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                             Arrangement Involving



                              Accelio Corporation


                                    - and -



                           Adobe Systems Incorporated






                   Notice of Special Meeting of Shareholders

                            To be held April 9, 2002


                                    - and -



                           Management Proxy Circular


                             of Accelio Corporation







                                 March 8, 2002






<PAGE>


                                                                   March 8, 2002

Dear Accelio Corporation shareholders:

The board of  directors  cordially  invites  you to attend a special  meeting of
holders of Accelio  Corporation  ("Accelio")  common  shares to be held at 10:00
a.m.  (Ottawa time) on Tuesday,  April 9, 2002 at the Marriott  Hotel,  100 Kent
Street, Ottawa, Ontario.

At this special meeting, Accelio shareholders will be asked to approve a plan of
arrangement  pursuant to which Adobe Systems  Incorporated  ("Adobe"),  together
with its wholly-owned limited partnership,  Adobe Systems  International Limited
Partnership,  will  acquire  Accelio  through  the  acquisition  of  certain  of
Accelio's assets and all of Accelio's  outstanding equity securities in exchange
for  common  stock of Adobe  valued at U.S.$72  million  (less  certain  amounts
described below).

The enclosed materials contain important  information  regarding Adobe, Accelio,
the plan of arrangement, and the proposals relating thereto. We urge you to read
all  the  information  carefully.  If  you  require  assistance,   consult  your
financial, legal or other professional advisors.

Under  the  terms of the  plan of  arrangement,  through  a  series  of  related
transactions, each common share of Accelio will be exchanged for a fraction of a
share of Adobe common  stock.  This  fraction will be determined by (a) dividing
U.S.$72 million (less the in-the-money amount of all Accelio options,  estimated
to be approximately  U.S.$1.3  million) by the weighted average trading price of
one share of Adobe common stock, as reported on The Nasdaq National Market,  for
the ten  consecutive  trading days ending on the third  trading day prior to the
closing of the  arrangement,  and (b) further  dividing such resulting amount by
the total  number of  outstanding  common  shares of Accelio on a  fully-diluted
basis at the closing.

By way of example  only,  assuming the weighted  average  trading price of Adobe
common stock over the period described above is equal to U.S.$38.80, and further
assuming that  24,992,652  Accelio common shares are issued and outstanding on a
fully-diluted  basis at the closing, an Accelio shareholder would be entitled to
receive  0.0729 shares of Adobe common stock for each Accelio common share held.
Based on the foregoing  fraction of a share, the arrangement would result in the
issuance  of Adobe  common  stock  valued as  described  above at  approximately
U.S.$2.83  for each common share of Accelio,  or based on the noon spot exchange
rate on March 7, 2002 of  Cdn.$1.5823,  approximately  Cdn.$4.48 for each common
share of Accelio.

Please note that because the number of shares of Adobe common stock to be issued
in connection  with the proposed  transaction  is based on the weighted  average
trading  price of Adobe common stock over the period  described  above,  the per
share value of the shares of Adobe common stock to be issued in connection  with
the  arrangement,  as measured by the actual closing sales price of Adobe common
stock on the closing date of the  arrangement,  may be more or less than the per
share values described  above.  Assuming that the weighted average trading price
is equal to the  closing  sales  price of  shares of Adobe  common  stock on the
closing date of the arrangement,  the value of the  consideration to be provided
to  Accelio   shareholders   pursuant  to  the  arrangement  will  represent  an
approximate  46% premium  over the  trading  price of Accelio  common  shares at
January  31,  2002,  the last  trading day  preceding  the  announcement  of the
proposed plan of arrangement.

After  careful  consideration,  Accelio's  board of  directors  has  unanimously
determined  that the proposed  arrangement is fair to, and in the best interests
of,  Accelio's  shareholders.  Accordingly,  the board of  directors  of Accelio
unanimously recommends that you vote FOR the arrangement.

All of the directors of Accelio and certain persons and entities affiliated with
them, who collectively represent 1.25% of the shares eligible to be voted at the
special meeting, have already agreed to vote in favour of the arrangement.  Your
vote, as a shareholder, is also requested to approve the arrangement resolution.
Approving the arrangement  requires the affirmative  vote of at least 66 2/3% of
the votes that are cast, in person or by proxy,  by  shareholders at the special
meeting to consider the arrangement resolution.

Subject  to  obtaining  court and other  regulatory  approvals,  if the  Accelio
shareholders  approve the  arrangement  resolution,  it is anticipated  that the
arrangement  will be completed on or about April 15,  2002.  Accelio  intends to
send a form of letter of  transmittal to all Accelio  shareholders  prior to the
effective  date of the  arrangement.  The  letter of  transmittal  will  contain
complete  instructions  on how to exchange your Accelio common shares for shares
of Adobe common stock.  Accelio  shareholders will not receive  certificates for
Adobe common stock to which they are entitled under the  arrangement  until they
return  a  properly   completed   letter  of  transmittal,   together  with  the
certificates  representing  their  Accelio  common  shares  and  other  required
documentation,  to the exchange agent at the address  specified in the letter of
transmittal.

Your vote is very  important,  and we hope  that you will be able to attend  the
special meeting.  However, whether or not you plan to attend the special meeting
in  person,  we urge you to  complete  the  enclosed  proxy and return it in the
envelope  provided  for your  convenience  so that it will be received not later
than 5:00 p.m. (Ottawa time) on Friday, April 5, 2002.

We  appreciate  your  interest  in  Accelio  and  your   consideration   of  the
arrangement.

Yours very truly,
ACCELIO CORPORATION

/s/ A. Kevin Francis
-----------------------------------
A. Kevin Francis
President & Chief Executive Officer

<PAGE>

                                                              Page
NOTICE OF SPECIAL MEETING OF
  SHAREHOLDERS...................................................1
SUMMARY..........................................................3
GLOSSARY OF TERMS................................................8
INFORMATION CONCERNING THE MEETING..............................15
     Purpose of Meeting.........................................15
     Date, Time and Place of Meeting............................15
     Solicitation and Appointment of Proxies....................15
     Voting of Proxies..........................................15
     Revocation of Proxies......................................16
     Advice to Beneficial Holders of
          Common Shares.........................................16
     Record Date and Entitlement to Vote........................17
     Quorum ....................................................17
     Voting Securities and Principal Holders
          of Voting Securities..................................17
     Approval Requirements and Eligible
          Voting Shares.........................................17
     Dissenters' Rights.........................................18
     Other Business.............................................18
FORWARD LOOKING STATEMENTS......................................19
THE TRANSACTION.................................................20
     Background.................................................20
     Recommendation of the Board of
          Directors.............................................21
     Reasons for the Recommendation.............................21
     Fairness Opinion...........................................22
     The Transaction............................................22
     Calculation of the Exchange Ratio..........................23
     Options and Warrants.......................................23
     Arrangement Mechanics......................................24
     Accounting Treatment.......................................25
     Procedure for the Arrangement to
          Become Effective......................................25
     Reduction in Stated Capital Account........................26
     Rights Plan................................................26
     Procedure for Exchange of Share
          Certificates..........................................27
     Illegality of Delivery of Adobe Shares.....................28
     Stock Exchange Listings....................................28
     Issuance and Resale of Adobe Shares
          Received Under the
          Arrangement...........................................28
THE ACQUISITION AGREEMENT.......................................30
     General Description........................................30
     Conditions to the Completion of the
          Arrangement...........................................33
     Termination of Acquisition Agreement.......................35
     Expenses and Termination Fees..............................35
     Support Agreements and Non-
          Competition Agreements................................36
INVESTMENT CONSIDERATIONS.......................................37
     General Risks Relating to the Proposed
          Transaction...........................................37
CERTAIN INCOME TAX CONSIDERATIONS
     TO ACCELIO SHAREHOLDERS....................................40
     Canadian Federal Income Tax
          Considerations........................................40
     United States Federal Income Tax
          Considerations........................................43

MARKET PRICES OF AND DIVIDENDS ON
     ADOBE SHARES AND ACCELIO
     SHARES.....................................................48
     Common Share Prices........................................48
     Dividends Paid.............................................50
REPORTING CURRENCIES AND
     ACCOUNTING PRINCIPLES......................................51
CANADIAN/U.S. EXCHANGE RATES....................................51
SELECTED HISTORICAL FINANCIAL DATA..............................52
INFORMATION RELATING TO ADOBE...................................54
     Business of Adobe..........................................54
     Corporate Structure........................................55
     Description of Share Capital...............................55
     Management's Discussion and Analysis
          of Financial Position and
          Results of Operations.................................57
     Options to Purchase Adobe Shares...........................57
     Prior Sales of Adobe Shares................................59
     Principal Holders of Adobe Shares..........................59
     Indebtedness of Directors and Senior
          Officers of Adobe.....................................59
     Information Concerning the Acquisition
          Entity................................................59
INFORMATION RELATING TO ACCELIO.................................60
     Corporate Structure........................................60
     Description of the Business................................60
     Documents Incorporated by Reference........................61
     Statement of Executive Compensation........................62
     Employment Agreements and
          Termination of Employment.............................63
     Compensation of Directors..................................65
     Indebtedness of Directors and Senior
          Officers..............................................65
     Interests of Management and Others in
          Material Transactions.................................65
     Accelio Rights Plan........................................66
COMPARISON OF SHAREHOLDERS' RIGHTS..............................67
DISSENTING SHAREHOLDER RIGHTS...................................75
LEGAL MATTERS...................................................78
ENFORCEABILITY OF CIVIL LIABILITIES.............................78
AUDITORS, TRANSFER AGENT AND REGISTRAR..........................78
WHERE YOU CAN FIND INFORMATION..................................78
APPROVAL OF THE ACCELIO BOARD OF DIRECTORS......................80

APPENDIX A - Form of Arrangement Resolution..................A - 1

APPENDIX B - Notice of Application and Interim Order.........B - 1

APPENDIX C - Plan of Arrangement.............................C - 1

APPENDIX D - Acquisition Agreement ..........................D - 1

APPENDIX E - Fairness Opinion ...............................E - 1

APPENDIX F - Adobe Annual Report on Form 10-K................F - 1

APPENDIX G - Adobe Definitive Proxy Statement................G - 1

APPENDIX H - Dissenting Shareholder Rights...................H - 1

<PAGE>


                              ACCELIO CORPORATION

                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

                      TO BE HELD ON TUESDAY, APRIL 9, 2002

NOTICE  IS  HEREBY  GIVEN  that  a  special   meeting  (the  "Meeting")  of  the
shareholders  of Accelio  Corporation  ("Accelio")  will be held at the Marriott
Hotel, 100 Kent Street,  Ottawa, Ontario at 10:00 a.m. (Ottawa time) on April 9,
2002 for the following purposes:

1.   to consider,  pursuant to an order of the Ontario Superior Court of Justice
     dated March 8, 2002 (the "Interim  Order"),  and, if deemed  advisable,  to
     pass, with or without  variation,  a special  resolution (the  "Arrangement
     Resolution") to approve an arrangement  (the  "Arrangement")  under Section
     192 of the Canada Business  Corporations  Act, and matters related thereto,
     all as more  particularly  described in the  accompanying  management proxy
     circular of Accelio (the "Circular"); and

2.   to transact such further or other  business as may properly come before the
     special meeting or any adjournment thereof.

The  Arrangement is described in the Circular,  which forms part of this Notice.
The full text of the  Arrangement  Resolution  is set out in  Appendix  A to the
Circular.

The board of directors of Accelio has fixed 5:00 p.m.  (Ottawa time) on March 5,
2002 (the  "Record  Date"),  as the record date for  determining  the holders of
record of common  shares of Accelio who are  entitled  to receive  notice of the
Meeting  and  to  attend  and  vote  at  the  Meeting  and  any  adjournment  or
postponement thereof.

Pursuant to the Interim  Order, a copy of which is attached as Appendix B to the
Circular,  shareholders have been granted the right to dissent in respect of the
Arrangement. If the Arrangement becomes effective, a dissenting shareholder will
be entitled  to be paid the fair value of the common  shares held by such holder
provided  that such  holder  provides  a written  objection  to the  Arrangement
Resolution that is received by Accelio,  c/o LaBarge Weinstein,  Attention:  Ms.
Deborah L. Weinstein,  333 Preston Street, 11th Floor, Ottawa,  Ontario, K1S 5N4
not  later  than  5:00 p.m.  (Ottawa  time) on April 5, 2002 and the  dissenting
holder shall have  otherwise  complied with the provisions of Section 190 of the
Canada Business  Corporations Act, as modified by the Interim Order. The dissent
right is described in the accompanying  Circular. The text of Section 190 of the
Canada Business  Corporations  Act is set out in Appendix H to the Circular.  If
holders of more than 10% of the common shares, in the aggregate,  exercise their
right to dissent from the Arrangement Resolution,  Adobe has the right to choose
not to effect the Arrangement.

Failure to strictly comply with the requirements set forth in Section 190 of the
Canada Business  Corporations  Act, as modified by the Interim Order, may result
in the loss of any  right of  dissent.  Persons  who are  beneficial  owners  of
Accelio common shares registered in the name of a broker, custodian,  nominee or
other  intermediary who wish to dissent should be aware that only the registered
holders of such shares are entitled to dissent.  Accordingly,  if you are such a
beneficial  owner of common  shares  desiring to exercise your right of dissent,
you must make arrangements for the common shares beneficially owned by you to be
registered  in your name  prior to the time that the  written  objection  to the
resolution in respect of the  Arrangement  is required to be received by Accelio
or,  alternatively,  make  arrangements for the registered holder of your common
shares to dissent on your behalf.

Shareholders are urged to promptly complete,  sign, date and return the enclosed
proxy in the  envelope  provided  and mail it to or  deposit it by hand with the
Proxy  Department at CIBC Mellon Trust Company,  200 Queen's Quay East,  Unit 6,
Toronto,  Ontario M5A 4K9 or by  facsimile  transmission  to CIBC  Mellon  Trust
Company at (416)  368-2502.  To be  effective,  proxies must be received by CIBC
Mellon Trust Company,  not later than 5:00 p.m.  (Ottawa time) on April 5, 2002,
or, if the Meeting is adjourned or postponed, not later than 48 hours (excluding
Saturdays,  Sundays and holidays in Canada or the United States) before the time
of the adjourned or postponed  special  meeting,  or any further  adjournment or
postponement thereof.

DATED at Ottawa, Ontario, this 8th day of March, 2002.

By Order of the Board of Directors of Accelio


/s/ A. Kevin Francis
-----------------------------------
A. Kevin Francis
President & Chief Executive Officer

                                     Page 1
<PAGE>

THE SECURITIES TO BE ISSUED IN THIS  TRANSACTION  HAVE NOT BEEN REGISTERED UNDER
THE UNITED  STATES  SECURITIES  ACT OF 1933,  AS AMENDED (THE "1933  ACT"),  THE
SECURITIES LAWS OF ANY STATE OR THE SECURITIES  LAWS OF ANY OTHER  JURISDICTION,
NOR IS SUCH  REGISTRATION  CONTEMPLATED.  THE  SECURITIES  TO BE  ISSUED IN THIS
TRANSACTION  WILL BE ISSUED IN RELIANCE UPON THE  EXEMPTION  PROVIDED BY SECTION
3(a)(10) OF THE 1933 ACT.

THE  SECURITIES  TO BE  ISSUED IN THIS  TRANSACTION  HAVE NOT BEEN  APPROVED  OR
DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES  COMMISSION  NOR  HAS  THE  UNITED  STATES  SECURITIES  AND  EXCHANGE
COMMISSION  PASSED  UPON  THE  ACCURACY  OR  ADEQUACY  OF  THIS  CIRCULAR.   ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

INFORMATION  RELATING TO ACCELIO  CORPORATION HAS BEEN INCORPORATED BY REFERENCE
IN THIS CIRCULAR FROM  DOCUMENTS  FILED WITH  SECURITIES  COMMISSIONS OR SIMILAR
AUTHORITIES IN CANADA.

THE  INFORMATION   CONCERNING  ADOBE  SYSTEMS  INCORPORATED  CONTAINED  IN  THIS
CIRCULAR,  INCLUDING  THE  APPENDICES,  HAS BEEN  TAKEN  FROM OR IS  BASED  UPON
PUBLICLY  AVAILABLE  DOCUMENTS  AND  RECORDS  ON FILE  WITH  THE  UNITED  STATES
SECURITIES  AND  EXCHANGE  COMMISSION,  OTHER  PUBLIC  SOURCES  AND  INFORMATION
PROVIDED DIRECTLY BY ADOBE SYSTEMS INCORPORATED WHERE INDICATED HEREIN. ALTHOUGH
ACCELIO  CORPORATION  HAS NO KNOWLEDGE  THAT WOULD  INDICATE THAT ANY STATEMENTS
CONTAINED HEREIN TAKEN FROM OR BASED ON SUCH DOCUMENTS AND RECORDS ARE UNTRUE OR
INCOMPLETE,  ACCELIO  CORPORATION  ASSUMES NO RESPONSIBILITY FOR THE ACCURACY OF
THE INFORMATION CONTAINED IN SUCH DOCUMENTS, OR FOR ANY FAILURE BY ADOBE SYSTEMS
INCORPORATED  TO  DISCLOSE  EVENTS  WHICH MAY HAVE  OCCURRED  OR MAY  AFFECT THE
SIGNIFICANCE  OR  ACCURACY  OF ANY SUCH  INFORMATION  BUT WHICH ARE  UNKNOWN  TO
ACCELIO CORPORATION.

NO PERSON IS AUTHORIZED TO GIVE ANY  INFORMATION  OR TO MAKE ANY  REPRESENTATION
NOT  CONTAINED  IN THIS  CIRCULAR,  AND IF GIVEN OR MADE,  SUCH  INFORMATION  OR
REPRESENTATION  SHOULD  NOT BE  RELIED  UPON AS  HAVING  BEEN  AUTHORIZED.  THIS
CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION  OF AN OFFER TO
PURCHASE,  THE SECURITIES  OFFERED BY THIS CIRCULAR,  OR THE  SOLICITATION  OF A
PROXY, IN ANY JURISDICTION, TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS  CIRCULAR NOR ANY  DISTRIBUTION  OF THE  SECURITIES
OFFERED  PURSUANT TO THIS CIRCULAR SHALL,  UNDER ANY  CIRCUMSTANCES,  CREATE ANY
IMPLICATION  THAT THERE HAS BEEN NO CHANGE IN THE  INFORMATION  SET FORTH HEREIN
SINCE THE DATE OF THIS CIRCULAR.

SHAREHOLDERS  SHOULD NOT CONSTRUE THE CONTENTS OF THIS CIRCULAR AS LEGAL, TAX OR
FINANCIAL ADVICE AND SHOULD CONSULT WITH THEIR OWN  PROFESSIONAL  ADVISORS AS TO
RELEVANT LEGAL, TAX, FINANCIAL OR OTHER MATTERS IN CONNECTION HEREWITH.

SHAREHOLDERS  SHOULD BE AWARE  THAT THE  PUBLIC  DISCLOSURE  DOCUMENTS  OF ADOBE
SYSTEMS  INCORPORATED  HAVE BEEN FILED IN ACCORDANCE WITH THE SECURITIES LAWS OF
THE UNITED STATES, AND THESE REQUIREMENTS MAY DIFFER FROM THOSE OF THE PROVINCES
OF CANADA.  IN PARTICULAR,  FINANCIAL  STATEMENTS  INCLUDED OR  INCORPORATED  BY
REFERENCE IN THE PUBLIC DISCLOSURE  DOCUMENTS OF ADOBE SYSTEMS INCORPORATED HAVE
NOT BEEN PREPARED IN  ACCORDANCE  WITH CANADIAN  GENERALLY  ACCEPTED  ACCOUNTING
PRINCIPLES  AND  MAY  NOT BE  COMPARABLE  TO  FINANCIAL  STATEMENTS  OF  ACCELIO
CORPORATION.

                                     Page 2

<PAGE>


                                    SUMMARY

The following is a summary of certain  information  contained  elsewhere in this
Circular,  including the Appendices  hereto, and is qualified in its entirety by
reference to the more detailed information contained or referred to elsewhere in
this Circular or in the Appendices hereto.  Shareholders  should read the entire
Circular,  including  the  Appendices  hereto.  Capitalized  terms  used in this
Summary are defined in the Glossary of Terms or elsewhere in the Circular.

Date, Place and Purpose of the Meeting

The  Meeting  will be held on April 9, 2002 at 10:00 a.m.  (Ottawa  time) at the
Marriott  Hotel,  100 Kent Street,  Ottawa,  Ontario to consider  and, if deemed
advisable by the Shareholders,  pass, with or without variation, the Arrangement
Resolution. See "Information Concerning the Meeting".

The Companies

Accelio.  Accelio (formerly JetForm Corporation) is a leading global provider of
Web-enabled  business process  solutions,  headquartered in Canada.  With fiscal
2001 revenues of over Cdn.$100  million,  and in business since 1982,  Accelio's
global distribution  network spans every continent,  and has attracted more than
8.5 million users worldwide.  Accelio customers are global 2000 organizations in
the financial services,  banking,  manufacturing,  utilities and public sectors.
See "Information Relating to Accelio".

Adobe.  Founded in 1982,  Adobe  builds  award-winning  software  solutions  for
network publishing, including web, e-paper, print, video, wireless and broadband
applications.  Its graphic  design,  imaging,  dynamic media and authoring tools
enable customers to create, manage and deliver visually-rich,  reliable content.
Headquartered in San Jose,  California,  Adobe is the second-largest PC software
company in the United States,  with annual revenues  exceeding U.S.$1.2 billion.
See "Information Relating to Adobe".

Recommendation of the Board of Directors

The Board of Directors has unanimously  approved the Arrangement,  including the
Acquisition  Agreement,  and has unanimously  determined that the Arrangement is
fair  to,  and  in  the  best  interests  of,  the   Shareholders  and  Accelio.
Accordingly, the Board of Directors unanimously recommends that the Shareholders
vote in favour of and approve the Arrangement Resolution. See "The Transaction -
Recommendation of the Board of Directors".

Fairness Opinion

In  deciding  to approve  the  Arrangement,  the Board  considered,  among other
things,  the Fairness  Opinion.  The Fairness Opinion  concludes that, as of the
date thereof,  the Consideration (as defined therein) was fair, from a financial
point of view, to the Shareholders. See "The Transaction - Fairness Opinion".

The Exchange Ratio

Under the Arrangement,  Adobe together with the Acquisition Entity will acquire,
directly or indirectly, all of the Common Shares for the Net Purchase Price. The
Net Purchase  Price,  being U.S.$72 million less the  in-the-money  value of all
Options  (estimated to be approximately  U.S.$1.3  million),  will be payable in
Adobe Shares.

Under  the  terms of the  Plan of  Arrangement,  through  a  series  of  related
transactions,  each Common  Share will be  exchanged  for a fraction of an Adobe
Share known as the "Exchange  Ratio".  The Exchange  Ratio will be determined by
(a)  dividing  U.S.$72  million  (less the  in-the-money  amount of all Options,
estimated  to be  approximately  U.S.$1.3  million) by the Adobe  Average  Stock
Price,  and (b) further  dividing such  resulting  amount by the total number of
outstanding  Common  Shares  on a  fully-diluted  basis  at the  Closing  of the
Arrangement.

By way of example  only,  assuming  the Adobe  Average  Stock  Price is equal to
U.S.$38.80,  and further  assuming that 24,992,652  Common Shares are issued and
outstanding  on a  fully-diluted  basis at the Closing,  a Shareholder  would be
entitled to receive 0.0729 Adobe Shares for each Common Share held. Based on the
foregoing  fraction  of a Common  Share,  the  Arrangement  would  result in the
issuance of Adobe Shares valued as described  above at  approximately  U.S.$2.83
for  each  Common  Share,  or  based  on the  Noon  Rate  on  March  7,  2002 of
Cdn.$1.5823, approximately Cdn.$4.48 for each Common Share.

                                     Page 3

<PAGE>

Because  the  number  of  Adobe  Shares  to be  issued  in  connection  with the
Arrangement is based on the weighted  average trading price of Adobe Shares over
the period described above, the per share value of the Adobe Shares to be issued
in  connection  with the  Arrangement,  as measured by the actual  closing sales
price of Adobe Shares on the Effective Date of the  Arrangement,  may be more or
less than the per share values described above.  Assuming that the Adobe Average
Stock  Price is equal to the Adobe  Closing  Price on the date of  Closing,  the
value of the  consideration  to be  provided  to  Shareholders  pursuant  to the
Arrangement  will represent an approximate 46% premium over the trading price of
Common  Shares  at  January  31,  2002,  the  last  trading  day  preceding  the
announcement of the proposed Arrangement.

Options and Warrants

Accelio has agreed  that all  outstanding  Accelio  Options,  whether  vested or
unvested,  shall  terminate  at the  Option  Termination  Time  as  part  of the
Arrangement.  As permitted  under the terms of the  Acquisition  Agreement,  the
vesting of all Options will be accelerated  in accordance  with the terms of the
Option Plan, and any Option that remains  unexercised at the Option  Termination
Time will expire and be cancelled at such time.  Optionholders therefore will be
given the opportunity to exercise all of their outstanding  Options prior to the
Option Termination Time, whether they are currently vested or unvested.

Optionholders  with  in-the-money  Options  will be entitled to elect a cashless
exercise  of their  Options  and  receive  a cash  payment  from  Accelio  as an
alternative to exercising  the Options and paying the applicable  exercise price
and receiving Common Shares. Accelio estimates that if all Optionholders holding
in-the-money  Options make such election,  the aggregate  amount payable to them
will be approximately U.S.$1.3 million. These payments will reduce the value and
the number of Adobe  Shares that would  otherwise  be  issuable to  Shareholders
pursuant to the Arrangement.

Certain Optionholders with  out-of-the-money  Options have employment agreements
with Accelio  which  provide  that,  upon a change in control of Accelio,  their
Options will be exercisable  for a period of up to three years  following such a
change in control.  Adobe and Accelio  have agreed that  Accelio will pay a cash
amount  not to  exceed  approximately  U.S.$500,000  in the  aggregate  to  such
Optionholders  in  consideration  of the  surrender  of such  rights.  Adobe and
Accelio  have also  agreed  that  Accelio  will pay a cash  amount not to exceed
U.S.$10,000 in the aggregate to the holders of the Warrants in  consideration of
the early expiry of such  Warrants,  conditional  on the Closing.  The foregoing
payments  will not reduce the value or the number of the Adobe Shares that would
otherwise be issuable to Shareholders pursuant to the Arrangement.

Arrangement Mechanics

The  Arrangement  provides  for the  acquisition  of  Accelio  by Adobe,  either
directly or indirectly through the Acquisition  Entity,  through the acquisition
of certain of Accelio's  assets and all of the outstanding  equity  interests of
Accelio in a transaction in which the Shareholders  will receive the Adobe Stock
Consideration.  As a result of the Arrangement,  Adobe,  through the Acquisition
Entity,  will become the sole beneficial owner of all of the outstanding  Common
Shares. See "The Transaction - Arrangement Mechanics".

The Plan of Arrangement provides that:

(a)  at 12:02 a.m. (Ottawa time) on the Effective Date, the Accelio Rights Plan,
     and all  rights  issued or  issuable  thereunder,  shall  terminate  for no
     consideration;

(b)  in order that each  holder of Common  Shares  shall be  entitled to receive
     that number of Adobe  Shares  equal to the number of Common  Shares held by
     such holder  multiplied by the Exchange Ratio,  the following  events shall
     occur:

     (i) at 1:00 a.m. (Ottawa time) on the Effective Date:

          (1)  the  Acquisition  Entity will purchase from Accelio,  and Accelio
               will sell to the Acquisition Entity, certain assets in return for
               the  delivery  by the  Acquisition  Entity  to  Accelio  of Adobe
               Shares,  the number of Adobe Shares so delivered to be determined
               by dividing the  Acquisition  Entity Asset  Purchase Price by the
               Adobe Average Stock Price; and

          (2)  Adobe will purchase from Accelio, and Accelio will sell to Adobe,
               certain  other  assets in  return  for the  delivery  by Adobe to
               Accelio of Adobe Shares,  the number of Adobe Shares so delivered
               to be  determined by dividing the Adobe Asset  Purchase  Price by
               the Adobe Average Stock Price;

     (ii) at 1:35 a.m.  (Ottawa  Time) on the Effective  Date,  Cdn.$150,000,000
          shall be deducted from the  contributed  surplus  account and added to
          the stated capital account (and to the paid-up capital account for the
          purposes  of the Tax Act),  in each case as  maintained  by Accelio in
          respect of the Common Shares;

     (iii)at 2:00  a.m.  (Ottawa  time)  on the  Effective  Date,  Accelio  will
          purchase  from each holder of Common  Shares (other

                                     Page 4
<PAGE>

          than Common  Shares held by  Dissenting  Shareholders,  Adobe,  or any
          entities which are, directly or indirectly, wholly-owned by Adobe) and
          each such holder of Common  Shares will be deemed to have  transferred
          to Accelio,  the number of Common  Shares of such holder  equal to the
          Accelio  Repurchased Shares, in exchange for a certain number of Adobe
          Shares equal to the Accelio Repurchase Price;

     (iv) at 3:00 a.m.  (Ottawa  time) on the  Effective  Date,  each  remaining
          outstanding  Common Share (other than Common Shares held by Dissenting
          Shareholders,   Adobe,   or  any  entities  which  are,   directly  or
          indirectly,  wholly-owned  by Adobe) will be transferred by the holder
          thereof,  to the  Acquisition  Entity in exchange for a fraction of an
          Adobe Share equal to the Exchange Ratio;

(c)  at 2:30 a.m. (Ottawa time) on the Effective Date, all Accelio Options shall
     terminate  without any act or  formality  on the part of a holder  thereof,
     subject to any  obligations  contemplated in Section 5.3 of the Acquisition
     Agreement, if applicable; and

(d)  at 3:00 a.m. (Ottawa time) on the Effective Date, the name of Accelio shall
     be  changed  to "Adobe  Systems  Canada  Inc." or such other name as may be
     selected by the Board of Directors  and as may be  acceptable to regulatory
     authorities.

Assuming that the Adobe Average Stock Price is equal to U.S.$38.80,  and further
assuming  that  24,992,652  Common  Shares  are  issued  and  outstanding  on  a
fully-diluted basis at the Closing, the Exchange Ratio would be equal to 0.0729,
and the  Shareholders  would  be  entitled  to  receive  an  aggregate  total of
approximately  1.82  million  Adobe  Shares in  exchange  for all Common  Shares
exchanged  in   connection   with  the   Arrangement,   which  would   represent
approximately  0.77% of the issued and outstanding  Adobe Shares at the close of
trading on March 7, 2002. No certificates  representing  fractional Adobe Shares
will be delivered in exchange for Common Shares pursuant to the Arrangement.  In
lieu of any such fractional  securities each Shareholder otherwise entitled to a
fractional  interest  in  an  Adobe  Share  (after  aggregating  all  fractional
interests in Adobe Shares otherwise issuable to such holder) will receive a cash
payment from the Exchange Agent equal to the product of such fractional interest
and the Adobe  Closing Price on the last trading day  immediately  preceding the
Effective Date.

Accounting Treatment

Adobe will account for the Arrangement as a purchase for financial reporting and
accounting purposes, in accordance with U.S. GAAP.

Procedure for the Arrangement to become Effective

The CBCA requires the  Arrangement  to be approved by the Court.  Before mailing
the Circular,  Accelio  obtained the Interim Order providing for the calling and
holding of the Meeting and other procedural matters.

Subject to the approval of the  Arrangement by the  Shareholders at the Meeting,
the  hearing in respect of the Final Order is  scheduled  to take place on April
12, 2002 at 10:00 a.m.  (Ottawa time) in the Court at 161 Elgin Street,  Ottawa,
Ontario.  Any  Shareholder  who wishes to present  evidence or arguments at that
hearing  must file and deliver a Notice of  Appearance,  and any  affidavits  on
which it relies, in accordance with the rules of the Court and the provisions of
the Interim Order. The Court will consider, among other things, the fairness and
reasonableness  of the  Arrangement.  The  Court  may  approve  the  Arrangement
unconditionally   or  subject  to  compliance  with  any  conditions  the  Court
specifies.

The  Arrangement  will be  effective  on the date  shown in the  Certificate  of
Arrangement  issued by the  Director in  connection  with the Closing  after the
Articles of  Arrangement  have been filed with the  Director.  The Closing  will
occur after the required Shareholder approval,  the issuance of the Final Order,
when all required  Canadian  securities  regulatory orders and rulings have been
obtained and all other  conditions to the Closing have been satisfied or waived.
As of the date hereof and assuming the  satisfaction  or waiver of the foregoing
conditions   within  customary  time  frames,   Accelio   anticipates  that  the
Arrangement  will  become  effective  on or  about  April  15,  2002.  See  "The
Transaction - Procedure for the Arrangement to Become Effective".

Votes Required

Subject to any  further  order of the Court,  the  approval  of the  Arrangement
requires the approval of at least 66 2/3% of the votes cast by the  Shareholders
present in person or by proxy at the Meeting.  See  "Information  Concerning the
Meeting - Approval Requirements and Eligible Voting Shares".

Shareholders Entitled to Vote

Each  Shareholder at the close of business (Ottawa time) on the Record Date
is entitled to attend the Meeting in person or by proxy and to cast one vote for
each Common Share held by such  Shareholder  on the Record Date. At the close of
business

                                     Page 5
<PAGE>

on March 5, 2002, there were 24,992,652 Common Shares issued and outstanding.

In many instances,  Common Shares  beneficially owned by a person are registered
in the name of, or held by, other persons  (particularly  securities brokers and
trust  companies,  and their  nominees)  who hold  securities  on behalf of such
person who is not the registered holder of the securities.  Beneficial owners of
Common Shares in such circumstances must provide written voting  instructions to
such  intermediaries  before their Common Shares can be voted on their behalf by
such  intermediaries.  See  "Information  Concerning  the  Meeting  - Advice  to
Beneficial Holders of Common Shares".

Procedures for Exchange of Common Share Certificates

At or promptly  after the Effective  Time,  the  Acquisition  Entity and Accelio
shall deposit with the Exchange Agent,  for the benefit of the  Shareholders who
will  receive  Adobe Shares in  connection  with the  Arrangement,  certificates
representing  that  whole  number  of  Adobe  Shares  to be  delivered  upon the
repurchase or exchange of Common Shares,  as the case may be. Accelio intends to
mail a Letter of Transmittal to  Shareholders  prior to the Effective  Date. The
Letter of  Transmittal  will contain  complete  instructions  on how to exchange
Common  Shares  for Adobe  Shares.  Upon  surrender  to the  Exchange  Agent for
cancellation  of a certificate  which  immediately  prior to the Effective  Date
represented  outstanding  Common Shares that were  repurchased  or exchanged for
Adobe Shares under the Arrangement,  together with a duly completed and properly
signed Letter of Transmittal  such other documents and instruments as would have
been  required to effect the  transfer of shares  formerly  represented  by such
certificate under the CBCA and Accelio By-laws and such additional documents and
instruments  as the Exchange Agent may  reasonably  require,  the holder of such
surrendered  certificate shall be entitled to receive in exchange therefor,  and
the Exchange Agent shall deliver to such holder, a certificate representing that
number  (rounded  down to the nearest  whole  number) of Adobe Shares which such
holder has the right to receive  (together  with any dividends or  distributions
with respect  thereto and any cash in lieu of fractional  Adobe Shares) less any
amounts 00000 subject to withholding pursuant to applicable tax legislation, and
the certificate so surrendered  shall forthwith be cancelled.  In the event of a
transfer of ownership of Common  Shares which is not  registered in the transfer
records of Accelio, a certificate representing the proper number of Adobe Shares
may be issued to the  transferee  if the  certificate  representing  such Common
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence  and effect such  transfer.  See "The  Transaction  - Procedure  for
Exchange of Share Certificates".

Stock Exchange Listings and Resale of Adobe Shares

The Adobe  Shares are quoted on Nasdaq.  It is a condition to the closing of the
Arrangement  that the Adobe Shares issued  pursuant to the  Arrangement  will be
listed on Nasdaq. Upon consummation of the Arrangement, application will be made
to the TSE, PSE and Nasdaq to delist the Common  Shares so that such shares will
cease to be traded on such markets or exchanges  following the  Effective  Date.
See "The Transaction - Stock Exchange Listings".

The Adobe Shares issued to  Shareholders  will not be registered  under the 1933
Act  or the  securities  laws  of  any  state,  nor  is  any  such  registration
contemplated. Generally, the Adobe Shares received in exchange for Common Shares
in the  Arrangement  will be freely  transferable  under United  States  federal
securities  laws.  Adobe  has  applied  for  rulings  or  orders  of  securities
regulatory authorities in such provinces of Canada as is necessary to permit the
issuance  of the Adobe  Shares.  Resales  of Adobe  Shares  that are  subject to
Canadian  securities  laws will  generally  be  permitted to be made through the
facilities of an exchange or market  outside of Canada or to a person outside of
Canada.  See "The  Transaction  - Issuance and Resale of Adobe  Shares  Received
Under the Arrangement".

Conditions to Closing

The  respective  obligations  of Accelio and Adobe to complete the  transactions
contemplated by the Acquisition  Agreement are subject to a number of conditions
that  must be  satisfied  or  waived  in order  for the  Arrangement  to  become
effective.  See "The Acquisition Agreement - Conditions to the Completion of the
Arrangement".  A number of such  conditions  are  outside  the control of either
Adobe or Accelio. There is no assurance that any conditions will be satisfied or
waived on a timely basis.

Restrictions on the Solicitation of Alternative Acquisition Proposals By Accelio

Under the terms of the Acquisition Agreement,  Accelio may not solicit, initiate
or, subject to limited  exceptions,  engage in discussions or negotiations with,
or provide  non-public  information  to, any third party regarding some types of
extraordinary transactions involving Accelio,  including an amalgamation,  other
business combination or sale of a material amount of assets of Accelio or any of
its  subsidiaries.  See "The  Acquisition  Agreement - General  Description - No
Solicitation".

Termination

Accelio and Adobe may terminate the Acquisition Agreement and the Arrangement at
any time prior to the  Effective  Date by

                                     Page 6

<PAGE>

mutual  agreement and each of them may
terminate the Acquisition Agreement under certain other circumstances.  See "The
Acquisition Agreement - Termination of Acquisition Agreement".

If the Acquisition Agreement is terminated under certain circumstances,  Accelio
shall  pay Adobe (in cash) a  non-refundable  termination  fee in the  amount of
U.S.$2,880,000  plus the sum of  U.S.$1,250,000  for expenses paid or payable by
Adobe  in  connection  with the  transactions  contemplated  by the  Acquisition
Agreement. See "The Acquisition Agreement - Expenses and Termination Fees".

Investment Considerations

Shareholders   should   carefully  read  and  consider  the  information   under
"Investment  Considerations"  in evaluating the Arrangement and deciding whether
to approve the Arrangement Resolution.  Some of these investment  considerations
relate to the  Arrangement  and  others  relate to the  business  of Adobe.  See
"Investment Considerations".

Certain Income Tax Considerations

Shareholders  should  carefully read the  information  under "Certain Income Tax
Considerations  to Accelio  Shareholders"  which  qualifies the  information set
forth below. The following summary of income tax considerations is intended as a
general summary and does not discuss all of the facts and circumstances that may
affect the tax liability of particular Shareholders. Therefore, all Shareholders
are urged to consult their tax advisers. No advance income tax rulings have been
sought or obtained with respect to the Transaction described herein.

For Canadian  federal  income tax  purposes,  a holder of Common Shares who is a
Canadian Resident and holds Common Shares as capital property and receives Adobe
Shares  pursuant to the  Arrangement,  will realize a capital gain (or a capital
loss) equal to the amount by which the sum of the fair market value of the Adobe
Shares  and any cash (in lieu of a  fractional  Adobe  Share)  received  by such
holder on the exchange, net of any reasonable costs of disposition,  exceeds (or
is less than) the  adjusted  cost base to such  holder of the  Common  Shares so
exchanged.

For U.S.  federal  income tax purposes,  the exchange by a U.S.  Shareholder  of
Common  Shares for Adobe Shares  pursuant to the  Arrangement  is intended to be
treated as a taxable event and a U.S.  Shareholder will recognize a gain or loss
measured by the difference between the sum of the fair market value of the Adobe
Shares and any cash in lieu of a  fractional  Adobe Share  received by such U.S.
Shareholder and such U.S.  Shareholder's adjusted tax basis in the Common Shares
exchanged therefor.

Market Prices and Dividends

The closing price of the Common Shares on the TSE on January 31, 2002,  the last
trading  day  preceding  the  announcement  of  the  proposed  Arrangement,  was
Cdn.$3.07.  The closing  price of the Common  Shares on the TSE on March 7, 2002
was  Cdn.$4.39.  Accelio has not paid any  dividends on its Common  Shares.  For
information  regarding  dividends  paid by  Adobe,  see  "Market  Prices  of and
Dividends on Adobe Shares and Accelio Shares - Dividends Paid".

Right of Dissent

Registered   Shareholders  have  the  right  to  dissent  from  the  Arrangement
Resolution,  and any  Registered  Shareholders  who dissent in  compliance  with
Section  190 of the  CBCA,  the  terms  of the  Interim  Order  and the  Plan of
Arrangement will be entitled,  if the Arrangement becomes effective,  to be paid
by Accelio or the Acquisition  Entity, as elected by the Acquisition Entity, the
fair value of the Common Shares they hold. Any Registered Shareholder who wishes
to dissent  must  provide a Notice of Dissent to  Accelio's  Corporate  Counsel,
LaBarge  Weinstein,  not later than 5:00 p.m.  (Ottawa time) on April 5, 2002 or
5:00 p.m.  (Ottawa  time) on the last business day that is no more than 48 hours
prior to any  adjournment of the Meeting.  The dissent  provisions  contained in
Section  190 of the CBCA are  attached  in their  entirety  to this  Circular as
Appendix H.

Persons who are beneficial  owners of Common Shares  registered in the name of a
broker, custodian,  nominee or other intermediary and who wish to dissent should
contact such broker,  custodian,  nominee or other intermediary for instructions
on how to exercise their right to dissent.  Failure to comply  strictly with the
relevant  provisions of the CBCA, the terms of the Interim Order and the Plan of
Arrangement  relating  to such right to  dissent  may result in the loss of this
right.  Please see  "Dissenting  Shareholder  Rights"  and  "Certain  Income Tax
Considerations to Accelio Shareholders".

It is a condition  precedent in favour of Adobe to closing the Arrangement  that
Shareholders  holding no more than 10% of the outstanding Common Shares exercise
dissent  rights under Section 190 of the CBCA,  as amended by the  provisions of
the Interim Order and the Plan of Arrangement.

                                     Page 7
<PAGE>

                               GLOSSARY OF TERMS

The  following is a glossary of certain terms used in this  Circular,  including
the Summary  hereof.  Terms and  abbreviations  used in the  Appendices  to this
Circular are defined  separately and the terms and  abbreviations  defined below
are not used therein, except where otherwise indicated.

     "1933 Act" means the United States Securities Act of 1933, as amended;

     "Accelio" means Accelio Corporation,  a corporation  incorporated under the
CBCA;

     "Accelio  By-laws"  means By-law Number 4 of Accelio dated June 9, 1992, as
amended from time to time, and any other by-law of Accelio in force from time to
time;

     "Accelio  Directors" means each of Abraham E. Ostrovsky,  A. Kevin Francis,
John Gleed, Stephen A. Holinski, Patrick J. Martin, Paul K. Bates and Deborah L.
Weinstein, being the elected directors of Accelio at the date hereof;

     "Accelio Options" means, the unexpired subscription rights, calls, options,
warrants  and  other  rights  to  purchase  Common  Shares  (including,  without
limitation,  all securities  exchangeable or exercisable for or convertible into
Common Shares and all  commitments,  arrangements,  conditions or  circumstances
that may give rise to or  provide a basis  for the  assertion  of a claim by any
person against  Accelio to the effect that such person is entitled to acquire or
receive any shares of capital stock or other  securities  of Accelio)  which are
outstanding  immediately  prior  to  the  Effective  Time  (including,   without
limitation,  pursuant to the Options,  the Option Plan,  the Stock Purchase Plan
and the Warrants);

     "Accelio  Repurchased  Shares" means in respect of each Shareholder  (other
than  Dissenting  Shareholders,  Adobe and any entities  which are,  directly or
indirectly,  wholly-owned  by Adobe),  the number of Adobe Shares which  results
when (a) the number of Common Shares held by such Shareholder  immediately prior
to the Effective Time is multiplied by (b) the Asset Purchase Price Proportion;

     "Accelio  Repurchase  Price" means, in respect of each  Shareholder  (other
than  Dissenting  Shareholders,  Adobe and any entities  which are,  directly or
indirectly,  wholly-owned  by Adobe),  the number of Adobe Shares which  results
when the number of Accelio  Repurchased Shares in respect of such Shareholder is
multiplied by the Exchange Ratio;

     "Accelio  Rights  Plan"  means the Accelio  shareholder  rights plan as set
forth in a shareholder  rights plan agreement dated and effective as of June 25,
1998, as amended, between Accelio and CIBC Mellon Trust Company of Canada;

     "Acquisition  Agreement"  means the acquisition  agreement  entered into on
January 31, 2002, which was amended and restated on March 1, 2002, providing for
the Plan of  Arrangement,  a copy of which is  attached  as  Appendix  D to this
Circular,  as it may be amended,  supplemented  and/or  restated  in  accordance
therewith;

     "Acquisition Entity" means Adobe Systems International Limited Partnership,
a limited  partnership  formed  under the laws of the Cayman  Islands,  which is
wholly owned  (directly  or  indirectly)  by Adobe and, as  described  under the
heading "The Acquisition Agreement" in the Circular,  will become the sole owner
of all of the  outstanding  Common Shares upon  completion  of the  Arrangement,
other than Common  Shares  that may be owned by Adobe (or any entity  other than
the Acquisition Entity which is, directly or indirectly,  wholly-owned by Adobe)
immediately prior to the Effective Time;

     "Acquisition  Entity  Asset  Purchase  Price"  means  the  purchase  price,
specified in U.S. dollars,  to be paid by Acquisition Entity for the Acquisition
Entity  Assets,  which  purchase  price shall be determined  by the  Acquisition
Entity in its  discretion  and set forth in a written  notice  delivered  by the
Acquisition Entity to Accelio prior to the Effective Date;

     "Acquisition  Entity Assets" means the assets,  if any, of Accelio proposed
to be  acquired  by the  Acquisition  Entity as set  forth in a  written  notice
delivered by the Acquisition Entity to Accelio prior to the Effective Date;

                                       8

<PAGE>

     "Acquisition Proposal" means any offer, proposal,  inquiry or indication of
interest (other than an offer, proposal,  inquiry or indication of interest made
or submitted by Adobe)  contemplating  or otherwise  relating to any Acquisition
Transaction;

     "Acquisition  Transaction" means any transaction or series of transactions,
other  than  the  transactions   contemplated  by  the  Acquisition   Agreement,
involving:

     (a)  (i)  any  merger,  arrangement,  consolidation,   amalgamation,  share
          exchange,  business  combination,   recapitalization,   tender  offer,
          exchange offer or other similar  transaction  involving any of Accelio
          or its subsidiaries, (ii) any transaction in which a person or "group"
          (as defined in the Exchange Act and the rules promulgated  thereunder)
          of persons  directly or indirectly  acquires  beneficial  ownership of
          securities  representing  more  than  20%  of the  outstanding  voting
          securities  of any  of  Accelio  or its  subsidiaries,  or  (iii)  any
          transaction in which any of Accelio or any of its subsidiaries  issues
          securities  representing  more  than  20%  of the  outstanding  voting
          securities of Accelio or such subsidiary;

     (b)  any sale, lease,  exchange,  transfer,  license, or disposition of any
          business or businesses or assets that constitute or account for 20% or
          more of the consolidated net revenues,  net income or assets of any of
          Accelio or its subsidiaries; or

     (c)  any liquidation or dissolution of any of Accelio or its subsidiaries.

     "Adobe" means Adobe Systems Incorporated, a Delaware corporation;

     "Adobe  Articles" means the restated  certificate of incorporation of Adobe
dated as of June 22, 2001;

     "Adobe Asset Purchase  Price" means the purchase  price,  specified in U.S.
dollars, to be paid by Adobe for the Adobe Assets, which purchase price shall be
determined  by  Adobe  in its  discretion  and set  forth  in a  written  notice
delivered by Adobe to Accelio prior to the Effective Date;

     "Adobe Assets" means the assets, if any, of Accelio proposed to be acquired
by Adobe as set forth in a written notice delivered by Adobe to Accelio prior to
the Effective Date;

     "Adobe  Average  Stock Price" means the weighted  average sales price of an
Adobe Share as reported on Nasdaq during the ten (10)  consecutive  trading days
ending on the third trading day  immediately  prior to the  Effective  Time (the
"Measurement Period");  provided, however, that if, between the first day of the
Measurement  Period and the Effective  Time,  the  outstanding  Adobe Shares are
changed into a different number of shares by reason of any stock split, division
or subdivision of shares, stock dividend,  reverse stock split, consolidation of
shares,  reclassification,  recapitalization or other similar transaction,  then
the Adobe Average Stock Price shall be appropriately adjusted.

     "Adobe  By-laws"  means the By-laws of Adobe dated as of April 12, 2001, as
amended;

     "Adobe  Closing  Price"  means,  for any given day, the closing price of an
Adobe Share on Nasdaq on that day;

     "Adobe Financial  Statements" means the audited consolidated balance sheets
of Adobe for the financial  years of Adobe ended  November 30, 2001 and December
1, 2000 and  consolidated  statements  of income  and cash flows for each of the
years in the three-year period ended November 30, 2001,  including  management's
discussion  and  analysis  of  financial  condition  and  results of  operations
relating to each such period,  copies of which are included in Adobe's Form 10-K
for the year ended November 30, 2001, attached as Appendix F to this Circular;

     "Adobe  Shares"  means shares of common stock of Adobe,  having a par value
U.S.$0.0001 per share;

     "Adobe Stock  Consideration"  means the number of Adobe Shares equal to the
quotient  determined  by  dividing  (i) the excess of  U.S.$72,000,000  over the
aggregate amount of (a) all Permitted Option Repurchase  Amounts paid or payable
in cash to holders of Accelio Options pursuant to clause "(i)" of Section 5.3(b)
of the  Acquisition  Agreement,  (b) all  Permitted  Option  Repurchase  Amounts
underlying

                                       9
<PAGE>

all Common Shares issued or issuable to holders of Company  Options  pursuant to
clause "(ii)" of Section 5.3(b) and 5.3(c) of the Acquisition Agreement, and (c)
other  amounts  (if any) paid or  payable  in cash to equity  holders of Accelio
pursuant to the Interim Order,  the Final Order or the Plan of  Arrangement,  by
(ii) the Adobe Average Stock Price.

     "Affiliate"  of any person  means any other person  directly or  indirectly
controlling,  controlled by, or under common control with, that person.  For the
purposes of this definition,  "control"  (including,  with correlative meanings,
the terms  "controlled by" and "under common control  with"),  as applied to any
person, shall mean the possession by another person, directly or indirectly,  of
the power to direct or cause the  direction  of the  management  and policies of
that first mentioned person, whether through the ownership of voting securities,
by contract or otherwise;

     "Approvals"   means  certain   approvals   contemplated   pursuant  to  the
Acquisition  Agreement  as  contemplated  under the heading "The  Transaction  -
Procedure for the Arrangement to Become Effective" in the Circular;

     "Arrangement"  means the arrangement under the provisions of Section 192 of
the CBCA on the  terms  and  subject  to the  conditions  set out in the Plan of
Arrangement,  subject to any amendments or variations thereto made in accordance
with the Acquisition  Agreement,  the Plan of Arrangement or at the direction of
the Court in the Final Order;

     "Arrangement  Resolution" means the special  resolution of the Shareholders
approving  the  Arrangement  and  ratifying  the  Plan  of  Arrangement  and the
transactions  contemplated  thereby to be voted upon by the  Shareholders at the
Meeting, in the form set forth in Appendix A to this Circular;

     "Articles  of  Arrangement"  means the articles of  arrangement  of Accelio
giving effect to the  Arrangement  pursuant to Section 192(6) of the CBCA, to be
sent to the Director after the Final Order is made;

     "Asset  Purchase  Price" means the  aggregate  of the Adobe Asset  Purchase
Price and the Acquisition Entity Asset Purchase Price;

     "Asset Purchase Price Proportion" means the quotient determined by dividing
(a) the Asset Purchase Price by (b) the Net Purchase Price;

     "Board of Directors" or "Board" means the board of directors of Accelio;

     "business  day"  means any day other  than a  Saturday,  Sunday or  federal
holiday in Canada or a day on which  banks are not open for  business in Ottawa,
Ontario;

     "Canadian GAAP" means generally accepted  accounting  principles as applied
in Canada;

     "Canadian Resident" means a person who is a resident of Canada for purposes
of the Tax Act;

     "CBCA" means the Canada Business  Corporations  Act, as amended,  including
the regulations made thereunder, as amended;

     "CCRA" means the Canada Customs and Revenue Agency;

     "Certificate of Arrangement" means the certificate of arrangement  endorsed
upon the Articles of Arrangement by the Director after the Final Order is made;

     "CIBC World Markets" means CIBC World Markets Inc.;

     "Circular"  means  this  Management  Proxy  Circular  dated  March 8, 2002,
together  with  all  Appendices   hereto  and  including  the  Summary   hereof,
distributed by Accelio to the Shareholders in connection with the Meeting;

     "Closing" means the  consummation of the  transactions  contemplated by the
Arrangement;

     "Closing  Date" means the date to be  designated  by Accelio and Adobe with
respect  to the  Closing,  which in any  event  will be no later  than the fifth
business  day after the  satisfaction  or waiver of the last to be  satisfied or
waived of the conditions set forth in Section 6 and Section 7 of the Acquisition

                                       10
<PAGE>

Agreement  (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the satisfaction or waiver of such conditions);

     "Common Shares" means common shares in the capital of Accelio;

     "Consolidated   Financial   Statements"  means  the  audited   consolidated
financial  statements of Accelio for the fiscal years ended April 30, 2001, 2000
and 1999 including  management's  discussion and analysis of financial condition
and  results  of  operations  relating  to each such  period  and the  unaudited
consolidated  financial  statements  of Accelio for the nine month periods ended
January 31, 2002 and 2001  including  management's  discussion  and  analysis of
financial condition and results of operations relating to each such period;

     "Control Person" means, with respect to a corporation,  a person that holds
a sufficient  number of securities of that corporation to affect  materially the
control of that  corporation  and includes,  without  limitation,  a person that
holds more than 20% of the  outstanding  voting  securities of that  corporation
unless it can be demonstrated that such 20% holder does not have such control;

     "Court" means the Ontario Superior Court of Justice;

     "DGCL" means the General Corporation Law of the State of Delaware;

     "Director"  means the  Director  appointed  pursuant  to Section 260 of the
CBCA;

     "Dissenting   Shareholder"  means  a  Registered  Shareholder  who  validly
exercises a right of dissent in accordance with the provisions of Section 190 of
the CBCA, the Interim Order and the Plan of Arrangement;

     "dollars"  or "$" means the lawful  currency  of Canada,  unless  otherwise
stated herein;

     "Effective  Date"  means  the  date  shown  as the  effective  date  of the
Arrangement in the Certificate of Arrangement;

     "Effective Time" means 12:01 a.m. (Ottawa Time) on the Effective Date;

     "Exchange Act" means the United States Securities  Exchange Act of 1934, as
amended;

     "Exchange Agent" means Computershare Trust Company of New York;

     "Exchange  Ratio"  means a  fraction  whose  numerator  is the Adobe  Stock
Consideration, and whose denominator is the Fully-Diluted Accelio Shares;

     "Fairness  Opinion"  means the written  opinion dated March 1, 2002 of CIBC
World Markets addressed to the Board in connection with the Arrangement,  a copy
of which is attached as Appendix E to this Circular;

     "Final Order" means the final order of the Court  approving the Arrangement
to be applied for  following the Meeting  pursuant to  subsection  192(4) of the
CBCA,  as such  order  may be  amended  by the  Court at any  time  prior to the
Effective  Date,  or, if  appealed,  then,  unless such appeal is  withdrawn  or
denied, as affirmed;

     "Fully-Diluted Accelio Shares" means the sum of (a)the aggregate number of
Common Shares that are  outstanding  immediately  prior to the  Effective  Time,
(b) the  aggregate  number  of  Common  Shares  that  are  purchasable  under or
otherwise subject to all options and warrants to purchase Common Shares that are
outstanding immediately prior to the Effective Time, (c)the aggregate number of
Common  Shares that are directly or indirectly  issuable upon the  conversion of
all other  convertible  securities of Accelio that are  outstanding  immediately
prior to the Effective  Time, and (d) the aggregate  number of Common Shares (if
any) which Accelio has entered into any  commitment or  arrangement to issue (or
to issue options or warrants with respect to) prior to the Effective  Time,  but
which are not outstanding immediately prior to the Effective Time; provided that
any Common  Shares that are  purchasable  under or otherwise  subject to Accelio
Options  that  are  exercised  or  terminated  pursuant  to  Section  5.3 of the
Acquisition  Agreement and at the Option  Termination  Time shall not be counted
for purposes of determining the "Fully Diluted Accelio Shares";

                                       11

<PAGE>

     "Governmental Body" means any: (a) nation, state,  commonwealth,  province,
territory, county,  municipality,  district or other jurisdiction of any nature;
(b) federal, state, provincial,  local, municipal,  foreign or other government;
or (c) governmental or quasi-governmental authority of any nature (including any
governmental  division,   department,   agency,   commission,   instrumentality,
official, ministry, fund, foundation, center, organization, unit, body or entity
and any court or other tribunal);

     "Interim  Order"  means the interim  order of the Court dated March 8, 2002
pursuant  to  subsection  192(4)  of the  CBCA,  as the same may be  amended  or
supplemented  from time to time,  a copy of which is  attached  as Appendix B to
this Circular and providing for, among other things,  the calling and holding of
the Meeting and certain other procedural matters;

     "IRS" means the United States Internal Revenue Service;

     "Legal Requirement" means any federal, state, provincial, local, municipal,
foreign or other law (including privacy laws), statute, constitution,  principle
of common law, resolution,  ordinance,  code, edict,  decree, rule,  regulation,
ruling or requirement  issued,  enacted,  adopted,  promulgated,  implemented or
otherwise  put into effect by or under the  authority of any  Governmental  Body
(including under the authority of Nasdaq, the PSE or the TSE);

     "Letter of Transmittal"  means the letter of transmittal  for  certificates
representing Common Shares to be forwarded to each Shareholder that enables such
Shareholder to exchange such  certificates for certificates  representing  Adobe
Shares;

     "Material   Adverse   Effect"  means  an  event,   violation,   inaccuracy,
circumstance  or other matter  (considered  together with all other matters that
would constitute exceptions to the representations and warranties of Accelio set
forth in the Acquisition  Agreement,  disregarding any "Material Adverse Effect"
or other  materiality  qualifications,  or any similar  qualifications,  in such
representations  and warranties) that has had or could reasonably be expected to
have a material adverse effect on (i) the business,  condition,  capitalization,
assets, liabilities,  operations,  financial performance or prospects of Accelio
and its subsidiaries taken as a whole, (ii) the ability of Accelio to consummate
the Arrangement or any of the other  transactions  contemplated by the Agreement
or to perform any of its obligations under the Acquisition  Agreement,  or (iii)
Adobe's or the  Acquisition  Entity's  ability to vote,  receive  dividends with
respect to or otherwise  exercise ownership rights with respect to the shares of
Accelio and its subsidiaries;  provided,  however,  that, for purposes of clause
(i) above, in no event shall any of the following,  alone or in combination,  be
deemed to  constitute,  nor shall any of the  following be taken into account in
determining  whether  there has been or will be, a  Material  Adverse  Effect on
Accelio:  (A) any effect resulting from compliance with the terms and conditions
of the Acquisition Agreement; (B) any effect that results from changes affecting
any of the  industries in which such entity  operates  generally or the Canadian
economy generally (which changes in each case do not  disproportionately  affect
such entity in any material  respect);  (C) any effect that results from changes
affecting general worldwide economic or capital market conditions (which changes
in each  case do not  disproportionately  affect  such  entity  in any  material
respect);  (D) the  failure  of  Accelio  or  any of its  subsidiaries  to  meet
published or internal  earnings,  revenue  estimates or projections;  or (E) any
adverse effect that results from the announcement or pendency of the Arrangement
or any of the other transactions contemplated by the Acquisition Agreement.

     "Meeting"  means the  special  meeting  of  Shareholders  to be held at the
Marriott Hotel, 100 Kent Street, Ottawa, Ontario on April 9, 2002, at 10:00 a.m.
(Ottawa  time) to consider the  approval of the  Arrangement  Resolution  and to
transact such other  business as may properly  come before the Meeting,  and any
adjournment or postponement thereof;

     "Nasdaq" means The Nasdaq National Market;

     "Net Purchase Price" means the excess of U.S.$72,000,000 over the aggregate
amount of (a) all Permitted Option Repurchase Amounts paid or payable to holders
of Accelio Options pursuant to clause "(i)" of Section 5.3(b) of the Acquisition
Agreement,  (b) all Permitted Option  Repurchase  Amounts  underlying all Common
Shares  issued or  issuable  to holders of Accelio  Options  pursuant  to clause
"(ii)" of Section 5.3(b) of the Acquisition  Agreement and (c) other amounts (if
any) paid or  payable  in cash to equity  holders  of  Accelio  pursuant  to the
Interim Order, the Final Order or the Plan of Arrangement;

     "Noon  Rate" means the noon spot  exchange  rate on such day of the Bank of
Canada for one (1) U.S. dollar expressed in Canadian dollars;

                                       12

<PAGE>

     "Notice of  Meeting"  means the Notice of Special  Meeting of  Shareholders
that accompanies this Circular;

     "Options"  means options to purchase  Common Shares  pursuant to the Option
Plan;

     "Optionholder" means a holder of Options pursuant to the Option Plan;

     "Option Plan" means,  collectively,  Accelio's  1993 Employee  Stock Option
Plan and Accelio's 1995 Stock Option Plan;

     "Option  Termination  Time" means 2:30 a.m.  (Ottawa time) on the Effective
Date;

     "Permitted  Option  Repurchase  Amount" means, with respect to each Accelio
Option  outstanding  immediately prior to the Effective Time, an amount equal to
the  excess  (if any) of (1) the  product  of (i) the  number of  Common  Shares
issuable  upon the  exercise  of such  Accelio  Option,  multiplied  by (ii) the
Exchange Ratio,  and further  multiplied by (iii) the Adobe Average Stock Price,
over (2) the  product  of (x) the  number of  Common  Shares  issuable  upon the
exercise of such Accelio Option,  multiplied by (y) the exercise price per share
of such  Accelio  Option.  If, with  respect to any Accelio  Option,  the amount
described  in clause (1) above is less than the amount  described  in clause (2)
above, the Permitted Option  Repurchase Amount applicable to such Accelio Option
shall be zero. Without limiting the generality of the foregoing,  as used herein
the term  "Permitted  Option  Repurchase  Amount" shall not include (A) the cash
value of any Common Shares issued pursuant to clause "(ii)" of Section 5.3(b) of
the Acquisition  Agreement or (B) any amounts paid in respect of Accelio Options
repurchased  by the Company  pursuant to Section 5.3(c) or Section 5.3(d) of the
Acquisition Agreement.

     "person"  means  any  individual,  corporation,  partnership,  association,
syndicate, organization, Governmental Body, limited liability company, unlimited
liability  company,  trust,  joint  venture or any other  entity or group of any
nature;

     "Plan of Arrangement"  means the plan of arrangement  substantially  in the
form and content of Appendix C to this Circular and any amendments or variations
thereto  made  in  accordance  with  the  Acquisition  Agreement,  the  Plan  of
Arrangement or at the direction of the Court in the Final Order;

     "Proposed Amendments" means specific proposals to amend the Tax Act and the
regulations  promulgated  thereunder  publicly  announced by or on behalf of the
Minister of Finance (Canada) prior to the date of this Circular;

     "PSE" means the Pacific Stock Exchange;

     "Record  Date"  means the close of  business  on March 5,  2002,  being the
record date for determining which Shareholders are entitled to receive notice of
and vote at the Meeting;

     "Registered  Shareholder"  means any Shareholder  whose name appears on the
shareholders'  register of Accelio as held and maintained by Accelio's registrar
and transfer agent;

     "Required   Shareholder   Vote"  means  the  approval  of  the  Arrangement
Resolution by at least 66 2/3% of the votes cast at the Meeting;

     "SEC" means the United States Securities and Exchange Commission;

     "Shareholder"   means  a  holder  of  Common   Shares,   and,   in  certain
circumstances,   where  the  context  so   indicates,   may  mean  a  Registered
Shareholder;

     "Stock Purchase Plan" means Accelio's 1997 Employee Stock Purchase Plan;

     "Superior  Offer" means an  unsolicited,  bona fide written offer made by a
third party to purchase all of the  outstanding  Common Shares on terms that the
Board  determines,   in  good  faith,  considering  the  written  advice  of  an
independent  financial advisor of nationally recognized  reputation,  to be more
favourable  to the  Shareholders  than the terms of the  Arrangement;  provided,
however, that any such offer shall not be deemed to be a "Superior Offer" if any
financing  required to consummate the transaction  contemplated by such offer is
not  committed  and is not  reasonably  capable of being  obtained by such third
party;

                                       13

<PAGE>

     "Support  Agreements" means agreements  between Adobe, on the one hand, and
each of the Accelio Directors, on the other hand, pursuant to which such Accelio
Directors  have  each  agreed,  among  other  things,  to vote in  favour of the
Arrangement Resolution at the Meeting;

     "Tax  Act"  means  the  Income  Tax  Act  (Canada),  as  amended,  and  the
regulations thereunder;

     "Tax Code"  means the  United  States  Internal  Revenue  Code of 1986,  as
amended, and any regulations promulgated thereunder;

     "Transaction" means, collectively,  the transactions contemplated under and
by this Circular, the Plan of Arrangement and the Acquisition Agreement;

     "Triggering Event" shall be deemed to have occurred if: (i)the Board shall
have failed to unanimously  recommend that the Shareholders  vote to approve the
Agreement and the  Arrangement  (the "Accelio Board  Recommendation"),  or shall
have  withdrawn  or modified  in a manner  adverse to Adobe,  the Accelio  Board
Recommendation (it being understood that the Accelio Board  Recommendation shall
be deemed to have been  modified  in a manner  adverse  to Adobe if the  Accelio
Board  Recommendation  is no longer  unanimous),  or shall  have taken any other
action which a reasonable person would believe indicates that the Board does not
support the Agreement or the  Arrangement or does not believe that the Agreement
or the  Arrangement is in the best interests of the  Shareholders;  (ii) Accelio
shall have failed to include in this Circular the Accelio  Board  Recommendation
or a statement to the effect that the Board has determined and believes that the
Arrangement is in the best interests of the Shareholders;  (iii) the Board fails
to  reaffirm  the  Accelio  Board  Recommendation,  or  fails  to  reaffirm  its
determination that the Arrangement is in the best interests of the Shareholders,
within  five   business   days  after  Adobe   requests  in  writing  that  such
recommendation  or  determination  be  reaffirmed;  (iv)the  Board  shall  have
approved,  endorsed or recommended any Acquisition  Proposal;  (v)Accelio shall
have  entered  into any letter of intent or  similar  document  or any  contract
providing for any Acquisition  Proposal  (other than a standard  confidentiality
agreement   permitted   pursuant  to  and  in  accordance  with  Section  4.3(a)
(non-solicitation)  of the  Acquisition  Agreement);  (vi) a tender or  exchange
offer or  take-over  bid  relating  to  securities  of  Accelio  shall have been
commenced by a person other than Adobe or any of Adobe's  Affiliates and Accelio
shall not have sent to its securityholders,  within five business days after the
commencement  of such tender or exchange  offer,  a  statement  disclosing  that
Accelio  recommends  rejection  of such  tender  or  exchange  offer;  (vii)  an
Acquisition  Proposal  is publicly  announced,  and Accelio (A) fails to issue a
press release announcing its opposition to such Acquisition Proposal within five
business  days after such  Acquisition  Proposal is announced  or (B)  otherwise
fails to take all  reasonable  steps to oppose  such  Acquisition  Proposal;  or
(viii) Accelio or any of its  subsidiaries or any  representative  of any of the
foregoing  shall  have  breached  in any  material  respect  or taken any action
inconsistent  in any material  respect with any of the  provisions  set forth in
Section 4.3 (non-solicitation) of the Acquisition Agreement;

     "TSE" means The Toronto Stock Exchange;

     "U.S. GAAP" means generally  accepted  accounting  principles as applied in
the United  States;  and

     "Warrants"  means the  warrants to purchase up to an  aggregate  of 200,000
Common Shares at a price per share of Cdn.$5.75  issued to certain  underwriters
in connection with Accelio's  offering of Common Shares pursuant to a prospectus
filed with the Canadian securities regulatory authorities on October 4, 2000.

Words  importing the singular  number only include the plural and vice versa and
words importing any gender include all genders.

In this  Circular,  references  to  "U.S.$"  are to United  States  dollars  and
references to "Cdn.$" are to Canadian dollars.

In this Circular,  all references to a time of day mean, unless otherwise stated
or the context otherwise requires, local Ottawa time.

                                       14
<PAGE>

                       INFORMATION CONCERNING THE MEETING

This  Circular,  the  accompanying  Notice of Meeting  and the form of proxy are
being  mailed to  Shareholders  on or about  March 15,  2002.  Unless  otherwise
stated, information contained in this Circular is given as of the date hereof.

Purpose of Meeting

This Circular is furnished in  connection  with the  solicitation  of proxies by
management of Accelio for use at the Meeting. At the Meeting,  Shareholders will
consider and vote upon the Arrangement Resolution and such other business as may
properly come before the Meeting.

Date, Time and Place of Meeting

The Meeting will be held on Tuesday,  April 9, 2002 at 10:00 a.m.  (Ottawa time)
at the Marriott Hotel, 100 Kent Street, Ottawa, Ontario.

Solicitation and Appointment of Proxies

The persons named in the form of proxy  accompanying  this Circular are officers
and/or directors of Accelio. A Registered Shareholder has the right to appoint a
person, who need not be a Shareholder,  other than the persons named in the form
of proxy  accompanying  this  Circular,  as nominee to attend and act for and on
behalf of such  Shareholder  at the  Meeting,  and may  exercise  such  right by
inserting  the name of such  person in the blank  space  provided on the form of
proxy,  or by  executing  a  proxy  in a form  similar  to the  form  of  proxy,
accompanying this Circular.  If a Shareholder  appoints one of the persons named
in  the  form  of  proxy  accompanying  this  Circular  as  the  nominee  of the
Shareholder  and does not direct  such  nominee to vote either for or against or
withhold from voting on a matter or matters with respect to which an opportunity
to specify how the Common Shares  registered in the name of such Shareholder are
to be voted,  the proxy  shall be voted for the matter or  matters  set forth on
such proxy and in the  discretion  of the person  appointed on all other matters
(if any) upon which the  Shareholder is entitled to cast a vote. A proxy nominee
need not be a Shareholder.  If the Shareholder is a corporation,  the proxy must
be executed by an officer or properly appointed attorney.

In order for a proxy to be effective at the Meeting, it must be addressed to the
Corporate  Secretary  of Accelio and be mailed to or  deposited by hand with the
Proxy  Department at CIBC Mellon Trust Company,  200 Queen's Quay East,  Unit 6,
Toronto,  Ontario M5A 4K9 or by  facsimile  transmission  to CIBC  Mellon  Trust
Company at (416)  368-2502,  not later than 5:00 p.m.  (Ottawa time) on April 5,
2002 or, if the  Meeting  is  adjourned  or  postponed,  not later than 48 hours
(excluding any day which is not a business day) before the time of the adjourned
or  postponed  special  meeting,  or any  further  adjournment  or  postponement
thereof.  Proxies may also be deposited with the scrutineers of the Meeting,  to
the  attention  of the  chair of the  Meeting,  at or  immediately  prior to the
commencement  of the Meeting,  or any adjournment or  postponement  thereof.  An
undated but executed proxy will be deemed to be dated the date of this Circular.

The  solicitation  of proxies for the Meeting  will be  primarily  by mail,  but
proxies may also be solicited  personally or by telephone by employees or agents
of Accelio.  Employees  of Accelio will not receive any extra  compensation  for
such activities. Accelio will pay brokers or other persons holding Common Shares
in their own names, or in the names of nominees,  for their reasonable  expenses
for sending proxies and proxy material to beneficial owners of Common Shares and
requesting  authority to execute  proxies in respect of such Common Shares.  The
solicitation  of proxies by this  Circular  is being made by or on behalf of the
management  of  Accelio  and its Board of  Directors  and the total cost of this
solicitation will be borne by Accelio.

Voting of Proxies

The Common  Shares  represented  by a proxy at the Meeting  will be voted for or
against the Arrangement  Resolution in accordance  with the  instructions of the
Shareholder, so long as such instructions are certain, on any ballot that may be
called for and,  where the  Shareholder  whose  proxy is  solicited  specifies a
choice  with  respect  to  any  matter  to be  voted  upon,  the  Common  Shares
represented by such proxy will be voted in accordance with the  specification so
made.  If no  choice  is  specified  in the  proxy or the  instructions  are not
certain,  the persons named in the form of proxy accompanying this Circular will
vote FOR

                                       15
<PAGE>

all of the matters  proposed by  management  at the Meeting and described in the
Notice of Meeting and in the  discretion  of the person  appointed  on all other
matters (if any) upon which the Shareholder  appointing the proxy is entitled to
cast a vote.

The form of proxy  accompanying  this  Circular,  when  properly  completed  and
executed,  confers  discretionary  authority upon the persons named therein with
respect to any amendment or variation to the matters identified in the Notice of
Meeting and with respect to other  matters  which may  properly  come before the
Meeting. Management of Accelio and the Board of Directors knows of no matters to
come before the Meeting  other than those  referred to in the Notice of Meeting.
However, if any other matters that are not now known to management of Accelio or
the Board of  Directors  should  properly  come before the  Meeting,  the Common
Shares  represented  by proxies given in favour of the persons named in the form
of proxy  accompanying this Circular will be voted on such matters in accordance
with the discretion of such person.

Revocation of Proxies

A Shareholder may revoke a previously given proxy by:

     (i)  completing  and signing a proxy bearing a later date and depositing it
          with CIBC Mellon Trust Company as described above;

     (ii) depositing an instrument in writing  signed by the  Shareholder  or an
          attorney  authorized by a document  signed in writing or by electronic
          signature (if the  Shareholder is a  corporation,  under its corporate
          seal by an officer or attorney thereof properly authorized, indicating
          the capacity  under which such officer or attorney is signing),  or by
          transmitting,  by telephonic or electronic  means, a revocation signed
          by  electronic  signature,  or by any other  manner  permitted by law,
          which  must be  received  either (A) at the Proxy  Department  at CIBC
          Mellon Trust Company, 200 Queen's Quay East, Unit 6, Toronto,  Ontario
          M5A 4K9 at any time up to and including 5:00 p.m. (Ottawa time), April
          5, 2002, or (B) with the  scrutineers  of the Meeting to the attention
          of the chair of the  Meeting  on the day of the  Meeting  prior to the
          taking of the vote to which such  proxy  relates,  or any  adjournment
          thereof; or

     (iii)in any other manner permitted by law.

Advice to Beneficial Holders of Common Shares

This  section  applies  to  beneficial   holders  of  Common  Shares  only.  The
information  set forth in this  section  is of  significant  importance  to many
holders of Common Shares,  as a substantial  number of  Shareholders do not hold
Common  Shares in their  own name.  Shareholders  who do not hold  their  Common
Shares in their own name  (referred  to  herein  as  "Beneficial  Shareholders")
should note that only proxies  deposited by  Shareholders  whose names appear on
the records of Accelio as Registered  Shareholders  can be recognized  and acted
upon at the  Meeting.  If  Common  Shares  are  listed in an  account  statement
provided to a Shareholder by a broker,  then, in almost all cases,  those Common
Shares  will not be  registered  in the  Shareholder's  name on the  records  of
Accelio. Such Common Shares will more likely be registered under the name of the
Shareholder's broker or an agent of that broker. In Canada, the vast majority of
such Common Shares are registered under the name of CDS & Co. (the  registration
name for The Canadian Depository for Securities,  which acts as nominee for many
Canadian  brokerage  firms).  Common  Shares held by brokers or their  agents or
nominees can only be voted (for or against resolutions) upon the instructions of
the Beneficial Shareholder.  In Canada, without specific instructions,  a broker
and its agents and nominees are  prohibited  from voting shares for the broker's
clients.  Therefore,  Beneficial  Shareholders  should ensure that  instructions
respecting the voting of their Common Shares are communicated to the appropriate
person  or that the  Common  Shares  are duly  registered  in their  name.  If a
Beneficial  Shareholder  so  requests,  and  provides  a broker  or its agent or
nominee  with  appropriate  documentation,  the  broker,  agent or nominee  must
appoint the Beneficial Shareholder or a nominee of the Beneficial Shareholder as
proxyholder.

Applicable Canadian regulatory policy requires intermediaries/brokers to provide
all documentation relating to a shareholders' meeting to Beneficial Shareholders
and to seek  voting  instructions  from  Beneficial  Shareholders  in advance of
shareholders' meetings. Every intermediary/broker has its own mailing procedures
and provides its own return  instructions to clients,  which should be carefully
followed by Beneficial  Shareholders in order to ensure that their Common Shares
are voted at the  Meeting.  Often,  the form of proxy  supplied to a  Beneficial
Shareholder  by its broker (or the agent of the broker) is identical

                                       16

<PAGE>

to the form of proxy provided to Registered  Shareholders.  However, its purpose
is limited to instructing the Registered Shareholder (the broker or agent of the
broker)  how to vote on behalf of the  Beneficial  Shareholder.  In Canada,  the
majority of brokers now delegate  responsibility for obtaining instructions from
clients to the Independent Investor  Communications  Corporation ("IICC").  IICC
typically applies a special sticker to the proxy forms, mails those forms to the
Beneficial  Shareholders  and asks  Beneficial  Shareholders to return the proxy
forms to IICC. IICC then tabulates the results of all instructions  received and
provides  appropriate  instructions  respecting  the  voting  of  shares  to  be
represented at the Meeting. A Beneficial  Shareholder  receiving a proxy with an
IICC sticker on it cannot use that proxy to vote Common  Shares  directly at the
Meeting - the proxy must be  returned  to IICC well in advance of the Meeting in
order to have the Common Shares voted.

Although a Beneficial  Shareholder may not be recognized directly at the Meeting
for  the  purposes  of  voting  Common  Shares  registered  in the  name of such
Shareholder's  broker (or an agent of the broker), a Beneficial  Shareholder may
attend the Meeting as proxy holder for the Registered  Shareholder  and vote the
Common Shares in that capacity.  A Beneficial  Shareholder  who wishes to attend
the Meeting and indirectly vote such Shareholder's Common Shares as proxy holder
for the Registered  Shareholder  should enter such Shareholder's own name in the
blank space on the proxy  instructions  form provided to such Shareholder by the
broker (or agent)  and  return  the same to the  broker (or  broker's  agent) in
accordance  with the  instructions  provided by such broker (or agent),  well in
advance of the Meeting, in order to obtain from the broker (or agent) a proxy in
favour of the Beneficial Holder.

Record Date and Entitlement to Vote

The record date for the purpose of determining Registered  Shareholders entitled
to receive the  Circular  and vote at the Meeting has been fixed as the close of
business  (Ottawa time) on March 5, 2002 (the "Record  Date").  Each  Registered
Shareholder  at the  close  of  business  (Ottawa  time) on the  Record  Date is
entitled  to attend  the  Meeting in person or by proxy and to cast one (1) vote
for each Common Share held by such Shareholder on the Record Date.

Quorum

Pursuant to the Interim Order,  a quorum for the  transaction of business at the
Meeting is two Shareholders  present in person or by proxy;  provided,  however,
that if no quorum is present within thirty minutes of the appointed time for the
Meeting,  the  Meeting  shall  stand  adjourned  to a day which is not more than
thirty days  thereafter,  as determined  by the chairman of the Meeting,  and at
such adjourned Meeting,  those persons present in person or by proxy entitled to
vote at such Meeting will constitute a quorum for the adjourned Meeting.

Voting Securities and Principal Holders of Voting Securities

As at the Record Date of March 5, 2002,  there were  24,992,652  Common  Shares,
Options for  4,542,420  Common  Shares and Warrants for 200,000  Common  Shares,
issued and outstanding. Each Common Share carries the right to one vote.

Other than AGF Funds Inc.,  which was the  Registered  Shareholder  of 2,555,900
Common Shares, representing approximately 10.2% of all outstanding Common Shares
at the close of trading on March 5, 2002,  to the knowledge of the directors and
senior  officers  of  Accelio,  as of the date of this  Circular,  no  person or
company  beneficially  owns,  directly or  indirectly,  or exercises  control or
direction  over,  voting  securities  of Accelio  carrying  more than 10% of the
voting  rights  attached  to all of the  outstanding  Common  Shares (on a fully
diluted  basis).  The address of AGF Funds Inc. is 31st Floor, TD Bank Tower, TD
Centre, Toronto, Ontario, M5K 1E9.

As at March 5, 2002,  the directors  and senior  officers of Accelio and, to the
knowledge of the  directors  and senior  officers of Accelio,  after  reasonable
enquiry, their respective associates,  as a group,  beneficially owned, directly
or  indirectly,  or exercised  control or direction  over 335,772  Common Shares
(approximately  1.3% of all outstanding  Common Shares on such date) and options
to purchase  1,999,753 Common Shares  (approximately  44.0% of all Common Shares
subject to outstanding Options on such date).

Approval Requirements and Eligible Voting Shares

Subject to any further order of the Court,  pursuant to the Interim  Order,  the
Arrangement  Resolution must

                                       17
<PAGE>

be approved  by at least  662/3% of the votes cast by  Shareholders,  present in
person  or by proxy at the  Meeting.  For these  purposes,  any  spoiled  votes,
illegible  votes,  defective votes and abstentions  will not be considered votes
cast.

