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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
600 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(415) 252-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 .
--- ---
As of October 31, 1996, there were outstanding 36,854,378 shares of the
Registrant's Common Stock, par value $0.001 per share.
This Report, including exhibits, consists of 36 sequentially numbered pages. The
Index to Exhibits appears on sequentially numbered page 14 .
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MACROMEDIA, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
September 30, 1996 and March 31, 1996 3
Condensed Consolidated Statements of Income
Three and Six Months Ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended September 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
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PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
MACROMEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, March 31,
1996 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 15,900 $ 28,829
Short-term investments 99,181 87,833
Accounts receivable, net 14,968 14,601
Inventory 1,886 1,568
Prepaid expenses and other current assets 8,218 8,115
--------- ---------
Total current assets 140,153 140,946
Property and equipment, net 24,965 12,219
Other long-term assets 2,490 1,957
========= =========
Total assets $ 167,608 $ 155,122
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,566 $ 11,364
Accrued liabilities 8,667 8,956
Unearned revenue 861 1,235
Other current liabilities 18 331
--------- ---------
Total current liabilities 20,112 21,886
Long-term liabilities 27 55
--------- ---------
Total liabilities 20,139 21,941
Stockholders' equity:
Common stock, par value $0.001 per share; 80,000,000
shares authorized; 36,834,306 and 36,413,211 shares
issued and outstanding at September 30, 1996 and
March 31, 1996, respectively 37 36
Additional paid-in capital 132,096 129,591
Deferred compensation (363) (415)
Retained earnings 15,699 3,969
--------- ---------
Total stockholders' equity 147,469 133,181
--------- ---------
Total liabilities and stockholders' equity $ 167,608 $ 155,122
========= =========
See accompanying notes to condensed consolidated financial statements.
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MACROMEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three months ended Six months ended
September 30, September 30,
------------------------ ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues $ 31,025 $ 27,301 $ 66,035 $ 51,158
Cost of revenues 4,505 4,675 9,939 8,900
-------- -------- -------- --------
Gross profit 26,520 22,626 56,096 42,258
Operating expenses:
Sales and marketing 12,352 9,516 24,538 18,592
Research and development 7,125 4,615 14,037 8,720
General and administrative 1,588 1,370 3,113 2,590
Merger 0 400 0 400
-------- -------- -------- --------
Total operating expenses 21,065 15,901 41,688 30,302
-------- -------- -------- --------
Operating income 5,455 6,725 14,408 11,956
Other income (expenses), net 1,228 906 2,594 1,202
-------- -------- -------- --------
Income before income taxes 6,683 7,631 17,002 13,158
Provision for income taxes (2,073) (2,214) (5,272) (3,319)
-------- --------- -------- --------
Net income $ 4,610 $ 5,417 $ 11,730 $ 9,839
======== ======== ======== ========
Net income per share $ 0.12 $ 0.15 $ 0.29 $ 0.27
======== ======== ======== ========
Weighted average common shares
outstanding 40,013 37,316 40,648 36,166
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
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MACROMEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six months ended September 30,
------------------------
1996 1995
-------- --------
Cash flows from operating activities:
Net income $ 11,730 $ 9,839
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,300 1,766
Compensation expense on stock options 52 0
Changes in operating assets and liabilities, net of effect of mergers:
Accounts receivable, net (367) 459
Inventory (318) (59)
Prepaid expenses and other current assets (103) (1,166)
Accounts payable (798) 2,000
Accrued liabilities (289) 3,345
Unearned revenue (374) (1,396)
Other current liabilities (313) (80)
Other long-term liabilities (28) 63
-------- --------
Net cash provided by operating activities 12,492 14,771
-------- --------
Cash flows from investing activities:
Capital expenditures (15,186) (4,732)
Net purchase of short-term investments (11,348) (31,943)
Other long-term assets (1,393) (501)
-------- --------
Net cash used in investing activities (27,927) (37,176)
-------- --------
Cash flows from financing activities:
Proceeds from secondary offering of common stock, net 0 55,844
Proceeds from issuance of common stock 2,506 2,707
-------- --------
Net cash provided by financing activities 2,506 58,551
-------- --------
(Decrease)/Increase in cash and cash equivalents (12,929) 36,146
Cash and cash equivalents, beginning of period 28,829 10,230
-------- --------
Cash and cash equivalents, end of period $ 15,900 $ 46,376
======== ========
Supplemental disclosure of cash flow information:
Interest paid during period $ -- $ 2
======== ========
Income taxes paid $ 3,935 $ 455
======== ========
See accompanying notes to condensed consolidated financial statements.
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MACROMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The condensed consolidated financial statements at September 30, 1996 and for
the three and six months ended September 30, 1996 and 1995 are unaudited and
reflect all adjustments (consisting only of normal recurring accruals) which
are, in the opinion of management, necessary for a fair presentation of the
Company's financial position and operating results for the interim periods.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
contained in the Company's annual report on Form 10-K for the fiscal year ended
March 31, 1996.
The results of operations for the three and six months ended September 30, 1996
are not necessarily indicative of the results for the fiscal year ending March
31, 1997 or any other future periods.
All net income per share and other amounts included in this document reflect the
two-for-one stock split which occurred on October 16, 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues. The Company derives revenues primarily from software sales to domestic
and international distributors, value-added resellers, original equipment
manufacturers, corporate accounts and registered users. To a lesser extent,
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 a substantial majority of its revenues are Authorware,
Director, Extreme 3D, Fontographer, FreeHand, xRes, SoundEdit 16, DECK II , and
Backstage.
The Company's second quarter fiscal 1997 revenues of $31.0 million represent an
increase of 14% from revenues of $27.3 million for the same period in fiscal
1996. This increase resulted primarily from an increase in units shipped of
Director, Authorware, Director Multimedia Studio and FreeHand Graphics Studio,
due in part to the continuing development of the Company's indirect
international sales channels, but was offset by a decrease in units shipped of
FreeHand. North America revenues of $15.2 million contributed 49% of total
worldwide sales in the second quarter of fiscal 1997, as compared to $15.1
million, or 55%, in the second quarter of fiscal 1996. International revenues
increased to $15.8 million, which accounted for 51% of the Company's revenues in
the second quarter of fiscal 1997, as compared to $12.2 million, or 45%, in the
second quarter of fiscal 1996. North America revenues for the second quarter of
fiscal 1997 remained relatively flat compared to the same period in fiscal 1996,
while international revenues grew by 29% over the same period in fiscal 1996.
