a comprehensive audio solution for sound editing and synchronization from the Macintosh desktop. WEB DEVELOPMENT PRODUCTS Backstage Designer Plus allows Windows users to create their own dynamic Web sites without having to use HTML. Offering a WYSIWYG point-and- click authoring environment, Backstage Designer is easy to use, and powerful enough for professional use. Backstage Internet Studio refers to two full-featured Windows-based packages for developing mission-critical, Web-based business applications. Backstage Desktop Studio, an advanced Web design, development, and management package, combines a WYSIWYG authoring environment with customizable objects, a project-level management system, and a browser-optimizing object server. Objects include features such as database connectivity, forms-to-email, discussion groups, and more. Backstage Enterprise Studio extends the features and functionality of the Desktop Studio with client/server database connectivity. Shockwave is compression standard technology for playing multimedia and graphics files created with Macromedia tools over the World Wide Web and corporate intranets. Shockwave applications can be developed in Windows and on the Macintosh and viewed on either platform, as well. 2 5 GRAPHIC ARTS PRODUCTS FreeHand is a design and illustration software package that offers a comprehensive feature set and customizable working environment for graphic designers, artists, and illustrators. Its open architecture provides access to a range of third-party Xtras and its support for Adobe Photoshop filters enables TIFF manipulation without leaving FreeHand. FreeHand's text environment features text style sheets, copy fitting and column balancing, spelling checker, hyphenation, tabs, text on a path, inline graphics, and more. Graphic artists, designers, and illustrators can experiment with 100 levels of undo and redo. FreeHand also features 500 fonts and 10,000 clip-art images. FreeHand 5.5 is currently available for the Macintosh and Power Macintosh and FreeHand 5.0 is available for use on Windows 95, NT, and 3.1. The FreeHand Graphics Studio is a complete set of tools for graphic arts and design. The studio includes: FreeHand, for graphic design, illustration, and page layout; Extreme 3D, for 3D models, animations, and renderings; Macromedia xRes, for hi-res image editing and compositing; and Fontographer, for modifying existing fonts or creating new typefaces. This studio also contains clip art, photography, 3D models, and fonts. Extreme 3D features 3D modeling, animation, and rendering. Extreme 3D's interface conforms to popular illustration, animation, and rendering standards and offers functionality and integration with Macromedia xRes, FreeHand, Director, and Authorware. With identical environments and file formats on Windows and Macintosh, Extreme 3D allows transparent file exchange and supports built-in distributed rendering across platforms. Fontographer is software for creating and modifying fonts in Windows and on the Macintosh. It is designed for graphic artists, type designers, and technical professionals who want to modify their existing fonts or create new fonts from scratch. Fontographer offers ease-of-use and precision drawing tools to serve the type design needs of novices and professionals alike. Macromedia xRes is cross-platform image editing and design software that lets users create and edit high-resolution files quickly, without using extra RAM or hardware. Macromedia xRes features a familiar Adobe Photoshop-style interface, as well as Photoshop-compatible keyboard shortcuts and imaging conventions. Other features include multiple undos, artistic brushes and textures, and floating text objects. Macromedia xRes also supports such Web-ready formats as GIF89a (interleaved with transparency), Progressive JPEG, and PNG. PRODUCT DEVELOPMENT Macromedia is focusing its product development efforts on creating the Macromedia Studios, a completely integrated line of affordable, high-quality, easy-to-use software tools for multimedia, graphic arts, and digital video professionals. Its products are distinguished by five key design strategies: 1) Ease-of-Use -- Macromedia products are designed and documented for ease-of-use in order to serve the needs of the largest number of multimedia, graphic arts, and online publishing users. The Company's products share similar user interface conventions to facilitate learning multiple products. 2) Integration -- Macromedia offers a family of multimedia and graphic arts tools that are designed to share data formats and user interface conventions. This enables our tools to work well together and reduces the learning curve from one application to the next. 3) Power/Performance -- Macromedia products combine comprehensive feature sets with high performance to provide the power and efficiency necessary for creative and business professionals' use. 4) Extensibility -- Macromedia products can be extended by third-party developers through built-in scripting languages and published Application Programmer Interfaces. 5) Author Once, Publish Anywhere -- Macromedia software provides the means for interactive authoring and multimedia production, including 2D graphics, in Windows and on the Macintosh, as 3 6 well as print output and playback of applications on the leading personal computer, consumer player, online, and interactive television platforms. The Company's principal product development efforts include (i) utilizing its core technology to develop a common graphical user interface across all products on all platforms, (ii) developing enhanced, fully integrated versions of its existing authoring and media creation tools, (iii) developing new versions of its tools for graphic arts, multimedia, online publishing, sound and video, (iv) integrating 3D technology into its authoring tools to meet the anticipated future demand for 3D capabilities, (v) adapting its products to support new operating systems, and (vi) developing players for delivery of applications to new playback platforms, including the Internet. In addition, the Company plans to continue developing, and from time to time acquiring, basic software technologies that it considers critical to building multimedia, graphic arts, Web development, and digital video software tools and applications. The Company believes that its future success will depend on its ability to enhance its existing products and to develop and introduce new products on a timely basis. New products and enhancements must keep pace with competitive offerings, adapt to new hardware platforms and emerging industry standards, and provide additional functionality. If Macromedia were unable to develop and introduce such products in a timely manner, this inability would have an adverse effect on the Company's results of operations. Macromedia currently has a number of new product development efforts under way, including Authorware 4.0, FreeHand 7.0, and Director 6.0, which are scheduled to be released during the current fiscal year. Any delay in these new products' availability could have an adverse impact on the results of operations. For fiscal 1996, 1995, and 1994, the Company's research and development expenses were $20.0 million, $12.4 million, and $10.1 million respectively. MARKETING Macromedia generates awareness and demand for its products through public relations activities, advertising, product reviews, and national and local trade shows. The Company also uses direct mail to introduce and educate customers about new products and enhancements, and to cross-sell additional products to current customers. In addition, Macromedia sells its products by distributing a variety of interactive multimedia demonstration materials and videos directly to prospective customers, and then follows up through outbound telemarketing. To support users of its tools, the Company sponsors innovative programs and services through its Source & Center programs. One of the more high-profile events is the Macromedia International User Conference held in San Francisco each fall. Macromedia also manages the Authorized Developer Program which certifies third-party developers and refers prospective clients to them. In addition, the Company provides incentives to third-party developers to use the "Made with Macromedia" trademark on multimedia applications that have been authored with the Company's products. In the last year, 670 U.S., 300 European, and 225 Japanese titles displayed the logo. In return, the title developers paid no license fees to Macromedia for their distribution of Macromedia's player software. The Company has also certified more than 80 Authorized Training Centers worldwide to provide third-party training in the use of its products and since March 1995, 460 Authorized Graphic Imaging Centers have been certified to provide the highest level of print service to Macromedia's graphic arts customers. The Company views the education market as a strategic opportunity to establish product and brand preferences early in the careers of future professionals. There are now 75 New Media Centers resulting from the Company's partnership with educational institutions committed to developing curricula focused on multimedia. A key element of the Company's marketing strategy is to work with industry leaders to develop the multimedia market and gain broad acceptance of Macromedia products on all leading platforms. Many such arrangements have been established by the Company, including: o Agreements to develop industry-standard multimedia playback technology (Macromedia Portable Players) for IBM's OS/2 Warp and Microware's OS/9 in addition to Windows and Macintosh operating systems, and for interactive television set-top boxes from Online Media and Apple Computer. 4 7 o Shipment of the FreeHand Software Developers Kit, free of charge, to third-party developers resulting in the development of Metatool Inc.'s Kai's Power Tools; Vector Effects; Letraset; USA's Envelopes; Azalea Software, Inc.'s Prepress Xtra and UPCTools; and Bullfrog Software Engineering's Encompass. o An agreement with Netscape Communications to bundle Shockwave with various retail products, allowing users of the Netscape browser to retrieve and play Macromedia Director animations and applications over the Internet. o An agreement with Microsoft to bundle Shockwave technology with the Internet Explorer 3.0 and Windows 95. o An agreement with America Online to distribute Macromedia Shockwave with America Online 3.0. o Through additional agreements with Sun Microsystems, Silicon Graphics, Navisoft, CompuServe, and NetManage, Director and Shockwave technology will be widely available for use on the Internet. SALES AND DISTRIBUTION A substantial majority of the Company's revenues is derived from the sale of its products through a variety of distribution channels, including traditional software distributors, educational distributors, VARs, OEMs, hardware and software superstores, retail dealers, mail order, and direct sales. The Company also enters into and maintains alliances with other key players in multimedia, graphic arts, and online publishing, as well as related emerging industries. Domestically, the Company's products are sold primarily through distributors, VARs, and OEMs. Internationally, the Company's products are sold through distributors. In fiscal 1996 and 1995 one distributor, Ingram Micro, Inc., accounted for 21% and 23%, respectively, of the Company's total revenues; in fiscal 1994, another distributor, Merisel, Inc., accounted for 10% of the Company's total revenues. Accordingly, the Company is dependent on the continued viability and financial stability of these distributors. The Company's resellers generally offer products of several different companies, including in some cases products that are competitive with the Company's products. There can be no assurance that the Company's resellers will continue to purchase the Company's products or provide them with adequate levels of support. In addition, the Company believes that certain distributors may be reducing their inventory in the channel to better manage their internal working capital, and that this could result in a one-time reduction in orders, as this adjustment takes effect. The loss of, or a significant reduction in sales volume to, a significant reseller could have a material adverse effect on the Company's results of operations. The Company's sales and distribution channels are targeted at the buying patterns of the Company's two principal customer types: multimedia and graphic arts professionals. Software Distributors -- Macromedia sells and distributes its products primarily through large national software distributors, such as Ingram Micro, Inc., Merisel, Inc., MicroAge, and Tech Data Corporation which in turn distribute the Company's products through large retail chains, mail order, National corporate resellers and small independent dealers. The Company supports this channel by referring mail order and retail dealer sales through distributors. The Company's direct sales staff calls on large distributors and retailers and assists them in the placement of orders and the management of inventory of the Company's products. The Company receives monthly inventory and sales reports from its distributors and major retailers to help monitor sales through this channel. As is typical in the personal computer software industry, the Company grants its distributors limited rights under a stock balancing policy to return unsold inventories of the Company's products in exchange for new purchases. In addition, the Company provides price protection to its distributors in certain instances where it reduces the price of its products. International Distributors -- With over 80 distributors in over 50 countries around the world, international sales of Macromedia products accounted for 42% of total revenues during the last fiscal year. In many cases, the distributor has exclusive distribution rights to certain products or for certain platforms in its country and, in certain cases, has the responsibility for preparing "localized" versions of Macromedia's products in the language of the country. The Company believes that the international markets for its products present a 5 8 strategic opportunity and is committed to increasing its international sales to 50 percent of total sales. The Company continues to actively review its international distribution arrangements. Value Added Resellers -- Macromedia sells and distributes the Authorware Interactive Studio and the Director Multimedia Studio through 170 VARs and high-end dealers. The VARs are selected by Macromedia based on their knowledge of the products and applications. During fiscal 1996, the standards for VAR selection were reviewed and refined, resulting in fewer, more highly qualified VARs. Many of the VARs have experience selling desktop computer-aided-design software or desktop video editing systems. They are required to provide service and training to their customers and to conduct seminars on the use of Macromedia's products. The Authorware Interactive Studio for Windows and Macintosh is distributed exclusively through the VAR network. The Director Multimedia Studio for Windows and Macintosh is distributed through the VAR network and through dealers on a non-exclusive basis. Educational Market Distributors -- Macromedia sells its products to educational institutions primarily through distributors such as Ingram Micro Inc., Douglas Stewart, and Educational Technology Specialists, Inc. ("Edutech"), which specialize in selling to the education market, e.g. bookstores, campus resellers, educational mail order companies, and Macromedia education value-added resellers (VARs). The Company offers substantial educational discounts on (i) its individual products to seed the market, (ii) on ten-packs of products to stimulate adoption by computer and multimedia laboratories, and, through Edutech, (iii) for on-site licenses under which educational institutions can obtain institution-wide licenses of a mix of Macromedia products. Further discounts are available on training classes, materials, and services. In addition, the Company currently offers Authorware Academic and expects to offer Director Academic, educational versions of its multimedia authoring products, at preferred educational pricing through a license agreement with Prentice-Hall, the largest textbook publisher in higher education. OEM Distribution -- Macromedia actively maintains OEM relationships with many hardware and software vendors that bundle Macromedia products with their own complementary hardware or software products and pay the Company a per unit royalty. In the last year alone, 12 new OEM agreements were signed. The Company believes that OEM sales increase the brand recognition of its products and expand its customer base. In addition, these OEM relationships give the Company early access to new multimedia technologies being developed by OEMs and allow Macromedia to quickly adapt its products for compatibility. The companies with whom Macromedia has established OEM distribution arrangements include: ASCII Corporation ATI Technology, Inc. Chang Chung Co. Creative Labs, Inc. Darim System Digital Equipment Corporation Digital Vision Eastman Kodak Fujitsu Computer Products of America Grass Valley Group, Inc. High Technology Intergraph Computer Systems, Inc. International Thomson Publishing, Inc. JVC Information Products of America Korg U.S.A. Inc. NEC Technologies, Inc. Orchid Technology Optibase Ltd. Play Inc. Power Computing, Inc. Reveal Corporation Roland Corporation US. Samsung Electronics Company Ltd. Telex Communications VideoLogic, Ltd. 6 9 Inside Sales - The Company offers product upgrades and services, including membership in various authorized programs, directly to qualified third-parties and end users. Direct sales, by selling to repeat customers in the Company's installed base of registered users, complements Macromedia's indirect distribution channel. Technology Licensing - For certain large customers, the Company enters into licensing agreements under which the customer has the right to reproduce and use Macromedia software. For example, the Company has entered into licensing agreements with Brederbund Software, Compuserve, Inc., Interaxx Television Network, Inc., NetManage Inc., and Attachmate. TECHNICAL SERVICES The Technical Services department offers technical support, training, and consulting, and is dedicated to increasing customer satisfaction by supporting customers in their on-going relationship with the Company. The Company offers product training for Authorware and Director. Its training classes are led by professional instructors and provide customers with hands-on learning experiences. Classes are offered in locations throughout the United States and in various locations both in and outside the United States through Macromedia's Authorized Training Centers. Training for FreeHand and Macromedia's 3D graphics products is offered through third-party training professionals using course materials developed by the Company. The Company also offers strategic consulting to organizations through the Macromedia Consulting Group. This group specializes in needs analysis, project planning, application prototyping, technology assessments, and critical short-term applications development assistance for developers and publishers. The Company relies on third parties, as well as its own direct consulting group, to provide training and consulting for large customers. Macromedia provides customer support on a complimentary basis for a period of 90 days after the first technical support call from a customer. Thereafter, the Company offers its customers a technical support plan called Priority Access that provides the customer with access to a toll- free support line, priority call queuing, priority response to mail, and facsimile support inquiries, 24-hour voicemail messaging, and a quarterly mailing that includes the TechNotes newsletter with product tips and techniques, and the Macromedia "KnowledgeBase," a database of common technical support questions and answers. The Company also offers sophisticated Developer Support and per-incident support. COMPETITION Sales of the Company's Director, Freehand, and Authorware products have generally represented and are expected to continue to represent a substantial majority of the Company's total revenues. The Company expects that its revenues will continue for the foreseeable future to be substantially dependent on these products and that competition for these products will intensify in the future. A decline in sales of any of these products, as a result of competition, technological change, or other factors, would have a material adverse effect on the Company's results of operations. To date, a majority of the Company's revenues has been derived from its products for the Macintosh. Although sales of the Company's products for Windows accounted for approximately one-third of the Company's total revenues in fiscal 1996 and are expected to become an increasingly important component of the Company's revenues, a leveling-off or decline in the sales rate of multimedia-capable Macintosh computers or shifts in mail-order or other distribution mechanisms for Macintosh products could have a material adverse effect on the Company's results of operations. The markets for the Company's products are highly competitive and characterized by pressure to reduce prices, incorporate new features, and accelerate the release of new product versions. A number of companies currently offer products that compete directly or indirectly with one or more of the Company's products. These companies include Adobe Systems Incorporated, Aimtech Corporation, Apple Computer Incorporated, Asymetrix Corporation, Autodesk, Incorporated, Corel Corporation ("Corel"), Microsoft Corporation, and Strata Incorporated. As the Company competes with larger competitors such as Adobe, Corel, and Microsoft across a broader range of product lines, the Company may face increasing competition from such companies. In addition, the Company's products compete to a certain extent with multimedia authoring tools developed and used internally by developers of multimedia applications. The Company's growth will depend in part on its ability to persuade such potential customers to replace or augment their in-house tools with the Company's products. 7 10 The Company believes that the principal competitive factors in the graphic arts, multimedia, and Web publishing tools categories are product features and quality, price, ease-of-use, brand name recognition, access to distribution channels, reliability, and quality of support services. The Company believes that it competes favorably with respect to each of these factors. In the event that price competition significantly increases, competitive pressures could cause the Company to reduce the prices of its products, which would result in reduced profit margins. Prolonged price competition would have an adverse effect on the Company's operating results and financial condition. A variety of other potential actions by the Company's competitors, including increased promotion and accelerated introduction of new or enhanced products, could have a material adverse effect on the results of operations. Although the Company believes that its principal products have achieved market acceptance, there can be no assurance that they will continue to do so. Furthermore, there is a possibility that new personal and network computer hardware platforms or new multimedia delivery systems may provide new entrants with opportunities to make substantial inroads into the graphic arts, multimedia, or Web publishing tools market segments. PROPRIETARY RIGHTS AND LICENSES The Company relies on a combination of copyright, trade secret, and trademark laws, and employee third-party nondisclosure agreements, to protect its intellectual property rights and products. The Company distributes its software under a "shrink-wrap" license agreement and generally does not obtain signed license agreements from its end users. The Company uses a hardware lock-out device with respect to certain versions of its software that are sold internationally but otherwise does not copy-protect its software. It may be possible for unauthorized third parties to copy the Company's products or to reverse engineer or obtain and use information that the Company regards as proprietary. There can be no assurance that the Company's competitors will not independently develop technologies that are substantially equivalent or superior to the Company's technologies. Policing unauthorized use of the Company's products is difficult, and while the Company is unable to determine the extent to which software piracy of its products exists, software piracy can be expected to be a persistent problem. In addition, the laws of certain countries in which the Company's products are or may be distributed do not protect the Company's products and intellectual rights to the same extent as the laws of the United States. The Company is a member of the Business Software Alliance ("BSA") and the Software Publishers Association ("SPA") and supports their efforts to stop the unauthorized distribution of software. The Company believes that its products, intellectual property, and other proprietary rights do not infringe on the proprietary rights of third parties. From time to time, however, the Company has received communications from third parties asserting that features or content of certain of its products may infringe intellectual property rights of such parties. To date, no such claim has resulted in litigation or in the payment of any claims, and the Company believes that the impact of any such known claims will be immaterial. However, as the number of software products in the industry increases and the functionality of these products further overlaps, the Company believes that its software increasingly will become the subject of claims that such software infringes the rights of others. There can be no assurance that third parties will not assert infringement claims against the Company in the future or that any such assertion will result in costly litigation or require the Company to obtain a license to intellectual property rights of third parties. There can be no assurance that such licenses will be available on reasonable terms or at all. The Company licenses certain software products from other companies to create suites of multimedia products. There can be no assurance that upon the expiration of these licenses, such licenses will be available on reasonable terms or at all, or that similar products could be obtained to substitute into the suites. MANUFACTURING AND SHIPPING The Company is dependent on a sole source, Stream, International ("Stream"), for the manufacture and shipment of its finished products. The manufacture of the Company's products consists of duplicating diskettes, pressing CD-ROMs, printing manuals, and packaging and assembling finished products all of which are in accordance with the Company's specifications and forecasts. The Company currently 8 11 performs quality assurance testing at its own facilities. Stream operates multiple facilities that are capable of serving the Company's needs, and the Company believes any alternative sources could not be implemented without undue delay. To date, the Company has not experienced any material difficulties or delays in the manufacture or assembly of its products or material returns due to product defects. EMPLOYEES As of March 31, 1996, the Company had 396 full-time employees, including 45 in North American sales, 26 in international sales, 77 in marketing, 191 in development, quality assurance, and documentation, and 57 in finance and administration. The employees and the Company are not parties to any collective bargaining agreements, and the Company believes that its relations with its employees are good. ITEM 2. PROPERTIES The Company's primary facility consists of approximately 95,489 square feet located in a multi-story building in San Francisco, California. This space houses a majority of the Company's United States operations. The facility is leased pursuant to an agreement that expires August 31, 2005. Macromedia has two options to renew for successive five-year terms at 95 percent of the then current fair market value of the space. The Company also holds a right of first refusal to certain space in a building located adjacent to the space it now occupies. In addition, the Company currently leases 29,665 square feet in San Mateo, California, and approximately 20,000 square feet in Richardson, Texas. In March 1996, the Company entered into an agreement with a third party to purchase a parcel of land in Redwood City, California, for $6,960,000. The Company believes its facilities are adequate for current and near-term needs and that additional space is available to provide for anticipated growth during the life of the leases. The Company also leases space in Berkshire, England, for its European operations and in Tokyo, Japan, for its Japanese operations. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Company is a party or of which any of its property is the subject. 9 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the Company's current executive officers as of May 31, 1996:
Name Age Position - ---- --- -------- John C. Colligan 41 Chairman, President, Chief Executive Officer, and Director Richard B. Wood 47 Vice President of Operations, Chief Financial Officer, and Secretary Norman Meyrowitz 36 Senior Vice President of Engineering Philip Schiller 36 Vice President of Product Management Susan Gordon Bird 36 Vice President of Worldwide Sales Miles C. Walsh 44 Vice President of Corporate Marketing and Customer Support Jim Funk 38 Vice President of Corporate Development James Von Ehr 45 Vice President of Product Development/JAVA and Director Kevin Crowder 41 Vice President of Product Integration and Director Samantha Seals-Mason 28 Vice President of Digital Arts Products Steve Kusmer 39 Vice President of Multimedia Products
Mr. Colligan has been Chairman of the Company since February 1996 and a director since March 1992. He has also been President of the Company since December 1992 and Chief Executive Officer since January 1993. He was Chief Operating Officer of the Company from March 1992 to December 1992. Mr. Colligan was President, Chief Executive Officer and a director of Authorware from December 1988 until its merger into the Company in March 1992. Prior to joining Authorware, Mr. Colligan was employed by Apple Computer, Inc. in a variety of positions from May 1983 until December 1988, most recently as Director of Marketing and Sales for Higher Education. Mr. Colligan holds a Bachelor of Science degree in international economics from Georgetown University and a Master of Business Administration from Stanford University. Mr. Colligan is a director of S3 Corporation and c/net. Mr. Wood has been Vice President of Operations since June 1990 and has been Chief Financial Officer and Secretary of the Company since March 1992. He was Vice President of Finance and Operations, Chief Financial Officer, and Secretary of MacroMind and its successor from July 1990 until the formation of the Company in March 1992. From January 1990 to March 1990, Mr. Wood was employed by Altos Computer Systems, Inc., a manufacturer of personal computers, as Chief Financial Officer, and from September 1986 to December 1989, Mr. Wood was employed by PIXAR, a graphics and imaging computer company, as Chief Financial Officer. Mr. Wood holds a Bachelor of Science degree in business and economics and a Master of Business Administration degree from the University of California, Berkeley and is a Certified Public Accountant in the State of California. Mr. Meyrowitz has been Senior Vice President of Engineering since February 1996 and manages Macromedia's engineering, quality assurance, and documentation efforts for the Director Multimedia Studio, the FreeHand Graphics Studio, the Backstage Internet Studio, the Authorware Interactive Studio, SoundEdit 16, Deck II, xRes, Video, and Extreme 3D products, as well as cross-product integration and engineering operations. From October 1994 to February 1996, he was Vice President of Product Development, San Francisco, and from October 1993 to October 1994, he was Director of Strategic Technology. From May 1991 to October 1993, he served as Director of System/User Software at GO Corporation. From October 1981 to May 1991, he served various positions at Brown University; in his last position, he was Co-Director of the university's Institute for Research in Information and Scholarship (IRIS) where he managed and was the principal architect of IRIS's Intermedia system. Mr. Meyrowitz graduated from Brown in 1981 with a Bachelor of Science degree in computer science. He is a member of the ACM and the IEEE Computer Society. 10 13 Mr. Schiller has been Vice President of Product Management since April 1996. He joined Macromedia as the Director of Product Management in December 1995. He is responsible for product management for all Macromedia products. Mr. Schiller was the Director of Marketing at FirePower Systems, Inc. of Menlo Park, CA. At Apple Computer in Marlborough, MA and Cupertino, CA Mr. Schiller held a variety of marketing positions over a six year period. His positions included responsibilities in field marketing, channel marketing, multimedia marketing, and product marketing. Mr. Schiller has also held marketing and programming positions at Nolan, Norton & Company and Massachusetts General Hospital. He graduated with a Bachelor of Science degree in biology from Boston College in 1982. Ms. Gordon Bird has been Vice President of Worldwide Sales since January 1994. She joined the Company as Vice President of North American Sales in April 1993. From January 1989 to April 1993, Ms. Bird held various positions in sales at Frame Technology, a desktop publishing company, most recently as Vice President and General Manager of North American Sales and Operations. From June 1984 to January 1989, she was National Sales Manager for Government, Education and Major Resellers at Ashton-Tate, a database software company. Ms. Bird holds a Bachelor of Science degree in education from Frostburg State University. Mr. Walsh has been Vice President of Corporate Marketing and Customer Support since June 1994. From July 1993 to May 1994, he held the position of Vice President of Marketing for MiniStor Peripherals International Ltd., a PCMCIA disk drive company. From June 1991 to April 1993, Mr. Walsh held the position of Vice President at Conner Peripherals, Inc., a disk drive company. From April 1990 to May 1991, he held the position of Vice President of Marketing at Evernet Systems, Inc., a Systems Integrator (acquired by Control Data). Prior to Evernet, Mr. Walsh was the President of 2X Corporation, a direct mail and catalog consulting company for the distribution channel. Mr. Walsh has a Bachelor of Arts degree in history from Vanderbilt University. Mr. Funk has been the Vice President of Corporate Development for Macromedia since February 1996. Prior to joining Macromedia in February 1994, he was the Manager of Market Development for the Personal Interactive Electronics Division of Apple Computer. During his employment with Apple Computer starting in 1986, he held several marketing management positions within the Apple U.S.A division, focusing primarily on the company's higher education markets. He has also held product marketing positions at Interactive Software of Mountain View, California and Digital Research of Monterey, California. He holds a Bachelor of Arts in Economics and an MBA from Stanford University. Mr. Von Ehr has been a director and a Vice President of the Company since January 1995. Mr. Von Ehr was Chairman of the Board, President, and Chief Executive Officer of Altsys from December 1984, when he co-founded Altsys, until January 1995. Prior to founding Altsys, Mr. Von Ehr was employed by Texas Instruments, Incorporated from 1973, where he was Senior Member, Technical Staff and Manager of Integrated Circuit Layout Graphics. Mr. Von Ehr holds a Bachelor of Science degree in computer science from Michigan State University and a Master of Science degree in computer science from the University of Texas at Dallas. Mr. Crowder has been a director of the Company since January 1995 and has been the Vice President of Product Integration since July 1995. He was Vice President, Macromedia Studios from January 1995 to July 1995. Mr. Crowder was Vice President, Secretary, and a director of Altsys from December 1984, when he co-founded Altsys, until January 1995. Prior to founding Altsys, Mr. Crowder was employed by Texas Instruments, Incorporated from 1973, where he was a Member of the Group Technical Staff in the Semiconductor Design Automation Department. Mr. Crowder holds a Bachelor of Science degree in computer Science from Texas A & M University and a Master of Science degree in mathematical sciences from the University of Texas at Dallas. Ms. Seals-Mason has been the Vice President of Digital Arts Products since February 1996. From June 1995 to February 1996 she acted as Director of FreeHand Engineering. Ms. Seals-Mason began her professional career at Altsys Corporation in 1989, as one of the main engineers on FreeHand 3. She later became Engineering Manager for FreeHand 4.0, and at the time of Macromedia's acquisition of Altsys in January 1995, she managed the shipping of FreeHand 5.0. Ms. Seals-Mason graduated from the University of Kentucky with a Bachelor of Science degree in mathematical sciences in 1989. Mr. Kusmer rejoined the Company in May 1995 as Vice President of Multimedia Products. From September 1992 to April 1995, Mr. Kusmer was Vice President of Engineering of Aha! Software Corporation. From June 1991 to March 1992, he was Vice President of Engineering of Authorware and from April 1992 to July 1992, he was the Company's Vice President of Authorware Products following the 11 14 merger of Authorware into the Company in March 1992. From June 1987 to May 1991, Mr. Kusmer was Section Manager of Software Publishing Corporation. Mr. Kusmer holds a Bachelor of Science degree in electrical engineering from Cornell University. 12 15 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the Nasdaq Market under the symbol MACR. The following table sets forth, for the periods indicated, the high and low closing prices for the Company's common stock as reported by Nasdaq. Prices have been retroactively adjusted to reflect the 2-for-1 stock split that occurred on October 16, 1995. Fiscal 1996 High Low 4th Quarter 53.00 32.75 3rd Quarter 62.50 24.375 2nd Quarter 30.50 21.44 1st Quarter 21.75 15.38 Fiscal 1995 High Low 4th Quarter 18.75 10.94 3rd Quarter 13.63 7.44 2nd Quarter 8.63 4.00 1st Quarter 7.63 4.03 The Company has not paid cash dividends and has no present plans to do so. There were 423 stockholders of record as of April 30, 1996, excluding stockholders whose stock is held in nominee or street name by brokers. 13 16 ITEM 6. SELECTED FINANCIAL DATA SELECTED FIVE-YEAR FINANCIAL DATA (in thousands, except per share data)
YEARS ENDED MARCH 31, 1996 1995 1994 1993 1992 -------- ------- ------- ------ ------- STATEMENT OF OPERATIONS DATA: Total revenues . . . . . . . . $116,691 $55,892 $37,542 $31,462 $29,339 Total cost of revenues . . . . 19,600 9,618 6,478 6,411 6,529 Operating expenses . . . . . . 69,411 39,057 27,236 24,431 34,179 Operating income (loss) . . . 27,680 7,217 3,828 620 (11,369) Net income (loss). . . . . . . 23,002 6,538 3,475 241 (11,378) Net income per share . . . . . $ 0.59 $ 0.19 $ 0.12 $ 0.01 $ -- Shares used in computing net income per share . . . . 39,044 34,414 30,018 25,146 --
All income per share amounts reflect a two-for-one stock split which became effective October 16, 1995.