Dissenters' Rights

Registered  Shareholders  who oppose the  Arrangement are entitled to dissent in
accordance with Section 190 of the CBCA as modified by the Interim Order and the
Plan of Arrangement. See "Dissenting Shareholder Rights".

Other Business

The  management  of Accelio  does not  intend to  present  and does not have any
reason to believe that others will present, at the Meeting, any item of business
other than those set forth in this Circular.  If, however, any other business is
properly presented at the Meeting and may properly be considered and acted upon,
proxies  will be voted by those named in the  applicable  form of proxy in their
sole  discretion,  including with respect to any amendments or variations to the
matters identified herein.

                                       18

<PAGE>

                           FORWARD LOOKING STATEMENTS

This  Circular  contains  certain  forward-looking  statements as defined in the
United States Private  Securities  Litigation  Reform Act of 1995. Words such as
"will",  "expects",  "anticipates",  "intends",  "plans",  "believes",  "seeks",
"estimates" and variations of such words and similar expressions are intended to
identify these forward-looking  statements.  Specifically,  and without limiting
the generality of the foregoing,  all statements  included in this Circular that
address activities,  events or developments that either Accelio or Adobe expects
or anticipates  will or may occur in the future,  including such items as future
capital  (including  the amounts and nature  thereof),  business  strategies and
measures to implement such strategies,  competitive strengths,  goals, expansion
and growth,  or  references  to the future  success of Adobe or  Accelio,  their
respective  subsidiaries  and the companies,  joint ventures or  partnerships in
which Adobe or Accelio has equity  investments are  forward-looking  statements.
Actual   results   could  differ   materially   from  those   reflected  in  the
forward-looking  statements as a result of (i) the factors  described  under the
heading  "Investment  Considerations"  in this  Circular and in the Adobe annual
report on Form 10-K for the year ended  November  30,  2001,  a copy of which is
attached  at  Appendix  F to this  Circular,  (ii)  general  economic  market or
business  conditions,  (iii) the  opportunities  (or lack  thereof)  that may be
presented to and pursued by Adobe or Accelio,  (iv) competitive actions by other
companies,  (v) changes in Legal  Requirements  and (vi) other factors,  many of
which are beyond the control of Adobe and Accelio.

All  written  and  oral  forward-looking  statements  attributable  to  Adobe or
Accelio,  or persons  acting on their behalf,  are expressly  qualified in their
entirety by the cautionary  statements set forth above. Readers of this Circular
are  cautioned  not  to  place  undue  reliance  on  forward-looking  statements
contained in this  Circular,  which  reflect the analysis of the  management  of
Adobe and Accelio, as appropriate, only as of the date of this Circular, or such
earlier date as is otherwise indicated. Neither Adobe nor Accelio undertakes any
obligation   to  release   publicly   the  results  of  any  revision  to  these
forward-looking  statements which may be made to reflect events or circumstances
after the date of this Circular or to reflect the  occurrence  of  unanticipated
events.

                                       19

<PAGE>

                                THE TRANSACTION

Background

In a directors' circular dated January 9, 2002 (the "Directors' Circular"),  the
Board of Directors  described the background to the unsolicited offer (the "Open
Text Offer") made by Open Text Corporation  ("Open Text") through a wholly-owned
subsidiary, to purchase for cash all of the issued and outstanding Common Shares
of Accelio at a price of Cdn.$2.75 per Common Share. In the Directors' Circular,
the Board of Directors unanimously recommended that Shareholders reject the Open
Text Offer.  Shareholders  were advised  that  Accelio had  retained  CIBC World
Markets  to act as a  financial  advisor  to  assist  Accelio  and the  Board of
Directors  in  responding  to the Open Text  Offer and to  review,  solicit  and
consider  alternatives  to the Open Text Offer in order to maximize  shareholder
value.

As part of its response to the Open Text Offer,  Accelio and CIBC World  Markets
invited interested parties to enter into discussions with Accelio with a view to
acquiring  Accelio.  These parties were eligible to review  Accelio  information
contained in a data room  established  for these  purposes,  subject to entering
into acceptable  confidentiality and standstill agreements in favour of Accelio.
Various parties,  including  Adobe,  expressed an interest in Accelio and gained
access to the data room and met with various members of Accelio's executive team
as well as other Accelio employees during separate due diligence  investigations
that lasted throughout the month of January.

On January 25, 2002,  Adobe submitted a draft  acquisition  agreement to Accelio
providing for the terms on which Adobe would consider  acquiring  Accelio.  This
draft  agreement did not contain an indication of the aggregate  purchase  price
Adobe was willing to pay to acquire  Accelio.  Adobe informed Accelio that Adobe
would  propose an aggregate  purchase  price for the  transaction  after Adobe's
board of  directors  had an  opportunity  to review a  presentation  by  Adobe's
executive  team at a  meeting  of the Adobe  board of  directors  scheduled  for
January 27, 2002. Moreover,  the draft agreement  contemplated an acquisition of
all of the outstanding equity securities of Accelio in exchange for Adobe Shares
pursuant  to a  court-approved  plan of  arrangement  as opposed to an  all-cash
takeover bid structure, which was favoured by Accelio.

Also on January 25, 2002, the Board of Directors met to consider  written offers
from  interested  parties that had been received by Accelio.  In assessing these
offers,  the Board of Directors  considered,  among other things, the amount and
nature of the consideration  proposed, the conditions attached to the proposals,
the length of time required to satisfy such  conditions and perceived  execution
risk.  After  reviewing  these  proposals and  obtaining  advice from CIBC World
Markets and legal  counsel,  the Board of Directors  instructed  its advisors to
continue negotiating  agreements with parties that had submitted  expressions of
interest.

On January 27, 2002,  the Adobe board of  directors  met to discuss the proposed
transaction  with  members  of  Adobe's  executive  team.  As a result  of these
discussions,  the Adobe board of directors approved a proposal to acquire all of
the outstanding  equity interests of Accelio in exchange for Adobe Shares valued
at  approximately   U.S.$50  million  pursuant  to  the  transaction   structure
contemplated by Adobe's proposed  acquisition  agreement previously delivered to
Accelio.  Bruce Chizen,  Adobe's President and Chief Executive  Officer,  called
Kevin  Francis,  Accelio's  Chief  Executive  Officer,  and  presented the Adobe
proposal to him.

On January 30, 2002,  Accelio announced that it had received several offers that
were  superior  to the Open Text Offer and that it was  engaged in  negotiations
with a view to concluding a definitive  agreement following due diligence.  Also
on this day, representatives of CIBC World Markets contacted Adobe to inform him
that Accelio had decided to reject Adobe's January 27 offer as it was inadequate
and was  instead  focusing  its  efforts on other the other  offers  Accelio had
received.

On January 31, 2002,  however,  representatives  of CIBC World Markets contacted
Adobe and stated that Accelio remained  interested in a possible  acquisition of
Accelio by Adobe if Adobe could increase the aggregate  purchase price Adobe was
willing to pay in connection with the acquisition.  The Adobe board of directors
held a telephonic  meeting with  members of Adobe's  executive  team to consider
increasing the proposed purchase price for the proposed transaction. As a result
of these  discussions,  the Adobe board of  directors  authorised  Adobe  senior
management  to  contact  Accelio  and  make a new  offer to  acquire  all of the
outstanding  equity securities of Accelio in exchange for Adobe Shares valued at
U.S.$72  million.  Mr.  Chizen  communicated  the new offer to Mr.  Francis  and
informed  him  that  this  offer  was  predicated  on  Accelio's  acceptance  of
substantially all the terms set forth in Adobe's proposed acquisition agreement.

                                       20

<PAGE>

Also on January 31, 2002, the Board of Directors met to review the status of the
negotiations  with the parties who had  submitted  expressions  of interest  and
received  presentations  from CIBC World Markets  regarding these expressions of
interest, including the new Adobe offer. After considering the material terms of
the Adobe offer,  the Board of Directors  unanimously  determined that the Adobe
offer was superior to the offers made by all other interested parties, including
Open Text,  and,  for the reasons  discussed  below,  in the best  interests  of
Accelio, and authorized the conclusion of an acquisition agreement with Adobe on
substantially the terms set forth in Adobe's proposed acquisition agreement.

The  terms  of  such  acquisition   agreement  were  finalized  after  extensive
negotiations  throughout the day and late evening of January 31, 2002.  Prior to
the  opening of trading on  February  1, 2002,  Accelio  issued a press  release
announcing that it had reached an agreement with Adobe.

On February 4, 2002,  Open Text announced an extension of the Open Text Offer to
April 30, 2002, with no increase in the  consideration  offered.  In a notice of
variation  to the  Directors'  Circular  dated  February  4, 2002,  the Board of
Directors continued to recommend that Shareholders reject the Open Text Offer.

On February 27, 2002, the Board of Directors met to consider certain  amendments
to the  acquisition  agreement.  The Board of Directors  considered the proposed
amendments and determined that the Shareholders would not be prejudiced thereby.
Consequently,  the Board of  Directors  unanimously  approved  entering  into an
amended and restated Acquisition Agreement, which was executed by the parties on
March 1, 2002.

Recommendation of the Board of Directors

The  Board  of  Directors  has  unanimously  approved  the  Arrangement  and the
Acquisition  Agreement and has determined  unanimously  that the  Arrangement is
fair to the Shareholders and in the best interests of Accelio.  Accordingly, the
Board  of  Directors  unanimously  recommends  that  Shareholders  vote  FOR the
Arrangement Resolution at the Meeting.

In reaching their  conclusions  stated above, the Board of Directors  considered
the advantages of the Arrangement and other  considerations  described below and
reviewed the financial condition,  results of operations and business of Accelio
on a historical and prospective  basis as well as current and expected  industry
and market  conditions and the Fairness  Opinion provided by CIBC World Markets.
The Board of Directors  also  considered  that, as a result of the  Arrangement,
Shareholders  may benefit  from any future  increases  in the value of the Adobe
Shares  following the Effective  Date,  although  there is no assurance that any
such increase will occur.

The Board of Directors  determined that it was not appropriate to attach special
weightings to the factors they  considered  in reaching  their  conclusions  and
individual directors may have given different weights to different factors.

Shareholders  should consider the terms of the Arrangement  carefully and should
come to their own  decision  as to whether to vote in favour of the  Arrangement
and  Acquisition  Agreement.  Shareholders  who are in any  doubt as to how they
should vote should consult their own investment dealer,  stockbroker,  chartered
accountant, lawyer or other professional advisor.

The Board of Directors and senior  officers of Accelio do not, after  reasonable
inquiry, know of any prior valuation in respect of Accelio that has been made in
the 24 months preceding the date hereof.

Reasons for the Recommendation

In reaching its unanimous decision to approve the Acquisition  Agreement and the
Arrangement, the Board of Directors considered a number of factors, including:

(a)  the fact that,  assuming the purchase  price was U.S.$72  million  (less an
     adjustment amount for all Options,  estimated to be approximately  U.S.$1.5
     million as of January 31, 2002) and  24,969,794  Common  Shares were issued
     and  outstanding on a fully diluted basis on January 31, 2002, the value of
     the  fraction  of an Adobe  Share  to be  issued  per  Common  Share  would
     represent  a premium  of  approximately  46.6%  over the  closing  price of
     Cdn.$3.07 for the Common Shares on the TSE on January 31, 2002,  89.1% over
     the  closing  price of the  Common  Shares on the TSE 30 days  prior to the
     announcement  of the Open Text Offer,  and 80.0% over the closing  price of
     the Common Shares on the TSE 90 days prior to the  announcement of the Open
     Text Offer, assuming

                                       21

<PAGE>

     an exchange rate equal to the Noon Rate on January 31, 2002 of  Cdn.$1.5923
     for the Canadian dollar versus U.S. dollar;

(b)  the financial advice provided by CIBC World Markets to the Board, including
     the Fairness Opinion;

(c)  the terms of the Acquisition Agreement, including that:

(i)  the  Acquisition  Agreement  does  not  preclude  the  initiation  by other
     potential  bidders of  competing  offers.  If  Accelio  receives a Superior
     Offer,  the Board of  Directors  may,  subject  to certain  conditions  and
     payment of certain fees, modify or withdraw its recommendation in favour of
     the Arrangement.  As of the date of this Circular, Accelio has not received
     any competing proposal and is not in any discussions that could be expected
     to lead to a competing proposal; and

(ii) Shareholders have the right to dissent.

(d)  the  Arrangement  Resolution must be approved by no less than 662/3% of the
     votes cast at the Meeting by Shareholders  and must also be approved by the
     Court  which  will  consider,  among  other  things,  the  fairness  of the
     Arrangement to Shareholders;

(e)  the support of the Arrangement by Accelio's management;

(f)  the perceived value of Accelio based on acquisition  discussions  held with
     other potential acquirors and the Open Text Offer; and

(g)  a positive  assessment  made by the Board of  Directors  regarding  Adobe's
     business, assets, financial condition and results of operations,  resulting
     in the potential for future growth and profitability.

The Board of Directors realizes that there are certain risks associated with the
Transaction,  including those set forth under  "Investment  Considerations"  and
"Certain Income Tax Considerations to Accelio Shareholders".  However, the Board
of Directors  believes that the positive factors outweigh those risks,  although
there cannot be assurances in this regard.

Fairness Opinion

On January 31, 2002,  in  connection  with  approving  the original  acquisition
agreement,  CIBC World Markets provided a fairness opinion to the Board that the
Consideration  (as defined therein) offered to Shareholders by Adobe pursuant to
the Arrangement was, as of the date thereof, fair from a financial point of view
to the Shareholders.  In addition,  as a result of the subsequent  amendment and
restatement  of the  Acquisition  Agreement,  CIBC World  Markets  updated  this
opinion on March 1, 2002. The Fairness  Opinion  concludes that,  based upon and
subject to the factors considered, assumptions made and qualifications stated in
such opinion,  as of the date of such  opinion,  the  Consideration  (as defined
therein) was fair, from a financial point of view, to the Shareholders.

The  complete  text of the  Fairness  Opinion is  attached as Appendix E to this
Circular.  The Fairness Opinion addresses only the fairness of the Consideration
(as defined  therein) from a financial  point of view and does not  constitute a
recommendation  to any  Shareholder  as to  how to  vote  at  the  Meeting.  The
foregoing  summary  of the  Fairness  Opinion  set  forth  in this  Circular  is
qualified in its entirety by reference to the full text of such opinion.

CIBC World Markets in its capacity as financial advisor to Accelio in connection
with the Arrangement will receive a fee for its services,  a significant portion
of which is contingent  upon the completion of the Arrangement and certain other
events. In addition,  Accelio has agreed to pay for CIBC World Markets' expenses
in connection  with its performance of its services and will also indemnify CIBC
World  Markets in respect of  certain  liabilities  that might  arise out of its
engagement as Accelio's financial advisor.

The Transaction

Adobe will effect the  acquisition  of the Common  Shares under the  Arrangement
using the  Acquisition  Entity so as to qualify the  acquisition  as a qualified
stock purchase for U.S.  federal income tax purposes.  Upon  consummation of the
Transaction,  Accelio will become a wholly owned  subsidiary of the  Acquisition

                                       22

<PAGE>

Entity, which will become the sole holder of the Common Shares.

Calculation of the Exchange Ratio

Under the Arrangement,  Adobe together with the Acquisition Entity will acquire,
directly or indirectly, all of the Common Shares for the Net Purchase Price. The
Net Purchase Price will be payable in Adobe Shares based on the Exchange Ratio.

Under  the  terms  of the  Plan  of  Arrangement,  the  Exchange  Ratio  will be
determined by (a) dividing the Net Purchase  Price (i.e.,  U.S.$72  million less
all Permitted Option  Repurchase  Amounts) by the Adobe Average Stock Price, and
(b) further  dividing such resulting amount by the total number of Fully-Diluted
Accelio Shares at the Effective Time.

The aggregate value of all Permitted Option  Repurchase  Amounts is equal to the
dollar amount resulting from the cashless  exercise of all in-the-money  Accelio
Options. Accelio estimates that the aggregate Permitted Option Repurchase Amount
will be approximately  U.S.$1.3 million.  The Permitted Option Repurchase Amount
with respect to each Accelio Option outstanding prior to the Effective Time will
be equal to the  excess  of (a) the  product  of the  number  of  Common  Shares
issuable  upon the exercise of such Accelio  Option,  multiplied by the Exchange
Ratio and further  multiplied  by the Adobe  Average  Stock Price,  over (b) the
product  of the  number of Common  Shares  issuable  upon the  exercise  of such
Accelio Option multiplied by the exercise price per Common Share of such Accelio
Option. See also "The Transaction - Options and Warrants" below.

By way of example  only,  assuming  the Adobe  Average  Stock  Price is equal to
U.S.$38.80,  and further  assuming that 24,992,652  Common Shares are issued and
outstanding  on a  fully-diluted  basis at the Closing,  a Shareholder  would be
entitled to receive 0.0729 Adobe Shares for each Common Share held. Based on the
foregoing  fraction  of a Common  Share,  the  Arrangement  would  result in the
issuance of Adobe Shares valued as described  above at  approximately  U.S.$2.83
for each Common Share,  or based on the Noon Rate on March 7, 2002  Cdn.$1.5823,
approximately Cdn.$4.48 for each Common Share.

Because  the  number  of  Adobe  Shares  to be  issued  in  connection  with the
Arrangement  is based on the Adobe Average  Stock Price,  the per share value of
the Adobe Shares to be issued in connection with the Arrangement, as measured by
the actual  closing  sales price of Adobe  Shares on the  Effective  Date of the
Arrangement,  may be more or less than the per  share  values  described  above.
Assuming  that the Adobe Average Stock Price is equal to the Adobe Closing Price
on the  date of  Closing,  the  value of the  consideration  to be  provided  to
Shareholders  pursuant to the  Arrangement  will  represent an  approximate  46%
premium over the trading  price of Common  Shares at January 31, 2002,  the last
trading day preceding the announcement of the proposed Arrangement.

Options and Warrants

Accelio has agreed  that all  outstanding  Accelio  Options,  whether  vested or
unvested,  shall  terminate  at the  Option  Termination  Time  as  part  of the
Arrangement.  As permitted  under the terms of the  Acquisition  Agreement,  the
vesting of all Options will be accelerated  in accordance  with the terms of the
Option Plan, and any Option that remains  unexercised at the Option  Termination
Time will expire and be cancelled at such time.  Optionholders therefore will be
given the opportunity to exercise all of their outstanding  Options prior to the
Option Termination Time, whether they are currently vested or unvested.

Optionholders  with  in-the-money  Options  will be entitled to elect a cashless
exercise  of their  Options  and  receive  a cash  payment  from  Accelio  as an
alternative to exercising  the Options and paying the applicable  exercise price
and receiving Common Shares. Accelio estimates that if all Optionholders holding
in-the-money  Options make such election,  the aggregate  amount payable to them
will be approximately U.S.$1.3 million. These payments will reduce the value and
the number of Adobe  Shares that would  otherwise  be  issuable to  Shareholders
pursuant to the Arrangement.

Certain Optionholders with  out-of-the-money  Options have employment agreements
with Accelio  which  provide  that,  upon a change in control of Accelio,  their
Options will be exercisable  for a period of up to three years  following such a
change in control.  Adobe and Accelio  have agreed that  Accelio will pay a cash
amount  not to  exceed  approximately  U.S.$500,000  in the  aggregate  to  such
Optionholders  in  consideration  of the  surrender  of such  rights.  Adobe and
Accelio  have also  agreed  that  Accelio  will pay a cash  amount not to exceed
U.S.$10,000 in the aggregate to the holders of the Warrants in  consideration of
the early expiry of such  Warrants,  conditional  on the Closing.  The foregoing
payments  will not reduce the

                                       23


<PAGE>

value or the number of the Adobe  Shares  that would  otherwise  be  issuable to
Shareholders pursuant to the Arrangement.

Arrangement Mechanics

The  Arrangement  provides  for the  acquisition  of  Accelio  by Adobe,  either
directly or indirectly through the Acquisition  Entity,  through the acquisition
of certain of Accelio's  assets and all of the outstanding  equity  interests of
Accelio in a transaction in which the Shareholders  will receive the Adobe Stock
Consideration.  As a result of the Arrangement,  Adobe,  through the Acquisition
Entity,  will become the sole beneficial owner of all of the outstanding  Common
Shares.

The Plan of Arrangement provides that:

(a)  at 12:02 a.m. (Ottawa time) on the Effective Date, the Accelio Rights Plan,
     and all  rights  issued or  issuable  thereunder,  shall  terminate  for no
     consideration;

(b)  in order that each  holder of Common  Shares  shall be  entitled to receive
     that number of Adobe  Shares  equal to the number of Common  Shares held by
     such holder  multiplied by the Exchange Ratio,  the following  events shall
     occur:

     (i)  at 1:00 a.m. (Ottawa time) on the Effective Date:

          (1)  the  Acquisition  Entity will purchase from Accelio,  and Accelio
               will sell to the Acquisition Entity, certain assets in return for
               the  delivery  by the  Acquisition  Entity  to  Accelio  of Adobe
               Shares,  the number of Adobe Shares so delivered to be determined
               by dividing the  Acquisition  Entity Asset  Purchase Price by the
               Adobe Average Stock Price; and

          (2)  Adobe will purchase from Accelio, and Accelio will sell to Adobe,
               certain  other  assets in  return  for the  delivery  by Adobe to
               Accelio of Adobe Shares,  the number of Adobe Shares so delivered
               to be  determined by dividing the Adobe Asset  Purchase  Price by
               the Adobe Average Stock Price;

     (ii) at 1:35 a.m.  (Ottawa  Time) on the Effective  Date,  Cdn.$150,000,000
          shall be deducted from the  contributed  surplus  account and added to
          the stated capital account (and to the paid-up capital account for the
          purposes  of the Tax Act),  in each case as  maintained  by Accelio in
          respect of the Common Shares;

    (iii) at 2:00  a.m.  (Ottawa  time)  on the  Effective  Date,  Accelio  will
          purchase  from each holder of Common  Shares (other than Common Shares
          held by Dissenting  Shareholders,  Adobe,  or any entities  which are,
          directly or indirectly, wholly-owned by Adobe) and each such holder of
          Common  Shares  will be deemed to have  transferred  to  Accelio,  the
          number  of  Common   Shares  of  such  holder  equal  to  the  Accelio
          Repurchased  Shares,  in exchange for a certain number of Adobe Shares
          equal to the Accelio Repurchase Price;

     (iv) at 3:00 a.m.  (Ottawa  time) on the  Effective  Date,  each  remaining
          outstanding  Common Share (other than Common Shares held by Dissenting
          Shareholders,   Adobe,   or  any  entities  which  are,   directly  or
          indirectly,  wholly-owned  by Adobe) will be transferred by the holder
          thereof,  to the  Acquisition  Entity in exchange for a fraction of an
          Adobe Share equal to the Exchange Ratio;

(c)  at 2:30 a.m. (Ottawa time) on the Effective Date, all Accelio Options shall
     terminate  without any act or  formality  on the part of a holder  thereof,
     subject to any  obligations  contemplated in Section 5.3 of the Acquisition
     Agreement, if applicable; and

(d)  at 3:00 a.m. (Ottawa time) on the Effective Date, the name of Accelio shall
     be  changed  to "Adobe  Systems  Canada  Inc." or such other name as may be
     selected by the Board of Directors  and as may be  acceptable to regulatory
     authorities.

Assuming that the Adobe Average Stock Price is equal to U.S.$38.80,  and further
assuming that  24,992,652  Common Shares are issued and  outstanding  on a fully
diluted basis at the Closing,  the Exchange Ratio would be equal to 0.0729,  and
the   Shareholders   would  be  entitled  to  receive  an  aggregate

                                       24
<PAGE>

total of  approximately  1.82  million  Adobe  Shares in exchange for all Common
Shares  exchanged in  connection  with the  Arrangement,  which would  represent
approximately  0.77% of the issued and outstanding  Adobe Shares at the close of
trading on March 7, 2002. No certificates  representing  fractional Adobe Shares
will be delivered in exchange for Common Shares pursuant to the Arrangement.  In
lieu of any such fractional  securities each Shareholder otherwise entitled to a
fractional  interest  in  an  Adobe  Share  (after  aggregating  all  fractional
interests in Adobe Shares otherwise issuable to such holder) will receive a cash
payment from the Exchange Agent equal to the product of such fractional interest
and the Adobe  Closing Price on the last trading day  immediately  preceding the
Effective Date.

Accounting Treatment

Adobe  has  informed  Accelio  that it will  account  for the  Arrangement  as a
purchase for financial  reporting and accounting  purposes,  in accordance  with
U.S.  GAAP.  Under the  purchase  method of  accounting,  the total  cost of the
Arrangement  is allocated to the tangible  and  intangible  assets  acquired and
liabilities assumed based upon their respective fair values at the Closing Date,
with any excess of the total cost over the net of the amounts assigned to assets
acquired and liabilities assumed being recognized as goodwill.  Amounts assigned
to assets to be used in particular  research and development  projects that have
no alternative future use are charged to expense at the Closing Date.

Procedure for the Arrangement to Become Effective

The  Arrangement  is proposed  to be carried out  pursuant to Section 192 of the
CBCA. The following  procedural steps must be taken in order for the Arrangement
to become effective:

(a)  the  Arrangement  must be  approved by the  Shareholders  in the manner set
     forth in the Interim Order;

(b)  the Court must grant the Final Order approving the Arrangement;

(c)  all  conditions  precedent  to  the  Arrangement,   as  set  forth  in  the
     Acquisition  Agreement,  must be  satisfied  or waived  by the  appropriate
     party;

(d)  the Final Order and Articles of Arrangement  in the form  prescribed by the
     CBCA must be filed with the Director under the CBCA; and

(e)  the Director must issue the Certificate of Arrangement.

     Shareholder Approval

     Pursuant to the Interim Order, the Court has directed that the Shareholders
be asked to approve the  Arrangement  Resolution at the Meeting.  The Meeting is
scheduled  to be held at 10:00  a.m.  (Ottawa  time)  on  April  9,  2002 at the
Marriott Hotel, 100 Kent Street,  Ottawa,  Ontario.  The Arrangement  Resolution
must be approved  by at least  662/3% of the votes cast in person or by proxy at
the  Meeting,  subject  to  further  order of the Court.  At the  Meeting,  each
Shareholder  will be entitled to vote on the basis of one vote per Common  Share
for the purposes of voting upon the Arrangement Resolution.

     Court Approval

     The CBCA provides that an arrangement requires Court approval.  On March 8,
2002, Accelio obtained the Interim Order,  providing for the calling and holding
of the  Meeting  and  other  procedural  matters.  Subject  to the  terms of the
Acquisition  Agreement  and, if the  Arrangement  Resolution  is approved at the
Meeting in the manner  required by the Interim Order,  Accelio will apply to the
Court for the Final Order at the Court,  161 Elgin  Street,  Ottawa,  Ontario on
April 12,  2002,  2002 at 10:00  a.m.  (Ottawa  time) or as soon  thereafter  as
counsel may be heard. The Notice of Application for the Final Order  accompanies
this  Circular  and is attached as  Appendix B. All  Shareholders  and any other
interested party who wish to participate or be represented at the hearing may do
so,  subject  to filing  with the  Court and  serving  on  Accelio,  a Notice of
Intention  to Appear on or before  April 8, 2002  together  with any evidence or
materials which are to be presented to the Court,  setting out the Shareholder's
or other interested  party's mailing address for service and indicating  whether
such  Shareholder  or other  interested  party  intends to support or oppose the
application  or make  submissions.  Service of such notice  shall be effected by
service upon the solicitors for Accelio,  LaBarge Weinstein, 333 Preston Street,
11th Floor,  Ontario,  K1S 5N4,  Attention:  Ms. Deborah L.  Weinstein.  See the
Interim Order attached at Appendix B to this Circular.

                                       25


<PAGE>

     Accelio has been advised by its counsel, LaBarge Weinstein,  that the Court
has broad  discretion  under the CBCA when  making  orders  with  respect  to an
arrangement  and that the Court, in hearing the application for the Final Order,
will  consider,  among other  things,  the  fairness of the  Arrangement  to the
Shareholders   (and  any  other   interested   party  as  the  Court  determines
appropriate).  The Court may  approve the  Arrangement  either as proposed or as
amended in any manner as the Court may direct,  subject to compliance  with such
terms and conditions, if any, as the Court may determine appropriate.  Adobe may
determine  not to proceed with the  Arrangement  in the event that any amendment
ordered by the Court is not satisfactory to it, acting reasonably.

     Acquisition Agreement Conditions & Articles of Arrangement

     Assuming  the Final  Order is granted and the other  conditions  to closing
contained  in  the  Acquisition   Agreement  are  satisfied  or  waived,  it  is
anticipated  that the following  will occur:  the steps set forth in the Plan of
Arrangement will be completed; Articles of Arrangement for Accelio will be filed
with the  Director to give  effect to the  Arrangement;  and the  various  other
documents  necessary  to  consummate  the  transactions  contemplated  under the
Acquisition Agreement will be executed and delivered.

     Effective Date

     The  Arrangement  will become  effective  on the  Effective  Date after the
filing  with the  Director  of a copy of the  Final  Order and the  Articles  of
Arrangement, and the issuance of the Certificate of Arrangement by the Director.

     Accelio's  objective  is to  have  the  Effective  Date  occur  as  soon as
practicable after the Meeting. The Effective Date could be delayed, however, for
a number of reasons,  including an objection  before the Court in the hearing of
the  application  for the Final Order.  As soon as the  Effective  Date has been
determined, Accelio and Adobe will issue a press release.

Reduction in Stated Capital Account

Accelio believes that it is necessary and desirable in order to proceed with the
Arrangement  under the CBCA to reduce its stated capital  account for the Common
Shares by Cdn.$150 million. Accordingly, the Arrangement Resolution contemplates
the  approval by the  Shareholders  of such a reduction  in such stated  capital
account.

Under the CBCA a corporation is prohibited  from effecting a fundamental  change
in the nature of an arrangement  where the realizable value of the assets of the
corporation are less than the aggregate of its liabilities and stated capital of
all classes.  The purpose of the proposed  reduction in Accelio's stated capital
is to ensure that the realizable value of Accelio's assets are not less than the
aggregate  of  its  liabilities  and  stated  capital  of all  classes,  thereby
permitting the Arrangement to proceed.

The reduction in the stated  capital  account of the Common Shares will not give
rise to any tax  consequences  to  Shareholders.  Although the  reduction in the
stated capital  account of the Common Shares will reduce the paid-up  capital of
the Common  Shares for  purposes of the Tax Act,  there will be a  corresponding
increase to the stated  capital  account of the Common Shares and as a result to
the paid up capital of the Common  Shares for purposes of the Tax Act as part of
the Plan of  Arrangement.  See "The  Transaction  - Arrangement  Mechanics"  and
"Certain Income Tax Consequences to Accelio Shareholders".

Rights Plan

Prior to execution of the Acquisition  Agreement,  at its meeting on January 31,
2002, the Board of Directors approved an amendment to the Accelio Rights Plan so
as to (i) render the Accelio Rights Plan inapplicable to the Arrangement and the
other  transactions  contemplated by the  Acquisition  Agreement and the Support
Agreements,  (ii) ensure that (x) neither Adobe nor the  Acquisition  Entity nor
any of their  Affiliates  would be deemed to have become an Acquiring Person (as
defined in the Accelio  Rights  Plan)  pursuant  to the  Accelio  Rights Plan by
virtue of the execution of the Acquisition  Agreement or the Support  Agreements
or  the  consummation  of  the  transactions  contemplated  thereby  and  (y)  a
Separation  Time or a Flip-In  Event (as such terms are  defined in the  Accelio
Rights Plan) or similar  event would not occur by reason of the execution of the
Acquisition  Agreement  or the Support  Agreements  or the  consummation  of the
transactions  contemplated  thereby,  (iii)  provide  that the rights  under the
Accelio  Rights  Plan would  expire on the  Effective  Date,  and (iv) that such
amendment  could not be further  amended by Accelio without the prior consent of
Adobe.

                                       26

<PAGE>

The Arrangement Resolution  contemplates the approval by the Shareholders of the
amendment  to the Accelio  Rights Plan.  The effect of such Accelio  Rights Plan
amendment will be to exempt the  Arrangement and the  transactions  contemplated
thereby from the application of the Accelio Rights Plan. Therefore, by approving
the Arrangement  Resolution,  Shareholders  will consent to the Board's previous
amendment  to the  Accelio  Rights Plan so as to render it  inapplicable  to the
Arrangement and the transactions  contemplated by the Acquisition  Agreement and
to ensure that the exercise of rights under the Accelio  Rights Plan will expire
on the Effective Date. The Accelio Rights Plan is more fully described under the
heading "Information Relating to Accelio - Accelio Rights Plan".

Procedure for Exchange of Share Certificates

At or promptly  after the Effective  Time,  the  Acquisition  Entity and Accelio
shall deposit with the Exchange Agent,  for the benefit of the  Shareholders who
will  receive  Adobe Shares in  connection  with the  Arrangement,  certificates
representing  that  whole  number  of  Adobe  Shares  to be  delivered  upon the
repurchase or exchange of Common Shares,  as the case may be. Accelio intends to
mail a Letter of Transmittal to  Shareholders  prior to the Effective  Date. The
Letter of  Transmittal  will contain  complete  instructions  on how to exchange
Common  Shares  for Adobe  Shares.  Upon  surrender  to the  Exchange  Agent for
cancellation  of a certificate  which  immediately  prior to the Effective  Date
represented  outstanding  Common Shares that were  repurchased  or exchanged for
Adobe Shares  under the  Arrangement,  together  with such other  documents  and
instruments  as would  have been  required  to  effect  the  transfer  of shares
formerly  represented by such certificate under the CBCA and Accelio By-laws and
such  additional  documents  and  instruments  as the  Exchange  Agent  and  the
Acquisition  Entity  may  reasonably  require,  the  holder of such  surrendered
certificate shall be entitled to receive in exchange therefor,  and the Exchange
Agent  shall  deliver to such  holder,  on behalf of the  Acquisition  Entity or
Accelio,  as the case may be, a certificate  representing  that number  (rounded
down to the  nearest  whole  number) of Adobe  Shares  which such holder has the
right to receive  (together  with any  dividends or  distributions  with respect
thereto  and any cash in lieu of  fractional  Adobe  Shares)  less  any  amounts
subject  to  withholding  pursuant  to  applicable  tax  legislation,   and  the
certificate  so  surrendered  shall  forthwith be  cancelled.  In the event of a
transfer of ownership of Common  Shares which is not  registered in the transfer
records of Accelio, a certificate representing the proper number of Adobe Shares
may be issued to the  transferee  if the  certificate  representing  such Common
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer. Until surrendered,  each certificate which
immediately  prior to the Effective  Date  represented  one or more  outstanding
Common Shares that were  repurchased by Accelio or exchanged by the  Acquisition
Entity for Adobe Shares shall be deemed at all times after the Effective Time to
represent  only the right to receive  upon such  surrender  (i) the  certificate
representing  Adobe Shares,  (ii) a cash payment in lieu of any fractional Adobe
Shares and (iii) any  dividends  or  distributions  with a record date after the
Effective Time theretofore paid or payable with respect to such Adobe Shares.

No certificates  representing  fractional  Adobe Shares shall be issued upon the
surrender  for  exchange  of  certificates.  In  lieu  of  any  such  fractional
securities,  each person otherwise entitled to a fractional interest in an Adobe
Share will receive  (after  aggregating  all  fractional  shares of Adobe Shares
issuable to such holder) a cash  payment  from the  Exchange  Agent equal to the
product of such  fractional  interest  and the Adobe  Closing  Price on the last
trading date  immediately  preceding the Effective Date. The Acquisition  Entity
shall be  entitled  to any  fractional  Adobe Share in respect of which any such
entitled person has received the foregoing cash payment.

In the event any  certificate,  which  immediately  prior to the Effective  Date
represented one or more outstanding  Common Shares that were exchanged  pursuant
to the Arrangement,  shall have been lost, stolen or destroyed,  upon the making
of an affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed,  and  providing  such other  documentation  as the Exchange
Agent may reasonably require, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed certificate,  any cash and/or one or more certificates
representing one or more Adobe Shares (and any dividends or  distributions  with
respect  thereto)  deliverable  in  accordance  with  such  holder's  Letter  of
Transmittal.  When authorizing such payment in exchange for any lost,  stolen or
destroyed  certificate,  the person to whom certificates  representing the Adobe
Shares are to be issued shall, as a condition precedent to the issuance thereof,
give a bond  satisfactory  to the Exchange Agent in such sum as the  Acquisition
Entity may direct or otherwise indemnify Accelio and the Acquisition Entity in a
manner satisfactory to the Acquisition Entity against any claim that may be made
against  Accelio or the  Acquisition  Entity  with  respect  to the  certificate
alleged to have been lost, stolen or destroyed.

                                       27
<PAGE>

Adobe,  Accelio, the Acquisition Entity and the Exchange Agent shall be entitled
to deduct and withhold from any dividend or consideration  otherwise  payable to
any holder of Common Shares or Adobe Shares such amounts as Adobe,  Accelio, the
Acquisition  Entity or the  Exchange  Agent  determine is required to deduct and
withhold  with  respect to such  payment  under the Tax Act, the Tax Code or any
provision  of  provincial,  state,  local or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having  been paid to the holder of the shares in respect of which such
deduction and  withholding  was made,  provided  that such withheld  amounts are
actually remitted to the appropriate taxing authority within the applicable time
limit. To the extent that the amount so required to be deducted or withheld from
any payment to a holder exceeds the cash portion of the consideration  otherwise
payable to the holder,  Adobe,  Accelio, the Acquisition Entity and the Exchange
Agent are hereby  authorized to sell or otherwise dispose of such portion of the
consideration as is necessary to provide sufficient funds to Adobe, Accelio, the
Acquisition  Entity or the Exchange  Agent,  as the case may be, to enable it to
comply with such deduction or withholding  requirement and Adobe,  Accelio,  the
Acquisition  Entity or the Exchange  Agent shall  notify the holder  thereof and
remit any unapplied balance of the net proceeds of such sale.

Illegality of Delivery of Adobe Shares

If it appears to Adobe, the Acquisition  Entity or Accelio,  acting  reasonably,
that it would be contrary to applicable  Legal  Requirements to issue or deliver
any Adobe  Shares to a person  that is not a  resident  of Canada or the  United
States,  such Adobe Shares shall be delivered  and issued to the Exchange  Agent
for  sale by it on  behalf  of such  Person.  The Plan of  Arrangement  sets out
specific  procedures  that the  Exchange  Agent must follow in carrying out such
sales.  Neither Adobe, nor the Acquisition  Entity, nor the Exchange Agent shall
be liable for any loss arising out of any such sales.

Stock Exchange Listings

The Adobe Shares are traded on Nasdaq under the symbol "ADBE". It is a condition
to the closing of the  Arrangement  that the Adobe Shares issued pursuant to the
Arrangement will be quoted on Nasdaq.

Upon  consummation of the Arrangement,  application will be made to the TSE, PSE
and  Nasdaq to delist  the Common  Shares so that such  shares  will cease to be
traded on such markets or exchanges after the Effective Date.

In  addition,  it is  anticipated  that  Accelio  will  apply to the  applicable
securities regulatory authorities for an order deeming it to have ceased to be a
"reporting   issuer"  or  its  equivalent  under  British   Columbia,   Alberta,
Saskatchewan,  Manitoba,  Ontario,  Quebec,  Nova  Scotia and  Newfoundland  and
Labrador provincial  securities laws. As a result of the Arrangement,  Adobe may
become a  reporting  issuer,  or the  equivalent,  in certain  jurisdictions  in
Canada.

Issuance and Resale of Adobe Shares Received Under the Arrangement

     United States

     The transfer of Adobe Shares to Shareholders  will not be registered  under
the 1933 Act or the securities laws of any state,  nor is any such  registration
contemplated.  Such shares will instead be issued in reliance upon the exemption
provided  by  Section  3(a)(10)  of  the  1933  Act.  Section  3(a)(10)  exempts
securities  issued in exchange for one or more  outstanding  securities from the
general  requirement  of  registration  under  the 1933 Act  where the terms and
conditions of the issuance and exchange of such securities have been approved by
any court of  competent  jurisdiction,  after a hearing upon the fairness of the
terms and  conditions  of the issuance and exchange at which all persons to whom
such securities will be issued have the right to appear. The Court is authorized
to conduct a hearing to determine  the fairness of the terms and  conditions  of
the  Arrangement.  The Court  entered  the  Interim  Order on March 8, 2002 and,
subject to the approval of the Arrangement by the Shareholders, a hearing on the
fairness of the  Arrangement  will be held on April 12,  2002 by the Court.  See
"The  Transaction - Procedure for the  Arrangement  to Become  Effective - Court
Approval".

     The Adobe Shares  received in exchange for Common Shares in the Arrangement
will be freely  transferable under United States federal securities laws, except
that Adobe  Shares  held by persons who are deemed to be  "affiliates"  (as such
term is defined for the  purposes of Rule 145 of the 1933 Act) of Accelio  prior
to the  Arrangement  may be  resold by them only (i)  pursuant  to an  effective
registration  statement under the 1933 Act or (ii) in transactions permitted by,
and in accordance with, the resale provisions of

                                       28
<PAGE>

Rule 145(d)(1),  (2) or (3) promulgated  under the 1933 Act or another available
exemption  under  the  1933  Act  and  the  rules  and  regulations  promulgated
thereunder.

     Rule 145(d)  provides a safe harbour for resales of securities  received by
certain  persons  in  transactions  such  as  the  Arrangement.  Rule  145(d)(1)
generally  provides that  "affiliates"  of Accelio may sell  securities of Adobe
received in the  Arrangement  if such sale is  effected  pursuant to the volume,
current  public   information  and  manner  of  sale  limitations  of  Rule  144
promulgated  under the 1933 Act. These  limitations  generally  require that any
sales made by such an  affiliate  in any three month period shall not exceed the
greater  of 1% of the  outstanding  shares of the  securities  being sold or the
average  weekly  trading  volume  over the four  calendar  weeks  preceding  the
placement  of the sell  order and that such sales be made in  unsolicited,  open
market "brokers  transactions".  Rules 145(d)(2) and (3) generally  provide that
the foregoing  limitations  lapse for  non-affiliates of Adobe after a period of
one or  two  years,  respectively,  depending  upon  whether  certain  currently
available  information  continues to be available with respect to Adobe. Persons
who may be  deemed  to be  "affiliates"  of an  issuer  will  generally  include
individuals  or entities that control,  are  controlled  by, or are under common
control with Accelio and may include certain  officers and directors of Accelio,
and their respective spouses, as well as principal shareholders of Accelio.

     Accelio  has  agreed  that,  prior  to the  Effective  Date,  it  will  use
reasonable  efforts to cause each person who may be deemed to be an  "affiliate"
of Accelio  within the  meaning  of Rule 145  promulgated  under the 1933 Act to
execute and deliver an agreement to Adobe pertaining to the  acknowledgement  of
the restrictions under Rule 145 on such affiliate's  ability to resale the Adobe
Shares  received by such  affiliate  in the  Arrangement  (each,  an  "Affiliate
Letter").  Each such Affiliate Letter will provide that such "affiliate"  agrees
not to effect any sale, transfer or other disposition of any of the Adobe Shares
received by such  "affiliate"  in exchange for Common Shares in connection  with
the  Arrangement  (a) such  sale,  transfer  or other  disposition  is  effected
pursuant to an  effective  registration  statement  under the 1933 Act; (b) such
sale,  transfer or other disposition is made in conformity with the requirements
of Rule  145(d)  under the 1933 Act,  as  evidenced  by a broker's  letter and a
representation  letter  executed by the  "affiliate"  (satisfactory  in form and
content to Adobe)  stating  that such  requirements  have been met;  (c) counsel
reasonably  satisfactory  to Adobe shall have advised Adobe in a written opinion
letter  (satisfactory in form and content to Adobe),  upon which Adobe may rely,
that  such  sale,  transfer  or  other  disposition  will  be  exempt  from  the
registration  requirements of the 1933 Act; (d) an authorised  representative of
the  Securities  and Exchange  Commission  ("SEC") shall have  rendered  written
advice to the  "affiliate"  to the effect that the SEC would take no action,  or
that the staff of the SEC would not  recommend  that the SEC take  action,  with
respect to such sale, transfer or other disposition,  and a copy of such written
advice  and all  other  related  communications  with the SEC  shall  have  been
delivered to Adobe; or (e) such sale,  transfer or other disposition is effected
outside  the  United  States  in  a  transaction  meeting  the  requirements  of
Regulation S under the 1933 Act and in compliance with applicable local laws and
regulations  of the  jurisdiction(s)  in which  such  transaction  is  effected.
Furthermore, under the terms of the Affiliate Letters, Adobe will be entitled to
place  appropriate  restrictive  legends on  certificates  evidencing  any Adobe
Shares to be received by such "affiliates".  As of the date hereof, "affiliates"
of Accelio held an aggregate of 335,772  Common Shares and Options for 1,999,753
Common Shares.

     Canada

     Adobe  has  advised  Accelio  that  Adobe  has  applied  to the  securities
regulatory  authority or regulator in certain provinces of Canada for rulings or
orders  exempting the  distribution  of Adobe Shares pursuant to the Arrangement
from the prospectus and  registration  requirements  contained in the securities
legislation  of such  provinces.  Resales of Adobe  Shares  that are  subject to
Canadian  securities  laws will  generally  be  permitted to be made through the
facilities of an exchange or market  outside of Canada or to a person outside of
Canada.  Holders of such securities should refer to applicable provisions of the
securities  legislation of their  respective  jurisdiction or consult with their
legal  advisors.  The completion of the  Arrangement is conditional on obtaining
the rulings or orders.

                                       29
<PAGE>

                           THE ACQUISITION AGREEMENT

General Description

On January 31, 2002,  Adobe and Accelio  entered into an acquisition  agreement,
which was amended and  restated on March 1, 2002 (as amended,  the  "Acquisition
Agreement"), whereby the parties agreed to complete the Arrangement on the terms
and subject to the conditions set forth in the Acquisition  Agreement.  The full
text of the Acquisition  Agreement  (without schedules and exhibits) is appended
to this  Circular as Appendix D and the  following  summary is  qualified in its
entirety by the terms of the Acquisition Agreement.

The Acquisition Agreement provides that, among other things:

(a)  Accelio will apply to the Court for the Interim Order and shall prepare and
     mail the Circular to all Shareholders;

(b)  Accelio  will  convene  and hold the  Meeting to  consider  and approve the
     Arrangement Resolution;

(c)  subject to the approval of the Arrangement  Resolution by the  Shareholders
     and compliance  with the terms of the Interim Order,  Accelio will apply to
     the Court for the Final Order as soon as possible after the Meeting;

(d)  subject to compliance  with the Final Order and the  satisfaction or waiver
     of all of the other  conditions to the  completion of the  Arrangement  set
     forth in the  Acquisition  Agreement,  Accelio  will file the  Articles  of
     Arrangement to give effect to the Arrangement;

(e)  Accelio will enter into such asset purchase  agreements and other documents
     reasonably   necessary  to  transfer   Accelio  assets  to  Adobe  and  the
     Acquisition Entity as contemplated by the Plan of Arrangement; and

(f)  the  Arrangement  will become  effective at and be binding at and after the
     Effective  Time  on  Accelio,   Adobe,  the  Acquisition   Entity  and  all
     Shareholders.

The  respective   obligations  of  the  parties  to  complete  the  transactions
contemplated  by the Arrangement are subject to a number of conditions that must
be satisfied or waived in order for the  Arrangement to become  effective.  Upon
all of the conditions  being satisfied or waived,  Accelio is required to file a
copy of the Final Order and the  Articles of  Arrangement  with the  Director in
order to give effect to the Arrangement.

     Representations and Warranties

     In  the  Acquisition  Agreement,   Accelio  has  made  representations  and
warranties  relating  to  Accelio  and its  subsidiaries,  including  corporate,
commercial,  financial,  legal and other matters, as well as representations and
warranties relating to the Accelio's ability to complete the Arrangement. In the
Acquisition  Agreement,   Adobe  and  the  Acquisition  Entity  also  have  made
representations  and warranties relating to Adobe and the Acquisition Entity and
their respective  abilities to complete the Arrangement.  These  representations
and warranties are not easily summarised,  and thus Shareholders are referred to
Sections 2 and 3 of the  Acquisition  Agreement  attached  as Appendix D to this
Circular for the complete text of these provisions.

     Pre-Closing Operating Covenants of Accelio

     Accelio has agreed that among other things, during the period from March 1,
2002 to the  Effective  Time,  (a)  Accelio  will,  and will  cause  each of its
subsidiaries  to, conduct its business and operations in the ordinary course and
in accordance  with past practices and in compliance  with all applicable  Legal
Requirements and the  requirements of all material  contracts of Accelio and its
subsidiaries and (b) use all reasonable  efforts to ensure that Accelio and each
of its subsidiaries  preserves intact its current business  organization,  keeps
available  the services of their  current  officers and  employees and preserves
their  respective  relationships  with  customers,  suppliers  and others having
business dealings with them. In addition, there are specific restrictions on the
ability of Accelio to take  certain  actions  without the consent of Adobe until
the Effective Time.  Shareholders are referred to Section 4.2 of the Acquisition
Agreement attached as Appendix D to this Circular for the complete text of these
provisions.

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<PAGE>

     No Solicitation

     Under the terms of the Acquisition  Agreement,  Accelio may not directly or
indirectly, and may not permit any of its subsidiaries or any officer, director,
attorney,  accountant or advisor of Accelio or any of its subsidiaries  directly
or  indirectly  to,  and shall not  authorize  any  employee  or other  agent or
representative of Accelio or any of its subsidiaries  directly or indirectly to,
(i) solicit, initiate, encourage, induce or facilitate the making, submission or
announcement of any Acquisition Proposal (including by amending, or granting any
waiver under,  the Accelio Rights Plan) or take any action that could reasonably
be expected to lead to an  Acquisition  Proposal,  (ii) furnish any  information
regarding Accelio or any of its subsidiaries to any person in connection with or
in response to an  Acquisition  Proposal or an inquiry or indication of interest
that  could  reasonably  lead  to  an  Acquisition  Proposal,  (iii)  engage  in
discussions  or  negotiations  with any person with  respect to any  Acquisition
Proposal,  (iv)  subject  to the  express  terms of the  Acquisition  Agreement,
approve,  endorse or recommend  any  Acquisition  Proposal or (v) enter into any
letter of intent or similar document or any contract  contemplating or otherwise
relating to any Acquisition Transaction.

     The Acquisition  Agreement  further  provides,  however,  that prior to the
approval of the Arrangement Resolution by the Required Shareholder Vote, Accelio
may (i) enter into a confidentiality  agreement containing customary limitations
on the  use  and  disclosure  of all  nonpublic  written  and  oral  information
furnished  to such  person by or on behalf of Accelio and  containing  customary
"standstill" provisions (a "Standard Confidentiality  Agreement"),  (ii) furnish
information regarding Accelio and its subsidiaries to, or enter into discussions
or  negotiations  with,  any  person in  response  to a  Superior  Offer that is
submitted to Accelio by such person (and not  withdrawn) or (iii) subject to the
express  terms of the  Acquisition  Agreement,  endorse or  recommend a Superior
Offer if (a)  neither  Accelio nor any  representative  of Accelio or any of its
subsidiaries  has  breached  or taken any  action  inconsistent  with any of the
provisions set forth in Section 4.3 of the Acquisition Agreement,  (b) the Board
concludes in good faith,  after  considering  the written  advice of its outside
legal  counsel,  that such  action is  required in order for the Board to comply
with its fiduciary  obligations to the  Shareholders  under  applicable law, (c)
prior to or concurrently  with furnishing any such nonpublic  information to, or
entering into discussions with, such person,  Accelio gives Adobe written notice
of  the   identity   of  such  person   (subject  to  Adobe   agreeing  to  such
confidentiality  requirements  as such  person may  reasonably  request)  and of
Accelio's  intention  to  furnish  nonpublic   information  to,  or  enter  into
discussions with, such person, and Accelio receives from such person an executed
Standard Confidentiality  Agreement and (d) at the same time as it furnishes any
such information to such person, Accelio furnishes such nonpublic information to
Adobe (to the extent it has not been previously furnished to Adobe).

     The Acquisition Agreement further provides that Accelio shall promptly (and
in no event later than 24 hours after receipt of any Acquisition  Proposal,  the
amendment  of any  Acquisition  Proposal  previously  received,  any  inquiry or
indication of interest that could lead to an Acquisition Proposal or any request
for nonpublic  information in connection  with an Acquisition  Proposal)  advise
Adobe orally and in writing of any Acquisition  Proposal (or amendment  thereto)
or any  request  for  nonpublic  information  relating  to Accelio or any of its
subsidiaries in connection with an Acquisition  Proposal (including the identity
of the person making or submitting such Acquisition  Proposal  (subject to Adobe
agreeing to such  confidentiality  requirements  as such  person may  reasonably
request) and the terms  thereof)  that is made or submitted by any person before
the Closing Date. The Acquisition  Agreement  further  requires  Accelio to keep
Adobe  fully  informed  with  respect  to the  status  of any  such  Acquisition
Proposal,  inquiry,  indication of interest or request and any  modification  or
proposed modification thereto.

     Obligation of Accelio Board of Directors to Recommend that the Shareholders
Approve the Arrangement Resolution

     Under the terms of the Acquisition Agreement,  Accelio must take all action
necessary  under all applicable  Legal  Requirements to call, give notice of and
hold the Meeting.  The  Acquisition  Agreement  further  provides  that (i) this
Circular  must  include a  statement  to the effect  that the Board  unanimously
recommends that the Shareholders  vote to approve the Arrangement  Resolution at
the Meeting (the  unanimous  recommendation  of the Board that the  Shareholders
vote to approve the  Arrangement  Resolution  being  referred to as the "Company
Board  Recommendation");  and (ii) the Company Board  Recommendation must not be
withdrawn or modified in a manner  adverse to Adobe,  and no  resolution  by the
Board  or any  committee  thereof  to  withdraw  or  modify  the  Company  Board
Recommendation  in a manner  adverse to Adobe may be adopted  or  proposed.  For
purposes of the Acquisition Agreement, the

                                       31
<PAGE>

Company Board  Recommendation  shall be deemed to have been modified in a manner
adverse to Adobe if the Company Board Recommendation is no longer unanimous.

     The Acquisition  Agreement  further  provides,  however,  that, at any time
prior to the approval of the Acquisition  Agreement by the Required  Shareholder
Vote, the Company Board  Recommendation may be withdrawn or modified in a manner
adverse to Adobe, and the Board may endorse or recommend,  but may not accept or
enter into any contract (other than a Standard  Confidentiality  Agreement) with
respect to, a Superior Offer (such a withdrawal or  modification  of the Company
Board  Recommendation  or endorsement or  recommendation  of a Superior Offer is
referred to as a "Company  Board  Recommendation  Withdrawal"),  if: (i) Accelio
provides  Adobe with at least two business  days' prior notice of any meeting of
the Special  Committee of the Board or the Board at which the Special  Committee
or the Board will consider a Company Board Recommendation  Withdrawal;  (ii) any
offer that is causing the Special  Committee  or the Board to consider a Company
Board Recommendation Withdrawal is an unsolicited,  bona fide written offer made
by a third party and not withdrawn and is one which the Special Committee or the
Board  determines  in good faith  (after  considering  the written  advice of an
independent  financial  advisor of nationally  recognized  reputation) that such
offer  constitutes a Superior Offer;  (iii) the Board  determines in good faith,
after having  considered the written advice of Accelio's  outside legal counsel,
that, the Company Board  Recommendation  Withdrawal is required in order for the
Board to  comply  with  its  fiduciary  obligations  to the  Shareholders  under
applicable law; (iv) the Company Board Recommendation  Withdrawal does not occur
at any time within three business days after Adobe receives  written notice from
Accelio  confirming  that  the  Board  has  determined  that the  Company  Board
Recommendation  Withdrawal is required in order for the Board to comply with its
fiduciary  obligations to the Shareholders under applicable law; and (v) neither
Accelio  nor  any of its  representatives  has  breached  or  taken  any  action
inconsistent with the  nonsolicitation  provisions of the Acquisition  Agreement
described above.

     The Acquisition  Agreement  further  provides that Accelio's  obligation to
call,  give  notice of and hold the  Meeting  will not be limited  or  otherwise
affected by the commencement,  disclosure, announcement, submission, endorsement
or  recommendation  of any Superior Offer or other  Acquisition  Proposal by any
person  (including  the Board),  or by any  withdrawal  or  modification  of the
Company Board Recommendation.

     Regulatory Approvals

     Each of Accelio  and Adobe  have  agreed to use all  reasonable  efforts to
obtain various regulatory approvals necessitated or advisable in connection with
the  Transaction  and  to  cooperate  with  each  other  and  their   respective
representatives  in  furtherance  of such  efforts,  including,  in the  case of
Accelio,  to divest,  sell,  dispose of or otherwise limit its freedom of action
with respect to its and its subsidiaries businesses, product lines and assets as
is required to obtain a required consent or approval from a regulatory authority
related to the Arrangement and conditioned on its consummation.

     The Acquisition Agreement expressly provides,  however, that Adobe will not
have  any  obligation:  (i)  to  dispose  of or  transfer  or  cause  any of its
subsidiaries to dispose of or transfer any assets, or to commit to cause Accelio
or any of its  subsidiaries  to dispose of any assets;  (ii) to  discontinue  or
cause any of its subsidiaries to discontinue offering any product or service, or
to commit to cause Accelio or any of its  subsidiaries  to discontinue  offering
any product or service;  (iii) to license or otherwise make available,  or cause
any of its  subsidiaries to license or otherwise make available,  to any person,
any  technology,  software  or other  proprietary  Asset,  or to commit to cause
Accelio or any of its subsidiaries to license or otherwise make available to any
person  any  technology,  software  or  other  proprietary  asset;  (iv) to hold
separate  or cause  any of its  subsidiaries  to hold  separate  any  assets  or
operations  (either  before or after the  Closing  Date),  or to commit to cause
Accelio or any of its  subsidiaries  to hold separate any assets or  operations;
(v) to make or cause any of its  subsidiaries  to make any commitment  regarding
its  future  operations  or  the  future  operations  of  Accelio  or any of its
subsidiaries;   or  (vi)  to  contest  any  legal  proceeding  relating  to  the
Arrangement  if Adobe  determines  in good  faith  that  contesting  that  legal
proceeding might not be advisable.

     Options, Warrants and Employee Stock Purchase Plan

     Accelio has agreed that all outstanding Accelio Options,  whether vested or
unvested,  shall  terminate  at the  Option  Termination  Time  as  part  of the
Arrangement.  As permitted  under the terms of the  Acquisition  Agreement,  the
vesting of all Options will be accelerated as  contemplated  in the Option Plan,
and any Option that  remains  unexercised  at the Option  Termination  Time will
expire and be cancelled at

                                       32
<PAGE>

such time. Optionholders therefore will be given the opportunity to exercise all
of their outstanding  Options prior to the Option Termination Time, whether they
are currently vested or unvested.

     Optionholders  with  in-the-money  Options  will  be  entitled  to  elect a
cashless exercise of their Options and receive a cash payment from Accelio as an
alternative to exercising  the Options and paying the applicable  exercise price
and receiving Common Shares. Accelio estimates that if all Optionholders holding
in-the-money  Options make such election,  the aggregate  amount payable to them
will be approximately U.S.$1.3 million. These payments will reduce the value and
the number of Adobe  Shares that would  otherwise  be  issuable to  Shareholders
pursuant to the Arrangement.

     Certain  Optionholders  with   out-of-the-money   Options  have  employment
agreements with Accelio which provide that, upon a change in control of Accelio,
their Options will be  exercisable  for a period of up to three years  following
such a change in control.  Adobe and Accelio have agreed that Accelio will pay a
cash amount not to exceed  approximately  U.S.$500,000  in the aggregate to such
Optionholders  in  consideration  of the  surrender  of such  rights.  Adobe and
Accelio  have also  agreed  that  Accelio  will pay a cash  amount not to exceed
U.S.$10,000 in the aggregate to the holders of the Warrants in  consideration of
the early expiry of such  Warrants,  conditional  on the Closing.  The foregoing
payments  will not reduce the value or the number of the Adobe Shares that would
otherwise be issuable to Shareholders pursuant to the Arrangement.

     Accelio agreed to terminate its Stock Purchase Plan as of February 28, 2002
and pursuant to the terms of such plan an aggregate of 22,576 Common Shares were
issued  as of the date of such  termination,  and  such  Common  Shares  will be
included in the  calculation  of Fully  Diluted  Accelio  Shares for purposes of
calculating  the Exchange  Ratio.  No other Common Shares are issuable or may be
issued under the Stock Purchase Plan.

     Employee Benefits and Employee Terminations

     Adobe has  agreed  that it will  continue  to  provide  certain  current or
substitute employee health and welfare benefits for all employees of Accelio who
continue  employment  with Adobe or Accelio after the Effective  Time on certain
terms and conditions.

     Adobe has also agreed that in the event of an  involuntary  termination  of
any Accelio  employees  (other than for cause) during the period  commencing the
Effective Time and ending on the date six months thereafter, Accelio shall offer
severance to each such employee  equal to one months'  salary for each full year
of service with  Accelio,  up to a maximum of the greater of (a) twelve  months'
salary and (b) the amount required to be paid under applicable law.

     Indemnification of Directors and Officers of Accelio

     The  Acquisition  Agreement  provides  that all  rights to  indemnification
provided in existing  indemnification  agreements  between Accelio and Accelio's
current  directors  and officers  shall survive the  Arrangement  and remain the
obligation of Accelio until the expiration of the applicable  limitation  period
with respect to any claims against such indemnified parties arising out of their
acts or omissions  before the Effective Time. Under the terms of the Acquisition
Agreement,  Adobe has also agreed to indemnify  Accelio's directors and officers
to the extent  certain claims arise against these  indemnified  parties from the
transactions  contemplated  by the Plan of  Arrangement.  In addition,  from and
after the Effective  Time until the third  anniversary  of the  Effective  Time,
Adobe or Accelio will  maintain  directors'  and officers'  liability  insurance
substantially similar to Accelio's existing policy.

Conditions to the Completion of the Arrangement

The  respective  obligations  of Accelio and Adobe to complete the  transactions
contemplated by the Acquisition  Agreement are subject to a number of conditions
that  must be  satisfied  or  waived  in order  for the  Arrangement  to  become
effective.

The mutual closing conditions for the benefit of each of Accelio and Adobe under
the Acquisition Agreement include:

(a)  the  approval  by the  Shareholders  of  the  Arrangement  and  Arrangement
     Resolution;

(b)  obtaining  each  of the  Interim  Order  and  the  Final  Order  on a basis
     reasonably satisfactory to each of

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<PAGE>

Accelio and Adobe;

(c)  the approval for listing on Nasdaq (subject to official notice of issuance)
     of the Adobe Shares issued as part of the Adobe Consideration;

(d)  all consents by all  Governmental  Bodies that are  necessary in connection
     with the  Arrangement  shall  have been  obtained  on terms and  conditions
     reasonably  satisfactory to Adobe,  except where the failure to obtain such
     consents would not adversely  impact in any material respect the ability of
     Adobe or any of its subsidiaries or affiliates  (including  Accelio and its
     subsidiaries) to conduct their respect businesses;

(e)  if applicable to the  consummation of the  Arrangement,  the waiting period
     under the U.S.  Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976, as
     amended,  shall have expired or been terminated,  and there shall not be in
     effect  any  voluntary  agreement  between  Adobe or  Accelio  and the U.S.
     Federal Trade  Commission or the U.S.  Department of Justice by which Adobe
     or Accelio has agreed not to consummate the  Arrangement  for any period of
     time, and any similar waiting period under any applicable foreign antitrust
     law or regulation or other similar Legal  Requirement shall have expired or
     terminated, and any consent required under any applicable foreign antitrust
     law or regulation or other Legal Requirement shall have been obtained;

(f)  the  satisfaction of the  requirements of Section  3(a)(10) of the 1933 Act
     with  respect to the issuance of the Adobe  Shares in  connection  with the
     Arrangement; and

(g)  the accuracy in all material respects of all representations and warranties
     of the other  party and the  performance  in all  material  respects by the
     other party of all its covenants.

The additional  closing  conditions for the benefit of Adobe and the Acquisition
Entity under the Acquisition Agreement include:

(a)  Shareholders representing in excess of 10% of the outstanding Common Shares
     shall not have exercised dissent rights with respect to the Arrangement;

(b)  obtaining  certain  identified  consents  to  the  Arrangement  from  third
     parties, if any;

(c)  the  receipt  by Adobe of  executed  non-competition  and  non-solicitation
     agreements from certain  specified  employees of Accelio for the benefit of
     Accelio and Adobe, each of which shall be in full force and effect;

(d)  the receipt by Adobe of written  resignation  of all officers and directors
     of Accelio and its  subsidiaries,  each of which shall be in full force and
     effect;

(e)  the  receipt by Adobe of  Affiliate  Letters  from  certain  affiliates  of
     Accelio, each of which shall be in full force and effect;

(f)  certification of the Plan of Arrangement as effective by the Director under
     the CBCA through the issuance of the Certificate of Arrangement;

(g)  Accelio  shall have  executed and  delivered  to Adobe and the  Acquisition
     Entity any asset transfer  agreements and related documents and instruments
     providing for the respective  transfer to Adobe and the Acquisition  Entity
     of the Adobe Assets and the  Acquisition  Entity  Assets,  and each of such
     agreements  shall remain in full force and effect,  and Accelio  shall have
     taken all actions and fulfilled all responsibilities under such agreements;

(h)  the  absence  since  March  1,  2002  of  any  change,   effect,  event  or
     circumstance that, in combination with any other changes,  effects,  events
     or circumstances, has resulted in or would reasonably be expected to result
     in, a Material Adverse Effect on Accelio;

(i)  the absence of any temporary  restraining  order,  preliminary or permanent
     injunction or other order  preventing the  consummation  of the Arrangement
     and the absence of any Legal  Requirement  that makes  consummation  of the
     Arrangement illegal;

(j)  Adobe,  the  Acquisition  Entity and Accelio shall have obtained  exemption
     orders from the Canadian  Securities  Commissions from the registration and
     prospectus requirements with respect to the

                                       34
<PAGE>

     transactions contemplated by the Acquisition Agreement; and

(k)  the absence of certain specified pending or threatened legal proceedings in
     which a  Governmental  Body is or is  threatened  to  become  a party or is
     otherwise  involved  and the  absence of certain  specified  pending  legal
     proceedings in which another person is a party or is otherwise involved and
     which would  reasonably  be expected to have a Material  Adverse  Effect on
     Accelio or Adobe.

The  Acquisition  Agreement  also  provides  that it  shall  be a  condition  to
Accelio's  obligation to consummate the  Arrangement  that the  Arrangement  and
Arrangement   Resolution  shall  have  been  approved  by  the  Shareholders  in
accordance  with any  conditions  in addition to approval by at least 66 2/3% of
the votes cast by Shareholders at the Meeting that may be imposed by the Interim
Order and which are satisfactory to Accelio, acting reasonably.

There is no assurance that the above conditions will be satisfied or waived on a
timely basis.

The Arrangement  Resolution  authorizes the Board,  without further notice to or
approval  of the  Shareholders,  but  subject  to the  terms of the  Acquisition
Agreement,  to decide not to proceed  with the  Arrangement  and to revoke  such
Arrangement  Resolution at any time prior to the Arrangement  becoming effective
pursuant to the  provisions of the CBCA. See Appendix A to this Circular for the
full text of the Arrangement Resolution.

Termination of Acquisition Agreement

The  Acquisition  Agreement  and the  Arrangement  may be terminated at any time
prior to the  Effective  Date  (whether  before  or after  the  approval  of the
Acquisition  Agreement and the Arrangement by the Required  Shareholder Vote) in
any of the following circumstances:

(a)  by mutual written consent of Adobe and Accelio;

(b)  by either Adobe or Accelio,  if the Arrangement has not been consummated by
     August 31, 2002,  unless the failure to consummate  the  Arrangement is the
     result of a failure by the party seeking to terminate to satisfy any of its
     covenants under the Acquisition Agreement;

(c)  by either Adobe or Accelio if any Governmental  Body has issued a final and
     non-appealable   order,   decree  or  ruling  or  taken  any  other  action
     permanently   enjoining,   restraining   or   otherwise   prohibiting   the
     Arrangement;

(d)  by either Adobe or Accelio if the Meeting has been held and  completed  and
     the Acquisition Agreement and the Arrangement have not been approved by the
     Required Shareholder Vote;

(f)  by Adobe,  at any time prior to the approval of the  Acquisition  Agreement
     and the Arrangement, if a Triggering Event has occurred; or

(g)  by Adobe or  Accelio if the  representations  and  warranties  of the other
     party in the  Acquisition  Agreement are or become  inaccurate or the other
     party breaches its covenants,  so that the conditions to the obligations of
     the non-breaching  party to complete the Arrangement would not be satisfied
     and the inaccuracy or breach is not cured within 30 days following delivery
     by the non-breaching party of a written notice of the breach.

Expenses and Termination Fees

     Shared Fees and Expenses

     The  Acquisition   Agreement   provides  that  regardless  of  whether  the
Arrangement is completed,  Adobe and Accelio will each pay their own expenses in
connection  with the  Arrangement,  except  that  Accelio  and Adobe  will share
equally  all  fees  and  expenses,  other  than  attorneys'  fees,  incurred  in
connection  with the  filing,  printing  and  mailing of this  Circular  and any
filings under U.S.,  Canadian and foreign antitrust laws made in connection with
the Arrangement.

     Payment of Certain Expenses and Termination Fees by Accelio

     Under the terms of the Acquisition Agreement, Accelio will also be required
to pay Adobe (a) U.S.$1,250,000 as payment in full for Adobe's fees and expenses
incurred in connection with the

                                       35
<PAGE>

preparation and negotiation of the Acquisition Agreement and the Arrangement and
(b) U.S.$2,880,000 as a "termination fee" in the event:

     (1)  the  Acquisition  Agreement is terminated  by either  Accelio or Adobe
          either  because the  Arrangement  has not been completed by August 31,
          2002 or because the  Shareholders  have not approved  the  Acquisition
          Agreement  and  the   Arrangement  at  the  Meeting  by  the  Required
          Shareholder Vote, and at or before the time the Acquisition  Agreement
          has been  terminated,  any person has publicly  disclosed,  announced,
          commenced,  submitted or made an Acquisition  Proposal (other than the
          Open Text Offer) or an Acquisition  Proposal (other than the Open Text
          Offer)  has  otherwise  become  generally  known to the  Shareholders;
          provided that Accelio will not be required to pay the fees referred to
          above  following the  termination of the  acquisition by reason of the
          Arrangement  not having been  completed by August 31, 2002, if, at the
          time the  Acquisition  Agreement is  terminated  by either  Accelio or
          Adobe for such  reason,  no  Acquisition  Proposal  has been  publicly
          disclosed,  announced,  commenced,  submitted  or  made  or  otherwise
          becomes  generally known to the Shareholders  that is superior for the
          Shareholders from a financial point of view to the Open Text Offer; or

     (2)  the  Acquisition  Agreement  is  terminated  by Adobe  because  of the
          occurrence of a Triggering Event.

     The Acquisition  Agreement  provides that if Accelio  becomes  obligated to
make  the  payments  referred  to  above  because  Accelio  has  terminated  the
Acquisition  Agreement,  Accelio  must  make the  payments  at the time  Accelio
terminates the Acquisition Agreement.  If, however, Accelio becomes obligated to
make the payments referred to above because Adobe has terminated the Acquisition
Agreement, then Accelio must make the payments referred to above within two days
of the termination of the Acquisition Agreement.

Support Agreements and Non-Competition Agreements

Each of the Accelio Directors,  who collectively hold Common Shares representing
approximately  1.25%  of the  votes  eligible  to be cast at the  Meeting,  have
entered  into  Support  Agreements  with Adobe  pursuant  to which such  Accelio
Directors have agreed,  among other things, to vote in favour of the Arrangement
and in favour  of each of the  other  actions  contemplated  by the  Acquisition
Agreement.

Certain  executive  officers of Accelio  have entered  into  noncompetition  and
nonsolicitation agreements in favour of and for the benefit of Adobe and Accelio
which restrict such persons from engaging in a variety of activities  that would
be competitive with Accelio's  business until the later of the first anniversary
of the Effective Date or the first anniversary of such employee's termination of
employment or from encouraging,  inducing,  attempting to induce,  soliciting or
attempting to solicit certain  employees of Adobe or its Affiliates from leaving
their employment.



                                       36
<PAGE>

                           INVESTMENT CONSIDERATIONS

In addition to other information contained in this document, Shareholders should
consider  the  following  factors in  evaluating  the  Arrangement  and deciding
whether to approve the  Arrangement  Resolution,  in conjunction  with the other
information included in this Circular and its Appendices. By voting in favour of
the Arrangement,  Shareholders will be choosing to invest in Adobe Shares. Adobe
is subject to certain risks  associated  with its business and the industries in
which it  operates.  These and other risks are  discussed  in detail in Part II,
Item 7, Management's  Discussion and Analysis of Financial Condition and Results
of  Operations  under the heading  "Factors  That May Affect  Future  Results of
Operations"  of Adobe's  Annual  Report on Form 10-K for the  fiscal  year ended
November 30, 2001 attached to this Circular as Appendix F.

General Risks Relating to the Proposed Transaction

     Failure to Complete the Arrangement Could Negatively Impact Accelio's Share
Price, Future Business and Operations

     If the Arrangement is not completed,  Accelio may be subject to a number of
material risks, including the following:

o    the price of the Common  Shares may decline to the extent that the relevant
     current market price reflects a market assumption that the Arrangement will
     be completed; and

o    certain costs related to the  Arrangement,  such as legal,  accounting  and
     financial  advisor fees, must be paid by Accelio even if the Arrangement is
     not completed. In addition, if the Arrangement is not completed, Accelio is
     not entitled to any  reimbursement  for any expense  incurred in connection
     with the Arrangement  from Adobe.  These expenses are significant and could
     reasonably be expected to adversely affect the cash position,  business and
     operations of Accelio.

     In addition,  Accelio's  customers,  strategic  partners and suppliers,  in
response to the  announcement of the  Arrangement,  may delay or defer decisions
concerning  Accelio.  Any delay or deferral  in those  decisions  by  customers,
strategic  partners or  suppliers  could have a material  adverse  effect on the
business and  operations of Accelio,  regardless of whether the  transaction  is
ultimately completed.  For example,  customers or potential customers of Accelio
who use desktop and network publishing software marketed by competitors of Adobe
could terminate or delay orders with Accelio due to perceived uncertainties over
Accelio's  continued  commitment to provide products and enhancements or support
services for Accelio products used in conjunction with such competing  software.
Similarly, current and prospective Accelio and/or Adobe employees may experience
uncertainty  about their future roles with Adobe until Adobe's  strategies  with
respect to  Accelio  are  announced  and  executed.  This may  adversely  affect
Accelio's  and/or Adobe's ability to attract and retain key  management,  sales,
marketing and technical personnel.

     Furthermore,  if the  Arrangement  is terminated and the Board of Directors
decides  to  seek  another  merger  or  business  combination,  there  can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more  attractive  price  than  the  price to be paid by  Adobe  pursuant  to the
Arrangement.  In addition,  the Board has approved the Accelio  Rights Plan (see
section titled "Information Relating to Adobe - Accelio Rights Plan"), the terms
of which may discourage  potential acquirors from making an offer for all of the
outstanding Common Shares.

     The Termination  Fee Described in the Arrangement  Agreement May Discourage
Other Companies From Trying to Acquire Accelio

     In the Acquisition  Agreement,  Accelio has agreed to pay a termination fee
of  U.S.$2,880,000  plus an  additional  U.S.$1,250,000  as  payment  in full of
Adobe's  expenses  incurred in connection  with the proposed  Transaction in the
event the  Acquisition  Agreement is  terminated in certain  circumstances.  The
termination  fee may  discourage  other  companies from trying to acquire Common
Shares  even if those  companies  might be  willing  to offer  greater  value to
Shareholders than Adobe has offered in the Acquisition Agreement. The payment of
the aforementioned  termination fee could also have a material adverse effect on
Accelio's financial condition.

     The Number of Adobe Shares that  Shareholders  Will Receive in Exchange for
Each  Common  Share and the Value of these  Shares Will Not be Fixed Until After
the Meeting

                                       37
<PAGE>

     In the  Arrangement,  each  Shareholder  (other  than  Adobe  or any of its
Affiliates)  will  exchange  each Common  Share held by such  Shareholder  for a
fraction  of an Adobe Share  determined  by an  Exchange  Ratio  pursuant to the
Acquisition  Agreement.  This  Exchange  Ratio will be determined in part by the
weighted  average sales price of an Adobe Share as reported on Nasdaq during the
ten (10)  consecutive  trading days ending on the third trading day  immediately
prior to the Effective  Time for the  Arrangement  (the  "Measurement  Period").
Since the  Measurement  Period value cannot be  calculated  until the end of the
Measurement  Period,  it is not  possible  at this time to  calculate  the exact
number of Adobe Shares or the trading  value of these shares as of the Effective
Date that will be issued in  exchange  for the Common  Shares.  The  Measurement
Period value may be greater or less than the market price of Adobe Shares on the
date of this document,  the date of the Meeting or the Effective Date. There can
be no assurance that the market value of Adobe Shares that Shareholders  receive
after  consummation of the Arrangement  will equal or exceed the market value of
the Common Shares held by such Shareholders prior to the Effective Time.

     This is Not a Tax-Deferred  Transaction  Under U.S. or Canadian  Income Tax
Legislation

     The  Arrangement  has  not  been  structured  to  allow  Canadian  Resident
Shareholders to defer Canadian income taxation of accrued capital gains on their
Common  Shares.  Under  current  Canadian  tax  legislation,  Canadian  Resident
Shareholders who hold Common Shares as capital property will generally recognize
a capital gain (or loss) equal to the amount by which the sum of the fair market
value of the Adobe  Shares and any cash (in lieu of a  fractional  Adobe  Share)
received  by  such  holder  on the  exchange,  net of any  reasonable  costs  of
disposition,  exceeds (or is less than) the adjusted cost base to such holder of
the Common Shares exchanged. The exchange of Common Shares for Adobe Shares by a
U.S.  Shareholder is intended to be treated as a taxable event for U.S.  federal
income tax purposes.

     Shareholders  should  review  carefully  the  information  contained in the
Circular  under the  heading  "Certain  Income  Tax  Considerations  to  Accelio
Shareholders" and consult with their own tax advisors.

     Adobe's  Business and the Trading Price of the Adobe Shares May be Affected
by Factors that are Different from those that Affect Accelio's  Business and the
Trading Price of Common Shares

     As a result of the Arrangement,  Accelio's business will be integrated into
Adobe's business.  Adobe's business is, and  post-integration,  will continue to
be, more diversified than that of Accelio, and post-integration  Adobe's results
of  operations  as well as the trading price of the Adobe Shares may be affected
by factors  different from those affecting  Accelio's  results of operations and
the trading price of Common Shares.  There can be no assurance that the value of
Adobe Shares will not decline for reasons not  anticipated by  Shareholders.  In
addition,  the  trading  price of Adobe  Shares  may  decline as a result of the
Arrangement for a number of reasons, including if:

o    the integration of Adobe and Accelio is unsuccessful;

o    Adobe does not achieve the perceived benefits of the Arrangement as rapidly
     or to the extent anticipated by financial or industry analysts; or

o    the  effect  of  the  Arrangement  on  Adobe's  financial  results  is  not
     consistent with the expectations of financial or industry analysts.

     The Sales,  Marketing and  Distribution  Channels of Both Adobe and Accelio
may be Negatively Affected

     The Arrangement will require  integration of two  geographically  separated
companies  that  have  previously  operated  independently.  Among  the  factors
considered  by the  Board  of  Directors  and  Adobe's  board  of  directors  in
connection  with  their   respective   approvals  of  the  Arrangement  and  the
Acquisition  Agreement were the perceived  opportunities  for broadened  product
offerings,  the  joint  completion,  development  and  commercialization  of new
product offerings,  and marketing and operational efficiencies that could result
from the Arrangement.  However, no assurance can be given that difficulties will
not be encountered in integrating the product  offerings and operations of Adobe
and  Accelio,   that  the  combined  company  will  successfully   complete  and
commercialize new products currently in development or develop any new products,
that the marketing, distribution, or other operational benefits and efficiencies
anticipated  from  integration  of the  respective  businesses  and  products of
Accelio and Adobe will be achieved,  or that Accelio employee morale will not be
adversely affected as a result of the Arrangement and the resulting integration.
In  particular,  Adobe  and  Accelio  may  experience  disruption  in sales  and
marketing  as a  result  of  attempting  to  integrate  their  respective  sales
channels, and may be unable to smoothly or effectively

                                       38
<PAGE>

correct such  disruption,  or to successfully  execute their sales and marketing
objectives, even after the companies' respective sales and marketing forces have
been  integrated.  In  addition,  sales  cycles and sales models for the various
products may vary significantly. Sales personnel not accustomed to the different
sales cycles and approaches required for products newly added to their portfolio
may experience delays and difficulties in selling these newly added products. As
a result, Adobe and Accelio may be unable to take full advantage of the combined
sales forces' efforts,  and the sales approach and distribution  channels of one
company may be  ineffective  in promoting  the products of the other,  which may
have a material adverse effect on the business, financial condition or operating
results  of  the  combined  company.  The  difficulties  of  integration  may be
increased by the necessity of coordinating geographically separate organizations
or of integrating  personnel with disparate  business  backgrounds and different
corporate  cultures.  There can be no assurance  that either Accelio will retain
its key  personnel,  that  the  engineering  teams  of Adobe  and  Accelio  will
successfully cooperate and realize any technological benefits, that Accelio will
benefit from the broader  distribution  and  marketing  opportunities  available
through  Adobe,  that Adobe will  benefit  from the  broader  product  offerings
available through Accelio,  or that the combined company will realize any of the
other  anticipated  benefits of the  Arrangement.  Any failure to integrate  the
businesses and technologies of Adobe and Accelio  successfully or any failure to
realize  the  anticipated  benefits  of the  Arrangement  could  have a material
adverse effect on the business,  results of operations,  and financial condition
of the combined company.