Windows product revenue comprised 49% of total revenue for the second quarter of
fiscal 1997, up 46% over the second quarter of fiscal 1996.
For the six months ended September 30, 1996, revenues of $66.0 million represent
an increase of 29% from revenues of $51.2 million for the same period in fiscal
1996. This increase for the first six months reflected ongoing strength in sales
of Macromedia's principal products, primarily Authorware and Director Multimedia
Studios, which grew 35% from an increase in units shipped. North America
revenues of $34.1 million contributed 52% of total worldwide sales for the first
six months of fiscal 1997, as compared to $28.8 million or 56%, for the first
six months of fiscal 1996. International revenues of $31.9 million accounted for
48% of the Company's revenues for the first six months of fiscal 1997, as
compared to $22.4 million, or 44%, for the first six months of fiscal 1996 due
to increased sales in Europe and Japan. North America revenues grew by 18% while
International revenues grew by 43% over the same period in fiscal 1996. Windows
product revenue comprised 47% of total revenue for the first six months of
fiscal 1997, up 73% over the same period in the prior year.
Cost of revenues. Cost of revenues for the three and six months ended September
30, 1996 was 15% of revenues, compared to 17% for the same periods in fiscal
1996. This percentage decrease was due primarily to cost reduction programs
which benefited from increased volumes.
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Sales and marketing. Sales and marketing expenses increased by $2.9 million,
from $9.5 million in the second quarter of fiscal 1996 to $12.4 million in the
second quarter of fiscal 1997 and increased as a percentage of revenues from 35%
to 39%. Sales and marketing expenses for the six months ended September 30, 1996
were $24.5 million, an increase of $5.9 million compared to the first six months
of fiscal 1996 and increased as a percentage of revenues from 36% to 37%.
Expenses increased both as a percentage of revenues and in absolute dollars in
fiscal 1997 due to the timing of discretionary marketing expenses such as
product launch costs, advertising and direct mail and 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 sales also led to increases in certain variable selling
expenses.
Research and development. Research and development expenses grew by $2.5 million
from $4.6 million in the second quarter of fiscal 1996 to $7.1 million in the
second quarter of fiscal 1997, and increased as a percentage of revenues from
17% to 23%. For the six month period ended September 30, 1996, research and
development expenses were $14.0 million, an increase of $5.3 million compared to
the first six months of fiscal 1996, and increased as a percentage of revenues
from 17% to 21%. Expenses increased as a percentage of sales and in absolute
dollars in fiscal 1997 due to planned increases in headcount and higher outside
service costs as a result of the increase in products under development.
General and administrative. General and administrative expenses increased by
$0.2 million, from $1.4 million in the second quarter of fiscal 1996 to $1.6
million in the second quarter of fiscal 1997, but remained constant as a
percentage of revenues at 5%. For the six months ended September 30, 1996,
general and administrative expenses were $3.1 million, an increase of $0.5
million compared to the first six months of fiscal 1996, but remained constant
as a percentage of revenues at 5%. Expenses increased slightly in absolute
dollars in fiscal 1997 due primarily to planned increases in headcount and costs
associated with building the infrastructure required to support the growth of
the Company.
Merger. A one-time charge to earnings of $400,000 was recorded for the August
1995 acquisition of Fauve Software, Inc. The acquisition was accounted for as a
pooling of interests. Financial statements were not restated due to
immateriality.
Operating income. Operating income for the second quarter of fiscal 1997 was
$5.5 million, a 19% decrease over operating income of $6.7 million in the second
quarter of fiscal 1996, and decreased as a percentage of revenues from 25% to
18%. The decreases were due to an increase in operating expenses due to planned
increases in headcount, marketing and promotional efforts associated with new
product releases, management's commitment to fund discretionary marketing, an
increase in cooperative advertising and an increase in products under
development. Operating income for the six months ended September 30, 1996 was
$14.4 million, an increase of $2.4 million over the same period in fiscal 1996,
but decreased as a percentage of revenues from 23% to 22%. The increase in
absolute dollars was primarily due to higher revenues and increased gross profit
margins.
Provision for income taxes. After using available net operating loss
carryforwards, the Company's provision for income taxes for the first six months
of fiscal 1997 was $5.3 million as compared with $3.3 million for the first six
months of fiscal 1996. The Company's effective tax rate increased to 31% for the
first six months of fiscal 1997, as compared to 25% for the first six months of
fiscal 1996. This increase was primarily due to the fact that the Company fully
utilized their net operating loss carryforwards in fiscal 1997.
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Net income. Net income for the second quarter of fiscal 1997 decreased by 15% to
$4.6 million, compared to $5.4 million for the same quarter a year ago. Net
income per share was $0.12, a 20% decrease from $0.15 for the second quarter of
fiscal 1996. The decrease in net income was due to an increase in operating
expenses. Net income for the six months ended September 30, 1996 was $11.7
million, a 19% increase over net income of $9.8 million for the first six months
of fiscal 1996. Earnings per share increased by 7% from $0.27 for the first six
months of fiscal 1996 to $0.29 for the same period in fiscal 1997. The increase
in net income and net income per share were primarily related to the growth in
revenues.
Stock Option Repricing. The Company approved a repricing of stock options on
July 25, 1996. Directors and officers of the Company were ineligible for the
repricing of stock options. Stock options were repriced at the lowest closing
price during the month of July.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters discussed in
this Form 10-Q are forward looking statements that involve risks and
uncertainties, including those related to management of growth, quarterly
fluctuations of operating results, impact of competition, the developing
multimedia, Internet and on-line services markets, and the other risks detailed
below, and from time to time in the Company's other reports filed with the
Securities and Exchange Commission. The actual results that the Company achieves
may differ materially from any forward looking statements due to such risks and
uncertainties.
Macromedia has grown in substantial part from combinations with other companies.
In January 1995, Macromedia acquired Altsys Corporation, 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, software for
creating and modifying fonts. In August 1995, the Company acquired Fauve
Software, Inc., 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, Inc., 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 is 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
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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.
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 continuing 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. For the quarter ended September
30, 1996, Macintosh product revenue comprised 51% of total revenue. Windows
product revenue comprised 49% of total revenue for the second quarter of fiscal
1997, up 46% over the second quarter of fiscal 1996. Windows product revenue
comprised 47% of total revenue for the first six months of fiscal 1997, up 73%
over the same period in the prior year.