BALANCE SHEET DATA: Cash, cash equivalents, and short-term investments . . . $116,662 $33,981 $27,172 $ 1,290 $ 1,608 Working capital . . . . . . . 119,060 33,273 28,217 827 66 Total assets . . . . . . . . . 155,122 52,430 38,503 12,270 15,073 Long-term liabilities . . . . 55 136 225 118 78 Total stockholders' equity . . 133,181 39,681 31,860 4,205 3,824
14 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW THE COMPANY completed three separate acquisitions in fiscal 1996, each of which was accounted for as a pooling of interests. To effect the combinations, Macromedia exchanged a total of 1,502,001 shares of its common stock and stock options for all the common stock and stock options of the three separate companies (see Note 2 of Notes to Consolidated Financial Statements). A reclassification has been made to include co-op advertising in revenues and in sales and marketing expenses for all periods presented, in accordance with the implementation of accounting pronouncement Statement of Position (SOP) 93-7. For fiscal years 1996, 1995, and 1994, the increases were $6,914,000, $2,194,000, and $0, respectively. There was no effect on net income. o o o FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995 TOTAL REVENUES (IN THOUSANDS)
1996 1995 % change -------- ------- -------- Product revenue . . . . $112,577 $53,528 110% Service revenue . . . . 4,114 2,364 74% Total revenues . . . . $116,691 $55,892 109% -------- -------
THE COMPANY derives revenues primarily from software sales to domestic and international distributors, VARs, OEMs, corporate accounts, and registered users. Revenues are also derived from training and consulting services and from contracts to provide maintenance to customers. The company's principal products from which it derives substantially all of its revenues are: Authorware, Director, Extreme 3D, Fontographer, FreeHand, xRes, SoundEdit16, DECK II, and Backstage. The growth in product revenue reflects ongoing strength across Macromedia's principal products, which grew 113% resulting from strong market growth and the continuing development of the Company's customer base, indirect sales channels, and strategic partnerships. Service revenue increased by 74% as a result of the Company's strategy to focus on high value-added consulting and to offer additional service and support options. 15 18 COST OF REVENUES (IN THOUSANDS)
1996 1995 % change ------- ------ -------- Cost of product revenue . . . . . . . . . $17,295 $8,125 113% Cost of service revenue . . . . . . . . . 2,305 1,493 54% ------- ------ -------- Total cost of revenues . . . . . . . . . . $19,600 $9,618 104% ------- ------ -------- Percentage of total revenues . . . . . . . 17% 17%
Cost of product revenue includes cost of goods sold, royalties, amortization of acquired technology, localization costs, and reserves for inventory obsolescence. Cost of product revenue remained constant as a percentage of total revenues as the increase in cost attributable to bringing localization in-house was offset by cost reduction programs. Cost of service revenue includes consulting and technical support personnel and related costs including travel and lodging associated with providing services. These costs decreased as a percent of service revenue due to an increased number of consulting projects and increased student to teacher class ratios. OPERATING EXPENSES (IN THOUSANDS)
1996 1995 % change ------- ------ -------- Sales and marketing . . . . . . . . . . . $41,387 $20,181 105% Percentage of total revenues . . . . . . 35% 36% ------- ------- Research and development . . . . . . . . $20,033 $12,360 62% Percentage of total revenues . . . . . . 17% 22% General and administrative . . . . . . . $ 5,466 $ 3,491 57% Percentage of total revenues . . . . . . 5% 6% ------- ------- Merger, relocation, and reorganization . $ 2,525 $ 3,025 (17%) Percentage of total revenues . . . . . . 2% 5%
Sales and marketing expenses increased in fiscal 1996, but declined as a percentage of total revenues. The increase was due primarily to marketing and promotional efforts associated with new product releases, management's commitment to fund discretionary marketing, and an increase in cooperative advertising. In addition, higher revenue also led to increases in certain variable selling expenses. 16 19 Research and development expenses increased in fiscal 1996, but declined as a percentage of total revenues. The increase was due primarily to additional headcount as a result of the increase of products under development. The Company released ten major products in fiscal 1996 compared to five in fiscal 1995. General and administrative expenses increased in fiscal 1996, but declined as a percentage of total revenues. The increase was due to additional headcount and costs associated with building the infrastructure required to support the growth of the Company. Following the three acquisitions of Fauve Software, Inc. ("Fauve"), OSC, Inc. ("OSC"), and iband, Inc. ("iband"), the Company recorded merger costs in 1996 which included transaction fees for financial and legal advisers and relocation and reorganization expenses, which included approximately $1.4 million relating to the issue of 40,000 shares of the Company's common stock for payment to certain entities and individuals to settle certain iband obligations. OTHER INCOME (EXPENSE) (IN THOUSANDS)
1996 1995 % change ------ ---- -------- Total other income, net . . . . . . . $4,101 $376 991% Percentage of total revenues . . . . 4% 1% --
Other income increased in fiscal 1996 due primarily to higher interest income from higher cash balances that were generated from the Company's secondary offering of common stock and normal operations. PROVISIONS FOR INCOME TAXES (IN THOUSANDS)
1996 1995 % change ------ ------ -------- Provision for income taxes . . . . . $8,779 $1,055 732% Percentage of total revenues . . . . 8% 2% --
After using available net operating loss carryforwards, the Company's effective tax rate for fiscal 1996 was 28%, compared to 14% in 1995. Tax expense for the year was reduced by $4,555 as a result of a reduction in the valuation allowance for deferred tax assets. As of March 31, 1996, the balance in the valuation account is $3,612. 17 20 NET INCOME (IN THOUSANDS)
1996 1995 % change ------- ------ -------- Net income . . . . . . . . . . . . . $23,002 $6,538 252% Percentage of total revenues . . . . 20% 12% --
The increase in net income was due primarily to higher revenues. o o o RESULTS OF OPERATIONS FISCAL 1995 COMPARED TO 1994 TOTAL REVENUES (IN THOUSANDS)
1995 1994 % change ------- ------- -------- Product revenue . . . . . . . . . . . $53,528 $35,970 49% Service revenue . . . . . . . . . . . 2,364 1,572 50% ------- ------- Total revenues . . . . . . . . . . . $55,892 $37,542 49% ======= =======
THE GROWTH in product revenues reflected ongoing strength across Macromedia's principal products, which grew 82% resulting from strong customer demand, new product introductions, the Company's acquisition strategy, and the continuing development of the Company's indirect sales channels and strategic partnerships. Service revenues increased by 50% as a result of the Company's strategy to focus on value-added consulting and to offer additional service and support options. COSTS OF REVENUES (IN THOUSANDS)
1995 1994 % change ------ ------ -------- Cost of product revenue . . . . . . . $8,125 $5,601 45% Cost of service revenue . . . . . . . 1,493 877 70% ------ ------ -------- Total cost of revenues . . . . . . . $9,618 $6,478 48% ====== ====== Percentage of total revenues . . . . 17% 17%
18 21 Cost of product revenue includes cost of goods sold, royalties, amortization of acquired technology, localization costs, and reserves for inventory obsolescence. The increase was attributable primarily to the cost of bringing localization in-house. Cost of service revenue includes consulting and technical support personnel and related costs including travel and lodging associated with providing services. These costs increased due to increased consulting projects and training offered. Operating Expenses (in thousands)
1995 1994 % change ------- ------ -------- Sales and marketing . . . . . . . . . . . $20,181 $14,587 38% Percentage of total revenues . . . . . . 36% 39% ------- ------- Research and development . . . . . . . . $12,360 $10,106 22% Percentage of total revenues . . . . . . 22% 27% ------- ------- General and administrative . . . . . . . $ 3,491 $ 3,009 16% Percentage of total revenues . . . . . . 6% 8% ------- ------- Merger, relocation, and reorganization . $ 3,025 $ (476) 736% Percentage of total revenues . . . . . . 5% (1%)
Sales and marketing expenses increased in fiscal 1995, but declined as a percentage of total revenues. The increase was due primarily to marketing and promotional efforts associated with new product releases, the additional staffing required to support these efforts, and the higher payroll and related expenses as a result of the increased headcount due to the merger with Altsys Corporation ("Altsys"). In addition, higher revenues also led to increases in certain variable selling expenses. Research and development expenses increased in fiscal 1995, but declined as a percentage of total revenues. The increase was due primarily to additional headcount as a result of the merger with Altsys. The Company released five major products in fiscal 1995 compared to seven in fiscal 1994. General and administrative expenses increased in fiscal 1995, but declined as a percentage of total revenues. The increase was due to additional headcount and costs associated with installing the systems required to support the operations of a larger company. 19 22 Following the merger with Altsys, the Company recorded merger costs in 1995 that included consultants' fees and professional fees for investment bankers, attorneys, accountants, and financial printers. The Company incurred costs in purchasing from Adobe Systems Incorporated ("Adobe") certain inventory of the FreeHand product, the write-off of certain assets, personnel severance costs, the cancellation and continuation of contractual obligations, and other integration costs incident to the merger. Other Income (Expense) (in thousands)
1995 1994 % change ---- ---- -------- Total other income (expense), net. . . . . . . $376 $(61) 716% Percentage of total revenues . . . . . . . . . 1% --
Other income increased in fiscal 1995 due primarily to the increase in interest income from investments and higher cash balances. Provision for Income Taxes (in thousands)
1995 1994 % change ---- ---- -------- Provision for income taxes . . . . . . . . . . $1,055 $292 261% Percentage of total revenues . . . . . . . . . 2% 1%
After using available net operating loss carryforwards, the Company's effective tax rate for fiscal 1995 was 14%, compared to 8% in 1994. Net Income (in thousands)
1995 1994 % change ---- ---- -------- Net income . . . . . . . . . . . . . . . . . . $5,538 $3,475 88% Percentage of total revenues . . . . . . . . . 12% 9%
The increase in net income was due primarily to higher revenues. * * * 20 23 LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ended March 31, 1996, cash, cash equivalents, and short-term investments increased by $82,631,000. Approximately $55,846,000 was from the completion of the Company's secondary public offering, another $4,479,000 was from the exercise of common stock options and warrants, and the balance was primarily from operations and other activities. Cash provided by operating activities was $33,166,000, an increase of $21,859,000 over the prior year. The increase was primarily due to the increase in net income of $16,464,000 as well as the tax benefit from employee stock plans of $8,827,000. The Company's working capital increased by $85,787,000 from March 31, 1995 to $119,060,000 at March 31, 1996. In addition to cash, cash equivalents, and short-term investments, the Company has $15,000,000 available under an unsecured revolving line of credit. The line of credit bears interest at the bank's prime rate and expires on July 15, 1997. As of March 31, 1996, the Company had no borrowings outstanding. Of the $2,525,000 in merger-related expenses, $1,628,000 related to noncash expenditure while $897,000 related to expected cash expenditure. As of March 31, 1996, substantially all of the cash-related expenditure had been paid. During the twelve-month period ended March 31, 1996, the Company spent $9,537,000 on capital equipment, primarily for management information systems and engineering equipment, and facilities expansion. The Company anticipates spending $9,400,000 through the end of fiscal 1997. In March 1996, the Company entered into an agreement with a third party to purchase a parcel of land in Redwood City, California, for $6,960,000. As of March 31, 1996, the Company made an initial deposit of approximately $350,000. The balance, including related fees, was paid in full in May 1996. Management believes that existing cash, cash equivalents, and short-term investments, available bank borrowings and cash generated from operations will be sufficient to meet the Company's cash and investment requirements through at least fiscal 1997. o o o FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS Except for the historical information contained in this Form 10-K, the matters discussed herein are forward looking statements. These statements concern matters that involve risks and uncertainties, including but not limited to those set forth below, that could cause actual results to differ materially from those projected in the forward looking statements. In any event, the matters set 21 24 forth below, as well as the matters set forth under "Business -- Sales and Distribution," "-- Competition," "-- Proprietary Rights," and "-- Manufacturing and Shipping" should be carefully considered when evaluating the Company's business and prospects. Macromedia has grown in substantial part from combinations with other companies. In January 1995, Macromedia acquired Altsys, which developed the FreeHand graphic design and illustration product whose revenues prior to that date consisted primarily of royalties from Aldus Corporation, which had marketed FreeHand until January 1995, and revenues from Fontographer. In August 1995, the Company acquired Fauve, a developer of image editing software. In December 1995, the Company acquired OSC, a developer of digital audio production software. In March 1996, the Company acquired iband, a developer of Internet Web site development tools. There can be no assurance that sales of the Company's existing products will either continue at historical rates or increase, or that new products introduced by the Company, whether developed internally or acquired, will achieve market acceptance. The Company's historical rates of growth should not be taken as indicative of growth rates that can be expected in the future. The Company's quarterly operating results may vary significantly depending on the timing of new product introductions and enhancements by the Company. The Company's quarterly results of operations also may vary significantly depending on the timing of product introductions by competitors, changes in pricing, execution of technology licensing agreements, and the volume and timing of orders received during the quarter, which are difficult to forecast. The future operating results of the Company may fluctuate as a result of these and other factors, including the Company's ability to continue to develop innovative products, its product and customer mix, and the level of competition. The Company's results of operations may also be affected by seasonal trends. A significant portion of the Company's operating expenses are relatively fixed, and planned expenditures are based primarily on sales forecasts. As a result, if revenues do not meet the Company's forecasts, operating results may be materially adversely affected. Although the Company has been profitable each quarter since the quarter ended September 30, 1992, there can be no assurance that the Company will be able to sustain profitability in the future. The markets for the Company's products are highly competitive and characterized by pressure to reduce prices, incorporate new features, and accelerate the release of new product versions. A number of companies currently offer products that compete directly or indirectly with one or more of the Company's products. These companies include Adobe, Aimtech Corporation, Apple Computer, Inc., Asymetrix Corporation, Autodesk, Inc., Corel Corporation ("Corel"), Microsoft Corporation ("Microsoft"), and Strata Incorporated. As the Company competes with larger competitors such as Adobe, Corel, and Microsoft across a broader range of product lines, the Company may face increasing competition from such companies. 22 25 The developing multimedia market, Internet, and online services, and the personal computer industry in general are characterized by rapidly changing technology, resulting in short product life cycles and rapid price declines. The Company must continuously update its existing products to keep them current with changing technology and must develop new products to take advantage of new technologies that could render the Company's existing products obsolete. The Company's future prospects are highly dependent on its ability to increase functionality of existing products in a timely manner and to develop new products that address new technologies and achieve market acceptance. New products and enhancements must keep pace with competitive offerings, adapt to new platforms and emerging industry standards, and provide additional functionality. There can be no assurance that the Company will be successful in these efforts. The Company has in the past experienced delays in the development of new products and enhancement of existing products, and such delays may occur in the future. If the Company were unable, due to resource constraints or technological or other reasons, to develop and introduce such products in a timely manner, this inability could have a material adverse effect on the Company's results of operations. For the twelve months ended March 31, 1996, the Company derived approximately 42% of its total revenues from international sales. The Company expects that international sales will continue to generate a significant percentage of its total revenues, and the Company is seeking to increase international sales to approximately half of its total revenues. The Company relies on distributors for sales of its products in foreign countries and, accordingly, is dependent on their ability to promote and support the Company's products, and in some cases, to translate them into foreign languages. International business is subject to a number of special risks, including foreign government regulation; general geopolitical risks such as political and economic instability, hostilities with neighboring countries and changes in diplomatic and trade relationships; more prevalent software piracy; unexpected changes in, or imposition of, regulatory requirements, tariffs, import and export restrictions and other barriers and restrictions; longer payment cycles, greater difficulty in accounts receivable collection, potentially adverse tax consequences, the burdens of complying with a variety of foreign laws; and other factors beyond the control of the Company. The revenues generated through international sales are denominated in U.S. dollars, but the expenses are denominated in the local currency in the countries in which the Company has offices. As a result, the Company's operating results are subject to fluctuations in foreign currency exchange rates. This impact to date has been immaterial, and the Company has not had to engage in hedging activities to protect it from foreign currency fluctuations. * * * 23 26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MACROMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1996 and 1995 (in thousands, except share data)
1996 1995 ASSETS Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 28,829 $ 10,230 Short-term investments . . . . . . . . . . . . . . . . . . . 87,833 23,751 Accounts receivable, less allowance for returns and doubtful accounts of $4,377 and $1,487, respectively. . . . . . . . 14,601 8,040 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 1,508 1,601 Prepaid expenses and other current assets. . . . . . . . . . 8,115 2,264 Total current assets . . . . . . . . . . . . . . . . . . 140,946 45,886 Property and equipment, net. . . . . . . . . . . . . . . . . . 12,219 5,809 Other long-term assets . . . . . . . . . . . . . . . . . . . . 1,957 735 -------- -------- Total assets . . . . . . . . . . . . . . . . . . . . . . $155,122 $ 52,430 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 11,364 $ 6,007 Accrued liabilities. . . . . . . . . . . . . . . . . . . . . 8,956 3,492 Unearned revenue . . . . . . . . . . . . . . . . . . . . . . 1,235 2,767 Other current liabilities. . . . . . . . . . . . . . . . . . 331 347 -------- -------- Total current liabilities. . . . . . . . . . . . . . . . 21,886 12,613 Other long-term liabilities. . . . . . . . . . . . . . . . . . 55 136 -------- -------- Total liabilities. . . . . . . . . . . . . . . . . . . . $ 21,941 $ 12,749 ======== ======== Stockholders' equity: Common stock, par value $0.001 per share; 80,000,000 shares authorized; 36,413,211 and 31,00,608 shares issued and outstanding, respectively . . . . . . . . . . . 36 16 Additional paid-in capital . . . . . . . . . . . . . . . . . 129,591 58,266 Deferred compensation. . . . . . . . . . . . . . . . . . . . (415) -- Retained earnings (accumulated deficit). . . . . . . . . . . 3,969 (18,601) -------- -------- Total stockholders' equity . . . . . . . . . . . . . . . 133,181 39,681 -------- -------- Total liabilities and stockholders' equity . . . . . . . $155,122 $ 52,430 ======== ========
See accompanying notes to consolidated financial statements. 24 27 MACROMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended March 31, 1996, 1995, and 1994 (in thousands, except per share data)
1996 1995 1994 -------- ------- ------- Revenues: Product revenue.............................. $112,577 $53,528 $35,970 Service revenue.............................. 4,114 2,364 1,572 -------- ------- ------- Total revenues........................... 116,691 55,892 37,542 -------- ------- ------- Cost of revenues: Cost of product revenue...................... 17,295 8,125 5,601 Cost of service revenue...................... 2,305 1,493 877 -------- ------- ------- Total cost of revenues................... 19,600 9,618 6,478 -------- ------- ------- Gross profit............................. 97,091 46,274 31,064 Operating expenses: Sales and marketing.......................... 41,387 20,181 14,597 Research and development..................... 20,033 12,360 10,106 General and administrative................... 5,466 3,491 3,009 Merger, relocation, and reorganization....... 2,525 3,025 (476) -------- ------- ------- Total operating expenses................. 69,411 39,057 27,236 Operating income......................... 27,680 7,217 3,828 Other income (expense): Interest and investment income, net.......... 4,307 1,135 196 Interest expense............................. (3) (6) (60) Reserve on related party note receivable..... -- (507) (130) Other........................................ (203) (246) (67) -------- ------- ------- Total other income (expense)............. 4,101 376 (61) -------- ------- ------- Income before taxes...................... 31,781 7,593 3,767 Provision for income taxes..................... 8,779 1,055 292 -------- ------- ------- Net income............................... $ 23.002 $ 6,538 $ 3,475 -------- ------- ------- Net income per share........................... $ 0.59 $ 0.19 $ 0.12 -------- ------- ------- Weighted average common shares outstanding..... 39,044 34,414 30,018 -------- ------- -------
See accompanying notes to consolidated financial statements. 25 28 MACROMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended March 31, 1996, 1995, and 1994 (in thousands, except share data)
PREFERRED STOCK COMMON STOCK ADDITIONAL -------------------- -------------------- PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL --------- ------ ---------- ------ --------- Balances as of March 31, 1993 ........................ 3,738,022 $4 16,564,808 $8 $ 31,092 Issuanc of common stock, net of offering costs of $1,059 .................................. -- -- 4,375,000 2 23,354 Exercise of stock options .......................... -- -- 806,492 1 389 Conversion of preferred stock to common stock ...... (3,738,022) (4) 7,476,044 4 -- Repurchase of common stock ......................... -- -- (98,438) -- (125) Dividends .......................................... -- -- -- -- -- Note receivable repayment .......................... -- -- -- -- -- Exercise of common stock warrants .................. -- -- 335,190 -- 670 Foreign currency translation adjustment ............ -- -- -- -- -- Net income ......................................... -- -- -- -- -- --------- --- ---------- --- -------- Balances as of March 31, 1994 ........................ -- -- 29,459,096 15 55,380 Exercise of stock options .......................... -- -- 1,398,302 1 1,037 Repurchase of common stock ......................... -- -- (31,500) -- (40) Common stock issued under Employee Stock Purchase Plan .................................... -- -- 83,640 -- 387 Tax benefit from employee stock plans .............. -- -- -- -- 526 Common stock issued under stock appreciation rights .............................. -- -- 91,070 -- 976 Adjustment for change in Altsys Corporation fiscal year-end .................................. -- -- -- -- -- Note receivable repayment .......................... -- -- -- -- -- Foreign currency translation adjustment ............ -- -- -- -- -- Net income ......................................... -- -- -- -- -- --------- --- ---------- --- -------- Balances as of March 31, 1995 ........................ -- -- 31,000,608 16 58,266 Exercise of stock options .......................... -- -- 1,461,806 1 3,467 Exercise of warrants ............................... -- -- 11,680 -- -- Common stock issued under Employee Stock Purchase Plan .................................... -- -- 61,732 -- 1,011 Tax benefit from employee stock plans .............. -- -- -- -- 8,827 Sale of common stock in secondary offering net of issuance costs of $435,000 ................ -- -- 2,442,676 2 55,844 Two-for-one common stock split ..................... -- -- -- 15 (15) Adjustment for effect of poolings on prior periods .................................... -- -- 1,434,709 2 1,776 Deferred compensation - iband ...................... -- -- -- -- 415 Net income ......................................... -- -- -- -- -- --------- --- ---------- --- -------- Balances as of March 31, 1996 ........................ -- $-- 36,413,211 $36 $129,591 ========= === ========== === ========
See accompanying notes to consolidated financial statements. Chart continued on page 27 26 29 (Caption> NOTES RETAINED FOREIGN RECEIVABLE EARNINGS CURRENCY TOTAL DEFERRED (FROM (ACCUMULATED TRANSLATION STOCKHOLDERS' COMPENSATION STOCKHOLDERS DEFICIT ADJUSTMENTS EQUITY ------------ ------------ ----------- ------------ ------------ Balances as of March 31, 1993 ........................ $ -- $(115) $(26,708) $ (76) $ 4,205 Issuanc of common stock, net of offering costs of $1,059 .................................. -- -- -- -- 23,356 Exercise of stock options .......................... -- -- -- -- 390 Conversion of preferred stock to common stock ...... -- -- -- -- -- Repurchase of common stock ......................... -- -- -- -- (125) Dividends .......................................... -- -- (4) -- (4) Note receivable repayment .......................... -- 26 -- -- 26 Exercise of common stock warrants .................. -- -- -- -- 670 Foreign currency translation adjustment ............ -- -- -- (133) (133) Net income ......................................... -- -- 3,475 -- 3,475 ----- ----- -------- ----- -------- Balances as of March 31, 1994 ........................ -- (89) (23,237) (209) 31,860 Exercise of stock options .......................... -- -- -- -- 1,038 Repurchase of common stock ......................... -- -- -- -- (40) Common stock issued under Employee Stock Purchase Plan .................................... -- -- -- -- 387 Tax benefit from employee stock plans .............. -- -- -- -- 526 Common stock issued under stock appreciation rights .............................. -- -- -- -- 976 Adjustment for change in Altsys Corporation fiscal year-end .................................. -- -- (1,902) -- (1,902) Note receivable repayment .......................... -- 89 -- -- 89 Foreign currency translation adjustment ............ -- -- -- 209 209 Net income ......................................... -- -- 6,538 -- 6,538 ----- ----- -------- ----- -------- Balances as of March 31, 1995 ........................ -- -- (18,601) -- 39,681 Exercise of stock options .......................... -- -- -- -- 3,468 Exercise of warrants ............................... -- -- -- -- -- Common stock issued under Employee Stock Purchase Plan .................................... -- -- -- -- 1,011 Tax benefit from employee stock plans .............. -- -- -- -- 8,827 Sale of common stock in secondary offering net of issuance costs of $435,000 ................ -- -- -- -- 55,846 Two-for-one common stock split ..................... -- -- -- -- -- Adjustment for effect of poolings on prior periods .................................... -- -- (432) -- 1,346 Deferred compensation - iband ...................... (415) -- -- -- -- Net income ......................................... -- -- 23,002 -- 23,002 ----- ----- -------- ----- -------- Balances as of March 31, 1996 ........................ $(415) $ -- $ 3,969 $ -- $133,181 ===== ===== ======== ===== ========
See accompanying notes to consolidated financial statements. 27 30 MACROMEDIA, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended March 31, 1996, 1995, and 1994 (in thousands, except share data)
1996 1995 1994 ---------- --------- -------- Cash flows from operating activities: Net income .................................................. $ 23,002 $ 6,538 $ 3,475 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .......................... 4,013 2,110 1,311 Tax benefit from employee stock plans .................. 8,827 526 -- Provision for merger-related cost ...................... 1,628 386 -- Reserve on related party note receivable ............... -- (507) (130) Compensation expense on stock appreciation rights ............................................... -- 976 -- Deferred income taxes .................................. (4,675) -- -- Changes in operating assets and liabilities, net of effect of mergers: Accounts receivable, net ............................. (6,561) (1,764) (371) Inventory ............................................ 33 (1,139) 269 Prepaid expenses and other current assets ............ (2,011) (1,539) (37) Accounts payable ..................................... 5,357 3,042 380 Accrued liabilities .................................. 5,464 1,805 234 Unearned revenue ..................................... (1,532) 1,433 (151) Other current liabilities ............................ (298) (471) (661) Other long-term liabilities .......................... (81) (89) (41) --------- -------- -------- Net cash provided by operating activities .......... 33,166 11,307 4,278 Cash flows from investing activities: Acquisition of property and equipment ....................... (9,537) (4,266) (1,410) Purchase of short-term investments .......................... (248,741) (28,855) (17,690) Maturities and sales of short-term investments .............. 184,659 16,857 -- Other long-term assets ...................................... (1,273) (13) (66) --------- -------- -------- Net cash used in investing activities .............. (74,892) (10,277) (19,166) --------- -------- --------
Chart continued on page 29 28 31 MACROMEDIA, INC. AND SUBSIDIARIES
1996 1995 1994 ------- ------- ------- Cash flows from financing activities: Proceeds from notes payable................. $ -- $ -- $ 85 Repayments of notes payable................. -- -- (1,139) Proceeds from secondary offering, net of issuance costs..................... 55,846 -- -- Proceeds from issuance of common stock and warrants........................ 4,479 1,425 1,061 Proceeds from initial public offering, net of offering costs........... -- -- 23,356 Repayments of notes receivable from stockholders......................... -- 89 26 Repurchase of common stock.................. -- (40) (125) Other....................................... -- -- (52) Net cash provided by financing activities.......... 60,325 1,474 23,212 Foreign currency translation.................. -- 209 (133) ------- ------- ------- Increase in cash and cash equivalents......... 18,599 2,713 8,191 Cash and cash equivalents, beginning of year..................................... 10,230 9,419 1,228 Adjustments for change in Altsys Corporation fiscal year-end................. -- (1,902) -- ------- ------- ------- Cash and cash equivalents, end of year........ $28,829 $10,230 $ 9,419 ======= ======= ======= Supplemental disclosure of cash flow information: Interest paid............................... $ 3 $ 22 $ 80 ------- ------- ------- Income taxes paid........................... $ 920 $ 449 $ 309 ------- ------- ------- Supplemental noncash investing and financing activities: Common stock issued in exchange for stock appreciation rights............... $ -- $ 976 $ -- ------- ------- -------
