MACROMEDIA, INC.
OFFER TO EXCHANGE OUTSTANDING OPTIONS
THIS OFFER EXPIRES AT 5:00 P.M. PACIFIC TIME ON JUNE 4, 2001 UNLESS IT IS
EXTENDED
Starting May 4, 2001, Macromedia, Inc. is offering its option holders
the opportunity to exchange outstanding stock options for new options granted
more than six months and a day from the date this offer expires, with an
exchange price set at the then-prevailing fair market value. Any options that
were granted and are outstanding under the Macromedia, Inc. 1992 Equity
Incentive Plan, the Macromedia, Inc. 1999 Stock Option Plan and the Andromedia,
Inc. 1999 Stock Plan (collectively, the "PLANS"), along with some non-plan
option grants originally granted by Macromedia, are eligible for this exchange
offer. We are making this offer subject to the terms and conditions set forth in
this offer to exchange and in the election form. The offer expires on June 4,
2001, unless we extend the offer period.
If you choose to exchange any of your stock options, you MUST also
exchange and agree to cancel any stock options granted on or after December 1,
2000. This offer is subject to other conditions, which we describe in Sections 5
and 6 of this offer. The number of shares of common stock covered by the new
options to be granted to each option holder will be equal to the number of
shares subject to the options exchanged by that option holder and accepted for
exchange. The new options will be granted on a date between December 5, 2001 and
January 21, 2002 (we call this the "REPLACEMENT GRANT DATE").
If you elect to exchange options as described in this offer and your
offer is accepted, we will, subject to the conditions set forth in Section 5,
grant you a new option, pursuant to a new stock option agreement. The exercise
price of the new option will be equal to the last reported sale price of our
common stock on the Nasdaq National Market on the date preceding the replacement
grant date. The new options will be nonqualified stock options and will have the
same vesting schedule as the options that you exchanged, except that you will
not be able to exercise the new options for one week following the replacement
grant date, to let us handle administrative matters relating to the new grant.
The other terms and conditions of the new options will be determined by the
Compensation Committee.
ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR
THE BOARD MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD ELECT TO
EXCHANGE YOUR OPTIONS. YOU MUST MAKE YOUR OWN DECISION WHETHER TO ELECT TO
EXCHANGE YOUR OPTIONS.
Shares of our common stock are quoted on the Nasdaq National Market
under the symbol "MACR." On May 3, 2001, the closing sale price of the common
stock on the Nasdaq National Market was $20.60 per share. WE RECOMMEND THAT YOU
OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK AND CONSULT WITH YOUR OWN
ADVISORS BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS.
YOU SHOULD DIRECT QUESTIONS ABOUT THIS OFFER OR REQUESTS FOR ASSISTANCE
OR FOR ADDITIONAL COPIES OF THE OFFER TO EXCHANGE OR THE ELECTION FORM TO
DARRELL HONG, BY EMAIL AT DHONG@MACROMEDIA.COM, OR BY TELEPHONE AT (415)
252-6860 OR TO FRANCI CLAUDON, BY EMAIL AT FCLAUDON@MACROMEDIA.COM, OR BY
TELEPHONE AT (415) 252-4086.
<PAGE> 2
IMPORTANT
If you wish to elect to exchange some or all of your options, you must
complete and sign the election form in accordance with its instructions, and
send it and any other required documents to Darrell Hong or Franci Claudon by
fax at (415) 252-2348 or by mail to Darrell Hong or Franci Claudon, Macromedia,
Inc., 600 Townsend St., San Francisco, CA 94103, no later than 5:00 p.m. Pacific
Time on June 4, 2001.
We are not making this offer to, and we will not accept any election to
exchange options from, option holders in any jurisdiction in which the offer or
the acceptance of any election to exchange would not be in compliance with the
laws of such jurisdiction. However, we may at our discretion take any actions
necessary for us to make this offer to option holders in any such jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR
BEHALF AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM ELECTING TO
EXCHANGE YOUR OPTIONS PURSUANT TO THE OFFER. YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE
NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION
IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS
CONTAINED IN THIS DOCUMENT OR IN THE ELECTION FORM. IF ANYONE MAKES ANY
RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST
NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN
AUTHORIZED BY US.
RELEVANT DATES
COMMENCEMENT DATE: May 4, 2001, the date of this
exchange offer
EXPIRATION DATE: June 4, 2001, unless extended
REPLACEMENT GRANT DATE: Date to be determined, between
December 5, 2001 and January 21, 2002
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY TERM SHEET..................................................................................................1
THE OFFER .........................................................................................................10
1. NUMBER OF OPTIONS; EXPIRATION DATE......................................................................10
2. PURPOSE OF THE OFFER....................................................................................11
3. PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS.............................................................12
4. WITHDRAWAL RIGHTS.......................................................................................13
5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND CANCELLATION AND ISSUANCE OF NEW OPTIONS.........................14
6. CONDITIONS OF THE OFFER.................................................................................15
7. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS......................................................17
8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS................................................18
9. INFORMATION CONCERNING MACROMEDIA.......................................................................18
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS...............19
11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF THE OFFER.....................20
12. LEGAL MATTERS; REGULATORY APPROVALS.....................................................................21
13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES...........................................................21
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT..............................................................23
15. FEES AND EXPENSES.......................................................................................24
16. ADDITIONAL INFORMATION..................................................................................24
17. MISCELLANEOUS...........................................................................................25
FINANCIAL INFORMATION.............................................................................................F-1
SENT UNDER SEPARATE COVER: Election form
</TABLE>
<PAGE> 4
SUMMARY TERM SHEET
This section answers some of the questions you may have about this
offer. It is only a summary, so you should read the remainder of this offer to
exchange and the election form carefully, because the summary is not complete
and additional important information is contained in the remainder of this offer
to exchange and the election form.
GENERAL QUESTIONS ABOUT THE PROGRAM
1. WHAT ARE THE ELIGIBLE OPTIONS IN THIS OFFER TO EXCHANGE?
We are offering to exchange all options to purchase shares of
Macromedia, Inc. common stock that were granted and are outstanding under the
Macromedia, Inc. 1992 Equity Incentive Plan, the Macromedia, Inc. 1999 Stock
Option Plan and the Andromedia, Inc. 1999 Stock Plan (collectively, the
"PLANS"), along with some non-plan option grants that were originally granted by
Macromedia, for new options. Any options not listed above, including, but not
limited to, those granted by Allaire Corporation and assumed by Macromedia as
part of our merger, are not included in this offer. See Section 1 of the Offer.
2. WHY ARE WE MAKING THE OFFER TO EXCHANGE?
Many of you have stock options that are priced significantly above our
current stock price and the recent trading prices for our stock. These options
have lost much of the incentive benefit that we originally intended them to
have. By making this offer, we intend to provide you with the benefit of owning
options that, over time, may have a greater potential to increase in value. We
believe the offer creates better performance incentives for employees and
thereby maximizes shareholder value.
This option exchange program is voluntary. You choose whether to keep
your current stock options at their existing exercise price or to cancel those
options in exchange for new options to be granted on a date between December 5,
2001 and January 21, 2002 (we call this the "REPLACEMENT GRANT DATE"). The new
options would be nonqualified stock options, would cover the same number of
shares as the options you validly tendered for exchange, and would have an
exercise price equal to the last sale price of our common stock on the trading
day immediately preceding the replacement grant date. See Section 2 of the
Offer.
3. WHO IS ELIGIBLE?
Except for non-executive members of the Macromedia Board of Directors,
any current employee of Macromedia or any subsidiary of Macromedia who holds a
current stock option under one or more of the Plans (along with some non-plan
option grants), is eligible to participate in the program. See Section 1 of the
Offer.
4. DOES THE OFFER TO EXCHANGE EXTEND TO ALL OUTSTANDING MACROMEDIA OPTIONS?
No. The offer to exchange extends only to the eligible options
identified in question 1.
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5. WILL OVERSEAS EMPLOYEES BE ELIGIBLE TO PARTICIPATE?
Yes, subject to the applicable laws of the corresponding jurisdiction.
6. WHEN DOES THE EXCHANGE OFFER START?
May 4, 2001.
7. WHEN DOES THE OFFER END?
To participate, you must make a voluntary and valid election that is not
subsequently withdrawn, no later than 5:00 p.m. Pacific Time on June 4, 2001
(the "EXPIRATION DATE").
8. WHAT HAPPENS IF I ELECT TO PARTICIPATE?
If you elect to participate in the exchange offer by the expiration date
and we accept your election, we will cancel your outstanding stock options
surrendered by you for exchange in the offer by the expiration date. In
exchange, subject to the conditions set forth in Section 5, you will receive a
new option to purchase the same number of shares as your canceled option, to be
issued on the replacement grant date, with a new exercise price per share that
is equal to the last sale price of Macromedia's stock on the trading day
immediately preceding the replacement grant date.
Your new options granted in this program will have the same vesting
schedule as your canceled options. The vesting start date for the replacement
option will be the same vesting start date that applied to the canceled option.
You will receive vesting credit for the time between the date we cancel your
options, which we expect to be June 4, 2001, and the replacement grant date as
if the options you elect to cancel were outstanding throughout this period. See
question 36 below for an example.
If you wish to exchange any of your options, you must also agree to
cancel all options granted to you on or after December 1, 2000, regardless of
their exercise price.
9. WHAT DO I NEED TO DO TO PARTICIPATE IN THE OFFER TO EXCHANGE?
Complete the election form, sign it, and ensure that Darrell Hong or
Franci Claudon receives it no later than the expiration date and follow all
other applicable instructions set forth in this offer and the election form. You
can return your form either by fax to (415) 252-2348, or by mail to Darrell Hong
or Franci Claudon, Macromedia, Inc., 600 Townsend St., San Francisco, CA 94103.