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 ("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 and different
platforms, the Company may face increasing competition from such companies.
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.
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.
Domestically, the Company's products are sold primarily through distributors,
VARs, and OEMs. Internationally, the Company's products are sold through
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
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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 place. 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.
For the six months ended September 30, 1996, the Company derived approximately
48% of its total revenues from international sales. The Company expects that
international sales will continue to generate a significant percentage 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; foreign currency risk; and other factors beyond the control of the
Company.
As of April 1, 1996, revenues generated through international sales in certain
European countries are denominated in local currency, while expenses continue to
be denominated in the local currency of the countries in which the Company has
offices. As a result of this program, the Company has entered into hedging
contracts to protect it from exchange rate fluctuations. As of September 30,
1996, the contracts outstanding totaled $9.6 million. These contracts are of a
short-term duration.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash, cash equivalents and short-term
investments of $115.1 million. For the six months ended September 30, 1996, cash
provided by operating activities of $12.5 million was primarily attributable to
net income. Cash used in investment activities of $27.9 million related
primarily to $11.3 million in net short-term investment purchases, $7.0 million
to purchase a parcel of land in Redwood Shores, California, and $8.2 million for
capital equipment, primarily for computer systems to support the Company's
infrastructure and engineering equipment. Cash provided by financing activities
of $2.5 million was attributable to proceeds received from the issuance of
common stock. This resulted in a decrease of $1.6 million over March 31, 1996
cash, cash equivalent, and short-term investment balances. Working capital
increased by $1.0 million from March 31, 1996 to $120.0 million at September 30,
1996. The Company anticipates capital expenditures of approximately $12.6
million for the remainder of fiscal 1997.
In addition to cash, cash equivalents, and short-term investments, the Company
has $15.0 million 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 September 30, 1996, the Company had no borrowings outstanding.
The Company believes that existing cash resources, available bank borrowings and
cash generated from operations will be sufficient to meet the Company's cash and
investment requirements through at least September 30, 1997.
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed herewith:
Exhibit
Number Exhibit Title
10.20 - Employment agreement between Registrant and Robert K. Burgess
dated August 25, 1996.
11.01 - Statement regarding computation of per share earnings.
27.01 - Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the period ended September
30, 1996.
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SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: November 13, 1996 /s/ Richard B. Wood
-------------------------------------
Richard B. Wood
Vice President of Operations, Chief
Financial Officer, and Secretary
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EXHIBIT
NUMBER DESCRIPTION PAGE
10.20 - Employment Agreement between Registrant and Robert 15
K. Burgess dated August 25, 1996
11.01 - Statement Regarding Computation of Per Share Earnings 23
27.01 - Financial Data Schedule 24
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Exhibit Number 10.20 - Employment agreement between Registrant and Robert
K. Burgess dated August 25, 1996.
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MACROMEDIA, INC.
EMPLOYMENT AGREEMENT
This Agreement is made effective this 25th day of August 1996, between
Macromedia, Inc., a Delaware corporation ("Macromedia"), and Robert K. Burgess
("Executive").
WHEREAS, Macromedia is engaged in the business of developing and
marketing certain computer software; and
WHEREAS, Macromedia desires to secure the services of Executive as
President, and Executive desires to perform such services for Macromedia, on the
terms and conditions as set forth herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements set forth below, it is mutually agreed as follows:
1. Duties. Executive shall have such duties as the Board of Directors
of Macromedia may from time to time prescribe consistent with his position as
President of Macromedia. Executive shall devote his full time, attention,
energies and best efforts to the business of Macromedia based in San Francisco,
California, and shall not during his period of employment as President of
Macromedia engage in any other business activity, whether or not such business
activity is pursued for gain, profit of other pecuniary advantage; provided,
however, that for the period of time, not to exceed ninety days, as is necessary
for Executive to receive any required immigration visa, Executive shall perform
such duties in Toronto, Canada. In addition, Macromedia shall assist and support
Executive in his on-going efforts to obtain Permanent Resident status for
himself and his family.
This Section 1 shall not be construed as preventing Executive from
investing his assets in such form and manner as will not require any substantial
services on his part in the operation of the affairs of the business entities in
which such investments are made.
The Board of Directors will elect Executive to the Board of Directors
at its first meeting following Executive's commencement of employment, and
Macromedia shall use its best efforts to have Executive elected and re-elected
to the Board at each Annual Stockholders Meeting held during his period of
service as President of Macromedia.
Executive and the Chief Executive Officer of Macromedia shall carry out
their respective duties and responsibilities for Macromedia in partnership, and
Executive shall report directly to the Board of Directors.
2. Compensation. Macromedia shall pay and Executive shall accept as
full consideration for the services to be rendered hereunder compensation
consisting of the following:
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2.1 Base Salary. $300,000 per year in base salary, payable in
installments twice per month, with such deductions or withholdings which are
required by law.
2.2 Bonus. A target bonus of $200,000 per year based on attainment of
100% of the Macromedia Executive Bonus Plan objectives, with a total bonus
potential of up to $480,000 per year based on attainment of specified hurdles in
excess of 100% of the Macromedia Executive Bonus Plan objectives, as established
each year by the Board of Directors. The Macromedia Executive Bonus Plan
objectives for fiscal 1997 are attached as Exhibit A. For Executive's initial
year of employment, Executive will be guaranteed total base salary and bonus of
at least $500,000. The $200,000 guaranteed bonus payment for such initial year
of employment shall be paid in four equal quarterly installments at the end of
each fiscal quarter of Macromedia, beginning with the last day of the fiscal
quarter commencing October 1, 1996. In addition, Macromedia will pay Executive
an amount equal to (i) $100,000 or (ii) the sum of (A) any moving expenses
necessary to relocate from Canada to California (excluding costs associated with
any sale or purchase of a principal residence), together with a tax gross-up on
any non-deductible expenses and (B) any fees for legal, accounting and tax
advice associated with immigration to the United States, the negotiation and
execution of this Agreement and Executive's resignation from his current
employer and transition to the employ of Macromedia. Executive shall, upon
completion of 30 days of employment at Macromedia, elect which of the foregoing
amounts he is to receive; provided that Executive will be required to repay this
amount if Executive voluntarily terminates employment with Macromedia other than
for Good Reason, as set forth in Section 7.3, within one year of the effective
date of this Agreement. Such repayment obligation shall decrease proportionately
based on the number of months divided by twelve that Executive is employed as
President of Macromedia.