All convertible preferred stock was exchanged for 7,476,044 shares of common stock upon the Company's initial public offering during the year ended March 31, 1994. See accompanying notes to consolidated financial statements. 29 32 MACROMEDIA INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Years ended March 31, 1996, 1995 and 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations MACROMEDIA, INC. (the Company) is a supplier of software tools and services to the multi-media, graphic arts, Web publishing, and video communities. The Company develops, markets, and supports an integrated line of multimedia and digital arts software for Windows, Macintosh, and the World Wide Web. These tools are used to create interactive multimedia applications and printed materials for communication, education, and entertainment. The Company sells its products worldwide through a variety of distribution channels, including original equipment manufacturers (OEMs), traditional software distributors, educational distributors, value-added resellers (VARs), hardware and software superstores, retail dealers, mail order, and direct sales. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries: Macromedia Europe Limited, located in England, and Macromedia Japan KK, located in Japan, and the Company's international branches. All significant intercompany balances and transactions have been eliminated in consolidation. Foreign Currency Translation In fiscal 1995, the Company changed its functional currency from the local currency to the U.S. dollar. Translation gains or losses are reflected in net income. Prior to the change in fiscal 1995, local currencies were the functional currency and assets and liabilities denominated in foreign currencies were translated to U.S. dollars at the exchange rate on the balance sheet date. Revenues, costs, and expenses were translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are shown separately in stockholders' equity. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported accounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. 30 33 MACROMEDIA, INC. AND SUBSIDIARIES Concentration of Credit Risks The Company derived approximately 77% of its 1996 revenues from the sale of three products: Director, FreeHand, and Authorware. The Company expects that its revenues will continue for the foreseeable future to be substantially dependent on these products and that competition for those products will intensify in the future. A decline in sales of any of these products, as a result of competition, technological change, or other factors, would have a material adverse effect on the Company's results of operations. Financial instruments that potentially subject to Company to concentrations of credit risk consist principally of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base and their dispersion across different industries and geographic areas. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on sales. Cash Equivalents and Short-term Investments Cash equivalents consist of certificates of deposit and money market funds with stated effective maturities of three months or less at the time of purchase. Cash equivalents and all of the Company's short-term investments are classified as "available-for-sale" under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115. The securities are carried at fair value which approximates cost. The amortized cost of available-for-sale debt securities are adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in net investment income. Realized gains and losses, and declines in value judged to be other than temporary on available-for-sale securities are included in net investment income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest and investment income, net. Inventory Inventory consists primarily of software media, hardware product components, manuals, and related packaging materials. Inventory is recorded at the lower of cost or market, determined on a first-in, first-out basis. Property and Equipment Property and equipment are recorded at cost. Depreciation of equipment, furniture, and fixtures is provided over estimated useful lives ranging from five to ten years using the straight-line method. 31 34 MACROMEDIA, INC. AND SUBSIDIARIES Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the related assets, generally five to nine years. Revenue Recognition Revenue from product sales is recognized upon shipment. Revenue from software maintenance contracts is recognized on a straight-line basis over the term of the contract, generally one year. Revenue from consulting, training, and other services is generally recognized on the percentage of completion method. The Company has entered into agreements whereby it licenses products to OEMs or provides customers the right to multiple copies. These agreements generally provide for nonrefundable fixed fees which are recognized at delivery of the product master or the first copy. Per copy royalties in excess of the fixed minimum amounts and refundable license fees are recognized as earned and are no longer refundable. The Company maintains an allowance for potential credit losses and an allowance for anticipated returns on products sold to distributors and direct customers. In the years ended March 31, 1996 and 1995, one customer accounted for 21% and 23%, respectively, of consolidated revenue. Accounts receivable relating to this customer were $3,934,000 as of March 31, 1996. In the year ended March 31, 1994, another customer accounted for 10% of consolidated revenues. Software Development Costs SFAS No. 86 "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," governs accounting for software development costs. This statement provides for capitalization of certain software development costs once technological feasibility is established. The cost so capitalized is then amortized on a straight-line basis over the estimated product life, or on the ratio of current revenue to total projected product revenues, whichever is greater. No such costs have ever been capitalized. Advertising Costs The Company adopted SOP 93-7, "Reporting on Advertising Costs," in fiscal year 1996. As the Company has historically expensed advertising costs as incurred, the adoption of SOP 93-7 did not have a material impact on the accompanying consolidated financial statements. In accordance with SOP 93-7, a reclassification has been made to include co-op advertising in revenues and in sales and marketing expenses for all periods presented. The increases in these balances as a result of this reclassification amounted to $6,914,000, $2,194,000, and $0 in fiscal 1996, 1995, and 1994, respectively. 32 35 MACROMEDIA, INC. AND SUBSIDIARIES Income Taxes The Company utilizes SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires the use of the asset and liability method of accounting for income taxes. Net Income Per Share Net income per common and common equivalent share is computed using the weighted average number of common shares outstanding, and common equivalent shares from the exercise of stock options using the treasury stock method. Future Adoption of New Accounting Standard The Financial Accounting Standards Board recently issued SFAS No. 123, "Accounting for Stock-Based Compensation." This statement establishes financial accounting and reporting standards for stock-based employee compensation plans, including employee stock purchase plans and stock option plans. The Company will adopt SFAs No. 123 effective April 1, 1996. Management plans to remain on APB No. 25, "Accounting for Stock Issued to Employees," for purposes of measurement of compensation expense. Therefore, adoption of SFAS No. 123 will not have a material effect on the Company's consolidated results of operations. Reclassification Certain fiscal 1995 and 1994 amounts have been reclassified to conform to the fiscal 1996 presentation. * * * 2 BUSINESS COMBINATIONS 1996 Poolings of Interests The company completed three separate acquisitions in fiscal 1996, as described below, which were properly accounted for as poolings of interests. The impact of the poolings on all periods prior to fiscal 1996 is immaterial both in the aggregate, as well as individually, and, therefore, results for those periods have not been restated. The accounts and operations of all three of the acquired companies are included in the Company's consolidated financial statements subsequent to their acquisition. Fauve On August 30, 1995, the Company issued 580,000 shares of its common stock in exchange for all of the common stock of Fauve Software, Inc., the developer of xRes, a full-featured image editing and composition application for Macintosh and Windows, and Matisse, a full-color painting program for 33 36 MACROMEDIA, INC. AND SUBSIDIARIES Windows. The 1996 merger expenses of $400,000 associated with this acquisition consisted principally of transaction fees for financial and legal advisers, and relocation and reorganization expenses. OSC On December 2, 1995, the Company acquired the business and operations of OSC pursuant to the exchange of all of the outstanding shares of OSC for 62,001 shares of the Company's common stock. OSC is the developer of DECK II, software for professional quality multi-track music and sound production. The 1996 merger expenses of $225,000 related to this acquisition consisted principally of transaction fees for financial and legal advisers, and relocation and reorganization expenses. iband Effective March 14, 1996, the Company merged with iband, a developer of a family of tools used to build dynamic Web sites on the Internet. The transaction was accounted for as a pooling of interests; the Company exchanged 860,000 shares of common stock and stock options for all outstanding shares and stock options of iband. The 1996 merger expenses of $1,900,000 relating to costs incurred in connection with the merger of the Company and iband, included transaction fees for financial and legal advisers and relocation and reorganization expenses, including approximately $1,400,000 relating to the issuance of an additional 40,000 shares of the Company's common stock for payment to certain entities and individuals to settle certain iband obligations. Merger with Altsys Corporation On January 19, 1995, the Company issued approximately 4.3 million shares of its common stock in exchange for all of the common stock of Altsys Corporation (Altsys), a corporation that designs font editing and graphics design software programs for business use. Upon consummation of the merger, the Company issued approximately 45,000 shares of common stock in exchange for previously outstanding Altsys stock appreciation rights. In addition, the Company assumed Altsys stock options to purchase approximately 83,000 shares of the Company's common stock subsequent to the merger (see Note 8). The merger has been accounted for as a pooling of interests, and, accordingly, the consolidated financial statements for periods prior to the combination have been restated to include the results of operations, financial position, and cash flows of Altsys. 34 37 MACROMEDIA, INC. AND SUBSIDIARIES Information concerning common stock, employee stock option plans, and per share data has been restated on an equivalent stock basis. Prior to the combination, Altsys' fiscal year ended on December 31. In recording the business combination, Altsys' financial statements for the nine months ended September 30, 1994 and the three months ended March 31, 1995, have been combined with the Company's consolidated financial statements for the year ended March 31, 1995. Altsys' financial statements for the year ended December 31, 1993 have been combined with the Company's consolidated financial statements for the year ended March 31, 1994. The retained earnings charge for Altsys' quarter ended December 31, 1994, to conform year-ends included a charge of approximately $1.4 million for compensation expense related to the stock appreciation rights and is summarized below (in thousands): Revenue........................................... $ 1,409 Expenses.......................................... $(3,311) Net income........................................ $(1,902)
The results of operations for the separate enterprises and the combined amounts presented in the accompanying consolidated statements of income are summarized below (in thousands):
Nine-month period ended Year ended December 31, March 31, 1994 1994 ------------ ---------- Revenue: Macromedia, Inc. ............ $29,622 $30,132 Altsys Corporation........... 5,272 7,410 ------------ ---------- Combined........................ $34,894 $37,542 ============ ========== Net income: Macromedia, Inc. ............ $ 4,702 $ 3,120 Altsys Corporation........... 36 355 ------------ ---------- Combined........................ $ 4,738 $ 3,485 ============ ==========
There were no significant transactions between the Company and Altsys prior to the combination, which required elimination, and no adjustments were required to conform to accounting policies. 35 38 MACROMEDIA, INC. AND SUBSIDIARIES The 1995 merger expense of $3,025,000 relates to costs incurred in connection with the merger of the Company and Altsys. These costs consisted principally of a finder's fee, transaction fees for advisers, financial printing and other related charges, and the cancellation of a contractual agreement. * * * 3. CASH EQUIVALENTS AND SHORT TERM INVESTMENTS CASH EQUIVALENTS and short-term investments amounted to $16,545,000 and $87,833,000, respectively, as of March 31, 1996. As of March 31, 1995, cash equivalents and short-term investments were $2,541,000 and $23,751,000, respectively. Cash equivalents and short-term investments have been classified as available-for-sale securities and as of March 31, 1996 and 1995 consisted of the following (in thousands):
1996 1995 -------- -------- Corporate notes .............................. $ 7,553 $ 8,212 Corporate bonds .............................. 31,738 7,905 Commercial paper ............................. 38,942 3,951 United States government debt securities ..... 8,028 3,683 Money market funds ........................... 5,502 1,541 Certificate of deposit ....................... 12,615 1,000 -------- ------- $104,378 $26,292 ======== =======
Available-for-sale securities as of March 31, 1996 consisted of the following, by contractual maturity (in thousands): Due in one year or less.................................... $ 92,654 Due in one to three years.................................. 11,724 -------- $104,378 ========
* * * 36 39 MACROMEDIA, INC. AND SUBSIDIARIES 4. PROPERTY AND EQUIPMENT PROPERTY AND EQUIPMENT as of March 31, 1996 and 1995 consisted of the following (in thousands):
1996 1995 ------- ------- Computer equipment .............................. $13,163 $ 7,410 Officer equipment and furniture ................. 6,074 2,904 Leasehold improvements .......................... 1,237 623 20,474 10,937 Less accumulated depreciation and amortization .. 8,255 5,128 ------- ------- Net fixed assets ................................ $12,219 $ 5,809 ======= =======
Depreciation and amortization expense for the years ended March 31, 1996, 1995, and 1994, was $2,993,000, $1,603,000, and $1,127,000, respectively. * * * 5. ACCRUED LIABILITIES ACCRUED LIABILITIES as of March 31, 1996 and 1995 consisted of the following (in thousands):
1996 1995 ------ ------ Accrued compensation ............................ $ 747 $ 504 Accrued fringe benefits ......................... 921 653 Accrued marketing development funds ............. 2,408 1,468 Income taxes payable ............................ 3,468 21 Other accrued expenses .......................... 1,412 846 ------ ------ Total ......................................... $8,956 $3,492 ====== ======
* * * 6. LINE OF CREDIT THE COMPANY has a $15,000,000 unsecured line of credit with a bank at the bank's prime rate which expires on July 15, 1997. Certain financial covenants under the agreement become effective when borrowings commence. As of March 31, 1996, no borrowings had been made on this line of credit. * * * 37 40 MACROMEDIA, INC. AND SUBSIDIARIES 7. INCOME TAXES THE COMPONENTS of the provision for income taxes for the years ended March 31, 1996, 1995, and 1994 are as follows (in thousands):
1996 1995 1994 ------- ------ ---- Current: Federal............................ $ 3,519 $ 199 $201 State.............................. 765 100 41 Foreign............................ 343 230 50 ------- ------ ---- Total current................ 4,627 529 292 Deferred: Federal............................ (3,197) -- -- State.............................. (1,478) -- -- ======= ====== ==== Total deferred............... (4,675) -- -- Add charge in lieu of taxes attributable to employee stock plans.............................. 8,827 526 -- Total........................ $ 8,779 $1,055 $292 ======= ====== ====
The provision for income taxes differs from the expected tax expense amount computed by applying the statutory federal income tax rate of 35% to income before income taxes for the year ended March 31, 1996, and 34% for the years ended March 31, 1995 and 1994, as a result of the following (in thousands):
1996 1995 1994 ------- ------ ------- Computed tax at statutory rate....... $11,123 $ 2,582 $ 1,280 State taxes.......................... 497 485 41 Foreign Taxes........................ -- 230 50 Pre-acquisition taxes of Altsys...... -- 184 (49) Nondeductible acquisition costs...... 768 -- -- Change in beginning of year valuation allowance on deferred tax assets......................... (4,555) (2,582) (1,124) Alternative minimum tax.............. -- 156 94 Other................................ 946 -- -- ------- ------- ------- Total........................ $ 8,779 $ 1,055 $ 292 ======= ======= =======
38 41 MACROMEDIA, INC. AND SUBSIDIARIES The tax effect of temporary differences that give rise to significant portions of the deferred tax assets as of March 31, 1996 and 1995, is presented as follows (in thousands):
1996 1995 ------ ------- Reserves, accruals, and other....................... $4,027 $ 2,100 Net operating loss carryforward (federal)........... 1,392 5,780 Net operating loss carryforward (state)............. -- 167 Credit for increasing research activities........... 2,180 2,150 Other credits....................................... 688 355 ------ ------- Total deferred tax assets........................ 8,287 10,552 Less valuation allowance............................ 3,612 10,552 ------ ------- Net deferred tax assets.......................... $4,675 $ -- ====== =======
As of March 31, 1996, the Company has available federal net operating loss carryforwards of approximately $4,000,000. The Company also has unused research credit carryforwards of approximately $1,600,000 and $600,000 for federal and California purposes, respectively. If not utilized, net operating loss carryforwards and the credit carryforwards will expire in fiscal years 2004 through 2011. Approximately $3,300,000 of the valuation allowance for deferred tax assets is attributable to employee stock plans, the benefit from which will be allocated to paid-in capital rather than current earnings when subsequently recognized. The Company's ability to utilize the loss carryforwards and the research credit carryforwards are subject to certain limitations pursuant to the ownership change rules of Internal Revenue Code, Section 382. * * * 8. STOCKHOLDERS' EQUITY Stock Split EFFECTIVE OCTOBER 16, 1995, the Company completed a 2-for-1 stock split of its common stock which was effected in the form of a stock dividend. In this report, all per share amounts and number of shares have been retroactively restated to reflect the stock split. Preferred Stock The Company is authorized to issue 5,000,000 shares of convertible preferred stock with a par value of $0.001 per share. 39 42 MACROMEDIA, INC. AND SUBSIDIARIES Stock Warrants The following summarizes stock warrant activity for the years ended March 31, 1996, 1995 and 1994:
Number Exercise price of shares per share --------- -------------- Warrants outstanding as of March 31, 1993................. 407,220 $1.08-12.50 Exercised.............................................. (335,190) 1.08- 5.00 Canceled............................................... (54,530) 2.24-12.50 -------- ----------- Warrants outstanding as of March 31, 1994................. 17,500 5.74 Exercised.............................................. -- -- Canceled............................................... -- -- -------- ----------- Warrants outstanding as of March 31, 1995................. 17,500 5.74 Exercised.............................................. (11,680) 5.74 Canceled............................................... (5,820) 5.74 Warrants outstanding as of March 31, 1996................. -- -- -------- -----------
Stock Option Plans/Stock Appreciation Rights As of March 31, 1996, there are stock options outstanding in connection with the following stock option plans: (i) MacroMind 1989 Incentive and Nonstatutory Stock Option Plans (ii) Paracomp 1989 Stock Option Plan (iii) Authorware 1988 Stock Option Plan (iv) 1992 Equity Incentive Plan (EIP) (v) 1993 Employee Stock Purchase Plan (vi) 1993 Directors Stock Option Plan The options outstanding under the plans indicated at (i) through (iii) (Prior Plans) above were assumed as a result of the Company being the successor company resulting from merger activities. The EIP provides for the grant of incentive and nonqualified stock options, restricted stock, and stock bonuses. The total number of shares reserved pursuant to the EIP as of March 31, 1996, was 7,200,000 shares. Any shares issuable upon exercise of options granted pursuant to the Prior Plans that expire or become unexercisable for any reason without having been exercised in full shall no longer be available for distribution under the Prior Plans, but shall be available for distribution under the EIP. The 1993 Employee Stock Purchase Plan and the 1993 Directors Stock Option Plan have reserved 400,000 and 300,000 shares of common stock, respectively, for issuance under those plans. 40 43 MACROMEDIA, INC. AND SUBSIDIARIES In connection with the Altsys and iband acquisitions, all of the outstanding options to purchase Altsys and iband common stock were converted into options to purchase the Company's common stock. All of the Company's options converted from Altsys options were exercised as of March 31, 1995. Options granted normally vest over four years from the date of grant. The options expire 10 years from the date of grant and are normally canceled three months after an employee's termination. Incentive options are granted at a price equal to the lowest fair market value during the month of grant, as determined by the Board of Directors. Nonqualified options must be granted at a price not less than 85% of fair market value on the date of grant, as determined by the Board of Directors. The following summarizes activity in the stock option plans for the years ended March 31, 1996, 1995 and 1994:
Number Exercise price of shares per share ---------- --------------- Options outstanding as of March 31, 1993 ........... 4,301,092 $0.20- 1.44 Granted .......................................... 1,935,212 0.75- 9.63 Exercised ........................................ (806,492) 0.20- 3.50 Canceled ......................................... (549,884) 0.20- 9.50 ---------- ----------- Options outstanding as of March 31, 1994 ........... 4,879,928 0.20- 9.63 Granted .......................................... 3,330,794 4.75-16.50 Exercised ........................................ (1,398,302) 0.20-10.94 Canceled ......................................... (1,067,256) 0.22-10.94 ---------- ----------- Options outstanding as of March 31, 1995 ........... 5,745,164 0.20-16.50 Granted .......................................... 2,426,215 0.31-41.31 Exercised ........................................ (1,461,806) 0.20-36.88 Canceled ......................................... (346,547) 0.34-40.00 Options outstanding as of March 31, 1996 ........... 6,363,026 0.20-41.31 ---------- -----------
As of March 31, 1996, options to purchase 1,869,848 shares of common stock were exercisable under the plans. The Company has recorded deferred compensation of $415,000 for the difference between the grant price and the deemed fair value of the common stock underlying the options issued in connection with the iband acquisition in March 1996. This amount is to be amortized over the vesting period of the individual options, generally four years. * * * 41 44 MACROMEDIA, INC. AND SUBSIDIARIES 9. COMMITMENTS AND CONTINGENCIES Royalties THE COMPANY has entered into agreements with third parties that provide for royalty payments based on a per unit wholesale price of certain products. Leases The Company leases office space and certain equipment under operating leases, certain of which contain renewal and purchase options. Future minimum payments under operating leases with an initial term of more than one year are summarized as follows (in thousands): 1997.................................. $ 2,041 1998.................................. 2,034 1999.................................. 2,085 2000.................................. 2,060 2001.................................. 1,705 Thereafter............................ 1,279 ------- Total minimum lease payments..... $11,204 =======
Rent expense was $1,774,000, $1,131,000, and $961,000 for the years ended March 31, 1996, 1995, and 1994, respectively. Litigation The Company is also subject to various legal matters that arise in the normal course of business. In the opinion of management, any liability resulting from the disposition of such matters would not have a material adverse effect on the financial position of the Company. * * * 10. EMPLOYEE BENEFITS THE COMPANY maintains a profit sharing salary deferral 401(k) defined contribution benefit plan that covers all employees who have attained 21 years of age and completed at least 1,000 hours of service. This plan allows employees to defer up to 15% of their pretax salary in certain investments at the discretion of the employee. Employer contributions are made at the discretion of the Company's Board of Directors. Employer contributions made to the plan during the years ended March 31, 1996, 1995, and 1994, were $291,000, $0, and $150,000, respectively. 42 45 MACROMEDIA, INC. AND SUBSIDIARIES 11. LAND ACQUISITION AGREEMENT IN MARCH 1996, the Company entered into an Agreement of Purchase and Sale (the Agreement) with a third party to purchase a parcel of land in Redwood City, California, for $6,960,000. As of March 31, 1996, the Company had made an initial deposit of approximately $350,000 in connection with the Agreement. The Company intends to construct a building on this land parcel that will be occupied by certain of its research and development employees. Construction of the building is expected to begin in June 1996. * * * 12. INFORMATION BY GEOGRAPHIC AREA THE COMPANY'S OPERATIONS outside the United States consist of sales offices of wholly owned subsidiaries in Japan, the United Kingdom, and a branch in Australia. Domestic operations are responsible for the design and development of all products, as well as shipping to meet worldwide customer commitments. The foreign sales offices receive a commission on export sales within the territory. Accordingly, for financial statement purposes, it is not meaningful to segregate operating profit (loss) for the foreign sales offices. The distribution of net revenues and identifiable assets by geographic areas for the years ended March 31, 1996, 1995, and 1994, follows (in thousands):
1996 1997 1998 ---- ---- ---- Net revenues: United States........................... $ 67,560 $37,367 $28,739 Europe.................................. 28,089 8,696 3,212 Pacific Rim............................. 21,042 9,829 5,591 -------- ------- ------- Total net revenues.................. $116,691 $55,892 $37,542 ======== ======= ======= Identifiable assets: United States........................... $154,166 $54,900 $39,479 Europe.................................. 470 278 141 Pacific Rim............................. 1,479 228 36 Eliminations............................ (993) (2,976) (1,153) -------- ------- ------- Total assets........................ $155,122 $52,430 $38,503 ======== ======= =======
* * * 43 46 Quarterly Results of Operations (unaudited) SUMMARIZED QUARTERLY FINANCIAL INFORMATION for fiscal years 1996 and 1995 is as follows (in thousands, except per share data):
Quarter Ended Fiscal -------------------------------------------------- Year Fiscal Year June 30 September 30 December 31 March 31 Totals - ----------- ------- ------------ ----------- -------- -------- 1996: Total revenues ..................... $23,857 $27,301 $30,926 $34,607 $116,691 Gross profit ....................... 19,632 22,626 25,651 29,182 97,091 Operating income ................... 5,231 6,725 8,800 6,924 27,680 Net income ......................... 4,423 5,417 7,152 6,010 23,002 Net income per share(a) ............ 0.13 0.15 0.18 0.15 0.59 1995: Total revenues ..................... $10,339 $12,245 $12,310 $20,998 $ 55,892 Gross profit ....................... 8,614 10,213 10,199 17,248 46,274 Operating income ................... 1,256 2,202 2,024 1,735 7,217 Net income ......................... 1,019 1,884 1,835 1,800 6,538 Net income per share(a) ............ 0.03 0.06 0.05 0.05 0.19 - ----------
(a) See Note 1 of notes to consolidated financial statements for an explanation of the determination of the number of shares used in computing net income per share. 44 47 Independent Auditors' Report The Board of Directors Macromedia, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Macromedia, Inc. and subsidiaries as of March 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 1996. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We did not audit the financial statements of Altsys Corporation, a company acquired by Macromedia, Inc. in a business combination accounted for as a pooling of interests as described in Note 2 to the consolidated financial statements, which statements reflect total revenues constituting 9 percent and 20 percent in fiscal 1995 and 1994, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Altsys Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Macromedia, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 1996, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Palo Alto, California April 16, 1996 45 48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not Applicable. 46 49 PART III Certain information required by Part III is omitted from this Report since the Company plans to file with the Securities and Exchange Commission the definitive proxy statement for its 1996 Annual Meeting of Stockholders (the "Proxy Statement") not later than 120 days after the end of the fiscal year covered by this Report, and certain information included therein is incorporated herein by reference. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information concerning the Company's directors required by this Item is incorporated by reference to the section in the Company's Proxy Statement entitled "Proposal No. 1 - Election of Directors." The information concerning the Company's executive officers required by this Item is incorporated by reference herein to Part I, Item 4A, entitled "Executives Officers of the Registrant." on page 10 of this Report. The information concerning compliance with Section 16 of the Securities Exchange Act of 1934 is incorporated by reference to the section in the Company's proxy statement entitled "Compliance under Section 16(a) of the Securities Exchange Act of 1934." ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to the sections in the Company's Proxy Statement entitled "Executive Compensation," "Compensation of Directors," "Employment Agreements," and "Compensation Committee Interlocks and Insider Participation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference to the section in the Company's Proxy Statement entitled "Security Ownership of Certain Beneficial Owners and Management." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference to the section in the Company's Proxy Statement entitled "Certain Transactions." 47 50 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: 1. Financial Statements. The following Consolidated Financial Statements of Macromedia, Inc. are incorporated by reference from Part II, Item 8 of this 10K:
Page ---- Consolidated Balance Sheets - March 31, 1996 and 1995 24 Consolidated Statements of Income - Fiscal Years Ended March 31, 1996, 1995, and 1994 25 Consolidated Statements of Stockholders' Equity - Three Year Period Ended March 31, 1996 26 Consolidated Statements of Cash Flows - Fiscal Years Ended March 31, 1996, 1995, and 1994 28 Notes to Consolidated Financial Statements 30 Report of KPMG Peat Marwick LLP 45
2. Financial Statement Schedule. The following financial statement schedules of Macromedia, Inc. for the fiscal years ended March 31, 1996, 1995 and 1994 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Macromedia, Inc.
