Adobe 2003 Annual Report Download - page 86

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Note 12. Stockholders’ Equity
Stockholder Rights Plan
Our 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 our common stock held as of July 24, 1990 and
on each share of common stock issued by Adobe thereafter. In July 2000, the Stockholder Rights Plan was
amended to extend it for ten years so that each right entitles the holder to purchase one unit of Series A
Preferred Stock, which is equal to 1/1000 share of Series A Preferred Stock, par value $0.0001 per share, at
a price of $700 per unit. As adjusted for our 2000 stock split in the form of a dividend, each share of
common stock now entitles the holder to one-half of such a purchase right. Each whole right still entitles
the registered holder to purchase from Adobe a unit of preferred stock at $700. The rights become
exercisable in certain circumstances, including upon an entity’s acquiring or announcing the intention to
acquire beneficial ownership of 15% or more of our common stock without the approval of the Board of
Directors or upon our being acquired by any person in a merger or business combination transaction. The
rights are redeemable by Adobe prior to exercise at $0.01 per right and expire on July 23, 2010.
Stock Repurchase Program I – On-going Dilution Coverage
To facilitate our stock repurchase program designed to minimize dilution from stock issuance
primarily from employee stock plans, we have repurchased shares in the open market, sold put warrants
and purchased call options.
Authorization to repurchase shares to cover on-going dilution is not subject to expiration. However,
this repurchase program is limited to covering net dilution from stock issuances and is subject to business
conditions and cash flow requirements as determined by our Board of Directors from time to time. We
repurchased approximately 2.8 million, 8.6 million and 5.9 million in fiscal 2003, 2002 and 2001,
respectively, at a cost of $84.8 million, $255.0 million and $319.9 million, respectively.
In fiscal 2003, we did not sell any put warrants. In fiscal 2002 and 2001, we sold approximately 7.5
million and 5.6 million put warrants, respectively. Each put warrant entitled the holder to sell one share of
Adobe’s common stock to Adobe at a specified price for cash or stock at Adobe’s option. At November 28,
2003, no put warrants were outstanding.
In fiscal 2003, we did not purchase any call options. In fiscal 2002 and 2001, we purchased call
options that entitled us to buy 4.9 million and 3.9 million shares, respectively, of our common stock on
certain dates at specified prices. At November 28, 2003, no call options were outstanding.
Stock Repurchase Program II – Additional Authorization above Dilution Coverage
In March 2001, our Board of Directors authorized a program to purchase up to an additional 5.0
million shares of our common stock over a two-year period, subject to certain business and cash flow
requirements. Under this program, we repurchased approximately 2.0 million shares at a cost of $38.2
million during fiscal 2002. We did not make any repurchases under this plan in fiscal years 2003 and 2001.
The authorization for the remaining 3.0 million shares expired on March 2, 2003.
On September 25, 2002, our Board of Directors authorized a program to purchase up to an additional
5.0 million shares of our common stock over a three-year period, subject to certain business and cash flow
requirements. We have not made any purchases under this 5.0 million share repurchase program. The
authorization for this program will expire in September 2005.