2.3 Stock Options. Macromedia has granted Executive a non-qualified
option to purchase 1,000,000 shares of Macromedia common stock. The exercise
price for such option will be the fair market value of Macromedia common stock
on the date of grant. The option will have a maximum term of ten (10) years,
subject to earlier termination 180 days after the later of (i) the date of
Executive's termination of service with Macromedia or any successor entity or
(ii) the date all further vesting in Executive's options pursuant to this
Agreement (including Section 7 hereof) ceases, subject, however, to any longer
exercise period provided under Section 8. The option will vest as to 25% of the
option shares (250,000 shares) at the end of twelve (12) full months of
continuous service with Macromedia. Thereafter the option will vest in a series
of thirty-six (36) successive equal monthly installments over Executive's period
of service with Macromedia, with each monthly installment equal to 2.08% of the
total number of shares in the option (20,833.33 shares) on the last day of each
month over the thirty-six (36) month period. For purposes of such option, the
Executive will be deemed to continue in service with Macromedia for so long as
he renders services as an employee, director or independent consultant to
Macromedia or any parent or subsidiary corporation. Macromedia shall register
the shares issuable under the option on a Form S-8 registration statement prior
to the initial vesting date thereunder and shall keep such registration
statement in effect for the entire period the option thereafter remains
outstanding. The stock option shall be evidenced by the stock option agreement
attached as Exhibit B and shall contain terms no less favorable than the terms
in effect
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for employee nonqualified stock options granted under the Macromedia 1992 Equity
Incentive Plan.
2.4 Indemnification. In the event Executive is made, or
threatened to be made, a party to any legal action or proceeding, whether civil
or criminal, by reason of the fact that Executive is or was a director or
officer of Macromedia or serves or served any other corporation fifty percent
(50%) or more owned or controlled by Macromedia in any capacity at Macromedia's
request, Executive shall be indemnified by Macromedia, and Macromedia shall pay
Executive's related expenses when and as incurred, all to the fullest extent
permitted by law.
3. Benefits. Executive shall be entitled to and shall receive such
pension, profit sharing and fringe benefits such as hospitalization, medical,
life and other insurance benefits, vacation, sick pay and short-term disability
as the Board of Directors of Macromedia may, from time to time, determine to
provide for the key Executives of Macromedia.
4. Relocation Expenses. Macromedia will provide Executive with a
recourse loan of up to $2,000,000, at an interest rate of 6.0% to refinance
Executive's residence in the Bay Area. The loan shall be secured by Executive's
residence. All interest accrued and the principal on the loan will be due and
payable three years from the date of the loan. If Executive terminates
employment with Macromedia for any reason or sells his residence prior to the
end of such three year period, all interest accrued and principal on the loan
will become immediately due and payable 180 days after such termination or (if
earlier) immediately upon such sale.
5. Executive Proprietary Information and Inventions Agreement. As part
of the consideration between the parties for this Agreement, Executive hereby
agrees to enter into Macromedia's Proprietary Information and Inventions
Agreement attached as Exhibit C contemporaneously with the execution of this
Agreement.
6. Termination. Executive's employment as President of Macromedia shall
terminate immediately upon Executive's receipt of written notice by Macromedia,
upon Macromedia's receipt of written notice by Executive, or upon Executive's
death.
6.1 Surrender of Records and Property. At the time of
termination, Executive shall deliver promptly all equipment, records, manuals,
books, data tables or copies thereof regardless of the underlying media upon
which such materials are recorded which are property of Macromedia and which are
under Executive's possession and control.
7. Benefits Upon Termination as President. Except in connection with a
termination for Cause (as defined in Subsection 7.2) or a voluntary termination
by Executive for other than Good Reason (as defined in Subsection 7.3),
Macromedia shall provide Executive with termination benefits upon his
termination by Macromedia as President of Macromedia irrespective of the cause
of the termination, as follows:
7.1 Termination Benefits. During a period of time beginning on
the date of Executive's termination as President of Macromedia and ending twelve
months from such date,
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Executive's base salary at the time of termination shall continue to be paid by
Macromedia in installments twice per month with applicable deductions or
withholdings, and Executive shall also be entitled to quarterly bonus payments
at the target plan during that twelve-month period. Executive shall also be
entitled to participate in any plans or other employee benefit arrangements
which are generally available to employees or executives of Macromedia during
such period other than the Macromedia tax-qualified pension or profit-sharing
plans or the employee stock purchase plan. Under no circumstances shall
Macromedia be obligated to make any payments or continue benefits beyond the
twelve-month period after his termination by Macromedia as President of
Macromedia. Vesting on any stock options held by Executive shall continue
following Executive's termination by Macromedia as President of Macromedia for a
period of time equal to the greater of (i) twenty-four months reduced by the
number of months from the grant date of any such options to the date of
termination or (ii) twelve months, and such stock options shall vest monthly at
the rate of 20,833.33 per month retroactive to the grant date of such stock
options. Executive shall be retained as an employee on a leave of absence for
twelve months and as a consultant for the remaining portion, if any, of such
continued vesting period. Prior to the payment of any termination benefits under
this Section 7 or Section 8, Executive and Macromedia will enter into a mutual
general release; provided, however, that such release shall not extend to any
subsequent claims Executive may have with respect to those termination benefits
or continued option vesting.
7.2 Circumstances Under Which Termination Benefits Would Not
Be Paid. Macromedia shall not be obligated to pay Executive the termination
benefits or continue the option vesting described in Subsection 7.1 above if
Executive's employment as President of Macromedia is terminated for Cause. For
purposes of this Agreement, "Cause" shall be limited to (1) Executive's
conviction of any felony under federal or state law, or any fraud,
misappropriation or embezzlement or act of dishonesty; or (2) Executive's
commission of a material violation of the Executive's Proprietary Information
and Inventions Agreement. In addition, Executive shall not be entitled to any
termination benefits or continued option vesting under Subsection 7.1 if he
voluntarily terminates his service with Macromedia other than for Good Reason as
determined under Subsection 7.3.
