Adobe 1999 Annual Report Download - page 34

for odd-lot and fractional Siebel shares. Also, in fiscal 1997, we dividended one share of Netscape common
stock for each 200 shares of Adobe common stock held by stockholders of record on July 31, 1997. An
equivalent cash dividend was paid for holdings of less than 5,000 Adobe shares and for fractional Netscape
shares. The declaration of future dividends, whether in cash or in-kind, is within the discretion of Adobe’s
Board of Directors and will depend on business conditions, our results of operations and financial
condition, and other factors.
To facilitate our stock repurchase program, we sold put warrants in a series of private placements in
fiscal 1999, 1998, and 1997. Each put warrant entitles the holder to sell one share of our common stock to
us at a specified price. Approximately 6.0 million, 8.0 million, and 9.2 million put warrants were written in
fiscal 1999, 1998, and 1997, respectively. At December 3, 1999, approximately 2.7 million put warrants were
outstanding that expire on various dates through April 2000 and have exercise prices ranging from $40.16
to $69.35 per share, with an average exercise price of $54.78 per share.
In addition, in fiscal 1999, 1998, and 1997, we purchased call options that entitle us to buy 2.9 million,
3.2 million, and 4.6 million shares, respectively, of our common stock. At December 3, 1999, approximately
1.6 million call options were outstanding that expire on various dates through April 2000 and have exercise
prices ranging from $43.42 to $74.83 per share, with an average exercise price of $60.42 per share. Under
these arrangements, at our option, we can settle with physical delivery or net shares equal to the difference
between the exercise price and the value of the option as determined by the contract.
We believe that existing cash, cash equivalents, and short-term investments, together with cash
generated from operations, will provide sufficient funds for us to meet our operating cash requirements in
the foreseeable future.
Commitments
Our principal commitments as of December 3, 1999 consisted of obligations under operating leases, a
line of credit agreement, venture investing activities, real estate development agreements, and various
service agreements.
In fiscal 1994 and 1996, we entered into real estate development agreements and operating lease
agreements in connection with the construction of two corporate headquarters office facilities in San Jose,
California. The operating lease agreement for the first office building commenced in 1996, and the
operating lease agreement for the second facility commenced in 1998. In August 1999, we restructured
these two lease agreements for our corporate headquarters. The amended and restated agreement replaces
the two prior lease agreements commencing in 1996 and 1998, respectively. The lease is for a period of five
years and is subject to standard covenants including financial ratios. We have an option to purchase the
buildings at any time during the term for an amount equal to the total investment of the lessor. At the end
of the lease term, we may exercise the purchase option or, with the mutual agreement of the lessor, renew
the term of the lease. In addition to these possibilities, at the end of the term, we may elect to have the
buildings sold to an unrelated third party. In such case, we are obligated to use our best efforts to arrange
for such a sale and are obligated to pay the lessor the difference between the total investment in the
buildings and the net sales proceeds, provided, however, that in no event would we be required to pay
more than a maximum guaranteed residual amount as set forth in the lease. In the event we default during
the term of the lease, the lessor could require us to purchase the buildings for an amount equal to our
option price. As of December 3, 1999, we were in compliance with all financial covenants.
During 1998, we entered into a real estate development agreement for the construction of an office
building in Edinburgh, Scotland. During fiscal 1998 and 1999, we paid approximately $34.9 million for
land, fees, and construction costs. During fiscal 1999, we announced a Board-approved restructuring which
resulted in the reduction in workforce primarily in our European headquarters in Edinburgh, Scotland.
(For further information, see Note 7 of the Notes to Consolidated Financial Statements.) As a result of the
restructuring, the decision was made by management to sell the new facility in Edinburgh, and the sale was
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