     Effect of the Arrangement on Customers and Existing Agreements

     The  Arrangement  will  require  the  consent of certain  parties  who have
entered  into  contracts  with  Accelio.  There  can be no  assurance  that such
consent(s)  will be given  and,  if not  given,  that  such  contracts  will not
terminate,  which could have an adverse effect on Accelio's business and results
of operations.

     Accelio Executive  Officers and Directors Have Interests that May Influence
Them to Support and Approve the Arrangement

     The officers and  directors  of Accelio have  interests in the  Arrangement
that are in addition to, or different  than,  those of  Shareholders  generally.
These interests may include the following:

o    the payment of a cash amount not to exceed  approximately  U.S.$500,000  in
     the aggregate to certain executive officers with out-of-the-money  Options,
     whose  employment  agreements  provide  that  upon a change in  control  of
     Accelio their Options may become  exercisable  into shares of the acquiror,
     in consideration of the surrender of such rights;

o    the  potential  receipt of change of  control  benefits  in the  employment
     agreements  of certain  senior  employees  of  Accelio  in certain  limited
     circumstances  in which such senior  employees'  employment with Accelio is
     terminated following Closing; and

o    the receipt of indemnification  and insurance coverage with respect to acts
     taken and  omissions  to take action in their  capacities  as officers  and
     directors of Accelio.

     For the above reasons,  the directors and officers of Accelio could be more
likely to vote to approve the  Arrangement  Resolution than if they did not hold
these interests. Shareholders should consider whether these interests might have
influenced these directors and officers to support or recommend the Arrangement.
The  Board  was  aware of  these  interests  when it  approved  the  Acquisition
Agreement.

     Rights of Shareholders Following the Arrangement

     As a result of the Arrangement,  Shareholders  will become  shareholders of
Adobe,  and their rights will be governed by Delaware law and the Adobe Articles
and Adobe By-laws, which differ in certain material respects from the constating
documents and by-laws of Accelio. See "Comparison of Shareholders' Rights".


                                       39
<PAGE>

            CERTAIN INCOME TAX CONSIDERATIONS TO ACCELIO SHAREHOLDERS

Canadian Federal Income Tax Considerations

In the opinion of LaBarge  Weinstein,  Canadian  legal counsel for Accelio,  the
following  is  a  summary  of  the  principal   Canadian   federal   income  tax
considerations  under the Tax Act of  receiving  Adobe  Shares  pursuant  to the
Arrangement  generally  applicable to  Shareholders  resident in Canada who, for
purposes of the Tax Act and at all relevant times,  hold their Common Shares and
will hold their Adobe  Shares as capital  property  and deal at arm's length and
are not and will not be affiliated with Accelio or Adobe.  This summary does not
apply to  Shareholders  with  respect  to whom  Adobe  is or will be a  "foreign
affiliate"  within the  meaning of the Tax Act and does not apply to  "financial
institutions" within the meaning of section 142.2 of the Tax Act.

This summary is based on the Tax Act, the  regulations  thereunder and counsel's
understanding of the current published  administrative practices and policies of
the CCRA, all in effect as of the date of this Circular. This summary also takes
into account all Proposed  Amendments to the Tax Act, although no assurances can
be given that the Proposed  Amendments will be enacted in the form proposed,  or
at all. This summary is not exhaustive of all possible  Canadian  federal income
tax considerations and, except for the Proposed  Amendments,  does not take into
account  or  anticipate  any other  changes  in Legal  Requirements,  whether by
judicial,  governmental or legislative action or decision, nor does it take into
account   provincial,   territorial  or  foreign   income  tax   legislation  or
considerations,   which  may  differ  from  the  Canadian   federal  income  tax
considerations  described herein.  In addition,  this summary does not take into
account or anticipate any changes in the  administrative  practices of the CCRA.
No  advance  income  tax ruling  has been  sought or  obtained  from the CCRA to
confirm the tax consequences of any of the transactions described herein.

Common  Shares and Adobe  Shares  will  generally  be  considered  to be capital
property of a  shareholder  unless held in the course of carrying on a business,
in an  adventure  in the  nature of trade or as  "mark-to-market  property"  for
purposes  of the Tax Act.  Shareholders  who are  Canadian  Residents  and whose
Common Shares might not otherwise qualify as capital property may be entitled to
make the  irrevocable  election  provided by subsection  39(4) of the Tax Act to
have the Common Shares and every "Canadian security" (as defined in the Tax Act)
owned  by such  Shareholder  in the  taxation  year of the  election  and in all
subsequent taxation year deemed to be capital property.

THIS  SUMMARY IS OF A GENERAL  NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE  CONSTRUED  TO  BE,  LEGAL,  BUSINESS  OR TAX  ADVICE  TO ANY  PARTICULAR
SHAREHOLDER.  SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE  TAX  CONSEQUENCES  OF  THE  DESCRIBED   TRANSACTIONS  IN  THEIR  PARTICULAR
CIRCUMSTANCES.

For the  purposes  of the Tax Act,  all  amounts  relating  to the  acquisition,
holding or disposition of Adobe Shares (including dividends,  adjusted cost base
and proceeds of  disposition)  must be expressed  in Canadian  dollars.  Amounts
denominated in U.S. dollars must be converted into Canadian dollars based on the
U.S.  dollar  exchange  rate  generally  prevailing at the time such amounts are
received. In computing a Shareholder's  liability for tax under the Tax Act, any
cash amounts  received by such holder in U.S. dollars must be converted into the
Canadian  dollar  equivalent,  and  the  amount  of any  non-cash  consideration
received by such holder must be expressed  in Canadian  dollars at the time such
consideration is received.

Shareholders Resident in Canada

     The following  portion of the summary is applicable to a Shareholder who is
or is deemed to be a Canadian Resident at all relevant times.

     Acquisition by Accelio of a Portion of each Shareholder's Common Shares

     On the  acquisition  by Accelio of a certain  number of each  Shareholder's
Common Shares,  Shareholders  who are  individuals or  corporations  resident in
Canada will be deemed to receive a taxable  dividend  equal to the excess of the
amount  paid by Accelio  for the Common  Shares over the paid up capital of such
Common Shares. As at the date hereof, Accelio estimates that the paid up capital
per Common Share will not be less than Cdn.$6.40 at the time Accelio  acquires a
certain number of each  Shareholder's  Common Shares. It is anticipated that the
Exchange Ratio will provide the equivalent of approximately

                                       40
<PAGE>

Cdn.$4.48  of value for each  Common  Share,  based on the Noon Rate on March 7,
2002 of Cdn.$1.5823.  Therefore,  as the value of the proceeds per Common Share,
determined  by  reference  to the  Exchange  Ratio,  will  likely  be less  than
Cdn.$6.40,  it  is  anticipated  that  no  dividend  will  be  realized  by  the
Shareholders  as a result  of the  purchase  by  Accelio  of a  portion  of such
Shareholders' Common Shares.

     A Shareholder  whose Common Shares are acquired by Accelio in consideration
for Adobe Shares will be  considered  to have  disposed of the Common  Shares so
acquired  for  proceeds of  disposition  equal to the sum of (i) the fair market
value of  Adobe  Shares  received  by such  holder  on the  acquisition  of such
Shareholder's  Common  Sharers  less any  taxable  dividend  deemed to have been
received by a  Shareholder  on the  acquisition  by Accelio of a portion of such
Shareholder's  Common Shares (and, as discussed  above,  it is anticipated  that
there will not be any  taxable  dividend),  and (ii) any cash  received  by such
holder in respect of a fractional Adobe Share. As a result,  such holder will in
general  realize  a  capital  gain (or  capital  loss) to the  extent  that such
proceeds of disposition, net of any reasonable costs of disposition,  exceed (or
are less  than) the  adjusted  cost base to such  holder  of the  Common  Shares
immediately  before  the  acquisition  by  Accelio of such  Common  Shares.  See
"Certain Income Tax  Considerations - Canadian Federal Income Tax Considerations
-  Shareholders  Resident In Canada - Taxation of Capital Gain or Capital  Loss"
below.  The cost of Adobe Shares  received by Shareholders on the acquisition of
Common  Shares by Accelio  will be equal to the fair market  value of such Adobe
Shares at the time of the  acquisition  and generally  will be averaged with the
adjusted  cost base of any other Adobe Shares held at that time by the holder as
capital property for the purpose of determining the holder's  adjusted cost base
of such Adobe Shares.

     Exchange of Common Shares for Adobe Shares

     A  Shareholder  who  exchanges  Common  Shares  for  Adobe  Shares  will be
considered  to have  disposed of the Common  Shares  exchanged  for  proceeds of
disposition  equal to the sum of (i) the  fair  market  value  of  Adobe  Shares
acquired  by such  holder on the  exchange,  and (ii) any cash  received by such
holder in respect of a fractional Adobe Share. As a result,  such holder will in
general  realize  a  capital  gain (or  capital  loss) to the  extent  that such
proceeds of disposition, net of any reasonable costs of disposition,  exceed (or
are less  than) the  adjusted  cost base to such  holder  of the  Common  Shares
immediately  before the  exchange.  See  "Certain  Income Tax  Considerations  -
Canadian Federal Income Tax  Considerations - Shareholders  Resident In Canada -
Taxation  of  Capital  Gain or Capital  Loss"  below.  The cost of Adobe  Shares
received on the exchange of Common Shares will be equal to the fair market value
of such Adobe Shares at the time of the exchange and generally  will be averaged
with the  adjusted  cost base of any other Adobe Shares held at that time by the
holder as capital property for the purpose of determining the holder's  adjusted
cost base of such Adobe Shares.

     Dividends on Adobe Shares and Disposition of Adobe Shares

     Dividends  on Adobe Shares will be included in the  recipient's  income for
the purposes of the Tax Act. Such dividends  received by a Shareholder who is an
individual  will not be subject to the gross-up and dividend tax credit rules in
the Tax Act. A Shareholder  that is a corporation will include such dividends in
computing  its  income  and will not be  entitled  to deduct  the  amount of the
dividends  in  computing  its  taxable   income.   A   Shareholder   that  is  a
Canadian-controlled  private  corporation  may be  liable  to pay an  additional
refundable  tax of 62/3%  on such  dividends.  Any  United  States  non-resident
withholding  tax on these  dividends  generally will be eligible for foreign tax
credit or  deduction  treatment  where  applicable  under  the Tax Act.  Where a
Shareholder  disposes of an Adobe Share,  the Shareholder will realize a capital
gain (or  capital  loss) to the extent the  proceeds of  disposition  net of any
reasonable costs of disposition exceed (or are less than) the adjusted cost base
of the Adobe Share.

     Taxation of Capital Gain or Capital Loss

     One-half of any capital gain (the  "taxable  capital  gain")  realized by a
Shareholder  will be  included  in the  Shareholder's  income  for  the  year of
disposition.  One-half  of any  capital  loss  (the  "allowable  capital  loss")
realized may be deducted by the  Shareholder  against  taxable capital gains for
the year of  disposition.  Any excess of allowable  capital  losses over taxable
capital gains of the Shareholder for the year of disposition may be carried back
up to three  taxation  years or forward  indefinitely  and deducted  against net
taxable   capital  gains  in  those  other  years  to  the  extent  and  in  the
circumstances prescribed in the Tax Act.

     Capital  gains  realized  by an  individual  or trust,  other than  certain
specified trusts, may give rise to alternative  minimum tax under the Tax Act. A
Shareholder that is a  Canadian-controlled  private corporation may be liable to
pay an additional refundable tax of 62/3% on taxable capital gains.

                                       41
<PAGE>


     If the Shareholder is a corporation, the amount of any capital loss arising
from a disposition or deemed disposition of any such share may be reduced by the
amount of dividends received or deemed to have been received by it on such share
to the extent and under  circumstances  prescribed by the Tax Act. Similar rules
may apply where a corporation is a member of a partnership or a beneficiary of a
trust  that  owns a Common  Share or  where a trust  or  partnership  of which a
corporation  is a  beneficiary  or a member  is a member of a  partnership  or a
beneficiary of a trust that owns any such share.

     Foreign Property Information Reporting

     In general, a "specified Canadian entity" (as defined in the Tax Act) for a
taxation  year or fiscal  period whose total cost amount of  "specified  foreign
property"  (as defined in the Tax Act) at any time in the year or fiscal  period
exceeds Cdn.$100,000,  is required to file an information return for the year or
period  disclosing  prescribed  information,  including  the  cost  amount,  any
dividends received in the year, and any gains or losses realized in the year, in
respect of such property owned by the  "specified  Canadian  entity".  With some
exceptions,  a  taxpayer  resident  in Canada  in the year  will be a  specified
Canadian  entity.  Adobe Shares will be specified  foreign property to a holder.
Accordingly,  holders of Adobe Shares are advised to consult  their own advisers
regarding compliance with these rules.

     Foreign Investment Entity Draft Legislation

     Draft  legislation  regarding  the  taxation  of  investments  in  "foreign
investment  entities"  ("FIEs") was released on August 2, 2001 by the Minster of
Finance (Canada).  In general,  where the draft legislation applies, a holder of
an interest in a foreign  investment  entity  generally will be required to take
into account in computing income changes in the value of that interest. Pursuant
to an  announcement  by the  Minister of Finance on December  17, 2001 the rules
will apply to taxation  years  commencing  after 2002.  A  corporation  is not a
"foreign  investment  entity" if the "carrying  value" of all of its "investment
property" is not greater  than  one-half of the  "carrying  value" of all of its
property or if its principal business is not an "investment business" within the
meaning of those  terms in the draft  legislation.  In general,  these  proposed
rules  will not  apply to Adobe  Shares so long as the  Adobe  Shares  held by a
particular holder are widely held and actively traded and listed on a prescribed
stock exchange (which includes Nasdaq), unless it is reasonable to conclude that
the holder had a tax avoidance  motive for the acquisition of such shares in the
terms  contemplated  by the draft  legislation.  Holders  are advised to contact
their tax advisors for advice concerning the effect, if any, of the FIE rules in
their own circumstances.

     Dissenting Shareholders

     A Dissenting Shareholder is entitled, if the Arrangement becomes effective,
to  receive  from  Accelio  or the  Acquisition  Entity the fair value of Common
Shares  held by the  Dissenting  Shareholder.  In the event that the  Dissenting
Shareholder  receives  the  fair  value  of his or her  Common  Shares  from the
Acquisition  Entity,  the  Dissenting  Shareholder  will be  considered  to have
disposed of the Common  Shares for proceeds of  disposition  equal to the amount
received by the Dissenting  Shareholder  less any interest awarded by the Court.
Such a  disposition  of Common  Shares by a holder  will  generally  result in a
capital gain (or capital  loss) to the extent that the proceeds of  disposition,
net of any  reasonable  costs of  disposition,  exceed  (or are less  than)  the
adjusted cost base to the holder of those Common Shares  immediately  before the
disposition.  See "Certain Income Tax  Considerations  - Canadian Federal Income
Tax Considerations - Shareholders  Resident In Canada - Taxation of Capital Gain
or Capital Loss" above.  In the event that the Dissenting  Shareholder  receives
the fair market values of his or her Common  Shares from  Accelio,  a Dissenting
Shareholder  will be deemed to have  received a dividend  equal to the amount by
which the  proceeds  of  disposition  of the Common  Shares  exceed the  paid-up
capital of such Dissenting Shareholder's Common Shares. A Dissenting Shareholder
will also  realize a capital  gain (or a capital  loss)  equal to the  amount by
which the proceeds of disposition,  net of any reasonable  costs of disposition,
less the amount of any deemed  dividend  exceed (or are less than) the  adjusted
cost base to the holder of the Common Shares immediately before the disposition.
See  "Certain  Income  Tax   Considerations   -  Canadian   Federal  Income  Tax
Considerations - Shareholders Resident In Canada - Taxation of Capital Gains and
Capital Loss" above. Dissenting Shareholders who receive the fair value of their
Common Shares from Accelio should  consult their own tax advisors.  Any interest
awarded  to a  Dissenting  Shareholder  by the  Court  must be  included  in the
Dissenting  Shareholder's  income for the  purposes  of the Tax Act.  Dissenting
Shareholder  will not be entitled to the benefit of the  "replacement  property"
provisions of the Tax Act.

Shareholders Not Resident in Canada

The following  portion of the summary is  applicable  to a Shareholder  who, for
purposes of the Tax Act, has

                                       42
<PAGE>

not been and will not be  resident  (or deemed  resident)  in Canada at any time
while such  Shareholder has held Common Shares and will hold Adobe Shares and to
whom such  shares are not  "taxable  Canadian  property"  (as defined in the Tax
Act).  This  commentary is not applicable to a  non-resident  that is an insurer
carrying on business in Canada and elsewhere.

Generally,  Common Shares and Adobe Shares will not be taxable Canadian property
of a non-resident  Shareholder at a particular time provided that (i) the holder
does  not  use or  hold  (and is not  deemed  to use or  hold)  such  shares  in
connection with carrying on a business in Canada,  (ii) the shares are listed on
a prescribed stock exchange (which  currently  includes the TSE) and the holder,
alone or  together  with  persons  with whom the  holder  does not deal at arm's
length,  has not owned (or had under option) 25% or more of the issued shares of
any class or series of the  capital  stock of Accelio or Adobe,  as the case may
be, at any time within the 60-month period immediately  preceding the particular
time. Even if the Common Shares are taxable Canadian  property of a non-resident
Shareholder,  the holder  nonetheless may be exempt from tax under an applicable
income tax convention.

Where a non-resident Shareholder receives a dividend or interest consequent upon
the  exercise  of dissent  rights,  such  amount  will be  subject  to  Canadian
withholding  tax at the  rate of 25%  unless  the  rate  is  reduced  under  the
provisions of an applicable tax treaty.

A deemed  dividend  received by a  non-resident  Shareholder on Common Shares is
subject  to  Canadian  withholding  tax at the rate of 25%,  unless  the rate is
reduced  pursuant to the  provisions of an applicable  tax treaty.  Based on the
discussion above under the heading "Certain Income Tax Considerations - Canadian
Federal  Income  Tax   Considerations  -  Shareholders   Resident  In  Canada  -
Acquisition by Accelio of a Portion of each Shareholder's  Common Shares", it is
anticipated  that no dividend will arise on the purchase by Accelio of a certain
number of the Common Shares from non-resident Shareholders.

     Disposition of Common Shares and Adobe Shares

     Generally, a non-resident  Shareholder will not be subject to tax under the
Tax Act on (i) the acquisition by Accelio of Common Shares in consideration  for
Adobe  Shares,  (ii) the exchange of Common  Shares for Adobe Shares or (ii) the
sale or other disposition of Adobe Shares.

United States Federal Income Tax Considerations

The following is a summary of the principal  United  States  federal  income tax
considerations  generally  applicable  to U.S.  Holders (as  defined  below) who
receive Adobe Shares and Non-U.S.  Holders (as defined  below) who receive Adobe
Shares pursuant to the  Arrangement.  For purposes of this  discussion,  a "U.S.
Holder" is a beneficial owner of Common Shares that is (i) a citizen or resident
of the United States,  (ii) a corporation  or partnership  organized in or under
the laws of the United  States or any state  thereof,  including the district of
Columbia (iii) an estate the income of which is subject to United States federal
income taxation regardless of its source, or (iv) a trust if (a) a United States
court is able to exercise primary  supervision over the  administration  of such
trust and one or more United  States  persons have the  authority to control all
substantial  decisions  of such  trust or (b) such  trust  has in effect a valid
election to be treated as a domestic  trust for United States federal income tax
purposes. A "Non-U.S. Holder" is a beneficial owner of Common Shares that is not
a U.S. Holder.

This  summary   does  not  discuss  all  United   States   federal   income  tax
considerations  that may be  applicable  and/or  relevant  to U.S.  Holders  and
Non-U.S.  Holders  (collectively,   "Holders")  in  light  of  their  particular
circumstances  or to certain  Holders  that may be subject to special  treatment
under United States  federal  income tax laws  (including,  without  limitation,
certain financial institutions,  insurance companies,  tax-exempt entities, real
estate  investment  trusts,  regulated  investment  companies,  grantor  trusts,
dealers in securities or currencies, certain United States expatriates,  persons
who hold Common Shares as part of a straddle,  hedge, or conversion transaction,
U.S.  Holders whose  functional  currency is not the U.S. dollar and Holders who
acquire Common Shares through exercise of employee stock options or otherwise as
compensation for services). This discussion is limited to Holders who hold their
Common  Shares as capital  assets and does not  consider  the tax  treatment  of
Holders who hold  Common  Shares  through a  partnership  or other  pass-through
entity.  Furthermore,  this summary does not address any aspect of state, local,
foreign, estate or gift taxation.

     This  discussion is based on the Internal  Revenue Code of 1986, as amended
(the "Tax Code"),  existing and proposed  Treasury  Regulations,  administrative
pronouncements  and judicial  decisions,  each as available and in effect on the
date  hereof.  All of  the  foregoing  are  subject  to  change,  possibly  with
retroactive effect.

                                       43
<PAGE>


No advance  income tax ruling has been sought or obtained from the IRS regarding
the tax consequences of the transactions described in this Circular.

EACH HOLDER IS ADVISED TO CONSULT ITS TAX ADVISOR  REGARDING  THE UNITED  STATES
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE ARRANGEMENT.

U.S. Holders

     Purchase of Common Shares by Accelio

     The purchase of a U.S.  Holder's  Common Shares by Accelio  pursuant to the
Arrangement  will be a taxable  event  for  United  States  federal  income  tax
purposes and should be treated in the same manner as described under the heading
"Certain  Income  Tax   Considerations   -  United  States  Federal  Income  Tax
Considerations  - U.S.  Holders - Exchange  of Common  Shares for Adobe  Shares"
below.

     However,  the Internal Revenue Service could determine that the purchase of
a U.S. Holder's Common Shares by Accelio is a corporate  distribution by Accelio
to Holders of Common Shares.  If such a determination  is upheld,  to the extent
the  distribution  is paid out of a U.S  holder's  pro rata  share of  Accelio's
current or accumulated  earnings and profits,  as determined under United States
federal income tax principles, the distribution will be treated as a dividend to
the U.S.  Holder,  taxed at ordinary  United States federal income tax rates. If
the amount of such  distribution  exceeds  the U.S.  Holder's  pro rata share of
Accelio's  current and  accumulated  earnings and  profits,  such excess will be
treated as an amount  received  in  exchange  for Common  Shares and  treated as
described under the heading  "Certain Income Tax  Considerations - United States
Federal Income Tax Considerations - U.S. Holders - Exchange of Common Shares for
Adobe Shares" below.

     Exchange of Common Shares for Adobe Shares

     The exchange of Common Shares for Adobe Shares  pursuant to the Arrangement
will be a taxable event for United States  federal  income tax purposes.  A U.S.
Holder will  recognize a gain or loss equal to the  difference  between the U.S.
Holder's  tax basis in its Common  Shares and the amount  realized,  which shall
equal the sum of (i) the fair  market  value on the date of the  exchange of the
Adobe Shares received in the exchange and (b) the amount of any cash received in
lieu of  fractional  shares  (including  the amount of any Canadian  withholding
tax). In the case of a U.S. Holder who dissents from the  Arrangement,  the gain
or loss will be equal to the  difference  between  the  amount of cash  received
(including the amount of any Canadian withholding tax) and the U.S. Holder's tax
basis in its Common Shares surrendered in the exchange. Assuming Accelio was not
at any relevant  time  classified  as a PFIC,  as defined  below under  "Certain
Income Tax  Considerations  - United States Federal Income Tax  Considerations -
U.S. Holders - Passive Foreign Investment Company Considerations",  gain or loss
on the  exchange  of  Common  Shares  will be  capital  gain or loss and will be
long-term  capital  gain or loss if the U.S.  Holder held its Common  Shares for
more than one year at the time of the exchange.  In the case of a  non-corporate
U.S.  Holder,  the  maximum  marginal  United  States  federal  income  tax rate
applicable  to such gain will be lower than the maximum  marginal  United States
federal  income tax rate  applicable  to ordinary  income if such U.S.  Holder's
holding  period for such Common Shares exceeds one year.  The  deductibility  of
capital losses is subject to limitations.

     Passive Foreign Investment Company Considerations

     For United States  federal  income tax purposes,  a foreign  corporation is
classified as a passive  foreign  investment  company  ("PFIC") for each taxable
year in which either (i) 75% or more of its income is passive income (as defined
for United  States  federal  income tax  purposes)  or (ii) on average  for such
taxable year, 50% or more in value of its assets  produce  passive income or are
held for the production of passive income. For purposes of applying these tests,
a foreign  corporation that owns at least 25% (by value) of the stock of another
corporation is deemed to own its proportionate share of the assets of such other
corporation  and receive  its  proportionate  share of the gross  income of such
other  corporation.  Special  rules  apply to U.S.  holders  who own  stock of a
foreign  corporation  in a year that such  corporation  is classified as a PFIC.
These rules could result in the  imposition  of  additional  tax and an interest
charge  upon the  disposition  of shares in such  corporation  or the receipt or
deemed receipt of a distribution from such corporation.

                                       44
<PAGE>

     Based on certain  estimates  of its gross  income and gross  assets and the
nature of its business,  Accelio  believes that it may have been classified as a
PFIC for its1993, 1994 and 1995 taxable years. Accelio, however does not believe
that it will be  classified  as a PFIC for  taxable  years  subsequent  to 1995,
including its current taxable year. If Accelio were classified as a PFIC, a U.S.
Holder of Common Shares  generally would be subject to imputed  interest charges
and other  disadvantageous  tax treatment with respect to any gain from the sale
or exchange of, and certain  distributions  with respect to, Common  Shares.  In
addition,  a U.S.  Holder of Common Shares that held such Common Shares during a
taxable year in which Accelio was a PFIC and that did not make certain elections
regarding the U.S.  federal income tax treatment  relating to the Common Shares,
generally will be treated as though Accelio was a PFIC for the current tax year.

     Under the PFIC  rules,  a special  tax  regime  will  apply to both (a) any
"excess  distribution" by Accelio (generally,  the U.S. Holder's ratable portion
of  distributions  in any year which are greater than 125% of the average annual
distribution  received by such U.S. Holder in the shorter of the three preceding
years or the U.S. Holder's holding period) and (b) any gain realized on the sale
or  other  disposition  of  Common  Shares.   Under  this  regime,   any  excess
distribution  and realized  gain will be treated as ordinary  income and will be
subject  to tax as if (a) the  excess  distribution  or gain had  been  realized
ratably over the U.S.  Holder's  holding period,  (b) the amount deemed realized
had  been  subject  to tax in  each  year of that  holding  period,  and (c) the
interest charge generally applicable to underpayments of tax had been imposed on
the taxes deemed to have been payable in those years.

     Dividends on Adobe Shares

     A U.S.  holder of Adobe  Shares  generally  will be  required to include in
gross income as ordinary dividend income  distributions  paid on Adobe Shares to
the extent such  distributions  are made out of Adobe's  current or  accumulated
earnings and profits,  as  determined  under United  States  federal  income tax
principles.  Distributions  on Adobe  Shares to a U.S.  holder in excess of such
earnings  and  profits  will be treated  as a tax-free  return of capital to the
extent of the U.S.  holder's  adjusted  tax basis for such  shares  and,  to the
extent in excess of such adjusted  basis,  as capital  gain.  Dividends on Adobe
Shares received by U.S. corporate  shareholders generally should qualify for the
dividends received deduction applicable to U.S. corporations.

     Sale or Exchange of Adobe Shares

     A U.S. holder generally will recognize gain or loss on the sale or exchange
of Adobe Shares equal to the difference between the amount realized on such sale
or exchange and the U.S. holder's  adjusted tax basis in its Adobe Shares.  Such
gain or loss will be capital gain or loss. In the case of a  non-corporate  U.S.
holder, the maximum marginal United States federal income tax rate applicable to
such gain will be lower than the maximum  marginal  United States federal income
tax rate applicable to ordinary income if such U.S.  holder's holding period for
such Adobe Shares  exceeds one year and will be further  reduced if such holding
period  exceeds five years.  The  deductibility  of capital losses is subject to
limitations.

Non-U.S. Holders

     Exchange of Common Shares

     Non-U.S. Holders will not be subject to United States federal income tax as
a result of an exchange of Common Shares for Adobe Shares, cash or a combination
thereof pursuant to the Arrangement,  unless such gain is effectively  connected
with a United  States  trade or  business of the  Non-U.S.  Holder (or, if a tax
treaty applies,  is attributable to a United States  permanent  establishment of
the  Non-U.S.  Holder)  or,  in the  case of gain  recognized  by an  individual
Non-U.S. Holder, such individual is present in the United States for 183 days or
more during the taxable year of  disposition  and certain other  conditions  are
satisfied.

     Dividends on Adobe Shares

     In general,  dividends  paid on Adobe  Shares to a Non-U.S.  Holder will be
subject to  withholding  of United States federal income tax at a rate of 30% of
the gross amount thereof,  subject, however, to a reduced rate of withholding if
an income tax  treaty  applies.  Any such  dividends  paid that are  effectively
connected  with the conduct of a trade or  business in the United  States by the
Non-

                                       45
<PAGE>

U.S. Holder (or, where an income tax treaty applies,  that are attributable to a
United States permanent establishment of the Non-U.S. Holder) are not subject to
the 30% withholding tax, but instead are taxed at ordinary United States federal
income  tax rates on a net income  basis.  In order to claim a  reduction  in or
exemption  from the 30%  withholding  tax on dividends,  a Non-U.S.  Holder must
provide a properly  executed  IRS Form W-8BEN (or a suitable  substitute  form),
claiming a reduction of or exemption  from  withholding  under an applicable tax
treaty,  or IRS Form W-8ECI (or  suitable  substitute  form)  stating  that such
dividends  are not  subject to  withholding  tax  because  they are  effectively
connected with the conduct of a trade or business in the United States (or, if a
treaty applies, they are attributable to a United States permanent establishment
of the Non-U.S.  Holder). A Non-U.S.  Holder eligible for a reduced rate of U.S.
federal income tax withholding under an income tax treaty may obtain a refund of
any excess amounts  withheld by filing an appropriate  claim for refund with the
IRS.

     Sale or Exchange of Adobe Shares.

     A Non-U.S.  Holder  generally  will not be subject to United States federal
income or withholding tax in respect of any gain recognized on the sale or other
disposition  of Adobe Shares unless (a) the gain is  effectively  connected with
the  conduct of a trade or  business by the  Non-U.S.  Holder  within the United
States, or if a tax treaty applies, is attributable to a permanent establishment
of the  Non-U.S.  Holder in the  United  States;  (b) in the case of a  Non-U.S.
Holder who is an individual, the Non-U.S. Holder is present in the United States
for 183 or more days  during the taxable  year of the sale or other  disposition
and certain other conditions are satisfied;  or (c) Adobe is or has been a "U.S.
real property holding  corporation"  ("USRPHC") for United States federal income
tax  purposes  during  the  five  year  period  preceding  such  sale  or  other
disposition  (or if  shorter,  the period  that the  Non-U.S.  Holder  held such
shares).

     Backup Withholding Tax and Information Reporting Requirements

     United States backup withholding tax and information reporting requirements
generally apply to certain  payments to certain  non-corporate  holders of Adobe
Shares.  Information reporting generally will apply to payments of dividends on,
and to proceeds  from the sale or  redemption  of,  Adobe Shares made within the
United  States  to a holder of Adobe  Shares,  other  than an exempt  recipient,
including a  corporation,  a payee that is not a U.S.  person  that  provides an
appropriate certification and certain other persons. A payor will be required to
withhold  backup  withholding  tax from any  payments  of  dividends  on, or the
proceeds from the sale or  redemption  of, Adobe Shares within the United States
to a holder, other than an exempt recipient, if such holder fails to furnish its
correct  taxpayer  identification  number or otherwise  fails to comply with, or
establish an exemption  from,  such backup  withholding  tax  requirements.  The
current backup  withholding tax rate is 30%, but the rate will be reduced to 29%
for years 2004 and 2005, and 28% for 2006 through 2010.

     Under current Treasury  Regulations,  backup  withholding will not apply to
distributions  on the  Adobe  Shares  to a  holder  that  is not a U.S.  person,
provided that Adobe has received valid  certifications  meeting the requirements
of the Code and neither  Adobe nor the payor has actual  knowledge  or reason to
know that such holder is a U.S.  person for purposes of such backup  withholding
tax requirements.

     If provided by a beneficial owner, the certification must give the name and
address of such owner,  state that such owner is not a U.S.  person,  or, in the
case of an individual,  that such person is neither a citizen or resident of the
United States,  and must be signed by the owner under  penalties of perjury.  If
provided by a financial institution,  other than a financial institution that is
a  qualified  intermediary,  the  certification  must state  that the  financial
institution has received from the beneficial  owner the certificate set forth in
the preceding sentence,  set forth the information contained in such certificate
(and  include  a copy of  such  certificate),  and be  signed  by an  authorized
representative  of  the  financial   institution  under  penalties  of  perjury.
Generally,  the furnishing of the names of the beneficial owners of Adobe Shares
that are not U.S. persons and a copy of such beneficial owner's certificate by a
financial  institution will not be required where the financial institution is a
qualified intermediary.

     In the case of such  payments  made  within the United  States to a foreign
simple  trust,  a foreign  grantor  trust or a foreign  partnership,  other than
payments  to a  foreign  simple  trust,  a  foreign  grantor  trust or a foreign
partnership  that qualifies as a  "withholding  foreign trust" or a "withholding
foreign  partnership"  within  the  meaning  of such  Treasury  Regulations  and
payments  to a  foreign  simple  trust,  a  foreign  grantor  trust or a foreign
partnership  that  are  effectively  connected  with the  conduct  of a trade or
business in the United States,  the  beneficiaries  of the foreign simple trust,
the persons  treated as the owners of the foreign  grantor trust or the partners
of the foreign partnership,  as the case may be, will be required to provide the
certification  discussed  above in order to establish  an exemption  from backup
withholding tax

                                       46
<PAGE>

and  information  reporting  requirements.  Moreover,  a  payor  may  rely  on a
certification  provided by a payee that is not a U.S.  person only if such payor
does not have  actual  knowledge  or a reason  to know that any  information  or
certification stated in such certificate is incorrect.

     The discussion of United States federal income tax  consequences  set forth
above is for  general  information  only and does not  purport  to be a complete
analysis or listing of all  potential  tax  effects  that may apply to a Holder.
Each  Holder is  strongly  urged to consult  its tax  adviser to  determine  the
particular tax consequences to it of the Arrangement,  including the application
and effect of United States federal,  state, local, foreign,  estate or gift tax
laws.



                                       47

<PAGE>

        MARKET PRICES OF AND DIVIDENDS ON ADOBE SHARES AND ACCELIO SHARES

Common Share Prices

Adobe Shares are traded on Nasdaq under the symbol "ADBE". The Common Shares are
traded on the TSE under the symbol "LIO", and on Nasdaq under the symbol "ACLO".

     The following table sets forth,  for the calendar  periods  indicated,  the
high and low closing  sales  prices and the trading  volume for Adobe  Shares as
reported on Nasdaq, expressed in U.S. dollars.

                                                     Adobe Shares
                                      ------------------------------------------
                                                       Nasdaq
Period                                   High            Low         Volume
                                        --------       --------    ------------
                                                (U.S.$)              (000's)
2000:
Second Quarter.......................    65.86           44.03       279,683
Third Quarter........................    80.85           51.40       202,646
Fourth Quarter.......................    87.15           56.40       281,418

2001:
First Quarter........................    61.53           24.52       396,736
Second Quarter.......................    48.74           29.42       183,364
Third Quarter........................    47.80           22.19       342,407
Fourth Quarter.......................    37.58           23.25       269,294

2002:
January..............................    39.20           30.19        78,993
February.............................    37.75           33.02        61,861
March (1)............................    41.00           36.69        19,628

(1) Through to March 7, 2002.

                                       48

<PAGE>

The following table sets forth, for the calendar periods indicated, the high and
low closing sales prices and the trading  volume of the Common Shares of Accelio
as  reported  on the TSE,  expressed  in  Canadian  dollars,  and as reported on
Nasdaq, expressed in U.S. dollars.

<TABLE>
                                                           Common Shares of Accelio
                     ------------------------------------------------------------------------------------------------------
<CAPTION>

                                        TSE                                           Nasdaq
Period:               High            Low         Volume            High              Low           Volume
                     --------       --------    ------------     -----------       ---------     ------------
                             (Cdn.$)              (000's)                   (U.S.$)                 (000's)
<S>                  <C>            <C>         <C>              <C>               <C>           <C>

2000:
First Quarter         18.90            7.85        12,640           13.25             5.16         15,544
Second Quarter        11.00            6.75         3,480            7.63             4.00          2,255
Third Quarter          9.00            4.65         3,009            6.13             3.06          2,417
Fourth Quarter         6.50            3.60         6,341            4.38             2.31          2,129

2001:
First Quarter          5.50            2.91         5,376            3.69             1.88          1,126
Second Quarter         3.89            3.12         1,802            2.42             2.03            860
Third Quarter          4.35            2.10         2,060            2.88             1.33            533
October                3.90            2.21           515            3.20             1.25            279
November               2.40            1.50         2,239            1.53             0.98            495
December               3.15            1.80         1,962            2.00             1.13            384

2002:
January                3.30            2.85         2,047            2.10             1.79            664
February               4.53            4.32         7,946            3.10             2.60          2,917
March (1)              4.50            4.38           670            2.77             2.73            127

(1) Through to March 7, 2002.
</TABLE>

On January 31, 2002, the last full trading day prior to the public  announcement
of the  Arrangement,  the  closing  sale price per Adobe  Share,  as reported on
Nasdaq,  was U.S.$33.70,  and the closing sale price per Common Share of Accelio
as reported on the TSE was Cdn.$3.07 and as reported on Nasdaq was U.S.$1.92. On
March 7, 2002, the last full trading day prior to the date of this Circular, the
closing sale price per Adobe Share as reported on Nasdaq was U.S.$38.80, and the
closing  sale price per  Common  Share of  Accelio  as  reported  on the TSE was
Cdn.$4.39 and as reported on Nasdaq was  U.S.$2.77.  Because the market price of
Adobe Shares is subject to fluctuation due to numerous market forces, the market
value of the Adobe Shares that holders of Common Shares will receive pursuant to
the  Arrangement  may  increase or decrease  prior to the  Effective  Time.  The
Shareholders of Accelio are urged to obtain current market  quotations for their
Common Shares and the Adobe Shares.  Historical market prices are not indicative
of future market prices.




                                       49

<PAGE>


Dividends Paid

Since Accelio began its operations,  it has not paid any dividends on its Common
Shares.

Adobe has paid cash  dividends on the Adobe Shares each quarter since the second
quarter of 1988. In March 1997,  Adobe  established  the venture stock  dividend
program   under  which  Adobe  may,   from  time  to  time,   distribute   as  a
dividend-in-kind  shares of Adobe's  equity  holdings in investee  companies  to
Adobe's stockholders.

Under the terms of  Adobe's  line of credit  agreement,  corporate  headquarters
lease  agreements  and  real  estate  financing  agreement,  Adobe  may pay cash
dividends unless an event of default has occurred or Adobe does not meet certain
financial  ratios.  The  declaration  of future  dividends,  whether  in cash or
in-kind,  is within the discretion of Adobe's board of directors and will depend
upon business  conditions,  Adobe's  results of  operations,  Adobe's  financial
condition, and other factors.

The following table sets forth, for the fiscal periods indicated, cash dividends
paid per share on Adobe Shares, expressed in U.S. dollars.

                                                                   Adobe Shares
                                                                ----------------
                                                                      (U.S.$)
2000
Second Quarter..........................................                 0.0125
Third Quarter...........................................                 0.0125
Fourth Quarter..........................................                 0.0125

2001
First Quarter...........................................                 0.0125
Second Quarter..........................................                 0.0125
Third Quarter...........................................                 0.0125
Fourth Quarter..........................................                 0.0125

2002
First Quarter...........................................                    N/A



                                       50
<PAGE>


                 REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES

Except  as  otherwise  expressly  noted,  the  financial  information  regarding
Accelio,  including the Consolidated Financial Statements, the Accelio unaudited
consolidated  financial  statements and the summaries  thereof contained in this
Circular, is reported in Canadian dollars and such statements have been prepared
in accordance with Canadian GAAP and U.S. GAAP.

The  financial  information  regarding  Adobe,  including  the  Adobe  Financial
Statements and the summaries thereof contained in this Circular,  is reported in
U.S.  dollars and such  statements  have been prepared in  accordance  with U.S.
GAAP.


                          CANADIAN/U.S. EXCHANGE RATES

The  following  table sets forth,  for each period  indicated,  the high and low
exchange rates for one Canadian dollar expressed in U.S. dollars, the average of
such exchange rates during such period, and the exchange rate at the end of such
period, based upon the Noon Rate and generally reflecting the exchange rates for
transactions of U.S.$1 million or more:

<TABLE>
<CAPTION>
                                          Nine Months Ended                 Year Ended April 30,
                                          January 31, 2002
                                       ------------------------    --------------------------------------
                                                                     2001          2000          1999
                                                                   ----------    ----------   -----------
<S>                                    <C>                         <C>           <C>          <C>

High..................................        0.6623                 0.6830        0.6973        0.6983
Low...................................        0.6199                 0.6334        0.6609        0.6343
Average...............................        0.6399                 0.6611        0.6801        0.6624
Period End............................        0.6280                 0.6512        0.6752        0.6861

</TABLE>


On January  31,  2002,  the last  trading day prior to the  announcement  of the
Transaction, the exchange rate for one Canadian dollar expressed in U.S. dollars
based on the Noon Rate was U.S.$0.6280.  On March 7, 2002, the exchange rate for
one  Canadian  dollar  expressed  in U.S.  dollars  based on the  Noon  Rate was
U.S.$0.6320.

The  following  table sets forth,  for each period  indicated,  the high and low
exchange rates for one U.S. dollar expressed in Canadian dollars, the average of
such exchange rates during such period, and the exchange rate at the end of such
period, based upon the Noon Rate and generally reflecting the exchange rates for
transactions of Cdn.$1 million or more:

                                                 Year Ended November 30,
                                          --------------------------------------
                                            2001          2000          1999
                                          ----------    ----------   -----------
High...................................    1.6021        1.5593        1.5527
Low....................................    1.4936        1.4341        1.4505
Average................................    1.5436        1.4820        1.4898
Period End.............................    1.5718        1.5356        1.4728

On January  31,  2002,  the last  trading day prior to the  announcement  of the
Transaction, the exchange rate for one U.S. dollar expressed in Canadian dollars
based on the Noon Rate was Cdn.$1.5923.  On March 7, 2002, the exchange rate for
one U.S.  dollar  expressed  in  Canadian  dollars  based  on the Noon  Rate was
Cdn.$1.5823.


                                       51
<PAGE>


                       SELECTED HISTORICAL FINANCIAL DATA

The following table presents  selected audited  financial  information for Adobe
for the periods  indicated.  This table should be read in  conjunction  with the
Adobe  Financial  Statements and  Supplementary  Data included in Adobe's Annual
Report on Form 10-K for the fiscal year ending  November 30,  2001,  attached to
this Circular as Appendix F. The Adobe  Financial  Statements and  Supplementary
Data have been prepared in accordance with U.S. GAAP.
<TABLE>
<CAPTION>

                                                       As of and for the years ended
                                                  -----------------------------------------
                                                  November 30,   December 1,   December 3,
                                                      2001          2000          1999
                                                  -----------------------------------------
   <S>                                            <C>            <C>           <C>

                                                                   (Audited)
                                                   (U.S. dollars in thousands, except per
                                                         share amounts and ratios)
   Operating Results
   Revenue........................................  $1,229,720     $1,266,378   $1,015,434
   Gross Profit...................................   1,148,269      1,179,123      920,894
   Net Income (1).................................     205,644        287,808      237,751
   Basic earnings per share (1)...................        0.86           1.21         0.98
   Diluted earnings per share.....................        0.83           1.13         0.92
                                                   -----------------------------------------
   Dividend and Common Share Data
   Basic weighted-average number of shares........     238,461        238,292      241,572
   Diluted weighted-average number of shares......     249,145        255,774      258,410
   Common dividends paid..........................     $12,007        $11,979      $12,233
   Common dividends paid per share................        0.05           0.05         0.05
                                                   -----------------------------------------
   Year-End Financial Position
   Current assets.................................    $767,364       $877,912     $623,015
   Current liabilities............................     313,651        314,605      267,629
   Net working capital............................     453,713        563,307      355,386
   Property, plant and equipment, net.............      80,993         64,268       69,138
   Total assets...................................     930,623      1,069,416      803,859

</TABLE>

                          ADOBE 2001 QUARTERLY RESULTS
                      (Numbers for the Three Months Ended)
<TABLE>
<CAPTION>

                                                                   Quarter Ended
                                         ------------------------------------------------------------------
                                              Mar. 2        June 1         Aug. 31         Nov. 30
                                         ------------------------------------------------------------------
                                                                    (Unaudited)
                                          (U.S. dollars in thousands, except per share amounts and ratios)
   <S>                                   <C>                 <C>           <C>             <C>

   Revenue..........................         $328,969       $344,093       $292,118        $264,540
   Gross profit.....................          308,953        321,734        272,077         245,505
   Net income (2)...................           69,756         61,305         40,294          34,289
   Basic net income per share (2)...             0.29           0.26           0.17            0.15
   Diluted net income per share.....             0.28           0.25           0.16            0.14

</TABLE>

(1)  In 2001, includes  investment loss of U.S.$93.4 million,  restructuring and
     other  charges of  U.S.$12.1  million,  and  amortization  of goodwill  and
     purchased  intangibles of U.S.$14.3 million.  In 2000,  includes investment
     gains of  U.S.$14.3  million,  one-time  gains  from the sale of  assets of
     U.S.$2.7  million,  restructuring  and other  charges of U.S.$5.6  million,
     in-process  research and development of U.S.$0.5 million,  and amortization
     of  goodwill  and  purchased  intangibles  of  U.S.$7.0  million.  In 1999,
     includes  investment  gains of U.S.$88.9  million,  one-time gains from the
     sale of assets of  U.S.$5.7  million,  restructuring  and other  charges of
     U.S.$23.0 million, acquired in-process research and development of U.S.$3.6
     million, and amortization of goodwill and purchased intangibles of U.S.$4.8
     million.

(2)  In 2001, net income and net income per share  includes the  following:  The
     first  quarter   includes   investment   loss  of  U.S.$17.0   million  and
     amortization of goodwill and purchased intangibles of U.S.$3.6 million; the
     second  quarter   includes   investment  loss  of  U.S.$31.0   million  and
     amortization of goodwill and purchased intangibles of U.S.$3.6 million; the
     third  quarter   includes   investment   loss  of  U.S.$39.4   million  and
     amortization of goodwill and purchased intangibles of

                                       52
<PAGE>

     U.S.$3.6  million;  and the  fourth  quarter  includes  investment  loss of
     U.S.$5.9 million, restructuring and other charges of U.S.$12.1 million, and
     amortization of goodwill and purchased intangibles of U.S.$3.6 million.

Selected Historical Consolidated Financial Data of Accelio

Set forth below is a summary of certain consolidated  financial information with
respect  to Accelio  and its  subsidiaries  as at the dates and for the  periods
indicated.   The  selected   historical   financial  data  of  Accelio  and  its
subsidiaries  as at and for the fiscal years ended April 30, 2001, 2000 and 1999
has been derived from historical  financial  statements,  which  statements have
been  audited  by  PricewaterhouseCoopers  LLP,  whose  report  is  included  in
Accelio's  audited  financial  statements for the year ended April 30, 2001. The
selected  historical  financial  data for the nine months ended January 31, 2002
and  2001  has  been  derived  from  the  Accelio  unaudited  interim  financial
statements  for the periods ended January 31, 2002 and 2001,  respectively,  and
includes, in the opinion of management of Accelio, all adjustments consisting of
normal recurring  accruals which Accelio  considers  necessary to present fairly
the results of such periods.  Accelio's audited annual financial  statements and
Accelio's  unaudited  interim  financial  statements  from which  this  selected
historical  financial data is derived were prepared in accordance  with Canadian
GAAP and U.S. GAAP.  This selected  historical  financial data should be read in
conjunction  with the Accelio audited annual  financial  statements for the year
ended April 30, 2001, the Accelio unaudited interim financial statements for the
nine months ended  January 31, 2002,  the Accelio  management's  discussion  and
analysis for the year ended April 30, 2001 and the Accelio  quarterly report for
the nine months ended January 31, 2002, copies of which are incorporated  herein
by reference.

<TABLE>
<CAPTION>

                                        ------------------------------   ----------------------------------------------
                                              Nine Months ended
                                                 January 31,                     Fiscal year ended April 30,
                                        ------------------------------   ----------------------------------------------

                                             2002             2001             2001           2000            1999
                                        ------------   ---------------   --------------  --------------  --------------
                                                (in thousands of Canadian dollars, except per share amounts)
   <S>                                  <C>             <C>               <C>             <C>             <C>

   Net Sales...........................  $  69,212        $ 72,093         $ 100,639      $  94,317       $ 114,212
   Operating income (loss).............  $(27,660)        $ (7,814)        $(22,734)      $ (22,263)      $ (70,956)
   Net income (loss)...................  $(27,799)        $ (7,958)        $(28,581)      $ (20,186)      $ (64,589)

   Basic net income (loss per share)...  $  (1.12)        $ (0.36)         $ (1.26)       $   (1.01)      $   (3.26)
   Diluted income (loss) per share.....  $  (1.12)        $ (0.36)         $ (1.26)       $   (1.01)      $   (3.26)

                                              As at January 31                          As at April 30
                                        -----------------------------    ---------------------------------------------

                                           2002            2001              2001           2000            1999
                                        -----------    --------------    -------------- -------------- ---------------
   Working Capital.....................  $  13,946        $   60,273       $  48,171      $  33,568       $  45,054
   Total Assets........................  $  86,149        $  134,166       $ 114,676      $ 121,336       $ 168,954
   Long-term debt......................  $     880        $   11,135       $  11,011      $  10,000       $  32,557
   Shareholder's equity................  $  44,167        $   92,526       $  70,562      $  76,302       $  97,015

</TABLE>

                                       53
<PAGE>


                          INFORMATION RELATING TO ADOBE

Business of Adobe

Founded in 1982,  Adobe  builds  award-winning  software  solutions  for network
publishing,   including  Web,  print,  ePaper,  video,  wireless  and  broadband
applications.  Its graphic  design,  imaging,  and dynamic media authoring tools
enable customers to create, manage, and deliver visually rich, reliable content.
Adobe  licenses  its  technology  to  major  hardware  manufacturers,   software
developers,  and service providers,  and offers integrated software solutions to
businesses of all sizes.  Adobe  distributes  its products  through a network of
distributors  and  dealers,  value-added  resellers,  systems  integrators,  and
original equipment manufacturers ("OEM"), direct to end users through Adobe call
centers and through its own Web site at  www.adobe.com.  Adobe has operations in
the Americas, Europe, Middle East, Africa and Asia.

In 1984, Adobe developed the software that initiated desktop publishing.  Today,
Adobe continues to be uniquely  positioned to make dramatic  changes not only to
how society creates visually rich information for print and the Web, but also as
to how it distributes and accesses that information electronically.

In the simplest of terms, Adobe helps people  communicate  better. By delivering
powerful  graphic  design,  publishing,  and imaging  software for print and Web
production,  Adobe  helps  people  express,  share,  and manage  their  ideas in
imaginative and meaningful new ways.

Adobe's  strategy is to address the needs of:  graphic  designers;  professional
print, cross-media, and Web publishers; dynamic media artists; communicators and
workers within  businesses and  governments;  IS  technologists  and developers;
hobbyists; and consumers. Adobe executes on this strategy by delivering products
that support industry  standards and that can be deployed on multiple  computing
environments, including Microsoft Windows, Apple Macintosh, Linux, UNIX, Palm OS
and Pocket PC platforms.

Beginning  in  fiscal  year  2002,  Adobe  categorizes  its  products  into four
principal business segments: Graphics; Cross-Media Publishing; ePaper Solutions;
and OEM Postscript and other markets.

The  markets  for Adobe  products  are  characterized  by  intense  competition,
evolving  industry  standards,  rapid  technology  developments and frequent new
product  introductions.  Adobe's  future  success  will depend on its ability to
enhance existing products, introduce new products on a timely and cost-effective
basis,  meet changing  customer  needs,  extend Adobe's core technology into new
applications  and  anticipate  or  respond  to  emerging   standards  and  other
technological changes.

The  foregoing  description  is  qualified  by  reference  to the more  in-depth
discussion of Adobe's business in:

(a)  Adobe's  Annual Report on Form 10-K for the fiscal year ended  November 30,
     2001 (including Management's Discussion and Analysis of Financial Condition
     and Results of Operations) which is attached to this Circular as Appendix F
     without exhibits; and

(b)  Adobe's 2002 Definitive Proxy Statement on Schedule 14A dated March 5, 2002
     with respect to Adobe's  annual meeting of  stockholders  held on April 11,
     2002, which is attached to this Circular as Appendix G.

The  foregoing  documents,  filed  by  Adobe  with  the  SEC and  reproduced  as
Appendices  to the  Circular,  are  specifically  incorporated  in and  form  an
integral part of this Circular.

Any statement contained in a document  incorporated or deemed to be incorporated
herein  shall be deemed to be modified or  superseded  for the  purposes of this
Circular  to the  extent  that a  statement  contained  herein,  or in any other
subsequently  filed  document  which  also is or is  deemed  to be  incorporated
herein,  modifies or  supersedes  that  statement.  Any statement so modified or
superseded  shall  not be  deemed,  except  as so  modified  or  superseded,  to
constitute a part of this  Circular.  The making of a modifying  or  superseding
statement shall not be deemed an admission for any purposes that the modified or
superseded  statement,  when made,  constituted a  misrepresentation,  an untrue
statement  of a material  fact or an omission  to state a material  fact that is
required to be stated or that is necessary to make a statement not misleading in
light  of  the   circumstances  in  which  it  was  made.

                                       54
<PAGE>

Accelio assumes no responsibility  for the above documents relating to Adobe and
its Affiliates filed by Adobe with the SEC.



Corporate Structure

The following chart sets out the intercorporate  relationships between Adobe and
its material subsidiaries as of the date of this circular.







                               [GRAPHIC OMITTED]
















Description of Share Capital

     General

     Adobe is  authorised to issue  900,000,000  Adobe  Shares,  U.S$0.0001  par
value,  and  2,000,000  shares  of  preferred  shares,   U.S.$0.0001  par  value
("Preferred  Shares").  As of the close of  business  on January  25,  2002,  an
aggregate of 236,763,372  Adobe Shares were  outstanding  and no Adobe Preferred
Shares were issued and outstanding.

     The following  description of Adobe's  capital stock does not purport to be
complete and is subject to and  qualified in its entirety by the Adobe  Articles
and the Adobe By-Laws and by the provisions of applicable Delaware law.

     Adobe Shares

     Holders of Adobe  Shares are  entitled to one vote per share on all matters
to be  voted  upon by the  shareholders.  Holders  of Adobe  Shares  do not have
cumulative voting rights,  and,  therefore,  holders of a majority of the shares
voting for the election of  directors  can elect all of the  directors.  In such
event,  the  holders  of the  remaining  shares  will not be able to  elect  any
directors.

     Holders of the Adobe Shares are  entitled to receive such  dividends as may
be declared from time to time by Adobe's board of directors out of funds legally
available  therefore  subject to the terms of any existing or future  agreements
between  Adobe and its  debtholders  and the terms of the  lease  agreement  for
Adobe's headquarters  building in San Jose,  California.  Adobe has from time to
time paid  cash  dividends  on its  capital  stock.  See  "Market  Prices of and
Dividends on Adobe Shares and Accelio Shares".  In the event of the liquidation,
dissolution or winding up of Adobe,  the holders of Adobe Shares are entitled to
share rateably in all assets legally available for distribution after payment of
all debts and other  liabilities  and subject to the prior rights of any holders
of Preferred Shares then outstanding.

                                       55


<PAGE>

     Preferred Shares

     Adobe is authorized to issue 2,000,000  Preferred Shares.  Adobe's board of
directors has the authority to issue the Preferred  Shares in one or more series
and to fix the price, rights, preferences,  privileges and restrictions thereof,
including dividend rights,  dividend rates,  conversion  rights,  voting rights,
terms of redemption,  redemption prices,  liquidation preferences and the number
of shares  constituting a series or the designation of such series,  without any
further vote or action by Adobe's  shareholders.  Adobe has  designated  100,000
Preferred  Shares in  connection  with the  adoption  by Adobe of a  shareholder
rights plan  adopted on July 24, 1990,  and amended  July 1, 2000.  No shares of
Adobe Series A Preferred Stock are currently outstanding.

Ownership of and Transactions in Accelio Securities

As of March 5, 2002,  neither  Adobe nor  Acquisition  Entity  owned any Accelio
Common Shares.

Consideration

The  total  consideration  to  be  provided  to  Shareholders  pursuant  to  the
Arrangement  will be in the form of Adobe  Shares.  Such Adobe  Shares have been
reserved in full and it is a condition  to the closing of the  Arrangement  that
the Adobe Shares to be issued in connection with the Arrangement be approved for
listing (subject to notice of issuance) on Nasdaq.

Absence of Agreements or Other Business Relationships between Adobe and Accelio

Except as otherwise  disclosed in this Circular,  Adobe has not entered into any
agreements of any nature with Accelio  which are in force or effect,  whether in
whole or in  part,  or  maintained  any  material  business  relationships  with
Accelio.

Antitakeover  Effects of  Provisions  of Adobe  Articles  and Adobe  By-laws and
Delaware Corporate Law

     Adobe Articles and Adobe By-laws

     The Adobe Articles and the Adobe By-laws  contain  certain  provisions that
are  intended to enhance the  likelihood  of  continuity  and  stability  in the
composition  of  Adobe's  board of  directors  and which may have the  effect of
delaying,  deferring,  or  preventing a future  takeover or change in control of
Adobe unless such  takeover or change in control is approved by Adobe's board of
directors.

     The Adobe Articles provide that all shareholder actions must be effected at
a duly  called  annual or special  meeting  and may not be  effected  by written
consent.  The Adobe  Articles  and the Adobe  By-laws  provide  that,  except as
otherwise  required by law,  special  meetings of the  shareholders  can only be
called by the Chairman of Adobe's  board of  directors,  the President of Adobe,
the Adobe board of directors or  shareholders  holding  shares in the  aggregate
entitled to cast not less than 10% of the votes at such  meeting.  In  addition,
the Adobe Articles and the Adobe By-laws  establish an advance notice  procedure
for   shareholder   proposals  to  be  brought   before  an  annual  meeting  of
shareholders,  including proposed nominations of persons for election to Adobe's
board  of  directors.  Shareholders  at an  annual  meeting  may  only  consider
proposals or  nominations  specified in the notice of meeting or brought  before
the  meeting  by or at the  direction  of  Adobe's  board of  directors  or by a
shareholder  who was a shareholder of record on the record date for the meeting,
who is  entitled to vote at the meeting  and who has  delivered  timely  written
notice in proper form to Adobe's  Secretary  of the  shareholder's  intention to
bring such business before the meeting.

     Moreover, subject to the rights of the holders of any outstanding series of
preferred stock, the Adobe Articles  authorise only the Adobe board of directors
to fill vacancies,  including  newly created  directorships.  Accordingly,  this
provision could prevent a shareholder from obtaining majority  representation on
the Adobe board of directors by enlarging the board of directors and filling the
new directorships with its own nominees.

     The authorised but unissued Adobe Shares and Preferred Shares are available
for future issuance without shareholder approval. These additional shares may be
utilised for a variety of corporate purposes,  including future public offerings
to raise additional capital, corporate acquisitions and employee benefit

                                       56
<PAGE>

plans. The existence of authorised but unissued Adobe Shares and Adobe Preferred
Shares could render more difficult or discourage an attempt to obtain control of
Adobe by means of a proxy contest, tender offer, merger or otherwise.

     Furthermore,  the  Adobe  Articles  and the  Adobe  By-laws  provide  for a
classified  board.  Specifically,  Adobe  currently has a  nine-member  board of
directors  that is  divided  into  two  classes  (Class  I and  Class  II)  with
alternating two-year terms. There are five Class I directors, who will be up for
election in 2002,  and four Class II  directors,  who will be up for election in
2003. The  classification  of the board has the effect of requiring at least two
annual  stockholder  meetings,  instead of one,  to  replace a  majority  of the
members of the Adobe board of directors.

     The foregoing  provisions  of the Adobe  Articles and the Adobe By-laws are
intended  to  enhance  the   likelihood  of  continuity  and  stability  in  the
composition  of Adobe's  board of directors  and in the policies  formulated  by
Adobe's board of directors and to discourage certain types of transactions which
may involve an actual or threatened  change of control of Adobe. Such provisions
are designed to reduce the vulnerability of Adobe to an unsolicited  acquisition
proposal and, accordingly,  could discourage potential acquisition proposals and
could delay or prevent a change in control of Adobe.  Such  provisions  are also
intended to  discourage  certain  tactics  that may be used in proxy  fights but
could, however, have the effect of discouraging others from making tender offers
for Adobe's shares,  consequently,  may also inhibit  fluctuations in the market
price of Adobe's  shares that could  result  from  actual or  rumoured  takeover
attempts. These provisions may also have the effect of preventing changes in the
management of Adobe.

     Effect of Delaware Antitakeover Statute

     Adobe is subject to the  provisions of Section 203 of the Delaware  General
Corporation Law, as amended from time to time. Section 203 generally prohibits a
publicly-held  Delaware  corporation  from engaging in a "business  combination"
with an  "interested  stockholder"  for a period of three years from the date of
the transaction in which the person became an interested stockholder, unless the
interested  stockholder  attained  such status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business  combination"  includes mergers,  asset sales and other transactions
resulting in a financial benefit to the interested  stockholder.  Generally,  an
"interested  stockholder"  is a person who,  together with his or its affiliates
and  associates,  owns,  or  within  three  years  did  own,  15% or more of the
corporation's   voting  stock.   This  statute  could   prohibit  or  delay  the
accomplishment  of mergers or other takeover or change in control  attempts with
respect to Adobe and, accordingly, may discourage attempts to acquire Adobe.

Management's  Discussion  and  Analysis  of  Financial  Position  and Results of
Operations

For the Management's  Discussion and Analysis of Financial  Position and Results
of Operations of Adobe for the fiscal years ended November 30, 2001 and December
1, 2000, see Appendix F attached to this Circular.

Options to Purchase Adobe Shares

The following table contains information  regarding the options to acquire Adobe
Shares granted by Adobe that were outstanding as of March 5, 2002.

                                       57

<PAGE>

<TABLE>
<CAPTION>
                                        Number of                                    Market Price on
                                      Adobe Shares          Exercise Price            Date of Grant
Option Holder                         Under Option              (U.S.$)                  (U.S.$)            Expiration Date

--------------------------------     ----------------    ----------------------    ---------------------    -------------------
<S>                                  <C>                  <C>                      <C>                      <C>

Current and Past Directors            11,023,384           $8.45 - $78.88            $8.45 - $78.88         Sept 23, 2003 -
and Executive Officers of                                                                                     Dec 18, 2011
Adobe (18)

Current and Past Directors             2,854,085           $3.66 - $81.50            $3.66 - $81.50         Sept 24, 2002 -
and Executive Officers of                                                                                     Nov 02, 2009
Adobe Subsidiaries (21)

Current and Past Employees of         41,393,948           $2.56 - $83.19            $2.56 - $83.19         June 01, 2002 -
Adobe (2,393)                                                                                                 Feb 01, 2010

Current and Past Employees of          4,945,031           $3.38 - $81.50            $3.38 - $81.50          May 11, 2003 -
Adobe Subsidiaries (623)                                                                                      Feb 01, 2010

</TABLE>

                                       58
<PAGE>

Prior Sales of Adobe Shares

The following Adobe Shares have been issued by Adobe in the past 12 months:

<TABLE>
<CAPTION>
                                                                             Price Range per Adobe Share
                                                                                      High/Low
Type of Transaction                        Number of Adobe Shares                      (U.S.$)
-----------------------------------     -----------------------------     ----------------------------------
<S>                                     <C>                               <C>

Employee Stock Purchase Program                   737,216                            39.72/26.39

Stock Option Program                             5,127,432                           35.69/1.64

Restricted Stock Plan                              41,300                                N/A

</TABLE>

Principal Holders of Adobe Shares

For information  regarding the principal  holders of Adobe Shares as of February
19, 2002, see Appendix G to this Circular.

Indebtedness of Directors and Senior Officers of Adobe

For the indebtedness of directors and senior officers of Adobe during the fiscal
year ended November 30, 2001, see Appendix F to this Circular.

Information Concerning the Acquisition Entity

Adobe  is the  limited  partner  of  Acquisition  Entity.  Acquisition  Entity's
registered office address is: Adobe Systems  International  Limited Partnership,
Ernst and Young  Corporate  Centre,  Suite  204,  P.O.  Box  1383,  Bay  Street,
Bridgetown,  Barbados.  The  general  partner  of  Acquisition  Entity  is Adobe
International,  Inc.,  a  Delaware  corporation  that is a direct  wholly  owned
subsidiary of Adobe and was  incorporated  on 09/17/99.  The  registered  office
address of Acquisition  Entity's  general  partner is: c/o KPMG, P.O. Box 448GT,
Genesis  Bldg.,  Georgetown,  Grand  Cayman.  The  directors and officers of the
general partner of Acquisition Entity are as follows:  James Briody - President,
Treasurer  and Assistant  Secretary;  Guillermo  Diaz de Leon - Vice  President;
Digby Horner - Vice President; and Christine Csubak - Secretary.

                                       59
<PAGE>

                         INFORMATION RELATING TO ACCELIO

Corporate Structure

Accelio was incorporated as Jorag Computer Systems Ltd.  pursuant to the CBCA on
June 10,  1982.  By Articles of Amendment  dated  September  28,  1982,  Accelio
changed  its name to  Indigo  Software  Ltd.  By  Articles  of  Amendment  dated
September 30, 1991, Accelio changed its name to JetForm Corporation. By Articles
of  Amendment  dated  September  13,  2001,  Accelio  adopted its current  name.
Accelio's  registered  head and  principal  office is located  at 560  Rochester
Street, Ottawa, Ontario, K1S 5K2.

Below is a chart showing the  intercorporate  relationships  between Accelio and
its material subsidiaries for the fiscal year ended April 30, 2001.




                                [CHART OMITTED]




Description of the Business

Accelio  develops  software  solutions that extend and accelerate  core business
processes. Accelio solutions enable companies and governments to lower operating
costs, increase revenues and reduce cycle times. Accelio's core strengths are in
intelligent  data capture with Extensible  Mark-up Language ("XML") based forms,
business process integration and presentation of high fidelity,  customer-facing
documents.

Accelio  offers  scaleable   e-business   solutions  for  enterprises  to  adopt
contemporary  business models.  Accelio solutions are comprised of a combination
of  software  products  and  associated  implementation  and  support  services.
Accelio's  product  lines  have been  designed  and  developed  with a  modular,
open-systems  architecture  and support many  industry  standard  interfaces  to
e-mail,   groupware,   Internet/intranet   and  business  application  software.
Accelio's  products are sold  individually or in  combination.  The products are
priced  to  accommodate  various  customer  situations  based on the  number  of
licensed users and the combination of products and services to be provided.

Accelio  customers  include the  Australian  Department  of  Defence,  Microsoft
Corporation,  Axel  Springer  Verlag  AG,  Fidelity  Employer  Services  Company
("FESCO"),  Nationwide  Building Society,  Prudential Real Estate and Relocation
Services,  SAFECO,  U.S. Army Reserve,  National Guard,  GMAC Insurance  Online,
Dresdner Bank,  HealthAxis,  U.S. Army,  Ericsson Business Consulting - Sverige,
State of North  Carolina,  Reliant  Energy,  PSA Peugeot  Citroen,  SNCF,  Human
Resources  Development Canada,  Gras-Savoye,  Agribank FCB, Chase Manhattan Bank
and Dresdner Bank AG.

Accelio's   process   integration,   document   presentment   and  data  capture
technologies  provide  organizations  with the  capability  to adopt  e-business
models,  giving them a  competitive  advantage in their  respective  industries.
Accelio's  solutions are complemented by its  professional  services team, which
facilitates  product  implementation,  and its  customer  services  team,  which
provides ongoing technical support.

                                       60
<PAGE>

Accelio's   business  process   solutions   integrate   people,   processes  and
applications  in  e-business.  Accelio's  solutions  are  an  XML-based  process
automation solution that contains rich work management capabilities and provides
companies  with the  capability  to deliver their  services and products  across
multiple media, including the Internet,  wireless,  mobile, e-mail and agents or
brokers.

Accelio's  e-document  presentment  solutions  allow  organizations  to  produce
professional  quality  document  output from their  line-of-business,  legacy or
enterprise resource planning (ERP)  applications.  The data generated from these
business  applications  is  merged  with  an  electronic  document  template  to
dynamically  generate  documents  in multiple  formats for  delivery to multiple
devices, including print, e-mail, fax and the Web.

Accelio is an  industry  leader in  intelligent  data  capture  using  XML-based
electronic  forms.  Graphical  XML-based  design tools create compliant forms to
capture data. Accelio provides support for multiple  platforms,  whether the end
user is filling out a form at a desktop,  on a disconnected  handheld  device or
even on a mobile device with Internet access.  Accelio's intelligent e-forms are
robust in their ability to capture and validate data,  perform  calculations  or
access data throughout the organization.  Accelio's e-form solutions can be used
within  governments  and  businesses  wishing to improve  efficiencies  and save
costs.  According to Gartner  Group,  80 per cent of all business  documents are
forms. These forms may need to be signed, participate in a workflow or be stored
in a document management system.

Documents Incorporated by Reference

The following  documents of Accelio,  filed with the  securities  commissions or
similar  authorities  in certain of the  provinces of Canada,  are  specifically
incorporated by reference in and form an integral part of this Circular:

(a)  the management  proxy circular of Accelio dated July 23, 2001 in connection
     with the annual general meeting of Shareholders held on September 12, 2001,
     other  than the  sections  entitled:  "Corporate  Governance";  "Report  on
     Executive Compensation"; and "Performance Graph";

(b)  the interim  unaudited  financial  statements  of Accelio as at and for the
     period ended January 31, 2002;

(c)  the audited comparative  consolidated  financial  statements for the fiscal
     year  ended  April  30,  2001,  together  with the  notes  thereto  and the
     auditor's report thereon;

(d)  the  annual  report of Accelio  on Form 10-K  dated  June 16,  2001,  which
     includes  Accelio's  management's  discussion  and  analysis  of  operating
     results and financial position for the year ended April 30, 2001;

(e)  Accelio's  management's  discussion  and analysis of operating  results and
     financial position for the year ended April 30, 2001;

(f)  Accelio's  management's  discussion  and analysis of operating  results and
     financial position for the interim period ended January 31, 2002; and

(g)  material change reports dated November 7, 2001 and February 1, 2002.

Any  documents  of the type  referred to above and any material  change  reports
(excluding  confidential  material  change  reports)  filed  by  Accelio  with a
securities  commission or any similar authority in Canada subsequent to the date
of this Circular and prior to the termination of the offering hereunder shall be
deemed to be incorporated by reference into this Circular.

Any statement  contained  herein or in a document  incorporated  or deemed to be
incorporated  by reference  herein shall be deemed to be modified or  superseded
for purposes of this Circular to the extent that a statement  contained  herein,
or in  any  other  subsequently  filed  document  which  is or is  deemed  to be
incorporated by reference  herein,  modifies or supersedes such prior statement.
The modifying or  superseding  statement  need not state that it has modified or
superseded a prior  statement or include any other  information set forth in the
document  that  it  modifies  or  supersedes.  The  making  of  a  modifying  or
superseding statement shall not be deemed an admission for any purposes that the
modified or superseded statement, when made, constituted a misrepresentation, an
untrue statement of a material fact or an omission to state a material fact that
is required to be stated

                                       61
<PAGE>

or  that is  necessary  to make a  statement  not  misleading  in  light  of the
circumstances  in which it was made.  Any  statement  so modified or  superseded
shall not be deemed,  except as so modified or superseded,  to constitute a part
of this Circular.

Copies of the  documents  incorporated  herein by  reference  may be obtained on
request without charge from the Corporate  Secretary of Accelio,  Ms. Deborah L.
Weinstein,  LaBarge Weinstein,  333 Preston Street, 11th floor, Ottawa, Ontario,
K1S 5N4, telephone:  (613) 231-3000.  For the purpose of the Province of Quebec,
this Circular  contains  information to be completed by consulting the permanent
information  record. A copy of the permanent  information record may be obtained
from the Corporate Secretary of Accelio at the above-mentioned address and phone
number.

Statement of Executive Compensation

     Summary Compensation Table

     The following table sets forth the total  compensation in Canadian  dollars
paid for the fiscal years ended April 30, 2001, 2000 and 1999 to the individuals
who  occupied  the  office of Chief  Executive  Officer  and the four other most
highly  compensated  executive officers of Accelio who were serving as executive
officers at the end of the last completed fiscal year:

<TABLE>
<CAPTION>

                                                                                          Long Term
                                                                                         Compensation
                                                            Annual Compensation (1)          Awards
                                                          --------------------------    ----------------
                                                                                          Number of
                                            Fiscal                                        Common
                                            Year                                          Shares under
Name and                                    Ended                                         Options           Other
Principal Position                          April 30        Salary          Bonus         granted(2)     Compensation
----------------------------------------   -----------    -----------   --------------  -------------   --------------
<S>                                        <C>            <C>           <C>             <C>             <C>

A. Kevin Francis                              2001         $447,413       $49,406          200,000            -
President and Chief Executive                 2000                -             -          600,000            -
Officer                                       1999                -             -                -            -

Glen Doody(3)(6)                              2001         $200,261       $25,562          200,000            -
Senior Vice President and General             2000                -             -                -            -
Manager, North American Solutions Group       1999                -             -                -            -

Declan Kelly(3)                               2001         $273,527       $73,257           40,000            -
Senior Vice President and General             2000         $180,946      $144,856           10,000            -
Manager, European Solutions Group             1999         $126,537       $31,992            9,560            -

Jeffrey McMullen(4)                           2001         $191,250       $20,369           40,000            -
Senior Vice President Finance &               2000         $170,000             -                -            -
Chief Financial Officer                       1999         $145,000        $7,500           25,300            -

David Antila(5)                               2001         $172,500       $41,812           20,000            -
Vice President and General Manager            2000         $156,067       $36,750            7,060            -
e-Process Business Unit                       1999         $174,840             -           33,333            -
_________________

(1)  All references to "$" in this section are to Canadian dollars.
(2)  Represents number of Options granted in the fiscal year.
(3)  The  compensation  of Mr. Antila,  Mr. Doody and Mr. Kelly has been  converted from U.S.  dollars or Irish
     Punts using the average exchange rates for the year.
(4)  Mr. McMullen resigned from his employment with Accelio effective as of November 15, 2001.
(5)  Mr Antila's employment with Accelio was terminated on May 25, 2001.
(6)  Mr. Doody resigned from his employment with Accelio effective as of October 31, 2001.
</TABLE>

                                       62
<PAGE>


     2001 Stock Option Grants

The following  table sets forth the Options granted during the fiscal year ended
April 30,  2001 to each of  Accelio's  executive  officers  named in the Summary
Compensation Table:

<TABLE>
<CAPTION>
                         Shares           % of total
                       underlying      Options granted         Exercise       Market Price per
                        Options        to employees in        Price per        Share on Date
                      Granted (1)        Fiscal 2001        Share (U.S.$)     of Grant (U.S.$)       Expiry
                     --------------    ----------------     -------------     ----------------     -----------
<S>                  <C>               <C>                  <C>               <C>                  <C>

Name
-----

A. Kevin Francis        200,000             15.4%               $ 5.50             $ 5.50         September 6, 2004
Glen Doody              200,000             15.4%               $ 4.50             $ 4.50           July 31, 2004
Declan Kelly             40,000              3.1%               $ 3.50             $ 3.50         October 11, 2004
Jeffrey McMullen         40,000              3.1%               $ 3.50             $ 3.50         October 11, 2004
David Antila             20,000              1.5%               $ 3.50             $ 3.50         October 11, 2004
__________
(1)  Options are exercisable  starting 6 months after the date of grant,  with one-sixth of the shares becoming
     exercisable  at that time and with an additional  one-sixth of the Option shares  becoming  exercisable on
     each  successive  six month  period,  with full  vesting  occurring  on the third  anniversary  date.  All
     Options expire on the fourth anniversary date.
</TABLE>

     2001 Aggregate Option Exercises and Year-end Option Values

     The following table sets forth the number of shares acquired on exercise of
Options and the  aggregate  gains  realised  on exercise  during the fiscal year
ended  April 30,  2001 by  Accelio's  executive  officers  named in the  Summary
Compensation  Table.  The table also sets forth the number of shares  covered by
exercisable and unexercisable  Options held by such executives on April 30, 2001
and the  aggregate  gains that would have been  realised had these  Options been
exercised  on April 30,  2001,  even  though the  exercisable  Options  were not
exercised,  and the unexercisable Options could not have been exercised on April
30, 2001.

<TABLE>
<CAPTION>

                        Shares Acquired                     Number of Shares Covered          Value of Unexercised
                          on Exercise                        by Unexercised Options           in-the-money Options
                             during           Value            at April 30, 2001              at April 30, 2001(1)
                                                            -----------------------------------------------------------
Name                      Fiscal 2001       Realized      Exercisable    Unexercisable     Exercisable    Unexercisable
-----                   ----------------    --------      -----------    -------------     -----------    -------------
<S>                     <C>                 <C>          <C>             <C>               <C>            <C>

A. Kevin Francis               -                -             233,334          566,666          -               -
Glen Doody                     -                -              33,334          166,666          -               -
Declan Kelly                   -                -              26,042           41,518          -               -
Jeffrey McMullen               -                -              54,287           41,765          -               -
David Antila                   -                -              42,375           19,018          -               -
__________
(1)  Options are  in-the-money  if the market  value of the shares  covered  thereby is greater than the Option
     exercise  price.  At April 30, 2001 none of the named  executive  officers  had Options  exercisable  at a
     price less than the closing price on  Nasdaq of U.S.$2.20 per share.

</TABLE>

Employment Agreements and Termination of Employment

During the fiscal year ended April 30, 2001,  Accelio  entered  into  employment
agreements with A. Kevin Francis, Glen Doody, Declan Kelly, Jeffrey McMullen and
David Antila.

Mr. Antila's employment  agreement entitles him to 12 months notice in the event
that Accelio  terminates  his  employment  other than for cause,  disability  or
death, or in Accelio's sole discretion it may provide Mr. Antila with a lump sum
payment in lieu of such notice. If Mr. Antila terminates his employment for good

                                       63
<PAGE>


reason (i.e. a material  change in his  responsibilities,  a failure to maintain
his or her  compensation  and benefits,  a material  breach by Accelio under the
employment agreement, or the failure by Accelio to have the employment agreement
assumed by any successor to Accelio),  Mr. Antila will be entitled to a lump sum
payment in lieu of 12 months  notice.  Mr.  Antila will  remain  entitled to any
incentive compensation, bonus, profit sharing or other similar compensatory plan
applicable  to him  at the  date  of  termination,  pro-rated  to  the  date  of
termination.  Accelio  must  take all  necessary  steps so that all  Options  to
acquire  Common  Shares  held by Mr.  Antila  on the date of  termination  shall
continue to vest during the period of notice and Mr.  Antila  shall have 30 days
from the end of that notice  period to exercise  all such  vested  Options.  Mr.
Antila will also be provided with job relocation  counselling services of a firm
acceptable  to the  Corporation  for an amount  not to exceed  Cdn.$15,000.  Mr.
Antila is entitled to terminate his employment  within 90 days of the closing of
a change of control of Accelio,  by giving 30 days notice to Accelio if there is
any  adverse  material  change  in his  position,  duties,  responsibilities  or
compensation  in the 90 day  period  following  the  change of control or if the
person then in control of Accelio  advises in writing that it does not intend to
honour  the  terms of Mr.  Antila's  employment  agreement.  In the event of any
termination  of Mr.  Antila's  employment,  if Mr.  Antila  obtains  alternative
employment during a termination  notice period,  Accelio shall pay him an amount
equal to 50% of the total  annual  salary  remaining  payable  during the notice
period.  Mr.  Antila's  non-compete  period is 12 months  following  the date of
termination.

The employment agreements with Messrs.  Francis,  Doody, Kelly and McMullen were
amended as of October 1, 2001 and, except as noted below, contain  substantially
similar provisions.

Each employment agreement provides that the executive shall devote his full time
and attention to performing his duties for Accelio.  In the event of termination
by the  executive  following  an  adverse  material  change  in the  executive's
position,  responsibilities  or material  reduction  in  compensation  including
salary,  bonus,  benefits or any other form of remuneration (any one of which is
an "Adverse  Material  Change in  Position") in the 180-day  period  following a
change in  control  of  Accelio,  or by Accelio  for other  than  cause,  death,
disability or retirement, Accelio will pay salary and vacation pay earned to the
date of  termination  as well as providing a  continuance  of salary and benefit
entitlements  for a period  of  notice  set out in each  executive's  employment
agreement (the "Salary Continuance Period").  Except as noted below, all granted
Options remain  outstanding  and continue to vest during the Salary  Continuance
Period. All Options held vest automatically in the event of a change of control.

In the event  that Mr.  Francis  is  terminated  for other  than  cause,  death,
disability or retirement, Mr. Francis is entitled to a Salary Continuance Period
of 18 months.  Mr.  Francis'  target  incentives  will be paid up to the date of
termination,  but he will not be entitled to such  incentives  during the Salary
Continuance  Period. His non-compete term is for one (1) year. In the event that
Mr. Francis  terminates his employment  following an Adverse  Material Change in
Position  within  180 days  following  a change in  control  of  Accelio,  he is
entitled to a Salary Continuance Period of 24 months if Accelio is performing at
a minimum of 80% of the Board approved business plan, or 18 months if Accelio is
not then  achieving  such  targets.  He is also entitled  during the  applicable
Salary Continuance Period to continuation of target incentives at 100% of target
compensation.  If Mr. Francis obtains  alternative  employment during the Salary
Continuance  Period, Mr. Francis will receive a lump sum payment equal to 50% of
the  balance  of the target  incentives  payable  during the Salary  Continuance
Period.  Mr.  Francis'  entitlements  to salary  continuance  during  the Salary
Continuance Period continues despite his obtaining alternative employment.