See Section 3 of the Offer.
10. IS THIS A REPRICING?
This is not an option repricing in the traditional sense. Under a
traditional stock option repricing, your options would be immediately replaced
with new options at a lower option price. If you participate in this exchange,
you surrender your option or options and wait more than six months to be granted
a new option at the last sale price of Macromedia stock on the trading day
immediately preceding the replacement grant date. Because the new options will
be priced on a future date, the exercise price of the new options may be higher
than the exercise price of the surrendered options. See Section 11 of the Offer.
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<PAGE> 6
11. WHY CAN'T MACROMEDIA JUST REPRICE MY OPTIONS?
In 1998, the Financial Accounting Standards Board adopted unfavorable
accounting charge consequences for companies that reprice options. If we simply
repriced options, our profitability could be in serious jeopardy, because we
would be required to take a charge against earnings on any future appreciation
of the repriced options. These charges would continue for the entire term of the
repriced options - as long as ten years. We do not believe that jeopardizing our
profitability in this way is in the best interest of our employees or our
stockholders. This offer has been structured to avoid this variable plan
accounting treatment. See Section 11 of the Offer.
12. WHY CAN'T I JUST BE GRANTED ADDITIONAL OPTIONS?
Granting large numbers of new options would have a negative impact on
our dilution, outstanding shares and earnings per share. See Sections 2 and 11
of the Offer.
13. WOULDN'T IT BE EASIER TO JUST QUIT AND GET REHIRED?
This is not an available alternative because a re-hire and re-grant
within six months of the option cancellation date would be treated the same as a
repricing. Again, such a repricing would cause us to incur a variable accounting
charge against earnings.
14. IF I ELECT TO PARTICIPATE, WHAT WILL HAPPEN TO MY CURRENT OPTIONS?
Options that you designate to be exchanged under this program will be
canceled. See Section 5 of the Offer.
15. WHAT IS THE DEADLINE TO ELECT TO EXCHANGE AND HOW DO I DO SO?
The deadline to elect to participate in this program, which we also
refer to as the "EXPIRATION DATE", is 5:00 p.m. Pacific Time on June 4, 2001,
unless we extend it. This means that Darrell Hong or Franci Claudon must receive
your completed election form by this deadline. We may, in our discretion, extend
the offer at any time, but we cannot assure you that the offer will be extended
or, if it is extended, for how long. If we extend the offer, we will make an
announcement of the extension no later than the next business day following the
previously scheduled expiration of the offer period. If we extend the offer
beyond that time, you must deliver your completed election form before the
extended expiration of the offer.
We reserve the right to reject any or all options elected for exchange
that we determine are not in appropriate form or that we determine are unlawful
to accept. Otherwise, we will accept properly and timely elected options that
are not validly withdrawn. Subject to our rights to extend, terminate, and amend
the offer, we currently expect that we will accept all such properly elected
options promptly after the expiration of the offer.
16. WHAT WILL HAPPEN IF I DO NOT TURN IN MY FORM BY THE DEADLINE?
If you do not turn in your election form by the deadline, you will not
participate in the option exchange, and all stock options you currently hold
will remain intact at their original price and under their original terms. See
Section 3 of the Offer.
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17. DURING WHAT PERIOD OF TIME MAY I WITHDRAW PREVIOUSLY ELECTED OPTIONS?
You may withdraw any options that you elect to exchange up until 5:00
p.m. Pacific Time on June 4, 2001 or any extension of that date. To withdraw
your election to exchange, you must deliver a completed notice of withdrawal
form to Darrell Hong or Franci Claudon before the deadline. Once you have
withdrawn options from the exchange offer, you may re-elect to exchange options
only by again following the delivery procedures described above, but you may
only do so before the deadline.
Once the offer expires, you may not make any changes to your election to
participate in the offer - any decisions you make to participate or not to
participate are irrevocable after 5:00 p.m. Pacific Time on June 4, 2001 or any
extension of that date.
18. AM I ELIGIBLE TO RECEIVE FUTURE GRANTS DURING THE SIX-MONTH PERIOD IF I
PARTICIPATE IN THIS EXCHANGE?
Because of the unfavorable accounting charge consequences, participants
in this program are not eligible for any additional stock option grants until
after the replacement grant date. Even if we would normally have granted you an
option in this time period, we will not do so if you elect to participate in the
offer to exchange options.
Because of this limitation, refresh grants will not be made this summer.
The earliest that such grants may be made is after the replacement grant date.
See Section 5 of the Offer.
19. ARE THERE ANY TAX CONSEQUENCES TO MY PARTICIPATION IN THIS EXCHANGE?
If you exchange your options for new options, you will not be required
under current law to recognize income for U.S. federal income tax purposes at
the time of the exchange. We believe that the exchange will be treated as a
non-taxable exchange for U.S. federal income tax purposes. Further, at the date
of grant of the new options, you will not be required under current law to
recognize income for U.S. federal income tax purposes. The grant of options does
not result in recognition of taxable income. In the case of nonqualified stock
options, taxable income is recognized upon exercise.
Special considerations may apply to employees located abroad. In some
countries, the application of local taxation rules may have an impact upon the
new grant. For employees in the UNITED KINGDOM, which has adopted new laws
governing the exercise of stock options awarded after April 5, 1999, the grant
of the new option will be subject to the execution of a joint election between
you and Macromedia or any subsidiary of Macromedia to provide for the shifting
of any Secondary Class 1 National Insurance Contribution liability in connection
with the EXERCISE, ASSIGNMENT, RELEASE OR CANCELLATION of the option from
Macromedia or any subsidiary to you. This tax is currently set at 11.9% of the
difference between the strike price and the fair market value of the stock at
the time of exercise. By accepting the new option, to the extent allowable by
applicable law, you will be consenting to and agreeing to satisfy any liability
that Macromedia and/or any subsidiary realizes with respect to Secondary Class 1
National Insurance Contribution payments required to be paid by Macromedia
and/or any subsidiary in connection with the EXERCISE, ASSIGNMENT, RELEASE OR
CANCELLATION of the option. In addition, if you accept the new option, you will
be authorizing Macromedia or the subsidiary to withhold any such Secondary Class
1 National Insurance Contributions from the payroll AT ANY TIME or from the sale
of a sufficient number of shares upon EXERCISE, ASSIGNMENT, RELEASE OR
CANCELLATION of the option.
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<PAGE> 8
In the alternative, you agree to make payment on DEMAND FOR such contributions
to Macromedia or any subsidiary that will remit such contributions to the Inland
Revenue. If additional consents and/or any elections are required to accomplish
the foregoing shifting of liability, you agree to provide them promptly upon
request. If you do not enter into the joint election described above at the same
time that you accept the new option, or if the joint election is revoked at any
time by the Inland Revenue, Macromedia will have the right to cancel the new
option without further liability.
We recommend that you consult your own tax advisor with respect to the
foreign, federal, state and local tax consequences of participating in the
program. See Section 13 of the Offer.
20. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE?
We understand that this will be a challenging decision for many
employees. The program does carry considerable risk, and there are no guarantees
of our future stock performance. Because we will not grant new options until at
least six months and one day after the date we cancel the options accepted for
exchange, the new options may have a higher exercise price than some or all of
your current options. So, the decision to participate must be your personal
decision, and it will depend largely on your own assumptions about the future
overall economic environment, the performance of the overall market and
companies in our industry, and about our business and stock price. We recommend
that you obtain current market quotations for our common stock and consult with
your own advisors before deciding whether to elect to exchange your options.
21. WHAT DOES THE BOARD OF DIRECTORS THINK OF THE OFFER?
Although the Board has approved this offer, neither Macromedia nor the
Board makes any recommendation as to whether you should elect to exchange or
refrain from exchanging your options. See Section 2 of the Offer.
22. WHAT IF MY EMPLOYMENT AT MACROMEDIA ENDS BETWEEN THE DATE MY OPTIONS ARE
CANCELED AND THE REPLACEMENT GRANT DATE?
The election form will not be revocable after the election deadline
passes. Therefore, if you leave Macromedia (or one of its subsidiaries) for any
reason after the deadline but before your new option is granted, you will not
have a right to any stock options that were previously canceled, and you will
not have a right to the new option that would have been issued on the
replacement grant date if you had not left. THEREFORE, IF YOU ARE NOT AN
EMPLOYEE OF MACROMEDIA OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU ELECT TO
EXCHANGE OPTIONS THROUGH THE REPLACEMENT GRANT DATE, YOU WILL NOT RECEIVE ANY
NEW OPTIONS IN EXCHANGE FOR YOUR OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE.
YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR THE OPTIONS ELECTED TO BE
EXCHANGED IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS
THROUGH THE REPLACEMENT GRANT DATE. Please speak to your manager if you have
specific questions about your position. See Section 5 of the Offer.
23. WHAT ARE THE CONDITIONS TO THE OFFER?
The offer is subject to a number of conditions, which are described in
Section 6.
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SPECIFIC QUESTIONS ABOUT THE CANCELED OPTIONS
24. WHICH OPTIONS CAN BE CANCELED?
If you elect to participate in this offer, all options that you elect to
cancel will be canceled, and all options granted to you on or after December 1,
2000 will be canceled. Please refer to the election form for a list of options
that you may elect to exchange. See Section 1 of the Offer.
25. CAN I CANCEL THE REMAINING PORTION OF AN OPTION THAT I HAVE ALREADY
PARTIALLY EXERCISED?