7.3 Constructive Termination. Notwithstanding anything in this
Section 7 to the contrary, Executive's employment as President of Macromedia
will be deemed to have been terminated by Macromedia as President of Macromedia
(a "Constructive Termination") and Executive will be deemed to have Good Reason
for voluntary termination of his employment hereunder ("Good Reason"), if there
should occur:
(A) a material adverse change in Executive's position causing
it to be of materially less stature or responsibility without Executive's
written consent, and such a materially adverse change shall in all events be
deemed to occur if Executive no longer serves as President of a publicly traded
company, unless Executive consents in writing to such change,
(B) a reduction, without Executive's written consent, in his
level of compensation (including base salary and fringe benefits) by more than
ten percent (10%) or a
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reduction by more than ten percent (10%) in his target bonus formula under any
performance-based executive incentive plans, or
(C) a relocation of his principal place of employment by more
than 50 miles.
8. Change in Control Benefits
Should there occur a Change in Control (as defined below),
then the following provisions shall become applicable:
(A) During the period (if any) following a Change in Control
that Executive continues as President of Macromedia without a Constructive
Termination, then the terms and provisions of this Agreement shall continue in
full force and effect, and Executive shall continue to vest in his outstanding
stock options
(B) In the event of (x) a Constructive Termination of
Executive's employment as President of Macromedia at or at any time after a
Change in Control or (y) the Executive voluntarily terminates his employment as
President of Macromedia within one hundred eighty (180) days following a Change
in Control, the following benefits shall become due and payable:
(i) Executive's base salary in effect immediately
prior to his termination as President of Macromedia shall continue to be paid
for a twelve-month period by Macromedia or the successor entity in installments
twice per month with applicable deductions or withholdings, and Executive shall
also be entitled to quarterly bonus payments at the target plan (or any
successor plan) during that twelve-month period, with such bonus payments to be
not less than $200,000 in the aggregate for such period. Macromedia or any
successor entity shall be obligated to continue Executive's service in one or
more other capacities, but Executive shall have complete discretion in
determining whether he is to render such service as a part time employee or
independent consultant. Executive shall also be entitled to participate in any
plans or other employee benefit arrangements which are generally available to
employees or executives of Macromedia during such period other than the
Macromedia tax-qualified pension or profit-sharing plans or the employee stock
purchase plan.
(ii) Executive's options shall immediately become
exercisable and vest with respect to that number of option shares for which
those options would have otherwise vested over the twenty-four (24) month period
immediately following the effective date of the Change in Control had Executive
continued his employment under this Agreement. The options as so accelerated
shall remain exercisable for a period of twenty-four (24) months following the
later of (a) the date of Executive's termination of service as President of
Macromedia or (b) the date of such option acceleration.
For purposes of this Section 8, a Change of Control shall be
deemed to occur upon:
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(I) the sale, lease, conveyance or other disposition of all or
substantially all of Macromedia's assets as an entirety or substantially as an
entirety to any person, entity or group of persons acting in concert,
(II) any transaction or series of transactions (as a result of
a tender offer, merger, consolidation or otherwise) that results in, or that is
in connection with, any person, entity or group acting in concert, becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of more than 50% percent of the aggregate
voting power of all classes of common equity stock of Macromedia,
(III) a liquidation and winding up of the business of
Macromedia, or.
(IV) a change in the composition of the Macromedia Board of
Directors over a period of thirty-six (36) consecutive months or less such that
a majority of the then current Board members ceases to be comprised of
individuals who either (a) have been Board members continuously since the
beginning of such period, or (b) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (a) who were still in office at the time such election or
nomination was approved by the Board.
9. Arbitration.
9.1 Except for proceedings seeking injunctive relief,
including, without limitation, allegations of misappropriation of trade secrets,
copyright or patent infringements, or breach of any anti-competition provisions
of this Agreement, any controversy or claim arising out of or in relation to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration rules of the American Arbitration
Association ("AAA"), and judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. Arbitration of this
Agreement shall include claims of fraud or fraud in the inducement relating to
this Agreement. Arbitration further includes all claims, regardless of whether
the dispute arises during the term of the Agreement, at the time of termination
or thereafter.
9.2 Either party may initiate the arbitration proceedings, for
which the provision is herein made, by notifying the opposing party, in writing,
of its demand to arbitrate. In any such arbitration there shall be appointed one
arbitrator who shall be selected in accordance with the AAA Commercial
Arbitration Rules. The place of arbitration shall be San Francisco, California.
The law applicable to the dispute shall be the laws of the State of California.
Accordingly, the California Uniform Arbitration Act shall apply to the
interpretation of the arbitration procedure; pursuant thereto, the arbitrator's
powers shall include, without limitation, the power to issue subpoenas for the
attendance of witnesses for hearing or deposition, and for other production of
books, records, documents or other evidence pursuant to California law.
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9.3 The parties agree that the award of the arbitrator shall
be the sole and exclusive remedy between them regarding any claims,
counterclaims, issues or accountings presented or plead to the arbitrator; that
the arbitrator shall be the final judge of both law and fact in arbitration of
disputes arising out of or relating to this Agreement, including the
interpretation of the terms of this Agreement. The parties further agree it
shall be the sole and exclusive duty of the arbitrator to determine the
arbitrability of issues in dispute and that neither party shall have recourse to
the court for such a determination.
10. General.
10.1 Waiver. Neither party shall, by mere lapse of time,
without giving notice or taking other action hereunder, be deemed to have waived
any breach by the other party of any of the provisions of this Agreement.
Further, the waiver by either party of a particular breach of this Agreement by
the other shall neither be construed as, nor constitute a, continuing waiver of
such breach or of other breaches by the same or any other provision of this
Agreement.
10.2 Severability. If for any reason a court of competent
jurisdiction or arbitrator finds any provision of this Agreement to be
unenforceable, the provision shall be deemed amended as necessary to conform to
applicable laws or regulations, or if it cannot be so amended without materially
altering the intention of the parties, the remainder of the Agreement shall
continue in full force and effect as if the offending provision were not
contained herein.
10.3 Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
considered effective upon personal service or upon depositing such notice in the
U.S. Mail, postage prepaid, return receipt requested and addressed to the
Chairman of the Board of Macromedia as its principal corporate address, and to
Executive at his most recent address shown on Macromedia's corporate records, or
at any other address which he may specify in any appropriate notice to
Macromedia.