The Salary  Continuance  Period for Mr. Kelly,  in the event of termination  for
other  than  cause,  death,  disability  or  retirement,  is 6  months  with  an
additional 1 month for each full year of service  beyond 6 years to a maximum of
12 months. The Salary Continuance Period for Messrs. Doody and McMullen,  in the
event of termination for other than cause, death, disability or retirement, is 6
months with an additional 2 months for each full year of service  beyond 3 years
to a maximum  of 12 months.  Target  incentives  for  Messrs.  Kelly,  Doody and
McMullen  (the  "Executives")  are paid up to the date of  termination,  but not
during the Salary Continuance Period. In the event that the terminated Executive
obtains alternative  employment during the Salary Continuance Period, the salary
continuance obligations of Accelio cease.

In the event that an Executive  terminates his  employment  following an Adverse
Material  Change in  Position  within 180 days  following a change in control of
Accelio,  such Executive will be entitled to a Salary  Continuance  Period of 12
months,   including   continuation  of  target  incentives  at  100%  of  target
compensation. If such Executive obtains alternative employment during the Salary
Continuance Period, the salary and target incentive continuance  obligations end
and the Executive will be entitled to receive a lump

                                       64
<PAGE>


sum payment equal to 50% of the balance of salary and target incentives  payable
during the  Salary  Continuance  Period.  The  non-compete  term for each of the
Executives is for one (1) year.

Effective as of May 25, 2001,  Accelio terminated Mr. Antila's  employment.  Mr.
Doody  resigned  from his  employment  with Accelio  effective as of October 31,
2001. Mr.  McMullen  resigned from his employment  with Accelio  effective as of
November 15, 2001.

Compensation of Directors

The Board of  Directors  has  determined  for the year ended April 30, 2001 that
each non-employee director be paid an annual fee of U.S.$10,000, plus U.S.$1,000
per meeting  attended in person and U.S.$500 per meeting  attended by telephone.
In addition, the Chairman of the Board and the Chairman of each committee of the
Board will be paid an additional U.S.$5,000 annually.  Each of the Board members
was granted 10,000 Options.  Options are exercisable starting 6 months after the
date of grant,  with one-sixth of the shares  becoming  exercisable at that time
and with an additional  one-sixth of the Option shares  becoming  exercisable on
each  successive  six month  period,  with full  vesting  occurring on the third
anniversary  date.  All Options expire on the fourth  anniversary  date of their
grant.  Non-employee  directors are  reimbursed  for their  reasonable  expenses
incurred in attending Board and committee meetings.

Indebtedness of Directors and Senior Officers

Since the beginning of Accelio's last completed financial year, Accelio issued a
U.S.$110,000  loan to the  Chief  Executive  Officer  as part of his  employment
agreement to purchase 25,500 Common Shares. Such Common Shares have been pledged
as collateral for the loan. The loan will be forgiven and the share certificates
released in the event that Mr. Francis is still the Chief  Executive  Officer of
Accelio on May 15, 2003, or in the event of a change of control of Accelio.

Interests of Management and Others in Material Transactions

Except as otherwise  disclosed herein or set forth below, no director,  officer,
or 5% holder  of  Common  Shares,  or  immediate  family  member,  associate  or
affiliate  thereof,  had any  material  interest,  direct  or  indirect,  in any
transaction  since the  commencement of Accelio's last completed  fiscal year or
has any  material  interest,  direct or indirect,  in any proposed  transaction,
which has materially affected or would materially affect Accelio.

In considering the recommendation of the Accelio Board of Directors with respect
to the  Transaction,  Shareholders  should  be aware  that  certain  members  of
Accelio's  management  and the Board of  Directors  have  certain  interests  in
connection with the  Transaction,  including  those referred to below,  that may
present them with actual or potential  conflicts of interest in connection  with
the  Transaction.  The  Board of  Directors  is aware  of  these  interests  and
considered them along with the other matters described above in  "Recommendation
of the Board of Directors"'.

     Compensation Arrangements

     In addition to the terms of the  employment  agreements  for the  executive
officers described above, certain  Optionholders with  out-of-the-money  Options
have  employment  agreements  with Accelio which provide that,  upon a change in
control of Accelio,  their  Options  will be  exercisable  for a period of up to
three years  following  such a change in control.  Adobe and Accelio have agreed
that Accelio will pay a cash amount not to exceed approximately  U.S.$500,000 in
the aggregate to such  Optionholders  in  consideration of the surrender of such
rights.

     Employee Benefits and Employee Terminations

     Adobe has  agreed  that it will  continue  to  provide  certain  current or
substitute employee health and welfare benefits for all employees of Accelio who
continue  employment  with Adobe or Accelio after the Effective  Time on certain
terms and conditions.  Adobe has also agreed that in the event of an involuntary
termination  of any Accelio  employees  (other than for cause) during the period
commencing  the  Effective  Time and ending on the date six  months  thereafter,
Accelio shall offer  severance to each such employee equal to one months' salary
for each full year of service  with  Accelio,  up to a maximum of the greater of
(a) twelve months' salary or (b) the amount required to be paid under applicable
law.

                                       65
<PAGE>

     Indemnification of Directors and Officers of Accelio

     The Acquisition  Agreement  provides that all rights to  indemnification as
provided in  indemnification  agreements  between  Accelio and such  indemnified
parties,  shall survive the  Arrangement  until the expiration of the applicable
limitation period with respect to claim against such indemnified parties.  Adobe
has also agreed to indemnify  Accelio's  directors  and officers with respect to
any and all claims  arising  against  them in  connection  with the  Transaction
contemplated  by the  Plan of  Arrangement.  In  addition,  from and  after  the
Effective  Time until the third  anniversary  of the Effective  Time,  Adobe and
Accelio will maintain director's and officer's liability insurance substantially
similar to Accelio's existing policy.

Accelio Rights Plan

The Accelio  Rights Plan was adopted at a meeting of the Board of Directors held
on June 25, 1998.  The  provisions  of the Accelio  Rights Plan are set out in a
shareholder  rights plan agreement (the "Rights  Agreement") dated and effective
as of June 25, 1998,  between  Accelio and CIBC Mellon  Trust  Company as Rights
Agent,  as amended.  All  capitalized  terms used without  definition  under the
heading  "Accelio Rights Plan" have the meanings  ascribed to them in the Rights
Agreement.

The Accelio Rights Plan was originally approved by the Shareholders at Accelio's
annual and special  meeting of  Shareholders  held on September 9, 1998.  At the
annual and special  meeting of  Shareholders  held on September  12,  2001,  the
Shareholders approved the continued existence of, and certain amendments to, the
Accelio Rights Plan.

The  Board  determined  that  having  the  Accelio  Rights  Plan was in the best
interests of Accelio and its Shareholders.  The objectives of the Accelio Rights
Plan are to give adequate time for Shareholders to properly assess a bid without
undue pressure,  for the Board to consider  value-enhancing  alternatives and to
allow  competing bids to emerge.  In addition,  the Accelio Rights Plan has been
designed to provide  Shareholders  with equal  treatment in a bid for control of
Accelio.

The following summary of the Accelio Rights Plan is qualified in its entirety by
the full text of the Rights Agreement, copies of which will be made available to
Shareholders of record upon request made to Accelio  Corporation,  560 Rochester
Street, Ottawa, Ontario, K1S 5K2, Attention: Secretary.

The Accelio  Rights Plan  utilizes the concept of a Permitted Bid (as defined in
the Rights  Agreement) to ensure that a person seeking control of Accelio allows
Shareholders and the Board of Directors  sufficient time to evaluate the bid. If
a person makes a take-over bid that is a Permitted  Bid, the Accelio Rights Plan
will not affect the  transaction in any respect.  If an acquiror  decides not to
meet the  requirements  of a Permitted Bid, the Board of Directors may,  through
the  opportunity  to  negotiate  with the  acquiror,  be able to  influence  the
fairness of the terms of the bid.  The Accelio  Rights Plan  defines a Permitted
Bid as a take-over bid which,  among other things, is made to all the holders of
the voting shares of Accelio,  contains an unqualified  condition that no voting
shares be taken up or paid for  pursuant  to the  take-over  bid prior to a date
which is not less  than 45 days  following  the  date of the  take-over  bid and
provides  for the  acquisition  from  holders of not less than 50 percent of the
outstanding  Common  Shares  determined  at the date of first take-up or payment
under the take-over bid. The Accelio Rights Plan will  substantially  dilute the
holdings  of a person or group that seeks to  acquire  control of Accelio  other
than by means of a Permitted Bid.

In  connection  with the  Acquisition  Agreement,  at its meeting on January 31,
2002, the Board of Directors approved an amendment to Accelio Rights Plan, which
provides that, among other things, the provisions of the Accelio Rights Plan are
inapplicable  to  the  Arrangement  and  the  transactions  contemplated  by the
Acquisition Agreement, and the rights under the Accelio Rights Plan shall expire
on the Effective Date. See "The Transaction - Rights Plan".

                                       66
<PAGE>

                       COMPARISON OF SHAREHOLDERS' RIGHTS

Accelio was  incorporated  under the CBCA and,  accordingly,  is governed by the
laws  of  Canada,  the  Accelio  Articles  and the  Accelio  By-laws.  Adobe  is
incorporated  under the DGLC and,  accordingly,  is  governed by the laws of the
State of Delaware,  the Adobe Articles and the Adobe By-laws.  In the event that
the Arrangement is  consummated,  holders of Common Shares at the Effective Time
will exchange their Common Shares for Adobe Shares.

While the rights and privileges of shareholders of a Delaware  corporation  are,
in many instances,  comparable to those of  shareholders of a CBCA  corporation,
there  are  certain  differences.  The  following  is  a  summary  of  the  most
significant  differences in shareholder  rights.  These  differences  arise from
differences  between the DGLC and the CBCA,  and between the Adobe  Articles and
Adobe  By-laws and Accelio  Articles  and Accelio  By-laws.  This summary is not
intended to be complete  and is  qualified  in its  entirety by reference to the
DGLC, the CBCA and the governing corporate instruments of Adobe and Accelio. For
a  description  of the  respective  rights of the holders of Adobe  Shares,  see
"Information Relating to Adobe - Description of Share Capital".

Votes Required for Extraordinary Transactions

Under  the  CBCA,  certain  extraordinary  corporate  actions,  such as  certain
amalgamations  (other than with a direct or indirect  wholly-owned  subsidiary),
continuances,  and sales,  leases or exchanges of all or  substantially  all the
property of a  corporation  other than in the ordinary  course of business,  and
other extraordinary corporate actions such as liquidations, dissolutions and (if
ordered  by a court)  arrangements,  are  required  to be  approved  by  special
resolution. A special resolution is a resolution passed at a meeting by not less
than 66 2/3% of the votes cast by the  shareholders  who voted in respect of the
resolution.  In certain cases, a special  resolution to approve an extraordinary
corporate action is also required to be approved  separately by the holders of a
class or series  of  shares,  including  in  certain  cases a class or series of
shares not otherwise carrying voting rights.

The DGCL requires the affirmative  vote of a majority of the  outstanding  stock
entitled to vote thereon to authorize any merger, consolidation,  dissolution or
sale  of  substantially  all of the  assets  of a  corporation,  except  that no
authorizing  stockholder vote is required of a corporation surviving a merger if
(a) such  corporation's  certificate  of  incorporation  is not  amended  in any
respect by the merger,  (b) each share of stock of such corporation  outstanding
immediately  prior to the  effective  date of the  merger  will be an  identical
outstanding or treasury share of the surviving  corporation  after the effective
date of the merger and (c) the number of shares to be issued in the merger  does
not exceed 20 percent of such corporation's outstanding common stock immediately
prior to the  effective  date of the  merger.  Stockholder  approval is also not
required  under  the  DGCL  for  mergers  or  consolidations  in  which a parent
corporation  merges or consolidates  with a subsidiary of which it owns at least
90 percent of the  outstanding  shares of each class of stock.  Finally,  unless
required  by its  certificate  of  incorporation,  stockholder  approval  is not
required  under  the DGCL for a  corporation  to merge  with or into a direct or
indirect  wholly-owned  subsidiary of a holding company (as defined in the DGCL)
in certain circumstances.

Matters such as take-over  bids,  issuer bids,  or  self-tenders,  going private
transactions and transactions with directors,  officers, significant stockholder
officers, significant stockholders and other related parties to which Adobe is a
party  will be  subject to  regulation  under  United  States  securities  laws,
regulations and policies.

Cumulative Voting

Under the CBCA, unless a corporation's  articles provide otherwise,  there is no
cumulative  voting for the  election  of  directors.  Accelio's  articles do not
provide for cumulative voting.

Under  Delaware  law,  cumulative  voting in the  election of  directors  is not
mandatory,  and for  cumulative  voting  to be  effective  it must be  expressly
provided for in the  certificate of  incorporation.  In an election of directors
under  cumulative  voting,  each  share of  stock  normally  having  one vote is
entitled to a number of votes equal to the number of directors to be elected.  A
stockholder may then cast all such votes for a single  candidate or may allocate
them among as many candidates as the stockholder may choose.  Without cumulative
voting,  the holders of a majority  of the shares of stock  present at an annual
meeting  would have the power to elect all the  directors  to be elected at that
meeting,  and no person  could be elected  without  the  support of holders of a
majority of the shares of stock.  The Adobe  Articles  and Adobe  By-laws do not
currently provide for cumulative voting.

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Calling a Shareholders' Meeting

Under the  CBCA,  the  holders  of not less  than 5% of the  issued  shares of a
corporation  that carry the right to vote at the  meeting  sought to be held may
requisition  the directors to call a meeting of  shareholders.  Upon meeting the
technical  requirements  set out in the CBCA for making such a requisition,  the
directors of the  corporation  must call a meeting of  shareholders.  If they do
not, the shareholders who made the requisition may call the meeting.

Under the DGCL,  special meetings of the shareholders may be called by the board
of  directors  or by any  other  person  as may  be  authorized  to do so by the
certificate  of  incorporation  or the  bylaws  of the  corporation.  The  Adobe
Articles  and  the  Adobe  By-laws  provide  that a  special  meeting  of  Adobe
shareholders  may only be called by the Chairman of Adobe's  board of directors,
the  President of Adobe,  the Adobe board of directors or  shareholders  holding
shares in the aggregate  entitled to cast not less than 10% of the votes at such
meeting.

Shareholder Consent in Lieu of Meeting

Under  the CBCA,  shareholder  action  without  a  meeting  may only be taken by
written  resolution  signed by all  shareholders  who would be  entitled to vote
thereon at a meeting.

Under the DGCL,  unless otherwise  provided in the certificate of incorporation,
any  action  required  to be taken or which may be taken at an annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing is signed by all the registered  holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize  such action at a meeting at which all shares of stock
entitled to vote were present and voted. The Adobe Articles and Adobe By-laws do
not permit  Adobe  shareholders  to take action by written  consent in lieu of a
meeting.

Shareholder Quorum

Under the CBCA,  a  corporation's  by-laws may specify the number of shares with
voting rights attached thereto which shall be present,  or represented by proxy,
in order to  constitute  a quorum for the  transaction  of any  business  at any
meeting of the shareholders.

Under the DGCL, a  corporation's  certificate  of  incorporation  or by-laws may
specify the number of shares of stock or the voting power that shall be present,
or represented by proxy,  in order to constitute a quorum for the transaction of
any business at any meeting of the stockholders.  In no event, however,  shall a
quorum  consist of less than 1/3 of the shares  entitled  to vote at the meeting
except that,  where a separate vote by a class or series of classes or series is
required,  a quorum shall consist of no less than one-third  (1/3) of the shares
of such class or series or classes or series.  The Adobe By-laws  provide that a
quorum  will  consist of the  holders of a majority  of the  outstanding  shares
entitled to vote, whether represented by person or by proxy.

Advance Notice Provisions for Shareholder Nominations and Proposals

Under the CBCA,  proposals  with respect to the  nomination  of  candidates  for
election to the board of directors may be made at or before any annual  meetings
of the  corporation.  With respect to shareholder  proposals,  under the CBCA, a
shareholder  or persons who have the support of persons  who, in the  aggregate,
and including or not including the person that submits the proposal, holding, as
of the day on which  the  shareholder  submits  a  proposal  (in  registered  or
beneficial  form)  in  excess  of the  lesser  of 1% of the  outstanding  voting
securities of the corporation and voting  securities of the corporation equal in
value to Cdn.$2,000 (such value to be determined at the close of business on the
preceding  business day) for at least 6  consecutive  months  immediately  prior
thereto may submit notice to a corporation  of any matter that such  shareholder
or shareholders propose to raise at a meeting of shareholders, which notice must
be provided not later than 90 days prior to the anniversary of the last previous
annual  meeting of  shareholders.  Such a proposal  may not be with respect to a
personal  claim or redress a personal  grievance  against the  corporation,  its
directors,  officers or other security  holders and must relate in a significant
way to the  business  or  affairs  of the  corporation  but may not be abused to
secure  publicity.  If a notice complies with the  requirements of the CBCA, the
corporation  is  required  to  include  a  statement  relating  thereto  and not
exceeding  500 words in the  management  information  circular  for the relevant
meeting  of  shareholders.  If a

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<PAGE>

corporation  refuses to accept a notice that otherwise complies with the related
provisions of the CBCA, the shareholder or shareholders who provided such notice
and proposal may apply to a court to make any order that it seems fit, including
restraining  the holding of a meeting at which it was sought to bring forth such
a proposal.

The Adobe  By-laws allow  stockholders  to nominate  candidates  for election to
Adobe's  board of directors or propose  other  business at any annual or special
stockholders  meeting.  To be  properly  brought  before an  annual  or  special
meeting,  nominations for the election of directors or other business  proposals
must be:

o    specified in the notice of meeting, or any supplemental material,  given by
     or at the direction of the board of directors;

o    otherwise properly brought before the meeting by or at the direction of the
     board of directors; or

o    otherwise properly brought before the meeting by a stockholder of record of
     Adobe who was a stockholder  of record at the time the notice was given and
     who was entitled to vote at the meeting.

However,  nominations  and proposals  may only be made by a stockholder  who has
given  timely  written  notice to the  secretary  of Adobe  before the annual or
special stockholders  meeting.  Under the Adobe By-laws, to be timely, notice of
stockholder nominations or proposals to be made at an annual stockholder meeting
must, with certain limited exceptions, be received by the secretary of Adobe not
less than 120 days in advance of the first  anniversary of the date that Adobe's
proxy  statement  was  released to Adobe  stockholders  in  connection  with the
previous  year's  annual  meeting of  stockholders.  The Adobe  By-laws  further
provide  that for notice of a special  stockholder  meeting  to be  timely,  the
stockholder  proposal or nomination to be presented at a special meeting must be
delivered on or prior to the time of delivery of the  stockholder's  request for
the  establishment  of a  record  date  and  must  contain  certain  information
specified by the Adobe By-laws.

Amendment to Governing Documents

Under the CBCA, any amendment to a  corporation's  articles  generally  requires
approval by special  resolution which is a resolution passed by not less than 66
2/3% of the votes cast by shareholders  entitled to vote on the resolution.  The
CBCA  provides  that  unless the  articles  or by-laws  otherwise  provide,  the
directors  may, by resolution,  make,  amend or repeal any by-laws that regulate
the business or affairs of a  corporation.  Where the directors  make,  amend or
repeal a bylaw, they are required under the CBCA to submit the bylaw,  amendment
or repeal to the  shareholders  at the next  meeting  of  shareholders,  and the
shareholders may confirm,  reject or amend the bylaw,  amendment or repeal by an
ordinary  resolution,  which is a  resolution  passed by a majority of the votes
cast by shareholders who voted in respect of the resolution. If the directors of
a  corporation  do  not  submit  a  bylaw,  an  amendment  or a  repeal  to  the
shareholders at the next meeting of shareholders, the bylaw, amendment or repeal
will cease to be  effective,  and no  subsequent  resolution of the directors to
adopt, amend or repeal a bylaw having  substantially the same purpose and effect
is effective until it is confirmed or confirmed as amended by the shareholders.

The DGCL requires a vote of the corporation's board of directors followed by the
affirmative  vote of a majority of the outstanding  stock of each class entitled
to vote for any amendment to the certificate of  incorporation.  If an amendment
alters the powers, preferences or special rights of a particular class or series
of stock so as to affect them adversely, that class or series shall be given the
power  to  vote as a  class  notwithstanding  the  absence  of any  specifically
enumerated power in the certificate of incorporation.  If an amendment adversely
affects the rights or preferences of a particular class or series of stock, that
class or series must approve the amendment as a class even if the certificate of
incorporation  does not provide that right.  The DGCL also states that the power
to  adopt,  amend  or  repeal  the  by-laws  of a  corporation  shall  be in the
stockholders   entitlement  to  vote,  provided  that  the  corporation  in  its
certificate of incorporation  may confer such power on the board of directors in
addition to the stockholders.  The Adobe Articles expressly  authorize the board
of directors to make, alter, amend or repeal the Adobe By-laws.  Note that under
the  DGCL  this  authorization  of  the  board  of  directors  does  not  divest
stockholders  of the power  nor  limit  the  power to amend or repeal  the Adobe
By-laws.

Dissenters' or Appraisal Rights

The CBCA provides that shareholders of a corporation governed thereunder who are
entitled to vote on certain matters are entitled to exercise  dissent rights and
to be paid the fair value of their shares in connection therewith. The CBCA does
not  distinguish  for this  purpose  between  listed and unlisted  shares.

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<PAGE>

Such matters include:  (i) any amalgamation with another corporation (other than
with certain  affiliated  corporations);  (ii) an amendment to the corporation's
articles to add, change or remove any provisions restricting the issue, transfer
or ownership of shares; (iii) an amendment to the corporation's articles to add,
change or remove  any  restriction  upon the  business  or  businesses  that the
corporation  may  carry  on;  (iv) a  continuance  under  the  laws  of  another
jurisdiction;  (v) a sale,  lease or  exchange of all or  substantially  all the
property of the corporation other than in the ordinary course of business;  (vi)
a court  order  permitting  a  shareholder  to  dissent  in  connection  with an
application to the court for an order  approving an arrangement  proposed by the
corporation;  or (vii) certain amendments to the articles of a corporation which
require a separate  class or series vote,  provided  that a  shareholder  is not
entitled to dissent if an amendment to the articles is effected by a court order
approving a reorganization or by a court order made in connection with an action
for an oppression  remedy.  In addition,  recent  amendments to the CBCA provide
dissent rights on going-private and squeeze-out transactions.

Under the DGCL,  registered  holders  of shares of any class or series  have the
right, in certain  circumstances,  to dissent from a merger or  consolidation of
the  corporation  by demanding  payment in cash for the shares equal to the fair
value  (excluding any  appreciation  or  depreciation  as a  consequence,  or in
expectation, of the transaction) of such shares, as determined by agreement with
the corporation or by an independent appraiser appointed by a court in an action
timely brought by the corporation or the dissenters.  The DGCL grants dissenters
appraisal  rights only in the case of mergers or  consolidations  and not in the
case of a sale  or  transfer  of  assets  or a  purchase  of  assets  for  stock
regardless of the number of shares being issued.  Further,  no appraisal  rights
are available for shares of any class or series listed on a national  securities
exchange or designated as a national  market system  security on an  interdealer
quotation  system by Nasdaq or held of record by more than  2,000  stockholders,
unless the  agreement  of merger or  consolidation  converts  such  shares  into
anything other than (a) stock of the surviving corporation, (b) stock of another
corporation  which  is  either  listed  on a  national  securities  exchange  or
designated as a national  market  system  security on an  interdealer  quotation
system by Nasdaq or held of record by more than 2,000 stockholders,  (c) cash in
lieu of fractional  shares,  or (d) some  combination of the above. In addition,
dissenter's rights are not available for any shares of the surviving corporation
if the merger did not  require  the vote of the  stockholders  of the  surviving
corporation.

Oppression Remedy

The CBCA provides an  oppression  remedy that enables a court to make any order,
both  interim and final,  to rectify the matters  complained  of if the court is
satisfied upon application by a complainant (as defined below) that: (i) any act
or  omission  of the  corporation  or an  affiliate  effects a result;  (ii) the
business or affairs of the  corporation or an affiliate are or have been carried
on or  conducted  in a manner;  or (iii)  the  powers  of the  directors  of the
corporation  or an affiliate  are or have been  exercised  in a manner,  that is
oppressive or unfairly  prejudicial to or that unfairly  disregards the interest
of any  security  holder,  creditor,  director or  officer.  A  complainant  may
include:  (a) a present  or former  registered  holder  or  beneficial  owner of
securities of a corporation  or any of its  affiliates;  (b) a present or former
officer  or  director  of the  corporation  or any of its  affiliates;  (c)  the
director  under the CBCA;  and/or (d) any other person who in the  discretion of
the court is a proper person to make such application.

The oppression  remedy  provides the court with an extremely  broad and flexible
jurisdiction to intervene in corporate affairs to protect shareholders and other
complainants.  While conduct which is in breach of fiduciary duties of directors
or that is contrary to the legal right of a complainant  will  normally  trigger
the court's  jurisdiction  under the  oppression  remedy,  the  exercise of that
jurisdiction  does not  depend  on a  finding  of a  breach  of such  legal  and
equitable  rights.  Furthermore,  the court may order a  corporation  to pay the
interim  expenses  of a  complainant  seeking  an  oppression  remedy,  but  the
complainant may be held accountable for such interim costs on final  disposition
of the complaint (as in the case of a derivative action). The complainant is not
required to give security for costs in an oppression action.

The DGCL does not provide for an oppression remedy. However, the DGCL provides a
variety of legal and  equitable  remedies to a  corporation's  stockholders  for
improper acts or omissions of a corporation,  its officers and directors.  Under
the DGCL, only  stockholders  can bring an action alleging a breach of fiduciary
duty by the directors of a corporation.

Derivative Action

Under  the  CBCA,  a  complainant  may  apply to the court for leave to bring an
action in the name of and on behalf of a corporation  or any  subsidiary,  or to
intervene in an existing action to which any such

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<PAGE>

corporation or subsidiary is a party, for the purpose of prosecuting,  defending
or  discontinuing  the action on behalf of the corporation or subsidiary.  Under
the CBCA, no action may be brought and no  intervention in an action may be made
unless  the court is  satisfied  that the  complainant  has given  notice to the
directors of the corporation or its subsidiary of the complainant's intention to
apply to the  court  not less  than  fourteen  (14)  days  before  bringing  the
application,  or otherwise as ordered by the court and (i) the  directors of the
corporation  or its subsidiary do not bring,  diligently  prosecute or defend or
discontinue the action;  (ii) the complainant is acting in good faith; and (iii)
it appears to be in the interests of the  corporation or its subsidiary that the
action be brought,  prosecuted,  defended or  discontinued.  Under the CBCA, the
court in a derivative action may make any order it thinks fit including, without
limitation,  (i) an order  authorizing  the  complainant  or any other person to
control the  conduct of the  action,  (ii) an order  giving  directions  for the
conduct of the action, (iii) an order directing that any amount adjudged payable
by a defendant  in the action  shall be paid,  in whole or in part,  directly to
former and present security holders of the corporation or its subsidiary instead
of to the  corporation  or its  subsidiary,  and  (iv) an  order  requiring  the
corporation or its  subsidiary to pay reasonable  legal fees and any other costs
reasonably  incurred  by the  complainant  in  connection  with the  action.  In
addition,  under the CBCA, a court may order a corporation  or its subsidiary to
pay the  complainant's  interim  costs,  including  reasonable  legal  fees  and
disbursements.  Although the complainant may be held accountable for the interim
costs on final disposition of the complaint, it is not required to give security
for costs in a derivative action.

Under the DGCL,  derivative  actions may be brought in Delaware by a stockholder
on behalf of, and for the benefit of, the corporation.  The DGCL provides that a
stockholder  must aver in the complaint  that he or she was a stockholder of the
corporation at the time of the  transaction of which he or she complains or that
such stockholder's stock thereafter devolved upon such stockholders by operation
of law. A  stockholder  may not sue  derivatively  unless he or she first  makes
demand on the  corporation  that it bring suit and such demand has been refused,
unless it is shown that such demand would have been futile.

Director Qualifications

At least 25% of the  directors  of a  corporation  governed  by the CBCA must be
resident  Canadians,  unless:  (a) the  corporation is engaged in an activity in
Canada in a prescribed  business  sector;  (b) the  corporation is a constrained
share corporation or is otherwise  required by law to maintain a specified level
of  Canadian  ownership  or  control;  or (c) the  corporation  has less  than 4
directors  (in which case at least one  director  must be a resident  Canadian).
However, if a corporation earns in Canada, directly or through its subsidiaries,
less than five  percent of its gross  revenues,  not more than  one-third of the
directors of the corporation are required to be resident Canadians.

The CBCA also requires that a public  corporation (a  distributing  corporation,
any of the issued  securities of which remain  outstanding  and are held by more
than one person) shall have not fewer than three directors, at least two of whom
are not officers or employees of the corporation or its affiliates.

Delaware  law does not  have  comparable  requirements,  but a  corporation  can
prescribe qualifications for directors under its certificate of incorporation or
bylaws. The Adobe Articles do not contain any such prescribed qualifications.

Fiduciary Duties of Directors

Directors of corporations governed by the CBCA have fiduciary obligations to the
corporation.  Under the CBCA,  directors of a CBCA corporation must act honestly
and in good faith with a view to the best interests of the corporation, and must
exercise the care,  diligence and skill that a reasonably  prudent  person would
exercise  in  comparable  circumstances.  A director is not liable for breach of
this duty of care  under the CBCA if he  relies in good  faith on (i)  financial
statements  of  the  corporation  represented  to  him  by  an  officer  of  the
corporation or in a written report of the auditor of the  corporation  fairly to
reflect the financial condition of the corporation, or (ii) a report of a person
whose profession lends credibility to a statement made by him.

Under the DGCL,  the duty of care requires that the directors act in an informed
and  deliberative  manner and to inform  themselves,  prior to making a business
decision, of all material information  reasonably available to them. The duty of
loyalty  may  be  summarized  as the  duty  to act in  good  faith,  not  out of
self-interest,  and in a manner that the directors  reasonably  believe to be in
the best interests of the stockholders.

Removal of Directors

Under the CBCA,  provided  that articles of the  corporation  do not provide for
cumulative voting,

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<PAGE>

shareholders  of a corporation  may by ordinary  resolution  passed at a special
meeting remove any director or directors  from office.  If holders of a class or
series of shares  have the  exclusive  right to elect one or more  directors,  a
director  elected  by them may only be removed by an  ordinary  resolution  at a
meeting of the shareholders of that class or series.

If all of the directors have resigned or have been removed without  replacement,
a person who manages or supervises the management of the business and affairs of
the  corporation  is deemed to be a director,  unless the person who manages the
business or affairs of the  corporation is (a) an officer under the direction or
control of a shareholder  or other person,  (b) a lawyer,  notary  accountant or
other  professional who participates in the management of the corporation solely
for providing  professional  services or (c) a trustee in bankruptcy,  receiver,
receiver-manager  or secured  creditor who participates in the management of the
corporation or exercises control over its property solely for the purpose of the
realization of security or the  administration of the bankrupt's  estate, in the
case of a trustee in bankruptcy.

Adobe's  directors are generally  elected to hold office until the expiration of
the term for which they are elected and until  their  successors  have been duly
elected and  qualified.  However,  under the DGCL and the Adobe By-laws  (unless
otherwise restricted by statute, the Adobe Articles or an amendment to the Adobe
By-laws),  any director or the entire board of directors  may be removed with or
without  cause by the holders of a majority of the shares then  entitled to vote
at an election of  directors.  Furthermore,  the Adobe  By-laws  provide that no
reduction  of the  authorized  number  of  directors  would  have the  effect of
removing any director prior to the expiration of that director's term in office.

Filling Vacancies on the Board of Directors

Under the CBCA, subject to the articles of the corporation,  a vacancy among the
directors may be filled at a meeting of shareholders or by a quorum of directors
except when the vacancy results from an increase in the number or minimum number
of  directors  or from a failure to elect the  appropriate  number of  directors
required by the articles.  Each director appointed holds office until his or her
successor  is elected at the next  meeting of  shareholders  of the  corporation
unless his or her office is vacated earlier.

Under the Adobe By-laws,  any vacancy arising from the resignation or death of a
director or increase in the number of  directors  may be filled by a majority of
the  remaining  members  of the  board of  directors.  This is true  even if the
majority is less than a quorum, or if there is a sole remaining  director.  Each
director  elected in this manner  holds  office  until his or her  successor  is
elected at the next  succeeding  annual meeting of  stockholders or at a special
meeting called for that purpose.  A vacancy created by the removal of a director
may be filled only by the approval of the stockholders.

Indemnification of Officers and Directors

Under the CBCA Accelio may, and pursuant to Accelio's  By-Laws,  Accelio  shall,
indemnify a director or  officer,  a former  director or officer or a person who
acts or acted at the corporation's  request as a director or officer, or another
person acting in similar  capacity,  of another  entity (each an  "Indemnifiable
Person"),  against all costs, charges and expenses,  including an amount paid to
settle an action or satisfy a  judgment,  reasonably  incurred  by him or her in
respect of any civil,  criminal or administrative  action or proceeding to which
he or she is made a party by  reason  of  being or  having  been a  director  or
officer of Accelio or such body  corporation,  if: (a) he or she acted  honestly
and in good faith with a view to the best  interests of Accelio;  and (b) in the
case of a criminal or administrative  action or proceeding that is enforced by a
monetary penalty, he or she had reasonable grounds for believing that his or her
conduct was lawful. A corporation may with the approval of a court, indemnify an
Indemnifiable  Person or advance monies, in respect of or by or on behalf of the
corporation  or other  entity to procure a judgment in its favour,  to which the
individual  is made  party  because  of the  individual's  association  with the
corporation or other entity if the individual fulfils the requirements under (a)
and (b),  above.  An  Indemnifiable  Person is  entitled to  indemnity  from the
corporation  if he or she  was  not  judged  by the  court  or  other  competent
authority  to have  committed  any  fault or  omitted  to do  anything  that the
individual  ought to have done and fulfilled the  conditions  set out in (a) and
(b), above.

The DGCL permits a corporation  to indemnify its present or former  directors or
officers  made a party,  or  threatened  to be made a party to any  third  party
proceeding  by  reason of the fact that  such  person  is or was a  director  or
officer  of the  corporation,  against  expenses  (including  attorney's  fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in  connection  with such  action,  suit or  proceeding,  if such
person: (i) acted in good faith and in a manner such person reasonably  believed
to be in or not opposed to the best interests of the corporation; and, (ii) with
respect to any criminal action or proceeding, had no reason to believe that such
conduct was unlawful.

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In a derivative  action  under the DGCL,  or an action by or in the right of the
corporation,  the  corporation is permitted to indemnify  directors and officers
against expenses actually and reasonably incurred by them in connection with the
defence or  settlement of an action or suit if they acted in good faith and in a
manner  that  they  reasonably  believed  to be in or not  opposed  to the  best
interests of the corporation.  However, in such a case, no indemnification shall
be made if the person is adjudged liable to the corporation,  unless and only to
the  extent  that the  court in  which  the  action  or suit was  brought  shall
determine upon application  that the defendant  directors or officers are fairly
and reasonably entitled to indemnity for such expenses despite such adjudication
of liability.

The DGCL allows the corporation to advance  expenses before the resolution of an
action, if the person agrees to repay any such amount advanced if they are later
determined  not to be entitled to  indemnification.  The CBCA does not expressly
provide for such advance payment.

The Adobe By-laws provide for  indemnification  of directors and officers to the
fullest extent authorized by the DGCL.

Director Liability

The DGCL  provides that the charter of the  corporation  may include a provision
which limits or eliminates the liability of directors to the  corporation or its
stockholders  for monetary  damages for breach of fiduciary  duty as a director,
provided  such  liability  does  not  arise  from  certain  prescribed  conduct,
including  acts or omissions  not in good faith or which  involve  international
misconduct  or a knowing  violation of law,  breach of the duty of loyalty,  the
payment  of  unlawful  dividends  or  expenditure  of funds for  unlawful  stock
purchases or redemptions  or  transactions  from which such director  derived an
improper personal benefit.  The Adobe Articles contain a provision  limiting the
liability of its directors to the fullest extent permitted by the DGCL.

The CBCA does not permit any such limitation of a director's liability.

Certain Anti-Takeover Provisions

The DGCL prohibits,  in certain circumstances,  a "business combination" between
the  corporation  and an  "interested  shareholder"  within  three  years of the
shareholder  becoming an "interested  shareholder." An "interested  shareholder"
is,  except as limited in  certain  circumstances,  a holder  who,  directly  or
indirectly, (i) controls 15% or more of the outstanding voting stock, or (ii) is
an  affiliate  of the  corporation,  and  was  the  owner  of 15% or more of the
outstanding  voting  stock at any time  within the prior  three-year  period.  A
"business   combination"   includes,  as  defined  in  the  DGCL,  a  merger  or
consolidation,  a sale or other disposition of assets having an aggregate market
value  of 10% or more  of the  consolidated  assets  of the  corporation  or the
aggregate  market value of the outstanding  stock of the corporation and certain
transactions  that would  increase the  interested  shareholder's  proportionate
share of ownership of the corporation.

This  DGCL  provision  lists  several  situations  in which  it does not  apply,
including where either (i) the business  combination or the  transaction  making
the shareholder an interested shareholder is approved by the corporation's board
of directors  prior to the date the  interested  shareholder  acquired  such 15%
interest;  (ii) after the  completion  of the  transaction  making the person an
interested  shareholder,  the interested  shareholder  owned at least 85% of the
outstanding voting stock of the corporation;  (iii) the business  combination is
approved  by a  majority  of  the  board  of  directors  and  the  disinterested
shareholders  owning 66 2/3% of the outstanding  votes entitled to be cast; (iv)
the corporation does not have a class of voting stock that is either listed on a
national  securities  exchange,  authorized for quotation on Nasdaq,  or held of
record by more than 2,000  stockholders,  unless  resulting from action taken by
the  interested  stockholder  or from a transaction in which a person becomes an
interested stockholder; or (v) the corporation has opted out of this provision.

The CBCA does not  contain a  comparable  provision  with  respect  to  business
combinations.  However,  policies  of  certain  Canadian  securities  regulatory
authorities,  including  Rule 61-501  (Insider  Bid,  Issuer Bid,  Going Private
Transactions  and Related Party  Transactions)  of the OSC and Policy  Statement
Q-27 of the Commission  Mobilieres du Quebec ("CVMQ"),  contain  requirements in
connection  with  related  party  transactions,  subject to certain  materiality
thresholds.  A related party transaction  means,  generally,  any transaction by
which an issuer,  directly  or  indirectly,  acquires or  transfers  an asset or
acquires or issues treasury  securities or assumes or transfers a liability from
or to,  as the  case  may be, a  related  party  by any  means in any one or any
combination of transactions. "Related party" includes directors, senior officers
and holders of at least 10% of the voting securities of the issuer.

                                       73
<PAGE>


OSC Rule 61-501 and Policy  Statement  Q-27 require more detailed  disclosure in
the proxy material sent to security  holders in connection  with a related party
transaction.   Subject  to  certain  exceptions,   these  policies  require  the
preparation  of a formal  valuation of the subject  matter of the related  party
transaction and any non-cash  consideration offered therefor,  that the minority
shareholders  of the issuer  separately  approve  the  transaction,  by either a
simple  majority or 66 2/3% of the votes cast,  depending on the  circumstances,
and more detailed  disclosure in the proxy material sent to security  holders in
connection with a related party transaction including a copy of the valuation or
a summary of it. OSC Rule 61-501 and Policy  Statement  Q-27 also require  that,
subject to certain  exceptions,  an issuer  shall not engage in a related  party
transaction  unless minority approval for the related party transaction has been
obtained.

Access to Corporate Records

The CBCA provides that shareholders and creditors of a corporation, their agents
and  legal   representatives  and  the  Director  may  examine  certain  of  the
corporation's  records during usual  business hours and take extracts  therefrom
free of charge and persons  other than those listed above may review the records
of the business  during usual business  hours and take extracts  therefrom for a
reasonable  fee.  In  addition,  any  person is  entitled  to obtain the list of
registered shareholders of a "distributing corporation" (i.e. a reporting issuer
or public company) upon compliance with certain requirements.

Under  the  DGCL,  any  stockholder  of a  corporation,  their  agents  or legal
representatives  may make a  written  demand  to  examine  the  records  of that
corporation.  Such a demand to examine  the  corporation's  records  must have a
proper  purpose,  be sworn under oath,  and directed to that  corporation at its
principal  place of  business or its  registered  office in  Delaware.  A proper
purpose is one that is reasonably related to that stockholder's  interest in the
corporation as a stockholder.

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<PAGE>


                          DISSENTING SHAREHOLDER RIGHTS

The  following  description  of the right of  Dissenting  Shareholders  is not a
comprehensive  statement  of  the  procedures  to be  followed  by a  Dissenting
Shareholder  who seeks  payment of the fair value of such  Shareholder's  Common
Shares and is qualified in its entirety by reference to the full text of Section
190 of the CBCA (as modified by the Interim Order and the Plan of  Arrangement),
a copy of which is attached as Appendix H to this  Circular.  A Shareholder  who
intends to exercise such  Shareholder's  right of dissent and  appraisal  should
seek legal advice to ensure that they comply with the  provisions of the Interim
Order and the Plan of Arrangement.  Failure to comply with the provisions of the
Interim Order and to adhere to the procedures  established therein may result in
the loss of all rights thereunder.

A  Registered  Shareholder  is  entitled,  in  addition  to any other  right the
Registered Shareholder may have, to dissent and to be paid the fair value of the
Common  Shares  held by such  Registered  Shareholder  in  respect  of which the
Registered  Shareholder  dissents,  determined  as of the close of  business  in
Ottawa, Ontario on the last business day before the day on which the Arrangement
Resolution is adopted.

Under the Interim Order,  Dissenting Shareholders must send to Accelio a written
objection to the  Arrangement  Resolution  (a "Dissent  Notice"),  which Dissent
Notice must be received  by  Accelio's  corporate  counsel,  LaBarge  Weinstein,
Attention:  Ms. Deborah L. Weinstein,  333 Preston Street,  11th Floor,  Ottawa,
Ontario,  K1S 5N4 by 5:00 p.m. (Ottawa time) on Friday, April 5, 2002 or by 5:00
p.m.  on the last  business  day  which is not less  than 48 hours  prior to any
adjournment of the Meeting.  It is important that  Shareholders  strictly comply
with this requirement that is different from the statutory dissent provisions of
the CBCA that would  permit a Dissent  Notice to be  provided at or prior to the
Meeting.

The sending of a Dissent Notice does not deprive a Registered Shareholder of the
right to vote on the  Arrangement  Resolution;  however,  the CBCA provides,  in
effect, that a vote in favour of the Arrangement  Resolution or the execution of
a proxy which is so voted  constitutes a waiver of the right to dissent and will
deprive the  Registered  Shareholder  of further rights under Section 190 of the
CBCA. A vote against the Arrangement Resolution, an abstention, or the execution
of a proxy to vote  against the  Arrangement  Resolution  does not  constitute a
Dissent Notice, but a Shareholder need not vote his or her Common Shares against
the  Arrangement  Resolution  in order to dissent.  Similarly,  if a Shareholder
revokes a proxy  conferring  authority  on the proxy holder to vote in favour of
the  Arrangement  Resolution,  such  revocation  will not  constitute  a Dissent
Notice;  however,  any proxy granted by a Registered  Shareholder who intends to
dissent,  other than a proxy that instructs the proxy holder to vote against the
Arrangement  Resolution,  should be validly revoked (see "Information Concerning
the Meeting - Revocation  of Proxies") in order to prevent the proxy holder from
voting such Common Shares in favour of the  Arrangement  Resolution  and thereby
causing the Shareholder to forfeit their right to dissent.

A Shareholder may only dissent with respect to all of the shares of a class held
by the Shareholder on behalf of any one beneficial  owner and registered in such
Shareholder's  name. A Dissent  Notice must be executed by or for the Registered
Shareholder,  fully and  correctly,  as such  Shareholder's  name appears on the
Shareholder's security certificates. If the Common Shares are owned of record in
a fiduciary capacity, such as by a trustee,  guardian or custodian,  the Dissent
Notice  should be made in that  capacity,  and if the Common Shares are owned of
record by more than one  person,  as in a joint  tenancy or a tenancy in common,
the Dissent Notice should be given by or for all owners of record. An authorized
agent,  including one or more joint owners, may execute the Dissent Notice for a
Registered  Shareholder;  however,  such  agent  must  identify  the  Registered
Shareholder or Shareholders,  and expressly disclose in such Dissent Notice that
the agent is acting as agent for the Registered Shareholder or Shareholders.

Beneficial  Shareholders  who wish to  dissent  should  be aware  that  only the
registered owner of such shares is entitled to dissent.

In many  cases,  shares  beneficially  owned  by a  Beneficial  Shareholder  are
registered  either:  (i) in the  name of an  intermediary  that  the  Beneficial
Shareholder deals with in respect of the shares (such as banks, trust companies,
securities dealers and brokers,  trustees or administrators of self-administered
registered  retirement  savings  plans,   registered  retirement  income  funds,
registered  education  savings plans and similar plans, and their nominees);  or
(ii) in the name of a clearing agency (such as CDS) of which the intermediary is
a participant.  Accordingly,  a Beneficial  Shareholder  will not be entitled to
exercise  the right to dissent  under  Section 190  directly  (unless the Common
Shares are  re-registered  in the Beneficial

                                       75
<PAGE>

Shareholder's  name). A Beneficial  Shareholder who wishes to exercise the right
to dissent should immediately  contact the intermediary and either: (i) instruct
the   intermediary   to  exercise  the  right  to  dissent  on  the   Beneficial
Shareholder's  behalf (which, if the shares are registered in the name of CDS or
other clearing  agency,  would require that the share first be  re-registered in
the name of the intermediary);  or (ii) instruct the intermediary to re-register
the  shares  in the  name of the  Beneficial  Shareholder,  in  which  case  the
Beneficial Shareholder would have to exercise the right to dissent directly.

A Registered Shareholder such as a broker who holds Common Shares as nominee for
Beneficial  Shareholders,  some of whom wish to dissent,  must exercise  dissent
rights on behalf of such  Beneficial  Shareholders  with  respect  to the Common
Shares held for such Beneficial  Shareholders.  In such case, the Dissent Notice
should set forth the number of Common Shares covered by it.

Within ten days  after the  passing of the  Arrangement  Resolution,  Accelio is
required to notify in writing each  Shareholder  who has filed a Dissent  Notice
(each,  a  "Dissenting  Shareholder")  and has  not  voted  for the  Arrangement
Resolution  or  withdrawn  the  Dissenting  Shareholder's  objection,  that  the
Arrangement  Resolution has been adopted. A Dissenting Shareholder shall, within
20 days after he receives notice of adoption of the  Arrangement  Resolution or,
if he does not  receive  such  notice,  within 20 days after he learns  that the
Arrangement  Resolution  has been adopted,  send to Accelio a written  notice (a
"Demand for Payment") containing the Dissenting  Shareholder's name and address,
the number of Common  Shares in respect of which he  dissents,  and a demand for
payment of the fair value of such shares.  In accordance with the Interim Order,
such  payment  shall  be made  by  Accelio  or the  Acquisition  Entity,  as the
Acquisition  Entity may elect (prior to the Effective  Time) as  contemplated by
Section 190 of the CBCA, and as modified by the Plan of  Arrangement.  Within 30
days  after  sending  the  Dissenting  Shareholder's  Demand  for  Payment,  the
Dissenting  Shareholder  shall send the certificates  representing the shares in
respect of which he  dissents  to Accelio.  Accelio  shall  endorse on the share
certificates  notice that the holder thereof is a Dissenting  Shareholder  under
Section 190 of the CBCA and shall forthwith return the share certificates to the
Dissenting Shareholder. If a Dissenting Shareholder fails to forward this Demand
for Payment and send the Dissenting  Shareholder's share certificates within the
time required,  the Dissenting  Shareholder  has no rights to make a claim under
Section 190 of the CBCA.

After sending a Demand for Payment, a Dissenting  Shareholder ceases to have any
rights as a holder of the shares in respect of which the Dissenting  Shareholder
has  dissented  other than the right to be paid the fair value of such shares by
Accelio or the  Acquisition  Entity as determined  under Section 190 of the CBCA
and as  modified  by  the  Plan  of  Arrangement,  unless:  (i)  the  Dissenting
Shareholder  withdraws the Demand for Payment  before a written offer to pay (an
"Offer  to  Pay")  is  made;  (ii) a  timely  Offer  to Pay is not  made  to the
Dissenting  Shareholder and the Dissenting  Shareholder withdraws the Demand for
Payment; or (iii) the directors of Accelio revoke the Arrangement Resolution, in
all of which cases the  Dissenting  Shareholder's  rights as a  Shareholder  are
reinstated.

Not later  than seven  days  after the later of the  Effective  Date and the day
Accelio receives the Demand for Payment, Accelio, on its own behalf or on behalf
of the Acquisition  Entity,  shall send to each  Dissenting  Shareholder who has
sent a Demand  for  Payment  an Offer to Pay for the  shares  of the  Dissenting
Shareholder  in an amount  considered  by the  directors  of Accelio  and/or the
Acquisition  Entity,  to be the fair value  thereof,  accompanied by a statement
showing how the fair value was determined,  or a notification  that it is unable
to pay the Dissenting  Shareholders  for their shares because the corporation is
or would after the payment be unable to pay its  liabilities as they become due,
or the realizable value of the  corporation's  assets would thereby be less than
the  aggregate  of its  liabilities.  Every  Offer  to Pay  made  to  Dissenting
Shareholders for shares of the same class shall be on the same terms (except for
variance in the payor,  which may be Accelio or the Acquisition  Entity,  at the
election of the  Acquisition  Entity).  The amount  specified in an Offer to Pay
which has been  accepted by a  Dissenting  Shareholder  shall be paid within ten
days of the acceptance by the Dissenting Shareholder of the Offer to Pay, but an
Offer to Pay lapses if Accelio has not received an acceptance  thereof within 30
days after the Offer to Pay has been made.

If an Offer to Pay is not made by Accelio, on its own behalf or on behalf of the
Acquisition Entity, as the case may be, or if a Dissenting  Shareholder fails to
accept an Offer to Pay,  Accelio may, within 50 days after the Effective Date or
within such further  period as the Court may allow,  apply to the Court to fix a
fair  value to be paid by  Accelio  or the  Acquisition  Entity,  for the Common
Shares of any Dissenting Shareholder. If Accelio fails to so apply to the Court,
a Dissenting  Shareholder  may apply to the Court for the same purpose  within a
further  period of 20 days or within such further period as the Court may allow.
A  Dissenting  Shareholder  is not  required to give  security  for costs in any
application to the Court.

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<PAGE>

On making an  application  to the Court,  Accelio shall give to each  Dissenting
Shareholder  who (a) has sent to  Accelio a Demand for  Payment  and (b) has not
accepted  an Offer to Pay,  notice of the date,  place and  consequences  of the
application and of the Dissenting  Shareholder's right to appear and be heard in
person  or by  counsel.  A  similar  notice  shall be  given to each  Dissenting
Shareholder  who,  after the date of such  first  mentioned  notice  and  before
termination  of  the  proceedings   commenced  by  the  application,   satisfies
conditions  (a) and (b)  within  three  days  after the  Dissenting  Shareholder
satisfies such  conditions.  All Dissenting  Shareholders  whose shares have not
been purchased by Adobe or the Acquisition  Entity shall be joined as parties to
any such  application to the Court to fix a fair value and shall be bound by the
decision rendered by the Court in the proceedings commenced by such application.
The Court is  authorized  to determine  whether any other person is a Dissenting
Shareholder who should be joined as a party to such application.

An  application  may be made to the  Court to fix the  value  of the  Dissenting
Shareholder's  Common Shares after the Effective  Date. If an application to the
Court is made by either  Accelio  or a  Dissenting  Shareholder,  Accelio  must,
unless the Court otherwise orders, send to each Dissenting Shareholder a written
offer to pay the  Dissenting  Shareholder  an amount  considered by the Board of
Directors to be the fair value of the Common Shares. The offer, unless the Court
otherwise orders,  will be sent to each Dissenting  Shareholder at least 10 days
before  the date on which the  application  is  returnable,  if  Accelio  is the
applicant,  or  within  10 days  after  Accelio  is  served  with  notice of the
application,  if a Shareholder is the  applicant.  The offer must be made on the
same  terms  (except  for  variance  in the  payor,  which may be Accelio or the
Acquisition  Entity,  at  the  election  of  the  Acquisition  Entity)  to  each
Dissenting  Shareholder  and must be accompanied by a statement  showing how the
fair value was determined.

A Dissenting  Shareholder may enter into an agreement with Accelio, on behalf of
the Acquisition Entity, for the purchase of the Dissenting  Shareholder's Common
Shares by the Acquisition Entity in the amount of Accelio's offer (or otherwise)
at any time before the Court  pronounces  an order  fixing the fair value of the
Common  Shares.  A Dissenting  Shareholder  is not required to give security for
costs in respect of an application  and, except in special  circumstances,  will
not be  required  to pay the  costs  of the  application  or  appraisal.  On the
application,  the Court  will make an order  fixing the fair value of the Common
Shares of all Dissenting Shareholders who are parties to the application, giving
judgment  in that  amount  against  Accelio  and in  favour  of  each  of  those
Dissenting  Shareholders  and fixing the time within which Accelio must pay that
amount to the Dissenting  Shareholders.  The Court may in its discretion allow a
reasonable rate of interest on the amount payable to each Dissenting Shareholder
calculated from the date on which action approved by the resolution is effective
until the date of payment.  The cost of any  application to the Court by Accelio
or a Dissenting  Shareholder  will  generally be in the discretion of the Court,
although if Accelio, on its behalf or on behalf of the Acquisition Entity, fails
to make an Offer to Pay,  then the cost of a  Shareholder  application  is to be
borne by Accelio.

On the  Arrangement  becoming  effective,  or upon the  making  of an  agreement
between Accelio or the Acquisition  Entity and the Dissenting  Shareholder as to
the payment to be made to the Dissenting  Shareholder or upon the  pronouncement
of a court order,  whichever first occurs, the Dissenting Shareholder will cease
to have any  rights as a  Shareholder,  other than the right to be paid the fair
value of the Common  Shares in the  amount  agreed to  between  Accelio  and the
Dissenting  Shareholder  or in the amount of the  judgment,  as the case may be.
Until one of these events occurs, the Dissenting Shareholder may withdraw , such
Shareholder's  dissent, or Accelio may rescind the Arrangement Resolution and in
either  event,  the  dissent  and  appraisal  proceedings  in  respect  of  that
Shareholder will be discontinued.

Under the  Arrangement,  Shareholders who have given a Dissent Notice to Accelio
which remains outstanding on the Effective Date and:

(a)  who are ultimately  entitled to be paid fair value for the Common Shares in
     respect of which they  dissent in  accordance  with the  provisions  of the
     Interim Order and the Plan of Arrangement, whether by order of the Court or
     by  acceptance  of an offer made  pursuant to the Interim  Order,  shall be
     deemed to have transferred such Common Shares to Accelio or the Acquisition
     Entity for  cancellation  on the  Effective  Date and such shares  shall be
     deemed to no longer be issued and outstanding as of the Effective Date;

(b)  who are ultimately not entitled to be paid fair value for the Common Shares
     in  respect  of which  they  dissent,  shall not be, or be  reinstated  as,
     Shareholders but for purposes of receipt of Consideration  shall be treated
     as if they had  participated  in the  Arrangement  on the  same  basis as a
     non-dissenting Shareholder, and, accordingly,  shall be entitled to receive
     the Consideration on the basis set forth in the Arrangement;


                                       77

<PAGE>

provided,  however,  that in no case shall Accelio be required to recognize such
Shareholders as Shareholders after the Effective Date.

The above is only a summary  of the  dissenting  shareholder  provisions  of the
CBCA,  as amended by the Interim  Order and the Plan of  Arrangement,  which are
technical  and  complex.  A  Shareholder  wishing to exercise a right to dissent
should seek  independent  legal advice,  as failure to comply  strictly with the
provisions of the CBCA may prejudice the right of dissent.


                                  LEGAL MATTERS

Certain legal matters in connection with the Arrangement  will be passed upon by
LaBarge Weinstein,  Ottawa,  Ontario and White & Case LLP, New York, New York on
behalf of Accelio.  As at the date of this Circular,  partners and associates of
LaBarge  Weinstein  and  White  &  Case  LLP  owned  beneficially,  directly  or
indirectly, less than 1% of the outstanding Common Shares, respectively. Certain
legal matters in connection with the  Arrangement  will be passed upon by Cooley
Godward LLP, Palo Alto,  California and Aird & Berlis LLP,  Toronto,  Ontario on
behalf of Adobe.  As at the date of this  Circular,  partners and  associates of
Cooley  Godward  LLP and Aird &  Berlis  LLP  owned  beneficially,  directly  or
indirectly, less than 1% of the outstanding Adobe Shares, respectively.


                       ENFORCEABILITY OF CIVIL LIABILITIES

Accelio is a  corporation  incorporated  under the laws of  Canada.  Most of the
directors  and  officers of Accelio,  as well as certain  experts  named in this
Circular,  are  residents  of Canada and all or a  substantial  portion of their
assets and a  substantial  portion of the assets of Accelio are located  outside
the United States.  As a result,  it may be difficult for Shareholders to effect
service  within the United States upon the  directors,  officers and experts who
are not  residents of the United  States or to realize in the United States upon
judgements of courts of the United States  predicated upon civil liability under
United  States  federal   securities  laws.  There  is  some  doubt  as  to  the
enforceability  in Canada against  Accelio or any of its directors,  officers or
experts who are not  residents  of the United  States in original  actions or in
actions for  enforcement of judgements of United States  courts,  of liabilities
predicated solely upon United States federal securities laws.

Adobe is organized  under the laws of the State of Delaware,  United States.  In
addition,  substantial  portions of the assets of Adobe are  located  outside of
Canada.  As a result,  it may be difficult  for the  Shareholders  to realize in
Canada upon judgements  against Adobe obtained in Canadian courts.  In addition,
awards of  punitive  damages in actions  brought in Canada or  elsewhere  may be
unenforceable.


                     AUDITORS, TRANSFER AGENT AND REGISTRAR

The Adobe  Financial  Statements and the  consolidated  financial  statements of
Adobe as of and for the fiscal years ended  November 30, 2001,  December 1, 2000
and  December  3, 1999  have been  audited  by KPMG LLP,  independent  chartered
accountants, as stated in their reports attached to such financial statements.

The consolidated  financial statements of Accelio as of and for the fiscal years
ended April 30, 2001, 2000 and 1999 have been audited by  PricewaterhouseCoopers
LLP, independent chartered  accountants,  as stated in their reports attached to
such financial statements.

The  registrar  and  transfer  agent for the Common  Shares is CIBC Mellon Trust
Company at its principal office in Toronto. The registrar and transfer agent for
the Adobe Shares is Computershare Investor Services, LLC at its principal office
in New York.

                         WHERE YOU CAN FIND INFORMATION

Adobe and Accelio are subject to the informational  requirements of the Exchange
Act and in accordance  therewith  files reports and other  information  with the
SEC. The reports and other  information  filed by Adobe and Accelio with the SEC
can be inspected and copied at the public reference facilities maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington,  D.C. 20549 and at any SEC
Regional  Office.  Copies of such  material also can be obtained from the Public
Reference  Section  of the SEC at

                                       78

<PAGE>

Judiciary Plaza, 450 Fifth Street,  N.W.,  Washington,  D.C. 20549 at prescribed
rates.  Adobe and Accelio  public  filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at www.sec.gov.

Accelio  is  subject  to the  continuous  disclosure  requirements  of  Canadian
securities  legislation  and the TSE.  The  former  type of  information  can be
requested from Micromedia,  20 Victoria Street,  Toronto,  Ontario M5C 2N3 while
the latter  type of material  can be  inspected  at the offices of the TSE,  3rd
Floor, 2 First Canadian Place, 130 King Street West,  Toronto,  Ontario M5X 1J2.
Generally,  such information is also available at the web site maintained by CDS
at www.sedar.com.



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<PAGE>

                   APPROVAL OF THE ACCELIO BOARD OF DIRECTORS


The contents of this Circular and its sending to Shareholders have been approved
by the Board of Directors.



DATED at Ottawa, Ontario this 8th day of March, 2002.



                                        BY ORDER OF THE BOARD OF DIRECTORS

                                        /s/ A. Kevin Francis
                                        -----------------------------------
                                        A. Kevin Francis
                                        President & Chief Executive Officer


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<PAGE>

                                   APPENDIX A

                         FORM OF ARRANGEMENT RESOLUTION

BE IT RESOLVED as a Special Resolution that:

(a)  the  arrangement  (the  "Arrangement")  under  Section  192 of  the  Canada
     Business   Corporations   Act  ("CBCA")   involving   Accelio   Corporation
     ("Accelio"),  Adobe  Systems  Incorporated,  ("Adobe")  and  Adobe  Systems
     International  Limited  Partnership  (the  "Acquisition  Entity"),  as more
     particularly  described  and  set  forth  in  Accelio'?s  Management  Proxy
     Circular dated March 8, 2002 (the  "Circular"),  as the  Arrangement may be
     modified or amended, is hereby authorized, approved and adopted;

(b)  the  Plan of  Arrangement  involving  Accelio,  Adobe  and the  Acquisition
     Entity, the full text of which is set out as Appendix C to the Circular, as
     contemplated by the amended and restated  acquisition  agreement made as of
     March 1, 2002  between  Accelio,  the  Acquisition  Entity  and Adobe  (the
     "Acquisition  Agreement")  (as the Plan of  Arrangement  may be or may have
     been amended), is hereby approved and adopted;

(c)  any  director or officer of Accelio is hereby  authorized  and directed for
     and on  behalf  of  Accelio  to  execute,  under  the  seal of  Accelio  or
     otherwise,  and to deliver articles of arrangement and such other documents
     as are necessary or desirable to the Director  under the CBCA for filing in
     accordance with the Acquisition Agreement;

(d)  the reduction in the stated capital  account  maintained by Accelio for its
     common  shares by  Cdn.$150  million  and a  corresponding  increase in the
     contributed  surplus account maintained by Accelio for its common shares of
     Cdn.$150 million, are hereby authorized and approved;

(e)  the  Shareholder  Rights Plan  Agreement (the "Rights  Agreement")  between
     Accelio and CIBC Mellon  Trust  Corporation,  as Rights  Agent  thereunder,
     dated June 25,  1998 as  amended,  and all of the Rights (as defined in the
     Rights Agreement) granted thereunder shall not apply to the Arrangement and
     shall  terminate for no  consideration  without any act or formality on the
     part of a holder  thereof on the effective  date of the  Arrangement  (and,
     without  limiting the  generality  of the  foregoing,  no Flip-In  Event or
     Separation Time (as those terms are defined in the Rights  Agreement) shall
     be  considered  to have  arisen  as a result of the  Arrangement),  and for
     greater certainty, the amendments to the Rights Agreement providing for the
     foregoing made as of January 31, 2002, are hereby ratified and approved;

(f)  the amendment to the articles of incorporation of Accelio,  as amended,  to
     provide that the name of Accelio is changed from "Accelio  Corporation"  to
     "Adobe  Systems  Canada  Inc." or such other name as may be selected by the
     board of directors of Accelio and as may be  acceptable  to the  applicable
     regulatory authorities, is hereby authorized and approved;

(g)  notwithstanding  that this  resolution has been passed (and the Arrangement
     adopted) by the  shareholders  of Accelio or that the  Arrangement has been
     approved  by the  Ontario  Superior  Court of Justice  (the  "Court"),  the
     directors of Accelio are hereby  authorized  and empowered (i) to amend the
     Acquisition Agreement or the Plan of Arrangement to the extent permitted by
     the Acquisition Agreement,  and/or (ii) not to proceed with the Arrangement
     at any time prior to the issue of a certificate  of  arrangement  under the
     CBCA without further approval of the  shareholders of Accelio,  but only if
     the  Acquisition  Agreement is terminated  in accordance  with Article VIII
     thereof; and

(h)  any officer or director of Accelio is hereby  authorized  and  directed for
     and on behalf of  Accelio to  deliver  or cause to be  delivered,  all such
     other documents and instruments and to perform or cause to be performed all
     such other acts and things as in such person's  opinion may be necessary or
     desirable to give full effect to the foregoing  resolution  and the matters
     authorized thereby, such determination to be conclusively  evidenced by the
     execution  and delivery of such  document,  agreement or  instrument or the
     doing of any such act or thing.



                                      A-1

<PAGE>


                                   APPENDIX B

                     NOTICE OF APPLICATION AND INTERIM ORDER








                                      B-1

<PAGE>

                           Court File No. 02-CV-19882
                        Ontario Superior Court of Justice

                                  )
BEFORE THE HONOURABLE             )       THE 8TH DAY OF
JUSTICE P. COSGROVE               )        MARCH, 2002
                                  )


                       IN THE MATTER OF an application by
                        ACCELIO CORPORATION relating to a
                         proposed arrangement involving
                    ACCELIO CORPORATION and its shareholders


APPLICATION UNDER the Canada Business Corporations Act, R.S.C. 1985, c. C-44, s.
192, as amended and Rule 14.05(2) of the Rules of Civil Procedure


                              NOTICE OF APPLICATION


TO:  THE HOLDERS OF COMMON SHARES OF ACCELIO CORPORATION


     A LEGAL  PROCEEDING HAS BEEN COMMENCED by the applicant.  The claim made by
the applicant appears on the following page.

     THIS  APPLICATION  will come on for a hearing on April 12,  2002,  at 10:00
a.m. at 161 Elgin Street, Ottawa Ontario.

     IF YOU WISH TO OPPOSE THIS  APPLICATION,  to receive  notice of any step in
     the application or to be served with any documents in the application,  you
     or an  Ontario  lawyer  acting for you must  forthwith  prepare a notice of
     appearance in Form 38A prescribed by the Rules of Civil Procedure, serve it
     on the  applicant's  lawyer or, where the applicant does not have a lawyer,
     serve it on the applicant and file it, with proof of service, in this court
     office, and you or your lawyer must appear at the hearing.


     IF YOU WISH TO PRESENT AFFIDAVIT OR OTHER DOCUMENTARY EVIDENCE TO THE COURT
OR TO EXAMINE OR CROSS-EXAMINE WITNESSES ON THE APPLICATION,  you or your lawyer
must,  in addition to serving  your  notice of  appearance,  serve a copy of the
evidence  on the  applicant's  lawyer or,  where the  applicant  does not have a
lawyer,  serve it on the applicants,  and file it, with proof of service, in the
court office where the  application is to be heard as soon as possible,  but not
later than 2 p.m. on the day before the hearing.

     IF YOU FAIL TO APPEAR AT THE HEARING, JUDGMENT MAY BE GIVEN IN YOUR ABSENCE
AND WITHOUT FURTHER NOTICE TO YOU. IF YOU WISH TO

                                      B-2

<PAGE>


OPPOSE  THIS  APPLICATION  BUT ARE  UNABLE TO PAY LEGAL  FEES,  LEGAL AID MAY BE
AVAILABLE TO YOU BY CONTACTING A LOCAL LEGAL AID OFFICE.


Date: Feb 22 2002                       Issued by       (signed)
                                                    ----------------------------
                                                       Local registrar

                                                 Address of court office:
                                                               161 Elgin Street
                                                               Ottawa, Ontario

TO:       ALL HOLDERS OF SHARES OF ACCELIO CORPORATION

AND TO:   THE  DIRECTOR  APPOINTED  PURSUANT  TO  SECTION  260 of the Canada
          Business Corporations Act

          Richard Shaw
          Director General
          Corporations Directorate
          Industry Canada
          9th Floor, Jean Edmonds Tower South
          365 Laurier Avenue West
          Ottawa, Ontario
          K1A 0C8

AND TO:   AIRD & BERLIS LLP
          Suite 1800
          BCE Place
          181 Bay  Street
          Toronto, Ontario Canada
          M5J 2T9

          Jay A. Lefton
          (416) 863-1500 (p)
          (416) 863-1515 (f)
          Solicitors for Adobe Systems Incorporated




                                      B-3

<PAGE>

                                   APPLICATION


1.   The applicant, Accelio Corporation ("Accelio") makes application for:

     (a)  an interim order, to be sought by way of interlocutory motion prior to
          the hearing of this  application,  for directions  pursuant to section
          192(4) of the  Canada  Business  Corporations  Act (the  "CBCA")  with
          respect to, among other things:

          (i)  allowing for the conduct of a special meeting of the shareholders
               of Accelio to consider and, if deemed advisable, to pass, with or
               without variation, special resolutions approving the Arrangement,
               and with respect to provision of notice of said  meetings and the
               within Application;

          (ii) the approval of the Arrangement; and

          (iii)dissent  rights to be granted to  shareholders  of Accelio  under
               section 190 of the CBCA in respect of the Arrangement;

          (iv) approving  service  of the  motion  materials  upon the  director
               appointed  pursuant to section 260 of the CBCA and the solicitors
               for Adobe Systems  Incorporated,  as rendered and dispensing with
               service of the motion materials upon the shareholders of Accelio;

     (b)  a final order  pursuant to section 192 of the CBCA approving a plan of
          arrangement   (the   "Arrangement")    involving   Accelio   and   its
          securityholders,  which Arrangement shall be substantially in the form
          described in the  management  proxy circular to be mailed or delivered
          to Accelio's shareholders (the "Proxy Circular");

     (c)  in the alternative, an order approving the Arrangement, amended in any
          manner as this Honourable Court may direct, subject to compliance with
          such terms and  conditions,  if any, as this  Honourable  Court thinks
          fit; and

     (d)  such further or other order as to this Honourable Court may seem just.

2.   The grounds for the application are:

     (a)  Accelio is a CBCA corporation;

     (b)  the  Arrangement,  which is an  "arrangement"  within  the  meaning of
          section 192 of the CBCA, is in the best  interests of, and is fair and
          reasonable to, the shareholders of Accelio, and is put forward in good
          faith;

     (c)  all the statutory requirements of the CBCA have been fulfilled;

     (d)  Rules 14 and 38 of the Ontario Rules of Civil Procedure;

     (e)  sections 190 and 192 of the CBCA; and



                                      B-4

<PAGE>

     (f)  such  further  and other  grounds  as  counsel  may advise and as this
          Honourable Court may permit.

3.   If  granted,  the order  will be relied  upon for the  purposes  of section
     3(a)(10) of the United States  Securities  Act of 1933,  as amended,  which
     exempts   securities  issued  in  exchange  for  one  or  more  outstanding
     securities from the general requirement of registration where the terms and
     conditions  of the  issuance  and  exchange  of such  securities  have been
     approved  by a court,  after a hearing  upon the  fairness of the terms and
     conditions  of the  issuance  and  exchange  at which all  persons to which
     securities will be issued have the right to appear.

4.   The  following  documentary  evidence  will be used at the  hearing  of the
     application:

     (a)  such Interim Order as may be granted by this Honourable Court;

     (b)  the affidavit of Kevin  Francis sworn  February 26, 2002 in support of
          this Application;

     (c)  an affidavit  with respect to the mailing of the notice of the special
          meeting, management proxy circular and other relevant materials to all
          shareholders of record of Accelio as of March 5, 2002;

     (d)  an  affidavit  advising  this  Honourable  Court of the results of the
          special meeting of the shareholders of Accelio  scheduled for April 9,
          2002 and other matters relevant to the within Application; and

     (e)  such further and other documentary  evidence as counsel may advise and
          as this Honourable Court may permit.

5.   The Notice of  Application  will be sent to all holders of common shares of
     Accelio as part of Proxy Circular at their  addresses as they appear in the
     books and  records  of  Accelio  at the close of  business  on the date the
     directors of Accelio fix as the record date pursuant to sub-section  134(2)
     of the CBCA and  pursuant to Rules  17.02(n)  and  17.02(o) of the Rules of
     Civil Procedure to those  shareholders  whose addresses,  as they appear in
     the books and records of Accelio, are outside Ontario.

Date of issue:    Feb 22 2002
                                                 LaBarge Weinstein
                                                 333 Preston Street, 11th Floor
                                                 Ottawa, Ontario
                                                 K1S 5N5

                                                 Paul C. LaBarge

                                                 Phone: 231-3000
                                                 Fax: 231-3900

                                                 Solicitors for the Applicant
                                                 Accelio Corporation


                                      B-5

<PAGE>


<TABLE>

<CAPTION>
IN THE MATTER OF an application by Accelio Corporation
relating to a proposed arrangement involving Accelio
Corporation and its Shareholders
                                                                         Court File No.:  02-CV-19882
APPLICATION UNDER the Canada Business Corporations Act,
R.S.C. 1985, c. C-44, s. 192 and Rule 14.05(2) of the
Rules of Civil Procedure
<S>                                                           <C>

                                                              ---------------------------------------------------
                                                                ONTARIO SUPERIOR COURT OF JUSTICE


                                                                   Proceeding commenced at Ottawa

-----------------------------------------------------------------------------------------------------------------


                                                                       NOTICE OF APPLICATION


-----------------------------------------------------------------------------------------------------------------
                                                                 LaBarge Weinstein
                                                                 333 Preston Street, 11th Floor
                                                                 Ottawa, Ontario
                                                                 K1S 5N4 Canada

                                                                 Paul C. Labarge
                                                                 LSUC#: 16280F
                                                                 Tel:  (613) 231-3000
                                                                 Fax: (613) 231-3900

                                                                 Solicitors for the Applicant, Accelio
                                                                 Corporation


</TABLE>

                                      B-6

<PAGE>



                                                      Court File No. 02-CV-19882

                        ONTARIO SUPERIOR COURT OF JUSTICE

                              )
BEFORE THE HONOURABLE         )       THE 8TH DAY OF
JUSTICE P. COSGROVE           )        MARCH, 2002
                              )


                       IN THE MATTER OF an application by
             ACCELIO CORPORATION relating to a proposed arrangement
               involving ACCELIO CORPORATION and its shareholders


APPLICATION UNDER the Canada Business Corporations Act, R.S.C. 1985, c. C-44, s.
192, as amended and Rule 14.05(2) of the Rules of Civil Procedure


                                  INTERIM ORDER


     THIS MOTION, made by the Applicant,  Accelio Corporation ("Accelio") for an
Interim Order  pursuant to Section  192(4) of the Canada  Business  Corporations
Act, R.S.C. 1985, c. C-44, as amended (the "CBCA"):

(a)  authorizing  Accelio to call and  conduct a meeting  of the  holders of its
     common shares to approve the proposed plan of arrangement; and

(b)  granting certain other ancillary relief;

was heard at Ottawa this 1st day of March 2002

     ON READING the Notice of Application dated February 22, 2002, the Notice of
Motion dated February 22, 2002,  the affidavit of Kevin Francis,  sworn March 6,
2002 (the "Affidavit"), and on hearing the submissions of counsel for Accelio.

     The Meeting


     1.   THIS COURT ORDERS THAT Accelio is permitted to call,  hold and conduct
          a special  meeting  (the  "Special  Meeting") of the holders of common
          shares in the capital of Accelio ("Common Shares") to consider and, if
          deemed  advisable,  to pass,  with or  without  variation,  a  special
          resolution (the "Arrangement Resolution") approving (a) a reduction to
          Accelio's stated capital of all classes  substantially  and (b) a plan
          of arrangement involving Accelio, Adobe Systems Incorporated ("Adobe")
          and Adobe Systems International Limited Partnership ("Purchaser") (the
          "Plan of  Arrangement")  in the form set  forth as  Appendix  A to the
          draft proxy circular (the "Proxy Circular") attached as Exhibit "A" to
          the Affidavit.

     2.   THIS COURT ORDERS THAT the Special  Meeting shall be called,  held and
          conducted  in  accordance  with  the  notice  of  such  meeting,   the
          provisions  of

                                      B-7

<PAGE>


          the CBCA and the  articles  and by-laws of Accelio,  subject to all of
          the provisions of this Order and any further orders of this Court.

     3.   THIS COURT  ORDERS THAT the quorum  required  at the  Special  Meeting
          shall be two (2)  holders  of Common  Shares  present  in person or by
          proxy and each entitled to vote at the meeting.

     4.   THIS COURT  ORDERS THAT the only  persons  entitled to notice of or to
          attend the  Special  Meeting  shall be the  holders  of Common  Shares
          entitled to vote at the Special Meeting, holders of valid proxies from
          such holders of Common Shares, the directors, auditors and advisors of
          the  Company,  representatives  of Adobe and the  Purchaser  and their
          advisors, the Director appointed under the CBCA (the "CBCA Director"),
          and such other  persons  with the  permission  of the  Chairman of the
          Special  Meeting and that the only persons  entitled to be represented
          and to vote at the Special  Meeting  shall be holders of Common Shares
          of record as at the record date for the Special Meeting.

     5.   THIS COURT ORDERS THAT Accelio is authorized to use the form of proxy,
          in  substantially  the same form as  attached  as  Exhibit  "C" to the
          Affidavit.  Accelio is authorized, at its expense, to solicit proxies,
          directly  and through  its  officers,  directors  and  employees,  and
          through  such  agents  or  representatives  as it may  retain  for the
          purpose,  and by mail or such other forms of  personal  or  electronic
          communication as it may determine.

     6.   THIS COURT ORDERS THAT Accelio may, in its discretion, waive generally
          the time  limits for the  deposit of proxies by the  holders of Common
          Shares  entitled to vote at the Special  Meeting,  if Accelio deems it
          advisable to do so.

     Amendments


     7.   THIS COURT ORDERS THAT Accelio is authorized to make such  amendments,
          revisions  and/or  supplements  to the Plan of  Arrangement  as it may
          determine  necessary,  and the  Plan  of  Arrangement  as so  amended,
          revised  and/or  supplemented  shall be the Plan of  Arrangement to be
          submitted to the Special Meeting and be the subject of the Arrangement
          Resolution.

     Notice of Meetings


     8.   THIS COURT  ORDERS THAT the Notice of  Application,  the notice of the
          Special Meeting and the Proxy Circular in substantially  the same form
          as contained  in Exhibit "A" to the  Affidavit  (with such  amendments
          thereto may be necessary or desirable,  provided that such  amendments
          are  not  inconsistent   with  the  terms  of  this  Order)  shall  be
          distributed  to the holders of Common  Shares,  to the  directors  and
          auditors of the Company and to the CBCA Director by one of the methods
          set out in paragraph 11 of this Order,  not later than twenty-one (21)
          calendar  days  prior  to  the  date   established  for  said  meeting
          (excluding  the date of mailing or delivery and  excluding the date of
          the Special Meeting). Notwithstanding anything contained herein to the
          contrary,   the  Company  may  distribute  such  additional  or  other
          documents  as

                                      B-8

<PAGE>


          it  deems  advisable  to the  Company's  shareholders,  directors  and
          auditors less than  twenty-one (21) calendar days prior to the date of
          the Special Meeting.

     9.   THIS COURT ORDERS THAT accidental failure of or omission by Accelio to
          give notice to any one or more of its shareholders,  or any failure or
          omission to give such notice  arising as a result of events beyond the
          reasonable  control  of  Accelio  (including  without  limitation  any
          inability to utilize postal services, any transmission  interruptions,
          and/or any inability to secure publication in appropriate  newspapers)
          shall not constitute a breach of this Order or a defect in the calling
          of the Special Meeting, but if any such failure or omission is brought
          to the  attention  of Accelio,  Accelio  shall use its best efforts to
          rectify it by the method and in the time most  reasonably  practicable
          in the circumstances.

     Record Dates for Notice and Voting


     10.  THIS  COURT  ORDERS  THAT  the  record  date for  determining  Accelio
          shareholders entitled to receive notice of the Special Meeting and the
          other  materials  contemplated  herein  to  be  delivered  to  Accelio
          shareholders, and to vote at said meeting, shall be March 5, 2002.

     Method of Dissemination


     11.  THIS COURT ORDERS THAT the notice of the Special Meeting and the Proxy
          Circular,  which  shall  contain a copy of the  Notice of  Application
          herein  and a copy of this  Interim  Order,  the  proxy  and any other
          communication(s)  and/or  document(s)  determined  by  Accelio  to  be
          necessary or  appropriate  (the  "Materials")  shall be  disseminated,
          distributed, sent or given to Accelio's shareholders in one or more of
          the following methods:

          (a)  by prepaid ordinary mail,  addressed to each Accelio  shareholder
               at such shareholder's  address as shown on the books of Accelio's
               and by  complying  with its  obligations  under  National  Policy
               Statement No. 41 of the Canadian Securities Administrators and/or
               any  waiver  or  waivers  obtained  pursuant  to  the  provisions
               thereof, provided that where notices or documents previously sent
               by Accelio or its registrar  and transfer  agent to a shareholder
               have been  returned on three  consecutive  occasions  because the
               shareholder  cannot be found,  Accelio  shall not be  required to
               send the said notice or Materials in accordance with the CBCA; or

          (b)  by  delivery,  in person or by courier  service,  to the  address
               specified in (a) above; or

          (c)  by  facsimile  transmission  to any  shareholder  who  identifies
               itself  to  the  satisfaction  of  Accelio,   who  requests  such
               transmission and, if required by Accelio,  is prepared to pay the
               charges for such transmission.

                                      B-9

<PAGE>

     Deemed Receipt of Notice


     12.  THIS COURT  ORDERS  THAT the notice and  Materials  referred  to above
          shall be deemed for the purposes of this Order,  to have been received
          by Accelio's shareholders:

          (a)  in the case of mailing, in the ordinary course of mail;

          (b)  in the case of  delivery,  upon  receipt  thereof by the intended
               addressee or by the courier; and

          (c)  in the case of  facsimile  transmission,  upon  the  transmission
               thereof.