Yes, any outstanding, unexercised options can be canceled. The
replacement grant will be one-for-one but only in replacement of canceled
options.
26. CAN I SELECT ONE PART OF AN OPTION GRANT TO CANCEL, OR CANCEL AN OPTION
GRANT ONLY AS TO CERTAIN SHARES?
No, we cannot cancel portions of outstanding option grants.
27. IF I CHOOSE TO PARTICIPATE, WHAT WILL HAPPEN TO MY OPTIONS THAT WILL BE
CANCELED?
If you elect to participate in this program, then on the expiration
date, we will cancel all of your outstanding options that were granted on or
after December 1, 2000, plus any other options that you elected to cancel. You
will not be able to receive any option grants until the replacement grant date,
when your new grant will be issued. See Section 5 of the Offer.
SPECIFIC QUESTIONS ABOUT THE NEW OPTIONS
BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL AT LEAST SIX MONTHS AND ONE
DAY AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS
MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. WE
RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK AND
CONSULT WITH YOUR OWN ADVISORS BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR
OPTIONS.
28. WHAT WILL BE MY NEW OPTION SHARE AMOUNT?
The number of shares covered by your new option will be equal to the
number of shares canceled under your old stock option or options. Each new
option will be granted pursuant to a new option agreement between you and us.
29. WHAT WILL BE MY NEW OPTION EXERCISE PRICE?
The exercise price for the new options, which will be granted on the
replacement grant date, will be the closing sale price of our common stock on
the Nasdaq National Market on the date preceding the replacement grant date.
30. WHAT WILL MY NEW OPTION TYPE BE, AN INCENTIVE STOCK OPTION OR A
NONQUALIFIED STOCK OPTION?
The new options will be nonqualified stock options.
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31. WHEN WILL I RECEIVE MY NEW OPTIONS?
We will grant the new options on the replacement grant date. If we
cancel options elected for exchange on the expiration date, the replacement
grant date of the new options will be between December 5, 2001 and January 21,
2002. Note that we will require additional time to make the new options
available to you and to provide you with documentation of the grant, therefore
you will not be able to exercise any of your options for one week following the
replacement grant date. See Section 5 of the Offer.
32. WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE
OF THE OFFER?
If we were to grant the new options on any date earlier than six months
and one day after the date we cancel the options accepted for exchange, we would
be required to record a variable compensation expense against our earnings. By
deferring the grant of the new options for at least six months and one day, we
believe we will not have to record such a compensation expense. Please also see
question 11 above.
33. WHEN WILL I RECEIVE MY NEW OPTION NOTICE, AND WHEN WILL I BE ABLE TO
EXERCISE?
You will not be able to exercise the new options for one week following
the replacement grant date. We anticipate that the notice of your new option
will be sent to you within one week after the replacement grant date.
34. WHAT WILL BE THE VESTING SCHEDULE OF MY NEW OPTIONS?
Your new options granted in this program will have the same vesting
schedule as your canceled options. The vesting start date for the replacement
option will be the same vesting start date that applied to the canceled option.
You will receive vesting credit for the time between the cancellation date,
which we expect to be June 4, 2001, and the replacement grant date as if the
options you elect to cancel were outstanding throughout this period. See
question 36 below for an example.
35. WHAT WILL BE THE TERMS AND CONDITIONS OF MY NEW OPTIONS?
Except for the new option exercise price and the one week exercise
black-out following the replacement grant date, the terms of the new options
will be determined by the Compensation Committee.
36. CAN I HAVE AN EXAMPLE OF AN OFFER TO EXCHANGE?
The following is a representative example of an offer to exchange for a
hypothetical employee. Your situation is likely to vary in significant respects.
<TABLE>
<CAPTION>
Assumptions:
<S> <C>
Original Grant Date: September 10, 2000
Original Stock Option: 1,000 shares
Original Stock Option Price: $60.64 per share
</TABLE>
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Original Vesting Schedule: 250 shares vest September 10,
2001, and 2.083% of the shares
vest monthly thereafter until
fully vested on September 10,
2004.
HYPOTHETICAL Stock Price on
Replacement Grant Date
On or about December 5, 2001: $30 per share
If you choose to participate in the exchange offer, using the above
assumptions for the sake of illustration, on the replacement grant date
you would have:
New Option: 1,000 shares
New Option Price: $30 per share
New Option Vesting: 291 shares would be vested on
the replacement grant date, and
2.083% of the shares vest
monthly thereafter until fully
vested on September 10, 2004
(assuming your employment with
us continues throughout that
time).
If you do not participate in the exchange offer, on the replacement
grant date you would have:
Original Stock Option: 1,000 shares
Original Stock Option Price: $60.64 per share
Original Vesting Schedule: 291 shares would be vested on
the replacement grant date, and
2.083% of the shares vest
monthly thereafter until fully
vested on September 10, 2004
(assuming your employment with
us continues throughout that
time).
37. WHAT HAPPENS IF MACROMEDIA IS ACQUIRED DURING THE PERIOD AFTER MY
OPTIONS ARE CANCELED BUT BEFORE I AM GRANTED NEW OPTIONS?
While we currently have no plans to enter into any such transaction, it
is possible that prior to the replacement grant we might enter into an agreement
for a merger or other similar transaction. These types of transactions could
have substantial effects on our stock price, including substantial stock price
appreciation. Depending on the structure of a transaction, option holders
participating in this offer might be deprived of any further price appreciation
in the common stock or deprived of the opportunity to participate in the option
exchange program.
We reserve the right, in the event of a merger or similar transaction,
to take any actions we deem necessary or appropriate to complete a transaction
that our board of directors believes is in the best interest of our company and
our stockholders. This could include terminating your right to receive
replacement options under this offer. If we were to terminate your right to
receive replacement options under this offer in connection with such
transaction, employees who tendered options for cancellation pursuant to this
offer would not receive options to purchase our stock, or securities of the
acquiror or any other consideration for their tendered options.
Having said the above, we understand that it is generally not in the
best interest of the Company or its shareholders to take actions that are likely
to create employee ill will.
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See Section 5 of the Offer.
38. AFTER I RECEIVE MY NEW OPTION, WHAT HAPPENS IF I AGAIN END UP
UNDERWATER?
We are conducting this offer only at this time, considering the unusual
stock market conditions that have affected many companies throughout the
country. This is therefore considered a one-time offer and we do not expect to
offer it again in the future. As your stock options are valid for ten years from
the date of initial grant, subject to continued employment, the price of our
common stock may appreciate over the long term even if your options are
underwater for some period of time after the grant date of the new options.
HOWEVER, WE CAN PROVIDE NO ASSURANCE AS TO THE PRICE OF OUR COMMON STOCK AT ANY
TIME IN THE FUTURE. See Section 2 of the Offer.
39. WHAT DO I NEED TO DO TO PARTICIPATE IN THE EXCHANGE PROGRAM?
To participate, you must complete the election form, sign it and make
sure that Darrell Hong or Franci Claudon receives it no later than the
expiration date. You can return your form either by fax to Darrell Hong or
Franci Claudon at (415) 252-2348, or by mail to Darrell Hong or Franci Claudon,
Macromedia, Inc., 600 Townsend St., San Francisco, CA 94103. See Section 3 of
the Offer.
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THE OFFER
1. NUMBER OF OPTIONS; EXPIRATION DATE.
Upon the terms and subject to the conditions of the exchange offer, we
will grant new options to purchase common stock in exchange for all eligible
options that are properly elected for exchange and not withdrawn in accordance
with Section 4 before the "expiration date," as defined below. The options that
are eligible for exchange (the "ELIGIBLE OPTIONS") are any options that were
granted and are outstanding under the Macromedia, Inc. 1992 Equity Incentive
Plan, the Macromedia, Inc. 1999 Stock Option Plan and the Andromedia, Inc. 1999
Stock Plan (collectively, the "PLANS"), along with some non-plan option grants
that were originally granted by Macromedia. If your options are properly elected
for exchange and accepted for exchange, you will be entitled to receive new
options to purchase the number of shares of our common stock that is equal to
the number of shares subject to the options that you elected to exchange,
subject to adjustments for any stock splits, stock dividends and similar events.
All new options will be nonqualified stock options subject to the terms of a new
option agreement between you and us.
IF YOU ARE NOT AN EMPLOYEE OF MACROMEDIA OR ONE OF OUR SUBSIDIARIES FROM
THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW
OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR ELECTED
OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE, OR ANY OTHER CONSIDERATION FOR
THOSE CANCELED OPTIONS. YOU WILL NOT BE ABLE TO EXERCISE ANY OPTIONS SURRENDERED
FOR EXCHANGE AFTER THEY HAVE BEEN ACCEPTED FOR EXCHANGE.
EMPLOYEES RESIDING ABROAD WHO WISH TO PARTICIPATE IN THE EXCHANGE MAY BE
SUBJECT TO FURTHER RESTRICTIONS AND REQUIREMENTS, INCLUDING THE REQUIRED TAX
ELECTION DISCUSSED IN SECTION 13 BELOW.
The term "EXPIRATION DATE" means 5 p.m. Pacific Time on June 4, 2001,
unless, in our discretion, we have extended it to a later time and date, in
which event the term "expiration date" refers to the latest time and date at
which the offer, as so extended, expires. See Section 14 for a description of
our rights to extend, delay, terminate and amend the offer.
If we decide to take any of the following actions, we will notify you
and extend the offer for a period of ten business days after the date of such
notice if the offer is scheduled to expire within that time frame:
(a) increase or decrease the amount of consideration offered for the
options; or
(b) decrease the number of options eligible for exchange in the
offer; or
(c) increase the number of options eligible for exchange in the
offer by an amount greater than 10% of the shares of common
stock issuable upon exercise of the options that are subject to
the offer immediately prior to the increase.