Schedule Page -------- ---- II Valuation and Qualifying Accounts 52
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto. 3. Exhibits Exhibit Number Exhibit Title -------- ------------- 2.01 Agreement and Plan of Reorganization by and among the Registrant, Authorware, Inc. and MacroMind/Paracomp, Inc., dated as of February 28, 1992, and certain exhibits thereto. (Incorporated herein by reference to exhibit 2.01 to the Registrant's registration statement on Form S-1 (File number 33-70624) declared effective by the Commission on December 10, 1993 (The "Form S-1")). 2.02 Agreement and Plan of Reorganization among MacroMind, Inc., Paracomp, Inc. and Certain Shareholders of Paracomp, Inc. dated August 21, 1991, as amended October 11, 1991 and certain exhibits thereto. (Incorporated herein by reference to exhibit 2.02 to the Form S-1). 2.03 Agreement and Plan of Reorganization dated October 26, 1994 between the Registrant and Altsys Corporation. (Incorporated herein by reference to exhibit 2.03 to the Registrant's registration statement on Form S-4 (File number 33-87264) declared effective by the Commission on December 14, 1994 (The "Altsys S-4")). 2.04 Agreement of Merger and Articles of Merger dated January 20, 1995 entered into by the Registrant and Altsys Corporation. (Incorporated herein by reference to exhibit 2.04 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994 (the "December 31, 1994 10-Q")). 2.05 Agreement and Plan of Reorganization dated as of August 30, 1995, by and between Macromedia and Fauve and related documents. (Incorporated herein by reference to exhibit 2.01 to the Registrant's Current Report on Form 8-K dated August 31, 1995 (the "Fauve 8-K")). 2.06 Agreement of Merger dated as of August 30, 1995, by and between Macromedia and Fauve. (Incorporated herein by reference to exhibit 2.02 to the Fauve 8-K.) 3.01 Registrant's Certificate of Incorporation, as amended. (Incorporated herein by reference to exhibit 4.01 to the Registrant's registration statement on Form S-8 (File number 33-89092) declared effective by the Commission on February 3, 1995 (The "February 1995 S-8")). 48 51 3.02 Certificate of Amendment of Registrant's Amended and Restated Certificate of Incorporation. (Incorporated herein by reference to exhibit 3.02 to the Registrant's Amendment No. 1 to registration statement on Form 8-A filed on October 5, 1995 (the "First 8-A Amendment")). 3.03 Registrant's Bylaws. (Incorporated herein by reference to exhibit 3.02 to the Form S-1). 3.04 Amendment to Registrant's Bylaws effective October 15, 1993. (Incorporated herein by reference to exhibit 3.03 to the Form S- 1). 4.01 Investor Rights Agreement, dated as of March 31, 1992, as amended April 1, 1992, between the Registrant and various investors. (Incorporated herein by reference to exhibit 4.01 to the Form S-1). 4.02 Amendment to the Investor Rights Agreement affective January 20, 1995. (Incorporated herein by reference to exhibit 4.02 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 (the "March 31,1995 10-K")). 4.03 Amendment Number Three to Investor Rights Agreement effective July 12, 1995. (Incorporated herein by reference to exhibit 4.03 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (the "June 30, 1995 10-Q")). 4.04 Amendment Number Four to Investor Rights Agreement effective August 31, 1995. (Incorporated herein by reference to exhibit 4.04 to the First 8-A Amendment.) 4.05 Amendment No. Five to the Registration Rights Agreement (Incorporated herein by reference to exhibit 4.06 to Form S-3 (File number 333-644), declared effective February 8, 1996). 4.06 Amendment Number Six to Investor Rights Agreement, effective March 14, 1996. 10.01* 1989 Paracomp Stock Option Plan. (Incorporated herein by reference to exhibit 10.01 to the Form S-1). 10.02* 1989 MacroMind Incentive Stock Option Plan and 1989 Nonstatutory Stock Option Plan as amended March 1992. (Incorporated herein by reference to exhibit 10.02 to the Form S-1). 10.03* 1988 Authorware Stock Option Plan as amended and restated February 1992. (Incorporated herein by reference to exhibit 10.03 to the Form S-1). 10.04* 1992 Equity Incentive Plan and related documents, as amended to date. 10.05* 1993 Directors Stock Option Plan and related documents, as amended to date. (Incorporated herein by reference to exhibit 10.05 to the June 30, 1995 10-Q). 10.06* 1993 Employee Stock Purchase Plan. 10.07* Form of Indemnification Agreement entered into by Registrant with each of its directors and executive officers. (Incorporated herein by reference to exhibit 10.08 to the Form S-1). 10.08* Employment Agreement between the Registrant and John C. Colligan dated December 9, 1988. (Incorporated herein by reference to exhibit 10.09 to the Form S-1). 10.09* Employment and Noncompetition Agreement with Kevin F. Crowder. (Incorporated herein by reference to exhibit 10.12 to the December 31, 1994 10-Q). 10.10* Employment and Noncompetition Agreement with James R. Von Ehr II. (Incorporated herein by reference to exhibit 10.13 to the December 31, 1994 10-Q). 10.11 Escrow Agreement among the Registrant and James R. Von Ehr II, Gayla J. Von Ehr and Kevin F. Crowder. (Incorporated herein by reference to exhibit 10.11 to the December 31, 1994 10-Q). 10.12 Lease Agreement by and between Registrant and Toda Development, Inc. dated June 27, 1991 as amended. (Incorporated herein by reference to exhibit 10.07 to the Form S-1). 10.13 Third amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated November 7, 1994 and fourth amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated April 6, 1995. (Incorporated herein by reference to exhibit 10.14 to the March 31, 1995 10-K). 10.14 Fifth Amendment to lease Agreement by and between Registrant and Toda Development, Inc. dated August 31, 1995 and sixth amendment to lease Agreement by and between Registrant and Toda Development, Inc. dated October 31, 1995. (Incorporated herein by reference to exhibit 10.18 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995). 10.15 Seventh Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated December 15, 1995 and Eight Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated January 25, 1996 and Ninth Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated February 21, 1996 and Tenth Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated April 30, 1996 and Eleventh Amendment to 52 Lease Agreement by and between Registrant and Toda Development, Inc. dated June 13, 1996. 10.16 Termination and License Agreement by and between Altsys Corporation and Aldus Corporation, dated October 24, 1994 (Incorporated herein by reference to exhibit 10.11 to the Altsys S-4). 10.17 Letter Agreement between the Registrant and Michael Solomon (Incorporated herein by reference to exhibit 10.12 to the Altsys S-4). 10.18 Line of Credit Agreement by and between Registrant and Imperial Bank dated August 2, 1995. (Incorporated herein by reference to exhibit 10.17 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995). 10.19** Distribution Agreement by and between the Registrant and Ingram Micro, Inc. dated March 28, 1996. 11.01 Statement regarding computation of per share earnings. 21.01 List of Registrant's subsidiaries. 23.01 Consent of KPMG Peat Marwick LLP, Independent Auditors. 23.02 Consent of Arthur Andersen LLP, Independent Auditors. 24.01 Power of Attorney (see page 51 of this Form 10-K). 27.01 Financial Data Schedule. ______________________ * Represents a management contract or compensatory plan or arrangement ** Confidential treatment has been requested with respect to certain portions of this agreement. Such portions have been redacted and marked with a double asterisk. The non-redacted version of this agreement has been sent to the Securities and Exchange Commission pursuant to an application for confidential treatment. (b) Reports on Form 8-K: In March 1996, the Company filed a report on Form 8-K dated March 14, 1996, related to its acquisition of iband, Inc. pursuant to Item 5 under Form 8-K. No financial statements were required to be filed with the Form 8-K. With the exception of the information incorporated by reference to the Proxy Statement in Items 10, 11, 12 and 13 of Part III, the Proxy Statement is not deemed to be filed as part of this Report. 50 53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. MACROMEDIA, INC. By: /s/ John C. Colligan ---------------------------------- John C. Colligan President, Chief Executive Officer Dated: June 26, 1996 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John C. Colligan and Richard B. Wood, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and dates indicated.
Signature Title Date --------- ----- ---- PRINCIPAL EXECUTIVE OFFICER: /s/ John C. Colligan Chairman of the Board of Directors, June 26, 1996 - --------------------------- President, and Chief Executive Officer John C. Colligan PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER: /s/ Richard B. Wood Vice President of Operations, June 26, 1996 - --------------------------- Chief Financial Officer, and Secretary Richard B. Wood DIRECTORS: /s/ L. John Doerr Director June 26, 1996 - --------------------------- L. John Doerr /s/ C. Richard Kramlich Director June 26, 1996 - --------------------------- C. Richard Kramlich /s/ John C. Laing Director June 26, 1996 - --------------------------- John C. Laing /s/ Donald L. Lucas Director June 26, 1996 - --------------------------- Donald L. Lucas /s/ William B. Welty Director June 26, 1996 - --------------------------- William B. Welty /s/ James R. Von Ehr II Director June 26, 1996 - --------------------------- James R. Von Ehr II /s/ Kevin F. Crowder Director June 26, 1996 - --------------------------- Kevin F. Crowder
51 54 Macromedia, Inc. Schedule II Valuation and Qualifying Accounts For the years ended March 31, 1996, 1995 and 1994 (in thousands)
Balance at Charged to Balance at Beginning Costs and End Description of Period Expenses Deductions of Period - ------------------------------- ---------- ---------- ---------- --------- Allowance for Doubtful Accounts Year Ended March 31, 1996 $ 399 $ 740 $ 204 $ 935 ------ ------ ------ ------ Year Ended March 31, 1995 $ 321 $ 243 $ 165 $ 399 ------ ------ ------ ------ Year Ended March 31, 1994 $ 274 $ 528 $ 481 $ 321 ------ ------ ------ ------ Allowance for Returns Year Ended March 31, 1996 $1,088 $8,923 $6,569 $3,442 ------ ------ ------ ------ Year Ended March 31, 1995 $ 639 $3,791 $3,342 $1,088 ------ ------ ------ ------ Year Ended March 31, 1994 $ 170 $1,963 $1,494 $ 639 ------ ------ ------ ------
52 55
EXHIBIT NUMBER DESCRIPTION PAGE - ------ ----------- ---- 4.06 Amendment Number Six to Investor Rights Agreement 54 10.04* 1992 Equity Incentive Plan and related documents, as amended to date 59 10.06* 1993 Employee Stock Purchase Plan 72 10.15 Seventh Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated December 15, 1995 and Eight Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated January 25, 1996 and Ninth Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated February 21, 1996 and Tenth Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated April 30, 1996 and Eleventh Amendment to Lease Agreement by and between Registrant and Toda Development, Inc. dated June 13, 1996 78 10.19**Distribution Agreement by and between the Registrant and Ingram Micro, Inc. 97 11.01 Statement regarding computation of per share earnings 110 21.01 List of Registrant's subsidiaries 111 23.01 Consent of KPMG Peat Marwick LLP, Independent Auditors 112 23.02 Consent of Arthur Andersen LLP, Independent Auditors 113 27.01 Financial Data Schedule 114
- ------------------ *Represents a management contract or compensatory plan or arrangement **Confidential treatment has been requested with respect to certain portions of this agreement. Such portions have been redacted and marked with a double asterisk. The non-redacted version of this agreement has been sent to the Securities and Exchange Commission pursuant to an application for confidential treatment. 53 EX-4.06 2 EXHIBIT 4.06 1 AMENDMENT NUMBER SIX TO INVESTOR RIGHTS AGREEMENT The undersigned hereby consents and agrees to this Amendment (this "Amendment") of that certain Investor Rights Agreement, dated as of March 31, 1992 and amended as of April 1, 1992, January 20, 1995, July 12, 1995, August 30, 1995 and December 2, 1995 (the "Agreement"), among Macromedia, Inc., a Delaware corporation formerly named MMAW Consolidation Corp. (the "Company"), and the Investors listed on Schedule A thereto, James R. Von Ehr, II, Kevin F. Crowder, Frederick Krueger, Richard Krueger, Josh Rosen, Mats Myrberg and John Dalton. The undersigned is currently a "Holder" as defined in the Agreement. This Amendment is contingent upon the closing of the merger of Iband, Inc., a California corporation ("Iband"), with and into the Company (the "Merger") and will be deemed given as of the date of the consummation of the Merger. References to Sections and capitalized terms in this Amendment that are not otherwise defined herein will have the meaning ascribed to them in the Agreement. 1. S-3 Registration of Iband Shares and Aspen Shares (a) After the date hereof, Anthony Wood and Stephen Shannon (referred to herein as the "Iband Shareholders") may request in writing that the Company effect a registration on Form S-3 for the resale by such Iband Shareholder of all or any of the shares of Macromedia Common Stock that the Company issues to such Iband Shareholder upon consummation of the Merger (the shares of Macromedia Common Stock to be issued to the Iband Shareholders or either of them upon the Merger are referred to as the "Iband Shares"), and any related qualification or compliance with respect to all or a part of the Iband Shares owned by such Iband Shareholder. Upon receipt of such request, the Company will: (i) promptly give written notice of the proposed registration, and any related qualification or compliance, to the other Iband Shareholder(s); and (ii) file a registration statement on Form S-3 as provided above within 30 days after receipt of such request and, as soon as practicable, effect such registration (and all such qualifications and compliances as may be so requested) as would permit the sale and distribution of all or such portion of such Iband Shareholder's Iband Shares as are specified in such request, together with all or a portion of the Iband Shares of the other Iband Shareholder joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however: (A) that the Iband Shareholder(s) will sell Iband Shares pursuant to such registration only during an "Iband Permitted Window" (as defined below), only in "brokers' transactions" (as defined in Rule 144 under the Act) and only during the two-year period commencing with the effective date of the Merger; there will be no more than three "Iband Permitted Windows" under the registration statement, and there will be at least a 90-day interval between any two Iband Permitted Windows; (B) no Iband Shareholder will sell any Iband Shares, and no Iband Permitted Window will commence, until after the publication of the first quarterly financial statements of the Company that include at least 30 days of combined operating results of the Company and Iband; (C) no Iband Shareholder will sell pursuant to such registration, within 12 months after the date on which the Merger is consummated, 50% or more of the Iband Shares issued to such Iband Shareholder; (D) that, if the Company furnishes to the Iband Shareholder(s) a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of 54 2 Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time (or, in the case a "Notice of Resale" (as defined below) has been given, that it would be seriously detrimental to the Company and its stockholders for the Iband Permitted Window to commence at such time) due to the existence of a material development or potential material development involving the Company which the Company would be obligated to disclose in the prospectus contained in the Form S-3 registration statement, which disclosure would in the good faith judgment of the Board of Directors of the Company be premature or otherwise inadvisable at such time and would have a material adverse affect upon the Company and its stockholders, the Company will have the right to defer the filing of the Form S-3 registration statement (or the commencement of the Iband Permitted Window, as the case may be) for a period of not more than 90 days after receipt of the request of the Iband Shareholder under this Section 1 (or after receipt of the Notice of Resale, as the case may be); provided, however, that the Company will not utilize this right more than once in any twelve month period; and provided further, however, that the Company will defer the filing of the Form S-3 registration statement (or the commencement of the Iband Permitted Window as the case may be) for the minimum time reasonably necessary in the good faith judgment of the Board of Directors; and (E) that the Company will not be required to effect any such registration, qualification or compliance in any particular jurisdiction in which the Company would thereby be required to qualify to do business or to execute a general consent to service of process. For the purposes of this Section 1, a "Iband Permitted Window" is a period of 30 consecutive calendar days commencing upon the Company's written notification to the Iband Shareholder in response to a Notice of Resale that the prospectus contained in the S-3 registration statement is available for resale. In order to cause an Iband Permitted Window to commence, an Iband Shareholder must first give written notice to the Company of such Iband shareholder's present intention to sell some or all of such Iband Shareholder's Iband Shares pursuant to such registration (a "Notice of Resale"). Upon receipt of such Notice of Resale, the Company will give written notice to the Iband Shareholder as soon as practicable, but in no event more than five business days after such receipt, that the prospectus contained in the registration statement is current (it may be necessary for the Company during this period to supplement the prospectus or make an appropriate filing under the 1934 Act so as to cause the prospectus to become current) and that the Iband Permitted Window will commence on the date of such notice by the Company or that the Company is required under the Act and the regulations thereunder to amend the registration statement in order to cause the prospectus to be current (unless a certificate of the President is delivered as provided in (ii)(D) above). In the event that the Company determines an amendment is necessary as provided above, it will file and cause the amendment to become effective as soon as practicable; whereupon it will notify the Iband shareholder that the Iband Permitted Window will then commence. (b) After the date hereof, Aspen Ventures West II, L.P., Novus Ventures, and John R. Disbrow (referred to herein as the "Aspen Shareholders") may request in writing that the Company effect a registration on Form S-3 for the resale by such Aspen Shareholder of all or any of the shares of Macromedia Common Stock that the Company issues to such Aspen Shareholder upon consummation of the Merger and the execution of a certain Settlement and Release Agreement effective upon the consummation of the Merger (the shares of Macromedia Common Stock to be issued to the Aspen Shareholders or either of them are referred to as the "Aspen Shares"), and any related qualification or compliance with respect to all or a part of the Aspen Shares owned by such Aspen Shareholder. Upon receipt of such request, the Company will: (i) promptly give written notice of the proposed registration, and any related qualification or compliance, to the other Aspen Shareholder(s); and (ii) file a registration statement on Form S-3 as provided above within 30 days after receipt of such request and, as soon as practicable, effect such registration (and all such qualifications and compliances as may be so requested) as would permit the sale and distribution of all or such portion of such Aspen Shareholder's Aspen Shares as are specified in such request, together with all or a portion of the Aspen Shares of the other Aspen Shareholder joining in such request as are 55 3 specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however: (A) that the Aspen Shareholder(s) will sell Aspen Shares pursuant to such registration only during an "Aspen Permitted Window" (as defined below), only in "brokers' transactions" (as defined in Rule 144 under the Act) and only during the two-year period commencing with the effective date of the Merger; there will be no more than three "Aspen Permitted Windows" under the registration statement, and there will be at least a 90-day interval between any two Aspen Permitted Windows; (B) that, if the Company furnishes to the Aspen Shareholder(s) a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time (or, in the case a "Notice of Resale" (as defined below) has been given, that it would be seriously detrimental to the Company and its stockholders for the Aspen Permitted Window to commence at such time) due to the existence of a material development or potential material development involving the Company which the Company would be obligated to disclose in the prospectus contained in the Form S-3 registration statement, which disclosure would in the good faith judgment of the Board of Directors of the Company be premature or otherwise inadvisable at such time and would have a material adverse affect upon the Company and its stockholders, the Company will have the right to defer the filing of the Form S-3 registration statement (or the commencement of the Aspen Permitted Window, as the case may be) for a period of not more than 90 days after receipt of the request of the Aspen Shareholder under this Section 1 (or after receipt of the Notice of Resale, as the case may be); provided, however, that the Company will not utilize this right more than once in any twelve month period; and provided further, however, that the Company will defer the filing of the Form S-3 registration statement (or the commencement of the Aspen Permitted Window as the case may be) for the minimum time reasonably necessary in the good faith judgment of the Board of Directors; and (C) that the Company will not be required to effect any such registration, qualification or compliance in any particular jurisdiction in which the Company would thereby be required to qualify to do business or to execute a general consent to service of process. For the purposes of this Section 1, an "Aspen Permitted Window" is a period of 30 consecutive calendar days commencing upon the Company's written notification to the Aspen Shareholder in response to a Notice of Resale that the prospectus contained in the S-3 registration statement is available for resale. In order to cause an Aspen Permitted Window to commence, an Aspen Shareholder must first give written notice to the Company of such Aspen Shareholder's present intention to sell some or all of such Aspen Shareholder's Aspen Shares pursuant to such registration (a "Notice of Resale"). Upon receipt of such Notice of Resale, the Company will give written notice to the Aspen Shareholder as soon as practicable, but in no event more than five business days after such receipt, that the prospectus contained in the registration statement is current (it may be necessary for the Company during this period to supplement the prospectus or make an appropriate filing under the 1934 Act so as to cause the prospectus to become current) and that the Aspen Permitted Window will commence on the date of such notice by the Company or that the Company is required under the Act and the regulations thereunder to amend the registration statement in order to cause the prospectus to be current (unless a certificate of the President is delivered as provided in (ii)(D) above). In the event that the Company determines an amendment is necessary as provided above, it will file and cause the amendment to become effective as soon as practicable; whereupon it will notify the Aspen Shareholder that the Aspen Permitted Window will then commence. (c) All expenses incurred in connection with such registration, and any related qualification or compliance, including, without limitation, all registration, filing, qualification, printers' and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the Iband and Aspen Shareholders (the fees of such counsel not to exceed $20,000) shall be borne by the Company. 56 4 (d) A registration effective pursuant to this Section 1 will not be counted as a demand for registration under Section 1.2 of the Agreement and will not trigger any registration or notice rights under Section 1.3 or 1.12 of the Agreement. (e) Paragraphs (b), (c), (d) and (f) of Section 1.4 of the Agreement will apply to a registration under this Section 1, provided that the term "Holder" will, for the purposes hereof be deemed to refer only to the Iband and Aspen Shareholders. (f) It will be a condition precedent to the obligations of the Company to register pursuant to this Section 1 any Iband or Aspen Shares of any Iband or Aspen Shareholders that such Iband or Aspen Shareholders furnish to the Company for inclusion in the S-3 registration statement such information regarding such Iband or Aspen Shareholder and the Iband or Aspen Shares held by such Iband or Aspen Shareholder as will be required to effect the registration of such Iband or Aspen Shareholders of Iband or Aspen Shares; provided, however that no Iband or Aspen Shareholders will be required to make any representations or warranties or agreements with the Company except as to such matters. 2. Amendment of Definitions of "Registrable Securities" and "Holders." For purposes of Sections 1.9, 1.10, 1.11(a), (c) and (d), 1.13, 1.14, 1.15 (provided that the market stand-off provided for in Section 1.15 will apply to the Iband or Aspen Shares only if the Iband or Aspen Shareholders are permitted to include their Iband or Aspen Shares in the applicable registration without limitation) 1.16 and 3.1 through 3.9 (except that, notwithstanding anything to the contrary in Section 3.9, no amendment to the Agreement that materially changes this Amendment may be made without the written consent of the Iband Shareholder(s) holding at least a majority of the Iband Shares and the Aspen Shareholder(s) holding at least a majority of the Aspen Shares) of the Agreement (specifically excluding the other Sections of this Agreement), (a) the term "Registrable Securities" will be deemed to include the Iband and Aspen Shares and (b) the term "Holders" will be deemed to include the Iband and Aspen Shareholders so long as such individuals hold Iband or Aspen Shares. The provisions of Section 1.2, 1.3, 1.5, 1.6, 1.7, 1.8, 1.11(b), 1.12, 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7 and 2.8 will not apply to the Iband or Aspen Shareholders or any of their Iband or Aspen Shares. The provisions of Section 1.4 will apply to the Iband and Aspen Shareholders and their shares of Macromedia Common Stock only to the extent explicitly provided for in Section 1 of this Amendment. 3. Effectiveness of Amendment. As provided in Section 3.9 of the Agreement, this Amendment shall be binding upon each holder of any Registrable Securities then outstanding, any future holder of such Registrable Securities and the Company. This Amendment shall be effective when (a) the written consent of Macromedia and the holders of a majority of the Registrable Securities currently outstanding is obtained, and (b) the Merger has been consummated as evidenced by the filing of the Agreement of Merger, the Articles of Merger and such other certificates and agreements as may be required by the Secretaries of State of the States of Delaware and California. This Consent shall be void and have no effect if the Agreement and Plan of Reorganization dated as of March 13, 1996 is terminated in accordance with its terms before the Merger is consummated. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 57 5 6. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. MACROMEDIA, INC. HOLDER OF REGISTRABLE SECURITIES By: /s/ John C. Colligan -------------------------------- John C. Colligan, President Authorized Signature and Chief Executive Officer -------------------------------- Printed Name -------------------------------- Authorized Signature -------------------------------- Printed Name ACCEPTANCE BY THE IBAND SHAREHOLDERS Agreed to and Accepted: /s/ Anthony Wood Anthony Wood /s/ Stephen Shannon Stephen Shannon ACCEPTANCE BY THE ASPEN SHAREHOLDERS /s/Aspen Ventures West II, L.P /s/ John R. Disbrow Aspen Ventures West II, L.P. John R. Disbrow By: ________________________________ Its: _______________________________ /s/ Novus Ventures Novus Ventures By: ________________________________ Its: _______________________________ 58 EX-10.04 3 EXHIBIT 10.04 1 MACROMEDIA, INC. 1992 EQUITY INCENTIVE PLAN As Adopted September 23, 1992 and amended through April 29, 1996 1. PURPOSE. The purpose of the Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent, Subsidiaries and Affiliates, by offering them an opportunity to participate in the Company's future performance through awards of Options, Restricted Stock and Stock Bonuses. Capitalized terms not defined in the text are defined in Section 24. 2. SHARES SUBJECT TO THE PLAN. 2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the total number of Shares reserved and available for grant and issuance pursuant to the Plan shall be 9,000,0001 Shares. Any Shares issuable upon exercise of options granted pursuant to the Authorware 1988 Stock Option Plan, the Macromind, Inc. 1989 Incentive Stock Option Plan and 1989 Nonstatutory Stock Option Plan, and the Paracomp, Inc. 1989 Stock Option Plan (the "Prior Plans") that expire or become unexercisable for any reason without having been exercised in full, shall no longer be available for distribution under the Prior Plans, but shall be available for distribution under this Plan. Subject to Sections 2.2 and 18, Shares shall again be available for grant and issuance in connection with future Awards under the Plan that: (a) are subject to issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option, (b) are subject to an Award granted hereunder but are forfeited or are repurchased by the Company at the original issue price, or (c) are subject to an Award that otherwise terminates without Shares being issued. 2.2 Adjustment of Shares. In the event that the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under the Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options, and (c) the number of Shares subject to other outstanding Awards shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share shall not be issued but shall either be paid in cash at Fair Market Value or shall be rounded up to the nearest Share, as determined by the Committee; and provided, further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares. 3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. All other Awards may be granted to employees, officers, directors, consultants, independent contractors and advisers of the Company or any Parent, Subsidiary or Affiliate of the Company; provided such consultants, contractors and advisers render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. No "Named Executive Officer" (as that term is defined in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act) shall be eligible to receive more than 1,800,000 Shares at any time during the term of this Plan pursuant to the grant of Awards hereunder. A person may be granted more than one Award under the Plan. 4. ADMINISTRATION. - -------- (1) Reflects a two-for-one stock dividend effective October 1995. 59 2 4.1 Committee Authority. The Plan shall be administered by the Committee or the Board acting as the Committee. Subject to the general purposes, terms and conditions of the Plan, and to the direction of the Board, the Committee shall have full power to implement and carry out the Plan. The Committee shall have the authority to: (a) construe and interpret the Plan, any Award Agreement and any other agreement or document executed pursuant to the Plan; (b) prescribe, amend and rescind rules and regulations relating to the Plan; (c) select persons to receive Awards; (d) determine the form and terms of Awards; (e) determine the number of Shares or other consideration subject to Awards; (f) determine whether Awards will be granted singly, in combination, in tandem, in replacement of, or as alternatives to, other Awards under the Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary or Affiliate of the Company; (g) grant waivers of Plan or Award conditions; (h) determine the vesting, exercisability and payment of Awards; (i) correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Award or any Award Agreement; (j) determine whether an Award has been earned; and (k) make all other determinations necessary or advisable for the administration of the Plan. 4.2 Committee Discretion. Any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under the Plan to Participants who are not Insiders of the Company. 60 3 4.3 Exchange Act Requirements. If two or more members of the Board are Outside Directors, the Committee shall be comprised of at least two members of the Board, all of whom are Outside Directors and Disinterested Persons. The Company will take appropriate steps to comply with the disinterested administration requirements of Section 16(b) of the Exchange Act, which shall consist of the appointment by the Board of a Committee consisting of not less than two members of the Board, each of whom is a Disinterested Person. 5. OPTIONS. The Committee may grant Options to eligible persons and shall determine whether such Options shall be Incentive Stock Options within the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following: 5.1 Form of Option Grant. Each Option granted under the Plan shall be evidenced by an Award Agreement which shall expressly identify the Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and contain such provisions (which need not be the same for each Participant) as the Committee shall from time to time approve, and which shall comply with and be subject to the terms and conditions of the Plan. 5.2 Date of Grant. The date of grant of an Option shall be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Stock Option Agreement and a copy of the Plan will be delivered to the Participant within a reasonable time after the granting of the Option. 