Autodesk 2004 Annual Report Download - page 67

and certain guarantees, including limited product warranties. Autodesk accrues for known indemnification
and warranty issues if a loss is probable and can be reasonably estimated. Historically, costs related to these
warranties and indemnifications have not been significant, and because potential future costs are highly
variable, Autodesk is unable to estimate the maximum potential impact of these guarantees on its future
results of operations.
In connection with the sale or license to third parties of assets or businesses, Autodesk has entered into
customary indemnity agreements related to the assets or businesses sold or licensed. Historically, costs
related to these guarantees have not been significant, but because potential future costs are highly
variable, Autodesk is unable to estimate the maximum potential impact of these guarantees on its future
results of operations.
As permitted under Delaware law, Autodesk has agreements whereby it indemnifies its officers and
directors for certain events or occurrences while the officer or director is, or was, serving at Autodesk’s
request in such capacity. The maximum potential amount of future payments Autodesk could be required
to make under these indemnification agreements is unlimited; however, Autodesk has director and officer
insurance coverage that reduces its exposure and would generally enable Autodesk to recover a portion
of any future amounts paid. Autodesk believes the estimated fair value of these indemnification agreements
in excess of applicable insurance coverage is minimal.
Legal Proceedings
On December 27, 2001, Spatial Corp. (“Spatial”) filed suit in Marin County Superior Court against
Autodesk and D-Cubed Ltd. (“D-Cubed”), seeking among other things, termination of a development
agreement between Spatial and Autodesk and an injunction preventing Autodesk from working with
contractors under the development agreement. On October 2, 2003, a jury found that Autodesk did not
breach the development agreement. Spatial filed a notice of appeal on December 2, 2003, appealing the
decision of the jury. Autodesk believes that the ultimate resolution of this matter will not have a material
effect on its consolidated statements of financial condition, results of operations or cash flows.
Generally, Autodesk is involved in legal proceedings arising from the normal course of business
activities. In its opinion, resolution of pending matters is not expected to have a material adverse impact on
its consolidated results of operations, cash flows or financial position. However, it is possible that an
unfavorable resolution of a matter could materially affect the future results of operations, cash flows or
financial position in a particular period.
Note 8. Stockholders’ Equity
Preferred Stock
Under Autodesk’s Certificate of Incorporation, 2.0 million shares of preferred stock are authorized. At
January 31, 2004, there were no preferred shares issued or outstanding. The Board of Directors has the
authority to issue the preferred stock in one or more series and to fix rights, preferences, privileges and
restrictions,including dividends, andthe number of shares constituting any series or the designation ofsuch
series, without any further vote or action by the stockholders.
In December 1995, the Board of Directors approved a Preferred Shares Rights Agreement (the “Rights
Agreement”). The Rights Agreement is intended to protect stockholders’ rights in the event of an unsolicited
takeover attempt. It is not intended to prevent a takeover of the Company on terms that are favorable and
fair to all stockholders and will not interfere with a merger approved by the Board of Directors. Each right
entitles stockholders to buy 1/1000 of a share of preferred stock at an exercise price of $100, subject to further
adjustment. The rights will become exercisable for half-priced common stock if a person or group acquires
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7. Commitments and Contingencies (Continued)
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