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<PAGE> 14
2. PURPOSE OF THE OFFER.
We issued the eligible options to provide our employees an opportunity
to acquire or increase a proprietary interest in Macromedia, thereby creating a
stronger incentive to work hard for our growth and success and to encourage our
employees to continue their employment with Macromedia.
Many of our outstanding options, whether or not they are currently
exercisable, have exercise prices that are significantly higher than the current
market price of our common stock. We believe these options are unlikely to be
exercised in the foreseeable future. By making this offer to exchange
outstanding options for new options that will have an exercise price equal to
the market value of our common stock on the replacement grant date, we intend to
provide our employees with the benefit of owning options that over time may have
a greater potential to increase in value, create better performance incentives
for employees and thereby maximize stockholder value. Merely granting additional
options to option holders, with exercise prices based on our current stock
price, would have an adverse effect in the form of stockholder dilution. In
addition, we have a limited number of options available for grant and wish to
conserve our available options for new hires and ongoing grants. The offer is
designed to preserve options for future grants.
CONSIDERING THE RISKS ASSOCIATED WITH A VOLATILE AND UNPREDICTABLE STOCK
MARKET, AND WITH OUR INDUSTRY IN PARTICULAR, THERE IS NO GUARANTEE THAT THE
MARKET PRICE AT THE TIME OF THE NEW OPTION (AND THUS THE EXERCISE PRICE OF YOUR
NEW OPTION) WILL BE LESS THAN OR EQUAL TO THE STRIKE PRICE OF YOUR EXISTING
OPTION, OR THAT YOUR NEW OPTION WILL INCREASE IN VALUE OVER TIME. IF YOU
PARTICIPATE IN THE PROGRAM YOU ARE TAKING A RISK THAT YOUR REPLACEMENT GRANT
WILL HAVE AN EXERCISE PRICE HIGHER THAN YOUR CURRENT OPTION. IN ADDITION, IF YOU
ELECT TO PARTICIPATE IN THE OFFER AND THEN YOUR EMPLOYMENT TERMINATES BEFORE ANY
NEW OPTION IS GRANTED, YOUR CANCELED OPTION WOULD NOT BE AVAILABLE AND NO
REPLACEMENT WOULD BE ISSUED, SO YOU MIGHT LOSE AN OPPORTUNITY TO BUY OUR STOCK
AT A PRICE POTENTIALLY LOWER THAN THE MARKET PRICE.
Subject to the foregoing, and except as otherwise disclosed in this
offer to exchange or in our filings with the Securities and Exchange Commission,
we have no current plans or proposals that relate to or would result in:
(a) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving us or any of our
subsidiaries;
(b) Any purchase, sale or transfer of a material amount of our
assets or the assets of any of our subsidiaries;
(c) Any material change in our present dividend rate or policy, or
our indebtedness or capitalization;
(d) Any change in our Board of Directors or management, including a
change in the number or term of directors or to fill any
existing Board vacancies or to change any executive officer's
material terms of employment;
11
<PAGE> 15
(e) any other material change in our corporate structure or
business;
(f) our common stock not being authorized for quotation in an
automated quotation system operated by a national securities
association;
(g) our common stock becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") ;
(h) the suspension of our obligation to file reports pursuant to
Section 15(d) of the Exchange Act;
(i) the acquisition by any person of any of our securities or the
disposition of any of our securities; or
(j) any change in our certificate of incorporation or bylaws, or any
actions which may impede the acquisition of control of us by any
person.
Neither Macromedia nor our Board makes any recommendation as to whether
or not you should elect to exchange your options, nor have we authorized any
person to make any such recommendation. You are urged to evaluate carefully all
of the information in this offer to exchange and to consult your own investment
and tax advisors. You must make your own decision whether to elect to exchange
your options.
3. PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS.
Proper exchange of options. To elect to exchange your options pursuant
to the offer, you must, in accordance with the terms of the election form,
properly complete, duly execute and deliver to us the election form, or a
facsimile thereof, along with any other required documents. We must receive all
of the required documents by fax to Darrell Hong or Franci Claudon at (415)
252-2348 or by mail to Darrell Hong or Franci Claudon, Macromedia, Inc., 600
Townsend St., San Francisco, CA 94103, before the expiration date.
If you do not turn in your election form by the deadline, then you will
not participate in the option exchange, and all stock options currently held by
you will remain intact at their original price and terms.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING THE ELECTION FORM AND
ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE ELECTING OPTION
HOLDER. YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.
Determination of validity; rejection of options; waiver of defects; no
obligation to give notice of defects. We will determine, in our discretion, all
questions as to the form of documents and the validity, form, eligibility, time
of receipt, and acceptance of any exchange of options. Our determination of
these matters will be final and binding on all parties. We reserve the right to
reject any or all elections to exchange options that we determine are not in
appropriate form or that we determine are unlawful to accept. Otherwise, we will
accept properly and timely elected options that are not validly withdrawn. We
also reserve the right to waive any of the conditions of the offer or any defect
or irregularity in any election with respect to any particular options or
12
<PAGE> 16
any particular option holder. No election to exchange options will be valid
until all defects or irregularities have been cured by the electing option
holder or waived by us. Neither we nor any other person is obligated to give
notice of any defects or irregularities in elections, nor will anyone incur any
liability for failure to give any such notice.
Our acceptance constitutes an agreement. Your election to exchange
options pursuant to the procedures described above constitutes your acceptance
of the terms and conditions of the offer. OUR ACCEPTANCE FOR EXCHANGE OF OPTIONS
THAT YOU ELECT TO EXCHANGE PURSUANT TO THIS OFFER WILL CONSTITUTE A BINDING
AGREEMENT BETWEEN YOU AND US, ON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE
OFFER.
Subject to our rights to extend, terminate and amend the offer, we
currently expect that we will accept promptly after the expiration of the offer
all properly elected options that have not been validly withdrawn.
4. WITHDRAWAL RIGHTS.
You may only withdraw the options you have elected to cancel ("YOUR
ELECTED OPTIONS") in accordance with the provisions of this Section 4.
You may withdraw your elected options at any time before the expiration
date. If we extend the offer beyond that time, you may withdraw your elected
options at any time until the extended expiration date. In addition, unless we
accept your elected options for exchange before the expiration date, you may
withdraw options you elected to exchange at any time after that date.
To withdraw elected options, you must deliver a completed written notice
of withdrawal, or a facsimile thereof, to us prior to our acceptance of your
election to exchange. Except as described in the following sentence, the notice
of withdrawal must be executed by the option holder who elected to exchange the
options to be withdrawn exactly as such option holder's name appears on the
option agreement or agreements evidencing such options. If the signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or another person acting in a fiduciary or representative capacity,
the signer's full title and proper evidence of the authority of such person to
act in such capacity must be indicated on the notice of withdrawal.
You may not rescind any withdrawal, and any options you withdraw will
thereafter be deemed not properly elected for exchange for purposes of the
offer, unless you properly re-elect those options before the expiration date by
following the procedures described in Section 3.
Neither Macromedia nor any other person is obligated to give notice of
any defects or irregularities in any notice of withdrawal, nor will anyone incur
any liability for failure to give any such notice. We will determine, in our
discretion, all questions as to the form and validity, including time of
receipt, of notices of withdrawal. Our determination of these matters will be
final and binding.
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<PAGE> 17
5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND CANCELLATION AND ISSUANCE OF NEW
OPTIONS.
Upon the terms and subject to the conditions of this offer and as
promptly as practicable following the expiration date, we will accept for
exchange and cancel options properly elected for exchange and not validly
withdrawn before the expiration date. If your options are properly elected for
exchange and accepted for exchange on the effective date, you will be granted,
subject to the conditions set forth in this section, new options on the
replacement grant date, which will be on or after December 5, 2001. If we extend
the date by which we must accept and cancel options properly elected for
exchange, you will be granted new options upon the approval of the Compensation
Committee as of a date at least six months and one day after the extended date.
If we accept options you elect to exchange in the offer, you will be
ineligible until after the replacement grant date for any additional stock
option grants for which you may have otherwise been eligible before the
replacement grant date. This prevents us from incurring compensation expense
against our earnings because of accounting rules that could apply to these
interim option grants as a result of the offer.
Your new options will entitle you to purchase a number of shares of our
common stock that is equal to the number of shares subject to the options you
elect to exchange, subject to adjustments for any stock splits, stock dividends,
and similar events. IF YOU ARE NOT AN EMPLOYEE OF MACROMEDIA OR ONE OF OUR
SUBSIDIARIES FROM THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE
GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR
ELECTED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE
ANY OTHER CONSIDERATION FOR YOUR ELECTED OPTIONS IF YOU ARE NOT AN EMPLOYEE FROM
THE DATE YOU ELECT TO EXCHANGE OPTIONS THROUGH THE DATE WE GRANT THE NEW
OPTIONS. Therefore, if your employment with Macromedia or one of our
subsidiaries terminates for any reason before your new option is granted, you
will not have a right to any stock options that were previously canceled, and
you will not have a right to the new option that would have been issued on the
replacement grant date.