     Voting


     13.  THIS COURT ORDERS THAT the Arrangement  Resolution shall require,  for
          passage,  approval by the affirmative vote of a two-thirds majority of
          the total votes cast in person or by proxy at the  Special  Meeting in
          respect of the  Arrangement  Resolution  (for this purpose any spoiled
          votes,  ineligible  votes,  defective votes and  abstentions  shall be
          deemed to be votes not cast).

     Adjournments


     14.  THIS  COURT  ORDERS  THAT  Accelio  if  it  deems  it  advisable,   is
          specifically  authorized to adjourn or postpone the Special Meeting on
          one or more occasions, whether before or after the holding of any vote
          in respect of the  Arrangement  Resolution,  without the  necessity of
          first  convening  the Special  Meeting or first  obtaining any vote of
          holders of Common Shares  respecting the  adjournment or  postponement
          and no further notice of the date, time and location of such adjourned
          or postponed  meeting shall be required other than an  announcement at
          the Special  Meeting  together with the issuance of a press release in
          respect thereof.

     Dissent and Appraisal Rights


     15.  THIS  COURT  ORDERS  THAT all  Accelio  shareholders  be  entitled  to
          exercise rights of dissent in respect of the Arrangement Resolution in
          accordance and compliance with Section 190 of the CBCA and the Plan of
          Arrangement  so  long  as  they  provide  written   objection  to  the
          Arrangement Resolution by 5:00 p.m. (Ottawa time) on April 5, 2002 (or
          on the last  Business  Day that is not less than 48 hours prior to any
          adjournment of the Special  Meeting),  and otherwise  strictly  comply
          with the  requirements of the CBCA,  which written  objection shall be
          given to Accelio c/o its legal counsel, LaBarge Weinstein,  Attention:
          Deborah Weinstein, 333 Preston Street, 11th Floor, Ottawa, Ontario K1S
          5N4.

     Service and Notice of Sanction Hearing


     16.  THIS COURT  ORDERS  THAT the only  persons  entitled  to appear at any
          hearing to sanction and approve the Plan of Arrangement, and to appear
          and to be heard thereon,  shall be (i)  solicitors  for Accelio,  (ii)
          solicitors for Adobe


                                      B-10

<PAGE>


          and the Purchaser,  (iii) the CBCA Director, and (iv) persons who have
          filed a notice of intention to appear in accordance  with the Rules of
          Civil  Procedure  including  service  of said  notice  upon  Accelio's
          solicitors LaBarge Weinstein,  333 Preston Street, 11th Floor, Ottawa,
          Ontario K1S 5N4 Attention: Deborah Weinstein.

     17.  THIS  COURT  ORDERS  THAT on being  advised  that  Accelio  intends to
          deliver the  Materials in accordance  with  paragraph 11 hereof to its
          shareholders,  service of the  Materials  as provided for herein shall
          constitute  good  and  sufficient  notice  to  said  persons  of  this
          application to approve the Arrangement.

     18.  THIS COURT ORDERS THAT upon approval of the Arrangement by the holders
          of Common Shares as set forth in this Order, Accelio may apply to this
          Honourable Court for approval of the Arrangement (the  "Application"),
          and the service of the Notice of  Application  herein,  in  accordance
          with paragraph 11 of this Order,  shall constitute good and sufficient
          service  of such  Notice  of  Application  upon  all  persons  who are
          entitled to receive such Notice of Application pursuant to this Order,
          and no other form of service need be made and no other  material  need
          be served upon such persons in respect of those proceedings,  unless a
          Notice of Appearance is served on Accelio's solicitors within five (5)
          days prior to the date of the hearing of the Application.

     19.  THIS COURT  ORDERS  THAT in the event that the  application  for final
          approval  of  the  Plan  is  adjourned,   only  those  parties  having
          previously served a notice of intention to appear shall have notice of
          the adjourned date.

     20.  THIS COURT  ORDERS  THAT  service of the  motion  materials  herein as
          rendered upon the CBCA Director and counsel for Adobe shall constitute
          good and valid  service  and that the need for  service  of the motion
          materials upon the shareholders of Accelio is hereby dispensed with.



                                                     (signed) local registrar
                                                   -----------------------------

                               ENTERED AT OTTAWA
                               ON MARCH 8, 2002
                               IN BOOK NO. 73-13



                                      B-11

<PAGE>


<TABLE>

<CAPTION>
IN THE MATTER OF an application by Accelio Corporation
relating to a proposed arrangement involving Accelio
Corporation and its Shareholders
                                                                         Court File No.:  02-CV-19882
APPLICATION UNDER the Canada Business Corporations Act,
R.S.C. 1985, c. C-44, s. 192 and Rule 14.05(2) of the
Rules of Civil Procedure
<S>                                                           <C>

                                                              ---------------------------------------------------
                                                                ONTARIO SUPERIOR COURT OF JUSTICE


                                                                   Proceeding commenced at Ottawa

-----------------------------------------------------------------------------------------------------------------


                                                                            INTERIM ORDER


-----------------------------------------------------------------------------------------------------------------
                                                                 LaBarge Weinstein
                                                                 333 Preston Street, 11th Floor
                                                                 Ottawa, Ontario
                                                                 K1S 5N4 Canada

                                                                 Paul C. Labarge
                                                                 LSUC#: 16280F
                                                                 Tel:  (613) 231-3000
                                                                 Fax: (613) 231-3900

                                                                 Solicitors for the Applicant, Accelio
                                                                 Corporation


</TABLE>

                                      B-12

<PAGE>



                                   APPENDIX C

                               PLAN OF ARRANGEMENT





                                      C-1

<PAGE>


                                   APPENDIX C


                                     FORM OF
                      PLAN OF ARRANGEMENT UNDER SECTION 192
                     OF THE CANADA BUSINESS CORPORATIONS ACT


                                    ARTICLE 1
                         DEFINITIONS AND INTERPRETATION

Section 1.01 Definitions:  In this plan of arrangement  except as provided below
and unless something in the subject matter or context is inconsistent therewith,
the following words and phrases shall have the meanings hereinafter set forth:

     (a)  "Accelio" means Accelio Corporation,  a corporation existing under the
          laws of Canada;

     (b)  "Accelio  Common  Shareholders"  means the  holders of Accelio  Common
          Shares;

     (c)  "Accelio  Common  Shares"  means the common  shares in the  capital of
          Accelio;

     (d)  "Accelio  Options"  means the unexpired  subscription  rights,  calls,
          options,  warrants and other rights to purchase  Accelio Common Shares
          (including,   without  limitation,   all  securities  exchangeable  or
          exercisable  for or  convertible  into Accelio  Common  Shares and all
          commitments,  arrangements,  conditions or circumstances that may give
          rise to or provide a basis for the  assertion of a claim by any person
          against  Accelio to the effect that such person is entitled to acquire
          or receive any shares of capital stock or other securities of Accelio)
          which  are  outstanding   immediately  prior  to  the  Effective  Time
          (including,  without limitation,  pursuant to the Company Options, the
          Company Option Plans, the Stock Purchase Plan and the Warrants);

     (e)  "Accelio  Repurchase  Price" means,  in respect of each Accelio Common
          Shareholder,  the number of Adobe Common Shares which results when the
          number of Accelio  Repurchased  Shares in  respect  of such  holder is
          multiplied by the Exchange Ratio;

     (f)  "Accelio  Repurchased Shares" means, in respect of each Accelio Common
          Shareholder,  the number of Accelio  Common  Shares which results when
          (i)  the  number  of  Accelio   Common  Shares  held  by  such  holder
          immediately  prior to the  Effective  Time is  multiplied  by (ii) the
          Asset Purchase Price Proportion;

     (g)  "Acquisition  Agreement"  means the Amended and  Restated  Acquisition
          Agreement for Plan of  Arrangement  by and among Adobe,  Purchaser and
          Accelio  dated as of March 1, 2002,  as the same may be  amended  from
          time to time;

     (h)  "Adobe" means Adobe Systems Incorporated, a Delaware corporation;

     (i)  "Adobe Asset Purchase  Price" means the purchase  price,  specified in
          U.S. dollars, to be paid by Adobe for the Adobe Assets, which purchase
          price shall be determined by Adobe in its  discretion and set forth in
          a written notice  delivered by Adobe to Accelio prior to the Effective
          Date ;

     (j)  "Adobe  Assets"  means the Assets,  if any, of Accelio  proposed to be
          acquired by Adobe as set forth in a written notice  delivered by Adobe
          to Accelio prior to the Effective Date;

     (k)  "Adobe Average Stock Price" means the weighted  average sales price of
          a share of Adobe  Common  Shares as reported on Nasdaq  during the ten
          (10)  consecutive  trading  days  ending  on  the  third  trading  day
          immediately  prior to the Effective Time (the  "Measurement  Period");


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          provided,  however,  that if, between the first day of the Measurement
          Period and the Effective Time, the outstanding Adobe Common Shares are
          changed  into a  different  number  of  shares  by reason of any stock
          split,  division or subdivision  of shares,  stock  dividend,  reverse
          stock    split,    consolidation    of    shares,    reclassification,
          recapitalization or other similar transaction,  then the Adobe Average
          Stock Price shall be appropriately adjusted;

     (l)  "Adobe  Common  Shares"  means the shares in the common stock of Adobe
          with a par value of US$0.0001 per share as currently constituted;

     (m)  "Adobe Stock  Consideration"  means the number of Adobe Common  Shares
          equal to the  quotient  determined  by dividing  (i) the Net  Purchase
          Price by (ii) the Adobe Average Stock Price;

     (n)  "Arrangement" means the arrangement  contemplated herein to be made on
          the terms set out in this Plan,  subject to any amendment or variation
          made in  accordance  with this Plan;  or made at the  direction of the
          Court in the Final Order;

     (o)  "Arrangement  Resolution"  means the special  resolution in respect of
          the Arrangement considered and approved by Accelio Common Shareholders
          at the Meeting;

     (p)  "Assets"  means assets,  properties  or rights of any nature,  whether
          tangible or intangible, and wherever located;

     (q)  "Asset Purchase Price" means the aggregate of the Adobe Asset Purchase
          Price and the Purchaser Asset Purchase Price;

     (r)  "Asset Purchase Price  Proportion" means the amount which results when
          (i) the  Asset  Purchase  Price is  divided  by (ii) the Net  Purchase
          Price;

     (s)  "Business Day" means any day other than a Saturday,  Sunday, a federal
          holiday in Canada or a day on which banks are not open for business in
          Ottawa, Ontario;

     (t)  "CBCA" means the Canada  Business  Corporations  Act, as now in effect
          and as it may be  amended  from  time to time  prior to the  Effective
          Date, including the regulations made thereunder;

     (u)  "Certificate  of  Arrangement"  means the  certificate  of arrangement
          endorsed upon the articles of  arrangement  of Accelio by the Director
          after the Final Order is made;

     (v)  "Company Option Plans" means Accelio's 1993 Employee Stock Option Plan
          and Accelio's 1995 Stock Option Plan;

     (w)  "Company  Options" has the meaning ascribed thereto in the Acquisition
          Agreement;

     (x)  "Court" means the Superior Court of Justice (Ontario);

     (y)  "Director" means the director appointed under the CBCA;

     (z)  "Dissent  Procedures"  shall  have the  meaning  ascribed  thereto  in
          Section 3.02;

     (aa) "Dissent  Rights" shall have the meaning  ascribed  thereto in Section
          3.01;

     (bb) "Dissenting  Shareholder"  means an  Accelio  Common  Shareholder  who
          dissents in respect of the Arrangement Resolution in strict compliance
          with the Dissent Procedures;

     (cc) "Effective Date" means the date of the Certificate of Arrangement;


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     (dd) "Effective Time" means 12:01 a.m. (Ottawa Time) on the Effective Date;

     (ee) "Entity" means any corporation (including any non-profit corporation),
          general   partnership,    limited   partnership,   limited   liability
          partnership,  joint venture,  estate,  trust,  company  (including any
          company limited by shares,  limited  liability  company or joint stock
          company), firm, society or other enterprise, association, organization
          or entity;

     (ff) "Exchange Agent" means  Computershare Trust Company of New York at its
          principal  office in New York,  New York at the address set out in the
          letter of  transmittal  in its  capacity as an Exchange  Agent for the
          Accelio  Common  Shares under the Plan of  Arrangement,  or such other
          trust  company  or other  Entity  that Adobe  may,  in its  reasonable
          discretion, choose as the Exchange Agent;

     (gg) "Exchange  Ratio" means a fraction whose  numerator is the Adobe Stock
          Consideration,  and whose  denominator  is the  Fully-Diluted  Accelio
          Shares;

     (hh) "Final  Order"  means  the  final  order of the  Court  approving  the
          Arrangement  as such  order  may be  amended  by the Court at any time
          prior to the Effective Date or, if appealed,  then, unless such appeal
          is withdrawn or denied, as affirmed;

     (ii) "Fully-Diluted  Accelio  Shares"  means  the sum of (A) the  aggregate
          number of Accelio Common Shares that are outstanding immediately prior
          to the  Effective  Time,  (B) the aggregate  number of Accelio  Common
          Shares that are purchasable  under or otherwise subject to all options
          and warrants to purchase  Accelio  Common Shares that are  outstanding
          immediately  prior to the Effective Time, (C) the aggregate  number of
          Accelio  Common Shares that are directly or  indirectly  issuable upon
          the conversion of all other convertible securities of Accelio that are
          outstanding  immediately  prior  to the  Effective  Time,  and (D) the
          aggregate  number of Accelio  Common Shares (if any) which Accelio has
          entered  into any  commitment  or  arrangement  to issue  (or to issue
          options or warrants with respect to) prior to the Effective  Time, but
          which are not  outstanding  immediately  prior to the  Effective  Time
          (provided that any Accelio Common Shares that are purchasable under or
          otherwise  subject to Company Options that are exercised or terminated
          pursuant to Section 5.3 of the Acquisition  Agreement and at the times
          specified  in Section 2.02 hereof shall not be counted for purposes of
          determining the "Fully Diluted Accelio Shares");

     (jj) "Governmental  Body"  means  any:  (a)  nation,  state,  commonwealth,
          province,   territory,   county,   municipality,   district  or  other
          jurisdiction of any nature;  (b) federal,  state,  provincial,  local,
          municipal,  foreign  or  other  government;  or  (c)  governmental  or
          quasi-governmental authority of any nature (including any governmental
          division, department, agency, commission,  instrumentality,  official,
          ministry, fund, foundation, center, organization, unit, body or Entity
          and any court or other tribunal)

     (kk) "Interim  Order"  means  the order of the  Court  dated  March 8, 2002
          providing  for,  among  other  things,  the calling and holding of the
          Meeting  and  certain  other  procedural  matters,  as the same may be
          amended or supplemented from time to time;

     (ll) "Meeting"  means the special  meeting of Accelio Common  Shareholders,
          and all adjournments and  postponements  thereof,  called and held to,
          among other things, consider and approve the Arrangement Resolution;

     (mm) "Nasdaq" means The Nasdaq National Market;

     (nn) "Net  Purchase  Price"  means the  excess of US  $72,000,000  over the
          aggregate amount of (a) all Permitted Option  Repurchase  Amounts paid
          or payable to holders of Company  Options  pursuant to clause "(i)" of
          Section 5.3(b) of the Acquisition Agreement,  (b) all Permitted Option
          Repurchase  Amounts  underlying  all Accelio  Common  Shares issued or
          issuable to holders of Company  Options  pursuant to clause  "(ii)" of
          Section 5.3(b) of the Acquisition  Agreement and (c) other amounts (if
          any) paid or payable in cash to equity holders of Accelio  pursuant to
          the Interim


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          Order, the Final Order or the Plan of Arrangement (but excluding,  for
          greater  certainty,  any amounts  paid  pursuant to Section  5.3(c) or
          Section 5.3(d) of the Acquisition Agreement);

     (oo) "Permitted  Option  Repurchase  Amount"  means,  with  respect to each
          Accelio Option outstanding immediately prior to the Effective Time, an
          amount  equal to the  excess  (if any) of (1) the  product  of (i) the
          number of Accelio  Common  Shares  issuable  upon the exercise of such
          Accelio  Option,  multiplied by (ii) the Exchange  Ratio,  and further
          multiplied  by (iii)  the  Adobe  Average  Stock  Price,  over (2) the
          product of (x) the number of Accelio  Common Shares  issuable upon the
          exercise of such Accelio Option,  multiplied by (y) the exercise price
          per share of such  Accelio  Option.  If,  with  respect to any Accelio
          Option,  the  amount  described  in clause  (1) above is less than the
          amount described in clause (2) above, the Permitted Option  Repurchase
          Amount  applicable  to such  Accelio  Option  shall be  zero.  Without
          limiting  the  generality  of the  foregoing,  as used herein the term
          "Permitted  Option  Repurchase  Amount" shall not include (i) the cash
          value of any Accelio Common Shares issued pursuant to clause "(ii)" of
          Section 5.3(b) of the  Acquisition  Agreement or (ii) any amounts paid
          in respect of  Accelio  Options  repurchased  by Accelio  pursuant  to
          Section 5.3(c) or Section 5.3(d) of the Acquisition Agreement;

     (pp) "person" means an individual, Entity or Governmental Body;

     (qq) "Purchaser" means Adobe Systems International Limited Partnership,  an
          exempted  limited  partnership  under  Cayman  Islands  law  which  is
          wholly-owned (directly or indirectly) by Adobe;

     (rr) "Purchaser  Asset Purchase Price" means the purchase price,  specified
          in U.S.  dollars,  to be paid by Purchaser for the  Purchaser  Assets,
          which   purchase  price  shall  be  determined  by  Purchaser  in  its
          discretion and set forth in a written notice delivered by Purchaser to
          Accelio prior to the Effective Date;

     (ss) "Purchaser Assets" means the Assets, if any, of Accelio proposed to be
          acquired by  Purchaser as set forth in a written  notice  delivered by
          Purchaser to Accelio prior to the Effective Date;

     (tt) "Rights"  means the  rights  issued  and  issuable  under  the  Rights
          Agreement;

     (uu) "Rights  Agreement" means the shareholder  rights plan agreement dated
          June 25, 1998 between  Accelio and CIBC Mellon Trust  Corporation,  as
          "Rights Agent" thereunder;

     (vv) "Stated Capital  Account" means the stated capital account  maintained
          by Accelio at the  Effective  Time  pursuant to the CBCA in respect of
          the Accelio Common Shares;

     (ww) "Stock  Purchase Plan" means the stock purchase plan  contemplated  in
          Accelio's 1997 Employee Stock Purchase Plan;

     (xx) "this Plan", "Plan of Arrangement",  "hereof",  "herein", "hereto" and
          like references mean and refer to this plan of arrangement; and

     (yy) "Warrants"  means  the   compensation   warrants  granted  to  Yorkton
          Securities  Inc.,  BMO  Nesbitt  Burns  Inc.  and  Canaccord   Capital
          Corporation to acquire up to 200,000 Accelio Common Shares.

Words and  phrases  used  herein  that are  defined in the CBCA and not  defined
herein  shall have the same  meaning  herein as in the CBCA  unless the  context
otherwise requires.

Section 1.02 Interpretation Not Affected By Headings, etc.: The division of this
Plan  into  articles  and  Sections  and  the  insertion  of  headings  are  for
convenience  of  reference  only  and  shall  not  affect  the  construction  or
interpretation of this Agreement.

Section 1.03 Gender and Number: Unless the context requires the contrary,  words
importing  the singular  only shall  include the plural and vice versa and words
importing the use of any gender shall include all genders.


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                                    ARTICLE 2
                                   ARRANGEMENT


Section 2.01 Binding Effect:  This Plan of Arrangement will become effective at,
and be binding at and after,  the Effective Time on (i) Adobe,  (ii)  Purchaser,
(iii)  Accelio,  (iv) all Accelio  Common  Shareholders  and (vi) all holders of
Accelio Options.

Section 2.02  Arrangement:  After the Effective Time, the following events shall
occur and shall be deemed to occur at the time so specified  without any further
act or formality:

     (a)  at  12:02  a.m.  (Ottawa  Time)  on the  Effective  Date,  the  Rights
          Agreement and all of the Rights shall  terminate for no  consideration
          without any act or  formality  on the part of a holder  thereof  (and,
          without  limiting the  generality of the  foregoing,  the  Arrangement
          shall be deemed not to be a "Flip-In  Event" for the  purposes  of the
          Rights  Agreement  and no  Separation  Time (as  defined in the Rights
          Agreement)  shall be  considered  to have  arisen  as a result  of the
          Arrangement);

     (b)  in order that each  Accelio  Common  Shareholder  shall be entitled to
          receive  that  number of Adobe  Common  Shares  equal to the number of
          Accelio  Common Shares held by such holder  multiplied by the Exchange
          Ratio  (subject to Section 4.04 hereof),  the  following  events shall
          occur at the time so specified:

          (i)  at 1:00 a.m. (Ottawa Time) on the Effective Date:

               (1)  Purchaser will purchase from Accelio,  and Accelio will sell
                    to  Purchaser,  pursuant  to one  or  more  agreements,  the
                    Purchaser  Assets in return for the Purchaser Asset Purchase
                    Price, which purchase price shall be paid by the delivery by
                    Purchaser  to  Accelio of Adobe  Common  Shares to or to the
                    order of  Accelio,  the  number  of Adobe  Common  Shares so
                    delivered to be determined  by dividing the Purchaser  Asset
                    Purchase Price by the Adobe Average Stock Price;

               (2)  Adobe will purchase  from Accelio,  and Accelio will sell to
                    Adobe, pursuant to one or more agreements,  the Adobe Assets
                    in return for the Adobe Asset Purchase Price, which purchase
                    price  shall be paid by the  delivery by Adobe to Accelio of
                    Adobe  Common  Shares  to or to the  order of  Accelio,  the
                    number of Adobe Common  Shares so delivered to be determined
                    by  dividing  the Adobe  Asset  Purchase  Price by the Adobe
                    Average Stock Price;

          (ii) at 1:35 a.m.  (Ottawa Time) on the Effective  Date,  $150,000,000
               (being the amount by which the Stated  Capital  Account  (and the
               paid-up capital  account of the Accelio Common Shares  maintained
               by Accelio for the purposes of the Income Tax Act (Canada))  was,
               after the Meeting and prior to the Effective Time, reduced, which
               amount was added to a contributed  surplus account  maintained by
               Accelio  in  respect  of the  Accelio  Common  Shares)  shall  be
               deducted  from the  contributed  surplus  account  maintained  by
               Accelio in respect of the Accelio  Common Shares and added to the
               Stated Capital  Account (and to the paid-up  capital  account for
               the  purposes  of the Income Tax Act  (Canada)),  in each case as
               maintained by Accelio in respect of the Accelio Common Shares;

          (iii)at 2:00 a.m.  (Ottawa Time) on the Effective  Date,  Accelio will
               purchase  from each Accelio  Common  Shareholder  (other than any
               Dissenting  Shareholders,  Adobe,  or  any  entities  which  are,
               directly or indirectly,  wholly-owned  by Adobe) and each Accelio
               Common Shareholder will be deemed to have transferred to Accelio,
               without  any act or  formality  on the part of such  holder,


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               the number of Accelio  Common  Shares of such holder equal to the
               Accelio  Repurchased  Shares,  in exchange  for a number of Adobe
               Common Shares equal to the Accelio  Repurchase  Price  (including
               fractional  entitlements  thereto,  subject to the  provisions of
               Section 4.04 relating to Adobe Common Shares deliverable pursuant
               to this  Section  2.02(b)(iii)  together  with those  deliverable
               pursuant  to Section  2.02(b)(iv)),  and the  register of Accelio
               Common  Shareholders shall be adjusted to provide that the number
               of Accelio  Common  Shares  registered in the name of each holder
               shall be reduced by the number of Accelio  Repurchased  Shares in
               respect of such holder and the Accelio  Repurchased  Shares shall
               be  cancelled,  and  Adobe and  Purchaser  (at the  direction  of
               Accelio)  shall  deliver or cause to be delivered to the Exchange
               Agent all Adobe Common Shares received by Accelio pursuant hereto
               to  Subsection  (b)(i) in order to  effect  this  repurchase  and
               Accelio shall cause the Exchange Agent to effect this repurchase.
               The  provisions of Sections  34(2) and Section 118(2) of the CBCA
               shall  not  apply  to the  purchase  of the  Accelio  Repurchased
               Shares.

          (iv) at 3:00 a.m.  (Ottawa Time) on the Effective Date, each remaining
               outstanding  Accelio  Common  Share  (other than  Accelio  Common
               Shares held by Dissenting  Shareholders,  Adobe,  or any entities
               which are, directly or indirectly, wholly-owned by Adobe) will be
               deemed to be transferred by the holder  thereof,  without any act
               or formality on the part of such holder, to Purchaser in exchange
               for a fraction of an Adobe  Common  Share  equal to the  Exchange
               Ratio,  and the name of each such holder will be removed from the
               register of Accelio  Common  Shareholders,  and Purchaser will be
               recorded as the  registered  holder of such Accelio Common Shares
               so  exchanged  and will be deemed to be the legal and  beneficial
               owner  thereof,  and Purchaser  shall cause the Exchange Agent to
               effect this exchange (provided,  however,  that the provisions of
               Section 30 of the CBCA  shall not apply to the extent  that there
               are any Adobe Common  Shares that  continue to be held by Accelio
               which were  delivered to Accelio  pursuant to  Subsection  (b)(i)
               hereof  and  which  are  held  by  Accelio  for the  purposes  of
               effecting repurchases contemplated in Subsection (b)(ii));

     (c)  if any Accelio  Common  Shares  outstanding  immediately  prior to the
          Effective  Time are  unvested or are subject to a  repurchase  option,
          risk of forfeiture or other condition under any applicable  restricted
          stock  purchase  agreement  or other  agreement  with Accelio or under
          which  Accelio has any rights,  then any Adobe  Common  Shares  issued
          pursuant to Subsection  (b) in exchange for such Accelio Common Shares
          will also be unvested and subject to the same repurchase option,  risk
          of forfeiture or other condition,  and the  certificates  representing
          such Adobe Common Shares may  accordingly  be marked with  appropriate
          legends;

     (d)  at 2:30 a.m.  (Ottawa Time) on the Effective Date, all Accelio Options
          shall  terminate  without any act or formality on the part of a holder
          thereof, subject to any obligations contemplated in Section 5.3 of the
          Acquisition Agreement, if applicable; and

     (e)  at 3:00 a.m.  (Ottawa Time) on the Effective Date, the name of Accelio
          shall be changed to "Adobe  Systems Canada Inc." or such other name as
          may be  selected  by the board of  directors  of Accelio and as may be
          acceptable to regulatory authorities.

Section  2.03  Illegality  of Delivery of Adobe Common  Shares:  Notwithstanding
anything contained herein, if it appears to Accelio, Adobe or Purchaser,  acting
reasonably,  that it would be  contrary  to  applicable  law to issue or deliver
Adobe  Common  Shares  pursuant  to the  Arrangement  to a person  that is not a
resident of Canada or the United States,  the Adobe Common Shares that otherwise
would be issued or delivered to that person shall be issued and delivered to the
Exchange Agent for sale by the Exchange Agent on behalf of that person.

Section  2.04  Sales by  Exchange  Agent:  All  Adobe  Common  Shares to be sold
pursuant to Section 2.03 shall be pooled and sold as soon as  practicable  after
the  Effective  Date,  on such dates and at such  prices as the  Exchange  Agent
determines in its sole discretion. The Exchange Agent shall not be obligated


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to seek or obtain a minimum price for any of the Adobe Common Shares sold by it.
Each person that  otherwise  would have  received  an Adobe  Common  Share shall
receive a pro rata share of the net cash proceeds (after  transaction  costs and
commissions) from the sale of the Adobe Common Shares sold by the Exchange Agent
(less any amount  withheld  in respect of  Canadian  taxes) in lieu of the Adobe
Common Shares in consideration  for the Accelio Common Shares.  No payments will
be made to persons that  otherwise  would  receive  less than $1.00.  Any monies
remaining as a result of the preceding sentence shall be applied to any expenses
incurred in connection with sales pursuant to this Section 2.04.  Neither Adobe,
nor Purchaser nor the Exchange Agent shall be liable for any loss arising out of
any such sales.


                                    ARTICLE 3
                                RIGHTS OF DISSENT


Section 3.01 General:  Notwithstanding Article 2, each Dissenting Shareholder is
entitled  to be paid the fair value of the  Accelio  Common  Shares held by such
holder in respect of which such holder  dissents,  determined as of the close of
business  on the day  before  the date on which the  Arrangement  Resolution  is
passed,  as the case may be and in the event the Arrangement  becomes  effective
(the "Dissent Rights"),  provided that (i) such holder complies with Section 190
of the CBCA (except as hereinafter otherwise contemplated), (ii) notwithstanding
Section 190 of the CBCA (including  Subsection 190(5)), the written objection to
the  Arrangement  Resolution  must be received by Accelio c/o its legal counsel,
LaBarge Weinstein, Attention: Deborah Weinstein, 333 Preston Street, 11th Floor,
Ottawa,  Ontario K1S 5N4 by not later than 5:00 p.m.  (Toronto time) on April 5,
2002 (or on the last  Business  Day that is not less than 48 hours  prior to any
adjournment of the Meeting) stating therein (1) that the Dissenting  Shareholder
objects to the  Arrangement  and is  exercising  its Dissent  Rights and (2) the
specific  number of Accelio  Common  Shares in respect of which such  Dissenting
Shareholder is exercising its Dissent  Rights,  which shall not be less than all
of the Accelio Common Shares held by that  Dissenting  Shareholder  and (i) such
holder  shall not have voted any of its Accelio  Common  Shares in favour of the
Arrangement  Resolution at the Meeting in person or by proxy;  an Accelio Common
Shareholder  is not entitled to exercise its Dissent  Rights with respect to any
Accelio  Common Shares if it votes (or instructs or is deemed,  by submission of
an incomplete  proxy,  to have  instructed  his or her  proxyholder to vote) any
Accelio  Common Share in favour of any resolution  relating to the  Arrangement.
Nothing contained herein shall deprive a Dissenting  Shareholder of its right to
vote at the Meeting on any matter including in respect of the  Arrangement.  The
CBCA does not  provide,  and Accelio  will not assume,  that a vote  against the
Arrangement  Resolution or an abstention  constitutes an exercise of the Dissent
Rights,  but an Accelio  Common  Shareholder  need not vote its  Accelio  Common
Shares against the Arrangement in order to dissent.

Section 3.02 Treatment of Dissenting Shareholders: An Accelio Common Shareholder
who:

     (a)  properly  exercises  the Dissent  Right by  complying  with all of the
          procedures (the "Dissent  Procedures") required to be complied with by
          a Dissenting Shareholder in respect of the Arrangement, will:

          (i)  be bound by the provisions of this Article 3,

          (ii) be deemed not to have participated in the Arrangement,

          (iii)cease to have any rights as an Accelio Common  Shareholder  other
               than  the  right to be paid the  fair  value  of such  shares  by
               Accelio in accordance with the Dissent Procedures, and

          (iv) be deemed to have transferred such Accelio Common Shares:

               (1)  to Purchaser immediately prior to the Effective Time, to the
                    extent the fair value  therefor  is paid by  Purchaser,  and
                    Purchaser will be recorded as the registered  holder of such
                    Accelio Common Shares as of the Effective Time, or

               (2)  to Accelio  immediately  prior to the Effective Time, to the
                    extent the


                                      C-8

<PAGE>

                    fair value therefor is paid by Accelio, and such shares will
                    be cancelled as of the Effective Time;

               (1)  (it being understood that the payor shall be selected by the
                    Purchaser); or

     (b)  seeks to exercise the Dissent Right, but:

          (i)  who for any reason does not  properly  fulfil each of the Dissent
               Procedures required to be completed by a Dissenting Shareholder,

          (ii) subsequent to giving its written  notice of dissent  provided for
               in Section 190 of the CBCA acts inconsistently with such dissent,

          will be deemed to have  participated  in the  Arrangement  on the same
          basis as each Accelio Common Shareholder and shall receive such number
          of Adobe Common Shares as it is entitled to on the basis determined in
          accordance with Article 2;

but in no case will Adobe,  Purchaser,  Accelio, the Exchange Agent or any other
person be required to  recognize  such  holders as Accelio  Common  Shareholders
after  3:00 a.m.  (Ottawa  Time) on the  Effective  Date,  and the names of such
Accelio  Common  Shareholders  will be deleted  from the  register of holders of
Common Shares at 3:00 a.m. (Ottawa Time) on the Effective Date.


                                    ARTICLE 4
                       CERTIFICATES AND FRACTIONAL SHARES

Section 4.01 Issuance of Certificates:  At or promptly after the Effective Time,
Accelio  shall (in respect of the Adobe Common Shares  contemplated  in Sections
2.02(b)(iii))  and  Purchaser  shall  (in  respect  of the Adobe  Common  Shares
contemplated in Section  2.02(b)(iv))  deposit with the Exchange Agent,  for the
benefit of the Accelio Common  Shareholders who will receive Adobe Common Shares
in connection with the Arrangement,  certificates  representing the Adobe Common
Shares  issuable  pursuant to Sections  2.02(b)(iii)  and  2.02(b)(iv)  upon the
repurchase  and  exchange  of Accelio  Common  Shares,  as the case may be. Upon
surrender  to  the  Exchange  Agent  for  cancellation  of a  certificate  which
immediately prior to the Effective Date represented  outstanding  Accelio Common
Shares which were  repurchased  by Accelio or exchanged  for Adobe Common Shares
pursuant to Section 2.02, as the case may be, together with a duly completed and
validly  executed letter of transmittal and such other documents as the Exchange
Agent  deems  necessary,  the holder of such  surrendered  certificate  shall be
entitled to receive in exchange  therefor,  and the Exchange Agent shall deliver
to such holder,  a  certificate  representing  that number  (rounded down to the
nearest  whole number) of Adobe Common Shares which such holder has the right to
receive  (together  with any  dividends or  distributions  with respect  thereto
pursuant to Section 4.03 hereof and any cash in lieu of fractional  Adobe Common
Shares  pursuant to Section 4.04 hereof),  and the  certificate  so  surrendered
shall forthwith be cancelled.  Until surrendered as contemplated by this Section
4.01, each certificate which immediately prior to the Effective Date represented
outstanding  Accelio Common Shares that were repurchased by Accelio or exchanged
into Adobe Common Shares in accordance with Section 2.02(b),  shall be deemed at
any time after the  Effective  Date to represent  only the right to receive upon
such  surrender  (i)  the  certificate   representing  Adobe  Common  Shares  as
contemplated by this Section 4.01, (ii) a cash payment in lieu of any fractional
Adobe  Common  Shares as  contemplated  by  Section  4.04  hereof  and (iii) any
dividends  or  distributions  with  a  record  date  after  the  Effective  Date
theretofore  paid or payable with respect to Adobe Common Shares as contemplated
by Section 4.03 hereof.

Section 4.02 Share Certificates:

     (a)  As soon as practicable  following the Effective Date, where an Accelio
          Common  Shareholder  has  delivered  to  the  Exchange  Agent  a  duly
          completed letter of transmittal,  the certificates  representing  such
          holder's  Accelio  Common  Shares,  and such  other  documents  as the
          Exchange Agent deems  necessary,  Accelio and Purchaser will cause the
          Exchange Agent either:

          (i)  to forward or cause to be  forwarded  by first  class mail to the
               holder at the address specified in the letter of transmittal; or


                                      C-9

<PAGE>

          (ii) if the letter of  transmittal  does not  specify an  address,  to
               forward or cause to be  forwarded to the holder at the address of
               the holder as shown on the share  register as held and maintained
               by Accelio's  registrar and transfer agent  immediately  prior to
               the Effective Time;

          certificates  representing  the Adobe  Common  Shares  required  to be
          delivered to such holder pursuant to the provisions hereof.

     (b)  As soon as practicable  following the Effective Date, where an Accelio
          Common  Shareholder  has not  delivered  a letter of  transmittal  and
          certificates contemplated by Section 4.02(a) and has not exercised the
          Dissent Right in accordance with Article 3, Accelio and Purchaser will
          cause the Exchange Agent to make available  certificates  representing
          the Adobe  Common  Shares  required  to be  delivered  to such  holder
          pursuant  to  the  provisions  hereof  upon  presentation  of  a  duly
          completed  letter of  transmittal,  the  certificates  evidencing such
          holder's  Accelio  Common  Shares,  and such  other  documents  as the
          Exchange Agent deems necessary.

     (c)  Any  certificates  formerly  representing  Accelio Common Shares that,
          following the  Effective  Date,  are not  deposited  with the Exchange
          Agent,  together with a duly executed letter of transmittal,  and such
          other  documents as the Exchange Agent deems  necessary,  on or before
          the sixth  anniversary of the Effective Date, shall cease to represent
          a right or claim of any kind or nature  and the right of the holder of
          such  securities to receive Adobe Common Shares as provided for in the
          Arrangement  Agreement,  shall be deemed to be  surrendered to Accelio
          and  Purchaser,   as  applicable,   together  with  all  dividends  or
          distributions thereon held for such holder.

Section  4.03  Distributions  with  Respect to  Unsurrendered  Certificates:  No
dividends or other distributions  declared or made after the Effective Date with
respect to Adobe Common Shares with a record date after the Effective Date shall
be paid to the holder of any  unsurrendered  certificate which immediately prior
to the Effective Date  represented  outstanding  Accelio Common Shares that were
exchanged for Adobe Common Shares  pursuant to the procedures set out in Article
2, and no cash  payment in lieu of  fractional  shares shall be paid to any such
holder pursuant to Section 4.04 hereof, unless and until the holder of record of
such  certificate  shall  surrender such  certificate in accordance with Section
4.01 hereof.  Subject to  applicable  law, at the time of such  surrender of any
such  certificate  (or, in the case of clause  (iii) below,  at the  appropriate
payment  date),  there  shall be paid to the record  holder of the  certificates
representing  whole Adobe Common Shares,  without interest (i) the amount of any
cash payable in lieu of a fractional  Adobe Common Share to which such holder is
entitled pursuant to Section 4.04 hereof,  (ii) the amount of dividends or other
distributions  with a record date after the Effective Date theretofore paid with
respect to such Adobe Common Shares,  and (iii) the amount of dividends or other
distributions with a record date after the Effective Date but prior to surrender
and a payment date  subsequent  to surrender  payable with respect to such Adobe
Common Shares.

Section  4.04 No  Fractional  Shares:  No  certificates  or  scrip  representing
fractional  Adobe Common  Shares shall be issued upon the surrender for exchange
of  certificates  pursuant  to  Section  4.01  hereof  and,  subject to the last
sentence of this Section 4.04,  no dividend,  stock split or other change in the
capital structure of Adobe shall relate to any such fractional security and such
fractional interests shall not entitle the holder thereof to vote or to exercise
any  rights  as a  security  holder  of  Adobe.  In lieu of any such  fractional
securities,  each person otherwise entitled to a fractional interest in an Adobe
Common Share (after  aggregating all such fractional  shares to which the holder
is entitled,  pursuant to Section  2.02(b)(iii)  and Section  2.02(b)(iv))  will
receive from  Purchaser  an amount of cash  (rounded  down to the nearest  whole
cent),  without interest,  equal to the product (or, at the option of Purchaser,
the Canadian dollar equivalent of the product) of (i) such fraction,  multiplied
by (ii) the closing  price for Adobe Common Shares on Nasdaq on the last trading
day  immediately  preceding  the Effective  Time as reported by Nasdaq.  For the
purposes of the preceding sentence, a "trading day" means a day on which trading
generally  takes place on Nasdaq and on which trading in Adobe Common Shares has
occurred and "Canadian  dollar  equivalent"  means the applicable  United States
dollar amount multiplied by the noon spot rate on the day prior to the Effective
Date for Canadian dollars  expressed in United States dollars as reported by the
Bank of Canada.  The Purchaser  shall be entitled to any  fractional  securities
resulting from the foregoing calculations.

Section 4.05 Lost  Certificates:  In the event any certificate which immediately
prior to the Effective


                                      C-10

<PAGE>


Date represented  outstanding Accelio Common Shares that were exchanged pursuant
to Section 2.02 shall have been lost, stolen or destroyed, upon the making of an
affidavit  of that fact by the  person  claiming  such  certificate  to be lost,
stolen or  destroyed,  the Exchange  Agent will issue in exchange for such lost,
stolen or destroyed certificate,  certificates  representing Adobe Common Shares
(and any dividends or  distributions  with respect thereto and any cash pursuant
to Section  4.03  hereof)  deliverable  in  respect  thereof  as  determined  in
accordance  with Section 2.02 hereof.  When  authorizing  such  issuance  and/or
payment in exchange for any lost, stolen or destroyed certificate, the person to
whom  certificates  representing  Adobe Common Shares are to be issued shall, at
the discretion of Purchaser,  as a condition  precedent to the issuance thereof,
give a bond  satisfactory  to Purchaser,  in such sum as Purchaser may direct or
otherwise  indemnify Accelio and Purchaser in a manner satisfactory to Purchaser
against any claim that may be made against Accelio and Purchaser with respect to
the certificate alleged to have been lost, stolen or destroyed.

Section 4.06 Extinction of Rights:  Any certificate  which  immediately prior to
the  Effective  Time  represented  outstanding  Accelio  Common Shares that were
repurchased or exchanged  pursuant to Sections  2.02(b)(iii)  or 2.02(b)(iv) and
not deposited with the Exchange Agent in accordance with Section 4.01,  together
with all other  instruments  required by Section  4.01, on or prior to the sixth
anniversary  of the Effective  Date shall cease to represent a claim or interest
of any kind or nature as a shareholder  of Accelio or Adobe.  On such date,  the
Adobe  Common  Shares  (or  cash in lieu of  fractional  interests  therein,  as
provided  in  Section  4.04)  to  which  the  former  registered  holder  of the
certificate  referred to in the preceding sentence was ultimately entitled shall
be deemed to have been surrendered to Purchaser,  together with all entitlements
to dividends, distributions and interest thereon held for such former registered
holder in accordance with Section 4.03. None of Adobe, Purchaser, Accelio or the
Exchange  Agent  shall be liable to any person in  respect  of any Adobe  Common
Shares (or  dividends,  distributions  and  interest  in  respect  thereof or in
respect of any cash to which such may  otherwise  be  entitled  as  contemplated
herein)  delivered to a public  official  pursuant to any  applicable  abandoned
property, escheat or similar law.


                                    ARTICLE 5
                               WITHHOLDING RIGHTS

Section 5.01  Withholding  Rights:  Accelio,  Adobe,  Purchaser and the Exchange
Agent shall be entitled to deduct and withhold from the consideration  otherwise
payable  pursuant to this  Arrangement to any Accelio Common  Shareholders  such
amount as Accelio, Adobe, Purchaser or the Exchange Agent determines is required
to be deducted and withheld with respect to the making of such payment under the
United  States  Internal  Revenue Code of 1986,  as amended,  the Income Tax Act
(Canada) or any provision of state, local, provincial or foreign tax law. To the
extent that amounts are so withheld,  such withheld amounts shall be treated for
all  purposes  hereof as having been paid to the holder of the shares in respect
of which such deduction and  withholding  was made,  provided that such withheld
amounts are actually  remitted to the  appropriate  taxing  authority.  Accelio,
Adobe,  Purchaser  and the  Exchange  Agent  are  hereby  authorized  to sell or
otherwise  dispose of such  portion of such  consideration  as is  necessary  to
provide sufficient funds to Accelio,  Adobe, Purchaser or the Exchange Agent, as
the case may be,  in order  to  enable  it to  comply  with  such  deduction  or
withholding  requirement and Accelio, Adobe, Purchaser or the Exchange Agent, as
the case may be, shall give an accounting to the holder with respect thereto and
any balance of such  proceeds of sale.  The  provisions  of Section  2.04 hereof
shall apply hereto, mutatis mutandis.


                                    ARTICLE 6
                                   AMENDMENTS


Section 6.01 Amendment of the Arrangement:

     (a)  Accelio  reserves the right to amend,  modify and/or  supplement  this
          Arrangement  at any time and from time to time  provided that any such
          amendment,  modification, or supplement must be contained in a written
          document which is (i) agreed to by Adobe  pursuant to the  Acquisition
          Agreement,  (ii)  filed  with the Court  and,  if made  following  the
          Meeting,  approved  by the  Court and (iii)  communicated  to  Accelio
          Common  Shareholders  in  the  manner  required  by the  Court  (if so
          required).  Adobe and  Purchaser  reserve  the right to amend,  modify
          and/or  supplement this


                                      C-11

<PAGE>

          Arrangement  at any time and from time to time  provided that any such
          amendment,  modification,  or supplement (i) improves the financial or
          economic  interests of the Adobe  Common  Shareholders  (and,  without
          limiting the  generality of the foregoing,  Adobe and  Purchaser,  may
          unilaterally  increase  the  Adobe  Stock  Consideration)  and (ii) is
          contained in a written document which is delivered to Accelio pursuant
          to the Acquisition Agreement.


     (b)  Any amendment,  modification or supplement to this  Arrangement may be
          proposed by Accelio at any time prior to or at the  Meeting  (provided
          that Adobe  shall have  consented  thereto)  with or without any other
          prior notice or communication,  and if so proposed and accepted by the
          persons voting at the Meeting (other than as may be required under the
          Interim  Order),  shall  become  part  of  this  Arrangement  for  all
          purposes.

     (c)  Any amendment, modification or supplement to this Arrangement which is
          approved by the Court  following the Meeting  shall be effective  only
          (i) if it is  consented  to by each of  Accelio  and  Adobe,  and (ii)
          receives  such other  approvals and consents as may be required by the
          Court.

     (d)  Any amendment,  modification or supplement to this  Arrangement may be
          made following the Effective Date  unilaterally  by Accelio,  provided
          that  (i)  it is  agreed  to by  Adobe  pursuant  to  the  Acquisition
          Agreement  and (ii) it  concerns  a matter  which,  in the  reasonable
          opinion of Accelio, is of an administrative  nature required to better
          give  effect  to the  implementation  of this  Arrangement  and is not
          adverse to the financial or economic interests of the holders of Adobe
          Common Shares.

                                    ARTICLE 7
                               FURTHER ASSURANCES


7.01 Further  Assurances:  Notwithstanding  that the transactions and events set
out herein  shall occur and be deemed to occur in the order set out in this Plan
of Arrangement without any further act or formality,  each of the parties to the
Acquisition  Agreement shall make, do and execute, or cause to be made, done and
executed,  all such further  acts,  deeds,  agreements,  transfers,  assurances,
instruments  or documents as may  reasonably be required by any of them in order
further  to  document  or  evidence  any of the  transactions  or events set out
herein.



                                      C-12

<PAGE>


                                   APPENDIX D

                              ACQUISITION AGREEMENT







                                      D-1

<PAGE>

                              AMENDED AND RESTATED
                  ACQUISITION AGREEMENT FOR PLAN OF ARRANGEMENT


     This Amended and Restated  Acquisition  Agreement  for Plan of  Arrangement
("Agreement")  is made and entered into as of March 1, 2002,  by and among Adobe
Systems  Incorporated,   a  Delaware  corporation   ("Parent");   Adobe  Systems
International Limited Partnership,  an exempted limited partnership under Cayman
Islands  law  which  is  wholly  owned   (directly  or   indirectly)  by  Parent
("Purchaser"), and Accelio Corporation, a corporation existing under the laws of
Canada (the  "Company").  Certain  capitalized  terms used in this Agreement are
defined in Exhibit A.

                                    Recitals

A.   The  respective  boards of  directors of the Parent and  Purchaser  and the
     board of directors and a special committee of the board of directors of the
     Company have approved the transactions  contemplated by this Agreement, and
     the board of  directors  of the  Company  has  agreed to submit the Plan of
     Arrangement  and  the  other  transactions   contemplated   hereby  to  its
     shareholders for approval.

B.   Parent and the Company  entered  into an agreement  dated  January 31, 2002
     (the "Original Agreement"), which provided for the acquisition by Parent of
     the Company on the terms described  therein.  The parties wish to amend and
     restate the Original  Agreement in its entirety on the terms and subject to
     the conditions set forth herein.

C.   In order to induce  Parent to enter into this  Agreement  and to consummate
     the  Arrangement,  concurrently  with the  execution  and  delivery of this
     Agreement, each director of the Company and each shareholder of the Company
     which is  affiliated  with any  director  of the  Company  is  executing  a
     shareholder support agreement in favor of Parent (the "Shareholder  Support
     Agreements").

D.   In order to induce  Parent to enter into this  Agreement  and to consummate
     the  Arrangement,  concurrently  with the  execution  and  delivery of this
     Agreement,  certain Key Executives  (as defined  herein) of the Company are
     entering into  Noncompetition  and  Nonsolicitation  Agreements in favor of
     Parent.

                                    Agreement

     The parties to this  Agreement,  intending  to be legally  bound,  agree as
follows:

     1.   Description of Transaction

     1.1  Implementation Steps by the Company. The Company covenants in favor of
          Parent and Purchaser that the Company shall:

     (a)  as  soon  as  reasonably  practicable  after  the  execution  of  this
          Agreement,  apply in a manner acceptable to Parent, acting reasonably,
          under   subsection  192  of  the  CBCA  for  an  order  approving  the
          Arrangement and for the Interim Order, and thereafter proceed with and
          diligently pursue the obtaining of the Interim Order;

     (b)  as  soon  as  reasonably  practicable  after  the  execution  of  this
          Agreement,  convene  and hold the  Company  Shareholders'  Meeting  in
          accordance  with  Section  5.1  for the  purpose  of  considering  the
          Arrangement  Resolution  (and for any other  proper  purpose as may be
          acceptable to Parent, acting reasonably,  and as may be set out in the
          notice for such meeting);  provided,  however, that Parent may require
          that the Company adjourn or postpone the Company Shareholders' Meeting
          for a period of time  specified by Parent if on the scheduled  date of
          such  Company  Shareholders'  Meeting  all  of the  Consents  required
          pursuant  to  Section  6.8 have not been  obtained,  or for other good
          reason as determined by Parent;

     (c)  subject to  obtaining  such  approvals  as are required by the Interim
          Order, proceed with and diligently pursue the application to the Court
          for the Final Order;

     (d)  subject to obtaining the Final Order and the satisfaction or waiver of
          the other conditions  herein contained in favor of each party, send to
          the Director, for endorsement and filing by the Director, the Articles
          of  Arrangement  and  such  other  documents  as  may be  required  in
          connection therewith under the CBCA to give effect to the Arrangement;



                                      D-2

<PAGE>


     (e)  provide Parent with copies of and a reasonable  opportunity to comment
          on all applications,  circulars and other documents  prepared by or on
          behalf of the Company in connection  with the Arrangement and make any
          changes  to  such   applications,   circulars  and  documents  as  are
          acceptable to the Company and Parent, each acting reasonably; and

     (f)  enter into such asset  purchase  agreements  and other  documents  and
          instruments  with Parent and the  Purchaser as Parent or the Purchaser
          may  designate on such terms as Parent or the  Purchaser may designate
          providing for the transfer of the Adobe Assets (as defined in the Plan
          of Arrangement) to Parent and the transfer of the Purchaser Assets (as
          defined in the Plan of  Arrangement)  to the Purchaser as contemplated
          by or as may  otherwise be  consistent  with the Plan of  Arrangement,
          including  without  limitation  Section  2.02  thereof,  and  take all
          actions  and  fulfill  all  responsibilities  required  of the Company
          thereunder.

     1.2  Interim   Order.   In  the  notice  of  motion  for  the   application
          contemplated  by Section  1.1(a),  the Company  shall request that the
          Interim Order provide:

     (a)  for the class of Persons to whom  notice is to be  provided in respect
          of the Arrangement and the Company  Shareholders'  Meeting and for the
          manner in which such notice is to be provided;

     (b)  that the requisite  approval for the Arrangement  Resolution  shall be
          66-2/3% of the votes cast on the Arrangement Resolution by the Company
          Shareholders   present   in  person   or  by  proxy  at  the   Company
          Shareholders' Meeting;

     (c)  that, in all other respects, the terms, restrictions and conditions of
          the bylaws and articles of incorporation of the Company shall apply in
          respect of the Company Shareholders' Meeting; provided,  however, that
          for  purposes of the Company  Shareholders'  Meeting,  a quorum  shall
          exist if two Company Shareholders are present in person or represented
          by  proxy or power of  attorney  and each is  entitled  to vote at the
          Company Shareholders' Meeting, and Parent may require that the Company
          adjourn or postpone the Company  Shareholders' Meeting for a period of
          time  specified  by Parent if on the  scheduled  date of such  Company
          Shareholders' Meeting all of the Consents required pursuant to Section
          6.8 have not been obtained,  or for other good reason as determined by
          Parent; and

     (d)  for the grant of Dissenters' Rights to the holders of Common Shares.

     1.3  Articles of Arrangement.  The Articles of Arrangement shall, with such
          other matters as are necessary to effect the  Arrangement,  and all as
          subject  to  the  provisions  of  the  Plan  of  Arrangement,  provide
          substantially as follows:

     (a)  that each  outstanding  Common Share (other than (i) the Common Shares
          that are held by holders who have exercised their  Dissenters'  Rights
          in  accordance  with  Section  1.7  and  Article  3  of  the  Plan  of
          Arrangement and who are ultimately  entitled to be paid the fair value
          for such Common Shares, (ii) the Common Shares that are held by Parent
          or any of its wholly owned subsidiaries,  if any, and (iii) any Common
          Shares then held by the Company or any wholly owned  Subsidiary of the
          Company  (or  held in the  Company's  treasury)),  together  with  any
          associated  Rights,  shall be  transferred  by the  holder  thereof to
          either the Company or  Purchaser in exchange for a fraction of a fully
          paid and  non-assessable  share of Parent  Common  Stock  equal to the
          Exchange  Ratio,  all as more fully described in Article 2 of the Plan
          of Arrangement, and the name of each such Company Shareholder shall be
          removed from the register of Company Shareholders,  and Purchaser will
          be  recorded as the holder of such Common  Shares so  transferred  and
          will be deemed to be the legal and beneficial owner thereof;

     (b)  that  if  any  Common  Shares  outstanding  immediately  prior  to the
          Effective  Time are  unvested or are subject to a  repurchase  option,
          risk of forfeiture or other condition under any applicable  restricted
          stock purchase  agreement or other agreement with the Company or under
          which the  Company has any  rights,  then the shares of Parent  Common
          Stock issued in exchange for such Common  Shares will also be unvested
          and subject to the same repurchase option, risk of forfeiture or other
          condition,  and the  certificates  representing  such shares of Parent
          Common Stock may accordingly be marked with appropriate legends;



                                      D-3

<PAGE>

     (c)  that no  fractional  shares of Parent Common Stock shall be delivered,
          and that in lieu thereof, each Company Shareholder who otherwise would
          be entitled to receive a fraction  of a share of Parent  Common  Stock
          (after  aggregating  all  fractional  shares  of Parent  Common  Stock
          issuable to such Company  Shareholder) shall be paid by the Depository
          in an amount  determined by  multiplying  such fraction by the closing
          price of a share of Parent  Common  Stock,  as  reported on The Nasdaq
          National  Market,  on the last  trading day  immediately  prior to the
          Effective  Time, all as more fully  described in Article 4 of the Plan
          of Arrangement; and

     (d)  that  each  Company  Option  that  is  outstanding   and   unexercised
          immediately  prior to the Effective  Time will be  terminated  and the
          holder thereof otherwise treated pursuant to the terms of Section 5.3.

     1.4  Management Proxy Circular; Securities Law Compliance.

     (a)  As promptly as  reasonably  practicable  after the  execution  of this
          Agreement, and in any event within 15 days thereafter,  Parent and the
          Company, in consultation with each other, shall prepare the Management
          Proxy  Circular  together  with any other  documents  required  by the
          Canadian  Securities  Laws, the Exchange Act or other applicable Legal
          Requirements in connection with the Arrangement, and the Company shall
          cause the Management Proxy Circular and other  documentation  required
          in  connection  with the Company  Shareholders'  Meeting to be sent to
          each Company  Shareholder  and filed as required by the Interim  Order
          and applicable Legal Requirements.  Without limiting the generality of
          the foregoing, the Management Proxy Circular will comply as to form in
          all material  respects with the provisions of the Exchange Act and the
          rules and  regulations  promulgated by the SEC  thereunder,  and shall
          comply with all of the  requirements  thereunder for proxy  statements
          filed by issuers whose  securities are  registered  under the Exchange
          Act.

     (b)  The Company will respond to any comments of the SEC and will cause the
          Management Proxy Circular to be mailed to the Company  Shareholders at
          the earliest reasonably  practicable time after all required approvals
          of securities regulatory  authorities have been obtained.  The Company
          will notify Parent  promptly upon the receipt of any comments from the
          Canadian  Securities  Commissions  or the SEC or any other  government
          officials in connection  with any filing made  pursuant  hereto and of
          any request by the Canadian  Securities  Commissions or the SEC or any
          other  government  officials  for  amendments  or  supplements  to the
          Management  Proxy  Circular  or for  additional  information  and will
          supply Parent with copies of all correspondence between the Company or
          any  of its  representatives,  on  the  one  hand,  and  the  Canadian
          Securities  Commissions or the SEC or any other government  officials,
          on the other hand, with respect to the Management Proxy Circular.  The
          Company will cause all  documents  that it is  responsible  for filing
          with  the  Canadian  Securities  Commissions  or the SEC or any  other
          government  authorities  under  this  Section 1.4(b) to  comply in all
          material respects with all applicable Legal Requirements.  Parent will
          cause all documents or other  information  that it is responsible  for
          filing  with the  Canadian  Securities  Commissions  or the SEC or any
          other government  authorities  under this  Section 1.4(b) or  which is
          provided by Parent  expressly for  inclusion in any document  filed by
          the  Company  under  this  Section  1.4(b) to  comply in all  material
          respects with all applicable  Legal  Requirements.  Whenever any event
          occurs which is required to be set forth in an amendment or supplement
          to the Management  Proxy  Circular,  the Company will promptly  inform
          Parent of such  occurrence  and  cooperate in filing with the Canadian
          Securities  Commissions or the SEC or any other government  officials,
          and/or  mailing  to  the  Company  Shareholders,   such  amendment  or
          supplement.

     (c)  Parent and the Company shall use all reasonable  efforts to obtain all
          orders  (to  the  extent   required)  from  the  applicable   Canadian
          securities  authorities  and the SEC to permit the  issuance and first
          resale of the Parent Common Stock issued pursuant to the  Arrangement,
          without  qualification  with  or  approval  of or  the  filing  of any
          document,  including any prospectus or similar document, or the taking
          of any proceeding with, or the obtaining of any further order,  ruling
          or consent from, any Governmental  Body or regulatory  authority under
          any Canadian  Securities Laws or other Legal  Requirements or pursuant
          to the  policies,  rules  and  regulations  of any  Governmental  Body
          administering   such   Canadian   Securities   Laws  or  other   Legal
          Requirements, or the fulfillment of any other Legal Requirement in any
          such jurisdiction (other than, with respect to such first resales, any
          restrictions  on transfer by reason of, among other  things,  a holder
          being a "control  person" of Parent or the  Company  for  purposes  of
          Canadian Securities Laws).

     1.5  Preparation of Filings.

     (a)  Parent and the Company shall use their reasonable efforts to cooperate
          with one another in:



                                      D-4

<PAGE>

     (i)  the  preparation  of any  application  for the  orders,  any  required
          registration  statements and any other documents  reasonably deemed by
          Parent or the Company to be necessary to  discharge  their  respective
          obligations  under United States federal or state  securities laws and
          under Canadian  Securities Laws in connection with the Arrangement and
          the other transactions contemplated hereby;

     (ii) the taking of all such action as may be required  under any applicable
          United States federal or state  securities laws  (including  "blue sky
          laws") and any applicable  Canadian Securities Laws in connection with
          the  issuance  of the  Parent  Common  Stock  in  connection  with the
          Arrangement;  provided, however, that, notwithstanding anything to the
          contrary  contained  in this  Agreement,  with  respect  to the United
          States  "blue sky" and  Canadian  provincial  qualifications,  neither
          Parent nor the Company (or any  Subsidiary  or  Affiliate of Parent or
          the  Company)  shall be  required  to register or qualify as a foreign
          corporation or reporting issuer where any such Entity is not now or on
          the Closing Date so registered or qualified; and

     (iii)the  taking of all such  action as may be  required  under the CBCA in
          connection  with the  transactions  contemplated by this Agreement and
          the Plan of  Arrangement.

     (b)  Each of Parent  and the  Company  shall  furnish to the other all such
          information  concerning it and its shareholders as may be required for
          the  effectuation  of the  actions  described  in Section 1.4 and this
          Section 1.5.

     (c)  Each of Parent and the Company  will notify the other  promptly of the
          receipt of any comments from Canadian Securities Commissions,  the SEC
          or its staff and of any  request by Canadian  Securities  Commissions,
          the SEC or its staff for  amendments or  supplements to the Management
          Proxy Circular or a registration statement described in Section 1.5 or
          for additional  information,  and will supply the other with copies of
          all correspondence  with Canadian Securities  Commissions,  the SEC or
          its staff with respect to the  Management  Proxy  Circular or any such
          registration  statement.  Parent and the Company  shall each  promptly
          notify the other if at any time before or after the Effective  Time it
          becomes aware that the Management Proxy Circular or an application for
          an order or a registration statement described in Section 1.5 contains
          any untrue  statement of a material  fact or omits to state a material
          fact required to be stated therein or necessary to make the statements
          contained  therein not  misleading  in light of the  circumstances  in
          which  they are made,  or that  otherwise  requires  an  amendment  or
          supplement to the  Management  Proxy  Circular or such  application or
          registration  statement.  In any such  event,  Parent and the  Company
          shall  co-operate in the  preparation  of a supplement or amendment to
          the Management Proxy Circular or such other document,  as required and
          as the case may be,  and,  if  required,  shall  cause  the same to be
          distributed to the Company Shareholders and/or filed with the relevant
          securities regulatory authorities and/or stock exchanges.

     (d)  The Company shall ensure that the Management Proxy Circular (including
          all  information   regarding  the  Acquired  Corporations  and  Parent
          included  therein)  complies with all applicable  Legal  Requirements.
          Without  limiting the generality of the  foregoing,  the Company shall
          ensure  that  the  Management  Proxy  Circular  provides  the  Company
          Shareholders  with information in sufficient  detail to permit them to
          form a reasoned  judgement  concerning the matters to be placed before
          them at the Company  Shareholders'  Meeting and Parent shall have Made
          Available all information  regarding Parent  reasonably  necessary for
          the Company to do so.

     1.6  Dissenting Shares.

     (a)  Notwithstanding  any provision of this Agreement to the contrary,  the
          shares of any holder of Company  Common  Shares who has  demanded  and
          perfected appraisal and dissenters' rights ("Dissenters'  Rights") for
          such shares in accordance  with the Interim Order or the CBCA and who,
          as of the Effective Time, has not  effectively  withdrawn or lost such
          appraisal rights, shall not represent a right to receive Parent Common
          Stock pursuant to Section 1.3(a), but the holder thereof shall only be
          entitled to such  rights as are  granted by the  Interim  Order or the
          CBCA, as the case may be.

     (b)  Notwithstanding  the  provisions of Section  1.6(a),  if any holder of
          Company  Common Shares who demands  appraisal of such shares under the
          CBCA shall  effectively  withdraw (or otherwise by law not be entitled
          to) the right to  appraisal,  then,  as of the later of the  Effective
          Time and the  occurrence  of such event,  such  holder's  shares shall
          automatically represent the right to receive Parent Common Stock, upon
          surrender of the certificate  representing  such shares, in accordance
          with Section 1.3(a).


                                      D-5

<PAGE>

     (c)  The Company shall give Parent (i) prompt notice of any written demands
          for  appraisal  of any  Company  Common  Shares,  withdrawals  of such
          demands,  and any other  instruments  served  pursuant to the CBCA and
          received by the Company which relate to any such demand for appraisal,
          and  (ii) the  opportunity  to  participate  in all  negotiations  and
          proceedings  which take place prior to the Effective Time with respect
          to demands for appraisal under the CBCA. The Company shall not, except
          with the prior written consent of Parent, voluntarily make any payment
          with respect to any demands for appraisal of Company  Common Shares or
          offer to settle or settle any such demands.

     1.7  Tax and  Accounting  Consequences.  It is intended by the parties that
          the  Arrangement  shall not  constitute  a  reorganization  within the
          meaning of Section 368  of the IRC and shall be a taxable  transaction
          to  holders  of Common  Shares  for  purposes  of the  Income  Tax Act
          (Canada).  It is intended by the parties that the Arrangement shall be
          treated  as a  "purchase"  for  accounting  purposes.  Nothing in this
          Agreement shall prohibit or otherwise be deemed to prevent Parent from
          making any election otherwise available to it under Section 338 of the
          IRC.

     2.   Representations and Warranties of the Company

     The Company represents and warrants to Parent and Purchaser,  except as set
forth in the Disclosure  Schedule  prepared in accordance  with Section 9.6 (and
subject to the provisions of Section 9.6), as follows:

     2.1  Subsidiaries; Due Organization; Etc.

     (a)  The  Company  has  no   Subsidiaries,   except  for  the  corporations
          identified in Part 2.1(a)(i) of the Disclosure  Schedule;  and neither
          the  Company  nor any of the  other  corporations  identified  in Part
          2.1(a)(i) of the  Disclosure  Schedule  owns any shares in the capital
          of, or any equity  interest of any nature in, any other Entity,  other
          than the Entities  identified  in Part  2.1(a)(ii)  of the  Disclosure
          Schedule.  (The Company and each of its  Subsidiaries  are referred to
          collectively in this Agreement as the "Acquired  Corporations.")  None
          of the Acquired Corporations has agreed or is obligated to make, or is
          bound by any Acquired  Corporation  Contract under which it may become
          obligated to make, any future investment in or capital contribution to
          any other Entity. None of the Acquired  Corporations has, at any time,
          been a general partner of, or has otherwise been liable for any of the
          debts  or other  obligations  of,  any  general  partnership,  limited
          partnership or other Entity.

     (b)  Each of the Acquired  Corporations  is a corporation  duly  organized,
          validly  existing and (except where the failure to be in good standing
          would not be  material to the  Company or to the  Subsidiaries  of the
          Company  taken  as a whole)  in good  standing  under  the laws of the
          jurisdiction  of its  incorporation,  and has all necessary  power and
          authority:  (i) to  conduct  its  business  in the manner in which its
          business is currently being conducted;  (ii) to own and use its assets
          in the manner in which its assets are  currently  owned and used;  and
          (iii) to  perform  its  obligations  under  all  Acquired  Corporation
          Contracts by which it is bound.

     (c)  Each of the  Acquired  Corporations  is  qualified to do business as a
          foreign  corporation,  and is in good standing,  under the laws of all
          jurisdictions   where  the  nature  of  its  business   requires  such
          qualification, except where the failure to do so would individually or
          in the aggregate not be material to the Company or to the Subsidiaries
          of the Company taken as whole.

     2.2  Certificate of Incorporation and Bylaws.  The Company has delivered or
          Made  Available  to  Parent   accurate  and  complete  copies  of  the
          certificate of incorporation,  articles,  bylaws and other charter and
          organizational  documents  of the  Company  and each of the  Company's
          Subsidiaries, including all amendments thereto.

     2.3  Capitalization, Etc.

     (a)  The  authorized  capital of the Company  consists of (i) an  unlimited
          number  of  Common  Shares,   of  which   24,969,838  are  issued  and
          outstanding  as of the  date of this  Agreement,  and  (ii)  2,263,782
          Convertible Preference Shares, of which none are issued or outstanding
          as of the date of this Agreement. All of the outstanding Common Shares
          have been duly authorized and validly  issued,  and are fully paid and
          nonassessable.  There  are no Common  Shares  held by any of the other
          Acquired  Corporations.  None  of the  outstanding  Common  Shares  is
          entitled or subject to any preemptive right, right of participation or
          any  similar

D-6

<PAGE>

          right enforceable against the Company;  none of the outstanding Common
          Shares  is  subject  to any  right  of first  refusal  in favor of the
          Company;  and,  except  for  confidentiality  agreements  relating  to
          Acquisition  Proposals containing customary  "stand-still"  provisions
          (copies  of which  have been  provided  to  Parent,  except  for those
          Acquisition  Proposals disclosure of which by the Company is expressly
          prohibited  or which have been  disclosed by the Company to Parent but
          which contain  binding terms that prohibit the Company from  providing
          copies to Parent),  there is no Acquired Corporation Contract relating
          to the voting or  registration  of, or  restricting  any  Person  from
          purchasing,  selling,  pledging or otherwise disposing of (or granting
          any option or similar right with respect to), any Common Shares.  None
          of the Acquired  Corporations is under any obligation,  or is bound by
          any  Acquired  Corporation  Contract  pursuant  to which it may become
          obligated, to repurchase,  redeem or otherwise acquire any outstanding
          Common Shares.

     (b)  As of the date of this  Agreement:  (i)  there  are no  Common  Shares
          subject to issuance  pursuant to stock options granted and outstanding
          under the Company's  1993 Employee  Stock Option Plan;  (ii) 4,663,311
          Common  Shares  are  subject to  issuance  pursuant  to stock  options
          granted and  outstanding  under the Company's  1995 Stock Option Plan;
          (iii) 400,000 Common Shares are reserved for future issuance  pursuant
          to the  Company's  1997  Employee  Stock  Purchase  Plan (the "Company
          ESPP");  (iv) a  sufficient  number of Common  Shares are reserved for
          future  issuance upon  exercise of the rights  issued  pursuant to the
          Company  Rights  Plan  to  satisfy  all of the  Company's  obligations
          thereunder;  and (v)  200,000  shares  of  Company  Common  Stock  are
          reserved for future  issuance at a price per share of (Cdn.) $5.75 per
          Common Share pursuant to  after-market  support options with an expiry
          date of October  11, 2002  issued by the  Company to  underwriters  in
          connection  the  Company's  offering  of Common  Shares  pursuant to a
          prospectus filed with the Canadian securities  regulatory  authorities
          on  October 4, 2000 (the  "Underwriter  Support  Options").  (Purchase
          rights and options to purchase Common Shares  (whether  granted by the
          Company  pursuant to the Company Option Plans,  assumed by the Company
          in connection with any arrangement, merger, amalgamation,  acquisition
          or similar transaction or otherwise issued or granted) are referred to
          in  this  Agreement  as  "Company  Options.")  Part  2.3(b)(i)  of the
          Disclosure Schedule sets forth the following  information with respect
          to each Company Option  outstanding as of the date of this  Agreement:
          (i) the Company  Option Plan (if any)  pursuant to which such  Company
          Option was granted; (ii) the name of the optionee; (iii) the number of
          Common Shares subject to such Company Option;  (iv) the exercise price
          of such Company Option;  (v) the date on which such Company Option was
          granted;  and (vi) the extent to which such  Company  Option is vested
          and exercisable as of the date of this  Agreement.  Part 2.3(b)(ii) of
          the Disclosure Schedule sets forth the methodology for determining the
          applicable  exercise  price and the number of Common Shares  available
          for  purchase  and the  following  information  with  respect  to each
          purchase option  outstanding  under the Company ESPP as of the date of
          this Agreement:  (i) the name of the  participant;  (ii) the amount of
          withholdings  in each plan  participant's  account as at February  15,
          2002;  and  (iii)  the  applicable  option  period.  The  Company  has
          delivered or Made Available to Parent  accurate and complete copies of
          all stock plans pursuant to which any of the Acquired Corporations has
          granted  outstanding  stock  awards,  and the forms of all  agreements
          evidencing such awards.

     (c)  Except as set forth or referenced  in Sections  2.1(a) or 2.3(b) or as
          disclosed in Part 2.3(c) of the Disclosure Schedule and other than the
          Company Rights Plan, there is no (i) outstanding subscription, option,
          call,  warrant  or right  granted  by or  binding  upon  any  Acquired
          Corporation  (whether  or not  currently  exercisable)  to acquire any
          Common  Shares or other shares of the capital  stock of the Company or
          other securities of any of the Acquired Corporations; (ii) outstanding
          security,  instrument or obligation  that has the right to vote (other
          than the Common Shares) or that is or may become  convertible  into or
          exchangeable  for any  Common  Shares or other  shares of the  capital
          stock or other securities of any of the Acquired  Corporations;  (iii)
          shareholder  rights plan (or similar  plan  commonly  referred to as a
          "poison pill") or Acquired Corporation Contract under which any of the
          Acquired  Corporations is or may become obligated to sell or otherwise
          issue any Common  Shares or other  shares of its capital  stock or any
          other securities;  or (iv) to the knowledge of the Company,  condition
          or  circumstance  that may give  rise to or  provide  a basis  for the
          assertion  of a  claim  by any  Person  against  any  of the  Acquired
          Corporations  to the effect that such Person is entitled to acquire or
          receive any shares of capital stock or other  securities of any of the
          Acquired Corporations.

     (d)  All outstanding Common Shares, options,  warrants and other securities
          of  the  Acquired   Corporations  have  been  issued  and  granted  in
          compliance in all material respects with (i) all applicable securities
          laws  and  other   applicable   Legal   Requirements,   and  (ii)  all
          requirements set forth in applicable Acquired Corporation Contracts.

     (e)  All  of the  outstanding  shares  of  capital  stock  of  each  of the
          Company's Subsidiaries have been duly authorized


                                      D-7

<PAGE>

          and  validly  issued,  are fully  paid and  nonassessable  and free of
          preemptive  rights,  with  no  personal  liability  attaching  to  the
          ownership  thereof,  and are owned  beneficially  and of record by the
          Company  or by  another  Acquired  Corporation,  free and clear of any
          Encumbrances,  other than (i) Permitted Liens,  (ii) such Encumbrances
          as are described in Part 2.3(e) of the Disclosure Schedule,  and (iii)
          restrictions on transfer contained in the articles of incorporation or
          other  similar  organizational  documents of the  Subsidiaries  of the
          Company.

     2.4  Securities Filings; Financial Statements; Books and Records

     (a)  The Company has Made  Available to Parent,  through  their  posting on
          SEDAR or otherwise,  accurate and complete copies of all prospectuses,
          proxy statements and other statements,  reports,  schedules, forms and
          other  documents  filed by the Company  with the  Canadian  Securities
          Commissions,  and all  amendments  thereto  (the  "Company  Securities
          Commission Documents"). All statements,  reports, schedules, forms and
          other  documents  required to have been filed by the Company  with the
          Canadian  Securities  Commissions have been so filed on a timely basis
          except  where  the  failure  to do so  would  individually  or in  the
          aggregate not be material to the Company or to the Subsidiaries of the
          Company  taken  as a  whole.  None of the  Company's  Subsidiaries  is
          required  to  file  any   documents   with  the  Canadian   Securities
          Commissions.  As of the time it was filed with the Canadian Securities
          Commissions  (or, if amended or  superseded  by a filing  prior to the
          date of this Agreement,  then on the date of such filing): (i) each of
          the Company Securities  Commission  Documents complied in all material
          respects with the applicable  requirements of the Canadian  Securities
          Laws;  and (ii) none of the Company  Securities  Commission  Documents
          contained any untrue  statement of a material fact or omitted to state
          a material fact required to be stated therein or necessary in order to
          make the statements  therein,  in the light of the circumstances under
          which they were made, not misleading.

     (b)  The Company has Made  Available to Parent,  through  their  posting on
          EDGAR or otherwise,  accurate and complete copies (excluding copies of
          exhibits) of each report,  registration statement and definitive proxy
          statement filed by the Company with the SEC since January 1, 1999 (the
          "Company SEC Documents").  All statements,  reports,  schedules, forms
          and other  documents  required to have been filed by the Company  with
          the SEC have been so filed on a timely  basis except where the failure
          to do so would individually or in the aggregate not be material to the
          Company or to the  Subsidiaries of the Company taken as a whole. As of
          the time it was filed with the SEC (or, if amended or  superseded by a
          filing prior to the date of this  Agreement,  then on the date of such
          filing):  (i)  each  of the  Company  SEC  Documents  complied  in all
          material  respects with the applicable  requirements of the Securities
          Act or the  Exchange  Act (as the case may be);  and (ii)  none of the
          Company SEC  Documents  contained  any untrue  statement of a material
          fact or omitted to state a material fact required to be stated therein
          or necessary in order to make the statements  therein, in the light of
          the circumstances under which they were made, not misleading.

     (c)  Except as disclosed  in Part 2.4(c) of the  Disclosure  Schedule,  the
          financial  statements  (including any related notes)  contained in the
          Company  Securities   Commission  Documents  or  in  the  Company  SEC
          Documents at the time filed (or, if amended or  superceded by a filing
          prior to the date of this Agreement, then on the date of such filing):
          (i) complied as to form in all material  respects  with the  published
          rules,  regulations,  policies and notices of the Canadian  Securities
          Commissions or the SEC (as the case may be) applicable  thereto;  (ii)
          were  prepared  in  accordance  with  generally  accepted   accounting
          principles  of the  applicable  jurisdiction  applied on a  consistent
          basis  throughout the periods  covered  (except as may be indicated in
          the notes to such  financial  statements  or, in the case of unaudited
          statements,  as permitted by the Canadian Securities Commissions,  and
          except  that  the  unaudited  financial  statements  may  not  contain
          footnotes and are subject to normal and recurring year-end adjustments
          that  will not,  individually  or in the  aggregate,  be  material  in
          amount); and (iii) fairly present the consolidated  financial position
          of the Company and its consolidated  subsidiaries as of the respective
          dates  thereof and the  consolidated  results of  operations  and cash
          flows of the Company and its consolidated subsidiaries for the periods
          covered thereby.

     (d)  The books, records and accounts of each of the Acquired  Corporations,
          in all material respects,  (i) have been maintained in accordance with
          good business  practices  consistent with prior years, (ii) are stated
          in  reasonable   detail  and   accurately   and  fairly   reflect  the
          transactions   and   dispositions  of  the  assets  of  such  Acquired
          Corporations and (iii) accurately and fairly reflect the basis for the
          financial  statements  referred to in Section 2.4(c).  The Company has
          devised  and  maintains  a  system  of  internal  accounting  controls
          sufficient to provide reasonable  assurances that (i) transactions are
          executed  in  accordance   with   management's   general  or  specific


                                      D-8

<PAGE>

          authorization;  and (ii) transactions are recorded as necessary (A) to
          permit preparation of financial statements in conformity with Canadian
          generally  accepted  accounting  principles,  United States  generally
          accepted  accounting  principles or any other  criteria  applicable to
          such statements and (B) to maintain accountability for assets.

     2.5  Absence of Changes.  Since  October 31,  2001,  except as disclosed in
          Part 2.5 of the Disclosure Schedule:

     (a)  no event,  violation,  circumstance  or other  matter has  occurred or
          arisen that, in  combination  with any other events or  circumstances,
          has had or would  reasonably  be expected  to have a Material  Adverse
          Effect on the Company;

     (b)  there has not been any material loss, damage or destruction to, or any
          material  interruption  in the use of, any of the assets of any of the
          Acquired  Corporations  (whether  or not  covered by  insurance)  that
          individually  or in the aggregate  would be material to the Company or
          to the Subsidiaries of the Company taken as a whole;

     (c)  none of the Acquired Corporations has (i) declared, accrued, set aside
          or paid any dividend or made any other  distribution in respect of any
          shares of capital stock,  or (ii)  repurchased,  redeemed or otherwise
          reacquired any shares of capital stock or other securities;

     (d)  none of the  Acquired  Corporations  has sold,  issued or granted,  or
          authorized  the  issuance of, (i) any shares,  capital  stock or other
          security  (except for Common Shares issued upon the valid  exercise of
          outstanding  Company  Options or issued pursuant to the Company ESPP),
          (ii) any option, warrant or right to acquire any shares, capital stock
          or any other security (except for Company Options or options under the
          Company ESPP  identified in Parts 2.3(b)(i) and (ii) of the Disclosure
          Schedule),  or (iii) any instrument  convertible  into or exchangeable
          for any shares, capital stock or other security;

     (e)  the  Company  has not  amended or waived any of its rights  under,  or
          permitted the  acceleration of vesting under, (i) any provision of any
          of the  Company  Option  Plans,  (ii) any  provision  of any  Acquired
          Corporation  Contract  evidencing any outstanding  Company Option,  or
          (iii) any restricted stock purchase agreement;

     (f)  there  has been no  amendment  to the  certificate  of  incorporation,
          articles,  bylaws or other charter or organizational  documents of any
          of the Acquired  Corporations,  and none of the Acquired  Corporations
          has effected or been a party to any merger, amalgamation, arrangement,
          consolidation, share exchange, business combination, recapitalization,
          reclassification  of  shares,  stock  split,  reverse  stock  split or
          similar transaction;

     (g)  none  of  the  Acquired  Corporations  has  accepted  any  Acquisition
          Proposal,  and none of the  Acquired  Corporations  has  received  any
          Acquisition  Proposal  except for the Open Text Offer or as  otherwise
          set forth on Part 2.3(5)(g) of the Disclosure Schedule;

     (h)  none  of the  Acquired  Corporations  has  formed  any  Subsidiary  or
          acquired any equity interest or other interest in any other Entity;

     (i)  none of the  Acquired  Corporations  has made any capital  expenditure
          which, when added to all other capital  expenditures made on behalf of
          the  Acquired  Corporations  between  October 31, 2001 and the date of
          this Agreement, exceeds (Cdn.) $1,550,000 in the aggregate;

     (j)  none of the  Acquired  Corporations  has (i) entered into or permitted
          any of the assets,  including  the  Acquired  Corporation  Proprietary
          Assets,  owned or used by it to become bound by any Material  Contract
          (as defined in Section 2.10) except in the ordinary course of business
          and consistent with past practices, or (ii) amended or terminated,  or
          waived any  material  right or remedy  under,  any  Material  Contract
          (except  for  amendments,  terminations  or  waivers  with  respect to
          Material  Contracts  described in Section  2.10(a)(ii)  that have been
          entered  into or  performed  in the  ordinary  course of business  and
          consistent with past practices);

     (k)  none of the Acquired Corporations has (i) acquired, leased or licensed
          any  material  right or other  material  asset  from any other  Person
          except in the  ordinary  course of business and  consistent  with past
          practices,  (ii) sold or otherwise disposed of, or leased or licensed,
          any material  right or other  material  asset to any other Person,  or
          (iii) waived or relinquished any material right;


                                      D-9

<PAGE>


     (l)  none of the Acquired Corporations has written off as uncollectible, or
          established  any  extraordinary  reserve  with respect to, any account
          receivable  or other  indebtedness  having a value in excess of (Cdn.)
          $300,000 in any individual case and (Cdn.) $700,000 in the aggregate;

     (m)  none of the  Acquired  Corporations  has made any pledge of any of its
          assets or otherwise  permitted any of its assets to become  subject to
          any Encumbrance, except for Permitted Liens and pledges of assets made
          in the ordinary course of business and consistent with past practices;

     (n)  none of the Acquired Corporations has (i) lent money to any Person, or
          (ii) incurred or guaranteed any  indebtedness for borrowed money in an
          aggregate amount in excess of (Cdn.) $10,000;

     (o)  none of the  Acquired  Corporations  has (i) adopted,  established  or
          entered  into any  Employee  Plan (as defined in Section  2.17),  (ii)
          caused or permitted  any  Employee  Plan to be amended in any material
          respect,  or (iii)  except as  required  by the  express  terms of the
          Employee Plans disclosed in Part 2.17 of the Disclosure  Schedule (and
          without any  discretion on the part of the Company to fail to make any
          such payment),  paid any bonus or made any  profit-sharing  or similar
          payment to, or materially  increased the amount of the wages,  salary,
          commissions,  fringe  benefits or other  compensation  or remuneration
          payable to, any of its directors, officers or employees, except to the
          extent described in Part 2.5(o) of the Disclosure Schedule;

     (p)  none of the  Acquired  Corporations  has changed any of its methods of
          accounting  or  accounting  principles  or  practices  in any respect,
          except as otherwise  required by Canadian or United  States  generally
          accepted accounting principles;

     (q)  none of the Acquired Corporations has made any Tax election;

     (r)  none  of the  Acquired  Corporations  has  commenced  or  settled  any
          material  Legal  Proceeding  or  dispute  or  other  matter  with  any
          Governmental Body (including with respect to the assessment or payment
          of any Tax);

     (s)  none of the  Acquired  Corporations  has  entered  into  any  material
          transaction   or  taken  any  other  material   action  that,   either
          individually  or in the  aggregate,  has had, or could  reasonably  be
          expected to have, a Material Adverse Effect on the Company;

     (t)  none of the  Acquired  Corporations  has  entered  into  any  material
          transaction  or taken any other  material  action outside the ordinary
          course of business or  inconsistent  with past practices which has not
          been  disclosed in the Company SEC  Documents  or  otherwise  publicly
          disclosed by the Company; and

     (u)  none of the Acquired  Corporations has agreed or committed to take any
          of the actions referred to in clauses "(c)" through "(t)" above.