5.3 Exercise Period. Options shall be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement; provided, however, that no Option shall be exercisable after the expiration of one hundred twenty (120) months from the date the Option is granted, and provided further that no Option granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company ("Ten Percent Stockholder") shall be exercisable after the expiration of five (5) years from the date the Option is granted. The Committee also may provide for the exercise of Options to become exercisable at one time or from time to time, periodically or otherwise, in such number or percentage as the Committee determines. 5.4 Exercise Price. The Exercise Price shall be determined by the Committee when the Option is granted and may be not less than 85% of the Fair Market Value of the Shares on the date of grant; provided that (i) the Exercise Price of an ISO shall be not less than 100% of the Fair Market Value of the Shares on the date of grant and (ii) the Exercise Price of any Option granted to a Ten Percent Stockholder shall not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 8 of the Plan. 5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the "Exercise Agreement") in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares, if any, and such representations and agreements regarding Participant's investment intent and access to information, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased. 5.6 Termination. Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option shall always be subject to the following: (a) If the Participant is Terminated for any reason except death or Disability, then Participant may exercise such Participant's Options only to the extent that such Options would have been exercisable upon the Termination Date no later than ninety (90) days after the Termination Date (or such shorter time period as may 61 4 be specified in the Stock Option Agreement), but in any event, no later than the expiration date of the Options. (b) If the Participant is terminated because of death or Disability (or the participant dies within three months of such termination), then Participant's Options may be exercised only to the extent that such Options would have been exercisable by Participant on the Termination Date and must be exercised by Participant (or Participant's legal representative or authorized assignee) no later than twelve (12) months after the Termination Date (or such shorter time period as may be specified in the Stock Option Agreement), but in any event no later than the expiration date of the Options. 5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable. 5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under the Plan or under any other incentive stock option plan of the Company or any Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds $100,000, the Options for the first $100,000 worth of Shares to become exercisable in such calendar year shall be ISOs and the Options for the amount in excess of $100,000 that become exercisable in that calendar year shall be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date of the Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit shall be automatically incorporated herein and shall apply to any Options granted after the effective date of such amendment. 5.9 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of Participant, impair any of Participant's rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered shall be treated in accordance with Section 424(h) 62 5 of the Code. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 of the Plan for Options granted on the date the action is taken to reduce the Exercise Price; provided, further, that the Exercise Price shall not be reduced below the par value of the Shares, if any. 5.10 No Disqualification. Notwithstanding any other provision in the Plan, no term of the Plan relating to ISOs shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify the Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code. 6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee shall determine to whom an offer will be made, the number of Shares the person may purchase, the price to be paid (the "Purchase Price"), the restrictions to which the Shares shall be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following: 6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award Agreement ("Restricted Stock Purchase Agreement") that shall be in such form (which need not be the same for each Participant) as the Committee shall from time to time approve, and shall comply with and be subject to the terms and conditions of the Plan. The offer of Restricted Stock shall be accepted by the Participant's execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within thirty (30) days, then the offer shall terminate, unless otherwise determined by the Committee. 6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award shall be determined by the Committee and shall be at least 85% of the Fair Market Value of the Shares when the Restricted Stock Award is granted, except in the case of a sale to a Ten Percent Stockholder, in which case the Purchase Price shall be 100% of the Fair Market Value. Payment of the Purchase Price may be made in accordance with Section 8 of the Plan. 6.3 Restrictions. Restricted Stock Awards shall be subject to such restrictions as the Committee may impose. The Committee may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions, in whole or part, based on length of service, performance or such other factors or criteria as the Committee may determine. 63 6 7. STOCK BONUSES. 7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which may consist of Restricted Stock) for services rendered to the Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded for past services already rendered to the Company, or any Parent, Subsidiary or Affiliate of the Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that shall be in such form (which need not be the same for each Participant) as the Committee shall from time to time approve, and shall comply with and be subject to the terms and conditions of the Plan. A Stock Bonus may be awarded upon satisfaction of such performance goals as are set out in advance in Participant's individual Award Agreement (the "Performance Stock Bonus Agreement") that shall be in such form (which need not be the same for each Participant) as the Committee shall from time to time approve, and shall comply with and be subject to the terms and conditions of the Plan. Stock Bonuses may vary from Participant to Participant and between groups of Participants, and may be based upon the achievement of the Company, Parent, Subsidiary or Affiliate and/or individual performance factors or upon such other criteria as the Committee may determine. 7.2 Terms of Stock Bonuses. The Committee shall determine the number of Shares to be awarded to the Participant and whether such Shares shall be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of performance goals pursuant to a Performance Stock Bonus Agreement, then the Committee shall determine: (a) the nature, length and starting date of any period during which performance is to be measured (the "Performance Period") for each Stock Bonus; (b) the performance goals and criteria to be used to measure the performance, if any; (c) the number of Shares that may be awarded to the Participant; and (d) the extent to which such Stock Bonuses have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Stock Bonuses that are subject to different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by the Committee. The Committee may adjust the performance goals applicable to the Stock Bonuses to take into account changes in law and accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships. 7.3 Form of Payment. The earned portion of a Stock Bonus may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee may determine. Payment may be made in the form of cash, whole Shares, including Restricted Stock, or a combination thereof, either in a lump sum payment or in installments, all as the Committee shall determine. 7.4 Termination During Performance Period. If a Participant is Terminated during a Performance Period for any reason, then such Participant shall be entitled to payment (whether in Shares, cash or otherwise) with respect to the Stock Bonus only to the extent earned as of the date of Termination in accordance with the Performance Stock Bonus Agreement, unless the Committee shall determine otherwise. 64 7 8. PAYMENT FOR SHARE PURCHASES. 8.1 Payment. Payment for Shares purchased pursuant to the Plan may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law: (a) by cancellation of indebtedness of the Company to the Participant; (b) by surrender of Shares that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such Shares); or (2) were obtained by Participant in the public market; (c) by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that Participants who are not employees of the Company shall not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares; provided, further, that the portion of the Purchase Price equal to the par value of the Shares, if any, must be paid in cash; (d) by waiver of compensation due or accrued to Participant for services rendered; (e) by tender of property; (f) with respect only to purchases upon exercise of an Option, and provided that a public market for the Company's stock exists: (1) through a "same day sale" commitment from Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or (2) through a "margin" commitment from Participant and an NASD Dealer whereby Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (g) by any combination of the foregoing. 65 8 8.2 Loan Guarantees. The Committee may help the Participant pay for Shares purchased under the Plan by authorizing a guarantee by the Company of a third-party loan to the Participant. 9. WITHHOLDING TAXES. 9.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under the Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under the Plan, payments in satisfaction of Awards are to be made in cash, such payment shall be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements. 9.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date"). All elections by a Participant to have Shares withheld for this purpose shall be made in writing in a form acceptable to the Committee and shall be subject to the following restrictions: (a) the election must be made on or prior to the applicable Tax Date; (b) once made, then except as provided below, the election shall be irrevocable as to the particular Shares as to which the election is made; (c) all elections shall be subject to the consent or disapproval of the Committee; (d) if the Participant is an Insider and if the Company is subject to Section 16(b) of the Exchange Act: (1) the election may not be made within six (6) months of the date of grant of the Award, except as otherwise permitted by SEC Rule 16b-3(e) under the Exchange Act, and (2) either (A) the election to use stock withholding must be irrevocably made at least six (6) months prior to the Tax Date (although such election may be revoked at any time at least six (6) months prior to the Tax Date) or (B) the exercise of the Option or election to use stock withholding must be made in the ten (10) day period beginning on the third day following the release of the Company's quarterly or annual summary statement of sales or earnings; provided, that, prior to the date the Company elects to comply with the requirements of Rule 16b-3, as amended effective May 1, 1992, the provisions of former Rule 16b-3(e) of the Exchange Act shall apply with respect to any such elections; and (e) in the event that the Tax Date is deferred until six (6) months after the delivery of Shares under Section 83(b) of the Code, the Participant shall receive the full number of Shares with respect to which the exercise occurs, but such Participant shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date. 10. PRIVILEGES OF STOCK OWNERSHIP. 10.1 Voting and Dividends. No Participant shall have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant shall be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become 66 9 entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company shall be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant shall have no right to retain such dividends or distributions with respect to Shares that are repurchased at the Participant's original Purchase Price pursuant to Section 12. 10.2 Financial Statements. The Company shall provide financial statements to each Participant prior to such Participant's purchase of Shares under the Plan, and to each Participant annually during the period such Participant has Options outstanding; provided, however, the Company shall not be required to provide such financial statements to Participants whose services in connection with the Company assure them access to equivalent information. 11. TRANSFERABILITY. Awards granted under the Plan, and any interest therein, shall not be transferable or assignable by Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with the specific Plan and Award Agreement provisions relating thereto. During the lifetime of the Participant an Award shall be exercisable only by the Participant, and any elections with respect to an Award, may be made only by the Participant. 12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement (a) a right of first refusal to purchase all Shares that a Participant (or a subsequent transferee) may propose to transfer to a third party, and/or (b) a right to repurchase a portion of or all Shares held by a Participant following such Participant's Termination at any time within ninety (90) days after the later of Participant's Termination Date and the date Participant purchases Shares under the Plan, for cash or cancellation of purchase money indebtedness, at: (A) with respect to Shares that are "Vested" (as defined in the Award Agreement), the higher of: (l) Participant's original Purchase Price, or (2) the Fair Market Value of such Shares on Participant's Termination Date, provided, such right of repurchase terminates when the Company's securities become publicly traded; or (B) with respect to Shares that are not "Vested" (as defined in the Award Agreement), at the Participant's original Purchase Price, provided, that the right to repurchase at the original Purchase Price lapses at the rate of at least 20% per year over 5 years from the date the Shares were purchased, and if the right to repurchase is assignable, the assignee must pay the Company, upon assignment of the right to repurchase, cash equal to the excess of the Fair Market Value of the Shares over the original Purchase Price. 13. CERTIFICATES. All certificates for Shares or other securities delivered under the Plan shall be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed. 14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant's Shares, the Committee may require the Participant to deposit all certificates, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under the Plan shall be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant's obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company shall have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant's Shares or other collateral. In connection with any pledge of the Shares, Participant shall be required to execute and deliver a written pledge agreement in such form as the Committee shall from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a prorata basis as the promissory note is paid. 67 10 15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant shall agree. 16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in the Plan, the Company shall have no obligation to issue or deliver certificates for Shares under the Plan prior to (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (b) completion of any registration or other qualification of such shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company shall be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company shall have no liability for any inability or failure to do so. 17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted under the Plan shall confer or be deemed to confer on any Participant any right to continue in the employ of, or other relationship with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate of the Company to terminate Participant's employment or other relationship at any time, with or without cause. 18. CORPORATE TRANSACTIONS. 18.1 Assumption or Replacement of Awards by Successor. In the event of (a) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company and the Awards granted under the Plan are assumed or replaced by the successor corporation, which assumption shall be binding on all Participants), (b) a dissolution or liquidation of the Company, (c) the sale of substantially all of the assets of the Company, or (d) any other transaction which qualifies as a "corporate transaction" under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company), any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement shall be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject repurchase restrictions no less favorable to the Participant. 18.2 Expiration of Options. In the event such successor corporation, if any, refuses to assume or substitute the Options, as provided above, pursuant to a transaction described in Subsection 18.1(a) above, such Options shall expire on such transaction at such time and on such conditions as the Board shall determine. In the event such successor corporation, if any, refuses to assume or substitute the Options as provided above, pursuant to a transaction described in Subsections 18.1(b), (c) or (d) above, or there is no successor corporation, and if the Company ceases to exist as a separate corporate entity, then, notwithstanding any contrary terms in the Award Agreement, the Options shall expire on a date at least twenty (20) days after the Board gives written notice to Participants specifying the terms and conditions of such termination. 68 11 18.3 Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 18, in the event of the occurrence of any transaction described in Section 18.1, any outstanding Awards shall be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, sale of assets or other "corporate transaction." 18.4 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (a) granting an Award under the Plan in substitution of such other company's award, or (b) assuming such award as if it had been granted under the Plan if the terms of such assumed award could be applied to an Award granted under the Plan. Such substitution or assumption shall be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under the Plan if the other company had applied the rules of the Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award shall remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. 19. ADOPTION AND STOCKHOLDER APPROVAL. The Plan shall become effective on the date that it is adopted by the Board (the "Effective Date"). The Plan shall be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve months before or after the Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to the Plan; provided, however, that: (a) no Option may be exercised prior to initial stockholder approval of the Plan; (b) no Option granted pursuant to an increase in the number of Shares approved by the Board shall be exercised prior to the time such increase has been approved by the stockholders of the Company; and (c) in the event that stockholder approval is not obtained within the time period provided herein, all Awards granted hereunder shall be canceled, any Shares issued pursuant to any Award shall be canceled and any purchase of Shares hereunder shall be rescinded. After the Company becomes subject to Section 16(b) of the Exchange Act, the Company will comply with the requirements of Rule 16b-3 (or its successor), as amended, with respect to stockholder approval. 20. TERM OF PLAN. The Plan will terminate ten (10) years from the Effective Date or, if earlier, the date of stockholder approval. 21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend the Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to the Plan; provided, however, that the Board shall not, without the approval of the stockholders of the Company, amend the Plan in any manner that requires such stockholder approval pursuant to the Code or the regulations promulgated thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act or Rule 16b-3 (or its successor), as amended, thereunder. 22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan shall be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 23. GOVERNING LAW. The Plan and all agreements, documents and instruments entered into pursuant to the Plan shall be governed by and construed in accordance with the internal laws of the State of California, excluding that body of law pertaining to conflict of laws. 24. DEFINITIONS. As used in the Plan, the following terms shall have the following meanings: 69 12 "Affiliate" means any corporation that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, another corporation, where "control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to cause the direction of the management and policies of the corporation, whether through the ownership of voting securities, by contract or otherwise. "Award" means any award under the Plan, including any Option, Restricted Stock or Stock Bonus. "Award Agreement" means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the committee appointed by the Board to administer the Plan, or if no committee is appointed, the Board. "Company" means Macromedia, Inc., a corporation organized under the laws of the State of Delaware, or any successor corporation. "Disability" means a disability, whether temporary or permanent, partial or total, within the meaning of Section 22(e)(3) of the Code, as determined by the Committee. "Disinterested Person" shall have the meaning set forth in Rule 16b-3(c)(2)(i) as promulgated by the SEC under Section 16(b) of the Exchange Act, as such rule is amended from time to time and as interpreted by the SEC. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Price" means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option. "Fair Market Value" means, as of any date, the value of a share of the Company's Common Stock determined as follows: (a) if such Common Stock is then quoted on the NASDAQ National Market System, its last reported sale price on the NASDAQ National Market System or, if no such reported sale takes place on such date, the average of the closing bid and asked prices; (b) if such Common Stock is publicly traded and is then listed on a national securities exchange, the last reported sale price or, if no such reported sale takes place on such date, the average of the closing bid and asked prices on the principal national securities exchange on which the Common Stock is listed or admitted to trading; (c) if such Common Stock is publicly traded but is not quoted on the NASDAQ National Market System nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on such date, as reported by The Wall Street Journal, for the over-the-counter market; or 70 13 (d) if none of the foregoing is applicable, by the Board of Directors of the Company in good faith. "Insider" means an officer or director of the Company or any other person whose transactions in the Company's Common Stock are subject to Section 16 of the Exchange Act. "Option" means an award of an option to purchase Shares pursuant to Section 5. "Outside Director" shall mean any director who is not (i) a current employee of the Company or any Parent, Subsidiary or Affiliate of the Company, (ii) a former employee of the Company or any Parent, Subsidiary or Affiliate of the Company who is receiving compensation for prior services (other than benefits under a tax-qualified pension plan), (iii) a current or former officer of the Company or any Parent, Subsidiary or Affiliate of the Company or (iv) currently receiving compensation for personal services in any capacity, other than as a director, from the Company or any Parent, Subsidiary or Affiliate of the Company; provided, however, that at such time as the term "Outside Director", as used in Section 162(m) is defined in regulations promulgated under Section 162(m) of the Code, "Outside Director" shall have the meaning set forth in such regulations, as amended from time to time and as interpreted by the Internal Revenue Service. "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if at the time of the granting of an Award under the Plan, each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "Participant" means a person who receives an Award under the Plan. "Plan" means this Macromedia, Inc. 1992 Equity Incentive Plan, as amended from time to time. "Restricted Stock Award" means an award of Shares pursuant to Section 6. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Shares" means shares of the Company's Common Stock, $0.001 par value, reserved for issuance under the Plan, as adjusted pursuant to Sections 2 and 15, and any successor security. "Stock Bonus" means an award of Shares, or cash in lieu of Shares, pursuant to Section 7. "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "Termination" or "Terminated" means, for purposes of the Plan with respect to a Participant, that the Participant has ceased to provide services as an employee, director, consultant, independent contractor or adviser, to the Company or a Parent, Subsidiary or Affiliate of the Company, except in the case of sick leave, military leave, or any other leave of absence approved by the Committee, provided, that such leave is for a period of not more than ninety (90) days, or reinstatement upon the expiration of such leave is guaranteed by contract or statute. The Committee shall have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the "Termination Date"). 71 EX-10.06 4 EXHIBIT 10.06 1 MACROMEDIA, INC. 1993 EMPLOYEE STOCK PURCHASE PLAN Adopted by the Board of Directors on October 15, 1993 and Amended Through January 31, 1996 1. ESTABLISHMENT OF PLAN. Macromedia, Inc. (the "Company") proposes to grant options for purchase of the Company's Common Stock to eligible employees of the Company and its Subsidiaries (as hereinafter defined) pursuant to this Employee Stock Purchase Plan (this "Plan"). For purposes of this Plan, "Parent Corporation" and "Subsidiary" (collectively, "Subsidiaries") shall have the same meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). The Company intends the Plan to qualify as an "employee stock purchase plan" under Section 423 of the Code (including any amendments to or replacements of such section), and the Plan shall be so construed. Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. A total of 200,000 shares of the Company's Common Stock is reserved for issuance under the Plan. Such number shall be subject to adjustments effected in accordance with Section 14 of the Plan. 2. PURPOSE. The purpose of the Plan is to provide employees of the Company and Subsidiaries designated by the Board of Directors of the Company (the "Board") as eligible to participate in the Plan with a convenient means of acquiring an equity interest in the Company through payroll deductions, to enhance such employees' sense of participation in the affairs of the Company and Subsidiaries, and to provide an incentive for continued employment. 3. ADMINISTRATION. This Plan may be administered by the Board or a committee appointed by the Board (the "Committee"). If, at the time the Company registers under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a majority of the Board is not comprised of Disinterested Persons as defined in Rule 16b-3(d) promulgated under the Exchange Act, the Board shall appoint a committee consisting of at least two (2) members of the Board, each of whom is a Disinterested Person. As used in this Plan, references to the "Committee" shall mean either such committee or the Board if no committee has been established. After registration of the Company under the Exchange Act, Board members who are not Disinterested Persons may not vote on any matters affecting the administration of this Plan, but any such member may be counted for determining the existence of a quorum at any meeting of the Board. Subject to the provisions of the Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of the Plan shall be determined by the Board and its decisions shall be final and binding upon all participants. Members of the Board shall receive no compensation for their services in connection with the administration of the Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of the Plan shall be paid by the Company. 4. ELIGIBILITY. Any employee of the Company or the Subsidiaries is eligible to participate in an Offering Period (as hereinafter defined) under the Plan except the following: (a) employees who are not employed by the Company or Subsidiaries on the fifteenth (15th) day of the month before the beginning of such Offering Period; (b) employees who are customarily employed for less than 20 hours per week; (c) employees who are customarily employed for less than 5 months in a calendar year; (d) employees who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, own stock or hold options to purchase stock or who, as a result of being granted an option under the Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any of its Subsidiaries. 5. OFFERING DATES. The Offering Periods of the Plan (the "Offering Period") shall be of 6 months duration commencing February 16 and August 16 of each year and ending on August 15 and February 15 respectively, during which payroll deductions of the participant are accumulated under this Plan. The first day of each Offering Period is referred to as the "Offering Date". The last business day of each Offering Period is referred to as the "Purchase Date". The Board shall have the power to change the duration of Offering Periods with respect to future offerings without 72 2 stockholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected. 6. PARTICIPATION IN THE PLAN. Eligible employees may become participants in an Offering Period under the Plan on the first Offering Date after satisfying the eligibility requirements by delivering a subscription agreement to the Company's or Subsidiary's (whichever employs such employee) treasury department (the "Treasury Department") not later than the 15th day of the month before such Offering Date unless a later time for filing the subscription agreement authorizing payroll deductions is set by the Board for all eligible employees with respect to a given Offering Period. An eligible employee who does not deliver a subscription agreement to the Treasury Department by such date after becoming eligible to participate in such Offering Period shall not participate in that Offering Period or any subsequent Offering Period unless such employee enrolls in the Plan by filing a subscription agreement with the Treasury Department not later than the 15th day of the month preceding a subsequent Offering Date. Once an employee becomes a participant in an Offering Period, such employee will automatically participate in the Offering Period commencing immediately following the last day of the prior Offering Period unless the employee withdraws from the Plan or terminates further participation in the Offering Period as set forth in Section 11 below. Such participant is not required to file any additional subscription agreement in order to continue participation in the Plan. 7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in the Plan with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such employee of an option to purchase on the Purchase Date up to that number of shares of Common Stock of the Company determined by dividing the amount accumulated in such employee's payroll deduction account during such Offering Period by the lower of (i) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Offering Date (the "Entry Price") or (ii) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Purchase Date; provided, however, that the number of shares of the Company's Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (a) the maximum number of shares set by the Board pursuant to Section 10(c) below with respect to the applicable Offering Period, or (b) 200% of the number of shares determined by using 85% of the fair market value of a share of the Company's Common Stock on the Offering Date as the denominator. Fair market value of a share of the Company's Common Stock shall be determined as provided in Section 8 hereof. 8. PURCHASE PRICE. The purchase price per share at which a share of Common Stock will be sold in any Offering Period shall be 85 percent of the lesser of: (a) The fair market value on the Offering Date; or (b) The fair market value on the Purchase Date. For purposes of the Plan, the term "fair market value" on a given date shall mean the fair market value of the Company's Common Stock as determined by the Committee from time to time in good faith. If a public market exists for the shares, the fair market value shall be the average of the last reported bid and asked prices for the Common Stock of the Company on the last trading day prior to the date of determination, or, in the event the Common Stock of the Company is listed on the NASDAQ National Market System, the fair market value shall be the average of the high and low prices of the Common Stock on the determination date as quoted on the NASDAQ National Market System and reported in The Wall Street Journal. 