We are also reserving the right, in the event of a merger or similar
transaction after the expiration date, to take any actions we deem necessary or
appropriate to complete a transaction that our board of directors believes is in
the best interest of our company and our stockholders. This could include
terminating your right to receive replacement options under this offer to
exchange. IF WE WERE TO TERMINATE YOUR RIGHT TO RECEIVE REPLACEMENT OPTIONS
UNDER THIS OFFER IN CONNECTION WITH SUCH TRANSACTION, EMPLOYEES WHO TENDERED
OPTIONS FOR CANCELLATION PURSUANT TO THIS OFFER WOULD NOT RECEIVE OPTIONS TO
PURCHASE OUR STOCK, OR SECURITIES OF THE ACQUIROR, OR ANY OTHER CONSIDERATION
FOR THEIR TENDERED OPTIONS. We presently have no plans or proposals that relate
to or would result in an acquisition of Macromedia. Section 2 of this offer to
exchange describes our future plans.
For purposes of the offer, we will be deemed to have accepted for
exchange options that are validly elected for exchange and not properly
withdrawn as, if and when we give oral or written notice to the option holders
of our acceptance for exchange of such options. Subject to
14
<PAGE> 18
our rights to extend, terminate and amend the offer, we currently expect that we
will provide your notice of your new option within one week after the
replacement grant date.
6. CONDITIONS OF THE OFFER.
Notwithstanding any other provision of this exchange offer, we will not
be required to accept any options elected for exchange, and we may terminate or
amend the offer, or postpone our acceptance and cancellation of any options
elected for exchange, if at any time on or after the date of this offer and
prior to the expiration date any of the following events has occurred, or has
been determined by us to have occurred, and, in our reasonable judgment in any
such case and regardless of the circumstances giving rise thereto, including any
action or omission to act by us, the occurrence of such event or events makes it
inadvisable for us to proceed with the offer or with such acceptance and
cancellation of options elected for exchange:
(a) there has been threatened or instituted or is pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other
person, domestic or foreign, before any court, authority, agency
or tribunal that directly or indirectly challenges the making of
the offer, the acquisition of some or all of the options elected
for exchange pursuant to the offer, the issuance of new options,
or otherwise relates in any manner to the offer or that, in our
reasonable judgment, could materially and adversely affect the
business, condition (financial or other), income, operations or
prospects of Macromedia or our subsidiaries, or otherwise
materially impair in any way the contemplated future conduct of
our business or the business of any of our subsidiaries or
materially impair the contemplated benefits of the offer to us;
(b) there has been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment,
order or injunction threatened, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable
to the offer or us or any of our subsidiaries, by any court or
any authority, agency or tribunal that, in our reasonable
judgment, would or might directly or indirectly:
(i) make the acceptance for exchange of, or issuance of new
options for, some or all of the options elected for
exchange illegal or otherwise restrict or prohibit
consummation of the offer or otherwise relates in any
manner to the offer;
(ii) delay or restrict our ability, or render us unable, to
accept for exchange, or issue new options for, some or
all of the options elected for exchange;
(iii) materially impair the contemplated benefits of the offer
to us; or
(iv) materially and adversely affect the business, condition
(financial or other), income, operations or prospects of
Macromedia or our subsidiaries, or otherwise materially
impair in any way the contemplated future conduct of our
business or the business of any of our subsidiaries or
materially impair the contemplated benefits of the offer
to us;
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<PAGE> 19
(c) there has occurred:
(i) any general suspension of trading in, or limitation on
prices for, securities on any national securities
exchange or in the over-the-counter market;
(ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United
States, whether or not mandatory;
(iii) the commencement of a war, armed hostilities or other
international or national crisis directly or indirectly
involving the United States;
(iv) any limitation, whether or not mandatory, by any
governmental, regulatory or administrative agency or
authority on, or any event that in our reasonable
judgment might affect, the extension of credit by banks
or other lending institutions in the United States;
(v) any significant decrease in the market price of the
shares of our common stock or any change in the general
political, market, economic or financial conditions in
the United States or abroad that could, in our
reasonable judgment, have a material adverse effect on
the business, condition (financial or other), operations
or prospects of Macromedia or our subsidiaries or on the
trading in our common stock;
(vi) any change in the general political, market, economic or
financial conditions in the United States or abroad that
could have a material adverse effect on the business,
condition (financial or other), operations or prospects
of Macromedia or our subsidiaries or that, in our
reasonable judgment, makes it inadvisable to proceed
with the offer;
(vii) in the case of any of the foregoing existing at the time
of the commencement of the offer, a material
acceleration or worsening thereof; or
(viii) any decline in the Dow Jones Industrial Average, the
Nasdaq National Market or the Standard and Poor's Index
of 500 Companies by an amount in excess of 25% measured
during any time period after the close of business on
May 4, 2001;
(d) there has occurred any change in generally accepted accounting
standards that could or would require us for financial reporting
purposes to record compensation expense against our earnings in
connection with the offer;
(e) a tender or exchange offer with respect to some or all of our
common stock, or a merger or acquisition proposal for us, shall
have been proposed, announced or made by another person or
entity or shall have been publicly disclosed, or we shall have
learned that:
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<PAGE> 20
(i) any person, entity or "group," within the meaning of Section
13(d)(3) of the Exchange Act, shall have acquired or proposed to
acquire beneficial ownership of more than 5% of the outstanding
shares of our common stock, or any new group shall have been
formed that beneficially owns more than 5% of the outstanding
shares of our common stock, other than any such person, entity
or group that has filed a Schedule 13D or Schedule 13G with the
SEC on or before the expiration date;
(ii) any such person, entity or group that has filed a Schedule 13D
or Schedule 13G with the SEC on or before the expiration date
shall have acquired or proposed to acquire beneficial ownership
of an additional 2% or more of the outstanding shares of our
common stock; or
(iii) any person, entity or group shall have filed a Notification and
Report Form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, or made a public announcement
reflecting an intent to acquire us or any of our subsidiaries or
any of the assets or securities of us or any of our
subsidiaries; or
(f) any change or changes shall have occurred in the business,
condition (financial or other), assets, income, operations,
prospects or stock ownership of Macromedia or our subsidiaries
that, in our reasonable judgment, is or may be material to
Macromedia or our subsidiaries.
The conditions to the offer are for our benefit. We may assert them at
our discretion regardless of the circumstances giving rise to them prior to the
expiration date. We may waive them, in whole or in part, at any time and from
time to time prior to the expiration date, in our discretion, whether or not we
waive any other condition to the offer. Our failure at any time to exercise any
of these rights will not be deemed a waiver of any such rights. The waiver of
any of these rights with respect to particular facts and circumstances will not
be deemed a waiver with respect to any other facts and circumstances. Any
determination we make concerning the events described in this section will be
final and binding upon all persons.
7. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS.
Our common stock has been quoted on the Nasdaq National Market System
("NASDAQ") under the symbol MACR since our initial public offering on December
13, 1993. Our fiscal year runs from April 1 through March 31. The following
table sets forth, for the periods indicated, the high and low sale prices per
share of our common stock as reported on the Nasdaq for each of our fiscal
quarters for the past two fiscal years:
<TABLE>
<CAPTION>
High Low
---------- ---------
<S> <C> <C>
Fiscal year ended March 31, 2001
Fourth Quarter $ 64.25 $ 13.88
Third Quarter 85.25 54.75
Second Quarter 120.88 56.25
First Quarter 114.75 42.25
</TABLE>
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<PAGE> 21
<TABLE>
<S> <C> <C>
Fiscal year ended March 31, 2000
Fourth Quarter $ 100.00 $ 62.00
Third Quarter 88.69 39.88
Second Quarter 49.25 27.38
First Quarter 53.25 32.88
</TABLE>
WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON
STOCK BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS.
8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS.
Consideration. We will issue new options to purchase common stock in
exchange for outstanding eligible options properly elected and accepted for
exchange by us. The number of shares of common stock subject to new options to
be granted to each option holder will be equal to the number of shares subject
to the options elected by such option holder.
Terms of new options. We will issue a new option agreement to each
option holder who has elected to exchange options in the offer. Except for the
exercise price and blackout period, the terms and conditions of the new options
will be determined by the Compensation Committee.
The terms and conditions of current options under the Plans are set
forth in the respective plan and stock option agreement you entered into in
connection with the grant. The terms and conditions of the Plans are summarized
in the prospectuses prepared by us and previously distributed to you. You may
obtain copies of these prospectuses and the plans as indicated below.
IMPORTANT NOTE. THE STATEMENTS IN THIS OFFER CONCERNING THE PLANS AND
THE NEW OPTIONS ARE MERELY SUMMARIES AND DO NOT PURPORT TO BE COMPLETE. THE
STATEMENTS ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO,
ALL PROVISIONS OF THE PLANS, THE FORMS OF STOCK OPTION AGREEMENT UNDER THE PLANS
AND ANY OTHER TERMS AND CONDITIONS OF THE NEW OPTIONS DETERMINED BY THE
COMPENSATION COMMITTEE.
PLEASE CONTACT DARRELL HONG AT (415) 252-6860 OR BY EMAIL AT
DHONG@MACROMEDIA.COM, OR FRANCI CLAUDON AT (415) 252-4086 OR BY EMAIL AT
FCLAUDON@MACROMEDIA.COM, OR BY MAIL TO DARRELL HONG OR FRANCI CLAUDON,
MACROMEDIA, INC., 600 TOWNSEND ST., SAN FRANCISCO, CA 94103, TO RECEIVE A COPY
OF THE PLANS, PROSPECTUSES OR FORMS OF STOCK OPTION AGREEMENT. WE WILL PROMPTLY
FURNISH YOU COPIES OF THESE DOCUMENTS AT OUR EXPENSE.
9. INFORMATION CONCERNING MACROMEDIA.
Macromedia develops, markets and supports software products,
technologies and services that enable people to define what the Web can be. Its
customers, from developers to enterprises, use Macromedia solutions to help
build compelling and effective Web sites and e-business applications.