     2.6  Title to Assets.  The  Acquired  Corporations  own,  and have good and
          valid title to, all assets  purported to be owned by them,  including:
          (i) all  assets  reflected  on the  Unaudited  Interim  Balance  Sheet
          (except for  inventory  sold or otherwise  disposed of in the ordinary
          course of business  since the date of the  Unaudited  Interim  Balance
          Sheet);  and (ii) all other assets  reflected in the books and records
          of  the  Acquired   Corporations   as  being  owned  by  the  Acquired
          Corporations.   All  of  said   assets  are  owned  by  the   Acquired
          Corporations free and clear of any Encumbrances,  except for Permitted
          Liens and liens described in Part 2.6 of the Disclosure Schedule.

     2.7  Receivables; Customers; Inventories.

     (a)  All  existing  accounts   receivable  of  the  Acquired   Corporations
          (including  those  accounts  receivable  reflected  on  the  Unaudited
          Interim  Balance  Sheet  that  have not yet been  collected  and those
          accounts  receivable  that have arisen since October 31, 2001 and have
          not yet been collected) (a) represent  valid  obligations of customers
          of the  Acquired  Corporations  arising  from bona  fide  transactions
          entered into in the ordinary course of business, (b) will be collected
          in full,  without any counterclaim or set off (net of an allowance for
          doubtful accounts not to exceed (Cdn.) $4,050,000 in the aggregate).


                                      D-10

<PAGE>

     (b)  Part  2.7(b) of the  Disclosure  Schedule  contains  an  accurate  and
          complete  list as of the  date of this  Agreement  of all  outstanding
          loans and  advances  made by any of the Acquired  Corporations  to any
          employee,  director,  consultant or independent contractor, other than
          routine  travel,  meal and related  advances  made to employees in the
          ordinary course of business.

     (c)  Part 2.7(c) of the  Disclosure  Schedule  accurately  identifies,  and
          provides an accurate and complete  breakdown of the revenues  received
          from,  each customer or other Person that  accounted for (i) more than
          $100,000 of the consolidated gross sales of the Acquired  Corporations
          in the fiscal year ended April 30, 2001,  or (ii) more than $50,000 of
          the consolidated gross sales of the Acquired  Corporations in the nine
          month period ended January 31, 2002. To the knowledge of the directors
          and members of senior  management of the Company,  the Company has not
          received any notice or other  communication (in writing or otherwise),
          and has not  received  any  other  information,  indicating  that  any
          customer or other Person  identified in Part 2.7(c) of the  Disclosure
          Schedule may cease dealing with any of the Acquired Corporations.

     2.8  Real Property; Equipment; Leasehold.

     (a)  All material items of equipment and other tangible  assets owned by or
          leased to the Acquired Corporations are adequate for the uses to which
          they  are  being  put,  are in good  and  safe  condition  and  repair
          (ordinary  wear and tear excepted) and are adequate for the conduct of
          the business of the Acquired  Corporations in the manner in which such
          business  is  currently   being   conducted.   None  of  the  Acquired
          Corporations  own any real property or any interest in real  property,
          except  for the  leaseholds  created  under the real  property  leases
          identified in Part 2.8(a)(i) of the Disclosure Schedule.

     (b)  The leaseholds  created under the real property  leases  identified in
          Part 2.8(a)(i) of the Disclosure Schedule, together with such executed
          offers to lease,  agreements  to lease,  leases,  renewals  of leases,
          tenancy agreements, rights of occupation,  licenses or other occupancy
          agreements  entered  into during the  Pre-Closing  Period and approved
          pursuant  to  Section  4.2(b) of this  Agreement,  and  including  any
          parking and storage space leases (collectively,  the "Leases") are the
          only binding offers to lease, agreements to lease, leases, renewals of
          leases,  tenancy agreements,  rights of occupation,  licenses or other
          occupancy agreements granted in favor of the Acquired  Corporations or
          any of their  predecessors to possess or occupy space now or hereafter
          which are currently,  or may in the future, be enforceable against any
          Acquired  Corporation.  The respective Acquired Corporation under each
          Lease is in occupation of the premises  demised pursuant to such Lease
          and is paying the full rent due in  accordance  with the terms of such
          Lease,  no material  default is existing on the part of the respective
          Acquired  Corporation or, to the Company's  knowledge,  on the part of
          any landlord under any of the Leases and each of the Leases is in good
          standing.

     2.9  Proprietary Assets.

     (a)  Part 2.9(a)(i) of the Disclosure  Schedule sets forth, with respect to
          each Proprietary  Asset owned by any of the Acquired  Corporations and
          registered with any Governmental  Body or for which an application has
          been filed with any Governmental Body, (i) a brief description of such
          Proprietary Asset, (ii) the names of the jurisdictions  covered by the
          applicable  registration  or  application,   and  (iii)  the  date  of
          issuance,  filing or renewal (the  "Registered  Proprietary  Assets").
          Part 2.9(a)(ii) of the Disclosure  Schedule  identifies and provides a
          brief  description of, and identifies any ongoing license fee, royalty
          or payment obligations which, either alone or in the aggregate, are or
          in the future may be, in excess of (Cdn.) $5,000 with respect to, each
          Proprietary  Asset that is licensed or otherwise  made available to or
          used by any of the Acquired Corporations by any Person (except for any
          Proprietary  Asset that is licensed to any Acquired  Corporation under
          any third party software license  generally  available to the public),
          and identifies (i) the Contract under which such Proprietary  Asset is
          being licensed or otherwise made available to or used by such Acquired
          Corporation,  (ii)  whether  such  third  party  Proprietary  Asset is
          embedded or bundled with any Acquired Corporation Proprietary Asset or
          independently  distributed  by  an  Acquired  Corporation  (and  if so
          embedded or bundled,  the specific  Acquired  Corporation  Proprietary
          Asset with which such third  party  Proprietary  Asset is  embedded or
          bundled),  and  (iii)  if so  embedded  or  bundled  or  independently
          distributed,  any  representations,  warranties,  support obligations,
          indemnities or other commitments made by an Acquired  Corporation to a
          licensee in respect of such Proprietary  Asset which are not supported
          in any  material  way by a similar  commitment  under  the  applicable
          Contract  in favor of an Acquired  Corporation  pursuant to which such
          Proprietary Asset was licensed to the Acquired


                                      D-11

<PAGE>

          Corporation (except where the absence of such support is immaterial to
          the Acquired  Corporation's  ability to provide any such obligation or
          commitment).

     (b)  The  Acquired  Corporations  have good and  valid  title to all of the
          Registered  Proprietary  Assets  and to any  and  all  other  Acquired
          Corporation  Proprietary  Assets which are material to the business of
          the Acquired Corporations,  including each and every Product Currently
          in Use (the  "Material  Unregistered  Proprietary  Assets"),  free and
          clear of all  Encumbrances,  except  for  Permitted  Liens.  Except as
          disclosed in Part 2.9(b)(i) of the Disclosure  Schedule,  the Acquired
          Corporations  have the exclusive  right to bring  actions  against any
          Person that is infringing any Registered Proprietary Asset or Material
          Unregistered Proprietary Asset. The Acquired Corporations have a valid
          right  to  use,   license  and  otherwise   exploit  all  third  party
          Proprietary  Assets  identified  or required to be  identified in Part
          2.9(a)(ii) or Part 2.9(b)(ii) of the Disclosure  Schedule or otherwise
          material to the business of the Acquired Corporations in the manner in
          which such third party  Proprietary  Assets have been or are currently
          used,  licensed or exploited by the Acquired  Corporations.  Except as
          disclosed  in  Parts  2.9(a)(ii)  and  2.9(b)(ii)  of  the  Disclosure
          Schedule,  none of the Products  Currently in Use or in development by
          the Acquired  Corporations  include any third party Proprietary Asset.
          None  of  the  Products  Currently  in Use  or in  development  by the
          Acquired  Corporations  include  any  third  party  software  code  or
          technology licensed to such Acquired Corporation under an agreement or
          on terms and  conditions  under  which  the  Acquired  Corporation  is
          obligated,  or  purported  to be  obligated,  to disclose to, or share
          ownership   with,   any  third  party  of  any  Acquired   Corporation
          Proprietary  Asset that uses,  incorporates  or modifies  the licensed
          software code or  technology.  In respect of each  Acquired  Corporate
          Contract entered into in respect of the Proprietary  Assets set out in
          Part  2.9(a)(ii) or Part  2.9(b)(ii) of the  Disclosure  Schedule,  an
          Acquired  Corporation  (i) has been  provided with source code, or any
          required  portion,  aspect or segment of any source  code  relating to
          such Proprietary  Asset,  (ii) has arranged for such source code to be
          escrowed  with an  independent  third  party in  respect  of each such
          Proprietary  Asset  where  access by an  Acquired  Corporation  may be
          required in order for such Acquired  Corporation to continue to embed,
          support or otherwise make use of such  Proprietary  Asset in the event
          of  any   insolvency,   bankruptcy  or  similar  event  affecting  the
          applicable  third party,  (iii) does not require access to such source
          code  in  order  to  permit  the  Acquired  Corporation  to  use  such
          Proprietary Asset in the manner  contemplated by the license agreement
          relating  to such  Proprietary  Asset,  or as  required  by any of the
          Acquired  Corporations to perform their existing  obligations to third
          parties or (iv) has  determined  reasonably and in good faith that the
          third  party  Proprietary  Asset,  if it  became  unavailable  to  the
          Acquired  Corporation,  is replaceable  with an equivalent third party
          Proprietary  Asset at reasonable cost to the Acquired  Corporation and
          without disruption to the operation of the Product in respect of which
          such third party Proprietary Asset is utilized. None of the Registered
          Proprietary Assets or Material Unregistered  Proprietary Assets or, to
          the knowledge of the Company,  any  Proprietary  Assets  identified in
          Part  2.9(a)(ii)  or Part  2.9(b)(ii) of the  Disclosure  Schedule are
          subject to any outstanding  order,  judgment,  decree,  stipulation or
          agreement  restricting  the  use  thereof  or  restricting  the  sale,
          transfer,  assignment  or  licensing  thereof.  None  of the  Acquired
          Corporations has developed  jointly with any other Person any Acquired
          Corporation  Proprietary Asset that is material to the business of the
          Acquired  Corporations and with respect to which such other Person has
          any  rights.  There is no  Acquired  Corporation  Contract  (with  the
          exception of escrow agreements,  end user license agreements,  support
          agreements,   consulting  agreements,   distribution  agreements,  OEM
          agreements,  partner  agreements and other  customer  contracts in the
          forms  previously Made Available by the Company to Parent) pursuant to
          which any Person has any right (whether or not currently  exercisable)
          to  use,  license  or  otherwise  exploit  any  Acquired   Corporation
          Proprietary  Asset that is  material to the  business of the  Acquired
          Corporation.

     (c)  The  Acquired   Corporations   have  taken  reasonable   measures  and
          precautions to protect and maintain the  confidentiality,  secrecy and
          value of all material Acquired Corporation  Proprietary Assets (except
          for (i) disclosures  required in connection  with the  registration or
          application for registration of Registered  Proprietary Assets or (ii)
          other  Acquired  Corporation  Proprietary  Assets whose value would be
          unimpaired  by  disclosure).  Without  limiting the  generality of the
          foregoing,  (i)  each  current  or  former  employee  of any  Acquired
          Corporation  who is or was involved in, or who has contributed to, the
          creation  or   development  of  any  material   Acquired   Corporation
          Proprietary   Asset  has  executed  and  delivered  to  such  Acquired
          Corporation  an agreement  (containing  no material  exceptions  to or
          exclusions  from the scope of its  coverage)  that is  similar  in all
          material  respects  to one of the  forms of  employee  confidentiality
          agreement disclosed in Part 2.9(c)(i) of the Disclosure Schedule,  and
          (ii)  except  as  disclosed  in  Part  2.9(c)(ii)  of  the  Disclosure
          Schedule,   each  current  and  former   consultant  and   independent
          contractor to any Acquired  Corporation  who is or was involved in, or
          who has  contributed  to, the creation or  development of any material
          Acquired  Corporation  Proprietary Asset has executed and delivered to
          the Company an  agreement  (containing  no material  exceptions  to or
          exclusions  from the scope of its  coverage)  that is  similar  in all
          material  respects  to  the  form  of  "Contractor   Agreement  as  to


                                      D-12

<PAGE>

          Confidentiality of Information and Ownership of Proprietary  Property"
          previously  Made  Available  by the  Company to Parent.  No current or
          former  employee,  officer,  director,   shareholder,   consultant  or
          independent  contractor  has any right,  claim or  interest in or with
          respect to any Registered  Proprietary  Asset,  Material  Unregistered
          Proprietary Asset, or other material Acquired Corporation  Proprietary
          Asset.

     (d)  The Acquired Corporations have obtained in writing appropriate waivers
          of moral  rights in their favor and in favor of their  successors  and
          assigns as well as copyright assignments in writing,  where necessary,
          from all Persons whose  copyrightable work has been  incorporated,  in
          whole or in part, into any material Acquired  Corporation  Proprietary
          Asset owned by any of the Acquired Corporations,  and all such waivers
          are  irrevocable  and  without  any  limitations  of any kind.  To the
          knowledge of the Company,  no current employee or consultant of any of
          the  Acquired   Corporations  whose  duties  or  responsibilities  are
          important to the business of the  Acquired  Corporations  is obligated
          under any agreement (including  licenses,  covenants or commitments of
          any  nature) in such  manner,  or subject to any  judgment,  decree or
          order of any court or administrative  agency, or any other restriction
          that would  materially  interfere with the carrying out of its, his or
          her duties for the Acquired Corporations,  or to promote the interests
          of the Acquired  Corporations,  in their  current  businesses  or that
          would conflict with the business of the Acquired Corporations

     (e)  All  patents,  trademarks,  service  marks  and  copyrights  held  and
          Currently  in  Use by any of  the  Acquired  Corporations  are  valid,
          enforceable  and  subsisting  and  none  of the  Acquired  Corporation
          Proprietary  Assets,  including  no Acquired  Corporation  Proprietary
          Asset  that  is  currently  being  developed  by any  of the  Acquired
          Corporations  (either by itself or with any other Person),  infringes,
          misappropriates  or conflicts with any Proprietary Asset owned or used
          by  any  other  Person.  None  of  the  products,  systems,  software,
          hardware,   computer  programs,  source  code,  object  code,  models,
          algorithm,  formula,  compounds,   inventions,   designs,  technology,
          proprietary rights or other intellectual property rights or intangible
          assets that is or has been designed,  created,  developed,  assembled,
          manufactured   or  sold  by  any  of  the  Acquired   Corporations  is
          infringing,  misappropriating  or making any unlawful or  unauthorized
          use of any  Proprietary  Asset owned or used by any other Person,  and
          none of such products has at any time  infringed,  misappropriated  or
          made any unlawful or unauthorized use thereof.  Except as disclosed in
          Part  2.9(e)  of  the  Disclosure  Schedule,   none  of  the  Acquired
          Corporations has received any notice, claim or other communication (in
          writing  or  otherwise)  of  (i)  any  actual,  alleged,  possible  or
          potential  infringement,  misappropriation or unlawful or unauthorized
          use or misuse by any Acquired  Corporation  (or by any licensee of any
          Product of any of the  Acquired  Corporations  in a manner which would
          cause a prudent Acquired Corporation to be concerned that any Acquired
          Corporation Proprietary Asset may also be so misused by such licensee)
          of, any Proprietary  Asset owned or used by any other Person,  or (ii)
          suggesting that any other Person has or may have any claim of legal or
          beneficial  ownership  or other  claim  or  interest  in any  Acquired
          Corporation  Proprietary  Asset.  To the best of the  knowledge of the
          Company, no other Person is infringing, misappropriating or making any
          unlawful or  unauthorized  use of, and no  Proprietary  Asset owned or
          used by any other Person  infringes or  conflicts  with,  any material
          Acquired Corporation Proprietary Asset.

     (f)  To the  best of the  knowledge  of the  Company,  there  are no  legal
          opinions  to  the  effect  that  any  of the  subject  matters  of the
          Proprietary Assets may be or are invalid or unenforceable, or official
          actions or,  except as disclosed in the Part 2.9(f) of the  Disclosure
          Schedule,  other notices from any regulatory authority or governmental
          department, office or agency that any of the subject matters or claims
          of pending  applications  for  registration  constituting  any of such
          Proprietary Assets are unregistrable.

     (g)  Except  in the  ordinary  course  of  business  consistent  with  past
          practices   (which   include,   for   greater   certainty,   customary
          arrangements with distributors,  OEMs, VARs and channel partners based
          substantially on the forms previously Made Available by the Company to
          Parent) or as disclosed in the Part 2.9(g) of the Disclosure Schedule,
          none of the Acquired  Corporations  have granted any Person any right,
          license or  permission  to use any of the marks  which are part of the
          Acquired  Corporation  Proprietary Assets. None of the marks which are
          Currently  in Use have been or are now involved in any  opposition  or
          cancellation  proceedings,  nor are any such proceedings threatened to
          the knowledge of the Company.

     (h)  The  Acquired  Corporation   Proprietary  Assets  constitute  all  the
          Proprietary  Assets  necessary to enable the Acquired  Corporations to
          conduct  their  business in the manner in which such business has been
          or is being  conducted  or to  deliver  or provide  the  products  and
          services  which have been or are  offered  by or under such  business.
          None of the Acquired  Corporations  has (i) except as disclosed in the
          Part 2.9(h) of the Disclosure


                                      D-13

<PAGE>

          Schedule,  licensed any Acquired Corporation Proprietary Assets to any
          Person on an exclusive  basis, or (ii) except as disclosed in the Part
          2.9(h) of the  Disclosure  Schedule,  entered into any covenant not to
          compete or Acquired  Corporation  Contract  limiting or  purporting to
          limit the ability of any  Acquired  Corporation  to exploit  fully any
          Acquired Corporation Proprietary Assets or to transact business in any
          market or geographical area or with any Person.

     (i)  None of the Acquired  Corporations  has  disclosed or delivered to any
          Person,  or permitted  the  disclosure  or, except as disclosed in the
          Part  2.9(i)(i)  of the  Disclosure  Schedule,  delivery to any escrow
          agent or other  Person,  of any Acquired  Corporation  Source Code. No
          event has occurred,  and no  circumstance  or condition  exists,  that
          (with or without notice or lapse of time) will, or could reasonably be
          expected to, result in the disclosure or delivery to any Person of any
          Acquired Corporation Source Code or the release from any escrow of any
          other Acquired  Corporation  Proprietary Asset. Part 2.9(i)(ii) of the
          Disclosure  Schedule  identifies  each  Person in  respect of which an
          escrow account has been established in which the Company has deposited
          or is required to deposit with an escrowholder or any other Person any
          Acquired  Corporation  Source  Code.  Except  pursuant  to such escrow
          Contracts,  none of the  Acquired  Corporation  Source  Code  has been
          removed from the premises of the Acquired  Corporations listed in Part
          2.9(i)(iii) of the Company  Disclosure  Schedule  except in connection
          with  ordinary  course data back-ups and disaster  recovery  measures.
          Neither the execution of this Agreement nor the consummation of any of
          the transactions  contemplated  hereby could reasonably be expected to
          result in the release or disclosure of any Acquired Corporation Source
          Code or the release from any escrow of any other Acquired  Corporation
          Proprietary Asset. Except for licensees of the Acquired  Corporations,
          no Person  has been  provided  with a copy of the  object  code of any
          Acquired Corporation Proprietary Asset which is Currently in Use by an
          Acquired  Corporation  and which is  material  to the  conduct  of the
          business of any Acquired Corporation by any Acquired Corporation.

     (j)  Except with  respect to  demonstration  or trial  copies,  no product,
          system, program or software module designed, developed, sold, licensed
          or otherwise made available by any of the Acquired Corporations to any
          Person  contains any "back door," "time bomb," "Trojan horse," "worm,"
          "drop dead  device,"  "virus" or other  software  routines or hardware
          components  designed  to permit  unauthorized  access or to disable or
          erase software, hardware or data without the consent of the user.

     2.10 Contracts.

     (a)  Parts  2.8,  2.9  and  2.10 of the  Disclosure  Schedule  describe  or
          otherwise identify all Acquired Corporation  Contracts that constitute
          "Material Contracts." (For purposes of this Agreement,  in addition to
          the  Contracts  listed in Parts  2.8,  2.9 and 2.10 of the  Disclosure
          Schedule,  each of the following Acquired Corporation  Contracts shall
          be deemed to constitute a "Material Contract"):

     (i)  any Acquired  Corporation  Contract (A) relating to the employment of,
          or the  performance  of services by, any employee or  consultant,  (B)
          pursuant to which any of the  Acquired  Corporations  is or may become
          obligated  to make any  severance,  termination,  change in control or
          similar payment to any current or former employee or director,  or (C)
          pursuant to which any of the  Acquired  Corporations  is or may become
          obligated to make any bonus or similar  payment  (other than  payments
          constituting  base salary) in excess of (Cdn.)  $10,000 to any current
          or former employee or director;

     (ii) any  Acquired   Corporation  Contract  relating  to  the  acquisition,
          transfer,  development,  sharing or license of any  Proprietary  Asset
          (except for any Contract  pursuant to which (A) any Proprietary  Asset
          is  licensed  to the  Acquired  Corporations  under  any  third  party
          software  license  generally  available  to the  public,  or  (B)  any
          Acquired Corporation Proprietary Asset which is not material to any of
          the Acquired  Corporations'  respective  businesses and is licensed by
          any of the  Acquired  Corporations  to any  Person on a  non-exclusive
          basis);

     (iii)any Acquired  Corporation  Contract that provides for  indemnification
          of any officer, director or employee of any Acquired Corporation;

     (iv) any  Acquired  Corporation  Contract  pursuant to which (a) any monies
          have  been  loaned to any of the  Acquired  Corporations  (other  than
          inter-company  loans among the Acquired  Corporations),  or (B) any of
          the Acquired  Corporations  has granted a security  interest in any of
          its assets, other than security interests described in Part 2.6 of the
          Disclosure  Schedule and minor security  interests that have arisen in
          the ordinary course of business and


                                      D-14

<PAGE>

          that  are  not  (individually  or in the  aggregate)  material  to the
          Company or to the Subsidiaries of the Company taken as a whole;

     (v)  any Acquired  Corporation  Contract imposing any material  restriction
          (other  than   customary  and   commercially   reasonable   geographic
          restrictions) on the right or ability of any Acquired  Corporation (A)
          to compete with any other Person, (B) other than distribution or other
          partner  Contracts  including  customary and  commercially  reasonable
          restrictions  (including  restrictions  within a specified  geographic
          area) on the  Acquired  Corporations,  to acquire any product or other
          asset or any services from any other Person,  (C) to solicit,  hire or
          retain  any  Person  as  an  employee,   consultant   or   independent
          contractor,   except  for   customary  and   commercially   reasonable
          non-solicitation provisions of limited scope and duration, and subject
          to customary  qualifications,  entered into in the ordinary  course of
          business with third parties, (D) to develop, sell, supply, distribute,
          offer, support or service any product or any technology or other asset
          to or for any other  Person,  (E) to  perform  services  for any other
          Person,  or (F) to transact  business or deal in any other manner with
          any other Person;

     (vi) any Acquired  Corporation  Contract (other than Contracts entered into
          in  connection  with the  matters  disclosed  in Section  2.3(b))  (A)
          relating to the acquisition,  issuance, voting, registration,  sale or
          transfer  of  any   securities   currently   owned  by  any   Acquired
          Corporation, (B) providing any Person with any preemptive right, right
          of participation,  or similar right with respect to any securities, or
          (C) providing any of the Acquired Corporations with any right of first
          refusal  with  respect  to,  or right to  repurchase  or  redeem,  any
          securities;

     (vii)any Acquired  Corporation  Contract  incorporating  or relating to any
          guaranty, any warranty or any indemnity or similar obligation,  except
          for Contracts substantially similar to the end-user licenses,  support
          agreements,  consulting  agreements  and  other  Acquired  Corporation
          Contracts  in the forms  previously  Made  Available by the Company to
          Parent or Acquired Corporation  Contracts or otherwise entered into in
          the ordinary  course of the business of the Acquired  Corporations  in
          accordance with customary industry practices;

   (viii) any Acquired Corporation Contract relating to any currency hedging;

     (ix) any Acquired  Corporation  Contract  (A) imposing any  confidentiality
          obligation  on any  of the  Acquired  Corporations  or (B)  containing
          "standstill" or similar provisions;

     (x)  any Acquired  Corporation  Contract  outside of the ordinary course of
          business  consistent with past practice to which any Governmental Body
          is a party or under  which  any  Governmental  Body has any  rights or
          obligations;

     (xi) any Acquired  Corporation  Contract requiring that any of the Acquired
          Corporations  give any notice or provide any information to any Person
          prior to considering or accepting any Acquisition  Proposal or similar
          proposal,  or  prior to  entering  into  any  discussions,  agreement,
          arrangement or understanding  relating to any Acquisition  Transaction
          or similar transaction;

     (xii)any Acquired  Corporation  Contract that  contemplates or involves the
          guaranteed  payment or delivery of cash or other  consideration  in an
          amount or having a value in excess of (Cdn.)  $10,000 in the aggregate
          or the payment of such  consideration any time within six months prior
          to or  within  six  months  after  the  date  of  this  Agreement,  or
          contemplates or involves the performance of services having a value in
          excess of (Cdn.) $10,000 in the aggregate; and

   (xiii) any Acquired  Corporation Contract that is otherwise material to the
          Company  or to the  Subsidiaries  of the  Company  taken  as a  whole,
          including  any Contract  that could  reasonably  be expected to have a
          material  effect on the  ability of the  Company to perform any of its
          obligations   under,   or  to  consummate  any  of  the   transactions
          contemplated by, this Agreement.

The Company has Made  Available to Parent an accurate and complete  copy of each
Acquired  Corporation Contract that constitutes a Material Contract and that has
been specifically identified (rather than generally described) in Parts 2.8, 2.9
or  2.10 of the  Disclosure  Schedule,  and the  copies  of all  other  Acquired
Corporation  Contracts  that have been Made Available to Parent are accurate and
complete.


                                      D-15

<PAGE>

     (b)  Each  Acquired   Corporation  Contract  that  constitutes  a  Material
          Contract is valid and in full force and effect,  and is enforceable in
          accordance with its terms,  subject to (i) laws of general application
          relating to bankruptcy, insolvency and the relief of debtors, and (ii)
          rules of law governing  specific  performance,  injunctive  relief and
          other equitable remedies.

     (c)  None of the  Acquired  Corporations  has  violated  or breached in any
          material  respect,  or committed  any default in any material  respect
          under,  any Acquired  Corporation  Contract where any such  violation,
          breach or default (either individually or when considered collectively
          with  all  other  such  violations,  breaches  or  defaults)  would be
          material to the Company or to the Subsidiaries of the Company taken as
          a whole and, to the  knowledge  of the  Company,  no other  Person has
          violated or breached in any material respect, or committed any default
          in any material respect under, any Acquired Corporation Contract where
          any such  violation,  breach or default  (either  individually or when
          considered  collectively  with all other such violations,  breaches or
          defaults)  would be material to the Company or to the  Subsidiaries of
          the Company  taken as a whole.  Except as set forth in Part 2.10(c) of
          the Disclosure Schedule, to the knowledge of the Company, no event has
          occurred,  and no  circumstance  or  condition  exists,  that (with or
          without  notice or lapse of time)  could  reasonably  be  expected  to
          (A) result in a violation or breach in any material  respect of any of
          the provisions of any material Acquired Corporation Contract, (B) give
          any Person the right to declare a default or exercise any remedy under
          any Acquired  Corporation  Contract,  (C) give any Person the right to
          accelerate  the maturity or  performance  of any Acquired  Corporation
          Contract,  (D) result in the  disclosure,  release or  delivery of any
          Acquired  Corporation Source Code, or (E) give any Person the right to
          cancel,   terminate  or  modify  any  material  Acquired   Corporation
          Contract.  Except  as  disclosed  in Part  2.10(c)  of the  Disclosure
          Schedule, since January 1, 2000, none of the Acquired Corporations has
          received  any notice or other  communication  regarding  any actual or
          possible  violation  or breach  of, or  default  under,  any  material
          Acquired  Corporation Contract (other than doubtful accounts for which
          allowances have been made by the Company).

     (d)  There  are no,  and the  Company  has no  knowledge  of any,  material
          threatened  disputes or  disagreements  with  respect to any  Acquired
          Corporation  Contract  except  as  disclosed  in Part  2.10(d)  of the
          Disclosure Schedule.

     (e)  The Acquired Corporation Contracts which constitute licenses of goods,
          services or rights from third  parties  that are  incorporated  in any
          products,   services  or  rights  which  the   Acquired   Corporations
          sublicense to their customers are sublicensable in the manner in which
          such  third  party  products,  services  or  rights  have  been or are
          currently sublicensed by the Acquired Corporations without any further
          payment to any Person,  except as  identified  in Part  2.10(e) of the
          Disclosure  Schedule.  Except  as  disclosed  in Part  2.10(e)  of the
          Disclosure  Schedule,  no royalties,  fees,  honoraria,  volume-based,
          milestone or other payments are payable by any Acquired Corporation to
          any  Person  by  reason  of  the  ownership,   use,  sale,  licensing,
          distribution  or other  exploitation  of any third  party  Proprietary
          Asset  relating to the  conduct or  operation  of the  business of the
          Acquired  Corporations as they are currently conducted or the delivery
          or provision of any products, services or rights delivered or provided
          thereby or  thereunder,  except  for  obligations  relating  solely to
          end-user  operating systems and application  software,  the license of
          which is obtained with the acquisition or license thereof.

     (f)  Except as may be set forth in Part 2.10(f) of the Disclosure Schedule,
          none of the  Acquired  Corporations  has granted any other  Person any
          exclusive right to manufacture, have manufactured,  assemble, license,
          sublicense  or sell any products or proposed  products of the business
          of the  Acquired  Corporations  or to provide the services or proposed
          services of the business of the Acquired Corporations.

     2.11 Sale of Products; Performance of Services

     (a)  Each  product,  system,  program,  Proprietary  Asset or  other  asset
          designed,   developed,   manufactured,   assembled,  sold,  installed,
          repaired,  licensed or otherwise made available by any of the Acquired
          Corporations to any Person: (i) conformed and complied in all material
          respects with the terms and requirements of any applicable warranty or
          other  Contract  and  with all  applicable  Legal  Requirements;  (ii)
          contained  no  defects,   nonconformities   with   specifications   or
          associated user  documentation or malfunctions  which would materially
          affect the functioning of such item or any other associated such item,
          provided,   however,   that   any   defect   or   nonconformity   with
          specifications  shall  not be  deemed  to be so for  purposes  of this
          Section 2.11(a) if it was intended to be addressed in the next planned
          upgrade or  maintenance  release of the item and is  described in Part
          2.11(a)(i) of the Disclosure  Schedule;  (iii) was fully interoperable
          with the hardware and operating  platforms,  if any,  specified in any
          accompanying  user  documentation,   provided  that  it  was  used  in
          accordance  with the

                                      D-16

<PAGE>

          applicable  user  documentation;  (iv)  was  free of any  timer,  copy
          protection  device,  disabling code, clock,  counter or other limiting
          design  or  routing  which  was  designed  to cause  such item (or any
          portion thereof) to become erased, inoperable,  impaired, or otherwise
          incapable of being used in the full manner for which it was  designed;
          and (v) was free of any bug,  virus,  design defect or other defect or
          deficiency at the time it was sold or otherwise made available,  other
          than any  immaterial  bug or similar defect that has not had and would
          not have an adverse effect, in any material respect,  on such product,
          system, program, Acquired Corporation Proprietary Asset or other asset
          (or the operation or  performance  thereof).  An accurate and complete
          copy of the most  recent  "bug  list" with  respect  to each  product,
          system,   program  or  software   module  of  each  of  the   Acquired
          Corporations has been provided by the Company to Parent.

     (b)  All installation services, programming services, integration services,
          repair services,  maintenance  services,  support  services,  training
          services, upgrade services and other services that have been performed
          by the Acquired Corporations were performed properly and in conformity
          in all material  respects with (i) the terms and  requirements  of all
          applicable  warranties,  (ii) other  Contracts  of which the  Acquired
          Corporation  had  knowledge  and with which it was required to comply,
          and (iii) all applicable Legal Requirements.

     (c)  Except as disclosed in Part 2.11(c) of the Disclosure Schedule,  since
          January 1, 2000,  no customer or other  Person has asserted or, to the
          knowledge of the  Company,  threatened  to assert any  material  claim
          against any of the Acquired  Corporations  (i) under or based upon any
          warranty provided by or on behalf of any of the Acquired Corporations,
          or (ii)  based  upon any  services  performed  by any of the  Acquired
          Corporations.

     2.12 Liabilities.  None  of the  Acquired  Corporations  has  any  accrued,
          contingent  or other  liabilities  of any  nature,  either  matured or
          unmatured,  except  for:  (a)  liabilities  identified  as such in the
          "liabilities"  column of the  Unaudited  Interim  Balance  Sheet;  (b)
          normal and recurring  current  liabilities  that have been incurred by
          the  Acquired  Corporations  since  October 31,  2001 in the  ordinary
          course  of  business  and  consistent  with  past  practices;  and (c)
          liabilities described in Part 2.12 of the Disclosure Schedule.

     2.13 Compliance with Legal Requirements.  Each of the Acquired Corporations
          is, and has at all times since  January 1, 2000 been, in compliance in
          all material  respects with all applicable Legal  Requirements.  Since
          January 1, 2000,  none of the Acquired  Corporations  has received any
          notice  or other  communication  from any  Governmental  Body or other
          Person  regarding  any actual or possible  violation of, or failure to
          comply with, any material Legal Requirement.

     2.14 Certain Business Practices. None of the Acquired Corporations, and (to
          the knowledge of the Company) no director,  officer, agent or employee
          of any of the  Acquired  Corporations,  has (i)  used  any  funds  for
          unlawful  contributions,   gifts,   entertainment  or  other  unlawful
          expenses  relating  to  political  activity,  (ii)  made any  unlawful
          payment to foreign or domestic government officials or employees or to
          foreign or domestic  political  parties or  campaigns  or violated any
          provision  of the U.S.  Foreign  Corrupt  Practices  Act of  1977,  as
          amended or any  equivalent  legislation in any Canadian  province,  or
          (iii) made any other  unlawful  payment.  Except as  disclosed in Part
          2.14 of the  Disclosure  Schedule,  there is no  Acquired  Corporation
          Contract,  judgment,  injunction,  order or decree binding upon any of
          the Acquired  Corporations that has or could reasonably be expected to
          have the effect of  prohibiting,  restricting or materially  impairing
          any  business  practice  of  any  of the  Acquired  Corporations,  any
          acquisition  of property by any of the  Acquired  Corporations  or the
          conduct of business by any of the Acquired  Corporations  as currently
          conducted.

     2.15 Governmental Authorizations.

     (a)  The   Acquired    Corporations   hold   all   material    Governmental
          Authorizations  necessary  to  enable  the  Acquired  Corporations  to
          conduct  their  respective  businesses  in the  manner  in which  such
          businesses  are  currently  being  conducted.  All  such  Governmental
          Authorizations  are valid and in full force and effect.  Each Acquired
          Corporation  is, and at all times since  January 1, 2000 has been,  in
          substantial  compliance  with  the  terms  and  requirements  of  such
          Governmental  Authorizations.  Since  January  1,  2000,  none  of the
          Acquired  Corporations has received any notice or other  communication
          from any  Governmental  Body  regarding  (a) any  actual  or  possible
          violation of or failure to comply with any term or  requirement of any
          material  Governmental  Authorization,  or (b) any actual or  possible
          revocation,  withdrawal,  suspension,  cancellation,   termination  or
          modification   of  any   material   Governmental   Authorization.   No
          Governmental  Body has at any time  challenged in writing the right of
          any of the Acquired Corporations to design, manufacture, offer or sell
          any of its respective products or services.


                                      D-17

<PAGE>


     (b)  Part 2.15(b) of the  Disclosure  Schedule  describes the terms of each
          grant,  incentive or subsidy  provided or made available to or for the
          benefit of any of the Acquired  Corporations by any Canadian  (federal
          or provincial),  U.S. (federal or state) or foreign  Governmental Body
          or otherwise.  Each of the Acquired Corporations is in full compliance
          with  all of the  material  terms  and  requirements  of  each  grant,
          incentive and subsidy  identified or required to be identified in Part
          2.15(b) of the Disclosure Schedule. Neither the execution, delivery or
          performance of this Agreement, nor the consummation of the Arrangement
          or any of the other transactions  contemplated by this Agreement, will
          (with or without notice or lapse of time) give any Person the right to
          revoke,  withdraw,  suspend,  cancel, terminate or modify any material
          grant, incentive or subsidy identified or required to be identified in
          Part 2.15(b) of the Disclosure Schedule.

     2.16 Tax Matters.

     (a)  Each of the Tax  Returns  required  to be filed by or on behalf of the
          respective  Acquired  Corporations  with any  Governmental  Body  with
          respect to any taxable  period  ending on or before the  Closing  Date
          (the "Acquired  Corporation Returns") (i) has been or will be filed on
          or before the  applicable  due date  (including any extensions of such
          due date),  except where the failure to do so would not be material to
          the Company or to the  Subsidiaries  of the Company  taken as a whole,
          and  (ii) has  been,  or will be when filed,  prepared in all material
          respects in compliance with all applicable Legal Requirements and will
          be true and correct in all material respects. All amounts shown on the
          Acquired  Corporation  Returns to be due on or before the Closing Date
          have been or will be paid on or before the  earlier of the  applicable
          due date or the  Closing  Date.  All Taxes  required to be withheld or
          collected  have  been and will  continue  to be  withheld  and paid or
          remitted  on or before  the  applicable  due date up to and before the
          Closing Date.

     (b)  The  Unaudited  Interim  Balance  Sheet  fully  accrues all actual and
          contingent  liabilities  for Taxes with respect to all periods through
          October  31,  2001 in  accordance  with  Canadian  generally  accepted
          accounting  principles.  Each Acquired Corporation will establish,  in
          the ordinary  course of business and consistent  with past  practices,
          reserves  adequate  for the  payment of all Taxes for the period  from
          October 31, 2001 through the Closing Date.

     (c)  Except as  disclosed in Part 2.16(c) of the  Disclosure  Schedule,  no
          Acquired  Corporation  Return has ever been  audited or to the best of
          the knowledge of the Company,  examined by any  Governmental  Body. No
          extension or waiver of the limitation  period applicable to any of the
          Acquired  Corporation  Returns has been granted (by the Company or any
          other Person), and no such extension or waiver has been requested from
          any Acquired Corporation.

     (d)  Except as  disclosed in Part 2.16(d) of the  Disclosure  Schedule,  no
          claim,  Legal  Proceeding  adjustment,  assessment or  reassessment is
          pending  or, to the best of the  knowledge  of the  Company,  has been
          threatened, either formally or informally,  against or with respect to
          any  Acquired  Corporation  in  respect  of  any  Tax.  There  are  no
          unsatisfied  liabilities for Taxes (including  related  expenses) with
          respect  to any  notice  of  assessment  or  reassessment  or  similar
          document received by any Acquired  Corporation with respect to any Tax
          (other than  liabilities  for Taxes  asserted under any such notice of
          assessment  or  reassessment  or  similar  document  which  are  being
          contested in good faith by the Acquired  Corporations and with respect
          to which  adequate  reserves for payment have been  established on the
          Unaudited  Interim Balance  Sheet).  There are no liens for Taxes upon
          any of the assets of any of the Acquired Corporations except liens for
          current  Taxes  not  yet  due  and  payable.   None  of  the  Acquired
          Corporations  has entered  into or become  bound by any  agreement  or
          consent  pursuant  to any Tax laws that are  comparable  or similar to
          Section 341(f) of the IRC. None of the Acquired Corporations has been,
          and none of the Acquired Corporations will be, required to include any
          adjustment in taxable  income for any tax period (or portion  thereof)
          pursuant to any Tax laws that are comparable or similar to Section 481
          or 263A of the IRC as a result of transactions or events occurring, or
          accounting  methods  employed,  prior  to  the  Closing.  None  of the
          Acquired  Corporations  has  made  any  distribution  of  stock of any
          controlled  corporation,  as that term is defined in Section 355(a)(1)
          of the IRC.

     (e)  There is no agreement,  plan,  arrangement or other Contract  covering
          any  employee  or  independent   contractor  or  former   employee  or
          independent  contractor  of  any of the  Acquired  Corporations  that,
          considered individually or considered collectively with any other such
          Contracts,  will,  or could  reasonably  be  expected  to,  give  rise
          directly or  indirectly to the payment of any amount that would not be
          deductible pursuant to Section 280G

                                      D-18

<PAGE>

          or Section  162 of the IRC (or any  comparable  provision  of state or
          foreign Tax laws).  None of the Acquired  Corporations is, or has ever
          been, a party to or bound by any tax indemnity agreement,  tax sharing
          agreement, tax allocation agreement or similar Contract.

     (f)  Each Acquired  Corporation  is in full  compliance  with all terms and
          conditions of any Tax  exemptions,  Tax holiday or other Tax reduction
          agreement or order of any  Governmental  Body and the  consummation of
          the Arrangement will have no adverse effect on the continued  validity
          and effectiveness of any such Tax exemptions, Tax holiday or other Tax
          reduction agreement or order.

     (g)  None of the Acquired Corporations has deducted any amount in computing
          its income in a taxation  year which may be included  in a  subsequent
          taxation year under section 78 of the Income Tax Act (Canada).

     (h)  No   circumstances   exist  which  would  make  any  of  the  Acquired
          Corporations subject to the application of any of sections 79 to 80.04
          of the Income Tax Act (Canada).

     (i)  None of the Acquired  Corporations  has acquired  property or services
          from,  or disposed of property or provided  services to, a person with
          whom it does not deal at  arm's  length  (within  the  meaning  of the
          Income  Tax Act  (Canada))  for an amount  that is other than the fair
          market value of such property or services,  or has been deemed to have
          done so for purposes of the Income Tax Act (Canada).

     (j)  The paid-up  capital of the Common  Shares for  purposes of the Income
          Tax Act (Canada) is no less than (Cdn.) $160,000,000.

     2.17 Employee and Labor Matters; Benefit Plans.

     (a)  Part  2.17(a) of the  Disclosure  Schedule  identifies  each  material
          salary,   bonus,   vacation,    deferred    compensation,    incentive
          compensation, stock purchase, stock option, severance pay, termination
          pay, death and disability benefits, hospitalization,  medical, life or
          other  insurance,   flexible   benefits,   supplemental   unemployment
          benefits,  profit-sharing,  pension  or  retirement  plan,  program or
          agreement  and  each  other  employee   benefit  plan  or  arrangement
          (collectively,    the   "Employee   Plans")   sponsored,   maintained,
          contributed to or required to be contributed to by any of the Acquired
          Corporations  for the benefit of any current or former employee of any
          of the Acquired Corporations. The Company has Made Available to Parent
          accurate and complete  copies of the Employee Plans currently in force
          and all amendments thereto together with, as applicable,  accurate and
          complete copies of all funding  agreements and any Contracts  relating
          to  such  Employee  Plans  (including  service  provider   agreements,
          insurance contracts, minimum premium contracts,  stop-loss agreements,
          investment  management  agreements,   subscription  and  participation
          agreements and recordkeeping agreements),  all summary descriptions of
          the Employee Plans provided to past or present  participants  therein,
          the two most recent actuarial reports,  any annual information returns
          required  to  be  filed  under  a  Legal  Requirement,  the  financial
          statements,  if any,  and  evidence  of any  registration  in  respect
          thereof.

     (b)  None of the  Acquired  Corporations  has any  knowledge  of any  fact,
          condition or circumstance  since the date of the documents provided in
          accordance  with section 2.17(a) above which would  materially  affect
          the  information  contained  therein and, in  particular,  and without
          limiting the generality of the  foregoing,  no promises or commitments
          have been made by any of the Acquired  Corporations and no plans exist
          to amend any Employee Plan or to provide increased benefits thereunder
          to any employee, except as required by a Legal Requirement.

     (c)  All  of  the   Employee   Plans  are,   and  have  been  since   their
          establishment,  duly  registered  where required by Legal  Requirement
          (including  registration  with the relevant tax authorities where such
          registration  is  required  to  qualify  for tax  exemption  or  other
          beneficial  tax status and where such  exemption  or benefit  would be
          material to the Acquired  Corporation) and, in all material  respects,
          are  in  good  standing  under,  and in  compliance  with,  all  Legal
          Requirements.

     (d)  None of the  Acquired  Corporations  has ever  sponsored,  maintained,
          contributed  to or has been  required to  contribute to a pension plan
          registered under the Income Tax Act (Canada).

     (e)  All Employee  Plans have been  administered  in accordance  with their
          terms in all material respects, there are no


                                      D-19

<PAGE>

          outstanding  material  defaults or  violations  by any of the Acquired
          Corporations  of any  obligation  required  to be  performed  by it in
          connection with any Employee Plan and no order has been made or notice
          given  pursuant to any Legal  Requirements  requiring (or proposing to
          require)  any of the  Acquired  Corporations  to take (or refrain from
          taking) any action in respect of any Employee Plan.

     (f)  Except  where  the  failure  to do so  would  individually  or in  the
          aggregate not be material to the Company or to the Subsidiaries of the
          Company  taken  as  a  whole  ,  all  returns,  filings,  reports  and
          disclosures  relating to the Employee Plans  required  pursuant to the
          terms of the Employee  Plans,  Legal  Requirements  or any  regulatory
          authority,  have been  filed or  distributed  in  accordance  with all
          requirements, all filing fees and levies imposed on the Employee Plans
          by the regulatory  authorities or Legal Requirements have been made on
          a timely basis and the funds of the Employee  Plans are not exposed to
          any late filing fees that have not been remitted.

     (g)  There are no actions, suits, claims, trials, demands,  investigations,
          arbitrations  or  other  proceedings  pending  or,  to the best of the
          knowledge of the Company threatened with respect to the Employee Plans
          against  any of the  Acquired  Corporations,  the funding  agent,  the
          insurers  or the fund of such  Employee  Plans,  other than claims for
          benefits in the ordinary course.

     (h)  No event has occurred and no condition or circumstance exists that has
          resulted  or,  could  reasonably  result in any  Employee  Plan  being
          ordered or required to be  terminated  or wound-up in whole or in part
          or having its registration  under any Legal Requirements being refused
          or revoked or being placed under the  administration of any trustee or
          receiver  or any  regulatory  authority  or being  required to pay any
          material taxes or penalties under any Legal Requirements;

     (i)  No event has occurred and there has been no failure to act on the part
          of any of the Acquired Corporations or any administrator of any of the
          Employee Plans that could subject any of the Acquired  Corporations to
          the imposition of any tax, penalty or other disability with respect to
          any Employee Plans, whether by way of indemnity or otherwise.

     (j)  None of the Employee Plans are multi-employer benefit plans.

     (k)  No Employee Plan provides death,  medical or health benefits  (whether
          or not  insured)  with  respect to any  current or former  employee or
          director of any of the Acquired  Corporations after any termination of
          service of such employee or director.

     (l)  Except as set forth in Part 2.17(l) of the  Disclosure  Schedule or as
          otherwise provided in Section 5.10, neither the execution, delivery or
          performance of this Agreement, nor the consummation of the Arrangement
          or any of the other transactions  contemplated by this Agreement, will
          result in any bonus,  golden parachute,  severance or other payment or
          obligation to any current or former employee or director of any of the
          Acquired  Corporations  (whether or not under any Employee  Plan),  or
          materially  increase  the  benefits  payable  or  provided  under  any
          Employee Plan, or result in any acceleration of the time of payment or
          vesting of any such benefits.  Without  limiting the generality of the
          foregoing,  except  as set  forth in Part  2.17(l)  of the  Disclosure
          Schedule,  the  consummation of the Arrangement will not result in the
          acceleration of vesting of any unvested Company Options.

     (m)  Part  2.17(m)  of the  Disclosure  Schedule  contains  a  list  of all
          salaried employees of each of the Acquired Corporations as of the date
          of this Agreement,  and correctly reflects,  in all material respects,
          their names (where not  prohibited  under  applicable  privacy  laws),
          their  salaries,  any other  compensation  payable to them  (including
          compensation  payable  pursuant  to bonus,  deferred  compensation  or
          commission   arrangements),   their  dates  of  employment  and  their
          positions.  None  of  the  Acquired  Corporations  is a  party  to any
          collective bargaining agreement with a trade union or council of trade
          unions. No trade union,  council of trade unions,  employee bargaining
          agency or affiliated  bargaining  agent holds  bargaining  rights with
          respect  to any  of  the  Acquired  Corporations  employees  by way of
          certification,    interim   certification,    voluntary   recognition,
          designation  or  successor  rights,  has  applied  (at any time) to be
          certified as a bargaining  agent of any of the Acquired  Corporations'
          employees  or has  applied  to have any of the  Acquired  Corporations
          declared  a related  employer  pursuant  to the Labour  Relations  Act
          (Ontario).  Except  as set  forth in Part  2.17(m)  of the  Disclosure
          Schedule,  all  of the  employees  of the  Acquired  Corporations  are
          employed for an indefinite  term and the  employment of such employees
          may be terminated on reasonable notice or payment in lieu thereof.



                                      D-20

<PAGE>


     (n)  Part 2.17(n) of the Disclosure  Schedule  identifies  each employee of
          any of the Acquired Corporations who is not fully available to perform
          work  because of  disability  or other leave and sets forth the reason
          for such leave and the anticipated date of return to full service.

     (o)  There are no agreements for the payment of any pension,  bonus,  share
          of profits, retirement allowance, insurance,  hospitalization or other
          benefits for any of the employees of the Acquired  Corporations except
          as set out in Part 2.17(a) of the Disclosure Schedule.

     (p)  Each of the Acquired  Corporations  is in  compliance  in all material
          respects  with  all  applicable   Legal   Requirements   and  Acquired
          Corporation  Contracts relating to employment,  employment  standards,
          employment  practices,   wages,   bonuses,   benefits  and  terms  and
          conditions of  employment,  including  employee  compensation  matters
          except  where  the  failure  to so  comply,  individually  or  in  the
          aggregate, would not be material to the Company or to the Subsidiaries
          of the Company taken as a whole.

     (q)  There are no actual or to the best of the  knowledge  of the  Company,
          threatened material complaints or proceedings (nor, to the best of the
          knowledge  of the  Company,  any  facts or  circumstances  that  could
          reasonably  lead to a complaint or  proceeding)  involving  any of the
          Acquired  Corporations under the Labour Relations Act (Ontario) or any
          other similar  statute and there are no  proceedings  involving any of
          the Acquired  Corporations  under the Human Rights Act (Ontario),  the
          Employment Standards Act (Ontario),  the Pay Equity Act (Ontario), the
          Occupational Health and Safety Act (Ontario), the Workplace Safety and
          Insurance Act (Ontario),  the Employee  Health Tax Act (Ontario),  the
          Canada  Pension Plan or the  Employment  Insurance Act (Canada) or any
          other similar statute.

     (r)  There are no material  orders or assessments  outstanding or issued by
          the  Occupational  Safety and Health Branch of the Ontario Ministry of
          Labour which have not been complied  with or any material  outstanding
          orders,  assessments  or  proceedings  involving  any of the  Acquired
          Corporations'  employees  before  the  Ontario  Workplace  Safety  and
          Insurance Board or any other similar tribunal or body.

     (s)  Each of the Acquired Corporations has good employee relations, and the
          Company has no knowledge of any facts indicating that the consummation
          of the  Arrangement or any of the other  transactions  contemplated by
          this Agreement  (other than any  terminations of employment  resulting
          therefrom) will have a material  adverse effect on employee  relations
          of any of the Acquired Corporations.

     (t)  All  amounts  owing  in  respect  of  employee   payroll   withholding
          obligations,  remittances,  premiums,  contributions  and  assessments
          under  provincial or federal  statutes or employee  benefit plans have
          been  fully   accrued  in  the  books  and  records  of  the  Acquired
          Corporations  and  wages,  vacation  pay,  holiday  pay  and  employee
          benefits of the employees of the Acquired Corporations have been fully
          accrued in the  Corporations'  books and records and reflected as such
          in the Corporations' financial statements.

     (u)  Each employee of any of the Acquired  Corporations who participated in
          the Accelio Stock  Allocation  Program has executed one or more of the
          forms of ASAP  documents  previously  Made Available by the Company to
          Parent  or  Parent's  Representatives.  Except  as  disclosed  in Part
          2.17(u) of the Disclosure  Schedule,  each employee terminated as part
          of the terminations which occurred on or between March 1, 2001 and May
          31,  2001,  on or about  October 24, 2001 and on or about  November 8,
          2001 has also executed a General  Release,  substantially  in the form
          delivered  to  Parent  or  Parent's  Representatives  and the  related
          termination agreement letter, substantially in the form Made Available
          to Parent or Parent's Representatives.

     2.18 Environmental  Matters.  Each of the Acquired  Corporations  (i) is in
          compliance in all material respects with all applicable  Environmental
          Laws,   and  (ii)   possesses  all  permits  and  other   Governmental
          Authorizations required under applicable Environmental Laws, and is in
          compliance with the terms and conditions thereof. None of the Acquired
          Corporations  has  received  any  notice  or other  communication  (in
          writing or  otherwise),  whether from a  Governmental  Body,  citizens
          group,  employee or  otherwise,  that alleges that any of the Acquired
          Corporations is not in compliance with any Environmental  Law, and, to
          the best of the knowledge of the Company,  there are no  circumstances
          that  may  prevent  or  interfere  with the  compliance  by any of the
          Acquired Corporations with any Environmental Law in the future. To the
          knowledge  of the  Company,  (a)  all  property  that  is  leased  to,
          controlled  by or used by any of the  Acquired  Corporations,  and all


                                      D-21

<PAGE>

          surface water,  groundwater  and soil  associated  with or adjacent to
          such property,  is free of any Materials of  Environmental  Concern at
          levels  which  contravene,   or  which  would  require  investigatory,
          corrective or remedial  action to be taken under,  Environmental  Laws
          and any material  environmental  contamination of any nature, (b) none
          of  the  property  leased  to,  controlled  by or  used  by any of the
          Acquired  Corporations contains any aboveground or underground storage
          tanks, asbestos, equipment using PCBs, underground injection wells, or
          associated  works, and (c) none of the property leased to,  controlled
          by or used by any of the  Acquired  Corporations  contains  any septic
          tanks in which process  wastewater  or any Materials of  Environmental
          Concern have been disposed of. No Acquired  Corporation  has ever sent
          or  transported,  or arranged to send or  transport,  any Materials of
          Environmental  Concern  to a site  that,  pursuant  to any  applicable
          Environmental  Law,  (i) has been placed on the  "National  Priorities
          List" of  hazardous  waste  sites or any similar  state list,  (ii) is
          otherwise   designated  or   identified   as  a  potential   site  for
          remediation,   cleanup,   closure  or  other  environmental   remedial
          activity, or (iii) is subject to a Legal Requirement to take "removal"
          or "remedial"  action as detailed in any applicable  Environmental Law
          or to make payment for the cost of cleaning up any site. (For purposes
          of this  Section  2.18:  (A)  "Environmental  Law" means any  federal,
          provincial,  state,  local,  municipal  or foreign  Legal  Requirement
          relating to pollution or protection of human health or the environment
          (including  ambient air, surface water,  ground water, land surface or
          subsurface  strata),  including  any  law or  regulation  relating  to
          emissions, discharges, releases or threatened releases of Materials of
          Environmental  Concern,  or  otherwise  relating  to the  manufacture,
          processing, distribution, use, treatment, storage, disposal, transport
          or handling of Materials of Environmental  Concern; and (B) "Materials
          of Environmental Concern" include chemicals, pollutants, contaminants,
          wastes (including liquid,  industrial and hazardous waste),  hazardous
          material,  toxic  substances,   dangerous  substances,  petroleum  and
          petroleum  products and any other  substance  that is now or hereafter
          regulated  by any  Environmental  Law or that is otherwise a danger to
          health, reproduction or the environment.)

     2.19 Insurance.  The  Company  has Made  Available  to Parent a copy of all
          material insurance policies and all material  self-insurance  programs
          and materials  relating to the business,  assets and operations of the
          Acquired  Corporations.  Each of such  insurance  policies  is in full
          force  and  effect.  Since  January  1,  2000,  none  of the  Acquired
          Corporations has received any notice or other communication  regarding
          any  actual  or  possible  (a)  cancellation  or  invalidation  of any
          insurance  policy,  (b) refusal of any  coverage or  rejection  of any
          material claim under any insurance policy, or (c) material increase in
          the amount of the  premiums  payable  with  respect  to any  insurance
          policy.  There is no material pending  workers'  compensation or other
          claim under or based upon any insurance  policy of any of the Acquired
          Corporations.

     2.20 Transactions  with  Affiliates.  Except  as set  forth in the  Company
          Securities  Commission  Documents  filed  prior  to the  date  of this
          Agreement,  between  the date of the  Company's  last proxy  statement
          filed with the Canadian  Securities  Commissions  and the date of this
          Agreement, no event has occurred that would be required to be reported
          by the Company  pursuant to Item 8 of Form 30  prescribed  pursuant to
          Section 176 of the Regulation under the Securities Act (Ontario). Part
          2.20 of the Disclosure  Schedule identifies each Person who is (or who
          may be deemed to be) an "affiliate"  (as that term is used in Rule 145
          under  the  Securities  Act)  of the  Company  as of the  date of this
          Agreement.

     2.21 Legal Proceedings; Orders.

     (a)  Except as disclosed in Part 2.21(a) of the Disclosure Schedule,  there
          is no pending  Legal  Proceeding,  and to the best of the knowledge of
          the Company,  no Person has  threatened to commence any material Legal
          Proceeding:  (i) that involves any of the Acquired Corporations or any
          of  the  material  assets  owned  or  used  by  any  of  the  Acquired
          Corporations;  or (ii) that challenges, or that may have the effect of
          preventing,  delaying,  making illegal or otherwise  interfering with,
          the Arrangement or any of the other transactions  contemplated by this
          Agreement.  To the best of the knowledge of the Company,  no event has
          occurred,  and no claim,  dispute or other  condition or  circumstance
          exists that could  reasonably be expected to, give rise to or serve as
          a basis for the commencement of any such material Legal Proceeding.

     (b)  Except as disclosed in Part 2.21(b) of the Disclosure Schedule,  there
          is no order, writ, injunction,  judgment or decree to which any of the
          Acquired  Corporations,  or any of the assets  owned or used by any of
          the  Acquired  Corporations,  is  subject.  To  the  knowledge  of the
          Company,   no  officer  or  key   employee  of  any  of  the  Acquired
          Corporations is subject to any order,  writ,  injunction,  judgment or
          decree that  prohibits such officer or other employee from engaging in
          or  continuing  any  conduct,  activity  or  practice  relating to the
          business of any of the Acquired Corporations.


                                      D-22

<PAGE>


     2.22 Authority;   Binding   Nature   of   Agreement;   Inapplicability   of
          Anti-takeover  Statutes. The Company has the requisite corporate power
          and authority to enter into and to perform its obligations  under this
          Agreement.  Each of (a) the  Special  Committee,  and (b) the board of
          directors  of the  Company  (at  meetings  duly  called  and held) has
          (a) unanimously  determined that the Arrangement is advisable and fair
          to the Company  Shareholders and in the best interests of the Company,
          (b)  unanimously  authorized and approved the execution,  delivery and
          performance of this Agreement by the Company and unanimously  approved
          the  Arrangement,  and (c)  unanimously  determined  to recommend  the
          approval  of this  Agreement  and the  Arrangement  by the  holders of
          Common Shares and directed that this Agreement and the  Arrangement be
          submitted for consideration by the Company Shareholders at the Company
          Shareholders'  Meeting (as  defined in Section  5.1).  This  Agreement
          constitutes  the legal,  valid and binding  obligation of the Company,
          enforceable against the Company in accordance with its terms,  subject
          to (i) laws of general application relating to bankruptcy,  insolvency
          and any similar law relating to creditors'  rights,  and (ii) rules of
          law  governing  specific  performance,  injunctive  relief  and  other
          equitable  remedies.  No takeover statute or similar Legal Requirement
          applies or purports to apply to the Arrangement, this Agreement or any
          of the transactions contemplated hereby.

     2.23 No   Discussions.   None  of  the   Acquired   Corporations,   and  no
          Representative of any of the Acquired Corporations,  is engaged or has
          (from and after January 31, 2002 engaged),  directly or indirectly, in
          any discussions or negotiations  with any other Person relating to any
          Acquisition Proposal.

     2.24 Vote  Required.  Subject to the terms and  conditions  of the  Interim
          Order,   the  approval  of  this  Agreement  and  the  Arrangement  by
          two-thirds of the votes cast at the Company Shareholders' Meeting (the
          "Required Company  Shareholder  Vote") is the only vote of the holders
          of any  class  or  series  of the  Company's  capital  and  securities
          necessary to approve the Arrangement  and to otherwise  consummate the
          transactions contemplated by this Agreement.

     2.25 Non-Contravention;  Consents.  Neither (1) the execution,  delivery or
          performance of this Agreement, nor (2) the consummation by the Company
          of the  Arrangement or any of the other  transactions  contemplated by
          this Agreement, will directly or indirectly (with or without notice or
          lapse of time):

     (a)  contravene,  conflict  with or result in a violation of (i) any of the
          provisions of the articles or certificate of incorporation,  bylaws or
          other  charter  or  organizational  documents  of any of the  Acquired
          Corporations, or (ii) any resolution adopted by the shareholders,  the
          board of directors or any committee  (including the Special Committee)
          of the board of directors of any of the Acquired Corporations;

     (b)  subject  to   obtaining   the  Consents  set  forth  in  Section  6.8,
          contravene,  conflict  with or  result  in a  violation  of any  Legal
          Requirement  or any order,  writ,  injunction,  judgment  or decree to
          which any of the Acquired Corporations,  or any of the assets owned or
          used by any of the Acquired Corporations, is subject;

     (c)  contravene, conflict with or result in a violation of any of the terms
          or requirements of, or give any Governmental Body the right to revoke,
          withdraw,  suspend,  cancel,  terminate  or modify,  any  Governmental
          Authorization that is held by any of the Acquired Corporations or that
          otherwise relates to the business of any of the Acquired  Corporations
          or to  any  of the  assets  owned  or  used  by  any  of the  Acquired
          Corporations;

     (d)  contravene,  conflict  with or result in a violation  or breach of, or
          result in a default  under,  any  provision of any  material  Acquired
          Corporation   Contract   (or   Acquired   Corporation   Contracts   of
          substantially  the same form and that are collectively  material),  or
          give any Person the right to (i)  declare a default  or  exercise  any
          remedy under any such Acquired  Corporation  Contract,  (ii) a rebate,
          chargeback,  penalty  or change in  delivery  schedule  under any such
          Acquired  Corporation  Contract,  (iii)  accelerate  the  maturity  or
          performance of any such Acquired Corporation Contract, or (iv) cancel,
          terminate or modify any term of such Acquired Corporation Contract;

     (e)  result in the imposition or creation of any  Encumbrance  upon or with
          respect to any asset owned or used by any of the Acquired Corporations
          (except  for  minor  liens  that  will  not,  in  any  case  or in the
          aggregate,  materially  detract  from the value of the assets  subject
          thereto or  materially  impair the  operations  of any of the Acquired
          Corporations); or


                                      D-23

<PAGE>


     (f)  result in, or increase the  likelihood  of, the disclosure or delivery
          to any escrowholder or other Person of any Acquired Corporation Source
          Code,  or the  transfer of any  material  asset of any of the Acquired
          Corporations to any Person.

The  Company,  together  with its  affiliates  (as that term is  defined  in the
Competition  Act  (Canada))  did not have:  (i) assets in Canada  that  exceeded
(Cdn.) $150 million in aggregate  value,  determined as of April 30, 2001 and in
such manner as is prescribed for purposes of the Competition  Act (Canada);  and
(ii) gross revenues from sales in, from or into Canada,  determined for the year
ended  April 30, 2001 and in such manner as is  prescribed  for  purposes of the
Competition Act (Canada), that exceeded (Cdn.) $150 million in aggregate value.

Except as may be  required  by the  Interim  Order,  the Final  Order,  Canadian
Securities Laws, the CBCA, the Competition Act (Canada),  the Investment  Canada
Act, the HSR Act, any other foreign antitrust law or regulation or the TSE Rules
and Bylaws,  none of the  Acquired  Corporations  was, is or will be required to
make any filing with or give any notice to, or to obtain any Consent  from,  any
Person in connection  with (x) the  execution,  delivery or  performance of this
Agreement  by the  Company,  or (y)  the  consummation  by  the  Company  of the
Arrangement or any of the other transactions contemplated by this Agreement.

     2.26 Fairness  Opinion.  The Special  Committee and the Company's  board of
          directors  have  received the written  opinion of CIBC World  Markets,
          financial  advisor  to the  Company,  dated  the date of the  Original
          Agreement and dated the date of this Agreement, to the effect that the
          consideration being received by the Company  Shareholders  pursuant to
          the Arrangement is fair to the Company  Shareholders  from a financial
          point of view as of each of such dates.  The Company has  furnished an
          accurate and complete copy of said written opinion to Parent.

     2.27 Financial Advisor. Except for CIBC World Markets, no broker, finder or
          investment banker is entitled to any brokerage,  finder's or other fee
          or commission in connection  with the  Arrangement or any of the other
          transactions  contemplated by this Agreement  based upon  arrangements
          made by or on behalf of any of the Acquired Corporations. The total of
          all fees,  commissions  and other  amounts  that have been paid by the
          Company  to CIBC World  Markets  and all fees,  commissions  and other
          amounts that may become  payable to CIBC World  Markets by the Company
          if the Arrangement is consummated (excluding any payments which may be
          required in the future under the  indemnification  provisions attached
          as Schedule A to that certain letter agreement between the Company and
          CIBC World Markets dated  December 18, 2001) will not exceed an amount
          equal to (i) (Cdn.)  $2,600,000;  plus (ii) (Cdn.) $100,000 as payment
          of expenses. The Company has furnished to Parent accurate and complete
          copies of all  agreements  under which any such fees,  commissions  or
          other   amounts  have  been  paid  to  may  become   payable  and  all
          indemnification and other agreements related to the engagement of CIBC
          World Markets.

     2.28 Reporting  Issuer Status.  The Company is a "reporting  issuer" or has
          equivalent  status in each of the  provinces of Canada which have such
          equivalent status and the Common Shares are listed on the TSE, the PSE
          and the Nasdaq National Market,  and the Company has not been notified
          of any default or alleged default by the Company of any requirement of
          securities  and  corporate  laws,  regulations,  orders,  notices  and
          policies.

     2.29 Registration  Rights.  No  holder of  securities  issued by any of the
          Acquired   Corporations   has  any  right  to  compel  such   Acquired
          Corporation  to register or  otherwise  qualify  such  securities  for
          public sale in Canada or the United States.

     2.30 Company  Rights  Plan.  The Company  Rights  Plan has been  amended or
          waived (or its provisions have been  effectively  waived to the extent
          necessary) so as to (i) render the Company Rights Plan inapplicable to
          the  Arrangement  and  the  other  transactions  contemplated  by this
          Agreement and the Shareholder Support Agreements, (ii) ensure that (x)
          neither  Parent nor  Purchaser  nor any of their  affiliates  shall be
          deemed to have become an  Acquiring  Person (as defined in the Company
          Rights  Plan)  pursuant  to the  Company  Rights Plan by virtue of the
          execution of this Agreement or the Shareholder  Support  Agreements or
          the  consummation of the transactions  contemplated  hereby or thereby
          and (y) a  Separation  Time (as such term is  defined  in the  Company
          Rights  Plan) or  similar  event  does  not  occur  by  reason  of the
          execution of this Agreement or the Shareholder  Support  Agreements or
          the consummation of the transactions  contemplated  hereby or thereby,
          (iii)  provide that the  exercise of rights  under the Company  Rights
          Plan shall expire  immediately  prior to the Effective  Time, and (iv)
          that such amendment may not be further  amended by the Company without
          the prior consent of Parent in its sole discretion.


                                      D-24

<PAGE>

     2.31 Personal  Information.  Except  as  disclosed  in  Part  2.31  of  the
          Disclosure Schedule:

     (a)  Each of the  Acquired  Corporations  has been  and is now in  material
          compliance  with all applicable  Legal  Requirements  which govern the
          collection, use and disclosure of Personal Information;

     (b)  Each  of  the  Acquired  Corporations,   to  the  extent  required  by
          applicable  Legal  Requirements,  has a written  privacy  policy which
          governs its  collection,  use and disclosure of Personal  Information,
          and  each  of the  Acquired  Corporations  has  been  and is now is in
          substantial compliance with such privacy policy and any other industry
          privacy code or privacy procedures to which such Acquired  Corporation
          subscribes or is bound (collectively,  "Privacy  Practices"),  and the
          transactions  contemplated  by this Agreement are not in breach of any
          such Privacy Practices; and

     (c)  there is no complaint to or audit, proceeding,  investigation or claim
          existing or (to the knowledge of the Company)  threatened  against any
          of the Acquired  Corporations by the Office of the Privacy  Commission
          of Canada or any other  Governmental  Authority,  or by any  Person in
          respect of the collection,  use or disclosure of Personal  Information
          by any of the Acquired Corporations.

     2.32 Full Disclosure; Circular Disclosure.

     (a)  This Agreement  (including the Disclosure  Schedule) does not, and the
          certificate  referred to in Section  6.5(d) will not,  (i) contain any
          representation,  warranty or information  with respect to the Acquired
          Corporations  or  their   respective   businesses  that  is  false  or
          misleading  with respect to any material  fact,  or (ii) omit to state
          any  material  fact  necessary  in order to make the  representations,
          warranties and  information  contained and to be contained  herein and
          therein  (in  the  light  of  the   circumstances   under  which  such
          representations,  warranties and  information  were or will be made or
          provided) not false or misleading.

     (b)  None of the information  supplied or to be supplied by or on behalf of
          the  Company  for  inclusion  or  incorporation  by  reference  in the
          Management  Proxy  Circular or any amendment  thereto  (including  any
          information  referred to therein or incorporated therein by reference)
          will contain any untrue  statement of a material fact or omit to state
          any material fact required to be stated  therein or necessary in order
          to make the  statements  therein,  in the  light of the  circumstances
          under  which  they are made,  not  misleading.  The  Management  Proxy
          Circular  will  comply as to form in all  material  respects  with the
          provisions  of  the  Canadian   Securities  Laws,  the  CBCA  and  the
          regulations promulgated  thereunder,  the Rules and Bylaws of the TSE,
          the rules and  bylaws of the PSE,  the rules and  bylaws of the Nasdaq
          National  Market and the  provisions of the Exchange Act and the rules
          and regulations promulgated by the SEC thereunder.

     3.   Representations and Warranties of Parent and Purchaser

     Parent and Purchaser represent and warrant to the Company as follows:

     3.1  Due   Organization;   Subsidiaries.   Parent  is  a  corporation  duly
          organized, validly existing and in good standing under the laws of the
          State of Delaware.  Purchaser is a limited partnership duly organized,
          validly  existing  and in good  standing  under the laws of the Cayman
          Islands.  Each of Parent and  Purchaser  has all  necessary  power and
          authority:  (a) to  conduct  its  business  in the manner in which its
          business is currently being  conducted;  (b) to own and use its assets
          in the manner in which its assets are  currently  owned and used;  and
          (c) to perform  its  obligations  under all  Contracts  by which it is
          bound.

     3.2  Capitalization.  The  authorized  capital stock of Parent  consists of
          900,000,000  shares of Parent  Common  Stock and  2,000,000  shares of
          preferred stock of Parent. As of February 6, 2002,  236,855,447 shares
          of Parent Common Stock were issued and outstanding.  As of the date of
          this   Agreement,   no  shares  of  preferred   stock  of  Parent  are
          outstanding. All of the outstanding shares of Parent Common Stock have
          been duly  authorized  and  validly  issued,  and are  fully  paid and
          nonassessable.  As of  February 6, 2002,  31,120,188  shares of Parent
          Common Stock were reserved for future issuance pursuant to outstanding
          stock  options and Parent's  1997  Employee  Stock  Purchase  Plan, as
          amended.


                                      D-25

<PAGE>

     3.3  SEC Filings; Financial Statements.

     (a)  Parent has Made  Available to the Company,  through  their  posting on
          EDGAR or otherwise,  accurate and complete copies (excluding copies of
          exhibits) of each report,  registration statement and definitive proxy
          statement  filed by  Parent  with the SEC since  January  1, 1999 (the
          "Parent SEC Documents"). All statements, reports, schedules, forms and
          other  documents  required  to have been filed by Parent  with the SEC
          have been so filed.  As of the time it was filed with the SEC (or,  if
          amended or superseded by a filing prior to the date of this Agreement,
          then on the date of such filing): (i) each of the Parent SEC Documents
          complied in all material respects with the applicable  requirements of
          the  Securities Act or the Exchange Act (as the case may be); and (ii)
          none of the Parent SEC Documents  contained any untrue  statement of a
          material  fact or  omitted  to state a material  fact  required  to be
          stated therein or necessary in order to make the  statements  therein,
          in the light of the  circumstances  under  which they were  made,  not
          misleading.

     (b)  The  consolidated  financial  statements  contained  in the Parent SEC
          Documents:  (i) complied as to form in all material  respects with the
          published  rules and regulations of the SEC applicable  thereto;  (ii)
          were  prepared  in  accordance  with  generally  accepted   accounting
          principles  applied  on a  consistent  basis  throughout  the  periods
          covered  (except as may be  indicated  in the notes to such  financial
          statements and, in the case of unaudited  statements,  as permitted by
          Form 10-Q of the SEC, and except that unaudited  financial  statements
          may not  contain  footnotes  and are  subject to normal and  recurring
          year-end  audit  adjustments  which will not,  individually  or in the
          aggregate,  be  material  in  amount);  and (iii)  fairly  present the
          consolidated   financial  position  of  Parent  and  its  consolidated
          subsidiaries as of the respective  dates thereof and the  consolidated
          results of operations of Parent and its consolidated  subsidiaries for
          the periods covered thereby.

     3.4  Authority;  Binding Nature of Agreement. Parent and Purchaser have the
          requisite  corporate power and authority to perform their  obligations
          under this Agreement;  and the execution,  delivery and performance by
          Parent and Purchaser of this  Agreement  have been duly  authorized by
          all  necessary  action on the part of Parent and  Purchaser  and their
          respective boards of directors.  This Agreement constitutes the legal,
          valid and  binding  obligation  of Parent and  Purchaser,  enforceable
          against  them in  accordance  with its  terms,  subject to (i) laws of
          general application relating to bankruptcy,  insolvency and the relief
          of  debtors,  and (ii) rules of law  governing  specific  performance,
          injunctive relief and other equitable remedies.

     3.5  No Vote  Required.  No vote of the holders of Parent  Common  Stock is
          required to authorize the Arrangement.

     3.6  Non-Contravention;  Consents.  Neither the  execution  and delivery of
          this Agreement by Parent and Purchaser nor the  consummation by Parent
          or Purchaser of the  Arrangement  will (a) conflict  with or result in
          any breach of any provision of the  certificate  of  incorporation  or
          bylaws of Parent or the partnership agreement of Purchaser, (b) result
          in a default by Parent or Purchaser under any Contract to which Parent
          or Purchaser  is a party,  except for any default that has not had and
          will not have a Material Adverse Effect on Parent,  or (c) result in a
          violation  by Parent or  Purchaser  of any  order,  writ,  injunction,
          judgment,  decree  or  other  Legal  Requirement  to which  Parent  or
          Purchaser is subject,  except for any  violation  that has not had and
          will not have a Material  Adverse  Effect on Parent.  Except as may be
          required by the Interim Order,  the Final Order,  the Securities  Act,
          the  Canadian   Securities  Laws,  the  Investment   Canada  Act,  the
          Competition Act (Canada),  the Exchange Act, state securities or "blue
          sky"  laws,  the  DGCL,  the HSR Act,  any  foreign  antitrust  law or
          regulation  and the NASD Bylaws (as they may relate to the  Management
          Proxy Circular), Parent and Purchaser are not and will not be required
          to make any  filing  with or give any  notice  to,  or to  obtain  any
          Consent from, any Person in connection with the execution, delivery or
          performance of this Agreement or the consummation of the Arrangement.

Parent, together with its affiliates (as that term is defined in the Competition
Act  (Canada))  did not have:  (i) assets in Canada  that  exceeded  (Cdn.) $150
million in  aggregate  value,  determined  as of  November  30, 2001 and in such
manner as is prescribed for purposes of the Competition  Act (Canada);  and (ii)
gross revenues from sales in, from or into Canada, determined for the year ended
November  30,  2001 and in such  manner as is  prescribed  for  purposes  of the
Competition Act (Canada), that exceeded (Cdn.) $150 million in aggregate value.

     3.7  Valid  Delivery.  The  Parent  Common  Stock  to be  delivered  in the
          Arrangement  will, when delivered in accordance with the provisions of
          this  Agreement,  be validly  issued,  fully  paid and  nonassessable.
          Parent has  authorized  and reserved a sufficient  number of shares of
          Parent Common Stock to satisfy the obligations of Purchaser to deliver
          Parent Common Stock upon closing of the Arrangement.


                                      D-26

<PAGE>

     3.8  Full Disclosure; Circular Disclosure.

     (a)  This  Agreement does not, and the  certificate  referred to in Section
          7.4(b)  will  not,  (i)  contain  any   representation,   warranty  or
          information  with respect to Parent or its  business  that is false or
          misleading  with respect to any material  fact,  or (ii) omit to state
          any  material  fact  necessary  in order to make the  representations,
          warranties and  information  contained and to be contained  herein and
          therein  (in  the  light  of  the   circumstances   under  which  such
          representations,  warranties and  information  were or will be made or
          provided) not false or misleading.

     (b)  None of the information  supplied or to be supplied by or on behalf of
          Parent for inclusion or  incorporation  by reference in the Management
          Proxy Circular or any amendment  thereto  (including  any  information
          referred to therein or incorporated therein by reference) will contain
          any untrue  statement of a material fact or omit to state any material
          fact  required to be stated  therein or necessary in order to make the
          statements therein, in the light of the circumstances under which they
          are made, not misleading.

     3.9  Legal Proceedings;  Orders. There is no pending Legal Proceeding,  and
          to the best of the  knowledge of Parent,  no Person has  threatened to
          commence any material Legal  Proceeding:  (i) that involves  Parent or
          any of the  material  assets  owned or used by  Parent;  or (ii)  that
          challenges,  or that may  have the  effect  of  preventing,  delaying,
          making illegal or otherwise  interfering  with, the Arrangement or any
          of the other transactions  contemplated by this Agreement. To the best
          of the  knowledge  of  Parent,  no event has  occurred,  and no claim,
          dispute  or  other  condition  or   circumstance   exists  that  could
          reasonably  be  expected  to, give rise to or serve as a basis for the
          commencement of any such material Legal Proceeding.

