Adobe 2000 Annual Report Download - page 67

NOTE 10. EMPLOYEE STOCK PLANS
Stock Option Plans As of December 1, 2000, we had reserved 142.0 million shares of com-
mon stock for issuance under our 1994 and 1999 Stock Option Plans (the “Option
Plans”) for employees, which provide for the granting of stock options to employees and
officers at the fair market value of our common stock at the grant date. Initial options
granted under the Option Plans generally vest 25% after the first year and ratably there-
after such that 50% and 100% are vested after the second and third year, respectively;
subsequent options granted under the Option Plans generally vest ratably over the entire
term such that 50% and 100% are vested after the second and third year, respectively.
Outstanding option terms under all of our employee stock option plans range from five
to ten years.
As of December 1, 2000, we had reserved 2.5 million shares of common stock for issuance
under our 1996 Outside Directors Stock Option Plan, which provides for the granting of
nonqualified stock options to nonemployee directors. In December 1999, our Board of
Directors approved, and in April 2000 our stockholders approved, an increase in the
number of shares reserved under the 1996 Outside Directors Stock Option Plan of
500,000 to an aggregate of 2.5 million shares. Option grants are limited to 40,000 shares
per person in each fiscal year, except for a new nonemployee director, who is granted
60,000 shares upon election as a director. All options are exercisable as vested within
a ten-year term. Options generally vest over three years: 25% on the day preceding each of
Adobe’s next two annual meetings of stockholders and 50% on the day preceding Adobe’s
third annual meeting of stockholders after the grant of the option. The exercise price
of the options that are issued is equal to the fair value on the date of grant. In fiscal 2000,
we granted options for 160,000 shares with an exercise price of $61.72 to existing
directors and an option for 60,000 shares to a new director with an exercise price of
$78.88. In fiscal 1999, we granted options for 80,000 shares with an exercise price of
$14.86 to existing directors.
On September 23, 1998, the Board of Directors approved a stock option repricing program
whereby each eligible stock option was automatically amended to have an exercise price
equal to $8.45. As a result, approximately 20.2 million options were amended for eligible
employees for an equal number of repriced options. All other terms of the options,
including expiration dates, remain substantially the same.
Stock option activity for fiscal 2000, 1999, and 1998 is presented below:
DECEMBER 1 DECEMBER 3 NOVEMBER 27
YEARS ENDED 2000 1999 1998
WEIGHTED WEIGHTED WEIGHTED
AV E R AG E AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
Outstanding,
beginning
of year 38,149,038 $ 18.56 41,763,280 $ 7.92 32,584,940 $ 7.94
Granted 19,669,375 60.90 18,588,080 29.68 42,853,400 8.77
Exercised (8,724,580) 11.17 (17,042,800) 7.50 (7,955,908) 6.55
Canceled (4,076,433) 21.15 (5,159,522) 9.06 (25,719,152) 9.77
Outstanding,
end of year 45,017,400 38.26 38,149,038 18.56 41,763,280 7.92
Exercisable,
end of year 11,478,693 18.53 9,799,482 7.92 17,473,272 7.15
Weighted
average fair
value of options
granted during
the year $ 29.89 $ 11.66 $ 6.92