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<PAGE> 22
Macromedia's software business' products enable rich, engaging, and
personalized Web experiences. From stand-alone products for Web authoring and
graphics creation to integrated solutions for mission-critical server and
e-business applications, Macromedia has the technology and services that enable
developers and enterprises to create and deliver Web sites.
Macromedia is based in San Francisco, California, and has more than
1,700 employees worldwide working with industry partners to deliver compelling
and effective Web experiences.
Macromedia was incorporated in Delaware on February 25, 1992, and has
acquired several other businesses, including Allaire Corporation, since its
incorporation. Its common stock is listed on the Nasdaq National Market under
the symbol MACR. Its World Wide Web site can be accessed at macromedia.com.
For financial information regarding Macromedia, please see the financial
statements beginning on page F-1 of this offer. Additional information about
Macromedia is available from the documents described in Section 16.
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE OPTIONS.
The current directors and executive officers of Macromedia and their
positions and offices are set forth in the following table:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Robert K. Burgess Chairman and Chief Executive Officer
Brian J. Allum Executive Vice President
Elizabeth A. Nelson Executive Vice President, Chief Financial Officer and Secretary
Kevin Lynch Executive Vice President and President, Products
Stephen A. Elop Executive Vice President, Worldwide Field Operations
David R. Mendels Senior Vice President, Chief Strategy Officer
John (Ian) Giffen Director
Mark D. Kvamme Director
Donald L. Lucas Director
Alan Ramadan Director
William B. Welty Director
</TABLE>
The address of each director and executive officer is: c/o Macromedia,
Inc., 600 Townsend Street, San Francisco, CA 94103.
The following table sets forth information, as of April 16, 2001, with
respect to the beneficial ownership of our common stock by each director, each
of our executive officers and all directors and executive officers as a group.
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<PAGE> 23
<TABLE>
<CAPTION>
EXERCISABLE
WITHIN SHARES
60 DAYS HELD TOTAL
----------- ------ -------
<S> <C> <C> <C>
Robert K. Burgess 541,949 59,005 600,954
Brian J. Allum 168,500 1,478 169,978
Elizabeth A. Nelson 132,826 25,001 157,827
Kevin Lynch 206,709 804 207,513
Stephen A. Elop 86,042 1,585 87,627
David R. Mendels 86,533 4,946 91,479
John (Ian) Giffen 38,194 -- 38,194
Mark D. Kvamme 21,493 -- 21,493
Donald L. Lucas 43,624 297 43,921
Alan Ramadan 19,792 -- 19,792
William B. Welty 8,029 -- 8,029
Totals 1,353,691 93,116 1,446,807
</TABLE>
The following table lists the stock and stock option transactions
involving our officers and directors within the 60 days prior to this offering:
<TABLE>
<CAPTION>
NAME TRANSACTION DATE TRANSACTION DESCRIPTION
---- ---------------- -----------------------
<S> <C> <C>
Burgess, Rob 3/19/01 Exercised 1,176 options held by children's trust.
Exercise price $7.7810; market value on date of exercise
$20.9375
</TABLE>
Our executive officers are eligible to participate in this offer. Also,
we anticipate that several of our directors and executive officers will purchase
shares of common stock under our 1993 Employee Stock Purchase Plan on August 15,
2001, in the ordinary course pursuant to the terms of such plan. Except as
otherwise described above, there have been no transactions in options to
purchase our common stock or in our common stock which were effected during the
past 60 days by Macromedia, or to our knowledge, by any executive officer,
director, affiliate or subsidiary of Macromedia.
11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES
OF THE OFFER.
Options we acquire pursuant to the offer will be canceled and the shares
of common stock subject to those options will be returned to the pool of shares
available for grants of new options under the Plans and for issuance upon the
exercise of such new options. To the extent such shares are not fully reserved
for issuance upon exercise of the new options to be granted in connection with
the offer, the shares will be available for future awards to employees and other
eligible plan participants without further stockholder action, except as
required by applicable law
20
<PAGE> 24
or the rules of the Nasdaq National Market or any other securities quotation
system or any stock exchange on which our common stock is then quoted or listed.
We believe that we will not incur any compensation expense solely as a
result of the transactions contemplated by the offer because we will not grant
any new options until a business day that is at least six months and one day
after the date that we accept and cancel options elected for exchange; and the
exercise price of all new options will equal the market value of the common
stock on the date we grant the new options.
If we were to grant any options to any option holder before the
scheduled replacement grant date, our grant of those options to the electing
option holder would be treated for financial reporting purposes as a variable
award to the extent that the number of shares subject to the newly granted
options is equal to or less than the number of the option holder's option shares
elected for exchange. In this event, we would be required to record as
compensation expense the amount by which the market value of the shares subject
to the newly granted options exceeds the exercise price of those shares. This
compensation expense would accrue as a variable accounting charge to our
earnings over the period when the newly granted options are outstanding. We
would have to adjust this compensation expense periodically during the option
term based on increases or decreases in the market value of the shares subject
to the newly granted options.
12. LEGAL MATTERS; REGULATORY APPROVALS.
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our exchange of
options and issuance of new options as contemplated by the offer, or of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required for
the acquisition or ownership of our options as contemplated herein. Should any
such approval or other action be required, we presently contemplate that we will
seek such approval or take such other action. We are unable to predict whether
we may determine that we are required to delay the acceptance of options for
exchange pending the outcome of any such matter. We cannot assure you that any
such approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any such approval
or other action might not result in adverse consequences to our business. Our
obligation under the offer to accept options elected for exchange and to issue
new options for options elected for exchange is subject to conditions, including
the conditions described in Section 6.
13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of the material U.S. federal income
tax consequences of the exchange of options pursuant to the offer. This
discussion is based on the Internal Revenue Code, its legislative history,
Treasury Regulations thereunder and administrative and judicial interpretations
thereof as of the date of the offer, all of which are subject to change,
possibly on a retroactive basis. This summary does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances, nor is it intended to be applicable in all respects to all
categories of option holders.
21
<PAGE> 25
The option holders who exchange outstanding options for new options will
not be required to recognize income for U.S. federal income tax purposes at the
time of the exchange. We believe that the exchange will be treated as a
non-taxable exchange.
The new options that we will grant in the exchange of options pursuant
to the offer will be nonqualified stock options that are not intended to satisfy
the requirements of Section 422 of the Internal Revenue Code. Under U.S. law, an
optionee recognizes no taxable income upon the grant of a nonqualified option.
The optionee will, in general, recognize ordinary income in the year in which
the option is exercised. The amount of ordinary income is equal to the excess of
the fair market value of the purchased shares on the exercise date over the
exercise price paid for the shares. The optionee will be required to satisfy the
tax withholding requirements applicable to such income.
We will be entitled to a business expense deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
nonqualified option. The deduction will in general be allowed for the taxable
year of Macromedia in which the ordinary income is recognized by the optionee.
Special tax considerations may apply to employees located abroad. In
particular, for employees in the United Kingdom, which has adopted new laws
governing the exercise of stock options awarded after April 5, 1999, the grant
of the new option will be subject to the execution of a joint election between
you and Macromedia or any subsidiary of Macromedia to provide for the shifting
of any Secondary Class 1 National Insurance Contribution liability in connection
with the EXERCISE, ASSIGNMENT, RELEASE OR CANCELLATION of the option from
Macromedia and/or any subsidiary to you. This tax is currently set at 11.9% of
the difference between the strike price and the fair market value of the stock
at the time of exercise. By accepting the new option, to the extent allowable by
applicable law, you will be consenting to and agreeing to satisfy any liability
that Macromedia and/or any subsidiary realizes with respect to Secondary Class 1
National Insurance Contribution payments required to be paid by Macromedia
and/or any subsidiary in connection with the EXERCISE, ASSIGNMENT, RELEASE OR
CANCELLATION of the option. In addition, if you accept the new option, you will
be authorizing Macromedia or the subsidiary to withhold any such Secondary Class
1 National Insurance Contributions from the payroll AT ANY TIME or from the sale
of a sufficient number of Shares upon EXERCISE, ASSIGNMENT, RELEASE OR
CANCELLATION of the option. In the alternative, you agree to make payment on
demand for such contributions to Macromedia or any subsidiary that will remit
such contributions to the Inland Revenue. If additional consents and/or any
elections are required to accomplish the foregoing shifting of liability, you
agree to provide them promptly upon request. If you do not enter into the joint
election described above at the same time that you accept the new option, or if
the joint election is revoked at any time by the Inland Revenue, Macromedia will
have the right to cancel the new option without further liability.
WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE
FOREIGN, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE
OFFER.
22
<PAGE> 26
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
We expressly reserve the right, in our discretion, at any time and from
time to time, and regardless of whether or not any event set forth in Section 6
has occurred or is deemed by us to have occurred, to extend the period of time
during which the offer is open and thereby delay the acceptance for exchange of
any options by giving oral, written, or electronic notice of such extension to
the option holders.
We also expressly reserve the right, in our reasonable judgment, prior
to the expiration date to terminate or amend the offer and to postpone our
acceptance and cancellation of any options elected for exchange upon the
occurrence of any of the conditions specified in Section 6, by giving oral,
written, or electronic notice of such termination or postponement to the option
holders. Notwithstanding the foregoing, we will pay the consideration offered or
return the options elected for exchange promptly after termination or withdrawal
of the offer to exchange.
Subject to compliance with applicable law, we further reserve the right,
in our discretion, and regardless of whether any event set forth in Section 6
has occurred or is deemed by us to have occurred, to amend the offer in any
respect, including, without limitation, by decreasing or increasing the
consideration offered in the offer to option holders or by decreasing or
increasing the number of options being sought in the offer.
