Adobe 2005 Annual Report Download - page 83

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The Restricted Stock Plan will continue until the earlier of (i) termination by the Board or (ii) the date
on which all of the shares available for issuance under the plan have been issued and restrictions on issued
shares have lapsed.
Employee Stock Purchase Plan
Our 1997 Employee Stock Purchase Plan (the “ESPP”) allows eligible employee participants to
purchase shares of our common stock at a discount through payroll deductions. The ESPP consists of
twenty-four-month offering periods with four six-month purchase periods in each offering period.
Employees purchase shares in each purchase period at 85% of the market value of our common stock at
either the beginning of the offering period or the end of the purchase period, whichever price is lower. As
of December 2, 2005, we had reserved 76.0 million shares of our common stock for issuance under the
ESPP and approximately 22.8 million shares remain available for future issuance.
The weighted average fair value of the purchase rights granted in fiscal 2005, 2004 and 2003 were
$9.08, $6.27 and $5.49, respectively.
The ESPP will continue until the earlier of (i) termination by the Board or (ii) the date on which all of
the shares available for issuance under the plan have been issued.
Stock Appreciation Rights
Under the 2003 Plan, we are authorized to grant Stock Appreciation Rights (“SARs”), a form of
phantom stock, to designated key employees based on their performance. Additionally, we grant SARs to
employees in certain countries outside of the U.S. in lieu of stock options, generally with similar vesting
schedules to our option vesting schedule; these SARs generally expire eight years after the grant date.
The performance-based SARs generally vest four years from the date of grant but contain an
acceleration feature that allows for a two-year vesting period based on Adobe achieving predetermined
performance goals. These performance-based SARs expire five years from the date of grant. Under our
SAR plan, designated employees are awarded rights that are equal to one share of Adobe’s common stock
for each right awarded with an exercise price based on the fair market value on the grant date. When the
award vests, employees generally have the right to exercise the award and receive the then-current value in
cash of the appreciation from the exercise price of the exercised number of rights of our common stock. We
did not grant SARs in fiscal 2005, 2004 and 2003. We charged approximately $0.1 million, $0.2 million
and $0.1 million to expense in 2005, 2004 and 2003, respectively, for outstanding SARs. As of December
2, 2005, there were no SARs outstanding.
Note 11. 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 and 2005 stock splits each in the form of a dividend, each
share of common stock now entitles the holder to one-quarter 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.