9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF SHARES. (a) The purchase price of the shares is accumulated by regular payroll deductions made during each Offering Period. The deductions are made as a percentage of the participant's compensation in one percent increments not less than 2 percent nor greater than 10 percent, not to exceed $25,000 per year or such lower limit set by the Committee. Compensation shall mean all W-2 compensation, including, but not limited to base salary, wages, commissions, overtime, shift premiums and bonuses, plus draws against commissions; provided, however, that for purposes of determining a participant's compensation, any election by such participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code shall be treated as if the participant did not make such election. Payroll deductions shall commence on the first payday following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in the Plan. 73 3 (b) A participant may lower (but not increase) the rate of payroll deductions during an Offering Period by filing with the Treasury Department a new authorization for payroll deductions, in which case the new rate shall become effective for the next payroll period commencing more than 15 days after the Treasury Department's receipt of the authorization and shall continue for the remainder of the Offering Period unless changed as described below. Such change in the rate of payroll deductions may be made at any time during an Offering Period, but not more than one change may be made effective during any Offering Period. A participant may increase or decrease the rate of payroll deductions for any subsequent Offering Period by filing with the Treasury Department a new authorization for payroll deductions not later than the 15th day of the month before the beginning of such Offering Period. (c) All payroll deductions made for a participant are credited to his or her account under the Plan and are deposited with the general funds of the Company. No interest accrues on the payroll deductions. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. (d) On each Purchase Date, so long as the Plan remains in effect and provided that the participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the participant wishes to withdraw from that Offering Period under the Plan and have all payroll deductions accumulated in the account maintained on behalf of the participant as of that date returned to the participant, the Company shall apply the funds then in the participant's account to the purchase of whole shares of Common Stock reserved under the option granted to such participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The purchase price per share shall be as specified in Section 8 of the Plan. Any cash remaining in a participant's account after such purchase of shares shall be carried forward, without interest, into the next Offering Period; provided, however, that any cash remaining in such participant's account on a Purchase Date due to the limitations of Sections 10(a) and 10(d) shall be returned to the participant as soon as practicable after the end of the Offering Period, without interest. No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in the Plan has terminated prior to such Purchase Date. (e) As promptly as practicable after the Purchase Date, the Company shall arrange the delivery to each participant of a certificate representing the shares purchased upon exercise of his option. (f) During a participant's lifetime, such participant's option to purchase shares hereunder is exercisable only by him or her. The participant will have no interest or voting right in shares covered by his or her option until such option has been exercised. Shares to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse. 10. LIMITATIONS ON SHARES TO BE PURCHASED. (a) No employee shall be entitled to purchase stock under the Plan at a rate which, when aggregated with his or her rights to purchase stock under all other employee stock purchase plans of the Company or any Subsidiary, exceeds $25,000 in fair market value, determined as of the Offering Date (or such other limit as may be imposed by the Code) for each calendar year in which the employee participates in the Plan. (b) No more than 200% of the number of shares determined by using 85% of the fair market value of a share of the Company's Common Stock on the Offering Date as the denominator may be purchased by a participant on any single Purchase Date. (c) No employee shall be entitled to purchase more than the Maximum Share Amount (as defined below) on any single Purchase Date. Not less than thirty days prior to the commencement of any Offering Period, the Board may, in its sole discretion, set a maximum number of shares which may be purchased by any employee at any single Purchase Date (hereinafter the "Maximum Share Amount"). In no event shall the Maximum Share Amount exceed the amounts permitted under Section 10(b) above. If a new Maximum Share Amount is set, then all participants must be notified of such Maximum Share Amount not less than fifteen days prior to the commencement of the next Offering Period. Once the Maximum Share Amount is set, it shall continue to apply with respect to all succeeding Purchase Dates and Offering Periods unless revised by the Board as set forth above. 74 4 (d) If the number of shares to be purchased on a Purchase Date by all employees participating in the Plan exceeds the number of shares then available for issuance under the Plan, the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be practicable and as the Board shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares to be purchased under a participant's option to each participant affected thereby. 11. WITHDRAWAL. (a) Each participant may withdraw from an Offering Period under the Plan by signing and delivering to the Treasury Department notice on a form provided for such purpose. Such withdrawal may be elected at any time at least 15 days prior to the end of an Offering Period. (b) Upon withdrawal from the Plan, the accumulated payroll deductions shall be returned to the withdrawn participant, without interest, and his or her interest in the Plan shall terminate. In the event a participant voluntarily elects to withdraw from the Plan, he or she may not resume his or her participation in the Plan during the same Offering Period, but he or she may participate in any Offering Period under the Plan which commences on a date subsequent to such withdrawal by filing a new authorization for payroll deductions in the same manner as set forth above for initial participation in the Plan. 12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment for any reason, including retirement, death or the failure of a participant to remain an eligible employee, immediately terminates his or her participation in the Plan. In such event, the payroll deductions credited to the participant's account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest. For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company in the case of sick leave, military leave, or any other leave of absence approved by the Board; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. 13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest in the Plan is terminated by withdrawal, termination of employment or otherwise, or in the event the Plan is terminated by the Board, the Company shall promptly deliver to the participant all payroll deductions credited to his account. No interest shall accrue on the payroll deductions of a participant in the Plan. 14. CAPITAL CHANGES. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the "Reserves"), as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. In the event of the proposed dissolution or liquidation of the Company, the Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that the options under the Plan shall terminate as of a date fixed by the Board and give each participant the right to exercise his or her option as to all of the optioned stock, including shares which would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the participant shall have the right to exercise the option as to all of the optioned stock. If the Board makes an option exercisable in lieu of assumption or substitution in the event of a merger or sale of 75 5 assets, the Board shall notify the participant that the option shall be fully exercisable for a period of twenty (20) days from the date of such notice, and the option will terminate upon the expiration of such period. The Board may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, or in the event of the Company being consolidated with or merged into any other corporation. 15. NONASSIGNABILITY. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect. 16. REPORTS. Individual accounts will be maintained for each participant in the Plan. Each participant shall receive promptly after the end of each Offering Period a report of his or her account setting forth the total payroll deductions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Offering Period. 17. NOTICE OF DISPOSITION. Each participant shall notify the Company if the participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two years from the Offering Date or within one year from the Purchase Date on which such shares were purchased (the "Notice Period"). Unless such participant is disposing of any of such shares during the Notice Period, such participant shall keep the certificates representing such shares in his or her name (and not in the name of a nominee) during the Notice Period. The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to the Plan requesting the Company's transfer agent to notify the Company of any transfer of the shares. The obligation of the participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates. 18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Subsidiary, or restrict the right of the Company or any Subsidiary to terminate such employee's employment. 19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal rights and privileges with respect to the Plan so that the Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of the Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company or the Board, be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in the Plan. 20. NOTICES. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 21. TERM; STOCKHOLDER APPROVAL. This Plan shall become effective on the date that it is adopted by the Board of the Company. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve months before or after the date this Plan is adopted by the Board. No purchase of shares pursuant to the Plan shall occur prior to such stockholder approval. Thereafter, no later than twelve (12) months after the Company becomes subject to Section 16(b) of the Exchange Act, the Company will comply with the requirements of Rule 16b-3 with respect to stockholder approval. The Plan shall continue until the earlier to occur of termination by the Board, issuance of all of the shares of Common Stock reserved for issuance under the Plan, or one (1) year from the adoption of the Plan by the Board (unless extended by the Board for a period of up to ten (10) years from the adoption date.) 76 6 22. DESIGNATION OF BENEFICIARY. (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to the end of an Offering Period but prior to delivery to him of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to a Purchase Date. (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. 24. APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of California. 25. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend, terminate or the extend the term of the Plan, except that any such termination cannot affect options previously granted under the Plan, nor may any amendment make any change in an option previously granted which would adversely affect the right of any participant, nor may any amendment be made without approval of the stockholders of the Company obtained in accordance with Section 21 hereof within 12 months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under the Plan; (b) change the designation of the employees (or class of employees) eligible for participation in the Plan; or (c) constitute an amendment for which stockholder approval is required in order to comply with Rule 16b-3 (or any successor rule) of the Exchange Act. 77 EX-10.15 5 EXHIBIT 10.15 1 SEVENTH AMENDMENT TO LEASE THIS SEVENTH AMENDMENT TO LEASE (the "Amendment") is made and entered into as of the date below written by and between TODA DEVELOPMENT, INC., a California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware corporation ("Tenant"). RECITALS A. Landlord and Tenant are parties to that certain lease dated June 27, 1991 for certain premises on the third floor of the building commonly known as 600 Townsend Street, San Francisco, California, as amended by that certain First Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August 9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated August 31, 1995, and the Sixth Amendment to Lease dated October 31, 1995 (collectively, the "Lease"). Tenant's predecessor-in-interest under the Lease was Macromind, Inc. B. Landlord and Tenant desire to amend the Lease as set forth below. AGREEMENT Landlord and Tenant hereby agree as follows: 1. ADDITIONAL PREMISES. Commencing as of June 1, 1996 (the "Additional Premises Rental Commencement Date") the Premises shall include that portion of the third floor of the Building comprising approximately 2,884 rentable square feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The total rentable square footage of the Premises, including the Additional Premises, shall be approximately 74,850 as shown on EXHIBIT B. 2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession of the Additional Premises as of June 1, 1996. If Landlord is unable to deliver possession of the premises as of June 1, 1996, Landlord shall not be liable for any damage caused for failing to deliver possession, and this Amendment shall not be void or voidable. The Additional Premises Rental Commencement Date shall be delayed until Landlord delivers possession of the Additional Premises to Tenant. In the event that the Additional Premises are delivered on other than June 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery date. 3. RENTAL. Commencing upon the Additional Premises Rental Commencement Date, monthly Base Rental under the Lease shall be as follows: 78 2
Period Rental ------ ------ 6/1/96 - 8/31/96 $ 108,532.50 9/1/96 - 8/31/97 $ 114,520.50 9/1/97 - 12/31/2001 $ 122,005.50
Notwithstanding the Base Rent set forth above, Landlord shall forbear from demanding the payment of $4,181.80 of Base Rental for each of the first three months following the Additional Premises Rental Commencement Date (the "Suspended Base Rent") provided that Tenant is not in default under this Lease. In the event this Lease terminates at any time as a result of Tenant's default, Tenant shall immediately pay Landlord an amount equal to the Suspended Rent. 4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant with an additional Tenant Improvement Allowance in the amount of $86,520. Said allowance shall be paid and used for the Additional Premises in accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in the Additional Premises. All costs of design and construction shall be included within the above Allowance. 5. TENANT'S PARTICIPATION. Commencing as of the Additional Premises Rental Commencement Date, Tenant's Participation for purposes of paragraph 6 shall be determined using a numerator of 74,850 rentable square feet. The base year shall be 1996 for the Additional Rental payable by Tenant with respect to the Additional Premises. 6. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the Additional Premises in its "as is" condition. Tenant shall be responsible for all demolition of and improvements to the Additional Premises and shall comply with the terms of the Lease with respect to all work undertaken by Tenant to the Additional Premises, including, without limitation, paragraphs 8 and 9 thereof. 7. UTILITIES. Paragraph 4 of the Lease shall apply with respect to utilities for the Additional Premises. 8. CONDITION PRECEDENT. The parties acknowledge that the Additional Premises are currently occupied by another tenant (the "Existing Tenant") and that it will be necessary for Landlord to relocate the Existing Tenant by May 1, 1996 in order for Landlord to deliver the Additional Premises to Tenant by June 1, 1996. In the event that the Existing Tenant does not vacate the Additional Premises by May 1, 1996 on such terms as are acceptable to Landlord in its sole discretion, this Amendment shall be null and void and the parties shall have no liability of any nature to each other with respect to this Amendment except that Landlord shall return the security deposit paid by Tenant in accordance with paragraph 10 below. 9. PARKING. Tenant shall have the right to two (2) additional parking spaces in the Building Garage for a total of 50 spaces. The initial charge shall be $80 per month per space for the additional 79 3 stalls for the calendar year 1996. Commencing January 1, 1997, during the initial term of the Lease the charge shall increase on January 1st each year by an amount not to exceed 5% of the rate then in effect. The charge during the option period shall be the Fair Market Value. Notwithstanding the foregoing, if the garage becomes full Tenant shall be entitled only to one parking space per 1,500 square feet of rentable space leased hereunder. 10. SECURITY DEPOSIT. The Security Deposit shall be increased by $4,181.80, which sum shall be paid by Tenant upon execution of this Seventh Amendment and held in accordance with paragraph 5 of the Lease. 11. MISCELLANEOUS. Except as amended herein, the Lease shall remain in full force and effect. Defined terms in the Lease shall have the same meaning in this Seventh Amendment unless otherwise defined herein. This Seventh Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof. This Seventh Amendment shall become binding upon Landlord and Tenant only when fully executed by Landlord and Tenant. IN WITNESS WHEREOF, the parties have executed this Seventh Amendment to Lease as of the 15th day of December, 1995. LANDLORD: TODA DEVELOPMENT, INC., a California corporation By: _____________________________ Its: ________________________ TENANT: MACROMEDIA, INC., a Delaware corporation By: _____________________________ Its:_________________________ 80 4 EIGHTH AMENDMENT TO LEASE THIS EIGHTH AMENDMENT TO LEASE (the "Amendment") is made and entered into as of the date below written by and between TODA DEVELOPMENT, INC., a California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware corporation ("Tenant"). RECITALS A. Landlord and Tenant are parties to that certain lease dated June 27, 1991 for certain premises on the third floor of the building commonly known as 600 Townsend Street, San Francisco, California, as amended by that certain First Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August 9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, and the Seventh Amendment to Lease dated December 15, 1995 (collectively, the "Lease"). Tenant's predecessor-in-interest under the Lease was Macromind, Inc. B. Landlord and Tenant desire to amend the Lease as set forth below. AGREEMENT Landlord and Tenant hereby agree as follows: 1. ADDITIONAL PREMISES. Commencing as of April 1, 1996 (the "Additional Premises Rental Commencement Date") the Premises shall include that portion of the ground floor of the Building comprising approximately 3,720 rentable square feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The total rentable square footage of the Premises, including the Additional Premises, shall be approximately 78,570 as shown on EXHIBIT B. 2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession of the Additional Premises as of April 1, 1996. If Landlord is unable to deliver possession of the premises as of April 1, 1996, Landlord shall not be liable for any damage caused for failing to deliver possession, and this Amendment shall not be void or voidable. The Additional Premises Rental Commencement Date shall be delayed until Landlord delivers possession of the Additional Premises to Tenant. In the event that the Additional Premises are delivered on other than April 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery date. 3. RENTAL. Commencing upon the Additional Premises Rental 81 5 Commencement Date, monthly Base Rental under the Lease shall be as follows:
Period Rental ------ ------ 4/1/96 - 5/31/96 $ 109,744.70 6/1/96 - 8/31/96 $ 113,926.50 9/1/96 - 8/31/97 $ 120,212.10 9/1/97 - 12/31/2001 $ 128,069.10
The foregoing Base Rent shall be proportionately reduced in the event that the Seventh Amendment is null and void in accordance with paragraph 8 thereof. Notwithstanding the Base Rent set forth above, Landlord shall forbear from demanding the payment of $5,394 of Base Rental for each of the first three months following the Additional Premises Rental Commencement Date (the "Suspended Base Rent") provided that Tenant is not in default under this Lease. In the event this Lease terminates at any time as a result of Tenant's default, Tenant shall immediately pay Landlord an amount equal to the Suspended Rent. 4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant with an additional Tenant Improvement Allowance in the amount of $111,600. Said allowance shall be paid and used for the Additional Premises in accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in the Additional Premises. All costs of design and construction shall be included within the above Allowance. 5. TENANT'S PARTICIPATION. Commencing as of the Additional Premises Rental Commencement Date, Tenant's Participation for purposes of paragraph 6 shall be determined using a numerator of 78,570 rentable square feet. The base year shall be 1996 for the Additional Rental payable by Tenant with respect to the Additional Premises. 6. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the Additional Premises in its "as is" condition. Tenant shall be responsible for all demolition of and improvements to the Additional Premises and shall comply with the terms of the Lease with respect to all work undertaken by Tenant to the Additional Premises, including, without limitation, paragraphs 8 and 9 thereof. 7. UTILITIES. Paragraph 4 of the Lease shall apply with respect to utilities for the Additional Premises. 8. PARKING. Tenant shall have the right to two (2) additional parking spaces in the Building Garage for a total of 52 spaces. The initial charge shall be $80 per month per space for the additional stalls for the calendar year 1996. Commencing January 1, 1997, during the initial term of the Lease the charge shall increase on January 1st each year by an amount not to exceed 5% of the rate then in effect. The charge during the option period shall be the Fair Market Value. Notwithstanding the foregoing, if the garage becomes full Tenant shall be entitled only to one parking space per 1,500 square feet of rentable space leased hereunder. 82 6 9. SECURITY DEPOSIT. The Security Deposit shall be increased by $5,394, which sum shall be paid by Tenant upon execution of this Eighth Amendment and held in accordance with paragraph 5 of the Lease. 10. MISCELLANEOUS. Except as amended herein, the Lease shall remain in full force and effect. Defined terms in the Lease shall have the same meaning in this Eighth Amendment unless otherwise defined herein. This Eighth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof. This Eighth Amendment shall become binding upon Landlord and Tenant only when fully executed by Landlord and Tenant. IN WITNESS WHEREOF, the parties have executed this Eighth Amendment to Lease as of the 25th day of January, 1996. LANDLORD: TODA DEVELOPMENT, INC., a California corporation By: _____________________________ Its: ________________________ TENANT: MACROMEDIA, INC., a Delaware corporation By: _____________________________ Its:_________________________ 83 7 NINTH AMENDMENT TO LEASE THIS NINTH AMENDMENT TO LEASE (the "Amendment") is made and entered into as of the date below written by and between TODA DEVELOPMENT, INC., a California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware corporation ("Tenant"). RECITALS A. Landlord and Tenant are parties to that certain lease dated June 27, 1991 for certain premises on the third floor of the building commonly known as 600 Townsend Street, San Francisco, California, as amended by that certain First Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August 9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, the Seventh Amendment to Lease dated December 15, 1995, and the Eighth Amendment to Lease dated January 25, 1996 (collectively, the "Lease"). Tenant's predecessor-in-interest under the Lease was Macromind, Inc. B. Landlord and Tenant desire to amend the Lease as set forth below. AGREEMENT Landlord and Tenant hereby agree as follows: 1. ADDITIONAL PREMISES. Commencing as of May 1, 1996 (the "Additional Premises Rental Commencement Date") the Premises shall include that portion of the fourth floor of the Building comprising approximately 8,605 rentable square feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The total rentable square footage of the Premises, including the Additional Premises, shall be approximately 87,175 as shown on EXHIBIT B. 2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession of the Additional Premises as of May 1, 1996. If Landlord is unable to deliver possession of the premises as of May 1, 1996, Landlord shall not be liable for any damage caused for failing to deliver possession, and this Amendment shall not be void or voidable. The Additional Premises Rental Commencement Date shall be delayed until Landlord delivers possession of the Additional Premises to Tenant. In the event that the Additional Premises are delivered on other than May 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery date. 3. TERM. The Termination Date of the Lease is hereby 84 8 changed to December 31, 2005. Tenant shall continue to have two (2) options to renew this Lease on the terms and conditions set forth on Rider 10 upon expiration of the revised Termination Date. 4. RENTAL. Commencing upon the Additional Premises Rental Commencement Date, monthly Base Rental under the Lease shall be as follows:
Period Rental ------ ------ 5/1/96 - 5/31/96 $ 122,221.95 6/1/96 - 8/31/96 $ 126,403.75 9/1/96 - 8/31/97 $ 133,377.75 9/1/97 - 12/31/01 $ 142,095.25 1/1/02 - 12/31/03 $ 156,915.00 1/1/04 - 12/31/05 $ 169,991.25
The foregoing Base Rent shall be proportionately reduced in the event that the Seventh Amendment is null and void in accordance with paragraph 8 thereof. Notwithstanding the Base Rent set forth above, Landlord shall forbear from demanding the payment of $12,477.25 of Base Rental for each of the first three months following the Additional Premises Rental Commencement Date (the "Suspended Base Rent") provided that Tenant is not in default under this Lease. In the event this Lease terminates at any time as a result of Tenant's default, Tenant shall immediately pay Landlord an amount equal to the Suspended Rent. 5. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant with an additional Tenant Improvement Allowance in the amount of $258,150. Said allowance shall be paid and used for the Additional Premises in accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in the Additional Premises. All costs of design and construction shall be included within the above Allowance. 6. TENANT'S PARTICIPATION. Commencing as of the Additional Premises Rental Commencement Date, Tenant's Participation for purposes of paragraph 6 shall be determined using a numerator of 87,175 rentable square feet. The base year shall be 1996 for the Additional Rental payable by Tenant with respect to the Additional Premises. 7. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the Additional Premises in its "as is" condition. Tenant shall be responsible for all demolition of and improvements to the Additional Premises and shall comply with the terms of the Lease with respect to all work undertaken by Tenant to the Additional Premises, including, without limitation, paragraphs 8 and 9 thereof. 8. UTILITIES. Paragraph 4 of the Lease shall apply with respect to utilities for the Additional Premises. 9. PARKING. Tenant shall have the right to six (6) additional parking spaces in the Building Garage for a total of 58 spaces. The initial charge shall be $80 per month per space for the additional 85 9 stalls for the calendar year 1996. Commencing January 1, 1997, during the initial term of the Lease the charge shall increase on January 1st each year by an amount not to exceed 5% of the rate then in effect. The charge during the option period shall be the Fair Market Value. Notwithstanding the foregoing, if the garage becomes full Tenant shall be entitled only to one parking space per 1,500 square feet of rentable space leased hereunder. 10. SECURITY DEPOSIT. The Security Deposit shall be increased by $12,477.25 which sum shall be paid by Tenant upon execution of this Ninth Amendment and held in accordance with paragraph 5 of the Lease. 11. RIGHT OF FIRST REFUSAL. Provided an event of default by Tenant has not occurred either at the time of exercise of this right or at the time of taking possession of additional space, Tenant shall have an ongoing right of first refusal during the term of this Lease to lease the remainder of the fourth floor as such space becomes available. Such right of first refusal shall be exercised only by compliance with the terms of this paragraph. Landlord shall not enter into a lease with any third party tenant for any portion of such space which becomes available during the term of this Lease without first offering such space to Tenant as follows. Landlord shall provide Tenant with a ten (10) day right of first refusal to lease such space by notifying Tenant in writing of Landlord's intention to lease such space. Tenant shall have the right to lease such space on the following terms and conditions: (a) Base rental shall be as follows:
Rental per Period Rentable Square Foot ------ -------------------- through- 8/31/96 $1.45 9/1/96 - 8/31/97 $1.53 9/1/97 - 12/31/01 $1.63 1/1/02 - 12/31/03 $1.80 1/1/04 - 12/31/05 $1.95
(b) There shall be no rental waiver or forbearance. (c) Tenant's Participation for purposes of paragraph 6 shall be determined using the total number of rentable square feet leased by Tenant as the numerator. The security deposit shall be increased by an amount equal to $1.95 times the number of additional rentable square feet taken by Tenant. (d) Tenant shall take the space in its "as is" condition. Tenant shall be responsible at its expense for all demolition of and improvements to such premises and shall comply with the terms of the Lease with respect to all work undertaken by Tenant on such premises, including, without limitation, paragraphs 8 and 9 thereof. 86 10 (e) Landlord shall provide Tenant with an additional Tenant Improvement Allowance in the following amounts: (i) Thirty Dollars ($30) per rentable square foot with respect to the area marked on EXHIBIT C attached hereto; and (ii) Ten Dollars ($10) per rentable square foot with respect to the remainder of the available fourth floor premises. Said allowance shall be paid and used in accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in such premises. All costs of design and construction shall be included within the above allowance. (f) Paragraph 4 of the Lease shall apply with respect to utilities for such Premises. (g) All other terms of this Lease shall apply with respect thereto, including, without limitation, the revised Termination Date. If within ten (10) days of the date of such notice Landlord has received written notice from Tenant of its election to lease such space on the foregoing terms and conditions, Landlord and Tenant shall within thirty (30) days enter into a lease amendment setting forth said terms. If Tenant fails to respond to said notice within said ten (10) day period, or, after Tenant giving written notice of its exercise of its right to take the space, if Landlord and Tenant do not enter into said lease amendment within said thirty (30) day period for any reason other than Landlord's fault, Tenant's rights under this paragraph shall be deemed to have been waived, and Landlord shall be free to lease the space to anyone without any further obligation to Tenant. As used herein, "third-party tenant" excludes other parties then in possession of any portion of the premises subject to this right of first refusal which may desire to expand its premises or extend or renegotiate its lease or rental agreement or any other tenant in the Building. Nothing contained herein shall require Landlord to lease to Tenant any portion of the floor which would leave Landlord with any remaining portion of the floor which was not commercially and economically rentable to third parties. Should Tenant decline to take any space offered it pursuant to this paragraph, this right of first refusal shall lapse and become void thereafter. 12. WESTERN STAFF SERVICES SPACE. The parties acknowledge that Landlord currently leases the premises on the third floor marked on EXHIBIT D attached hereto (the "WSS Premises") to Western Staff Services, Inc. ("WSS") and that WSS has the right to terminate its lease upon 270 days notice to Landlord. In the event that WSS exercises such right and Landlord notifies Tenant in writing that Landlord desires to lease the WSS Premises to Tenant ("Landlord's Notice"), Tenant shall lease the WSS space from Landlord on the following terms and conditions: (a) Commencing as of sixty (60) days after the date Landlord's lease with WSS terminates, the Premises shall include the WSS Premises. 87 11 (b) Base rental shall be as follows:
Rental per Period Rentable Square Foot ------ -------------------- through- 8/31/96 $1.45 9/1/96 - 8/31/97 $1.53 9/1/97 - 12/31/01 $1.63 1/1/02 - 12/31/03 $1.80 1/1/04 - 12/31/05 $1.95 (j) There shall be no rental waiver or forbearance.