10.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which taken together constitutes one and the same instrument and in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
10.5 Entire Agreement. The parties hereto acknowledge that
each has read this Agreement, understands it, and agrees to be bound by its
terms. The parties further agree that this Agreement and the referenced stock
option agreement and Proprietary Information and Inventions Agreement constitute
the complete and exclusive statement of the agreement between the parties and
supersedes all proposals (oral or written), understandings, representations,
conditions, covenants, and all other communications between the parties relating
to the subject matter hereof.
10.6 Assignment and Successors. Macromedia shall have the
right to assign its rights and obligations under this Agreement to an entity
which acquires substantially all of the
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assets of Macromedia. The rights and obligation of Macromedia under this
Agreement shall inure to the benefit and shall be binding upon the successors
and assigns of Macromedia.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
MACROMEDIA, INC. ACCEPTED BY EXECUTIVE
By: /s/ John C. Colligan /s/ Robert K. Burgess
--------------------------- -----------------------------
Name: John C. Colligan
---------------------------
Title: Chairman
---------------------------
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EXHIBIT A
EXECUTIVE BONUS PLAN
FY 1997
DEFINITIONS:
- - EPS
EARNINGS PER SHARE CALCULATED ON OPERATING INCOME
- - BACKLOG
REVENUE THAT COULD HAVE BEEN RECORDED IN THE PERIOD BUT WAS NOT
RECORDED DUE TO A MANAGEMENT DECISION. CAN BE SHIPPED THE FIRST
DAY OF THE NEXT QUARTER
PLAN DESCRIPTION
EXECUTIVES WILL BE PAID A QUARTERLY BONUS BASED ON:
- - EPS
WILL BE CALCULATED AS 60% OF TARGET BONUS. ACCELERATOR:
CAN EARN UP TO 200% OF TARGET AMOUNT.
- - BACKLOG
WILL REPRESENT 40% OF TARGET BONUS TO BE EARNED. ACCELERATOR:
CAN EARN UP TO 300% OF TARGET AMOUNT. BACKLOG WILL NOT RESET IF
TARGET IS NOT MET IN ANY QUARTER.
CASH COMPENSATION:
BONUS
100% 2X 3X
-------- -------- --------
BASE SALARY $ 300,000
EPS $120,000 $240,000 $240,000
BACKLOG $ 80,000 $160,000 $240,000
TOTAL BONUS $200,000 $400,000 $480,000
TOTAL COMPENSATION: $500,000 $700,000 $780,000
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MACROMEDIA, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered into as
of the date of grant set forth below (the "Date of Grant") by and between
Macromedia, Inc., a Delaware corporation (the "Company"), and the participant
named below ("Participant"). Capitalized terms not defined herein shall have the
meaning ascribed to them in the Company's 1992 Equity Incentive Plan (the
"Plan").
Participant: Robert K. Burgess
Social Security Number: ###-##-####
Address: 12 Cowell
Atherton, California 94027
Total Option Shares: 1,000,000
Exercise Price Per Share: $15.00
Date of Grant: July 11, 1996
Vesting Start Date: July 11, 1996
Expiration Date: July 31, 2006
1. Grant of Option. The Company hereby grants to Participant an
option (the "Option") to purchase the total number of shares of Common Stock
$0.001 par value, of the Company set forth above (the "Shares") at the Exercise
Price Per Share set forth above (the "Exercise Price"), subject to all of the
terms and conditions of this Agreement. The Option is intended to be a
"nonqualified stock option."
2. Vesting and Exercise Periods
2.1 Vesting and Exercise Periods of Option. The Option will
vest as to 25% of the Shares at the end of twelve (12) full months of continuous
service with the Company. Thereafter the option will vest in a series of
thirty-six (36) successive equal monthly installments over Participant's period
of service with the Company with each monthly installment equal to 2.08% of the
total number of shares in the option (20,833.33 shares) on the last day of each
month over the thirty-six (36) month period. For purposes of such Option,
Participant will be deemed to continue in service with the Company for so long
as he renders services as an employee, director or independent consultant to the
Company or any Subsidiary, Parent or Affiliate of the Company; provided,
however, that in the event that Participant is terminated as
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President of the Company whether actually or pursuant to a Constructive
Termination (as defined in Participant's Employment Agreement with the Company
attached hereto as Exhibit A) (the "Employment Agreement") or a Change of
Control (as defined in the Employment Agreement) occurs, the terms of Sections 7
and 8 of such Employment Agreement shall be applicable to and shall govern the
vesting and exercise periods of such Option and shall supersede all provisions
to the contrary in this Agreement.
2.2 Expiration. The Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or before
the Expiration Date.
3. Termination. Subject to any provisions to the contrary in the
Employment Agreement, which shall supersede the provisions of this Section 3,
the following provisions shall govern the exercise of this Option in the event
the Participant is Terminated.
3.1 Termination for Any Reason Except Death or Disability. If
Participant is Terminated for any reason, except death or Disability,
notwithstanding any other provision in this Agreement or in the Plan to the
contrary, the Option, to the extent that it would have been exercisable by
Participant on the date of Termination pursuant to this Agreement or under the
terms of the Employment Agreement, may be exercised by Participant no later than
one hundred eighty (180) days after the date of Termination or, if longer, the
dates set forth in the Employment Agreement, but in any event no later than the
Expiration Date.
3.2 Termination Because of Death or Disability. If Participant
is Terminated because of death or Disability of Participant, the Option, to the
extent that it is exercisable by Participant on the date of Termination, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the date of Termination, but in any event no later than
the Expiration Date.
3.3 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on 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.
3.4 For purposes of this Section 3, the Participant shall not
be deemed Terminated nor shall a date of Termination be deemed to have occurred
for so long as Participant continues to render services as an employee, director
or independent consultant.
4. Manner of Exercise
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death, Participant's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form attached
hereto as Exhibit B, or in such other form as may be approved by the Company
from time to time (the "Exercise Agreement"), which shall set forth, inter alia.
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Participant's election to exercise the Option and the number of Shares being
purchased. If someone other than Participant exercises the Option, then such
person must submit documentation reasonably acceptable to the Company that such
person has the right to exercise the Option.
4.2 Limitations on Exercise. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than 100 Shares unless it is exercised as to all
Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock 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 open public market; and (3) are clear of
all liens, claims, encumbrances or security interests;
(c) by waiver of compensation due or accrued to Participant for
services rendered;
(d) 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 (a "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 a 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
(e) by any combination of the foregoing.
