Adobe 1998 Annual Report Download - page 12

In general, all facilities are in good condition and are operating at capacities that range from 75% to
100%.
The Company owns land in Edinburgh, Scotland on which a building is being constructed for future
use as a sales, marketing and administration office. The expected completion date of the building is
August 1999.
The Company also leases office space in the United States and various other countries under
operating leases.
The Company has two leased office buildings in San Jose, California that were vacated in connection
with the restructuring program that was implemented in the third quarter of fiscal 1998. The Company still
has commitments under these lease agreements, although the Company has already accrued these
commitments, net of anticipated sublease income, under its restructuring plan (see Note 13 of the
Consolidated Financial Statements).
Item 3. Legal Proceedings
On April 17, 1997, a derivative action was filed in the Superior Court of the State of California,
County of Santa Clara, against the current members of Adobe’s Board of Directors and Paul Brainerd, a
former member of the Board. The suit was filed by a stockholder purporting to assert on behalf of the
Company claims for alleged breach of the Directors’ fiduciary duty and mismanagement related to the
Company’s acquisition of Frame in October 1995. The Court granted Adobe’s demurrer to the suit, with
leave to amend for the plaintiff. In January 1998, the plaintiff filed an amended complaint making
substantially the same claims but not including Mr. Brainerd. In March 1998, Adobe filed a demurrer to
the amended complaint, which was overruled by the trial court in May 1998. In June 1998, Adobe filed a
writ petition with the California Court of Appeals for review of the trial court’s decision, which was denied.
In July 1998, Adobe filed a petition for review of the Court of Appeals’ refusal to grant the writ with the
Supreme Court of California, which was denied in September 1998. The Company intends to continue
vigorously defending the action.
On February 6, 1996, a securities class action complaint was filed against Adobe, certain of its officers
and directors, certain former officers of Adobe and Frame Technology Corporation (‘‘Frame’’), Ham-
brecht & Quist, LLP (‘‘H&Q’’), investment banker for Frame, and certain H&Q employees, in connection
with the drop in the price of Adobe stock following its announcement of financial results for the quarter
ended December 1, 1995. The complaint was filed in the Superior Court of the State of California, County
of Santa Clara. The complaint alleges that the defendants misrepresented material adverse information
regarding Adobe and Frame and engaged in a scheme to defraud investors. The complaint seeks
unspecified damages for alleged violations of California law. Adobe believes that the allegations against it
and its officers and directors are without merit and intends to vigorously defend the lawsuit. The case is
currently in the discovery phase.
On October 29, 1998, Heidelberger Druckmaschinen AG, a German company, filed a complaint
alleging that Adobe is using Heidelberger’s US patent number 4,393,399 for the partial electronic
retouching of colors. The complaint was filed in the United States District Court for the District of
Delaware, and seeks a permanent injunction and unspecified damages. Adobe believes that the allegations
against it are without merit and intends to vigorously defend the lawsuit.
Management believes that the ultimate resolution of these matters will not have a material impact on
the Company’s financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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