(c) Tenant's Participation for purposes of paragraph 6 shall be determined using the total number of rentable square feet leased by Tenant as the numerator. The security deposit shall be increased by an amount equal to $1.95 times the number of additional rentable square feet taken by Tenant. (d) Tenant shall take the space in its "as is" condition. Tenant shall be responsible at its expense for all demolition of and improvements to such premises and shall comply with the terms of this Lease with respect to all work undertaken by Tenant on such premises, including, without limitation, paragraphs 8 and 9 thereof. (e) Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in such premises. All costs of design and construction shall be paid by Tenant. Landlord shall have no responsibility to provide any additional Tenant Improvement Allowance. (f) Paragraph 4 of the Lease shall apply with respect to utilities for such Premises. (g) All other terms of this Lease shall apply with respect thereto, including, without limitation, the termination date. Landlord and Tenant shall acknowledge in writing that the Premises include the WSS Premises on the terms and conditions set forth above within ten (10) days of the date of Landlord's Notice. Tenant's failure to timely execute and deliver such acknowledgment shall constitute a default hereunder. 88 12 13. MISCELLANEOUS. Except as amended herein, the Lease shall remain in full force and effect. Defined terms in the Lease shall have the same meaning in this Ninth Amendment unless otherwise defined herein. This Ninth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof. This Ninth Amendment shall become binding upon Landlord and Tenant only when fully executed by Landlord and Tenant. IN WITNESS WHEREOF, the parties have executed this Ninth Amendment to Lease as of the 21st day of February, 1996. LANDLORD: TODA DEVELOPMENT, INC., a California corporation By: _____________________________ Its: ________________________ TENANT: MACROMEDIA, INC., a Delaware corporation By: _____________________________ Its:_________________________ 89 13 TENTH AMENDMENT TO LEASE THIS TENTH AMENDMENT TO LEASE (the "Amendment") is made and entered into as of the date below written by and between TODA DEVELOPMENT, INC., a California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware corporation ("Tenant"). RECITALS A. Landlord and Tenant are parties to that certain lease dated June 27, 1991 for certain premises on the third floor of the building commonly known as 600 Townsend Street, San Francisco, California, as amended by that certain First Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August 9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, the Seventh Amendment to Lease dated December 15, 1995, the Eighth Amendment to Lease dated January 25, 1996, and the Ninth Amendment to Lease dated February 21, 1996 (collectively, the "Lease"). Tenant's predecessor-in-interest under the Lease was Macromind, Inc. B. Landlord and Tenant desire to amend the Lease as set forth below. AGREEMENT Landlord and Tenant hereby agree as follows: 1. ADDITIONAL PREMISES. Commencing as of May 1, 1996 (the "Additional Premises Rental Commencement Date") the Premises shall include that portion of the second floor of the Building comprising approximately 1,733 rentable square feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The total rentable square footage of the Premises, including the Additional Premises, shall be approximately 88,908 as shown on EXHIBIT B. 2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession of the Additional Premises as of May 1, 1996. If Landlord is unable to deliver possession of the premises as of May 1, 1996, Landlord shall not be liable for any damage caused for failing to deliver possession, and this Amendment shall not be void or voidable. The Additional Premises Rental Commencement Date shall be delayed until Landlord delivers possession of the Additional Premises to Tenant. In the event that the Additional Premises are delivered on other than May 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery date. 90 14 3. RENTAL. Commencing upon the Additional Premises Rental Commencement Date, monthly Base Rental under the Lease shall be as follows:
Period Rental ------ ------ 5/1/96 - 5/31/96 $ 124,734.80 6/1/96 - 8/31/96 $ 128,916.60 9/1/96 - 8/31/97 $ 136,029.24 9/1/97 - 12/31/01 $ 144,920.04 1/1/02 - 12/31/03 $ 160,034.40 1/1/04 - 12/31/05 $ 173,370.60
4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant with an additional Tenant Improvement Allowance in the amount of $51,990. Said allowance shall be paid and used for the Additional Premises in accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in the Additional Premises. All costs of design and construction shall be included within the above Allowance. 4. TENANT'S PARTICIPATION. Commencing as of the Additional Premises Rental Commencement Date, Tenant's Participation for purposes of paragraph 6 shall be determined using a numerator of 88,908 rentable square feet. The base year shall be 1996 for the Additional Rental payable by Tenant with respect to the Additional Premises. 5. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the Additional Premises in its "as is" condition. Tenant shall be responsible for all demolition of and improvements to the Additional Premises and shall comply with the terms of the Lease with respect to all work undertaken by Tenant to the Additional Premises, including, without limitation, paragraphs 8 and 9 thereof. 6. RESTORATION OF ADDITIONAL PREMISES. The parties acknowledge that the Additional Premises are currently Building common area and that Landlord intends to again utilize such space as common area upon expiration of this Lease. Upon the expiration or termination of this Lease for any reason, Tenant shall at its sole cost and expense promptly remove any alterations, additions, fixtures or improvements to the Additional Premises made by Tenant and restore the Additional Premises as common area in the condition existing as of the date hereof, including, without limitation all finishes and details. Such restoration removal shall be completed prior to the expiration or termination of this Lease. 7. EXCLUSIVE ELEVATOR ACCESS TO ADDITIONAL PREMISES. Tenant shall have the right at its sole cost and expense to install card reading devices in the Building elevators which require a pass card to access the second floor of the Building, provided that the installation and utilization of such devices does not adversely affect the elevator service to other floors. Tenant shall provide Landlord with such pass cards so that Landlord at all times has access to the second floor. Tenant at its expense shall maintain such devices in good 91 15 operating condition and repair. Upon expiration or termination of this Lease for any reason, Tenant at its expense shall remove such devices, repair any damage caused by such removal and restore the elevators to the condition existing as of the date hereof. Tenant shall comply with all applicable codes in connection with the installation and operation of such devices. Tenant shall be responsible for all additional security it may desire for the second floor and Landlord shall have no responsibility for the same. 8. UTILITIES. Paragraph 4 of the Lease shall apply with respect to utilities for the Additional Premises. 9. SECURITY DEPOSIT. The Security Deposit shall be increased by $3,379.35 which sum shall be paid by Tenant upon execution of this Tenth Amendment and held in accordance with paragraph 5 of the Lease. 10. MISCELLANEOUS. Except as amended herein, the Lease shall remain in full force and effect. Defined terms in the Lease shall have the same meaning in this Tenth Amendment unless otherwise defined herein. This Tenth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof. This Tenth Amendment shall become binding upon Landlord and Tenant only when fully executed by Landlord and Tenant. IN WITNESS WHEREOF, the parties have executed this Tenth Amendment to Lease as of the 30th day of April, 1996. LANDLORD: TENANT: TODA DEVELOPMENT, INC., MACROMEDIA, INC., a California corporation a Delaware corporation By: _________________________ By: _________________________ Its: ____________________ Its:_____________________ 92 16 ELEVENTH AMENDMENT TO LEASE THIS ELEVENTH AMENDMENT TO LEASE (the "Amendment") is made and entered into as of the date below written by and between TODA DEVELOPMENT, INC., a California corporation ("Landlord"), and MACROMEDIA, INC., a Delaware corporation ("Tenant"). RECITALS A. Landlord and Tenant are parties to that certain lease dated June 27, 1991 for certain premises on the third floor of the building commonly known as 600 Townsend Street, San Francisco, California, as amended by that certain First Amendment to Lease dated May 4, 1992, the Second Amendment to Lease dated August 9, 1994, the Third Amendment to Lease dated November 7, 1994, the Fourth Amendment to Lease dated April 6, 1995, the Fifth Amendment to Lease dated August 31, 1995, the Sixth Amendment to Lease dated October 31, 1995, the Seventh Amendment to Lease dated December 15, 1995, the Eighth Amendment to Lease dated January 25, 1996, the Ninth Amendment to Lease dated February 21, 1996 and the Tenth Amendment to Lease dated April 30, 1996 (collectively, the "Lease"). Tenant's predecessor-in-interest under the Lease was Macromind, Inc. B. Landlord and Tenant desire to amend the Lease as set forth below. AGREEMENT Landlord and Tenant hereby agree as follows: 1. ADDITIONAL PREMISES. Commencing as of July 1, 1996 (the "Additional Premises Rental Commencement Date") the Premises shall include that portion of the fourth floor of the Building comprising approximately 6,581 rentable square feet as shown on EXHIBIT A attached hereto (the "Additional Premises"). The total rentable square footage of the Premises, including the Additional Premises, shall be approximately 95,489 as shown on EXHIBIT B. 2. DELIVERY OF ADDITIONAL PREMISES. Landlord shall deliver possession of the Additional Premises as of July 1, 1996. If Landlord is unable to deliver possession of the Additional Premises as of July 1, 1996, Landlord shall not be liable for any damage caused for failing to deliver possession, and this Amendment shall not be void or voidable. The Additional Premises Rental Commencement Date shall be delayed until Landlord delivers possession of the Additional Premises to Tenant. In the event that the Additional Premises are delivered on 93 17 other than July 1, 1996, Landlord and Tenant shall execute a letter confirming the delivery date. 3. RENTAL. Commencing upon the Additional Premises Rental Commencement Date, monthly Base Rental under the Lease shall be as follows:
Period Rental ------ ------ 7/1/96 - 8/31/96 $ 138,459.05 9/1/96 - 8/31/97 $ 146,098.17 9/1/97 - 12/31/01 $ 155,647.07 1/1/02 - 12/31/03 $ 171,880.20 1/1/04 - 12/31/05 $ 186,203.55
4. ADDITIONAL TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant with an additional Tenant Improvement Allowance in the amount of $117,510. Said allowance shall be paid and used for the Additional Premises in accordance with paragraph 8 and Rider 5.C of the Lease. Tenant may use its own contractor and architect (both subject to Landlord's reasonable approval) for tenant improvement work in the Additional Premises. All costs of design and construction shall be included within the above Allowance. 4. TENANT'S PARTICIPATION. Commencing as of the Additional Premises Rental Commencement Date, Tenant's Participation for purposes of paragraph 6 shall be determined using a numerator of 95,489 rentable square feet. The base year shall be 1996 for the Additional Rental payable by Tenant with respect to the Additional Premises. 5. CONDITION OF ADDITIONAL PREMISES; IMPROVEMENTS. Tenant accepts the Additional Premises in its "as is" condition. Tenant shall be responsible for all demolition of and improvements to the Additional Premises and shall comply with the terms of the Lease with respect to all work undertaken by Tenant to the Additional Premises, including, without limitation, paragraphs 8 and 9 thereof. 6. RESTORATION OF ADDITIONAL PREMISES. The parties acknowledge that a portion of the Additional Premises are currently Building common area and that Landlord intends to again utilize such space as common area upon expiration of this Lease. Upon the expiration or termination of this Lease for any reason, Tenant shall at its sole cost and expense promptly remove any alterations, additions, fixtures or improvements to the Additional Premises made by Tenant and restore that portion of the Additional Premises which is currently common area in the condition existing as of the date hereof, including, without limitation all finishes and details. Such restoration removal shall be completed prior to the expiration or termination of this Lease. 94 18 7. CONDITION PRECEDENT; PAYMENT OF RELOCATION EXPENSES. The parties acknowledge that the entry to the premises leased by Design/Sense, an existing tenant, is from that portion of the Additional Premises that is currently a corridor and that it will be necessary for Design/Sense to relocate the entrance to its premises. In the event that Design/Sense does not agree to such relocation on such terms as are acceptable to Landlord in its sole discretion by June 1, 1996, this Amendment shall be null and void and the parties shall have no liability of any nature to each other with respect to this Amendment except that Landlord shall return the security deposit paid by Tenant in accordance with paragraph 10 below. Tenant shall pay Landlord upon demand, as additional rental under this Lease, an amount equal to the following: (i) all costs of any nature incurred in connection with the relocation of the Design/Sense entryway and the construction of a new entryway in accordance with the space plan attached as EXHIBIT C, including, without limitation, architect and other professional fees, permit fees, and all costs of construction; and (ii) all out-of-pocket costs of any nature incurred by Design/Sense in the event that Design/Sense temporarily closes its business in connection with the construction of the new entryway. 8. UTILITIES. Paragraph 4 of the Lease shall apply with respect to utilities for the Additional Premises. 9. SECURITY DEPOSIT. The Security Deposit shall be increased by $12,832.95 which sum shall be paid by Tenant upon execution of this Eleventh Amendment and held in accordance with paragraph 5 of the Lease. 10. PARKING. Tenant shall have the right to four (4) additional parking spaces in the Building Garage for a total of 62 spaces. The initial charge shall be $80 per month per space for the additional stalls for the calendar year 1996. The charge shall increase 5% over the rate then in effect on each anniversary of the Additional Premises Rental Commencement Date during the initial term of the Lease. The charge during the option period shall be the Fair Market Value. Notwithstanding the foregoing, if the garage becomes full Tenant shall be entitled only to one parking space per 1,500 square feet of rentable space leased hereunder. 11. MISCELLANEOUS. Except as amended herein, the Lease shall remain in full force and effect. Defined terms in the Lease shall have the same meaning in this Eleventh Amendment unless otherwise defined herein. This Eleventh Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof. This Eleventh Amendment shall become binding upon Landlord and Tenant only when fully executed by Landlord and Tenant. IN WITNESS WHEREOF, the parties have executed this Eleventh Amendment to Lease as of the 13th day of June, 1996. 95 19 LANDLORD: TENANT: TODA DEVELOPMENT, INC., MACROMEDIA, INC., a California corporation a Delaware corporation By: _________________________ By: _________________________ Its: ____________________ Its:_____________________ 96 EX-10.19 6 EXHIBIT 10.19 1 CONFIDENTIAL TREATMENT REQUESTED MACROMEDIA DOMESTIC DISTRIBUTION AGREEMENT This Agreement between Macromedia, Inc., a Delaware corporation with principal offices at 600 Townsend St., San Francisco, California 94103 ("Macromedia") and Ingram Micro, Inc. ("Distributor"), a California corporation, whose address is 1600 E. St. Andrew Place, P.O. Box 25125, Santa Ana, CA 92799-5125, shall be effective as of the date of execution by Macromedia ("Effective Date"). In consideration of the representations, warranties, covenants and agreements set forth herein and intending to be mutually bound, the parties hereto agree as follows: 1. DEFINITIONS Capitalized terms shall have the meaning set forth in Exhibit A, attached hereto and incorporated herein by this reference. 2. DISTRIBUTION RIGHTS 2.1 During the term of this Agreement, Macromedia grants to Distributor the non-exclusive right and license to distribute the Products to Resellers located in the Territory, as defined on Exhibit A hereto. Pursuant to the terms hereof, Macromedia shall sell to Distributor, and Distributor shall purchase from Macromedia, the Products set forth on Exhibit B hereto ordered by Distributor at the Purchase Prices and upon the Payment Terms described below. 2.2 Macromedia reserves the right at any time to discontinue the production or distribution of any of its Products, to modify the design of or upgrade its Products or any part of its Products and to change its service, warranty, or other policies, upon thirty (30) days written notice to Distributor. In accordance with Section 4, Stock Balancing, Distributor may return, at Macromedia's expense, all or any portion of its own and its customers' inventory of any modified, upgraded or discontinued Product. 2.3 Macromedia also reserves the right to add products to or delete products from Exhibit B upon thirty (30) days written notice to Distributor. 3. PRICE 3.1 The current Products, Discounts, and Suggested List Prices are set forth on Exhibit B hereto. Macromedia reserves the right to change Exhibit B upon thirty (30) days written notice to Distributor. 3.2 In the event the Purchase Price of any Product is reduced through a reduction in the Suggested List Price of such Product, Macromedia will credit to Distributor an amount equal to the product of (a) the difference between the new Purchase Price and the former Purchase Price for such Product, and (b) the number of units of such Product then in Distributor's and its customers' Inventory plus (c) the number of units sold to Resellers thirty (30) days prior to the reduction provided that (i) the Resellers are entitled to price protection, and (ii) Distributor can provide evidence, within thirty (30) days of notification by Macromedia, that price production has been claimed by the Resellers for such units. In the event that Macromedia should raise the Suggested List Price of any Product, Macromedia will honor each order made or mailed by Distributor before such price change becomes effective at the Purchase Price in effect when such order was made or mailed. 3.3 Payments to Macromedia with respect to all products received by Distributor shall be made by Distributor in US dollars, free of withholding, within thirty (30) days of the date of Macromedia 's invoice. Such payment must be a certified check if any preceding check is returned to Macromedia for insufficient funds. 3.4 Macromedia's prices do not include any foreign, federal, state or local sales, use, value added or other taxes, customs duties, or similar tariffs and fees which Macromedia may be required to pay or collect upon the delivery of the Products or upon collection of the price. Should any tax or levy be made, Distributor agrees to pay such tax or levy and indemnify Macromedia for any claim for such tax or levy demanded. Distributor covenants to Macromedia that all Products acquired hereunder will be for redistribution in the ordinary course of Distributor's business, and Distributor agrees to provide Macromedia with appropriate resale certificate numbers and other documentation satisfactory for the applicable taxing authorities to substantiate any claim of exemption from any such taxes or fees. 3.5 Notwithstanding any other provision in this Agreement to the contrary, Distributor shall not be deemed in default if it withholds any specific amount to Macromedia because of a legitimate dispute between the parties as to that specific amount, pending the resolution of the disputed amount. 4. STOCK BALANCING Distributor may return Products to Macromedia, including 100% of modified, upgraded or discontinued Products, as follows: (a) Returns shall be made each quarter, at one time in the month immediately following the end of the quarter; (b) except as may be Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 97 2 agreed by the parties, from time-to-time, returns shall not exceed 20% of the previous quarter's purchases; and (c) returns shall be accepted on a dollar-for-dollar reorder basis, as follows: Distributor shall request a Return Merchandise Authorization ("RMA") number, offering offsetting purchase order(s) with a total value equal to or greater than the aggregate purchase price of the Products to be returned. The offsetting purchase order(s) may include one or more orders already placed and not yet shipped, provided such orders were placed in the same month as the RMA request. Upon receipt of the purchase order(s), Macromedia shall issue the RMA number, which must accompany the return shipment. Macromedia agrees not to ship against the offered purchase order(s) until it has approved the RMA. To be eligible for return, Products must be new, unused and in their original, sealed packaging. However, no return will be authorized by Macromedia if, at the time of the requested return, Distributor is in default or breach of any provision of this Agreement, including failure to comply with any applicable credit terms or delinquency in any payment to Macromedia, subject to Distributor's right of withhold under section 3.5. 5. ORDERS AND SHIPPING 5.1 Upon receipt of an order by Distributor, Macromedia shall use reasonable efforts to deliver such order to Distributor within ten (10) days of the date of such order. Orders shall be shipped F.O.B. Macromedia in accordance with the Ingram Micro Inc. Vendor Routing Guide, as set forth in Exhibit E, which may be amended by Distributor from time to time. Distributor shall use its best efforts in placing orders at least four (4) weeks in advance of the requested ship date. Macromedia requests that orders be placed at least four (4) weeks in advance of the requested date for shipment but in no event shall any order be placed more than ninety (90) days in advance of the requested ship date. All risk of loss or damage to the Products will pass to Distributor upon delivery by Macromedia to the carrier, freight forwarder, or Distributor, whichever occurs first. Macromedia shall ship orders to Distributor at least as promptly as Macromedia ships any other orders received at or about the same time. Should orders for Products exceed Macromedia's available inventory, Macromedia may allocate its available inventory and make deliveries on a basis Macromedia deems equitable, in its sole discretion, and without liability to Distributor on account of the method of allocation chosen or its implementation. In any event, Macromedia will not be liable for any damages, direct, consequential, special or otherwise, to Distributor or to any other person for failure to deliver or for any delay or error in delivery of Products. 5.2 Distributor shall be required to place an initial order, and purchase a the quarterly amounts set forth in Exhibit C. All orders for Products shall be subject to the criteria set forth in Exhibit C. 5.3 Macromedia reserves the right to cancel any orders placed by Distributor and accepted by Macromedia or to refuse or delay shipment thereof, if Distributor (i) fails to make any payment as provided in this Agreement or under the terms of payment set forth in any invoice or otherwise agreed to by Macromedia and Distributor, (ii) fails to meet reasonable credit or financial requirements established by Macromedia, including any limitations on allowable credit, or (iii) otherwise fails to comply with the terms and conditions of this Agreement. No such cancellation, refusal or delay will be deemed a termination (unless Macromedia so advises Distributor) or breach of this Agreement by Macromedia. 6. ADVERTISING AND PROMOTION 6.1 Distributor shall be entitled to participate in Macromedia's Development Fund ("MDF") Program in accordance with the terms and conditions set forth in Exhibit D attached hereto and made a part hereof. Macromedia shall be entitled to either cancel or change the terms and conditions of the MDF Program on thirty (30) days written notice. 6.2 Macromedia agrees to provide reasonable training and sales collateral materials as needed, and to provide sales training for Distributor's staff, at times mutually agreed upon by Macromedia. In addition, Macromedia agrees to provide reasonable units of each Macromedia Product for in-house training, resources library and technical support use; such units, as well as any "NFR" units (i.e., Products that may not be resold to end users), may not be redistributed for any reason, except for special promotional "NFR" units that are offered to Distributor in exchange for Distributor's purchase of specified Products. Distribution of such Product units in violation of the foregoing will constitute a material breach of this Agreement. When a new Product or new version is released, units of the new Product or new version will also be provided by Macromedia to Distributor. 6.3 Distributor will provide Macromedia within seven business (7) days after the end of each calendar month, a written or electronic report and computer media data files (in a format, style and manner approved by Macromedia) showing, for such month, (i) Distributor's shipments of each the Products with the ship-to address, Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 98 3 Reseller or VAR name, and the quantity and type of Product sold, and ii) Distributor's current inventory levels for each of the Products. Non-standard, subsection (i), point of sale (POS) data will be subject to a separate non-disclosure agreement attached hereto as Exhibit F. 7. ADVANCE NOTICE In the event that Macromedia shall sell any additional Product not set forth on Exhibit B which is offered by Macromedia through comparable wholesale distributors. Macromedia shall make reasonable efforts to notify Distributor not less than thirty (30) days in advance of such event and, in any event, at least as quickly as Macromedia notifies any other Distributor. 8. NOTICE Any notices hereunder to be given by either party to the other shall be in writing and sent by certified mail to each party's address as set forth above, with a courtesy copy to the General Counsel, and sent to the attention of the Senior Buyer or Product Manager as applicable if sent to Distributor, and to the attention of the Account Manager Distributor Sales, if sent to Macromedia. 9. DEFECTIVE PRODUCTS 9.1 Distributor will accept and will require its Resellers to accept the return of any Product by an enduser due to the enduser's failure to agree to the terms of the Enduser License accompanying such Products, provided that the disk package of such Product is returned unopened. Distributor may also return any opened units of defective Product which have been returned by endusers in accordance with the warranty set forth in the Enduser License accompanying the Product. Transportation charges for the return of such Products shall be borne by Macromedia. Such returns must be accompanied by a purchase order for replacement Products equal in value to the purchase price paid by Distributor for the returned Products. The offsetting purchase order(s) may include one or more orders already placed and not yet shipped, provided such orders were placed in the same month as the RMA request. 