4.4 Tax Withholding. In connection with the issuance of the
Shares upon exercise of the Option, Participant must pay or provide for any
applicable federal or state withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Upon the exercise of the Option in
accordance with this Section 4, the Company shall issue the purchased Shares
registered in the name of Participant, Participant's authorized assignee, or
Participant's legal representative, and shall deliver certificates representing
the Shares with the appropriate legends affixed thereto.
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6. Compliance with Laws and Regulations. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participants with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer.
7. Nontransferability of Option. The Option may not be transferred in
any manner other than by will or by the laws of decent and distribution and may
be exercised during the lifetime of Participant only by Participant. The terms
of the Option shall be binding upon the executors, administrators, successor and
assigns of Participant.
8. Tax Consequences. Set forth below is a brief summary as of the Date
of Grant of some of the federal and California tax consequences of exercise of
the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.
8.1 Exercise of Nonqualified Stock Option. Participant will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price. The Company will be required to
withhold from Participant's compensation or collect from Participant and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
8.3 Disposition of Shares. If the Shares are hold for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of the Option, any gain realized on disposition of the Shares will
be treated as long term capital gain for federal and California income tax
purposes.
9. Privileges of Stock Ownership. Participant shall not have any of the
rights of a shareholder with respect to any Shares until Participant exercises
the Option and pays the Exercise Price.
10. S-8 Registration. The Company shall register the Shares issuable
under this Option on a Form S-8 Registration Statement prior to the initial
vesting date hereunder and shall keep such Registration Statement in effect for
the entire period that this Option thereafter remains outstanding.
11. Entire Agreement. This Agreement and the Employment Agreement
constitutes the entire agreement of the parties and supersede all prior
undertakings and agreements with respect to the subject matter hereof. In the
event of any conflict between the terms of this Agreement and the terms of the
Employment Agreement, the terms of the Employment Agreement shall be
controlling.
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12. Notices. Any notices required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon; personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
13. Successor and Assigns. The Company any assign any of its rights
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns the Company. Subject to the restrictions
on transfer set forth herein, this Agreement shall be binding upon Participant
and Participant's heirs, executors, administrators, legal representatives,
successors and assigns.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
15. Acceptance. Participant hereby acknowledges receipt of this
Agreement. Participant has read and understands the terms and provisions
thereof, and accepts the Option subject to all the terms and conditions of this
Agreement. Participant acknowledges that there may be adverse tax consequences
upon exercise of the Option or disposition of the Shares and that Participant
should consult a tax adviser prior to such exercise or disposition.
16. Replacement Agreement. Participant shall have the right in his
discretion to require the Company to reissue a new Agreement in replacement of
this Agreement which more specifically incorporates the terms and provisions of
the Employment Agreement applicable to this Option.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed in duplicate by its duly authorized representative and Participant
has executed this Agreement in duplicate as of the Effective Date.
MACROMEDIA, INC. PARTICIPANT
By /s/ John C. Colligan /s/ Robert K. Burgess
------------------------------ -----------------------------
(Signature)
John C. Colligan Robert K. Burgess
- --------------------------------- -----------------------------
(Please print name) Please print name)
Chairman
- ---------------------------------
(Please print title)
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MACROMEDIA
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by
Macromedia, Inc., a Delaware corporation (the "Company"), and the compensation
now and hereafter paid to me, I hereby agree as follows:
1. Recognition of Company's rights; Nondisclosure.
At all times during the term of my employment and thereafter, I will hold in
strictest confidence and will not disclose, use, lecture upon or publish any of
the Company's Proprietary Information (defined below), except as such
disclosure, use or publication may be required in connection with my work for
the Company, or unless an officer of the Company expressly authorizes such in
writing. I hereby assign to the Company any rights I may have or acquire in such
Proprietary Information and recognition that all Proprietary Information shall
be the sole property of the Company and its assigns and the Company and its
assigns shall be the sole owner of all patent rights, copyrights, mask work
rights, trade secret rights, and all other rights throughout the world
(collectively, "Proprietary Rights") in connection therewith.
The term "Proprietary Information" shall mean trade secrets,
confidential knowledge, data, or any other proprietary information of the
Company. By way of illustration but not limitation, "Proprietary Information"
includes (a) inventions, mask works, trade secrets, ideas, processes, formulas,
sources and object codes, data, programs, other works of authorship, cell lines,
know-how, improvements, discoveries, developments, designs, and techniques (
hereinafter collectively referred to as "Inventions"); and (b) information
regarding plans for research, development, new products, marketing and selling,
business plans, budgets and unpublished financial statements, licenses, prices
and costs, suppliers and customers, and information regarding the skills and
compensation of other employees of the Company.
2. Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose (to anyone other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing
3. Assignment of Inventions.
(a) I hereby assign to the Company all my right, title, and interest
in and to any and all Inventions (and all Proprietary Rights with respect
thereto) whether or not patentable or registrable under copyright or similar
statutes, made or conceived or reduced to practice or learned by me, either
alone or jointly with others, during the period of my employment with the
Company. I recognize that this Agreement does not require assignment of any
invention which qualifies fully for protection under Section 2870 of the
California Labor Code (hereinafter "Section 2870"), which provides as follows:
(i) Any provision in an employment agreement which provides
that an employee shall assign, or offer to assign, any of his or her rights in
an invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for
inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee
for the employer.
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(ii) To the extent a provision in an employment agreement
purports to require an employee to assign an invention otherwise excluded from
being required to be assigned under subdivision (a), the provision is against
the public policy of the this state and is unenforceable.
(b) I also assign to or as directed by the Company all my right,
title, and interest in and to any and all Inventions, full title to which is
required to be in the United States by a contract between the Company and the
United States or any of its agencies.
(c) I acknowledge that all original works of authorship which are made
by me (solely or jointly with others) within the scope of my employment with the
Company and which are protectable by copyright are "works made for hire," as
that term is defined in the United States Copyright Act (17 U.S.C., Section
101). Inventions assigned to or as directed by the Company by this paragraph 3
are hereinafter referred to as "Company Inventions."