     4.   Certain Covenants of the Company

     4.1  Access and Investigation.

     (a)  During the period from the date of this Agreement  through the earlier
          of (A) the Effective  Time and (B) the  termination  of this Agreement
          pursuant to the terms of Section 8.1 (the "Pre-Closing  Period"),  the
          Company shall, and shall cause the respective  Representatives  of the
          Acquired   Corporations   to:  (1)   provide   Parent   and   Parent's
          Representatives  with reasonable access to the Acquired  Corporations'
          Representatives,  personnel  and  assets  and to all  existing  books,
          records, Tax Returns,  work papers and other documents and information
          relating to the  Acquired  Corporations;  and (2)  provide  Parent and
          Parent's  Representatives  with  such  copies of the  existing  books,
          records, Tax Returns,  work papers and other documents and information
          relating  to the  Acquired  Corporations,  and  with  such  additional
          financial,  operating  and other data and  information  regarding  the
          Acquired Corporations, as Parent may reasonably request, provided that
          such  reasonable  access and copy  requests do not cause  unreasonable
          disruptions  to  the  Company's  business  or  operations  during  the
          Pre-Closing Period.  Notwithstanding the foregoing,  the Company shall
          be under no obligation to provide  Parent or Parent's  Representatives
          with access to Acquired Corporation Source Code during the Pre-Closing
          Period.  Without limiting the generality of the foregoing,  during the
          Pre-Closing  Period,  the Company shall  promptly  provide Parent with
          copies of:

     (i)  all material  operating and financial reports prepared by the Acquired
          Corporations for the Company's senior management, including (A) copies
          of the unaudited monthly  consolidated  balance sheets of the Acquired
          Corporations and the related unaudited monthly consolidated statements
          of operations,  statements of  shareholders'  equity and statements of
          cash flows and (B)  copies of any sales  forecasts,  marketing  plans,
          development plans, discount reports, write-off reports, hiring reports
          and capital  expenditure  reports  prepared for the  Company's  senior
          management;

     (ii) any written  materials or  communications  sent by or on behalf of the
          Company to its shareholders;

     (iii)any material  notice,  document or other  communication  sent by or on
          behalf  of any of  the  Acquired  Corporations  to  any  party  to any
          Acquired   Corporation  Contract  or  sent  to  any  of  the  Acquired
          Corporations by any party to any Acquired  Corporation Contract (other
          than any  communication  that  relates  solely to  routine  commercial
          transactions  between an Acquired  Corporation  and the other party to
          any such Acquired Corporation Contract

                                      D-27

<PAGE>

          and that is of the type sent in the  ordinary  course of business  and
          consistent with past practices);

     (iv) any  notice,  report  or  other  document  filed  with  or sent to any
          Governmental  Body on behalf of any of the  Acquired  Corporations  in
          connection  with  the  Arrangement  or any of the  other  transactions
          contemplated by this Agreement; and

     (v)  any material notice,  report or other document  received by any of the
          Acquired Corporations from any Governmental Body.

     (b)  Parent and the Company agree that the Confidentiality  Agreement shall
          apply to all documents and information  provided to Parent pursuant to
          Section 4.1(a) to the extent covered by the Confidentiality Agreement.

     4.2  Operation of the Business of the Acquired Corporations.

     (a)  During the Pre-Closing  Period: (i) the Company shall ensure that each
          of the Acquired  Corporations conducts its business and operations (A)
          in the ordinary  course and in accordance  with past practices and (B)
          in  compliance  with  all  applicable   Legal   Requirements  and  the
          requirements  of all Acquired  Corporation  Contracts that  constitute
          Material Contracts;  (ii) the Company shall use all reasonable efforts
          to ensure that each of the Acquired Corporations  preserves intact its
          current  business  organization,  keeps  available the services of its
          current  officers  and  employees  and  maintains  its  relations  and
          goodwill  with  all  suppliers,   customers,   landlords,   creditors,
          licensors,  licensees,  employees  and other Persons  having  business
          relationships  with the respective  Acquired  Corporations;  (iii) the
          Company shall keep in full force all insurance policies referred to in
          Section  2.19 or  otherwise  currently  in  force,  provided  that the
          Company may  substitute for any such insurance a policy or policies of
          equivalent  coverage;  (iv) the Company shall cause to be provided all
          notices,  assurances and support required by any Acquired  Corporation
          Contract  relating to any Proprietary Asset in order to ensure that no
          condition under such Acquired  Corporation  Contract occurs that could
          result in, or could  increase the  likelihood  of, (A) any transfer or
          disclosure  by any Acquired  Corporation  of any Acquired  Corporation
          Source  Code,  or (B) a  release  from  any  escrow  of  any  Acquired
          Corporation  Source Code that has been  deposited or is required to be
          deposited  in  escrow  under the  terms of such  Acquired  Corporation
          Contract;  (v) the Company  shall  promptly  notify  Parent of (A) any
          notice  or other  communication  from  any  Person  alleging  that the
          Consent of such Person is or may be required in connection with any of
          the  transactions  contemplated by this  Agreement,  and (B) any Legal
          Proceeding  commenced,  or,  to the best of its  knowledge  threatened
          against,  relating to or involving or otherwise  affecting  any of the
          Acquired   Corporations  that  relates  to  the  consummation  of  the
          transactions  contemplated  by this  Agreement;  and (vi) the  Company
          shall (to the extent  requested by Parent)  cause its officers and the
          officers of its Subsidiaries to report regularly to Parent  concerning
          the status of the Company's business.

     (b)  During the  Pre-Closing  Period,  the Company  shall not and shall not
          permit any of the other  Acquired  Corporations  to  (except  with the
          prior written consent of Parent):

     (i)  declare,  accrue,  set  aside or pay any  dividend  or make any  other
          distribution  in  respect  of any  Common  Shares  or other  shares of
          capital stock,  or, except as otherwise  required by the express terms
          of this Agreement or the Plan of  Arrangement,  repurchase,  redeem or
          otherwise reacquire any Common Shares or other shares of capital stock
          or other securities;

     (ii) sell,  issue,  grant or  authorize  the  issuance  or grant of (A) any
          Common Shares or other shares of capital stock or other security,  (B)
          any option,  call,  warrant or right to acquire  any Common  Shares or
          other shares of capital stock or other security, or (C) any instrument
          convertible into or exchangeable for any Common Shares or other shares
          of capital stock or other security  (except that the Company may issue
          Common  Shares  (x)  upon  the  valid  exercise  of  Company   Options
          outstanding as of the date of this Agreement in accordance  with their
          respective terms, and (y) pursuant to the terms of the Company ESPP as
          in effect as of the date of this Agreement);

     (iii)except as otherwise  required by the express  terms of this  Agreement
          or the Plan of  Arrangement,  establish,  adopt or amend any  employee
          benefit  plan,  pay any bonus or make any  profit-sharing  or  similar
          payment  to,  fail to  implement  or  enforce  the terms of any salary
          reduction  plan,  or  increase  the  amount  of  the  wages,   salary,
          commissions,  fringe  benefits or other  compensation  or remuneration
          payable to, any of its directors, officers or employees;


                                      D-28

<PAGE>

     (iv) except as otherwise required by the express terms of this Agreement or
          the Plan of  Arrangement,  amend or waive any of its rights under,  or
          accelerate  the vesting  under,  any  provision  of any of the Company
          Option  Plans,   any  provision  of  any  agreement   evidencing   any
          outstanding  stock option or any restricted stock purchase  agreement,
          or  otherwise  modify  any of the  terms  of any  outstanding  option,
          warrant or other security or any related Contract;

     (v)  except as otherwise required by the express terms of this Agreement or
          the Plan of Arrangement, amend or permit the adoption of any amendment
          to its  certificate  of  incorporation  or bylaws or other  charter or
          organizational  documents,  or effect or become a party to any merger,
          arrangement,  consolidation,  share  exchange,  business  combination,
          amalgamation,  recapitalization,  reclassification  of  shares,  stock
          split,  reverse  stock  split,  division  or  subdivision  of  shares,
          consolidation of shares or similar transaction;

     (vi) except as set forth in Part 2.1(a) of the  Disclosure  Schedule,  form
          any Subsidiary or acquire any equity interest or other interest in any
          other Entity;

     (vii)make any capital  expenditure  (except that the Acquired  Corporations
          may make capital  expenditures  that,  when added to all other capital
          expenditures  made on  behalf  of the  Acquired  Corporations,  do not
          exceed (Cdn.) $250,000 monthly in the aggregate);

   (viii) except as otherwise  required by the express terms of this Agreement
          or the Plan of  Arrangement,  enter into or become bound by, or permit
          any of the assets owned or used by it to become bound by, any Material
          Contract,  or amend or  terminate,  or waive or exercise  any material
          right or remedy under,  (A) any Material  Contract which relate to (1)
          the transfer,  development,  sharing or license of any of the Acquired
          Corporation  Source Code, (2) any distribution  arrangements,  (3) any
          Proprietary  Asset which is material to the  respective  businesses of
          the Company or of the  Subsidiaries  of the Company  taken as a whole,
          (4)  the  license  of any  Proprietary  Asset  by any of the  Acquired
          Corporations  to any  Person  on an  exclusive  basis  or (5) a  third
          party's  ability to consent to any the  transactions  contemplated  by
          this Agreement,  or (B) any Material Contract not otherwise  described
          in clause  "(A),"  other than in the  ordinary  course of business and
          consistent with past practices;

     (ix) acquire,  lease or  license  any right or other  asset  from any other
          Person or sell or otherwise dispose of, or lease or license, any right
          or other asset to any other Person (except in each case for immaterial
          assets acquired, leased, licensed or disposed of by the Company in the
          ordinary  course of business and consistent with past  practices),  or
          waive or relinquish any material right;

     (x)  lend  money to any  Person,  or incur or  guarantee  any  indebtedness
          (except that the Company may make routine  borrowings  in the ordinary
          course  of  business  and  consistent  with past  practices  under its
          current  line of credit with Royal Bank of Canada),  but not to exceed
          an aggregate amount of (Cdn.)$50,000;

     (xi) hire any employee at the level of director or manager or above or with
          an annual  base  salary in excess of (Cdn.)  $50,000,  or promote  any
          employee except in order to fill a position  vacated after the date of
          this Agreement;

     (xii)change any of its pricing policies,  product return policies,  product
          maintenance polices, service policies, product modification or upgrade
          policies, personnel policies or other business policies, or any of its
          methods of accounting or accounting practices in any respect;

   (xiii) make any material Tax election;

     (xiv)except as otherwise  required by the express terms of this  Agreement,
          commence  any  Legal  Proceeding  (other  than  (A)  for  the  routine
          collection of amounts owing to any of the Acquired Corporations or (B)
          in  respect  of a  breach  of this  Agreement)  or  settle  any  Legal
          Proceeding or any dispute or other matter with any  Governmental  Body
          (including with respect to the assessment or payment of any Tax);

     (xv) undertake  any  transaction  which would reduce the paid up capital of
          the Common Shares for purposes of the Income Tax Act (Canada);


                                      D-29

<PAGE>

     (xvi)except as otherwise  required by the express terms of this  Agreement,
          enter into any material  transaction or take any other material action
          outside the  ordinary  course of business  or  inconsistent  with past
          practices; or

   (xvii) except as otherwise required by the express terms of this Agreement,
          agree or commit to take any of the actions  described in clauses "(i)"
          through "(xvi)" of this Section 4.2(b).

     (c)  During the  Pre-Closing  Period,  each of Parent and the Company  (the
          "Notifying  Party") shall  promptly  notify the other party in writing
          of: (i) the discovery by the Notifying Party of any event,  condition,
          fact or circumstance  that occurred or existed on or prior to the date
          of this Agreement and that caused or constitutes a material inaccuracy
          in any  representation or warranty made by the Notifying Party in this
          Agreement;  (ii)  any  event,  condition,  fact or  circumstance  that
          occurs,  arises or exists  after the date of this  Agreement  and that
          would cause or constitute a material  inaccuracy in any representation
          or warranty made by the Notifying  Party in this Agreement if (A) such
          representation  or  warranty  had  been  made  as of the  time  of the
          occurrence,  existence or discovery of such event, condition,  fact or
          circumstance,  or (B) such event, condition,  fact or circumstance had
          occurred, arisen or existed on or prior to the date of this Agreement;
          (iii)  any  material  breach  of any  covenant  or  obligation  of the
          Notifying  Party;  (iv) where the Company is the Notifying  Party, any
          event, condition, fact or circumstance,  either individually or in the
          aggregate,  that would make the timely  satisfaction by the Company of
          any of the conditions set forth in Section 6 impossible or unlikely or
          that  has had or  could  reasonably  be  expected  to have a  Material
          Adverse  Effect on the Company;  and (v) where Parent is the Notifying
          Party, any event, condition, fact or circumstance, either individually
          or in the aggregate, that would make the timely satisfaction by Parent
          of any of the conditions set forth in Section 7 impossible or unlikely
          or that has had or could  reasonably  be  expected  to have a Material
          Adverse  Effect on Parent.  Without  limiting  the  generality  of the
          foregoing,  the Company shall promptly advise Parent in writing of any
          Legal Proceeding or material claim  threatened,  commenced or asserted
          against  or  with  respect  to any of the  Acquired  Corporations.  No
          notification  given to Parent or the Company  pursuant to this Section
          4.2(c)  shall limit or  otherwise  affect any of the  representations,
          warranties,  covenants or obligations of the other party  contained in
          this Agreement.

     4.3  No Solicitation.

     (a)  The Company shall not directly or indirectly, and shall not permit any
          of the other Acquired Corporations or any officer, director, attorney,
          accountant or advisor of any of the Acquired  Corporations directly or
          indirectly  to, and shall not authorize any employee or other agent or
          representative  of  any  of  the  Acquired  Corporations  directly  or
          indirectly to, (i) solicit, initiate,  encourage, induce or facilitate
          the making,  submission or announcement  of any  Acquisition  Proposal
          (including  by  amending,  or granting any waiver  under,  the Company
          Rights Plan) or take any action that could  reasonably  be expected to
          lead  to  an  Acquisition  Proposal,   (ii)  furnish  any  information
          regarding any of the Acquired Corporations to any Person in connection
          with or in  response  to an  Acquisition  Proposal  or an  inquiry  or
          indication of interest that could  reasonably  lead to an  Acquisition
          Proposal,  (iii) engage in discussions or negotiations with any Person
          with  respect to any  Acquisition  Proposal,  (iv)  subject to Section
          5.1(c), approve,  endorse or recommend any Acquisition Proposal or (v)
          enter into any letter of intent or similar  document  or any  Contract
          contemplating  or otherwise  relating to any Acquisition  Transaction;
          provided,  however,  that prior to the approval of the  Arrangement by
          the Required Company  Shareholder  Vote, this Section 4.3(a) shall not
          prohibit the Company from  entering into a  confidentiality  agreement
          containing  customary  limitations  on the use and  disclosure  of all
          nonpublic written and oral information  furnished to such Person by or
          on  behalf  of  the  Company  and  containing  customary  "standstill"
          provisions  (a  "Standard  Confidentiality   Agreement"),   furnishing
          information  regarding the Acquired  Corporations to, or entering into
          discussions or negotiations with, any Person in response to a Superior
          Offer  that is  submitted  to the  Company  by such  Person  (and  not
          withdrawn) or subject to Section  5.1(c),  endorsing or recommending a
          Superior  Offer if (1) neither the Company nor any  Representative  of
          any of the  Acquired  Corporations  shall have  breached  or taken any
          action  inconsistent  with  any of the  provisions  set  forth in this
          Section 4.3,  (2) the board of  directors of the Company  concludes in
          good faith,  after considering the written advice of its outside legal
          counsel,  that  such  action  is  required  in order  for the board of
          directors of the Company to comply with its fiduciary  obligations  to
          the  Company  Shareholders  under  applicable  law,  (3)  prior  to or
          concurrently  with  furnishing any such nonpublic  information  to, or
          entering into discussions with, such Person,  the Company gives Parent
          written  notice of the  identity  of such  Person  (subject  to Parent
          agreeing to


                                      D-30

<PAGE>

          such  confidentiality  requirements  as  such  Person  may  reasonably
          request)  and  of  the  Company's   intention  to  furnish   nonpublic
          information to, or enter into discussions  with, such Person,  and the
          Company receives from such Person an executed Standard Confidentiality
          Agreement  and  (4)  at  the  same  time  as  it  furnishes  any  such
          information  to such  Person,  the Company  furnishes  such  nonpublic
          information  to Parent (to the extent such nonpublic  information  has
          not been previously  furnished by the Company to Parent).  The parties
          agree that for purposes of the  preceding  sentence  (but for no other
          purpose),  an  offer  which  is  conditioned  upon  completion  of due
          diligence  shall be deemed to  constitute  a "Superior  Offer" if such
          offer otherwise meets the definition of "Superior  Offer" as set forth
          in Exhibit A hereto. Without limiting the generality of the foregoing,
          the Company  acknowledges and agrees that any action inconsistent with
          any of the  provisions  set  forth in the  preceding  sentence  by any
          officer,  director,  attorney  or  accountant  of any of the  Acquired
          Corporations or by its financial advisor, CIBC World Markets,  whether
          or not CIBC  World  Markets or such  officer,  director,  attorney  or
          accountant  is  purporting  to act on  behalf  of any of the  Acquired
          Corporations,  shall be deemed to  constitute a breach of this Section
          4.3(a) by the Company.  Nothing in this Section  4.3(a) shall prohibit
          the Company from complying with the  requirements of Section 99 of the
          Securities  Act (Ontario) and  corresponding  provisions of applicable
          Canadian  Securities Laws in response to an unsolicited  take-over bid
          for the Company.

     (b)  The Company shall  promptly (and in no event later than 24 hours after
          receipt of any Acquisition Proposal,  the amendment of any Acquisition
          Proposal  previously  received,  any inquiry or indication of interest
          that  could  lead  to an  Acquisition  Proposal  or  any  request  for
          nonpublic  information  in connection  with an  Acquisition  Proposal)
          advise  Parent orally and in writing of any  Acquisition  Proposal (or
          amendment thereto) or any request for nonpublic  information  relating
          to any of the Acquired  Corporations in connection with an Acquisition
          Proposal  (including  the identity of the Person  making or submitting
          such  Acquisition   Proposal  (subject  to  Parent  agreeing  to  such
          confidentiality  requirements  as such Person may reasonably  request)
          and the terms  thereof) that is made or submitted by any Person during
          the Pre-Closing  Period.  The Company shall keep Parent fully informed
          with respect to the status of any such Acquisition Proposal,  inquiry,
          indication  of interest or request  and any  modification  or proposed
          modification thereto.

     (c)  The Company shall  immediately  cease and cause to be  terminated  any
          existing  discussions  with any Person that relate to any  Acquisition
          Proposal.

     (d)  The Company  agrees not to release or permit the release of any Person
          from,  or to waive or permit  the  waiver  of any  provision  of,  any
          confidentiality, "standstill" or similar agreement to which any of the
          Acquired  Corporations  is a party or under which any of the  Acquired
          Corporations has any rights,  and will use its best efforts to enforce
          or cause to be enforced each such  agreement at the request of Parent.
          The Company also will promptly  request each Person that has executed,
          within   12   months   prior  to  the  date  of  this   Agreement,   a
          confidentiality  agreement in connection with its  consideration  of a
          possible  Acquisition  Transaction or equity  investment to return, or
          certify the destruction of, all  confidential  information  heretofore
          furnished  to  such  Person  by or on  behalf  of any of the  Acquired
          Corporations.

     5.   Additional Covenants of the Parties

     5.1  Company Shareholders' Meeting

     (a)  The Company shall take all action necessary under all applicable Legal
          Requirements to call, give notice of and hold a meeting of all Company
          Shareholders  to  vote  on the  approval  of  this  Agreement  and the
          Arrangement  (the  "Company  Shareholders'   Meeting").   The  Company
          Shareholders' Meeting shall be held (on a date selected by the Company
          in consultation with Parent) as promptly as practicable after the date
          of this Agreement. The Company shall ensure that all proxies solicited
          in connection with the Company  Shareholders' Meeting are solicited in
          compliance with all applicable Legal Requirements.

     (b)  Subject to Section  5.1(c):  (i) the  Management  Proxy Circular shall
          include a statement  to the effect that the board of  directors of the
          Company unanimously  recommends that the Company  Shareholders vote to
          approve   this   Agreement   and  the   Arrangement   at  the  Company
          Shareholders'  Meeting (the unanimous  recommendation of the Company's
          board of directors that the Company  Shareholders vote to approve this
          Agreement and the Arrangement  being referred to as the "Company Board
          Recommendation");  and (ii) the Company Board Recommendation shall not
          be  withdrawn  or  modified  in a manner  adverse  to  Parent,  and no
          resolution  by the board of directors of the Company or any  committee
          thereof to withdraw or modify the Company  Board


                                      D-31

<PAGE>

          Recommendation  in a manner  adverse  to Parent  shall be  adopted  or
          proposed.   For  purposes  of  this   Agreement,   the  Company  Board
          Recommendation  shall be  deemed  to have  been  modified  in a manner
          adverse to Parent if the  Company  Board  Recommendation  is no longer
          unanimous.

     (c)  Notwithstanding  Section  4.3(a)(iv) and Section  5.1(b),  at any time
          prior  to the  approval  of this  Agreement  by the  Required  Company
          Shareholder Vote, the Company Board Recommendation may be withdrawn or
          modified in a manner  adverse to Parent,  and the  Company's  board of
          directors may endorse or  recommend,  but may not accept or enter into
          any Contract (other than a Standard Confidentiality Agreement pursuant
          to and in  accordance  with the terms of Section  4.3(a)) with respect
          to, a Superior Offer (such  withdrawal or  modification of the Company
          Board  Recommendation  or endorsement or  recommendation of a Superior
          Offer in accordance  with this Section 5.1(c) is hereinafter  referred
          to as a  "Company  Board  Recommendation  Withdrawal"),  if:  (i)  the
          Company  provides Parent with at least two business days' prior notice
          of any  meeting of the Special  Committee  or the  Company's  board of
          directors  at which the Special  Committee  or such board of directors
          will  consider a Company  Board  Recommendation  Withdrawal;  (ii) any
          offer that is causing the Special  Committee or the Company's board of
          directors to consider a Company Board Recommendation  Withdrawal is an
          unsolicited,  bona fide  written  offer made by a third  party and not
          withdrawn  and is one which the  Special  Committee  or the  Company's
          board of directors  determines  in good faith (after  considering  the
          written  advice of an  independent  financial  advisor  of  nationally
          recognized  reputation) that such offer  constitutes a Superior Offer;
          (iii) the Company's board of directors determines in good faith, after
          having  considered the written  advice of the Company's  outside legal
          counsel, that, the Company Board Recommendation Withdrawal is required
          in order for the  Company's  board of  directors  to  comply  with its
          fiduciary  obligations to the Company  Shareholders  under  applicable
          law; (iv) the Company Board  Recommendation  Withdrawal does not occur
          at any time within three business days after Parent  receives  written
          notice  from  the  Company  confirming  that  the  Company's  board of
          directors  has  determined  that  such  Company  Board  Recommendation
          Withdrawal is required in order for the  Company's  board of directors
          to comply with its fiduciary  obligations to the Company  Shareholders
          under  applicable  law;  and (v)  neither  the  Company nor any of its
          Representatives  shall have breached or taken any action  inconsistent
          with any of the provisions set forth in Section 4.3.

     (d)  The Company's  obligation to call, give notice of and hold the Company
          Shareholders'  Meeting in accordance  with Section 5.1(a) shall not be
          limited  or  otherwise  affected  by  the  commencement,   disclosure,
          announcement,   submission,   endorsement  or  recommendation  of  any
          Superior Offer or other Acquisition  Proposal by any Person (including
          the  board of  directors  of the  Company),  or by any  withdrawal  or
          modification of the Company Board Recommendation.

     (e)  If (i)  prior  to the time of the  Company  Shareholders'  Meeting,  a
          Person shall have publicly disclosed,  announced, commenced, submitted
          or made an Acquisition  Proposal or an Acquisition Proposal shall have
          otherwise become generally known to the Company Shareholders, and (ii)
          such Acquisition Proposal is publicly and definitively  withdrawn on a
          date (the "Acquisition  Proposal Withdrawn Date") between the 30th day
          prior to and the day  prior to the date of the  Company  Shareholders'
          Meeting,  then, at the request of Parent, in its sole discretion,  the
          Company shall cause the Company  Shareholders' Meeting to be adjourned
          or postponed (as determined by Parent in its sole  discretion)  for no
          more than 30 days after the Acquisition Proposal Withdrawn Date.

     5.2  Regulatory Approvals. Each party shall use all commercially reasonable
          efforts  to  file,  as  soon as  practicable  after  the  date of this
          Agreement,  all notices,  reports and other  documents  required to be
          filed by such party  with any  Governmental  Body with  respect to the
          Arrangement and the other transactions contemplated by this Agreement,
          and to submit  promptly any  additional  information  requested by any
          such  Governmental  Body.  Without  limiting  the  generality  of  the
          foregoing,  the Company and Parent shall,  promptly  after the date of
          this Agreement,  prepare and file the notifications required under the
          Investment  Canada Act, the Competition Act (Canada),  the HSR Act and
          any  other  applicable   foreign  antitrust  laws  or  regulations  in
          connection with the Arrangement, if applicable. The Company and Parent
          shall  respond as  promptly as  practicable  to (i) any  inquiries  or
          requests  received  from the (a)  Director  of  Investments,  Industry
          Canada,  concerning any filing made under the  Investment  Canada Act,
          (b) the United States  Federal  Trade  Commission or (c) the Antitrust
          Division of the United  States  Department  of Justice for  additional
          information or documentary material or any other request for documents
          or  information  and (ii) any inquiries or requests  received from any
          state  attorney  general,  the  Commissioner  of  Competition or other
          representative of the Competition  Bureau (Canada),  foreign antitrust
          authority or other  Governmental  Body in connection with antitrust or
          related matters. Each of the


                                      D-32

<PAGE>

          Company and Parent shall (1) give the other party prompt notice of the
          commencement or threat of  commencement of any Legal  Proceeding by or
          before any Governmental Body with respect to the Arrangement or any of
          the other  transactions  contemplated by this Agreement,  (2) keep the
          other party informed as to the status of any such Legal  Proceeding or
          threat,  and (3) promptly inform the other party of any  communication
          to or from the Director of Investments,  the Competition  Bureau,  the
          Federal  Trade  Commission,  the  Department  of  Justice or any other
          Governmental  Body  regarding  the  Arrangement.   Except  as  may  be
          prohibited by any Governmental Body or by any Legal  Requirement,  (a)
          the Company and Parent will  consult and  cooperate  with one another,
          and  will  consider  in  good  faith  the  views  of one  another,  in
          connection with any analysis,  appearance,  presentation,  memorandum,
          brief,  argument,  opinion or proposal made or submitted in connection
          with any Legal  Proceeding  under or relating to the  Competition  Act
          (Canada), the HSR Act or any other foreign, federal or state antitrust
          or  fair  trade  law,  and  (b) in  connection  with  any  such  Legal
          Proceeding,  each of the Company  and Parent  will  permit  authorized
          Representatives  of the other  party to be present at each  meeting or
          conference relating to any such Legal Proceeding and to have access to
          and be consulted in connection with any document,  opinion or proposal
          made or submitted to any Governmental Body in connection with any such
          Legal Proceeding. At the request of Parent, the Company shall agree to
          divest, sell, dispose of, hold separate or otherwise take or commit to
          take any action that limits its freedom of action with  respect to its
          or  its  Subsidiaries'  ability  to  operate  or  retain  any  of  the
          businesses,  product  lines or  assets  of the  Company  or any of its
          Subsidiaries,   provided  that  any  such  action  is  required  by  a
          Governmental Body in order to obtain a required Consent related to the
          Arrangement   and  is  conditioned   upon  the   consummation  of  the
          Arrangement.

     5.3  Company Options; ESPP.

     (a)  Parent will not assume any Company Options,  or any of the obligations
          of  any  of  the  Acquired   Corporations  with  respect  thereto,  in
          connection with the Arrangement. Accordingly, no Company Options will,
          at the  Effective  Time or at any other  time,  be  converted  into or
          become  options to purchase  Parent  Common  Stock.  Each  outstanding
          Company Option shall terminate at the Option Termination Time, and the
          Company hereby  covenants and agrees to take all actions  necessary or
          appropriate to effectuate such termination, and to provide all notices
          required  to be  delivered  to the  holders  of such  Company  Options
          necessary  or  appropriate  (under  the  plans and  option  agreements
          pursuant to which Company  Options are  outstanding  and otherwise) in
          connection  therewith,  including  such notices as may be necessary to
          enable such holders to exercise such Company Options on a timely basis
          prior to the  Effective  Time (it being  understood  that the  Company
          shall not  permit  any  holder of a Company  Option to  exercise  such
          option after the Effective Time except pursuant to this Section 5.3).

     (b)  Except as  otherwise  provided  in  Sections  5.3(c)  and  5.3(d),  in
          connection  with the  termination in accordance with Section 5.3(a) of
          each Company  Option,  the Company  shall be  permitted,  based on the
          election  of, or failure to elect by, the holder  thereof to  receive,
          effective as of the Option  Termination  Time,  cash or Common Shares,
          either  to (i) pay (and in the  event  of an  election  by the  holder
          thereof to receive cash the Company shall pay) to the holder  thereof,
          in cash, the Permitted Option Repurchase Amount (if any) applicable to
          such  Company  Option  or (ii)  issue  (and in the  event of either an
          election  by the  holder  thereof to  receive  Common  Shares or of no
          election by the holder  thereof the Company shall issue) to the holder
          thereof  Common  Shares  equal  in  value  to  the  Permitted   Option
          Repurchase Amount, rounded down to the nearest whole share. The number
          of Common  Shares  issuable to each holder of a Company  Option  under
          clause  "(ii)"  of the  preceding  sentence  shall  be  equal  to such
          optionholder's  Permitted  Option  Repurchase  Amount  divided  by the
          Exchange Ratio and further divided by the Parent Average Stock Price.


     (c)  The parties hereby  acknowledge  that the Company has granted  certain
          contractual rights which are inconsistent with the Company's rights of
          termination   under  the  Company's  1995  Stock  Option  Plan,  which
          contractual  rights were granted in respect of those  Company  Options
          identified on Schedule 5.3(c). The Company has obtained the consent of
          the holders  thereof to the  termination of such Company  Options.  In
          connection  with the  termination in accordance with Section 5.3(a) of
          each  Company  Option  described  on  Schedule  5.3(c) and in order to
          induce the holders thereof to agree to such  termination,  the Company
          shall  be  permitted  to pay (and  shall  pay) to the  holder  thereof
          effective as of the Option  Termination  Time, in cash, the amount set
          forth  opposite such holder's name on Schedule  5.3(c),  and shall not
          pay to all such holders in the  aggregate to purchase all such options
          an  amount in excess of the  aggregate  amount  set forth on  Schedule
          5.3(c).


                                      D-33

<PAGE>

     (d)  In connection  with the  termination in accordance with Section 5.3(a)
          of each Underwriter  Support Option described on Schedule 5.3(d),  the
          Company  shall be  permitted  to pay  (and  shall  pay) to the  holder
          thereof,  in cash, the amount set forth opposite such holder's name on
          Schedule  5.3(d),  and  shall  not  pay to  all  such  holders  in the
          aggregate to purchase all of the Underwriter Support Options an amount
          in excess of the aggregate amount set forth on Schedule 5.3(d).

     (e)  Prior to the  Effective  Time,  the Company shall take all action that
          may be necessary  (under the plans  pursuant to which Company  Options
          are  outstanding  and  otherwise) to effectuate the provisions of this
          Section 5.3 and to ensure  that,  from and after the  Effective  Time,
          holders of Company  Options have no rights with respect  thereto other
          than those specifically provided in this Section 5.3.

     (f)  The Company ESPP shall be  terminated  by not later than  February 28,
          2002. The rights of  participants  in the Company ESPP with respect to
          any  offering  period then  underway  under the Company  ESPP shall be
          determined  by  treating  February  28,  2002 as the  last day of such
          offering  period and by making such other pro-rata  adjustments as may
          be necessary to reflect the  shortened  offering  period but otherwise
          treating  such  shortened  offering  period as a fully  effective  and
          completed  offering  period for all purposes  under the Company  ESPP.
          Prior to the  Effective  Time,  the  Company  shall  take all  actions
          (including,  if  appropriate,  amending the terms of the Company ESPP)
          that are necessary to give effect to the transactions  contemplated by
          this Section 5.3(f).

     5.4  Employee Benefits.

     (a)  Parent  agrees that all  employees  of the Acquired  Corporations  who
          continue employment with Parent or the Acquired Corporations after the
          Effective Time ("Continuing  Employees") shall be eligible to continue
          to participate in either Parent's or the Acquired Corporations' health
          and  welfare  benefit  plans,  at the  election  of Parent;  provided,
          however,  that (i) nothing in this  Section 5.4 or  elsewhere  in this
          Agreement  shall  limit the  right of  Parent  or any of the  Acquired
          Corporations  to amend or terminate any such health or welfare benefit
          plan  at any  time,  and  (ii)  if  Parent  or  any  of  the  Acquired
          Corporations  terminates any such health or welfare benefit plan, then
          (upon expiration of any appropriate transition period), the Continuing
          Employees  shall be eligible  to  participate  in Parent's  health and
          welfare benefit plans, to  substantially  the same extent as similarly
          situated employees of Parent. The Continuing Employees shall be given,
          to the extent  consistent  with  Parent's  health and welfare  benefit
          plans and with  applicable  law,  service credit under Parent's health
          and welfare  benefit plans,  for purposes of eligibility  and vesting,
          equal to the service  credit  currently  provided  to such  Continuing
          Employees under the Company's  comparable  employee health and welfare
          benefit plans.  The  compensation  paid and benefits  provided to each
          employee who  continues  employment  with either Parent or the Company
          after the Closing  Date shall be paid or provided in  accordance  with
          Parent's  compensation and benefits policies.  Nothing in this Section
          5.4 or  elsewhere  in this  Agreement  shall be  construed to create a
          right in any employee to employment  with Parent,  any of the Acquired
          Corporations  or any other  Subsidiary or other Affiliate of Parent or
          any of the Acquired Corporations.

     (b)  At the request of Parent,  the Company  agrees to take (or cause to be
          taken) all actions  necessary or appropriate  to terminate,  effective
          immediately  prior to the Effective  Time,  any employee  benefit plan
          sponsored by any of the Acquired  Corporations (or in which any of the
          Acquired  Corporations  participate)  that contains a cash or deferred
          arrangement  intended to qualify under  section  401(k) of the IRC (or
          any comparable provision of state or foreign Tax laws).

     (c)  At the request of Parent,  the Company  agrees to take (or cause to be
          taken) all actions  necessary or appropriate  to terminate,  effective
          immediately  prior to the Effective  Time, any other Employee  Plan(s)
          sponsored,  maintained  or  contributed  to by  any  of  the  Acquired
          Corporations   (or  in  which   any  of  the   Acquired   Corporations
          participate).

     (d)  The Company  shall assist Parent in  identifying  the key employees of
          the  Company  (the  "Key   Employees")  and  shall  use   commercially
          reasonable efforts to retain the Key Employees, including offering the
          Key Employees  retention bonuses in amounts to be designated by Parent
          and payable by the Company promptly following the Effective Time as an
          incentive  to such Key  Employees  to remain  employed  by the Company
          through the Effective Time.



                                      D-34

<PAGE>

     5.5  Indemnification of Officers and Directors.

     (a)  All rights to  indemnification  existing in favor of those Persons who
          are directors and officers of any of the Acquired  Corporations  as of
          the date of this Agreement (the "Indemnified Managers") for their acts
          and omissions  occurring  prior to the Effective  Time, as provided in
          the   indemnification   agreements   between   the  Company  and  said
          Indemnified  Managers (as in effect as of the date of this  Agreement)
          in the forms  disclosed  by the Company to Parent prior to the date of
          this  Agreement  shall  survive  the  Arrangement  and  shall  be  the
          obligation  of the  Company  until the  expiration  of the  applicable
          limitations  period with respect to any claims against the Indemnified
          Managers arising out of such acts or omissions.

     (b)  From the Effective  Time until the third  anniversary of the Effective
          Time, Parent or the Company shall maintain in effect,  for the benefit
          of the  Indemnified  Managers with respect to their acts and omissions
          occurring  prior  to  the  Effective  Time,  the  existing  policy  of
          directors' and officers' liability insurance maintained by the Company
          as of the date of this  Agreement in the form disclosed by the Company
          to Parent prior to the date of this Agreement (the "Existing Policy"),
          to the  extent  that  directors'  and  officers'  liability  insurance
          coverage is commercially available; provided, however, that (i) Parent
          or the Company,  as the case may be, may  substitute  for the Existing
          Policy a policy or policies of comparable coverage, and (ii) Parent or
          the  Company,  as the case may be, shall not be required to pay annual
          premiums for the Existing  Policy (or for any substitute  policies) in
          excess of the current annual premium  payable for the Existing  Policy
          as of the date of this Agreement (the "Current Premium"). In the event
          any future annual  premiums for the Existing Policy (or any substitute
          policies) exceeds the Current Premium,  Parent or the Company shall be
          entitled to reduce the amount of coverage of the  Existing  Policy (or
          any  substitute  policies)  to the  amount  of  coverage  that  can be
          obtained for a premium equal to the Current Premium.

     (c)  Notwithstanding  anything  in  this  Agreement  to  the  contrary  and
          expressly in addition to any rights of indemnification provided to any
          such person pursuant to this Agreement,  the by-laws of the Company as
          amended,  the CBCA,  any  other  applicable  legislation  or any other
          agreement to which any  Indemnified  Manager is party,  Parent  hereby
          agrees  to  indemnify,   from  and  after  the  Effective  Time,  each
          Indemnified  Manager to the fullest  extent that the Company  would be
          permitted by applicable law to indemnify the Indemnified Managers with
          respect to (i) any and all judgments,  damages,  liabilities,  losses,
          penalties,   fines  and  amounts  paid  in  settlement  (collectively,
          "Indemnified  Liabilities") and (ii) any and all reasonable attorneys'
          fees,  disbursements  and  retainers,  other fees,  costs and expenses
          relating  (directly  or  indirectly)  to the  Indemnified  Liabilities
          including,  without limitation, court costs, fees or experts' fees and
          any other  disbursements and expenses relating thereto  (collectively,
          "Indemnified  Expenses")  to the extent such  Indemnified  Liabilities
          and/or  Indemnified  Expenses arise (directly or indirectly)  from the
          transactions  specifically  set forth in  Section  2.02 of the Plan of
          Arrangement;  provided,  however, that Parent shall not be required to
          indemnify any Indemnified Manager for any Indemnified Liability or any
          Indemnified  Expense to the extent that such Indemnified  Liability or
          Indemnified  Expense,  as the  case may be,  arises  out of any of the
          information   regarding   the  Company   supplied  for   inclusion  or
          incorporation  by reference in the  Management  Proxy  Circular or any
          amendment thereto (including any such information  referred to therein
          or incorporated  therein by reference) or out of the omission to state
          a material fact regarding the Company required to be stated therein or
          necessary in order to make the statements therein, in the light of the
          circumstances under which they are made, not misleading..

     5.6  Additional Agreements.

     (a)  Subject  to  Section  5.6(b),  Parent  and the  Company  shall use all
          reasonable  efforts  to  take,  or  cause  to be  taken,  all  actions
          necessary to consummate the  Arrangement  and make effective the other
          transactions  contemplated  by this  Agreement.  Without  limiting the
          generality of the foregoing, but subject to Section 5.6(b), each party
          to this  Agreement  (i) shall make all  filings  (if any) and give all
          notices  (if  any)  required  to be made and  given  by such  party in
          connection   with  the   Arrangement   and  the   other   transactions
          contemplated by this Agreement,  (ii) shall use all reasonable efforts
          to obtain each Consent (if any)  required to be obtained  (pursuant to
          any applicable  Legal  Requirement or Contract,  or otherwise) by such
          party  in  connection  with  the  Arrangement  or  any  of  the  other
          transactions  contemplated by this Agreement,  and (iii) shall use all
          reasonable  efforts to lift any  restraint,  injunction or other legal
          bar to the Arrangement.  Each of Parent and the Company shall promptly
          deliver to the other party a copy of each such filing made,  each such
          notice  given  and  each  such  Consent  obtained  by  it  during  the
          Pre-Closing Period.


                                      D-35

<PAGE>


     (b)  Notwithstanding  anything to the contrary contained in this Agreement,
          Parent  shall not have any  obligation  under this  Agreement:  (i) to
          dispose of or transfer or cause any of its  Subsidiaries to dispose of
          or  transfer  any  assets,  or to commit to cause any of the  Acquired
          Corporations  to dispose of any assets;  (ii) to  discontinue or cause
          any of  its  Subsidiaries  to  discontinue  offering  any  product  or
          service,  or to commit to cause any of the  Acquired  Corporations  to
          discontinue  offering  any  product  or  service;  (iii) to license or
          otherwise make available,  or cause any of its Subsidiaries to license
          or otherwise make available,  to any Person, any technology,  software
          or other Proprietary  Asset, or to commit to cause any of the Acquired
          Corporations  to license or otherwise make available to any Person any
          technology, software or other Proprietary Asset; (iv) to hold separate
          or cause  any of its  Subsidiaries  to hold  separate  any  assets  or
          operations  (either before or after the Closing Date), or to commit to
          cause any of the Acquired  Corporations to hold separate any assets or
          operations;  (v) to make or cause any of its  Subsidiaries to make any
          commitment  (to any  Governmental  Body or  otherwise)  regarding  its
          future  operations  or the future  operations  of any of the  Acquired
          Corporations;  or (vi) to contest any Legal Proceeding relating to the
          Arrangement if Parent  determines in good faith that  contesting  such
          Legal Proceeding might not be advisable.

     (c)  Parent and the  Purchaser  hereby waive  compliance by the Company and
          the other Acquired Corporations with the laws governing bulk sales (to
          the extent such laws are applicable to the  transactions  contemplated
          by this Agreement). The Company agrees to execute and deliver or cause
          to be executed and delivered to Parent and the Purchaser,  at or prior
          to the Closing,  any further  documents or affidavits  pursuant to the
          Bulk  Sales  Act  (Ontario)  as  may be  requested  by  Parent  or the
          Purchaser.

     5.7  Disclosure.  Parent  and the  Company  shall  consult  with each other
          before  issuing  any press  release  or  otherwise  making  any public
          statement  with  respect  to the  Arrangement  or  any  of  the  other
          transactions  contemplated  by this  Agreement.  Without  limiting the
          generality of the foregoing, neither Parent nor the Company shall, and
          neither Parent nor the Company shall permit any of its Subsidiaries or
          Representatives  to, make any disclosure  regarding the Arrangement or
          any of the other  transactions  contemplated by this Agreement  unless
          (a) the other parties  hereto shall have  approved such  disclosure or
          (b) the party  making the  disclosure  shall have been  advised by its
          outside legal  counsel that such  disclosure is required by applicable
          law or stock exchange requirements (it being understood that the party
          making such  disclosure  shall give notice to the other parties as far
          in advance of such disclosure as is reasonably practicable and will in
          good faith consult with the other party and consider the other party's
          suggestions concerning the nature, scope and manner of disclosure).

     5.8  Affiliate Agreements.  The Company shall use all reasonable efforts to
          cause each Person  identified in Part 2.20 of the Disclosure  Schedule
          and each other  Person  who is or becomes  (or may be deemed to be) an
          "affiliate"  (as that term is used in Rule 145  under  the  Securities
          Act) of the  Company to execute  and  deliver to Parent,  prior to the
          date of the mailing of the  Management  Proxy  Circular to the Company
          Shareholders, an Affiliate Agreement in the form of Exhibit B.

     5.9  Listing. Parent shall use commercially reasonable efforts to cause the
          shares of Parent  Common  Stock being  issued in  connection  with the
          Arrangement to be approved for listing (subject to notice of issuance)
          on the Nasdaq National Market.

     5.10 Employee Terminations.

     (a)  Each of the Company and the Parent  agree and  covenant  that,  in the
          event of the  involuntary  termination  of any employee of an Acquired
          Corporation  (other than for Cause) during the period  commencing with
          the  Effective  Time  and  ending  on the date six  months  after  the
          Effective  Time,  the  Company  shall  offer  severance  to each  such
          employee equal to one month of salary for each full year of service of
          each such employee to any Acquired Corporation, up to a maximum of the
          greater of (a) twelve months' salary, or (b) the amount required to be
          paid under applicable law.

     (b)  The salary  used for the  purposes  of  determining  the amount of the
          foregoing  payment shall be the employee's base salary in effect prior
          to the  company-wide  salary  reductions  implemented  by the Acquired
          Corporations in November,  2001,  excluding  bonuses,  commissions and
          other  benefits,  or, if the  employee was not employed by an Acquired
          Corporation  prior to November,  2001, the  employee's  base salary in
          effect at the time of such employee's termination,  excluding bonuses,
          commissions and other benefits.


                                      D-36

<PAGE>

     (c)  For the avoidance of doubt,  (i) where any employee is entitled at law
          or by  contract  to a greater  severance  payment  than the  severance
          payment  provided  by Section  5.10(a),  the  Company  shall make such
          greater  payment  (in  substitution  for  and not in  addition  to the
          severance provided by Section 5.10(a)), and (ii) where any employee is
          entitled at law or by contract to a lesser severance  payment than the
          severance  payment provided by Section 5.10(a),  the severance payment
          provided by Section  5.10(a) will be in  substitution  for, and not in
          addition to, any such lesser payment.

     6.   Conditions Precedent to Obligations of Parent and Purchaser

     The  obligations  of Parent and  Purchaser  to effect the  Arrangement  and
otherwise consummate the transactions contemplated by this Agreement are subject
to the  satisfaction,  at or  prior  to the  Closing,  of each of the  following
conditions:

     6.1  Accuracy of Representations  and Warranties.  The  representations and
          warranties  of the Company  contained  in Section 2 of this  Agreement
          shall be  accurate  in all  material  respects  as of the date of this
          Agreement  and as of the  Closing  Date  as if  made  on and as of the
          Closing Date (except (i) for such representations and warranties which
          address  matters only as of a particular  time,  which shall have been
          accurate in all material  respects as of such particular time and (ii)
          as such representations and warranties (as modified by any part of the
          Disclosure  Schedule that  expressly  qualifies or otherwise  delimits
          such  representations  and warranties) may be affected by transactions
          expressly  required or permitted  (and not  otherwise in conflict with
          this Agreement)  pursuant to this Agreement or pursuant to the written
          consent  of  Parent);   provided,   however,  that,  for  purposes  of
          determining the accuracy of such  representations and warranties,  (A)
          all "Material  Adverse Effect"  qualifications  and other  materiality
          qualifications  contained in such representations and warranties shall
          be disregarded and (B) any update of or modification to the Disclosure
          Schedule  made or  purported  to have been made after the date of this
          Agreement shall be disregarded.

     6.2  Performance of Covenants. Each covenant or obligation that the Company
          is  required  to comply  with or to perform at or prior to the Closing
          shall have been complied with and performed in all material respects.

     6.3  Shareholder Approval; Exercise of Dissenters' Rights.

     (a)  This  Agreement and the  Arrangement  shall have been duly approved by
          the Required  Company  Shareholder  Vote, and holders of not more than
          ten  percent  (10%)  of  the  Common  Shares  issued  and  outstanding
          immediately  prior to the Effective  Time shall have  exercised  their
          Dissenters'  Rights (and not  withdrawn  such  exercise)  or otherwise
          preserved such Dissenters' Rights in connection with the Arrangement.

     (b)  The Arrangement  shall have been duly approved by the Required Company
          Shareholder  Vote in  accordance  with any  conditions  in addition to
          those set forth in Section  6.3(a) which may be imposed by the Interim
          Order and which are satisfactory to Parent, acting reasonably.

     6.4  Consents.  The  Consents  identified  in  Part  6.4 of the  Disclosure
          Schedule  shall  have been  obtained  and  shall be in full  force and
          effect.

     6.5  Agreements  and  Documents.  Parent shall have  received the following
          agreements  and  documents,  each of which  shall be in full force and
          effect:

     (a)  Affiliate  Agreements in the form of Exhibit B executed by each Person
          who is or could  reasonably  be deemed to be an  "affiliate"  (as that
          term is used in Rule 145  under  the  Securities  Act) of the  Company
          (except AGF Funds, Inc., in respect of which the Company shall use its
          commercially  reasonable  efforts to obtain its execution and delivery
          of an Affiliate Agreement, but in respect of whom this condition shall
          not apply);

     (b)  Noncompetition and  Nonsolicitation  Agreements in the form of Exhibit
          C,  executed  by  those  individuals  identified  on  Schedule  6.5(b)
          (collectively, the "Key Executives");

     (c)  the Plan of Arrangement certified as effective through the issuance of
          a  Certificate  of  Arrangement  relating to  Articles of  Arrangement
          issued by the Director;


                                      D-37

<PAGE>

     (d)  a certificate executed on behalf of the Company by its Chief Executive
          Officer and Chief Financial Officer confirming that the conditions set
          forth  in  Sections  6.1,  6.2,  6.4,  6.6 and  6.11  have  been  duly
          satisfied; and

     (e)  the written  resignations of all officers and directors of each of the
          Acquired  Corporations,  effective  as of  the  Effective  Time  (such
          resignations  to be without  prejudice to any  applicable  contractual
          rights  associated  with the  termination of the applicable  officer's
          employment by the Company).

     6.6  No Material  Adverse Effect.  Since the date of this Agreement,  there
          shall not have  occurred  any change,  effect,  event or  circumstance
          that,  in  combination  with any  other  changes,  effects,  events or
          circumstances,  has  resulted  in or would  reasonably  be expected to
          result in a Material Adverse Effect on the Company.

     6.7  Regulatory Approvals.

     (a)  Parent,  Purchaser  and the Company  shall have obtained (1) exemption
          orders from the Canadian Securities  Commissions from the registration
          and  prospectus   requirements   with  respect  to  the   transactions
          contemplated  by this  Agreement  and (2) all  other  Consents  by all
          Governmental   Bodies  that  are  necessary  in  connection  with  the
          Arrangement (other than, with respect to the Consents  contemplated by
          this clause "(2),"  Consents where the failure to obtain such Consents
          would not  adversely  impact in any  material  respect  the ability of
          Parent  or  any of  its  Subsidiaries  or  Affiliates  (including  the
          Acquired  Corporations) to conduct their respective  businesses),  and
          each  such  Consent  shall  be  on  terms  and  conditions  reasonably
          satisfactory to Parent, and in any event:

     (i)  the  Commissioner  of  Competition  or  other  representative  of  the
          Competition Bureau (Canada) (the  "Commissioner")  shall not have made
          an application  for an order under section 100 of the  Competition Act
          (Canada)  in respect of the  transactions  contemplated  herein (or if
          made,  that  such  order  shall  have  been  rescinded  on  terms  and
          conditions acceptable to Parent);

     (ii) to the knowledge of Parent,  the Commissioner shall not have commenced
          an inquiry in respect of the  transactions  contemplated  herein under
          section 10 of the Competition Act (or if commenced,  that such inquiry
          shall have been  terminated and any action  required to be taken shall
          be acceptable to the Parent); and

     (iii)to the  knowledge of Parent,  no  application  under  section 9 of the
          Competition Act shall have been made to the Commissioner in respect of
          the transactions  contemplated  herein (or if made, that any resulting
          inquiry shall have been terminated and any action required to be taken
          shall be acceptable to the Parent).

     (b)  The  waiting   period  under  the  HSR  Act,  if   applicable  to  the
          consummation   of  the   Arrangement,   shall  have  expired  or  been
          terminated,  and there shall not be in effect any voluntary  agreement
          between Parent or the Company and the Federal Trade  Commission or the
          Department  of Justice  pursuant  to which  Parent or the  Company has
          agreed not to consummate the  Arrangement  for any period of time; any
          similar waiting period under any applicable  foreign  antitrust law or
          regulation or other similar  Legal  Requirement  shall have expired or
          been terminated; and any Consent required under any applicable foreign
          antitrust law or regulation or other Legal Requirement shall have been
          obtained.

     6.8  Court  Orders.  The Interim  Order and the Final Order shall each have
          been obtained in a form and on terms reasonably satisfactory to Parent
          and shall not have been set aside or modified (on appeal or otherwise)
          in a manner unacceptable to Parent (acting reasonably).

     6.9  Listing.

     (a)  The shares of Parent Common Stock to be issued in connection  with the
          Arrangement shall have been approved for listing (subject to notice of
          issuance) on the Nasdaq National Market.

     (b)  The  Common  Shares  shall  continue  to be  listed  on the TSE at the
          Effective Time.


                                      D-38

<PAGE>

     6.10 No  Restraints.   No  temporary  restraining  order,   preliminary  or
          permanent injunction or other order preventing the consummation of the
          Arrangement   shall  have  been  issued  by  any  court  of  competent
          jurisdiction  and remain in effect,  and there  shall not be any Legal
          Requirement enacted or deemed applicable to the Arrangement that makes
          consummation of the Arrangement illegal.

     6.11 No  Governmental  or Other  Litigation.  There shall not be pending or
          threatened any Legal Proceeding in which a Governmental  Body is or is
          threatened to become a party or is otherwise involved, and there shall
          not be pending  any Legal  Proceeding  in which any other  Person is a
          party or is otherwise  involved and which would reasonably be expected
          to have a Material Adverse Effect on the Company or a Material Adverse
          Effect on Parent:  (a)  challenging or seeking to restrain or prohibit
          the  consummation of the Arrangement or any of the other  transactions
          contemplated  by this  Agreement;  (b) relating to the Arrangement and
          seeking to obtain from Parent or any of the Acquired Corporations, any
          damages or other relief that may be material to Parent or the Acquired
          Corporations; (c) seeking to prohibit or limit in any material respect
          Parent's  or  Purchaser's  ability  to vote,  receive  dividends  with
          respect to or otherwise  exercise ownership rights with respect to the
          stock of any of the Acquired  Corporations;  (d) that could materially
          and  adversely  affect  the  right of  Parent  or any of the  Acquired
          Corporations to own the assets or operate the business of the Acquired
          Corporations;   or  (e)   seeking  to  compel  any  of  the   Acquired
          Corporations, Parent or any Subsidiary of Parent to dispose of or hold
          separate any material  assets as a result of the Arrangement or any of
          the other transactions contemplated by this Agreement.

     6.12 Compliance with Section 3(a)(10) of the Securities Act. All applicable
          requirements of Section 3(a)(10) of the Securities Act shall have been
          satisfied with respect to the issuance of Parent Common Stock pursuant
          to the Arrangement.

     6.13 Asset  Transfer  Agreement.   The  Company  shall  have  executed  and
          delivered  to  Parent  any  asset  transfer   agreements  and  related
          documents and instruments  referred to in Section 1.1(f) providing for
          the transfer to Parent of the Adobe Assets and shall have executed and
          delivered to the Purchaser any asset  transfer  agreements and related
          documents and instruments  referred to in Section 1.1(f) providing for
          the transfer to the  Purchaser of the  Purchaser  Assets,  and each of
          such agreements shall remain in full force and effect, and the Company
          shall  have  taken all  actions  and  fulfilled  all  responsibilities
          required of the Company thereunder.

     7.   Conditions Precedent to Obligation of the Company

     The  obligation  of the  Company to effect the  Arrangement  and  otherwise
consummate the  transactions  contemplated  by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:

     7.1  Accuracy of Representations  and Warranties.  The  representations and
          warranties of Parent contained in Section 3 of this Agreement shall be
          accurate in all material respects as of the date of this Agreement and
          as of the  Closing  Date  as if  made  on and as of the  Closing  Date
          (except (i) for such  representations  and  warranties  which  address
          matters only as of a particular  time,  which shall have been accurate
          in all material  respects as of such  particular time and (ii) as such
          representations   and  warranties  may  be  affected  by  transactions
          expressly  required or permitted  (and not  otherwise in conflict with
          this Agreement)  pursuant to this Agreement or pursuant to the written
          consent of the  Company);  provided,  however,  that,  for purposes of
          determining the accuracy of such  representations and warranties,  all
          "Material  Adverse  Effect"   qualifications   and  other  materiality
          qualifications  contained in such representations and warranties shall
          be disregarded.

     7.2  Performance of Covenants.  All of the covenants and  obligations  that
          Parent and  Purchaser  are required to comply with or to perform at or
          prior to the Closing  shall have been  complied  with and performed in
          all material respects.

     7.3  Shareholder Approval.

     (a)  The Arrangement  shall have been duly approved by the Required Company
          Shareholder Vote.

     (b)  The Arrangement  shall have been duly approved by the Required Company
          Shareholder  Vote in  accordance  with any  conditions  in addition to
          those set forth in Section  7.3(a) which may be imposed by the Interim
          Order and which are satisfactory to the Company, acting reasonably.


                                      D-39

<PAGE>

     7.4  Documents. The Company shall have received the following documents:

     (a)  the Plan of Arrangement; and

     (b)  a certificate  executed on behalf of Parent by an executive officer of
          Parent,  confirming  that the conditions set forth in Sections 7.1 and
          7.2 have been duly satisfied.

     7.5  Regulatory Approvals.

     (a)  Parent,  Purchaser and the Company shall have obtained all Consents by
          all  Governmental  Bodies that are  necessary in  connection  with the
          Arrangement  (other  than  Consents  where the  failure to obtain such
          Consents  would not  adversely  impact  in any  material  respect  the
          ability of Parent or any of its Subsidiaries or Affiliates  (including
          the Acquired  Corporations) to conduct their  respective  businesses),
          and each  such  Consent  shall be on terms and  conditions  reasonably
          satisfactory  to Parent (it being  understood  that any Consents which
          would  require any of the Acquired  Corporations  or the  directors or
          officers of the Acquired  Corporations to perform an illegal act shall
          be deemed not to be on terms and conditions reasonably satisfactory to
          Parent).

     (b)  The  waiting   period  under  the  HSR  Act,  if   applicable  to  the
          consummation   of  the   Arrangement,   shall  have  expired  or  been
          terminated,  and there shall not be in effect any voluntary  agreement
          between Parent or the Company and the Federal Trade  Commission or the
          Department  of Justice  pursuant  to which  Parent or the  Company has
          agreed not to consummate the  Arrangement  for any period of time; any
          similar waiting period under any applicable  foreign  antitrust law or
          regulation or other similar  Legal  Requirement  shall have expired or
          been terminated; and any Consent required under any applicable foreign
          antitrust law or regulation or other Legal Requirement shall have been
          obtained.

     7.6  Court  Orders.  The Interim  Order and the Final Order shall each have
          been obtained in a form and on terms  reasonably  satisfactory  to the
          Company  and shall not have been set aside or  modified  (on appeal or
          otherwise)   in  a  manner   unacceptable   to  the  Company   (acting
          reasonably).

     7.7  Listing.  The shares of Parent Common Stock to be issued in connection
          with the Arrangement  shall have been approved for listing (subject to
          notice of issuance) on the Nasdaq National Market.

     7.8  No  Restraints.   No  temporary  restraining  order,   preliminary  or
          permanent injunction or other order preventing the consummation of the
          Arrangement  by the  Company  shall  have been  issued by any court of
          competent  jurisdiction  and remain in effect,  and there shall not be
          any Legal Requirement  enacted or deemed applicable to the Arrangement
          that makes consummation of the Arrangement by the Company illegal.

     7.9  No  Governmental  Litigation.  There  shall not be  pending  any Legal
          Proceeding  in  which a  Canadian  Governmental  Body is a party or is
          otherwise involved  challenging or seeking to restrain or prohibit the
          consummation  of the  Arrangement  or any  of the  other  transactions
          contemplated by this Agreement.

     7.10 Compliance with Section 3(a)(10) of the Securities Act. All applicable
          requirements of Section 3(a)(10) of the Securities Act shall have been
          satisfied with respect to the issuance of Parent Common Stock pursuant
          to the Arrangement.

     8.   Termination

     8.1  Termination.  This Agreement may be terminated  prior to the Effective
          Time (whether  before or after the approval of this  Agreement and the
          Arrangement by the Required Company Shareholder Vote):

     (a)  by mutual written consent of Parent and the Company;

     (b)  by either Parent or the Company if the Arrangement shall not have been
          consummated by August 31, 2002;


                                      D-40

<PAGE>



          provided,  however,  that a party shall not be  permitted to terminate
          this  Agreement  pursuant  to this  Section  8.1(b) if the  failure to
          consummate the  Arrangement by such date is  attributable to a failure
          on the part of such party to perform any  covenant  in this  Agreement
          required to be  performed  by such party at or prior to the  Effective
          Time;

     (c)  by either  Parent or the Company if a court of competent  jurisdiction
          or other Governmental Body shall have issued a final and nonappealable
          order, decree or ruling, or shall have taken any other action,  having
          the  effect  of  permanently   restraining,   enjoining  or  otherwise
          prohibiting the Arrangement;

     (d)  by  either  Parent or the  Company  if (i) the  Company  Shareholders'
          Meeting  (including any adjournments and postponements  thereof) shall
          have been held and completed and the Company  Shareholders  shall have
          taken a final vote on a proposal  to approve  this  Agreement  and the
          Arrangement,  and (ii) this  Agreement and the  Arrangement  shall not
          have been approved at the Company Shareholders' Meeting (and shall not
          have been approved at any adjournment or postponement  thereof) by the
          Required Company Shareholder Vote;

     (e)  by Parent (at any time prior to the approval of this Agreement and the
          Arrangement by the Required Company  Shareholder Vote) if a Triggering
          Event shall have occurred;

     (f)  by Parent if (i) any of the Company's  representations  and warranties
          contained in this Agreement shall be inaccurate as of the date of this
          Agreement,  or shall have become inaccurate as of a date subsequent to
          the date of this Agreement (as if made on such subsequent  date), such
          that the  condition set forth in Section 6.1 would not be satisfied if
          tested as of the date of such  inaccuracy or (ii) any of the Company's
          covenants  contained in this  Agreement  shall have been breached such
          that the  condition set forth in Section 6.2 would not be satisfied if
          tested as of the date of such breach;  provided,  however,  that if an
          inaccuracy in any of the Company's  representations  and warranties as
          of a date  subsequent  to the date of this  Agreement or a breach of a
          covenant  by the Company is cured by the  Company  within  thirty (30)
          days following  delivery by Parent to the Company of written notice of
          such breach  (provided  such  inaccuracy  or breach is curable in such
          time  period  and  prior  to  the   expiration   date   specified   in
          Section 8.1(b)),  then Parent may not terminate this  Agreement  under
          this Section 8.1(f) on account of such inaccuracy or breach; or

     (g)  by the Company if (i) any of Parent's  representations  and warranties
          contained in this Agreement shall be inaccurate as of the date of this
          Agreement,  or shall have become inaccurate as of a date subsequent to
          the date of this Agreement (as if made on such subsequent  date), such
          that the  condition set forth in Section 7.1 would not be satisfied if
          tested as of the date of such  inaccuracy  or (ii) if any of  Parent's
          covenants  contained in this  Agreement  shall have been breached such
          that the  condition set forth in Section 7.2 would not be satisfied if
          tested as of the date of such breach;  provided,  however,  that if an
          inaccuracy in any of Parent's  representations  and warranties as of a
          date  subsequent  to the  date  of this  Agreement  or a  breach  of a
          covenant  by  Parent  is cured  by  Parent  within  thirty  (30)  days
          following  delivery by the Company to Parent of written notice of such
          breach  (provided  such  inaccuracy  or breach is curable in such time
          period and prior to the expiration date specified in  Section 8.1(b)),
          then  the  Company  may  not  terminate  this  Agreement   under  this
          Section 8.1(g) on account of such inaccuracy or breach.

     8.2  Effect  of  Termination.  In the  event  of the  termination  of  this
          Agreement as provided in Section 8.1,  this  Agreement  shall be of no
          further force or effect; provided, however, that (i) this Section 8.2,
          Section  8.3 and  Section  9 shall  survive  the  termination  of this
          Agreement  and  shall  remain  in full  force  and  effect,  (ii)  the
          Confidentiality  Agreement  (except as provided in Section  9.4) shall
          survive the  termination  of this  Agreement  and shall remain in full
          force and effect,  and (iii) the  termination of this Agreement  shall
          not relieve any party from any  liability  for any material  breach of
          any representation,  warranty, covenant, obligation or other provision
          contained in this Agreement.

     8.3  Expenses; Termination Fees.

     (a)  Except  as set  forth in this  Section  8.3,  all  fees  and  expenses
          incurred  in  connection  with  this  Agreement  and the  transactions
          contemplated  by this Agreement  shall be paid by the party  incurring
          such  expenses,   whether  or  not  the  Arrangement  is  consummated;
          provided, however, that:


                                      D-41

<PAGE>

     (i)  Parent and the  Company  shall share  equally  all fees and  expenses,
          other  than  attorneys'  fees,  incurred  in  connection  with (A) the
          filing,  printing and mailing of the Management Proxy Circular and any
          amendments  or  supplements  thereto and (B) the filing by the parties
          hereto  of  the   notification   and  report  forms  relating  to  the
          Arrangement  under the HSR Act (if  applicable)  and the filing of any
          notice  or  other  document  under  the  Investment  Canada  Act,  the
          Competition Act (Canada) and any other  applicable  foreign  antitrust
          law or regulation (if applicable);

     (ii) if (A) this Agreement is terminated by Parent or the Company  pursuant
          to Section 8.1(b) or Section  8.1(d),  and (B) at or prior to the time
          of the termination of this  Agreement,  any Person shall have publicly
          disclosed,  announced,  commenced,  submitted  or made an  Acquisition
          Proposal  (other than the Open Text Offer) or an Acquisition  Proposal
          (other than the Open Text Offer) shall have otherwise become generally
          known  to  the  Company  Shareholders,   then  (without  limiting  any
          obligation  of the Company to pay any fee payable  pursuant to Section
          8.3(c)),  the  Company  shall  make a  nonrefundable  cash  payment to
          Parent, at the time specified in Section 8.3(b), in an amount equal to
          $1,250,000 as payment in full of Parent's fees and expenses (including
          all attorneys' fees,  accountants'  fees,  financial advisory fees and
          filing  fees) that have been paid or that may become  payable by or on
          behalf of Parent in connection with the preparation and negotiation of
          this Agreement and otherwise in connection  with the  Arrangement,  it
          being  understood  that the Company shall have no obligation to make a
          payment to Parent under this Section  8.3(a)(ii)  if either  Parent or
          the Company shall have terminated  this agreement  pursuant to Section
          8.1(b) and no  Acquisition  Proposal  described  in clause "(B)" above
          shall have been publicly disclosed, announced, commenced, submitted or
          made, or shall have otherwise  become  generally  known to the Company
          Shareholders,  that is superior for the Company  Shareholders  (from a
          financial point of view) to the Open Text Offer; and

     (iii)if this Agreement is terminated by Parent  pursuant to Section 8.1(e),
          then  (without  limiting any  obligation of the Company to pay any fee
          payable  pursuant  to  Section  8.3(d)),  the  Company  shall  make  a
          nonrefundable cash payment to Parent, at the time specified in Section
          8.3(b),  in an  amount  equal  to  $1,250,000  as  payment  in full of
          Parent's   fees  and  expenses   (including   all   attorneys'   fees,
          accountants' fees,  financial advisory fees and filing fees) that have
          been  paid or that may  become  payable  by or on  behalf of Parent in
          connection  with the preparation and negotiation of this Agreement and
          otherwise in connection with the Arrangement.

     (b)  In the case of termination  of this Agreement by the Company  pursuant
          to  Section  8.1(b)  or  Section  8.1(d),  any  nonrefundable  payment
          required to be made pursuant to clause "(ii)" or clause "(iii)" of the
          proviso  to  Section  8.3(a)  shall be made  prior to the time of such
          termination;  and in the  case of  termination  of this  Agreement  by
          Parent pursuant to Section  8.1(b),  Section 8.1(d) or Section 8.1(e),
          any  nonrefundable  payment  required  to be made  pursuant  to clause
          "(ii)" or clause  "(iii)" of the  proviso to Section  8.3(a)  shall be
          made by the Company within two business days after such termination.

     (c)  If (A) this Agreement is terminated by Parent or the Company  pursuant
          to Section 8.1(b) or Section  8.1(d),  and (B) at or prior to the time
          of the termination of this  Agreement,  any Person shall have publicly
          disclosed,  announced,  commenced,  submitted  or made an  Acquisition
          Proposal  (other than the Open Text Offer) or an Acquisition  Proposal
          (other than the Open Text Offer) shall have otherwise become generally
          known to the  Company  Shareholders,  then the  Company  shall  pay to
          Parent,  in cash at the time  specified in the next  sentence  (and in
          addition  to the  amounts  payable  pursuant  to  Section  8.3(a)),  a
          nonrefundable fee in the amount of $2,880,000 (the "Termination Fee"),
          it being  understood that the Company shall have no obligation to make
          a payment to Parent under this Section  8.3(c) if either Parent or the
          Company  shall have  terminated  this  agreement  pursuant  to Section
          8.1(b) and no  Acquisition  Proposal  described  in clause "(B)" above
          shall have been publicly disclosed, announced, commenced, submitted or
          made, or shall have otherwise  become  generally  known to the Company
          Shareholders,  that is superior for the Company  Shareholders  (from a
          financial  point  of  view) to the  Open  Text  Offer.  In the case of
          termination  of this  Agreement  by the  Company  pursuant  to Section
          8.1(b) or Section 8.1(d), the Termination Fee, if it shall have become
          payable,  shall be paid by the Company prior to such termination,  and
          in the case of  termination  of this  Agreement by Parent  pursuant to
          Section 8.1(b) or Section  8.1(d),  the  Termination  Fee, if it shall
          become payable,  shall be paid by the Company within two business days
          after such termination.

     (d)  If this Agreement is terminated by Parent  pursuant to Section 8.1(e),
          then the Company shall pay to Parent, in cash at the time specified in
          the next sentence (and in addition to the amounts payable  pursuant to
          Section  8.3(a)),   a  nonrefundable   fee  in  the  amount  equal  to
          $2,880,000. The fee referred to in the preceding sentence


                                      D-42

<PAGE>

          shall be paid by the  Company  within  two  business  days  after such
          termination.

     (e)  Notwithstanding  anything to the contrary contained in this Agreement,
          if the  Company  fails to pay when due any amount  payable  under this
          Section 8.3, then (i) the Company shall reimburse Parent for all costs
          and expenses (including fees and disbursements of counsel) incurred in
          connection  with  the  collection  of  such  overdue  amount  and  the
          enforcement  by Parent of its rights  under this Section 8.3, and (ii)
          the Company shall pay to Parent  interest on such overdue  amount (for
          the  period  commencing  as  of  the  date  such  overdue  amount  was
          originally  required  to be paid and  ending on the date such  overdue
          amount is  actually  paid to Parent in full) at a rate per annum equal
          to the "prime rate" (as  announced by Bank of America or any successor
          thereto)  in effect on the date such  overdue  amount  was  originally
          required to be paid.

     9.   Miscellaneous Provisions

     9.1  Amendment.  This  Agreement  may be amended  with the  approval of the
          respective  boards of  directors of the Company and Parent at any time
          (whether  before  or after  the  approval  of this  Agreement  and the
          Arrangement  by the Company  Shareholders);  provided,  however,  that
          after any such  approval by the  Company  Shareholders,  no  amendment
          shall be made which by law  requires  further  approval of the Company
          Shareholders  without the further approval of such shareholders.  This
          Agreement may not be amended except by an instrument in writing signed
          on behalf of each of the parties hereto.

     9.2  Waiver.  No  failure on the part of any party to  exercise  any power,
          right,  privilege or remedy under this Agreement,  and no delay on the
          part of any party in exercising any power, right,  privilege or remedy
          under this Agreement,  shall operate as a waiver of such power, right,
          privilege  or remedy;  and no single or partial  exercise  of any such
          power, right,  privilege or remedy shall preclude any other or further
          exercise thereof or of any other power, right, privilege or remedy. No
          party  shall be deemed to have  waived any claim  arising  out of this
          Agreement,  or any  power,  right,  privilege  or  remedy  under  this
          Agreement, unless the waiver of such claim, power, right, privilege or
          remedy is expressly  set forth in a written  instrument  duly executed
          and  delivered on behalf of such party;  and any such waiver shall not
          be applicable  or have any effect  except in the specific  instance in
          which it is given.

     9.3  No  Survival  of   Representations   and   Warranties.   None  of  the
          representations  and warranties  contained in this Agreement or in any
          certificate  delivered  pursuant to this  Agreement  shall survive the
          Arrangement.

     9.4  Entire   Agreement;   Counterparts.   This  Agreement  and  the  other
          agreements  referred to herein  constitute  the entire  agreement  and
          supersede all prior  agreements and  understandings,  both written and
          oral,  among or between any of the parties with respect to the subject
          matter hereof and thereof,  including without  limitation the Original
          Agreement; provided, however, that the Confidentiality Agreement shall
          not be superseded  and shall remain in full force and effect (it being
          acknowledged by the parties hereto that the terms of Section 15 of the
          Confidentiality  Agreement  are  suspended,  null  and  void and of no
          further force and effect during the term of this Agreement;  provided,
          however, that the terms of Section 15 of the Confidentiality Agreement
          shall be reinstated  and operative  following any  termination of this
          Agreement  pursuant  to  Section  8.1 but  only  with  respect  to any
          Acquisition  Proposal first initiated by Parent  following the date of
          such   termination.   This   Agreement  may  be  executed  in  several
          counterparts,  each of which  shall be deemed an  original  and all of
          which shall constitute one and the same instrument

     9.5  Applicable Law; Jurisdiction. This Agreement shall be governed by, and
          construed  in  accordance  with,  the laws of the  State of  Delaware,
          regardless of the laws that might  otherwise  govern under  applicable
          principles  of  conflicts  of  laws  thereof,  except  to  the  extent
          mandatorily  governed by the laws of the  Province of Ontario.  In any
          action  between any of the parties  arising out of or relating to this
          Agreement or any of the  transactions  contemplated by this Agreement:
          (a) each of the parties irrevocably and  unconditionally  consents and
          submits  to the  exclusive  jurisdiction  and  venue of the  state and
          federal  courts  located  in the  State of  Delaware;  (b) if any such
          action is commenced in a state court, then, subject to applicable law,
          no party  shall  object to the  removal of such  action to any federal
          court  located  in the  State of  Delaware;  (c)  each of the  parties
          irrevocably  waives  the  right to trial by jury;  and (d) each of the
          parties  irrevocably  consents  to service  of process by first  class
          certified mail,  return receipt  requested,  postage  prepaid,  to the
          address at which such party is to receive  notice in  accordance  with
          Section 9.9.


                                      D-43

<PAGE>

     9.6  Disclosure  Schedule.  The  Disclosure  Schedule  shall be arranged in
          separate  parts  corresponding  to the numbered and lettered  sections
          contained in Section 2, and the information  disclosed in any numbered
          or lettered  part shall be deemed to relate to and to qualify only the
          particular  representation  or warranty set forth in the corresponding
          numbered  or  lettered  section in Section 2 and all other  applicable
          representations   and  warranties  to  which  the  relevancy  of  such
          disclosure is readily apparent on its face, but shall not be deemed to
          relate to or to qualify any other representation or warranty unless an
          explicit reference to such effect is included in the representation or
          warranty in question or an explicit cross-reference to another part of
          the  Disclosure  Schedule is provided  in the  applicable  part of the
          Disclosure Schedule.

     9.7  Attorneys'  Fees.  In any  action at law or suit in equity to  enforce
          this  Agreement  or the rights of any of the  parties  hereunder,  the
          prevailing party in such action or suit shall be entitled to receive a
          reasonable sum for its attorneys' fees and all other  reasonable costs
          and expenses incurred in such action or suit.

     9.8  Assignability.  This  Agreement  shall be binding  upon,  and shall be
          enforceable  by and inure solely to the benefit of, the parties hereto
          and their respective successors and assigns;  provided,  however, that
          neither this  Agreement  nor any of Parent's or the  Company's  rights
          hereunder  may be assigned by Parent or the Company  without the prior
          written  consent of the other party,  and any attempted  assignment of
          this Agreement or any of such rights by Parent or the Company,  as the
          case may be,  without  such  consent  shall be void and of no  effect.
          Notwithstanding  the  foregoing,  Parent and Purchaser may assign,  in
          their  sole  discretion,  any or all of their  respective  rights  and
          interests and may delegate any or all of their respective  obligations
          under this Agreement to any direct or indirect wholly owned subsidiary
          of  Parent or  Purchaser,  as the case may be,  provided  that no such
          assignment or delegation  shall relieve  Parent or Purchaser of any of
          their respective obligations hereunder. Notwithstanding the foregoing,
          all   obligations  of  Purchaser   hereunder  or  under  the  Plan  of
          Arrangement  may be  terminated  if Parent  assumes  such  obligations
          directly.  Nothing in this Agreement,  express or implied, is intended
          to or shall confer upon any Person (other than the parties hereto) any
          right,  benefit or remedy of any nature  whatsoever under or by reason
          of this Agreement, except for the provisions of Section 5.5, which are
          intended for the benefit of the Indemnified Managers.

     9.9  Notices. Any notice or other communication required or permitted to be
          delivered  to any party under this  Agreement  shall be in writing and
          shall be  deemed  properly  delivered,  given  and  received  (a) upon
          receipt when delivered by hand, or (b) two business days after sent by
          registered  mail or by  courier  or  express  delivery  service  or by
          facsimile,   provided   that  in  each   case  the   notice  or  other
          communication is sent to the address or facsimile telephone number set
          forth  beneath the name of such party below (or to such other  address
          or facsimile  telephone number as such party shall have specified in a
          written notice given to the other parties hereto):

              if to Parent or Purchaser:

                  Adobe Systems Incorporated
                  345 Park Avenue
                  San Jose, CA  95110-2704
                  Attn: General Counsel
                  Fax:  (408) 537-6000

              with a copy to:

                  Cooley Godward LLP
                  5 Palo Alto Square
                  3000 El Camino Real
                  Palo Alto, California  94306-2155
                  Attn:  David A. Lipkin, Esq.
                  Facsimile:  (650) 849-7400


                                      D-44

<PAGE>


              and with a copy to:

                  Aird & Berlis LLP
                  BCE Place
                  Suite 1800, Box 754
                  181 Bay Street
                  Toronto, Ontario M5J 2T9
                  Attn:  Jay A. Lefton, Esq.
                  Facsimile:  (416) 863-1515

              if to the Company:

                  Accelio Corporation
                  560 Rochester Street
                  Ottawa, Ontario, Canada  K1S 5K2
                  Attn: A. Kevin Francis
                  Fax:  (613) 594-8886

              with a copy to:

                  LaBarge Weinstein
                  Suite 1100
                  333 Preston Street,
                  Ottawa, Ontario   K1S 5N4
                  Attn: Deborah Weinstein
                  Facsimile:  (613) 231-3900

     9.10 Cooperation.  Each of Parent and the Company agrees to cooperate fully
          with  the  other  party  and  to  execute  and  deliver  such  further
          documents,  certificates,  agreements and instruments and to take such
          other  actions as may be  reasonably  requested  by the other party to
          evidence or reflect the  transactions  contemplated  by this Agreement
          and to carry out the intent and purposes of this Agreement.

     9.11 Severability In the event that any provision of this Agreement, or the
          application   of  any  such   provision   to  any  Person  or  set  of
          circumstances,  shall be determined to be invalid,  unlawful,  void or
          unenforceable to any extent, the remainder of this Agreement,  and the
          application of such provision to Persons or  circumstances  other than
          those as to which it is  determined to be invalid,  unlawful,  void or
          unenforceable,  shall not be impaired or otherwise  affected and shall
          continue to be valid and  enforceable to the fullest extent  permitted
          by law.

     9.12 Currency Unless otherwise specified,  all references in this Agreement
          to sums of money, "dollars" or "$" shall mean United States dollars.

     9.13 Construction.

     (a)  For purposes of this  Agreement,  whenever the context  requires:  the
          singular  number  shall  include  the  plural,  and  vice  versa;  the
          masculine  gender shall include the feminine and neuter  genders;  the
          feminine  gender shall include the masculine and neuter  genders;  and
          the neuter gender shall include masculine and feminine genders.

     (b)  The parties hereto agree that any rule of  construction  to the effect
          that  ambiguities are to be resolved  against the drafting party shall
          not  be  applied  in  the  construction  or   interpretation  of  this
          Agreement.

     (c)  As used in this Agreement,  the words "include" and  "including,"  and
          variations thereof, shall not be deemed to be terms of limitation, but
          rather  shall  be  deemed  to  be  followed  by  the  words   "without
          limitation."

     (d)  Except as otherwise  indicated,  all  references in this  Agreement to
          "Sections,"  "Exhibits"  and  "Schedules"  are  intended  to  refer to
          Sections  of  this   Agreement  and  Exhibits  or  Schedules  to  this
          Agreement.

     (e)  The   bold-faced   headings   contained  in  this  Agreement  are  for
          convenience  of  reference  only,  shall not be deemed to be a part of
          this  Agreement  and shall not be referred to in  connection  with the
          construction or interpretation of this Agreement.


                                      D-45

<PAGE>

     In Witness  Whereof,  the parties have caused this Agreement to be executed
as of the date first above written.


                             Adobe Systems Incorporated, a Delaware corporation


                             By:    /s/ Bruce Chizen
                                    -----------------------------------------
                             Name:  Bruce Chizen
                                    -----------------------------------------
                             Title: President & Chief Executive Officer
                                    -----------------------------------------



                             Adobe Systems International Limited Partnership, an
                             exempted limited partnership under Cayman Islands
                             law


                             By:    /s/ J.F. Briody
                                    -----------------------------------------
                             Name:  J.F. Briody
                                    -----------------------------------------
                             Title: President, Adobe International, Inc.,
                                    General Partner
                                    Adobe Systems International Limited
                                    Partnership
                                    -----------------------------------------



                             Accelio Corporation,  a corporation existing under
                             the laws of Canada


                             By:    /s/ A. Kevin Francis
                                    --------------------------------------------
                             Name:  A. Kevin Francis
                                    --------------------------------------------
                             Title: President & Chief Executive Officer
                                    --------------------------------------------




                                      D-46

<PAGE>

                                    Exhibit A

                               Certain Definitions

     For purposes of the Agreement (including this Exhibit A):

     Acquired Corporation  Contract.  "Acquired Corporation Contract" shall mean
any Contract:  (a) to which any of the Acquired  Corporations is a party; (b) by
which  any of the  Acquired  Corporations  or any  asset of any of the  Acquired
Corporations  is legally  bound or under which any of the Acquired  Corporations
has,  or may become  subject to, any  obligation;  or (c) under which any of the
Acquired Corporations has or may acquire any right or interest.