9.2 Macromedia provides a limited warranty to end users of the Products. Distributor will make no other warranty on Macromedia's behalf. EXCEPT FOR SUCH WARRANTY, THE PRODUCTS ARE PROVIDED WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED. MACROMEDIA DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE PRODUCTS WILL BE UNINTERRUPTED OR ERROR FREE. MACROMEDIA DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS, EITHER EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE 10. INDEMNIFICATION 10.1 Indemnification of Distributor. Macromedia agrees that, if notified promptly in writing and given sole control of the defense and all related settlement negotiations, and if Distributor cooperates and provides reasonable assistance, Macromedia will defend Distributor against any claim based on an allegation that (i) a Product supplied hereunder infringes a copyright, trademark, or state trade secret right within the Territory, (ii) a Product supplied hereunder caused property damage or the death of or a personal injury to, any person, arising out of or resulting in any way from any defect in a Product, (iii) Macromedia violated any United States law, statute or ordinance or any United States governmental or administrative order, rule or regulation with regard to the Product or its manufacture, possession, use or sale or (iv) arises from Macromedia's acts, omissions or misrepresentations with respect to the Products to the extent that Macromedia would have been found liable by a court if the claim had been made directly against Macromedia. Macromedia will pay any resulting costs, damages and attorneys' fees finally awarded by a court with respect to any such claims. Distributor agrees that, if the Products in the inventory of Distributor, or the operation thereof, become, or in Macromedia's opinion are likely to become, the subject of such a claim, Distributor will permit Macromedia, at Macromedia's option and expense, to, among other things, procure the right for Distributor to continue marketing and using such Products, or to replace or modify them so that they become noninfringing. If neither of the foregoing alternatives is available on terms that Macromedia in its sole discretion deems reasonable, Distributor will return such Products on written request from Macromedia. Macromedia will grant Distributor a credit equal to the price paid by Distributor for such returned Products, as adjusted for discounts, returns and credits actually given, provided that such returned Products are in an undamaged condition. Macromedia will have no obligation to Distributor with respect to infringement of patents, copyrights, trademarks or trade secrets or other proprietary rights beyond that stated in this Section 10.1 10.2 Indemnification of Macromedia Distributor agrees to indemnify and hold harmless Macromedia, its affiliates, employees and agents, against any and all claims and liabilities (including reasonable attorney's fees and costs of litigation) arising from Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 99 4 Distributor's acts, omissions or misrepresentations, regardless of the form of action. 11. TERM AND TERMINATION 11.1 Unless this Agreement is terminated as provided below, the rights and obligations of Distributor and Macromedia hereunder shall be effective for a term of one year from the effective date and will automatically renew, for additional one-year terms, upon each anniversary of the effective date. 11.2 Either party hereto may terminate this Agreement upon (a) thirty (30) days written notice to the other following any material breach or omission by the other with respect to any term, representation, warranty, condition, or covenant hereof and (b) the failure of such other party to cure such breach or omission prior to the expiration of such thirty (30) day period, provided that in the event Distributor defaults in any payment due Macromedia such notice period prior to termination will be reduced to ten (10) days. 11.3 Distributor or Macromedia may terminate this Agreement at will, at any time during the term of this Agreement, with or without cause, by written notice given to the other party not less than ninety (90) days prior to the effective date of such termination. 11.4 Upon termination or expiration of this Agreement, Distributor shall submit to Macromedia within ten (10) days after the effective date of termination or expiration, a list of all Products in Distributor's inventory. If Macromedia terminates this Agreement in accordance with Section 11.3 or if Distributor terminates this Agreement in accordance with Section 11.2, Macromedia shall repurchase all such Products, if they are in new and original condition. If Distributor terminates this Agreement in accordance with Section 11.3 or if Macromedia terminates this Agreement in accordance with Section 11.2, Macromedia may, at its option, repurchase any such Products, if they are in new and original condition. In such case, Macromedia will pay Distributor the actual price Distributor paid for such Products, subtracting any amounts then owing to Macromedia. 11.5 In the event Macromedia issues a notice of termination due to Distributor's breach of this Agreement, Macromedia will be entitled to reject all or part of any orders received from Distributor after notice but prior to the effective date of termination. In the event a notice of termination is issued by either party, Macromedia may limit monthly shipments to Distributor during the notice period to Distributor's average monthly shipments from Macromedia during the twelve (12) months prior to the date of notice of termination. Notwithstanding any credit terms made available to Distributor prior to the date of a termination notice, any Products shipped thereafter will be paid for by certified or cashier's check prior to shipment. The due dates of all outstanding invoices to Distributor for the Products will be accelerated automatically so they become due and payable on the effective date of termination, even if longer terms had been provided previously. All orders or portions thereof remaining unshipped as of the effective date of termination will automatically be canceled and any unused MDF will be forfeited. 11.6 DISTRIBUTOR AND MACROMEDIA EACH WAIVE ANY RIGHT IT MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION OR EXPIRATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS. 11.7 The termination or expiration of this Agreement shall not affect any rights of either party with respect to any breach of this Agreement, any rights under Section 10 (Indemnification) hereof or Distributor's rights to market and promote Distributor's inventory of Products as provided in Section 11..4 above. In addition the following Sections shall survive any termination of this Agreement: 3.3, 3.4, 4, 9.1, 9.2, 11.6, 12, 13, 14.6 and 14.8. 12. LIMITATION OF LIABILITY 12.1 NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR TO AN END-USER UNDER ANY THEORY FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS OR LOSS OF PROFITS) OR THE COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, EVEN IF THAT PARTY OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 12.2 No action arising out of or related to this Agreement, regardless of form, may be brought by Distributor more than one (1) year after the cause of action has accrued. 13. TRADEMARKS, TRADE NAMES AND COPYRIGHTS 13.1 During the term of this Agreement, Distributor is authorized by Macromedia to use the trademarks Macromedia uses for the Products solely in connection with Distributor's advertisement, promotion and distribution of the Products. Distributor's use of such trademarks and logos will be in accordance with Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 100 5 Macromedia's policies in effect from time to time, including but not limited to trademark usage policies. 13.2 As both a covenant by Distributor and a condition of Macromedia's authorization of Distributor's distribution, Distributor will include on each copy of any materials that it creates regarding or referring to the Products all trademark, copyright and other notices of proprietary rights included by Macromedia on the Products or requested to be so included by Macromedia from time to time. Distributor agrees not to alter, erase, deface or obscure any such notice on anything provided by Macromedia. 13.3 Distributor has paid no consideration for the use of Macromedia's trademarks, logos, copyrights, trade secrets, trade names or designations, and nothing contained in this Agreement will give Distributor any interest in any of them. Distributor acknowledges that Macromedia owns and retains all copyrights and other proprietary rights in all the Products, and agrees that it will not at any time during or after this Agreement assert or claim any interest in or do anything that may adversely affect the validity or enforceability of any trademark, trade name, trade secret, copyright or logo belonging to or licensed to Macromedia (including, without limitation, any act, or assistance to any act, which may infringe or lead to the infringement of any copyright in the Products) or attempt to grant any right therein. Distributor agrees not to attach any additional trademarks, logos, trade designations or other legends to any Product without the prior written consent of Macromedia. Distributor further agrees not to affix any Macromedia trademark, logo or trade name to any non-Macromedia product. 13.4 Except to the extent permitted pursuant to Section 11.4 hereof, upon expiration or termination of this Agreement, Distributor will forthwith cease all display, advertising and use of all Macromedia names, marks, logos and designations and will not thereafter use, advertise or display any name, make or logo which is, or any part of which is, similar to or confusing with any such designation associated with any Product. 13.5 Distributor agrees to cooperate without charge in Macromedia's efforts to protect its proprietary rights. Distributor agrees to notify Macromedia of any breach of Macromedia's proprietary rights that comes to Distributor's attention. 14. OTHER TERMS AND PROVISIONS 14.1 Product Discontinuation Macromedia shall provide Distributor with thirty (30) days written notice prior to discontinuation of any Product. Distributor may return such discontinued Products in accordance with Section 4 hereof. 14.2 During the term of this Agreement, Macromedia shall carry insurance coverage for product liability/completed operations with minimum limits of one million dollars ($1,000,000). Within ten (10) days of the full execution of this Agreement, Macromedia shall provide Distributor with a Certificate of Insurance evincing such insurance coverage including (a) a broad form vendor's endorsement naming Distributor as an additional insured and (b) to the extent permitted by applicable law, a mandatory thirty (30) day notice of cancellation to Distributor. 14.3 This Agreement and the Exhibits A through E attached hereto contain all the Agreements, understanding, representations, conditions, warranties and covenants, and constitutes the sole and entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior communications or agreements, written or oral. This Agreement may not be released or modified except by the mutual written consent of both Distributor and Macromedia as attested to by an instrument signed by an officer of each of them. 14.4 Macromedia and Distributor are each independent entities and neither party shall be, nor represent itself to be, a franchisor, franchisee, joint venturer, partner, master, servant, principal, agent or legal representative of the other party for any purpose whatsoever. 14.5 If any provision of this Agreement is declared invalid or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect. 14.6 All terms, conditions, or provisions which may appear as preprinted language or otherwise be inserted within any purchase order, confirmation or invoice for any Product shall be of no force (unless mutually agreed upon by both parties) and effect notwithstanding the execution of such purchase order or other document subsequent to the date of this Agreement. 14.7 The rights and liabilities of the parties hereto will bind and inure to the benefit of their respective assignees, successors, executors and administrators, as the case may be; provided, that, as the license from Macromedia hereunder is personal to Distributor, Distributor may not sublicense, assign or transfer any of its rights, privileges or obligations hereunder either in whole or in part, without the prior written consent of Macromedia. Nor shall an Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 101 6 assignment or transfer of the Agreement and the licenses granted herein be affected by operation of law, such as for example, by merger, consolidation, sale of the business or assets, or by acquisition of a majority of the voting stock of Distributor by a third party, without the prior written consent of Macromedia. Macromedia, in a like manner, shall not assign nor transfer the Agreement without the prior written consent of Distributor. However, Macromedia may assign this Agreement, without prior consent of Distributor, to a third party through merger, acquisition or purchase of all or substantially all of the assets of Macromedia. Any attempted assignment in violation of the provisions of this Section 14.5 will be void. 14.8 In the event any litigation is brought by either party in connection with this Agreement, the prevailing party in such litigation will be entitled to recover from the other party all the costs, attorney's fees and other expenses incurred by such prevailing party in the litigation. 14.9 Waiver by either Distributor or Macromedia of one or more terms, conditions, or defaults of this Agreement shall not constitute a waiver of the remaining terms and conditions or of any future defaults of this Agreements. 14.10 The validity, interpretation and performance of this Agreement shall be controlled by and construed under the laws of the State of California excluding that body of laws controlling conflict of laws. MACROMEDIA, INC. By: ------------------------------------- Name: /s/ Richard B. Wood ------------------------------------- Title: V.P. Operations and CFO ------------------------------------- Date: March 28, 1996 ------------------------------------- DISTRIBUTOR By: ------------------------------------- Name: /s/ Sanat K. Dutta ------------------------------------- Title: Executive Vice President ------------------------------------- Date: March 21, 1996 ------------------------------------- Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 102 7 Exhibit A For the purpose of this Agreement, the following terms shall have the meanings set forth below: 1. "Discounts" shall mean the discounts set forth in Exhibit B from the Suggested List Price of such Product. 2. "Distributor" shall mean Distributor and any parent, subsidiary or affiliated corporations it may have during the term hereof, and any person or entity purchasing Products from Macromedia for sale to Retailers. 3. "Intellectual Rights" shall mean any rights relating to any trademark, trade name, service mark, copyright, trade secret, invention, industrial model, patent, process, technology, know-how or design. 4. "Inventory" shall mean at any time all units of Product (a) in Distributor's inventory, (b) ordered by Distributor but not yet received by Distributor at such time, or (c) returned by Resellers to Distributor within 180 days of such time. 5. "Payment Terms" relating to any Product shall mean "net 30", defined as requiring payment to arrive in Macromedia's account by the 30th calendar day after Macromedia ships the Product. 6. "Purchase Price" of any Product shall mean the difference between (a) the applicable Suggested List Price, and (b) the product of the applicable Discount and Suggested List Price of such Product. 7. "Resellers" shall mean persons or entities who purchase Products from Distributor and resell Product to end-users. 8 "Return Price" for any unit of Product shall mean the amount originally billed Distributor for such unit less any rebates or amounts under Section 2.2 with respect to such unit actually paid or credited by Macromedia to Distributor. 9. "Suggested List Price" of any Product shall mean the retail sales price of such Product as suggested by Macromedia to retailers and set forth in Exhibit B. 10. "Territory" means the United States, Canada and all of Latin America, with the exceptions of Mexico, Brazil and Chile. Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 103 8 Exhibit B Products and Prices MACROMEDIA DISTRIBUTOR-COMMERCIAL PRICING
REGULAR PROGRAM MACROMEDIA DESCRIPTION SRP DISTRIBUTOR DISCOUNT SKU COST* RATE ACM10D01 Action 1.0 Mac $ 199 * * * * ACW30D01 Action 3.0 Windows $ 199 * * * * ACW30D11 Action! Bundle 3.0 Windows $ 299 * * * * DRM40D02 Director 4.0 Mac/PowerMac $1,199 * * * * DRM40D15 Director 4.0 Mac 10-pak $9,999 * * * * DRW40D02 Director 4.0 Windows $1,199 * * * * DRW40D15 Director 4.0 Windows 10-pak $9,999 * * * * DRD40D01 Director 4.0 Multi-Platform $1,999 * * * * DRM40D08 Director 4.0 upgrade Mac $ 349 * * * * DRW40D11 Director 4.0 upgrade Win $ 349 * * * * MMM15D02 Macromodel 1.5 Mac with Renderman $ 199 * * * * MMW15D01 Macromodel 1.5 Win with Renderman $ 199 * * * * SSM10D01 SoundEdit 16 $ 379 * * * * FHM50D01 FreeHand 5.0 Mac/PowerMac $ 599 * * * * FHM50D09 FreeHand 5.0 Upgrade Mac/PowerMac $ 149 * * * * FHM50D11 FreeHand 5.0 Competitive Upgrade $ 149 * * * * Mac/PowerMac FHM50D05 FreeHand 5.0 Mac/PowerMac 5-pak $2,399 * * * * FHW50D01 FreeHand 5.0 Win $ 599 * * * * FHW50D09 FreeHand 5.0 Upgrade Win $ 149 * * * * FHW50D11 FreeHand 5.0 Competitive Upgrade Win $ 149 * * * * FHW50D05 FreeHand 5.0 Win 5-pak $2,399 * * * * FTM41D01 Fontographer 4.1 Mac $ 499 * * * * FTW35D01 Fontographer 3.5 Win $ 499 * * * * WWMMPD50 Graphic Design Studio Mac $ 999 * * * * WWWMPD50 Graphic Design Studio Win $ 999 * * * *
TIER I VAR MACROMEDIA DESCRIPTION SRP VAR PROGRAM SKU COST* APM20D01 Authorware Pro 3.0 Mac TIER I $4,995 * * * * APW20D01 Authorware Pro 3.0 Win TIER I $4,995 * * * *
TIER II VAR/PRP PROGRAM: MACROMEDIA DESCRIPTION SRP PRP PROGRAM SKU COST* APW30D01 Authorware 3.0 Win TIER II $4,995 * * * * APM30D01 Authorware 3.0 Mac TIER II $4,995 * * * * DRM40D02 Director 4.0 Mac/PowerMac $1,199 * * * * DRW40D02 Director 4.0 Windows CD Rom $1,199 * * * * DRD40D01 Director 4.0 Multi-Platform $1,999 * * * * WWMMPD04 Director Multimedia Studio Mac/PowerMac $1,999 * * * * WWWMPD03 Director Multimedia Studio Windows $1,999 * * * * SSM10D01 SoundEdit 16 $ 379 * * * *
- ---------------- ** Confidential treatment has been requested for certain portions of this document. Such omitted portions have been filed separately with the Securities and Exchange Commission. Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 104 9 Exhibit C Minimum Orders Quarterly Minimum Purchase Commitment Within two weeks after the start of each calendar quarter, Macromedia shall provide, and the parties shall agree upon, sell-through and purchase requirements for that quarter. Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 105 10 Exhibit D Macromedia Marketing Funds Program Macromedia Marketing Funds consist of Marketing Development Funds and Cooperative Marketing Funds, are accrued as a percentage of Distributor's total purchases (not including Authorware(R) products) and are utilized as follows: Marketing Development Funds ("MDF") are accrued at Macromedia as a percentage of Distributor's total purchases at the rate of two per cent (2%) of each invoice and reimbursed to Distributor, as a credit to its account with Macromedia, as follows: Distributor must first contact Macromedia for prior approval of contemplated marketing expenditures. After approval and expenditure, Distributor shall request reimbursement by invoice to Macromedia, providing proof of performance, and requesting a credit to its account. Once Macromedia has verified Distributor's request, it will debit Distributor's MDF account and confirm a credit to Distributor's account receivable, in the form of a credit memo. Distributor may deduct the amount of its MDF claim from payments to Macromedia, only after receipt of the credit memo. MDF claims for credit, along with an invoice and supporting documentation of performance, must be submitted to Distributor's Macromedia Sales Representative, within three (3) months of performance, by mail or by fax, in order to be considered. Cooperative Marketing Funds are accrued separately, as a percentage of Distributor's total purchases, at the rate of one per cent (1%) of each invoice. Cooperative Marketing Funds shall be retained by Macromedia and shall be utilized by Macromedia, within its sole discretion, for cooperative marketing efforts. The following is an example of Distributor's invoice to Macromedia for MDF credits:
Product Quantity Unit Cost Extended Cost - --------------------------------------------------------------------------- Director 4.0 ** $** $** Total $** MDF Claim at 2% $**
** Confidential treatment has been requested for certain portions of this document. Such omitted portions have been filed separately with the Securities and Exchange Commission. Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 106 11 Exhibit E (Attach Ingram Micro, Inc. Vendor Routing Guide) Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 107 12 Exhibit F PROPRIETARY INFORMATION NON-DISCLOSURE AGREEMENT This Agreement is made this __day of ____, 1995 by and between Ingram Micro Inc., a California corporation with its business at 1600 East St. Andrew Place, Santa Ana, CA 92799-5125 ("Ingram"), and Macromedia, Inc., a California corporation, with its business at 600 Townsend Street, San Francisco, California 94103 ("Vendor") . WHEREAS Ingram has compiled and organized certain information relating to its sales which is proprietary and confidential, known as the "non-standard, subsection (i), point of sale (POS) data" component of its "Systems Sales Out Report" ("Proprietary Information"); and WHEREAS Ingram agrees to disclose Proprietary Information to Vendor for the limited purpose set out herein; and WHEREAS Vendor desires to inspect such Proprietary Information so Vendor may monitor sales through distribution; NOW, THEREFORE, in consideration of the mutual promises set out herein, the parties hereby agree as follows: 1. Except as authorized herein, Vendor agrees not to communicate, disclose, or otherwise make available all or any part of the Proprietary Information to any third party, including, but not limited to Vendor's parent, subsidiaries, or affiliated companies. 2. Vendor agrees not to use, or permit others to use, the Proprietary Information, other than for the purpose of monitoring sales through distribution. Vendor agrees to make no more than five (5) copies of the Proprietary Information unless otherwise agreed in writing between the parties; and Vendor agrees to limit distribution of and access to the Proprietary Information to those of Vendor's personnel who require access to Proprietary Information for the foregoing purpose. Vendor agrees not to directly contact, for the purpose of soliciting, or selling Product directly to any customer or dealer listed in the Proprietary Information. 3. Vendor and Ingram mutually agree that all copies of the Proprietary Information and all written descriptions, extractions, or summaries thereof, whether made by Vendor or Ingram, shall be the property of Ingram, and shall, upon expiration of this Agreement or Ingram's request, be immediately returned to Ingram. 4. Vendor and Ingram mutually agree that Ingram's public disclosure of the Proprietary Information, except pursuant to a confidential disclosure agreement, to any party will release Vendor from the obligation of confidentiality with respect to that portion of the Proprietary Information actually disclosed by Ingram. 5. Upon termination of this Agreement by either party for any reason, Vendor shall return all Proprietary Information to Ingram within thirty (30) days, irrespective of format. For purposes of enforcing this provision, Vendor's return obligation shall survive the termination of this Agreement. 6. The rights, promises, duties, and obligations set out herein, and the validity, interpretation, performance, and legal effect of the whole Agreement shall be governed and determined by the laws of the State of California. In the event that any provision is found invalid or unenforceable pursuant to Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 108 13 statutory or Judicial decree, such provision shall be construed only to the maximum extent permitted by law, and the remainder of the Agreement shall be valid and enforceable in accordance with its terms. INGRAM MICRO INC. MACROMEDIA, INC. By: ____________________________ By: _______________________________ Sanat K. Dutta Name: _____________________________ Executive Vice President Title: ____________________________ Date: ___________________________ Date: _____________________________ Domestic Distribution Agreement March 15, 1996 Form 403 Ingram Micro (3/15/96) 109 EX-11.01 7 EXHIBIT 11.01 1 Exhibit 11.01 Macromedia, Inc. Computation of Net Income Per Share For the years ended March 31, 1996, 1995 and 1994 (in thousands, except per share data)
Year Ended Year Ended Year Ended March 31, 1996 March 31, 1995 March 31, 1994 -------------- -------------- -------------- Net income $23,002 $ 6,538 $ 3,475 ======= ======= ======= Weighted average number of shares outstanding: Common 34,899 30,362 26,068 Number of common stock equivalents as a result of warrants outstanding -- 6 6 Number of common stock equivalents as a result of stock options outstanding 4,145 4,046 3,944 ======= ======= ======= Total 39,044 34,414 30,018 ======= ======= ======= Net income per common stock and common stock equivalent share $ 0.59 $ 0.19 $ 0.12 ======= ======= =======
All income per share amounts and number of shares have been retroactively stated to reflect a two-for-one stock split which became effective October 16, 1995. 110 EX-21.01 8 EXHIBIT 21.01 1 Exhibit 21.01 LIST OF REGISTRANT'S SUBSIDIARIES
PERCENTAGE OWNED BY NAME Country of Organization Macromedia, Inc. ---- ----------------------- ---------------- Macromedia Europe Limited England 100% Macromedia KK Japan 100%
111 EX-23.01 9 EXHIBIT 23.01 1 Consent of Independent Auditors The Board of Directors Macromedia, Inc. and Subsidiaries We consent to the use of our report included herein in the registration statements (Nos. 33-74202, 33-84208, 33-89092, 33-96188 and 333-3406) on Form S-8 of Macromedia, Inc. and subsidiaries. As indicated in our report, we did not audit the financial statements of Altsys Corporation, a company acquired by Macromedia, Inc. in a business combination accounted for as a pooling of interests, for the nine months ended September 30, 1994 and for the year ended December 31, 1993. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Altsys Corporation for such periods, is based solely on the report of the other auditors. KPMG Peat Marwick LLP Palo Alto, California June 19, 1996 112 EX-23.02 10 EXHIBIT 23.02 1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report on the financial statements of Altsys Corporation dated November 28, 1994, incorporated by reference in this Form 10-K, which is incorporated by reference into the previously filed registration statements on Form S-8 (Nos. 33-74202, 33-84208, 33-89092) of Macromedia, Inc. and subsidiaries. It should be noted that we have audited the financial statements of Altsys Corporation for the year ended December 31, 1993, and the nine-month period ended September 30, 1994. We have not audited any financial statements subsequent to September 30, 1994, or performed any audit procedures subsequent to the date of our report. Arthur Andersen LLP Dallas, Texas June 18, 1996 113 EX-27.01 11 EXHIBIT 27.01
5 1 YEAR MAR-31-1996 APR-01-1995 MAR-31-1996 28,829 87,833 18,978 4,377 1,508 140,946 20,474 8,255 155,122 21,886 0 0 0 36 133,145 155,122 112,577 116,691 17,295 19,600 69,411 740 3 31,781 8,779 23,002 0 0 0 23,002 0.59 0.59
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