4. Enforcement of Proprietary Rights. I will assist the Company in
every proper way to obtain and from time to time enforce United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify, and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining, and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify , and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate for the time actually spent by
me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
action specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officer and agents as my agent and
attorney in fact, to act for and in my behalf to execute, verify, and file any
such documents and to do all other lawfully permitted acts to further the
purposes of the preceding paragraph thereon with the same legal force and effort
as if executed by me. I hereby waive and quit claim to the Company any and all
claims, of any nature whatsoever, which I now or may hereafter have for
infringement of any Proprietary Rights assigned hereunder to the Company.
5. Obligation to Keep Company Informed. During the period of my
employment, I will promptly disclose to the Company fully and in writing and
will hold in trust for the sole right and benefit of the Company any and all
Inventions. In addition, after termination of my employment, I will disclose all
patent applications filed by me within a year after termination of employment.
At the time of each disclosure, I will advise the Company in writing of any
Inventions that I believe fully qualify for protection under section 2870; and I
will at that time provide the Company in writing all evidence necessary to
substantiate that belief. I understand that the company will keep in confidence
and will not disclose to third parties without my consent any proprietary
information disclosed in writing to the Company pursuant to this Agreement
relating to Inventions that qualify fully for protection under the provisions of
section 2870. I will preserve the confidentiality of any Invention that does not
fully qualify for protection under section 2870.
6. Prior Inventions. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit A attached hereto a complete list of all Inventions that I
have, alone or jointly with others, conceived, developed, or reduced to practice
or caused to be conceived, developed, or reduced to practice prior to the
commencement of my employment with the Company, that I consider to be my
property or the property of third parties and that I wish to have excluded from
the scope of this Agreement. If disclosure of any such Inventions on Exhibit A
would cause me to violate any prior confidentiality agreement, I understand that
I am not to list such Inventions in Exhibit A but am to inform the Company that
all such Inventions have been listed for that reason.
7. Additional Activities. I agree that during the period of my
employment by the Company I will not, without the Company's express written
consent, engage in any employment or business activity other than for the
Company, and for the period of my employment by the Company and for one (1) year
after
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the date of termination of my employment and I will not (i) induce any employee
of the Company to leave the employ of the Company or (ii) solicit the business
of any client or customer of the Company (other than on behalf of the Company).
8. No Improper use of Materials. During my employment by the Company I
will not improperly use or disclose any confidential information or trade
secrets, if any, of any former employee or any other person to whom I have an
obligation of confidentiality, and will not bring onto the premises of the
Company any unpublished documents or any property belonging to any former
employer or any other person to whom I have an obligation of confidentiality
unless consented to in writing by that former employer or person.
9. No Conflicting Obligation. I represent that my performance of all
the terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
10. Return of Company Documents. When I leave the employ of the
Company, I will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, molecules, cells, and documents together with
all copies thereof, and any other material containing or disclosing any Company
Inventions, Third Party Information, or Proprietary Information of the Company.
I further agree that any property situated on the Company's premises and owned
by the Company, including disks and other storage media, filing cabinets, or
other work areas, is subject to inspection by Company personnel at any time with
or without notice. Prior to leaving, I will cooperate with the Company in
completing and signing the Company's termination statement for technical and
management personnel.
11. Legal and Equitable Remedies. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by conjunction, specific
performance, or other equitable relief, without bond, without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.
12. Notices. Any notices required or permitted thereunder shall be
given to the appropriate party at the address specified below or at such other
address as the party shall specify in writing. Such notice shall be deemed given
upon personal delivery to the appropriate address or if sent by certified or
registered mail, three days after the date of mailing.
13. General Provisions.
13.1 Governing Law. This Agreement will be governed by and construed
according to the laws of the State of California.
13.2 Entire Agreement. This Agreement sets forth the entire agreement
and understanding between the Company and me relating to the subject matter
hereof and supersedes and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this agreement, will be effective unless in writing signed by the party to
be charged. Any subsequent change or changes in my duties, salary, or
compensation will not affect the validity or scope of this Agreement. As used in
this Agreement, the period of my employment includes any time during which I may
be retained by the Company as a consultant.
13.3 Severability. If one or more of the provisions in this Agreement
are deemed unenforceable by law, then the remaining provisions will continue in
full force and effect.
13.4 Predecessor, Successors, and Assigns. This Agreement will be
binding upon my heirs, executors, administrators, and other legal
representatives and will be for the benefit of the Company, its predecessor, its
successors, and its assigns. The term "Company" as used herein shall be deemed
to also refer to the Company's predecessor, Macromedia, Inc., a Delaware
corporation.
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13.5 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
13.6 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.
13.7 Waiver. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
This Agreement shall be effective as of the first day of my employment
with the Company, namely: November 1, 1996.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
CONFIDENTIAL INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT SCHEDULE A TO THIS AGREEMENT.
Dated: August 25, 1996
/s/ Robert K. Burgess
-------------------------------------------
Signature
Robert K. Burgess
-------------------------------------------
Print Name
12 Cowell Lane
-------------------------------------------
Address
Atherton
-------------------------------------------
-------------------------------------------
ACCEPTED AND AGREED TO:
Macromedia
A Delaware Corporation
600 Townsend Street
San Francisco, CA 94103
By: /s/ John C. Colligan
-------------------------------------
(Macromedia Representative)
Chairman
-------------------------------------
(Title)
August 25, 1996
-------------------------------------
(Date)
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EXHIBIT A
MACROMEDIA
600 Townsend Street
San Francisco, CA 94103
Gentlemen:
1. The following is a complete list of all inventions or improvements
relevant to the subject matter of my employment by Macromedia, Inc. (the
"Company") that have been made or conceived or first reduced to practice by me
alone or jointly with others prior to my engagement by the Company:
( )
( ) No inventions or improvements.
( )
( ) See below:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
( )
( ) Due to confidentiality agreements with prior employer, I
cannot certain inventions that would otherwise be included on
the above-described list.
2. I propose to bring to my employment the following devices, materials
and documents of a former employer or other person to whom I have an obligation
of confidentiality that are not generally available to the public, which
materials and documents may be used in my employment pursuant to the express
written authorization of my former employer or such other person (a copy of
which is attached hereto):
( )
( ) No materials.
( )
( ) See below:
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----------------------------------------------------------------------
----------------------------------------------------------------------
( )
( ) Additional sheets attached.
Date: , 19
Very truly yours,
-----------------------------
Employee
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