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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Continued)
NOTE 10. EMPLOYEE STOCK PLANS (CONTINUED)
Scholes option pricing model. The assumptions used to value the option grants and purchase rights are
stated as follows:
Years Ended
November 27 November 28 November 29
1998 1997 1996
Expected life of options ............................. 3 years 3 years 3 years
Expected life of restricted stock ........................ 3 years 3 years 3 years
Expected life of purchase rights ........................ 1.25 years 1.25 years 1.25 years
Volatility ........................................ 53% 50% 50%
Risk-free interest rate ............................... 4.2–5.7% 5.0–6.6% 5.5–6.7%
Dividend yield .................................... 0.5% 0.5% 0.5%
Options and restricted stock grants vest over several years, and new option and restricted stock grants
are generally made each year. Because of this, the pro forma amounts shown above may not be
representative of the pro forma effect on reported net income in future years.
NOTE 11. STOCKHOLDERS’ EQUITY
Stockholder Rights Plan
The Company’s Stockholder Rights Plan is intended to protect stockholders from unfair or coercive
takeover practices. In accordance with this plan, the Board of Directors declared a dividend distribution of
one common stock purchase right on each outstanding share of its common stock held as of July 24, 1990,
and on each share of common stock issued by the Company thereafter. Each right entitles the registered
holder to purchase from the Company a share of common stock at $115. The rights become exercisable in
certain circumstances including upon an entity acquiring or announcing the intention to acquire beneficial
ownership of 20 percent or more of the Company’s common stock without the approval of the Board of
Directors or upon the Company being acquired by any person in a merger or business combination
transaction. The rights are redeemable by the Company prior to exercise at $0.01 per right and expire on
July 24, 2000.
Stock Repurchase Program
In September 1997, the Board of Directors authorized, subject to certain business and market
conditions, the purchase of up to 15 million shares of the Company’s stock over a two-year period. This
new stock repurchase program was in addition to an existing program whereby the Company has been
authorized to repurchase shares to offset issuances under employee stock option and stock purchase plans.
The Company repurchased approximately 10.5 million shares and approximately 6.3 million shares of its
common stock in fiscal 1998 and 1997, respectively, at a cost of $379.2 million and $275.6 million,
respectively, under its stock repurchase programs. As of November 27, 1998, management is authorized to
repurchase an additional 836,000 shares under the 15 million share repurchase program. The Company has
sold put warrants which will expire in the first quarter of fiscal 1999 for all but 228 of those remaining
shares. In fiscal 1998, the Company reissued approximately 2.6 million treasury shares under its employee
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