Amendments to the offer may be made at any time and from time to time.
In the case of an extension, the amendment must be issued no later than 5 p.m.
Pacific Time, on the next business day after the last previously scheduled or
announced expiration date. Any amendment of the offer will be disseminated
promptly to option holders in a manner reasonably designated to inform option
holders of such change. Without limiting the manner in which we may choose to
disseminate any amendment of this offer, except as required by law, we have no
obligation to publish, advertise, or otherwise communicate any such
dissemination.
If we materially change the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we will
extend the offer. Except for a change in price or a change in percentage of
securities sought, the amount of time by which we will extend the offer
following a material change in the term of the offer or information concerning
the offer will depend on the facts and circumstances, including the relative
materiality of such terms or information. If we decide to take any of the
following actions, we will notify you of such action and extend the offer for a
period of ten business days after the date of such notice:
(a) (i) we increase or decrease the amount of consideration
offered for the options;
(i) we decrease the number of options eligible to be elected
for exchange in the offer; or
(ii) we increase the number of options eligible to be elected
for exchange in the offer by an amount that exceeds 10%
of the shares of common stock issuable upon exercise of
the options that are subject to the offer immediately
prior to the increase; and
23
<PAGE> 27
(b) the offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from,
and including, the date that notice of such increase or decrease
is first given.
15. FEES AND EXPENSES.
We will not pay any fees or commissions to any broker, dealer or other
person for soliciting elections to exchange options pursuant to this offer to
exchange.
16. ADDITIONAL INFORMATION.
For financial information regarding Macromedia, please see the financial
statements beginning on page F-1 of this offer.
We recommend that, in addition to this offer to exchange and election
form, you review the following materials, which we have filed with the SEC,
before making a decision on whether to elect to exchange your options:
(a) our annual report on Form 10-K for our fiscal year ended March
31, 2000, filed with the SEC on June 27, 2000;
(b) our quarterly reports on Form 10-Q for the quarters ended June
30, September 30, and December 31, 2000, filed with the SEC on
August 14, 2000, November 13, 2000 and February 2, 2001,
respectively;
(c) our definitive proxy statement for our 2000 annual meeting of
stockholders, filed with the SEC on June 30, 2000;
(d) our registration statement on Form S-4 filed with the SEC on
February 2, 2001, and amended on February 14, 2001;
(e) our registration statements on Form S-8 (registering shares to
be issued under the Plans) filed with the SEC on August 17, 2000
and December 7, 1999;
(f) our current reports on Form 8-K and 8-K/A filed with the SEC on
January 24, January 26, January 30, March 7, March 28 and April
4, 2001; and
(g) the description of our common stock included in our registration
statement on Form 8-A, which was filed with the SEC on October
22, 1993, as amended on Form 8-A/A filed with the SEC on October
5, 1995, including any amendments or reports we file for the
purpose of updating that description.
The SEC file number for these filings, other than the registration
statements, is 000-22688. The file number for the registration statement on Form
S-4 filed with the SEC on February 2, 2001 is 333-54930. The file numbers for
the registration statements on Form S-8 filed with the SEC on August 17, 2000
and December 7, 1999 are 333-44016 and 333-92233, respectively. These filings,
our other annual, quarterly and current reports, our proxy statements
24
<PAGE> 28
and our other SEC filings may be examined, and copies may be obtained, at the
following SEC public reference rooms:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
You may obtain information on the operation of the public reference
rooms by calling the SEC at 1-800-732-0330.
Our SEC filings are also available to the public on the SEC's website at
http://www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the
symbol "MACR," and our SEC filings can be read at the following Nasdaq address:
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
We will also provide without charge to each person to whom a copy of
this offer to exchange is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents to which we have referred
you, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to:
Darrell Hong or Franci Claudon
Macromedia, Inc.
600 Townsend St.
San Francisco, CA 94103
or by telephoning Darrell Hong at (415) 252-6860 or Franci Claudon at (415)
252-4086 between the hours of 9:00 a.m. and 5:00 p.m., Pacific Time, Monday
through Friday.
As you read the foregoing documents, you may find some inconsistencies
in information from one document to another. If you find inconsistencies between
the documents, or between a document and this offer to exchange, you should rely
on the statements made in the most recent document.
The information about us contained in this offer to exchange should be
read together with the information contained in the documents to which we have
referred you.
17. MISCELLANEOUS.
This offer to exchange and our SEC reports referred to above include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act. When used in this offer to
exchange, the words "anticipate," "believe," "estimate," "expect," "intend"
25
<PAGE> 29
and "plan" as they relate to Macromedia, Inc. or our management are intended to
identify these forward-looking statements. All statements by us regarding our
expected future financial position and operating results, our business strategy,
our financing plans and expected capital requirements, forecasted trends
relating to our services or the markets in which we operate and similar matters
are forward-looking statements. The documents filed by us with the SEC,
including our annual report on Form 10-K filed on June 27, 2000, discuss some of
the risks that could cause our actual results to differ from those contained or
implied in the forward-looking statements. These risks include risks related to
future growth and rapid expansion and variable revenues and operating results.
Other important risks include delays or difficulties in development, deployment,
and implementation of our products, pricing and market-share competition,
international uncertainties, adverse regulatory or legislative changes, and
other factors beyond our control. We undertake no obligation to update or revise
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
We are not aware of any jurisdiction where the making of the offer
violates applicable law. If we become aware of any jurisdiction where the making
of the offer violates applicable law, we will make a good faith effort to comply
with such law. If, after such good faith effort, we cannot comply with such law,
the offer will not be made to, nor will elections to exchange options be
accepted from or on behalf of, the option holders residing in such jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR
BEHALF AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE OR REFRAIN FROM EXCHANGING
YOUR OPTIONS PURSUANT TO THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT
AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS
CONTAINED IN THIS DOCUMENT OR IN THE ELECTION FORM. IF ANYONE MAKES ANY
RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST
NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN
AUTHORIZED BY US.
Macromedia, Inc. May 4, 2001
26
<PAGE> 30
MACROMEDIA, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
1. Macromedia audited financial statements and related notes included in Macromedia's Annual Report on
Form 10-K for the fiscal year ended March 31, 2000, filed with the SEC on June 27, 2000
Independent Auditors' Report...........................................................................F-1
Consolidated Balance Sheets for the years ended March 31, 2000 and 1999................................F-2
Consolidated Statements of Operations for the years ended March 31, 2000, 1999 and 1998................F-3
Consolidated Statements of Cash Flows for the years ended March 31, 2000, 1999 and 1998................F-4
Consolidated Statements of Stockholder's Equity for the years ended March 31, 2000, 1999 and 1998......F-5
Notes to Consolidated Financial Statements for the years ended March 31, 2000, 1999 and 1998...........F-6
Schedule II - Valuation And Qualifying Accounts........................................................F-28
2. Macromedia unaudited financial statements included in Macromedia's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 2000, filed with the SEC on February 2, 2001
Consolidated Balance Sheets for the quarter ended December 31, 2000....................................F-29
Consolidated Statements of Operations for the quarter ended December 31, 2000..........................F-30
Consolidated Statements of Cash Flows for the quarter ended December 31, 2000..........................F-31
3. Book value per share for the quarter ended December 31, 2000............................................F-32
</TABLE>
<PAGE> 31
1. MACROMEDIA AUDITED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN
MACROMEDIA'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH
31, 2000, FILED WITH THE SEC ON JUNE 27, 2000
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, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended March 31, 2000. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index in Item 14(a)2
herein. 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 conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 provide a
reasonable basis for our opinion.
In our opinion, 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, 2000 and 1999, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 2000, in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the related financial statement
schedules, 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.
/s/ KPMG LLP
San Francisco, California
April 24, 2000
F-1
<PAGE> 32
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets
Cash, cash equivalents, and short-term investments ...................... $ 187,036 $ 111,157
Accounts receivable, less allowance for returns and doubtful
accounts of $10,880 and $9,599, respectively .......................... 41,883 13,971
Inventory, net .......................................................... 1,349 615
Prepaid expenses and other current assets ............................... 12,944 13,911
Deferred tax assets, short-term ......................................... 7,812 6,899
--------- ---------
Total current assets ................................................. 251,024 146,553
Land and building, net .................................................. 18,982 19,945
Other fixed assets, net ................................................. 41,871 22,868
Related party loans ..................................................... 9,944 10,099
Other long-term assets .................................................. 17,538 3,030
--------- ---------
Total assets ......................................................... $ 339,359 $ 202,495
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................................ $ 4,988 $ 5,995
Accrued liabilities ..................................................... 53,842 27,701
Unearned revenue ........................................................ 10,044 7,490
--------- ---------
Total current liabilities ............................................ 68,874 41,186
--------- ---------
Other long-term liabilities ............................................... 321 381
Deferred tax liabilities, long-term ....................................... -- 306
--------- ---------
Total liabilities .................................................... 69,195 41,873
--------- ---------
Minority interest ......................................................... 15,888 --
Mandatorily redeemable convertible preferred stock, par value
$0.001 per share: 0 and 2,310 shares authorized; 0 and 1,216
issued and outstanding (aggregate liquidation preference of
$0 and $27,014 at March 31, 2000 and 1999, respectively) ............. -- 13,591
Stockholders' equity:
Common stock, par value $0.001 per share: 80,000 shares
authorized, 50,674 and 43,590 shares issued and
outstanding as of March 31, 2000 and 1999, respectively .............. 51 43
Treasury stock, at cost; 1,818 and 1,620 shares as of March 31, 2000
and 1999, respectively ............................................... (33,649) (25,445)
Additional paid-in capital .............................................. 335,497 203,431
Deferred compensation ................................................... (23,465) (1,544)
Accumulated other comprehensive income .................................. 393 38
Accumulated deficit ..................................................... (24,551) (29,492)
--------- ---------
Total stockholders' equity ........................................... 254,276 147,031
--------- ---------
Total liabilities and stockholders' equity ........................... $ 339,359 $ 202,495
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 33
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues ...................................................... $ 264,159 $ 153,243 $ 113,803
Cost of revenues .............................................. 28,829 15,625 15,107
--------- --------- ---------
Gross profit .......................................... 235,330 137,618 98,696
--------- --------- ---------
Operating expenses:
Sales and marketing ..................................... 113,005 73,153 60,379
Research and development ................................ 65,739 41,551 36,829
General and administrative .............................. 24,610 16,740 13,231
Acquisition related expenses ............................ 11,516 454 7,658
Non-cash compensation ................................... 11,071 287 49
Amortization of intangibles ............................. 1,013 248 --
--------- --------- ---------
Total operating expenses ............................. 226,954 132,433 118,146
--------- --------- ---------
Operating income (loss) .............................. 8,376 5,185 (19,450)
Other income (expense):
Interest and investment income, net ..................... 6,626 1,215 4,687
Foreign exchange (loss) gain ............................ (321) (110) 243
Other ................................................... (118) 3,932 (293)
--------- --------- ---------
Total other income ................................... 6,187 5,037 4,637
Minority interest ............................................. 6,179 -- --
--------- --------- ---------
Income (loss) before taxes ........................... 20,742 10,222 (14,813)
Provision for income taxes .................................... 11,975 7,612 828
--------- --------- ---------
Net income (loss) .................................... 8,767 2,610 (15,641)
Accretion on mandatorily redeemable convertible preferred
stock................................................. (2,538) (104) --
--------- --------- ---------
Net income (loss) applicable to common stockholders ........... $ 6,229 $ 2,506 $ (15,641)
========= ========= =========
Net income (loss) applicable to common stockholders per share
Basic ..................................................... $ 0.14 $ 0.06 $ (0.40)
Diluted ................................................... $ 0.12 $ 0.05 $ (0.40)
Weighted average common share outstanding
Basic ..................................................... 44,601 40,045 38,988
Diluted ................................................... 52,270 47,242 38,988
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 34
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................... $ 8,767 $ 2,610 $ (15,641)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................. 16,477 8,797 7,085
Write off of fixed assets related to merger ............... 191 -- --
Deferred income taxes ..................................... (1,583) 1,955 (41)
Tax benefit from employee stock plans ..................... 8,714 4,439 240
Minority interest ......................................... (6,179) -- --
Non-cash compensation ..................................... 9,719 607 --
Deferred compensation amortization ........................ 1,957 288 49
Changes in operating assets and liabilities,
net of effect of mergers:
Accounts receivable, net ............................... (27,912) (6,014) (5,565)
Inventory, net ......................................... (734) 128 1,139
Prepaid expenses and other current assets .............. 967 (9,889) 617
Other long-term assets ................................. (2,387) (2,471) 2,559
Accounts payable ....................................... (1,007) 1,211 (2,359)
Accrued liabilities .................................... 26,363 7,557 2,919
Unearned revenue ....................................... 2,554 5,418 (455)
Other long-term liabilities ............................ -- (478) 523
--------- --------- ---------
Net cash provided by (used in) operating activities ....... 35,907 14,158 (8,930)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets .............................. 625 961 --
Purchases of short-term investments ............................. (117,457) (133,549) (444,824)
Maturities of short-term investments ............................ 127,558 128,005 455,465
Acquisition of property and equipment ........................... (33,934) (12,655) (12,622)
Purchases of third party investments ............................ (13,300) -- (2,500)
Acquisition of intangible assets ................................ (80) -- --
Loan receivable ................................................. 155 (2,659) (4,943)
--------- --------- ---------
Net cash used in investing activities ..................... (36,433) (19,897) (9,424)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of mandatorily redeemable
convertible preferred stock ................................... -- 9,937 3,548
Proceeds from issuance of preferred stock ....................... 59,029 3,407 8,702
Proceeds from issuance of common stock .......................... 39,434 26,777 8,011
Borrowings on capital lease ..................................... 999 1,355 201
Payments on capital lease ....................................... (1,281) (833) (67)
Acquisition of treasury stock ................................... (8,204) (20,306) (5,139)
--------- --------- ---------
Net cash provided by financing activities ................. 89,977 20,337 15,256
Net increase (decrease) in cash and cash equivalents ............ 89,451 14,598 (3,098)
Adjustment to conform acquired companies' year end .............. (3,826) 2,084 --
--------- --------- ---------
Total ........................................................... 85,625 16,682 (3,098)
Cash and cash equivalents, beginning of year .................... 29,459 12,777 15,875
--------- --------- ---------
Cash and cash equivalents, end of year .......................... $ 115,084 $ 29,459 $ 12,777
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 35
MACROMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
-------------------------- -------------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCES AS OF MARCH 31, 1997 ............... 38,751 $ 39 -- $ -- $ 149,626
Comprehensive loss:
Net loss .................................
Unrealized loss on available-for-sale
securities, net of tax .................
Total comprehensive loss ....................
Common stock issued by acquired company ..... 46
Preferred Shares issued by acquired
companies .............................. 8,656
Exercise of stock options ................... 573 1 2,384
Issuance of warrants to purchase common
stock by acquired company .............. 182
Common stock issued under ESPP .............. 195 -- 1,469
Tax benefit from stock plans ................ 240
Common stock issued under purchase of
Solis .................................. 300 -- 3,975
Purchase of treasury stock .................. (510) (5,139)
Non-cash compensation ....................... (13)
--------- --------- --------- --------- ---------
BALANCES AS OF MARCH 31, 1998 ............... 39,819 40 (510) (5,139) 166,565
Comprehensive income:
Net income ...............................
Unrealized loss on available-for-sale
securities, net of tax .................
Total comprehensive income ..................
Preferred Shares issued by acquired
companies .............................. 6,416
Issuance of common stock upon acquisition of
LikeMinds, Inc. by Andromedia, Inc. .... 458 -- 2,608
Exercise of stock options ................... 3,168 3 22,546
Common stock issued under ESPP .............. 145 -- 1,618
Purchase of treasury stock .................. (1,110) (20,306)
Preferred stock accretion ................... (104)
Tax benefit from stock plans ................ 4,439
Non-cash compensation ....................... 2,352
Adjustment to conform acquired company's
year end (Note 4) ...................... (3,009)
--------- --------- --------- --------- ---------
BALANCES AS OF MARCH 31, 1999 ............... 43,590 43 (1,620) (25,445) 203,431
Comprehensive income:
Net income ...............................
Unrealized gain on available-for-sale
securities, net of tax .................
Total comprehensive income ..................
Preferred Shares issued by acquired
companies .............................. 520
Exercise of stock options ................... 3,725 4 36,842
Common stock issued under ESPP .............. 84 -- 2,445
Common stock exchanged for preferred stock
of pooled entities ..................... 3,231 4 31,403
Purchase of treasury stock .................. (198) (8,204)
Preferred stock accretion ................... (2,538)
Tax benefit from stock plans ................ 8,714
Non-cash compensation ....................... 33,251
Gain on sale of subsidiary stock ............ 21,109
Adjustment to conform acquired company's
year end (Note 4) ..................... 44 -- 320
--------- --------- --------- --------- ---------
BALANCES AS OF MARCH 31, 2000 ............... 50,674 $ 51 (1,818) $ (33,649) $ 335,497
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED (ACCUMULATED
OTHER DEFICIT) TOTAL
DEFERRED COMPREHENSIVE COMPREHENSIVE RETAINED STOCKHOLDERS'
COMPENSATION INCOME (LOSS) INCOME (LOSS) EARNINGS EQUITY
------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCES AS OF MARCH 31, 1997 ............... $ (149) $ 297 $ (18,545) $ 131,268
Comprehensive loss:
Net loss ................................. $ (15,641) (15,641) (15,641)
Unrealized loss on available-for-sale
securities, net of tax ................. (250) (250) (250)
---------
Total comprehensive loss .................... $ (15,891)
---------
Common stock issued by acquired company ..... 46
Preferred Shares issued by acquired
companies .............................. 8,656
Exercise of stock options ................... 2,385
Issuance of warrants to purchase common stock
by acquired company .................... 182
Common stock issued under ESPP .............. 1,469
Tax benefit from stock plans ................ 240
Common stock issued under purchase of
Solis .................................. 3,975
Purchase of treasury stock .................. (5,139)
Non-cash compensation ....................... 62 49
--------- --------- --------- --------- ---------
BALANCES AS OF MARCH 31, 1998 ............... (87) 47 (34,186) 127,240
Comprehensive income:
Net income ............................... $ 2,610 2,610 2,610
Unrealized loss on available-for-sale
securities, net of tax ................. (9) (9) (9)
---------
Total comprehensive income .................. $ 2,601
---------
Preferred Shares issued by acquired
companies .............................. 6,416
Issuance of common stock upon acquisition of
LikeMinds, Inc. by Andromedia, Inc. .... 2,608
Exercise of stock options ................... 22,549
Common stock issued under ESPP .............. 1,618
Purchase of treasury stock .................. (20,306)
Preferred stock accretion ................... (104)
Tax benefit from stock plans ................ 4,439
Non-cash compensation ....................... (1,457) 895
Adjustment to conform acquired company's
year end (Note 4) ......................