     Acquired Corporation  Proprietary Asset. "Acquired Corporation  Proprietary
Asset"  shall mean any  Proprietary  Asset  owned by or  licensed  to any of the
Acquired Corporations or otherwise used by any of the Acquired Corporations.

     Acquired Corporation Source Code. "Acquired  Corporation Source Code" shall
mean any source  code,  or any  portion,  aspect or segment of any source  code,
relating to any Acquired Corporation Proprietary Asset.

     Acquisition  Proposal.   "Acquisition   Proposal"  shall  mean  any  offer,
proposal,  inquiry or  indication  of interest  (other than an offer,  proposal,
inquiry or indication of interest made or submitted by Parent)  contemplating or
otherwise relating to any Acquisition Transaction.

     Acquisition   Transaction.   "Acquisition   Transaction"   shall  mean  any
transaction or series of transactions,  other than the transactions contemplated
by the Agreement, involving:

          (a) (i) any merger, arrangement,  consolidation,  amalgamation,  share
     exchange,  business combination,  recapitalization,  tender offer, exchange
     offer  or  other  similar   transaction   involving  any  of  the  Acquired
     Corporations, (ii) any transaction in which a Person or "group" (as defined
     in the  Exchange  Act and the  rules  promulgated  thereunder)  of  Persons
     directly  or  indirectly  acquires   beneficial   ownership  of  securities
     representing  more than 20% of the outstanding  voting securities of any of
     the Acquired  Corporations,  or (iii) any  transaction  in which any of the
     Acquired  Corporations issues securities  representing more than 20% of the
     outstanding voting securities of any of the Acquired Corporations;

          (b) any sale, lease,  exchange,  transfer,  license, or disposition of
     any business or businesses or assets that  constitute or account for 20% or
     more of the consolidated  net revenues,  net income or assets of any of the
     Acquired Corporations; or

          (c)  any   liquidation   or   dissolution   of  any  of  the  Acquired
     Corporations.

     Affiliate.  "Affiliate" of any Person shall mean any other Person  directly
or indirectly  controlling,  controlled by, or under common  control with,  that
Person.  For  the  purposes  of  this  definition,  "control"  (including,  with
correlative  meanings,  the terms  "controlled  by" and  "under  common  control
with"),  as applied to any Person,  shall mean the possession by another Person,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management  and policies of that first  mentioned  Person,  whether  through the
ownership of voting securities, by contract or otherwise.

     Agreement.  "Agreement"  shall mean the  Acquisition  Agreement for Plan of
Arrangement to which this Exhibit A is attached,  as it may be amended from time
to time.

     Arrangement.  "Arrangement"  shall mean an arrangement under Section 192 of
the CBCA on the  terms  and  subject  to the  conditions  set out in the Plan of
Arrangement,  subject to any amendments or variations thereto made in accordance
with  Section 9.1 of the  Agreement  or the Plan of  Arrangement  or made at the
direction of the Court in the Final Order.

     Arrangement  Resolution.  "Arrangement  Resolution"  shall mean the special
resolution to be passed by the Company Shareholders at the Company Shareholders'
Meeting.

     Articles of Arrangement.  "Articles of Arrangement" shall mean the articles
of arrangement of the Company in respect of the Arrangement  required by Section
192(6) of the CBCA to be sent to the Director after the Final Order is made.

     CBCA.  "CBCA"  shall mean the Canada  Business  Corporations  Act as now in
effect and as it may be amended  from time to time,  including  the  regulations
made thereunder.

     Canadian Securities  Commissions.  "Canadian Securities  Commissions" shall
mean the securities commissions or


                                      D-48

<PAGE>

other securities regulatory authorities of each of the provinces and territories
of Canada.

     Canadian  Securities  Laws.  "Canadian  Securities  Laws"  shall  mean  the
securities acts and comparable  Legal  Requirements of each of the provinces and
territories of Canada.

     Closing Date. "Closing Date" shall mean the date to be designated by Parent
and  the  Company  with  respect  to  the   consummation  of  the   transactions
contemplated  by the Agreement (the  "Closing"),  which in any event shall be no
later than the fifth business day after the  satisfaction  or waiver of the last
to be satisfied or waived of the conditions set forth in Sections 6 and 7 (other
than those  conditions  that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions).

     Common Shares.  "Common Shares" shall mean the common shares in the capital
of the Company.

     Company Option Plans.  "Company Option Plans" shall mean the Company's 1993
Employee Stock Option Plan and the Company's 1995 Stock Option Plan.

     Company  Rights  Plan.  "Company  Rights  Plan"  shall  mean the  Company's
shareholder  rights plan as set forth in a  shareholder  rights  plan  agreement
dated and  effective  as of June 25,  1998,  between the Company and CIBC Mellon
Trust Corporation.

     Company  Shareholders.  "Company  Shareholders"  shall mean the  holders of
Common Shares.

     Confidentiality  Agreement.  "Confidentiality  Agreement"  shall  mean  the
Master  Agreement  for  Disclosure  of  Information  dated as of January 4, 2002
between Parent and the Company.

     Consent.  "Consent" shall mean any approval,  consent, order, ratification,
permission, waiver or authorization (including any Governmental Authorization).

     Contract.  "Contract"  shall  mean any  written,  oral or other  agreement,
contract,  subcontract,  lease,  instrument,  note, option,  warranty,  purchase
order, license,  sublicense,  insurance policy,  benefit plan or legally binding
commitment or undertaking of any nature.

     Court. "Court" shall mean the Ontario Superior Court of Justice.

     Currently in Use.  "Currently  in Use" shall mean that an item is currently
marketed, distributed, sold, planned, proposed, supported or otherwise in use by
any Acquired Corporation.

     Data Room.  "Data Room" means the data rooms  established by the Company in
Ottawa,  Ontario at the offices of LaBarge  Weinstein in connection with the due
diligence   conducted  by  Parent  and  its   Representatives  on  the  Acquired
Corporations  between  January 19, 2002 and 3:00 p.m. Ottawa time on January 25,
2002.

     Depository.  "Depository"  shall  mean CIBC  Mellon  Trust  Company  at its
principal  office in  Toronto,  Ontario at the  address set out in the letter of
transmittal  and election  form in its  capacity as a depository  for the Common
Shares under the  Arrangement  or such other trust  company or other Entity that
Parent may, in its reasonable discretion, choose as depository.

     Director.  "Director" shall mean the Director appointed pursuant to Section
260 of the CBCA.

     Disclosure  Schedule.  "Disclosure  Schedule"  shall  mean  the  disclosure
schedule  that  has  been  prepared  by  the  Company  in  accordance  with  the
requirements  of Section 9.6 of the Agreement and that has been delivered by the
Company to Parent on the date of the  Agreement  and signed by the  President of
the Company.

     Dissenters' Rights.  "Dissenters'  Rights" has the meaning ascribed thereto
in Section 1.7 of the Agreement.

     Effective  Time.  "Effective  Time"  shall  mean  the  date  shown  on  the
certificate  of  arrangement  to be issued by the Director under the CBCA giving
effect to the Arrangement.

     Encumbrance.  "Encumbrance"  shall  mean any lien,  pledge,  hypothecation,
charge,  mortgage,   security  interest,   encumbrance,   claim,   infringement,
interference,  option,  right  of first  refusal,  preemptive  right,  community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset,  any restriction on the receipt of any income derived from any asset, any
restriction  on the use of any


                                      D-49

<PAGE>

asset and any restriction on the  possession,  exercise or transfer of any other
attribute of ownership of any asset).

     Entity.  "Entity"  shall mean any  corporation  (including  any  non-profit
corporation),   general  partnership,  limited  partnership,  limited  liability
partnership,  joint  venture,  estate,  trust,  company  (including  any company
limited by shares,  limited  liability  company or joint stock  company),  firm,
society or other enterprise, association, organization or entity.

     Exchange  Act.  "Exchange  Act"  shall mean the  United  States  Securities
Exchange Act of 1934, as amended.

     Exchange Ratio.  "Exchange  Ratio" shall mean a fraction whose numerator is
the Parent  Stock  Consideration,  and whose  denominator  is the  Fully-Diluted
Company Shares.

     Final  Order.  "Final  Order"  shall  mean the  final  order  of the  Court
approving the  Arrangement as such order may be amended at any time prior to the
Effective  Time or, if  appealed,  then  (unless  such  appeal is  withdrawn  or
denied), as affirmed on appeal prior to the Effective Time.

     Fully-Diluted Company Shares. "Fully-Diluted Company Shares" shall mean the
sum  of  (A)  the  aggregate  number  of  Common  Shares  that  are  outstanding
immediately  prior to the Effective  Time,  (B) the  aggregate  number of Common
Shares  that are  purchasable  under or  otherwise  subject to all  options  and
warrants to purchase Common Shares that are outstanding immediately prior to the
Effective  Time, (C) the aggregate  number of Common Shares that are directly or
indirectly  issuable upon the conversion of all other convertible  securities of
the Company that are  outstanding  immediately  prior to the Effective Time, and
(D) the aggregate number of Common Shares (if any) which the Company has entered
into any  commitment  or  arrangement  to issue (or to issue options or warrants
with  respect to) prior to the  Effective  Time,  but which are not  outstanding
immediately  prior to the Effective Time. Any Common Shares that are purchasable
under or otherwise  subject to Company  Options that are exercised or terminated
pursuant to Section 5.3 hereof and at the times specified in Section 2.02 of the
Plan of Arrangement  shall not be counted for purposes of determining the "Fully
Diluted Company Shares."

     Governmental  Authorization.  "Governmental  Authorization" shall mean any:
(a) permit, license, certificate,  franchise,  permission,  variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal  Requirement;  or (b) right under any Contract  with any  Governmental
Body.

     Governmental Body.  "Governmental Body" shall mean any: (a) nation,  state,
commonwealth,  province,  territory,  county,  municipality,  district  or other
jurisdiction of any nature; (b) federal,  state,  provincial,  local, municipal,
foreign or other government; or (c) governmental or quasi-governmental authority
of  any  nature  (including  any  governmental  division,   department,  agency,
commission,  instrumentality,  official,  ministry,  fund,  foundation,  center,
organization, unit, body or Entity and any court or other tribunal).

     HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino  Antitrust Improvements
Act of 1976, as amended.

     Interim Order. "Interim Order" shall mean the interim order of the Court in
respect of the Arrangement, as contemplated by Section 1.2 of the Agreement.

     IRC. "IRC" shall mean the Internal Revenue Code of 1986, as amended.

     Legal  Proceeding.   "Legal  Proceeding"  shall  mean  any  action,   suit,
litigation,    arbitration,   proceeding   (including   any   civil,   criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination  or  investigation  commenced,  brought,  conducted  or  heard by or
before,  or otherwise  involving,  any court or other  Governmental  Body or any
arbitrator or arbitration panel.

     Legal  Requirement.  "Legal  Requirement"  shall mean any  federal,  state,
provincial,  local,  municipal,  foreign or other law (including  privacy laws),
statute,  constitution,  principle of common law, resolution,  ordinance,  code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated,  implemented or otherwise put into effect by or under the authority
of any  Governmental  Body (or under the authority of the Nasdaq National Market
or the TSE).

     Made Available. Documents or other information with respect to the Acquired
Corporations or their  respective  businesses shall be deemed to have been "Made
Available" to Parent only if the Company shall have provided  Parent or Parent's
Representatives with physical access to such documents or other information in a
manner  that has  resulted  or would  reasonably  result in  Parent or  Parent's
Representatives  becoming  aware of the contents of such documents or such other
information. For greater certainty, a document shall be deemed to have been Made
Available to Parent hereunder if (i) it was


                                      D-50

<PAGE>

delivered by hand, facsimile  transmission,  courier, mail or electronic mail by
the Company or its  Representatives  (or, while  Representatives  of Parent were
present in the Company's offices,  by such  Representatives) to Parent or any of
its  Representatives,  and (ii) it was  present  in the Data Room at the time at
which  Parent  or  its   Representatives   were   provided  by  Company  or  its
Representatives  with access to the Data Room.  Documents  or other  information
with  respect  to Parent  or its  business  shall be  deemed to have been  "Made
Available"  to the Company only if Parent shall have provided the Company or the
Company's  Representatives  with  physical  access  to such  documents  or other
information  in a manner  that has  resulted or would  reasonably  result in the
Company or the Company's  Representatives becoming aware of the contents of such
documents or such other information.

     Management  Proxy  Circular.  "Management  Proxy  Circular"  shall mean the
notice of the Company  Shareholders'  Meeting and accompanying  management proxy
circular to be sent to the Company  Shareholders  in connection with the Company
Shareholders' Meeting.

     Material Adverse Effect. An event, violation,  inaccuracy,  circumstance or
other matter will be deemed to have a "Material  Adverse  Effect" on the Company
if such event, violation,  inaccuracy,  circumstance or other matter (considered
together  with  all  other  matters  that  would  constitute  exceptions  to the
representations  and  warranties  of the  Company  set  forth in the  Agreement,
disregarding   any  of   "Material   Adverse   Effect"   or  other   materiality
qualifications,  or any  similar  qualifications,  in such  representations  and
warranties)  had or could  reasonably  be  expected  to have a material  adverse
effect on (i) the  business,  condition,  capitalization,  assets,  liabilities,
operations,  financial  performance  or prospects  of the Acquired  Corporations
taken as a whole,  (ii) the ability of the Company to consummate the Arrangement
or any of the other transactions contemplated by the Agreement or to perform any
of its obligations under the Agreement, or (iii) Parent's or Purchaser's ability
to vote,  receive  dividends  with  respect to or otherwise  exercise  ownership
rights  with  respect  to the  shares of the  Acquired  Corporations;  provided,
however,  that,  for purposes of clause (i) above,  in no event shall any of the
following,  alone or in combination,  be deemed to constitute,  nor shall any of
the  following be taken into account in  determining  whether  there has been or
will be, a Material Adverse Effect on the Company: (A) any effect resulting from
compliance with the terms and conditions of this Agreement;  (B) any effect that
results  from  changes  affecting  any of the  industries  in which such  entity
operates generally or the Canadian economy generally (which changes in each case
do not  disproportionately  affect such entity in any material respect); (C) any
effect that results from changes affecting general worldwide economic or capital
market conditions (which changes in each case do not  disproportionately  affect
such  entity  in  any  material  respect);  (D)  the  failure  of  any  Acquired
Corporation  to meet  published  or  internal  earnings,  revenue  estimates  or
projections;  or (E) any adverse  effect that results from the  announcement  or
pendency of the  Arrangement or any of the other  transactions  contemplated  by
this Agreement.

An event, violation, inaccuracy,  circumstance or other matter will be deemed to
have a "Material Adverse Effect" on Parent if such event, violation, inaccuracy,
circumstance  or other  matter had or would  reasonably  be  expected  to have a
material adverse effect on (1) the business, condition, capitalization,  assets,
liabilities,  operations,  financial  performance or prospects of Parent and its
Subsidiaries  taken as a whole or (2) the  ability of Parent to  consummate  the
Arrangement or any of the other transactions contemplated by the Agreement or to
perform any of its obligations under the Agreement; provided, however, that, for
purposes of clause (1) above,  in no event shall any of the following,  alone or
in combination, be deemed to constitute, nor shall any of the following be taken
into  account  in  determining  whether  there  has been or will be, a  Material
Adverse  Effect on Parent:  (A) any effect  resulting from  compliance  with the
terms and conditions of this Agreement; (B) any effect that results from changes
affecting any of the industries in which Parent operates generally or the United
States economy  generally (which changes in each case do not  disproportionately
affect Parent in any material respect); (C) any effect that results from changes
affecting general worldwide economic or capital market conditions (which changes
in each case do not  disproportionately  affect Parent in any material respect);
(D) the  failure  of Parent to meet  published  or  internal  earnings,  revenue
estimates  or  projections;  or (E) any  adverse  effect that  results  from the
announcement  or pendency of the  Arrangement  or any of the other  transactions
contemplated  by this  Agreement;  and  provided  further,  that a change in the
market price or trading  volume of the Parent  Common Stock shall not be deemed,
in and of itself, to constitute a Material Adverse Effect on Parent.

     Open Text Offer.  "Open Text Offer" means the unsolicited Offer to Purchase
for Cash all of the  outstanding  Common  Shares  made by Open Text  Corporation
(through 3977374 Canada Inc.) dated December 20, 2001.

     Option Termination Time.  "Option  Termination Time" means 2:30 a.m. on the
Effective Time,  being the time after the completion of the repurchase of Common
Shares contemplated in Section 2.02(b)(ii) of the Plan of Arrangement.

     Parent  Average  Stock Price.  "Parent  Average Stock Price" shall mean the
weighted  average  sales price of a share of Parent  Common Stock as reported on
The Nasdaq National Market during the ten (10)  consecutive  trading days ending
on  the  third  trading  day  immediately  prior  to  the  Effective  Time  (the
"Measurement Period"); provided, however, that if,


                                      D-51

<PAGE>

between the first day of the  Measurement  Period and the  Effective  Time,  the
outstanding shares of Parent Common Stock are changed into a different number of
shares by reason of any stock split,  division or subdivision  of shares,  stock
dividend,  reverse  stock  split,  consolidation  of  shares,  reclassification,
recapitalization  or other similar  transaction,  then the Parent  Average Stock
Price shall be appropriately adjusted.

     Parent  Common  Stock.  "Parent  Common Stock" shall mean the Common Stock,
$0.0001 par value per share, of Parent.

     Parent Stock  Consideration.  "Parent Stock  Consideration"  shall mean the
number of shares of Parent  Common  Stock equal to the  quotient  determined  by
dividing (i) the excess of US $72,000,000  over the aggregate  amount of (a) all
Permitted  Option  Repurchase  Amounts  paid or  payable  to  holders of Company
Options  pursuant to clause "(i)" of Section  5.3(b),  (b) all Permitted  Option
Repurchase Amounts underlying all Common Shares issued or issuable to holders of
Company  Options  pursuant to clause "(ii)" of Section  5.3(b) and (c) and other
amounts  (if any) paid or  payable  in cash to  equity  holders  of the  Company
pursuant to the Interim Order,  the Plan of  Arrangement or the Final Order,  by
(ii) the Parent Average Stock Price.

     Permitted Liens.  "Permitted Liens" shall mean the following types of liens
to the extent that  individually  or in the aggregate  they are not material and
could not materially affect Parent's or any of the Acquired Corporation's use of
the assets of the Acquired Corporations: (i) liens for current Taxes not yet due
and  payable  or  delinquent  or that  are  being  contested  in good  faith  by
appropriate proceedings and are disclosed in the Disclosure Schedule or that are
otherwise not material;  (ii)  imperfections or irregularities in title, if any,
that  have  arisen  in the  ordinary  course of  business  consistent  with past
practices;  and  (iii)  statutory  or  common  law  liens in favor of  carriers,
warehousemen,  mechanics and materialmen,  to secure claims for labor, materials
or supplies and other like liens.

     Permitted Option Repurchase  Amount.  "Permitted Option Repurchase  Amount"
shall mean, with respect to each Company Option outstanding immediately prior to
the Effective Time, an amount equal to the excess (if any) of (1) the product of
(i) the number of Common  Shares  issuable  upon the  exercise  of such  Company
Option,  multiplied by (ii) the Exchange Ratio, and further  multiplied by (iii)
the Parent Average Stock Price, over (2) the product of (x) the number of Common
Shares issuable upon the exercise of such Company Option,  multiplied by (y) the
exercise price per share of such Company Option. If, with respect to any Company
Option,  the  amount  described  in clause  (1)  above is less  than the  amount
described in clause (2) above, the Permitted Option Repurchase Amount applicable
to such Company  Option shall be zero.  Without  limiting the  generality of the
foregoing,  as used herein the term "Permitted Option  Repurchase  Amount" shall
not include (i) the cash value of any Common  Shares  issued  pursuant to clause
"(ii)" of Section 5.3(b) or (ii) any amounts paid in respect of Company  Options
repurchased by the Company pursuant to Section 5.3(c) or Section 5.3(d).

     Person. "Person" shall mean any individual, Entity or Governmental Body.

     Personal Information.  "Personal Information" shall mean any information in
the  possession  of any of  the  Acquired  Corporations  about  an  identifiable
individual other than the name, title or business address or telephone number of
an employee.

     Plan  of  Arrangement.  "Plan  of  Arrangement"  shall  mean  the  plan  of
arrangement substantially in the form of Exhibit D attached to the Agreement and
any amendments or variations  thereto made in accordance with Section 9.1 of the
Agreement or the Plan of  Arrangement  or made at the  direction of the Court in
the Final Order.

     Products.  "Products" shall mean all source and object code owned by any of
the Acquired Corporations, as well as related documentation, and all versions of
the foregoing on all platforms,  and shall include  without  limitation  Accelio
Capture  Enterprise Server,  Accelio Capture Designer,  Accelio Capture Advanced
Client, Accelio Capture Standard Client, Accelio Capture Handheld,  FormFlow 99,
ReachForm,   PocketForm,  FormFlow  Classis,  JetForm  Filler,  JetForm  Design,
InTempo,  EAI Tools,  Accelio  Integrate  Suite 6.0,  Accelio  Present  Central,
Accelio Present Output Pak for my SAP.com, Accelio Present Output Pak for Oracle
E-Business  Suite, Web Output Pak,  Accelio Present Output Designer,  PeopleSoft
Student  Administration,  PeopleSoft  Grants,  Web Output  Pak for SAP,  Accelio
Template  Designer,  Accelio Present Suite,  Accelio Portal,  Accelio Enterprise
Server, Accelio Integrate Suite, and Accelio Capture Clients.

     Proprietary Asset.  "Proprietary Asset" shall mean any: (a) patent,  patent
application,   trademark   (whether   registered  or  unregistered),   trademark
application,  trade  name,  fictitious  business  name,  service  mark  (whether
registered  or  unregistered),  service  mark  application,  copyright  (whether
registered  or  unregistered),   copyright   application,   maskwork,   maskwork
application,  trade secret, know-how, customer list, franchise, system, computer
software,  computer program, source code, model, algorithm,  formula,  compound,
invention,   design,  blueprint,   engineering  drawing,   proprietary  product,


                                      D-52

<PAGE>


technology, proprietary right or other intellectual property right or intangible
asset; or (b) right to use or exploit any of the foregoing.

     PSE. "PSE" shall mean the Pacific Stock Exchange.

     Representatives.   "Representatives"   shall  mean   officers,   directors,
employees, agents, attorneys, accountants, advisors and representatives.

     Rights.  "Rights"  shall mean the Rights  issuable under the Company Rights
Plan.

     SEC. "SEC" shall mean the United States Securities and Exchange Commission.

     Securities Act.  "Securities  Act" shall mean the United States  Securities
Act of 1933, as amended.

     Special Committee.  "Special Committee" shall mean the special committee of
the board of directors of the Company  that has approved the  Agreement  and the
Arrangement,  and which has recommended  that the full board of directors of the
Company approve the Agreement and the Arrangement.

     Subsidiary.  An  entity  shall be deemed to be a  "Subsidiary"  of  another
Person if such Person  directly or indirectly  owns,  beneficially or of record,
(a) an amount of voting  securities  or other  interests  in such Entity that is
sufficient  to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or (b) at least 50% of
the outstanding equity or financial interests or such Entity.

     Superior  Offer.  "Superior  Offer"  shall mean an  unsolicited,  bona fide
written  offer made by a third party to purchase all of the  outstanding  Common
Shares on terms that the board of directors of the Company  determines,  in good
faith,  considering  the written advice of an independent  financial  advisor of
nationally  recognized   reputation,   to  be  more  favorable  to  the  Company
Shareholders than the terms of the Arrangement; provided, however, that any such
offer shall not be deemed to be a "Superior Offer" if any financing  required to
consummate the  transaction  contemplated  by such offer is not committed and is
not reasonably capable of being obtained by such third party.

     Tax.  "Tax" shall mean any tax  (including  any income tax,  franchise tax,
capital gains tax, gross receipts tax,  value-added  tax,  surtax,  capital tax,
estimated tax, unemployment or employment tax or insurance premium, national and
provincial  health insurance tax, Canada Pension Plan amount,  excise tax, goods
and services tax ("GST") ad valorem tax, transfer tax, stamp tax, sales tax, use
tax,  property tax,  business tax,  workers'  safety or  compensation  premiums,
withholding tax or payroll tax), levy,  assessment,  tariff, duty (including any
customs duty),  deficiency or fee, and any related  charge or amount  (including
any fine, penalty or interest),  imposed,  assessed or collected by or under the
authority of any Governmental Body.

     Tax Return.  "Tax Return" shall mean any return  (including any information
return),   report,   statement,   declaration,   estimate,   schedule,   notice,
notification, form, election, certificate or other document or information filed
with or  submitted  to,  or  required  to be filed  with or  submitted  to,  any
Governmental Body in connection with the determination,  assessment,  collection
or payment of any Tax or in connection with the  administration,  implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.

     Triggering Event. A "Triggering Event" shall be deemed to have occurred if:
(i) the board of  directors  of the  Company  shall have  failed to  unanimously
recommend  that the Company  Shareholders  vote to approve the Agreement and the
Arrangement,  or shall have  withdrawn or modified in a manner adverse to Parent
the Company Board  Recommendation  (it being  understood  that the Company Board
Recommendation  shall be deemed to have been  modified  in a manner  adverse  to
Parent if the Company Board  Recommendation  is no longer  unanimous),  or shall
have taken any other action which a reasonable  Person would  believe  indicates
that the board of directors of the Company does not support the Agreement or the
Arrangement or does not believe that the Agreement or the  Arrangement is in the
best interests of the Company  Shareholders;  (ii) the Company shall have failed
to include in the Management Proxy Circular the Company Board  Recommendation or
a  statement  to the  effect  that the board of  directors  of the  Company  has
determined  and believes that the  Arrangement  is in the best  interests of the
Company  Shareholders;  (iii) the board of  directors  of the  Company  fails to
reaffirm   the  Company   Board   Recommendation,   or  fails  to  reaffirm  its
determination  that the  Arrangement  is in the best  interests  of the  Company
Shareholders,  within five business  days after Parent  requests in writing that
such recommendation or determination be reaffirmed;  (iv) the board of directors
of the Company shall have  approved,  endorsed or  recommended  any  Acquisition
Proposal;  (v) the  Company  shall  have  entered  into any  letter of intent or
similar document or any Contract  providing for any Acquisition  Proposal (other
than  a  Standard  Confidentiality   Agreement  permitted  pursuant  to  and  in
accordance with the terms of Section 4.3(a)); (vi) a tender or exchange offer or
take-over bid relating to securities of the Company shall have been commenced by
a Person other than Parent or any of Parent's  Affiliates  and the Company shall
not have  sent to its


                                      D-53

<PAGE>

securityholders, within five business days after the commencement of such tender
or exchange offer, a statement  disclosing that the Company recommends rejection
of such  tender or exchange  offer;  (vii) an  Acquisition  Proposal is publicly
announced,  and the Company (A) fails to issue a press  release  announcing  its
opposition  to such  Acquisition  Proposal  within five business days after such
Acquisition  Proposal is announced or (B) otherwise fails to take all reasonable
steps to  oppose  such  Acquisition  Proposal;  or  (viii)  any of the  Acquired
Corporations or any  Representative  of any of the Acquired  Corporations  shall
have breached in any material  respect or taken any action  inconsistent  in any
material respect with any of the provisions set forth in Section 4.3.

     TSE. "TSE" shall mean The Toronto Stock Exchange.

     Unaudited  Interim Balance Sheet.  "Unaudited  Interim Balance Sheet" shall
mean  the  unaudited   consolidated   balance  sheet  of  the  Company  and  its
consolidated  subsidiaries  as of October 31,  2001,  included in the  Company's
Second  Quarter  Report for the fiscal  quarter ended October 31, 2001, as filed
with the Ontario Securities Commission prior to the date of this Agreement.



                                      D-54

<PAGE>

                                   APPENDIX E

                                FAIRNESS OPINION







                                      E-1


<PAGE>

                     [letterhead of CIBC World Markets Inc.]


March 1, 2002

The Board of Directors
Accelio Corporation
560 Rochester Street
Ottawa, Ontario
K1S 5K2


To the Board of Directors:

We understand that:

(a)  Accelio  Corporation  ("Accelio") is proposing to enter into an amended and
     restated acquisition agreement and plan of arrangement to be dated the date
     hereof  (the  "Acquisition  Agreement")  with  Adobe  Systems  Incorporated
     ("Adobe")  and  Adobe  Systems   International   Limited  Partnership  (the
     "Purchaser");

(b)  under the Acquisition  Agreement,  the Purchaser will acquire,  by way of a
     plan  of  arrangement  (the   "Arrangement")   under  the  Canada  Business
     Corporations Act, all of the issued and outstanding common shares and stock
     options of Accelio in exchange for common stock of Adobe;

(c)  pursuant to the Arrangement, in effect, each common share of Accelio (other
     than any share held by a dissenting shareholder) will be exchanged for that
     fraction of a share of Adobe common stock (the "Consideration") obtained by
     dividing: (i) the quotient determined by dividing US$72 million (reduced by
     any amounts  paid as a result of the  cash-less  exercise  of  in-the-money
     stock options) by the weighted  average trading price of Adobe common stock
     for each of the ten  consecutive  trading days ending on the third  trading
     day immediately  prior to the Effective Time (as defined in the Acquisition
     Agreement);  by (ii) the  aggregate  number  of common  shares  of  Accelio
     outstanding immediately prior to the Effective Time of the Arrangement; and

(d)  the completion of the  Arrangement  will be conditional  upon,  among other
     things, approval by Accelio's shareholders, at a special meeting to be held
     as soon as  reasonably  practicable  (the  "Special  Meeting"),  and by all
     appropriate regulatory authorities.

By letter agreement dated as of December 18, 2001 (the "Engagement  Agreement"),
Accelio  retained CIBC World Markets Inc. ("CIBC World Markets") to, among other
things,  provide  financial  advice to Accelio and its board of  directors  (the
"Board of Directors") in connection  with the  unsolicited  offer dated December
20, 2001 made by a  wholly-owned  subsidiary  of Open Text  Corporation  and any
Alternative  Transaction  (as such term is defined in the Engagement  Agreement)
that may be proposed or solicited  during the term of the Engagement  Agreement.
Pursuant to the Engagement Agreement,  the Board of Directors has requested that
we prepare and deliver this opinion (the  "Opinion") as to the fairness,  from a
financial  point of view,  of the  Consideration  to be  offered by Adobe to the
shareholders of Accelio pursuant to the Arrangement.

CIBC World Markets will be paid a fee for rendering  this Opinion.  In addition,
we will be paid fees that are contingent on completion of the Arrangement or any
Alternative  Transaction  on the  basis  set  out in the  Engagement  Agreement.
Accelio  has  agreed to  indemnify  CIBC  World  Markets  in  respect of certain
liabilities that might arise out of its engagement.

Credentials of CIBC World Markets

CIBC World  Markets is one of Canada's  largest  investment  banking  firms with
operations  in all facets of  corporate  and  government  finance,  mergers  and
acquisitions, equity and fixed income sales and trading and investment research.
The Opinion  expressed  herein is the opinion of CIBC World Markets and the form
and content herein have been approved for release by a committee of its managing
directors, each of whom is experienced in merger,  acquisition,  divestiture and
valuation matters.



                                      E-2


<PAGE>

Scope of Review

In  connection  with  rendering  our Opinion,  we have reviewed and relied upon,
among other things, the following:

i)   the agreement dated January 31, 2002 between Accelio and Adobe;

ii)  the Acquisition Agreement dated March 1, 2002;

iii) a  draft  dated  March  1,  2002  of  the  Notice  of  Special  Meeting  of
     Shareholders  and related  Management Proxy Circular of Accelio prepared in
     connection with the Special Meeting;

iv)  the annual reports to shareholders of Accelio and Forms 10-K for the fiscal
     years ended April 30, 1999, 2000 and 2001;

v)   Accelio's  proxy  circulars for the fiscal years ended April 30, 1999, 2000
     and 2001;

vi)  the  unaudited  interim  reports of Accelio  for the first two  quarters of
     fiscal 2002;

vii) Accelio's internal budget for the third quarter of fiscal 2002;

viii)Accelio's  internal  financial  projections  for the  fiscal  years 2002 to
     2007;

ix)  published  information and analysis  prepared by various research  analysts
     for Accelio and other companies in the business forms management industry;

x)   certain other internal information prepared and provided to us by Accelio's
     management, primarily financial in nature, concerning the business, assets,
     liabilities and prospects of Accelio;

xi)  review of the reported  price and recent and relevant  trading  activity of
     Accelio's common shares and the shares of common stock of Adobe;

xii) certain  publicly  available  financial  and other  information  concerning
     Adobe;

xiii)public  information  and  analysis  on  other  companies,   including  data
     relating  to  public  market  trading  levels  and  implied  multiples  for
     comparable acquisition transactions;

xiv) such other  information,  analysis and discussions  (including  discussions
     with third  parties)  as we  considered  necessary  or  appropriate  in the
     circumstances; and

xv)  a certificate  signed by Accelio  management  attesting to the accuracy and
     completeness of the information provided.

In addition to the  written  information  described  above,  CIBC World  Markets
conducted  interviews and discussions with the senior management of Accelio with
regard to, among other things, the Arrangement and other potential transactions,
as well as Accelio's  business,  operations,  financial position,  budgets,  key
assets and prospects.  CIBC World Markets has also  participated  in discussions
with Accelio's legal counsel regarding the Arrangement and other transactions.

Assumptions and Limitations

Our Opinion is subject to the  assumptions,  explanations  and  limitations  set
forth below.

We have not been asked to prepare and have not  prepared a formal  valuation  or
appraisal  of  Accelio  or any of its  assets  and  our  Opinion  should  not be
construed as such.

With your  permission,  we have relied upon, and have assumed the  completeness,
accuracy and fair  presentation  of all financial and other  information,  data,
advice,  opinions and  representations  obtained by us from public  sources,  or
provided to us by Accelio and its advisors or otherwise obtained pursuant to our
engagement, and our Opinion is conditional upon such completeness,  accuracy and
fair   presentation.   We  have  not  been  requested  or  attempted  to  verify
independently the accuracy, completeness or fairness of presentation of any such
information,  data,  advice,  opinions  and  representations.  With  respect  to
operating and financial  forecasts and budgets provided to us and relied upon in
our analysis,  we have assumed that they have been reasonably  prepared on bases
reflecting  the  most  reasonable  assumptions,   estimates  and  judgements  of
Accelio's management,  having regard to the Accelio's plans, financial condition
and  prospects.  We have also  assumed  that the  Arrangement  will be completed
substantially in accordance with the Acquisition Agreement.

Senior  management has  represented to us, in a certificate  delivered as at the
date hereof,  amongst other  things,  that the  information,  opinions and other
materials  provided  to us by or on behalf of  Accelio,  including  the  written
information  and  discussions  referred  to above  under the  heading  "Scope of
Review"  (collectively,  the "Information") are complete and correct at the date
the Information  was provided to us and that since the date of the  Information,
there has been no material  change,  financial or  otherwise,  in the  financial
condition, assets, liabilities (contingent or otherwise),  business,  operations
or prospects of Accelio or any of its  subsidiaries  and no material  change has
occurred in the  Information or any part thereof which would have or which would
reasonably be expected to have a material effect on the Opinion.

Our Opinion is rendered on the basis of securities markets, economic and general
business  and  financial  conditions  prevailing  as at the date  hereof and the
conditions  and  prospects,  financial  and  otherwise,  of  Accelio as they are
reflected  in  the  Information  and  as  they  were  represented  to us in  our
discussions  with management of Accelio.  In our analyses and in connection with
the  preparation of our Opinion,  we made numerous  assumptions  with respect to
industry performance,


                                      E-3

<PAGE>

general  business,  market and economic  conditions and other  matters,  many of
which are beyond the control of any party involved in the Arrangement.

The Opinion has been provided to the Board of Directors for its use only and may
not be relied upon by any other person without the prior written consent of CIBC
World  Markets.  Our Opinion is not to be construed as a  recommendation  to any
holder of Accelio's  common  shares as to how to vote at the Special  Meeting on
the special  resolution  approving  the  Arrangement.  In  addition,  we are not
expressing  any opinion as to the value of the shares of Adobe common stock,  if
and when issued to the  Accelio's  shareholders  under the  Arrangement,  or the
prices at which such shares will trade after completion of the Arrangement.


The Opinion is given as of the date hereof and, although we reserve the right to
change or withdraw the Opinion if we learn that any of the  information  that we
relied upon in preparing the Opinion was inaccurate, incomplete or misleading in
any  material  respect,  we disclaim  any  obligation  to change or withdraw the
Opinion, to advise any person of any change that may come to our attention or to
update the Opinion after today.


Opinion

Based upon and subject to the  foregoing and such other matters as we considered
relevant,  it is our  opinion,  as of the date  hereof,  that the  Consideration
offered  pursuant to the Arrangement is fair, from a financial point of view, to
the holders of Accelio common shares.



Yours very truly,
(signed)
CIBC World Markets Inc.




                                      E-4

<PAGE>

                                   APPENDIX F

                        ADOBE ANNUAL REPORT ON FORM 10-K









                                      F-1

<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 ______________

                                    FORM 10-K
                                 ______________
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended November 30, 2001

                                       OR
[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

          For the transition period from _____________ to ________________

                                     0-15175
                            (Commission file number)
                                 ______________

                           ADOBE SYSTEMS INCORPORATED
             (Exact name of registrant as specified in its charter)
                                 ______________

                   Delaware                                  77-0019522
        (State or other jurisdiction of                   (I.R.S. Employer
        incorporation or organization)                   Identification No.)

     345 Park Avenue, San Jose, California                   95110-2704
   (Address of principal executive offices)                  (Zip Code)

                                 (408) 536-6000
              (Registrant's telephone number, including area code)
        Securities registered pursuant to Section 12(b) of the Act: None
    Securities registered pursuant to Section 12(g) of the Act: Common Stock

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements incorporated by reference in Part III of this Form 10-K. [ ]

     The aggregate  market value of the common stock held by  non-affiliates  of
the registrant as of January 25, 2002 was $7,941,041,154.

     The number of shares  outstanding  of the  registrant's  common stock as of
January 25, 2002 was 236,763,372.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive  Proxy Statement to be delivered to stockholders
in connection  with the Notice of Annual Meeting of  Stockholders  to be held on
April 11, 2002 are incorporated by reference into Part III.


================================================================================

                                      F-2

<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                Page No.
<S>       <C>                                                                   <C>

PART I
Item 1.   Business..............................................................   3
Item 2.   Properties............................................................   17
Item 3.   Legal Proceedings.....................................................   17
Item 4.   Submission of Matters to a Vote of Security Holders...................   18

PART II
Item 5.   Market for Registrant's Common Stock and Related Stockholder Matters..   18
Item 6.   Selected Financial Data...............................................   19
Item 7.   Management's Discussion and Analysis of Financial Condition and
            Results of Operations...............................................   20
Item 7a.  Quantitative and Qualitative Disclosures About Market Risk............   39
Item 8.   Financial Statements and Supplementary Data...........................   42
Item 9    Changes in and Disagreements With Accountants on Accounting
            and Financial Disclosure............................................   43

PART III
Item 10.  Directors and Executive Officers of the Registrant....................   43
Item 11.  Executive Compensation................................................   43
Item 12.  Security Ownership of Certain Beneficial Owners and Management........   43
Item 13.  Certain Relationships and Related Transactions........................   44

PART IV
Item 14.  Exhibits, Financial Statement Schedule, and Reports on Form 8-K.......   45


SIGNATURES......................................................................   49
SUMMARY OF TRADEMARKS...........................................................   50
FINANCIAL STATEMENTS............................................................   51
FINANCIAL STATEMENT SCHEDULE....................................................   87
EXHIBITS
</TABLE>


                                      F-3

<PAGE>


Forward-Looking Statements

     In  addition to  historical  information,  this Annual  Report on Form 10-K
contains  forward-looking  statements that involve risks and uncertainties  that
could cause  actual  results to differ  materially.  Factors that might cause or
contribute to such differences  include, but are not limited to, those discussed
in the section  entitled  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations - Factors That May Affect Future  Results of
Operations."  You should carefully review the risks described in other documents
we file from time to time with the Securities and Exchange Commission, including
the  Quarterly  Reports  on Form  10-Q to be filed in  2002.  When  used in this
report,  the words "expects,"  "anticipates,"  "intends,"  "plans,"  "believes,"
"seeks," "targets,"  "estimates," and similar expressions are generally intended
to identify forward-looking  statements.  You should not place undue reliance on
the forward-looking  statements,  which speak only as of the date of this Annual
Report on Form  10-K.  We  undertake  no  obligation  to  publicly  release  any
revisions to the  forward-looking  statements or reflect events or circumstances
after the date of this document.


PART I

Item 1.   Business

     Founded in 1982, Adobe Systems Incorporated  ("Adobe") builds award-winning
software solutions for network publishing,  including Web, print, ePaper, video,
wireless and broadband  applications.  Its graphic design,  imaging, and dynamic
media authoring tools enable customers to create,  manage,  and deliver visually
rich,   reliable   content.   We  license  our   technology  to  major  hardware
manufacturers,   software  developers,  and  service  providers,  and  we  offer
integrated  software  solutions to  businesses of all sizes.  We distribute  our
products  through a network of distributors and dealers,  value-added  resellers
("VARs"),  systems integrators,  and original equipment  manufacturers  ("OEM");
direct to end users through Adobe call centers;  and through our own Web site at
www.adobe.com.  We have  operations in the Americas;  Europe,  Middle East,  and
Africa  ("EMEA");  and Asia.  Our  software  runs on  Microsoft  Windows,  Apple
Macintosh, Linux, UNIX, Palm OS, and Pocket PC platforms.

     Adobe was  originally  incorporated  in  California in October 1983 and was
reincorporated  in  Delaware  in May 1997.  We  maintain  executive  offices and
principal facilities at 345 Park Avenue, San Jose,  California  95110-2704.  Our
telephone  number  is  408-536-6000.  We  maintain  a  World  Wide  Web  site at
www.adobe.com.


                                BUSINESS OVERVIEW

     In 1984,  Adobe developed the software that initiated  desktop  publishing.
Today, we continue to be uniquely  positioned to make dramatic  changes not only
to how society creates visually rich information for print and the Web, but also
as to how it distributes and accesses that information electronically.

     In the  simplest  of terms,  Adobe  helps  people  communicate  better.  By
delivering powerful graphic design,  publishing,  and imaging software for print
and Web  production,  we help people express,  share,  and manage their ideas in
imaginative and meaningful new ways.

     Our  strategy  is to address the needs of graphic  designers;  professional
print, cross-media, and Web publishers; dynamic media artists; communicators and
workers within  businesses and  governments;  IS  technologists  and developers;
hobbyists;  and  consumers.  We execute on this strategy by delivering  products
that support industry  standards and that can be deployed on multiple  computing
environments,  including Microsoft Windows,  Apple Macintosh,  Linux, UNIX, Palm
OS, and Pocket PC platforms.



                                      F-4

<PAGE>


                          PRODUCTS AND MARKETS OVERVIEW

     Due to a change in business strategy and organizational  structure, we have
realigned  our business  segments  beginning in the first quarter of fiscal year
2002. A newly named  Graphics  segment will in the future replace the former Web
Publishing segment and will include Adobe Illustrator.  The Adobe GoLive and Web
Collection products will be reported in the Cross-media  Publishing segment. For
more information on our old and new segment  reporting,  please refer to Item 7,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations, and Note 16 of our Notes to Consolidated Financial Statements.

     Beginning  in  fiscal  2002,  we  categorize  our  products  into  the four
principal business segments as follows:

Graphics

     Graphics Market Opportunity

     The  Graphics  segment  consists  of  powerful  software  products  used by
creative  professionals  to create  visually rich  information.  These  creative
professionals are graphic designers,  photographers,  Web content creators,  and
multimedia,   film,  and  video   producers  who  work  in  industries  such  as
advertising,  marketing  communications,  graphic design, printing,  publishing,
architecture,  fine arts, Web  design/consulting,  and  entertainment.  They use
Adobe's  illustration,  digital  imaging,  and digital video  software to create
visually rich content found in  communication  media such as books,  newspapers,
magazines,  Web sites,  brochures,  movies, and television.  The digital content
they create,  which includes graphics,  video,  photographic  images,  streaming
media,  animations,  and textual  items,  are created with our software tools in
order  to make  their  work  stand  out and to  differentiate  their  companies'
products and services from their competitors.

     As the use of digital  photography  and  digital  video  cameras  grow,  we
believe  creative  professionals  throughout  the world will continue to require
software solutions to edit,  enhance,  and manage their digital  photographs and
digital  videos.  We also believe  business and hobbyist users will need digital
imaging and digital video  software as more people utilize  digital  cameras and
digital camcorders.

     In addition,  we anticipate that companies will need easier-to-use  methods
for dynamically  populating  printed  marketing-related  materials and Web pages
with information stored in databases or data that changes rapidly and comes from
multiple sources.

     We have responded to these market  opportunities by delivering  several new
releases of our Graphics  software  applications.  In January of fiscal 2001, we
released  Adobe  Premiere  version  6.0,  which  is an  updated  release  of our
professional  digital  video  editing tool. In April of fiscal 2001, we released
version 1.0 of our Adobe  Photoshop  Elements  product,  which is a new software
tool  that   offers   unique   features   designed   specifically   for  amateur
photographers,  hobbyists,  and  business  users  who want an  easy-to-use,  yet
powerful,  digital imaging  solution.  Also in April of fiscal 2001, we released
version  5.0 of  our  Adobe  After  Effects  product,  which  includes  enhanced
capabilities for creation of motion graphics and visual effects for film, video,
multimedia, and the Web.

     In  September  of fiscal 2001,  we  introduced  a new product  called Adobe
AlterCast,  which is server  software that helps  companies  deliver  compelling
visual  materials  on  frequently  updated  printed  materials  and Web sites by
automating the creation and the reuse of images. AlterCast helps reduce the time
it takes to reuse the images for use in  different  media and  enables  users to
reuse existing images by automatically  generating variations based on different
color modes, sizes, resolutions, and file types.

     In  November  of  fiscal  2001,  we  released  version  10.0  of our  Adobe
Illustrator  product,  which  includes  support for Mac OS X, enhanced  creative
options, and powerful tools for efficiently publishing artwork on the Web and in
print.

     We expect to  increase  our  worldwide  presence in  illustration,  digital
imaging,  and digital  video  software  markets with new  software  releases and
updates as these markets  continue to grow. We have announced plans to introduce
new versions of our Adobe  Photoshop,  Adobe  GoLive,  Adobe  LiveMotion,  Adobe
Premiere,  and Adobe After Effects  products in fiscal 2002. We will also strive
to continue growing our retail presence for Photoshop  Elements in order to gain
market share in the growing mid-range digital imaging software market.  Finally,
we intend to focus on developing  products for new and emerging software markets
such as digital image management and DVD authoring.

     Graphics Products

     Adobe  After  Effects - software  used to create  sophisticated  animation,
motion  compositing,  and  special  effects  found  in  multimedia,   television
broadcast, film, and the Web.


                                      F-5

<PAGE>

     Adobe  AlterCast - new imaging  server  software  used to maintain  digital
graphics and images on frequently updated content, such as Web sites and printed
catalogs,  by automating the creation and the reuse of images;  integrates  with
content  management  and e-commerce  systems,  and eliminates the tedious manual
tasks of refining and reformatting images for specific purposes.

     Adobe  Atmosphere - a new software  tool for  authoring  graphically  rich,
immersive,  three  dimensional  worlds that viewers on the Web can  figuratively
enter and interact in; provides a platform for creating  realistic and immersive
environments  that offer a  revolutionary  approach to content,  Web navigation,
community, and communication.

     Adobe  Dimensions  -  a  3D  rendering  tool  for  life-like  modeling  and
visualization;  brings 2D  structures  into 3D and  applies  textured  surfaces,
custom lighting effects and more.

     Adobe  Digital  Video  Collection  - suite of four  integrated  application
products  that  allows  users  to  produce   professional-quality  video,  film,
multimedia,  and Web projects;  includes  Adobe After Effects,  Adobe  Premiere,
Adobe Photoshop, and Adobe Illustrator.

     Adobe  Illustrator - an illustration  design tool used to create compelling
graphic artwork for print publications and the Web.

     Adobe  LiveMotion - a software tool that allows  professional  designers to
create two-dimensional Web animations;  it provides designers with a rich set of
content  creation  tools for  creating  both  vector and raster  graphics in one
application for increased productivity.

     Adobe  PhotoDeluxe - software that allows consumers and small businesses to
easily enhance and  personalize  their photos for a wide variety of applications
in print and electronic media.

     Adobe Photoshop - provides photo design enhancement capabilities for print,
the Internet,  and  multi-media;  used by graphic  designers,  Internet  content
creators, Web designers, video professionals, and digital photographers.

     Adobe   Photoshop   Elements  -  offers   unique,   easy-to-use,   powerful
image-editing tools designed specifically for amateur photographers,  hobbyists,
and business users who want to create  professional-quality images for print and
the Web.

     Adobe Premiere - professional digital video-editing software used to create
broadcast-quality  movies for video,  film,  multimedia,  and streaming over the
Web.

     Adobe  Streamline - converts  scanned  bitmap images and shapes into smooth
PostScript line art.

     Adobe SVG Viewer - a plug-in for Web browsers that allows users to view Web
graphics created in Scalable Vector Graphics ("SVG") format.

     Cross-media Publishing

     Cross-media Publishing Market Opportunity

     Graphic designers,  production artists,  technical writers,  Web designers,
and prepress  professionals  use Adobe's solutions for professional page layout,
Web publishing, business publishing, and printing visually rich information. Our
software  tools are used to create much of the  printed and on-line  information
people see and read  every  day,  including  magazines,  newspapers,  Web sites,
catalogs, advertisements,  brochures, product documentation,  technical manuals,
books, eBooks, memos, reports, and banners.

     We believe that Cross-media  Publishing  customers have an increased demand
for integrated publishing workflows,  a need to dynamically deliver personalized
content and to deliver the same content to different output mediums and devices,
and they  therefore  must  structure and manage their content in formats such as
eXtensible Markup Language ("XML"). The need for integrated publishing workflows
was the major driver for the change in our business segments beginning in fiscal
year 2002.

     We have  responded to the needs of our customers by delivering  several new
releases of our  Cross-media  Publishing  software  applications.  In January of
fiscal 2001, we released a new version of Adobe InDesign for the Japanese market
called Adobe  InDesign-J.  InDesign-J was developed to specifically  address the
unique requirements of the Japanese professional  publishing market. In April of
fiscal 2001, we shipped Adobe Content Server 2.0,  which enables  encryption and
distribution  of Adobe  PDF-based  eBooks.  In July of fiscal  2001,  we shipped
version  7.0 of  PageMaker,  which  is our page  layout  program  for  business,
education, and small-and home-office professionals.


                                      F-6

<PAGE>

     Finally,  in October of fiscal  2001,  we announced  availability  of Adobe
Studio, which is a new design network for creative  professionals.  Adobe Studio
consists of a free area offering design-related content and Adobe DesignTeam,  a
subscription-based collaboration service.

     We expect to maintain and grow our worldwide  presence in the  professional
publishing  markets in which we compete  and  increase  our market  share in the
professional  page layout market through  licensing and adoption of our InDesign
product.  We will also work to tightly  integrate  our products with each other,
providing cross-media professionals a complete and creative working environment.
We plan to  continue  to  provide  solutions  that help  publishers  of  printed
material reuse and repurpose their  information to output formats beyond that of
print.

     Cross-media Publishing Products

     Adobe Acrobat  InProduction - a new application  built for print production
professionals  that  contains  professional  tools  for  PDF  print  production;
increases  productivity  using a tightly  integrated toolset that enables you to
control  preflight,  color  separations  and  conversions,  and  trim/bleed  and
trapping parameters within Adobe PDF files.

     Adobe Content Server - an  easy-to-use,  all-in-one  system for publishers,
distributors,  retailers, and individual authors to prepare, secure, and license
eBooks.

     Adobe Design Collection - suite of four award-winning  application products
that allows consumers to create and produce professional images,  illustrations,
and layouts,  and to publish  documents  across media;  includes Adobe InDesign,
Adobe Photoshop, Adobe Illustrator, and Adobe Acrobat.

     Adobe Acrobat eBook Reader - software that displays Adobe PDF-based  eBooks
in full color with the high quality and careful design found in printed books.

     Adobe  Font Folio - contains  the  entire  Adobe Type  Library of more than
2,750 typefaces on two CD-ROMs, unlocked and ready to use.

     Adobe  FrameMaker - an  application  for  authoring  and  publishing  long,
structured,  content-rich  documents including books,  documentation,  technical
manuals, and reports;  provides users a way to publish their content to multiple
output  formats,  including  print,  Adobe  Portable  Document  Format  ("PDF"),
Hypertext Markup Language ("HTML"), XML, and Microsoft Word.

     Adobe  FrameMaker+SGML  - integrates all of the  capabilities of FrameMaker
with additional  features designed to simplify the Standard  Generalized  Markup
Language ("SGML") and XML authoring and publishing processes.

     Adobe  GoLive -  professional  Web  design  and  publishing  software  that
provides  innovative  tools Web authors require to design,  layout,  and produce
cutting-edge Web sites without the need for complex multimedia programming.

     Adobe InCopy - a powerful editorial tool for smooth  collaboration  between
writers, editors, and copy-fitters;  InCopy is a companion to Adobe InDesign and
is  licensed   through  Adobe's  system   integrator   partners   servicing  the
professional publishing market.

     Adobe  InDesign - an  innovative  page-layout  application  for  publishing
professionals; based on a new, open, object-oriented architecture that is highly
extensible,  it enables  Adobe and its  industry  partners  to deliver  powerful
publishing solutions.

     Adobe PageMaker - software used to create  high-quality  business documents
simply and reliably with robust page layout tools, templates, and stock art.

     Adobe PDF Transit - a Software Development Kit that enables print providers
to develop  streamlined,  reliable,  and secure Adobe  PDF-based  workflows that
begins at their  customers'  desktops  and  extends  across  the  Internet  to a
printing device.

     Adobe PressReady - powerful  printing  software used by  professionals  and
based on Adobe  PostScript 3; allow  professionals to proof their jobs on inkjet
printers.

     Adobe  Publishing  Collection  - suite  of four  award-winning  application
products that allows  business  users to create  visually  compelling  print and
online  communication;   includes  Adobe  PageMaker,   Adobe  Photoshop,   Adobe
Illustrator, and Adobe Acrobat.


                                      F-7

<PAGE>

     Adobe  Studio - a new Web site  service  that  provides a  creative  design
network for Web and print professionals;  includes tips,  galleries,  and online
resources,  and a set of  subscription  services that offer a virtual  workspace
where users manage projects,  collaborate online, and share and deliver files in
a secure environment that is tightly integrated with Adobe applications.

     Adobe Type Basics - includes Adobe's 65 best-selling typefaces,  plus Adobe
Type Manager;  makes it easy to create beautiful text for print,  Web, and video
projects.

     Adobe Type Library - offers for  individual  licensing over 2,500 Roman and
almost 100 Japanese  high-quality  outline  typefaces  that are used by graphics
professionals and Internet content creators worldwide.

     Adobe Type Manager - provides  powerful,  easy management of all PostScript
Type 1, OpenType, and TrueType fonts.

     Adobe Web  Collection - a  comprehensive,  integrated  software  suite that
allows  users to design  still and  interactive  Web  graphics  and  animations,
optimize  graphics for efficient  downloading,  and build dynamic Web sites that
support the latest  technology  and  standards;  includes  Adobe  GoLive,  Adobe
Illustrator, Adobe LiveMotion, and Adobe Photoshop.

ePaper Solutions

     ePaper Solutions Market Opportunity

     A significant opportunity exists to enable intelligent integration of paper
and  digital   document   communications   with  fidelity  and   reliability  in
corporations, governments, and education. Adobe Acrobat software, which contains
annotation,   collaboration,   digital  signature,  Web  capture,  and  security
features,  is the cornerstone of Adobe's ePaper Solutions  platform.  We believe
our Acrobat product  delivers unique  functionality  and  capabilities  that are
required in several markets.

     Adobe ePaper Solutions,  which also includes Adobe Acrobat Reader and Adobe
Portable Document Format ("PDF"), enables users to transition from a paper-based
to an electronic  workflow.  Companies in markets such as  aerospace,  financial
services,   government,   insurance,   legal,  and   pharmaceutical-those   with
paper-intensive  processes-use  Adobe  ePaper  Solutions  to ensure  that  their
electronic  documents are  delivered  reliably and securely and can be viewed by
the  recipient in the exact form that the  originator  intended.  Companies  can
reduce paper and storage costs  through the use of our ePaper  Solutions and can
realize productivity and time-to-market gains.

     We have  distributed  more than 400 million copies of Acrobat  Reader.  The
adoption of the PDF format by many  industries  and  governments  worldwide have
contributed to its widespread use. We had a significant increase in revenue from
Adobe ePaper Solution  products in 2001 due to increased  licensing of our Adobe
Acrobat product.

     Based on the growth of online business processes, the increasing government
requirements  for paper  reduction,  and the desire of  enterprise  customers to
lower  expenses   through  the  leverage  of  previous   Internet  and  Intranet
investments, Adobe has increased its investment in the ePaper business.

     In April 2001, we released  version 5.0 of Adobe  Acrobat.  The new version
includes tighter Web integration,  support for industry standard  protocols like
Open DataBase  Connectivity  ("ODBC") that connect Adobe PDF forms with back-end
databases, and easier data exchange in Adobe PDF files through support for XML.

     We also shipped a new ePaper product  called Acrobat  Approval in August of
fiscal  2001.  Approval  allows  corporate  customers,  government  agencies and
solution providers to deploy cost-effective  electronic forms solutions based on
Adobe PDF. It enables  users to easily  fill-in,  spell-check,  digitally  sign,
save, and submit eForms that have been created using Acrobat software.

     We believe that our ePaper  products will help companies  integrate  legacy
paper documents, forms, output from office and database applications,  and other
paper-based   communication   devices  (such  as  faxes,  letters,  air  courier
shipments,  and e-mails) so that companies and governments can use the Internet,
intranets,  and  extranets  as safe,  secure,  and  reliable  communication  and
collaboration  platforms.  In  fiscal  2002,  we plan to  expand  our  marketing
programs,  and our enterprise sales,  service, and support channels, to meet the
needs of our ePaper customers and to grow our ePaper revenue.

     ePaper Solutions Products

     Adobe  Acrobat -  software  that  allows  users to publish  and  distribute
business  documents  using  corporate  e-mail and  intranets,  the Internet,  or
CD-ROM.  Enables users to easily  convert files from almost any  application  to
Adobe PDF, a compact  cross-platform  electronic format that generally preserves
layout, fonts, colors, and images. Adobe Acrobat software


                                      F-8

<PAGE>

includes  everything  needed to create and distribute rich electronic  documents
that can be viewed easily within leading Web browsers.

     Adobe Acrobat Approval - a new application that enables business  workgroup
users  to  quickly  fill in,  save,  and  approve  electronic  forms,  marketing
materials, and other documents that have been created as interactive PDF files.

     Adobe Acrobat Capture - enables conversion of legacy paper-based  documents
into  indexable,  searchable,  platform-independent  electronic  PDF  files  for
archiving and distribution purposes.

     Adobe  Acrobat  Distiller  Server -  server-based  software  that  provides
workgroups with a centralized solution for converting  PostScript files to Adobe
PDF; gives IT and creative professionals the power of increased productivity and
the assurance of consistent, high-quality output.

     Adobe  Acrobat  Messenger  - software  that works with a scanner or digital
copier and is  designed  for  workgroups  and  departments  to  transform  paper
documents into electronic  Adobe PDF files and deliver them via e-mail,  Web, or
fax;  allows users to preview their  documents on screen,  crop or rotate pages,
and add electronic annotations.

     Adobe  Acrobat  Reader - free  software for  reliably  viewing and printing
Adobe PDF files on all major computer  platforms,  including  Microsoft Windows,
Apple Macintosh, Linux, UNIX, Palm OS and Pocket PC-based devices.

     Adobe Document  Server -  server-based  software that lets users view Adobe
PDF files within a Web browser  without  requiring Adobe Acrobat Reader or other
client software;  lets you make PDF content  accessible to the visually impaired
by  enabling  users to  convert  Adobe  PDF  files  into  HTML  text that can be
interpreted by conventional screen-reading software.

     Create Adobe PDF Online - a Web-hosted  fee-based service that allows users
to convert documents from a wide variety of applications into Adobe PDF files.

OEM PostScript and Other

     OEM PostScript and Other Market Opportunity

     Graphics   professionals  and  professional   publishers  require  quality,
reliability,  and efficiency in production printing, and we believe our printing
technology   provides   advanced   functionality   to  meet  the   sophisticated
requirements  of this  marketplace.  As  high-end  printing  systems  evolve and
transition to fully digital,  composite workflows,  Adobe is uniquely positioned
to be a supplier of software and  technology  based on the Adobe  PostScript and
Adobe PDF standards for use by hardware  manufacturers  in this industry.  Adobe
generates  revenues  by  licensing  its  technology  to  OEMs  that  manufacture
printers.

     OEM PostScript and Other Products

     Adobe PostScript - a page  description  language that delivers high quality
output, cross-platform  compatibility,  and top performance for graphically-rich
printing output from corporate desktop printers to high-end publishing printers.

     Adobe PostScript 3 - a printing and imaging page description  language that
is a standard, and is used by publishers,  corporations, and government agencies
around  the  world;  gives  users the power to create  and print  visually  rich
documents with total precision; licensed to printing equipment manufacturers for
integration into their printing environments.

     Adobe  Extreme - a printing  architecture  for  service  bureaus,  prepress
shops, and commercial  printers;  the fastest,  most flexible  implementation of
Adobe  printing  technology;  provides an  integrated  workflow  that  automates
prepress tasks,  optimizing output speeds and quality by using Adobe PDF and job
tickets;   offers  flexibility  while  delivering  a  scalable,   reliable,  and
productive printing environment.

     For  more  information  on  our  market  segments  and  information   about
geographic areas, please refer to Note 16 of our Notes to Consolidated Financial
Statements.

                                   COMPETITION

     The markets for Adobe products are  characterized  by intense  competition,
evolving industry  standards,  rapid technology  developments,  and frequent new
product introductions.  Our future success will depend on our ability to enhance
our existing  products,  introduce  new products on a timely and  cost-effective
basis,  meet  changing  customer  needs,  extend  our core  technology  into new
applications,  and  anticipate  or  respond  to  emerging  standards  and  other
technological changes.


                                      F-9

<PAGE>

     Graphics

     The graphics software market is a constantly evolving market, characterized
by rapid  technology  developments and frequent new product  introductions.  The
needs of the graphics  professionals  are rapidly changing to encompass  on-line
publishing  as well as  print-based  publishing.  Adobe's  tools in this market,
including Adobe Photoshop,  Adobe Photoshop Elements,  Adobe PhotoDeluxe,  Adobe
Illustrator,   Adobe  After  Effects,  and  Adobe  Premiere,   face  significant
competition  from companies  offering similar products and will continue to face
competition from emerging products and technologies.

     The mid-range  consumer digital imaging software market is characterized by
intense competition,  price sensitivity, brand awareness, and strength in retail
distribution.  We face  direct and  indirect  competition  in this market from a
number of companies,  including  Jasc Software,  Roxio  (formerly MGI Software),
Microsoft,  and Ulead  Systems.  We  believe  that we lead in  market  share and
compete  favorably  with our Adobe  Photoshop  Elements  product due to consumer
awareness  of our  brand in  digital  imaging,  our  strong  relationships  with
critical original equipment manufacturers ("OEM") and market influencers,  and a
strong feature set.

     The  professional  digital  imaging  software  market is  characterized  by
feature-rich competition, brand awareness, and price sensitivity. We face direct
and indirect  competition  in this market from a number of companies,  including
Jasc  Software  and  Macromedia.  We  believe  that we lead in market  share and
compete  favorably with our Adobe Photoshop product due to high awareness of the
Adobe Photoshop brand in digital imaging,  our strong  relationships with market
influencers,  the features and technical  capabilities  of the product,  and our
ability to leverage core features from our other established products.

     The dynamic media software market is an increasingly  competitive market as
professional,  enthusiast,  and home users  migrate away from analog video tools
towards the use of digital camcorders and digital video production.  Adobe After
Effects and Adobe  Premiere face  increased  competition  from companies such as
Apple Computer, Autodesk, Eyeon, Pinnacle, in-sync Corporation, Media 100, Roxio
(formerly  MGI  Software),  Avid,  Sonic  Foundry,  and  Ulead  Systems.  In the
professional  compositing and special effects editing market, we believe that we
lead in market  share with Adobe After  Effects and  compete  favorably  in this
market due to our strong feature set and the integration with our other products
to create a broad platform for our customers.  In the professional digital video
editing  market we believe that we lead in market  share with Adobe  Premiere on
the Microsoft Windows platform,  and compete favorably in this market due to our
strong feature set, our OEM  relationships,  and the integration  with our other
products  to create a broad  platform  for our  customers.  In the  professional
digital video editing market on the Macintosh  platform,  we believe we trail in
market share to Apple Computer's digital video editing product.  We believe that
our competition on the Macintosh platform with Adobe Premiere is more difficult,
based on Apple's marketing  advantage relative to their ownership and control of
the Macintosh operating system and hardware platform upon which we compete.

     The  drawing  and  illustration  market is  characterized  by  feature-rich
competition,  brand awareness,  and price  sensitivity.  Adobe Illustrator faces
competition from companies such as Corel and Macromedia. We believe that we lead
in market  share and  compete  favorably  with our product in this market due to
high  awareness  of the  features in our  Illustrator  product,  especially  the
drawing and illustration  functionalities,  our strong relationships with market
influencers,  the features and technical  capabilities  of the product,  and our
ability to leverage core technologies from our other established products.

     A number of companies  currently  offer one or more  products  that compete
directly or indirectly with more than one of Adobe's  Graphics  products.  These
companies include Corel, Macromedia, and Roxio.

     Cross-media Publishing

     In the Cross-media  Publishing  market, we offer several products including
Adobe GoLive, Adobe InDesign, Adobe PageMaker,  Adobe FrameMaker, and Adobe Type
Library.  We believe these individual products compete favorably on the basis of
features and  functionality,  ease of use,  product  reliability,  and price and
performance  characteristics.  In addition,  the products increasingly work well
together,  providing  broader  functionality and shortened product learning time
for the individual who uses multiple applications to complete a project.

     The Web page layout  market is a constantly  evolving  and highly  volatile
market that has been  impacted by both the recent global  economic  downturn and
the reduction in Web product spending.  We believe Adobe GoLive trails in market
share and faces  significant  direct and  indirect  competition  in the Web page
layout market from  companies  such as  Macromedia  and  Microsoft.  Although we
believe we compete  favorably  with our  product  due to the  features  of Adobe
GoLive and our ability to leverage core  technologies from our other established
products,  we  believe  it will be  difficult  to take  market  share  away from
competitive  products in the market due to the entrenched nature of Macromedia's
Dreamweaver  product  within Web design and  consultancy  businesses,  the broad
distribution  and use of  Microsoft's  FrontPage as a mid-range  Web page layout
solution, and the global economic impact on Web-based business in 2001.


                                      F-10

<PAGE>

     Our Adobe InDesign product faces tough competition in the professional page
layout market. The main competitor  product,  Quark Xpress, has a leading market
share in the Roman language markets for  professional  page layout in the United
States and Europe.  Quark  Xpress also  benefits  from an  established  industry
infrastructure that has been built around the use of the Xpress product in print
shops and service  bureaus,  and through the  development of third party plug-in
products.  Barriers to the adoption of Adobe InDesign by Quark Xpress  customers
include this infrastructure,  as well as the cost of conversion,  training,  and
software/hardware  procurement  required in a switch to InDesign.  We believe we
can gain market share with InDesign  software  against  Xpress due to our strong
brand name,  our support of Apple's new Mac OS X operating  system,  new product
capabilities,  and the recently improved  infrastructure support by the industry
for our solution.  Adobe recently made available version 2.0 of InDesign,  which
will compete against the new version of Quark Xpress, version 5.0.

     In the technical authoring and publishing market, Adobe FrameMaker products
face competition from large-scale  electronic  publishing  systems  developed by
several companies as listed below.  Participants in this market compete based on
the  quality and  features of their  products,  the level of  customization  and
integration  with other  publishing  system  components,  the number of hardware
platforms supported,  service, and price. We believe we can successfully compete
in this  market  based upon the quality  and  features  of the Adobe  FrameMaker
product, our extensive application  programming  interface,  the large number of
platforms supported, and other factors.

     In the business document  publishing and authoring market,  Adobe PageMaker
products face  competition  from other  desktop  publishing  software  products,
including Microsoft Publisher.  Participants in this market compete based on the
quality and features of their products,  ease-of-use,  printer service  support,
and price. We believe we have strong market share and can  successfully  compete
in this  market  based upon the  quality  and  features  of the Adobe  PageMaker
product,  its  widespread  adoption  among printer  service  bureaus,  and other
factors.

     A number of companies  currently  offer one or more  products  that compete
directly  or  indirectly  with more than one of Adobe's  Cross-media  publishing
products. These companies include Broadvision, Macromedia, Microsoft, Quark, and
Arbortext.

     ePaper Solutions

     In  electronic  document  delivery,  exchange,  collaboration,  and archive
markets,  the electronic  forms market,  and the PDF file creation  market,  our
Adobe  ePaper  product  family  faces   competition   from   entrenched   office
applications  and  increased   competition   from  new  emerging   products  and
technologies.    Current    office    applications    and    Internet    content
creation/management  tools  that use  Microsoft  Word,  XML,  HTML,  and  Tagged
Information File Format ("TIFF") file formats compete with Adobe PDF and Adobe's
ePaper  product  family.  In addition,  Microsoft's  new Office XP suite targets
business   users   that   want   improved    collaborative    document   review,
scanning/optical  character recognition ("OCR"), and security  capabilities,  in
competition with similar features offered by Adobe's ePaper products family.

     In the PDF file  creation  market,  our Adobe ePaper  product  family faces
competition  from  clone  products  such as the Jaws  product  line from  Global
Graphics (formerly Harlequin), and other smaller PDF creation solutions that can
be found  for free on the  World  Wide  Web.  In the  area of  electronic  forms
solutions,  we face  competition  from  Cardiff and  Microsoft,  as well as from
Accelio (formerly Jetform) unless and until our proposed  acquisition of Accelio
is consummated.

     We believe the Adobe ePaper product family competes favorably against these
companies   and  formats  in  terms  of  the   combined   benefits  of  superior
functionality,  file compression, visual page fidelity/reliability,  transmittal
time, and security of documents expressed using Adobe PDF.

     Looking to the future,  electronic  document systems targeting  enterprises
that utilize emerging standards such as XML and  Microsoft's.NET  initiative are
being  developed  and will  likely be  adopted.  Adobe is working to ensure that
compatibility and/or migration plans exist between these  formats/platforms  and
the Adobe PDF format,  as well as our Acrobat software  products and other Adobe
applications.

     OEM PostScript and Other

     We believe that the principal  competitive  factors for OEMs in selecting a
page  description  language or a printing  technology are product  capabilities,
market leadership,  reliability,  price,  support,  and engineering  development
assistance.  We believe that our competitive  advantages  include our technology
competency,  OEM customer  relationships,  and intellectual  property portfolio.
Adobe   PostScript   and  Adobe   Extreme   software   face   competition   from
Hewlett-Packard's  proprietary PCL page description language and from developers
of  page  description  languages  based  on the  PostScript  language  standard,
including Global Graphics (formerly called Harlequin) and Xionics.


                                      F-11

<PAGE>


     Although Adobe has numerous OEM customer  relationships  that license Adobe
PostScript  technologies,  revenues  from a small  number  of the OEMs make up a
majority of the revenue in this market segment.

                                   OPERATIONS

Marketing and Sales

     We market and distribute our products through sales channels, which include
distributors,   retailers,   systems  integrators,   software  developers,   and
value-added  resellers  ("VARs"),  as well as through  OEM and  hardware  bundle
customers.  We also  market and license our  products  directly  using our sales
force, Adobe call centers,  and through e-commerce methods via our Adobe.com Web
site.

     We support our worldwide  distribution  network and end-user customers with
international  offices  around  the world,  including  locations  in  Australia,
Belgium, Brazil, Canada, China, Denmark, England, Finland, France, Germany, Hong
Kong, India,  Ireland,  Italy,  Japan, Korea,  Mexico, the Netherlands,  Norway,
Portugal, Scotland, Singapore, Spain, Sweden, Switzerland, and Taiwan.

     We  license  our  Adobe  PostScript  software  and other  printing  systems
technology to computer and printer  manufacturers,  who in turn distribute their
products  worldwide.  We  derive  a  significant  portion  of  Adobe  PostScript
royalties from international sales of printers,  imagesetters,  and other output
devices by our OEMs.

     We also license  software with  post-contract  customer support ("PCS") for
two  years.  An  amount  equal to the  fair  value  of the PCS is  deferred  and
recognized  as  revenue  ratably  over  the  two-year  term.  Fair  value of the
undelivered  PCS is  determined  by the rate  charged  to  customers  to renew a
two-year  PCS  arrangement.  PCS  includes  rights  to  upgrades,  when  and  if
available, a limited period of telephone support, updates, and bug fixes.

     For information  regarding our significant  customers and geographic areas,
please refer to Note 16 of our Notes to Consolidated Financial Statements.

Order Fulfillment

     The procurement of the various components of packaged  products,  including
CDs and printed  materials,  and the  assembly of packages  for retail and other
applications  products  is  controlled  by  Order  Fulfillment  operations.   We
outsource all of our order fulfillment activities to third parties in the United
States, Europe, and Asia.

     To date, we have not experienced significant  difficulties in obtaining raw
materials  for the  manufacture  of our products or in the  replication  of CDs,
printing, and assembly of components,  although an interruption in production by
a supplier could result in a delay in shipment of Adobe's products.  The backlog
of orders as of January 25, 2002 was approximately $15.7 million. The backlog of
orders as of January 26, 2001 was approximately $22.4 million.

Technical Support and Education

     For application  software,  a technical support and services staff responds
to customer queries  received by phone,  online,  or via e-mail.  Free technical
phone support is provided to customers who are under  warranty for support.  For
customers in North  America and Asia,  support is provided up to a maximum of 30
or 90 days beginning  upon the customer's  first call or for a maximum of one or
two support  incidents,  depending  on the  product.  For  customers  in Europe,
support is provided  until our release of the second new full version  after the
version  purchased by the  customer.  Historically,  the majority of support for
European  customers is provided  within the first 90 days.  We have  invested in
improving self-help and on-line technical support capabilities so that customers
can find  answers to their  support  questions  via Adobe's Web site and through
user-to-user  forums where users can help other users with technical  questions.
We have also  outsourced  our initial  levels of technical  support to provide a
consistent  standard for  customer  support on a worldwide  basis.  We provide a
variety of fee-based  options for  customers  seeking  technical  and  developer
support, beyond the initial free support provided.

     We  inform  customers  about our  products  through  on-line  informational
services on our Web site (www.adobe.com), and through a growing series of how-to
books  published by Adobe Press  pursuant to a joint  publishing  agreement with
Peachpit Press. In addition,  we develop tests to certify  independent  trainers
who teach Adobe software  classes.  We sponsor workshops led by our own graphics
design staff, work with professional  associations and user groups,  and conduct
regular beta-testing programs.


                                      F-12

<PAGE>

Investment in New Markets

     We own  limited  partnership  interests  in four  venture  capital  limited
partnerships,  Adobe Ventures L.P.; Adobe Ventures II, L.P.; Adobe Ventures III,
L.P., and Adobe Ventures IV, L.P.  (collectively "Adobe Ventures"),  that invest
in early  stage  companies  with  innovative  technologies.  In  addition to the
potential for financial returns,  our venture activities  increase our knowledge
of emerging markets and  technologies,  as well as expand our ecosystem of Adobe
products and services.  The  partnerships  are managed by Granite  Ventures,  an
independent venture capital firm and sole general partner of Adobe Ventures.

     The investments in Adobe Ventures are accounted for using the equity method
of accounting,  and  accordingly,  the  investments  are adjusted to reflect our
share of Adobe Ventures'  investment  income (loss) and dividend  distributions.
Adobe  Ventures carry their  investments in equity  securities at estimated fair
market value and unrealized  gains and losses are included in investment  income
(loss).  The stock of a number of  technology  investments  held by the  limited
partnerships at November 30, 2001 are not publicly traded, and, therefore, there
is no established market for their securities.  As such, the fair value of these
investments  are  determined by Granite  Ventures using the most recent round of
financing  involving new  non-strategic  investors or estimates  made by Granite
Ventures.  We also  have a policy  in place to  review  the fair  value of these
investments  held by Adobe  Ventures on a regular basis to evaluate the carrying
value of the investments in these companies.  This policy  includes,  but is not
limited to,  reviewing each of the companies'  cash position,  financing  needs,
earnings/revenue outlook, operational performance, management/ownership changes,
and competition.  The evaluation process is based on information that we request
from these privately-held companies. This information is not subject to the same
disclosure  regulations  as U.S.  public  companies,  and as such, the basis for
these evaluations is subject to the timing and the accuracy of the data received
from these  companies.  If we believe  that the  carrying  value of a company is
carried  at an  amount in excess  of fair  value,  it is our  policy to record a
reserve in addition to our equity method of accounting and the related writedown
is recorded as an investment loss on our consolidated statements of income.

     In March 1997, as part of our venture investing program,  we established an
internal limited  partnership,  Adobe Incentive  Partners,  L.P. ("AIP"),  which
allows  certain of Adobe's  executive  officers to  participate in cash or stock
distributions  from  Adobe's  venture  investments.  Assets  held by AIP include
Adobe's entire  interests in Adobe Ventures L.P. and Adobe Ventures II, L.P. and
certain equity securities of privately-held companies. Adobe is both the general
partner and a limited  partner of AIP.  Other  limited  partners  are  executive
officers  and former  executive  officers  of Adobe who are or were  involved in
Adobe's venture investing activities and whose participation was deemed critical
to the success of the program. No limited partnership  interests were granted in
fiscal 2001, 2000, or 1999.

     Adobe's Class A senior limited partnership  interest in AIP includes both a
liquidation  preference  and a preference  in recovery of the cost basis of each
specific investment. The executives' Class B junior limited partnership interest
qualifies for partnership distributions only after (a) Adobe has fully recovered
the cost basis of its  investment in the specific  investee  company for which a
distribution is made; and (b) the  participating  executive has vested in his or
her distribution  rights. The distribution  rights generally vested on a monthly
basis over three years, and were 25% vested after one year, 50% vested after two
years  and fully  vested at the end of three  years.  As of June 30,  2000,  all
existing partnership  interests were fully vested or ceased vesting. The limited
partnership  investments  are  restricted to investments in Adobe Ventures or in
companies that were private at the time of the establishment of AIP, or when the
investment  is made,  whichever  is later.  In fiscal  2001,  the  participating
officers  received  aggregate  distributions  with a fair value of $0.6 million,
consisting  primarily of equity  securities.  The  distributions to the officers
represents their share of nonmarketable  securities that became  marketable as a
result  of a public  offering,  as well as their  share of cash  resulting  from
investments  that were  liquidated  by AIP. At November 30,  2001,  the minority
interest held by the participating  officers was $0.5 million and is included in
accrued expenses on the consolidated balance sheet.

     Our equity investments and Adobe Ventures  investments in equity securities
at November 30, 2001 consisted of the following companies:


                                      F-13

<PAGE>

                                                        Private        Public
Adobe Equity Investments
  AvantGo, Inc.                                                         X
  Classmates Online, Inc. (formerly eCircles, Inc.)      X
  Datalogics, Inc.                                       X
  Digimarc Corporation                                                  X
  Digital Think, Inc.                                                   X
  Engage, Inc.                                                          X
  InfoGate, Inc.                                         X
  Liquent, Inc. (formerly ESPS, Inc.)                                   X
  Objectivity, Inc.                                      X
  Salon.com                                                             X
  Tumbleweed Communications Corp.                                       X
  Viewpoint Corporation                                                 X
  Virage, Inc.                                                          X
  Winsoft                                                X




                                                        Private        Public
Adobe Ventures L.P. Equity Investments
  Engage, Inc.                                                          X
  ImageX.com, Inc.                                                      X
  Liquent, Inc. (formerly ESPS, Inc.)                                   X
  Managing Editor Software, Inc.                         X

Adobe Ventures II, L.P. Equity Investments
  Covia Technologies, Inc.                               X
  Digital Think, Inc.                                                   X
  Engage, Inc.                                                          X
  HAHT Software, Inc.                                    X
  ImageX.com, Inc.                                                      X
  PictureIQ Corporation                                  X
  Salon.com                                                             X
  Virage, Inc.                                                          X

Adobe Ventures III, L.P. Equity Investments
  AvantGo, Inc.                                                         X
  Biz 360, Inc.                                          X
  Covalent Technologies, Inc.                            X
  Covia Technologies, Inc.                               X
  Digital Fountain                                       X
  Digital Think, Inc.                                                   X
  Engage, Inc.                                                          X
  NetClerk, Inc.                                         X
  PictureIQ Corporation                                  X
  Sendmail, Inc.                                         X
  Shutterfly.com, Inc.                                   X
  Slam Dunk Networks, Inc.                               X


                                      F-14

<PAGE>


Adobe Ventures IV, L.P. Equity Investments
  Biz 360, Inc.                                          X
  Cardiff Software, Inc.                                 X
  Covio, Inc.                                            X
  Digital Fountain                                       X
  HAHT Software, Inc.                                    X
  Kinecta Corporation                                    X
  Shutterfly.com, Inc.                                   X

     We  intend  to  continue   investing  in  new  markets,   through   limited
partnerships as well as through direct investments, although we currently do not
anticipate investing further through AIP.


                               PRODUCT DEVELOPMENT

     Since the personal  computer  software  industry is  characterized by rapid
technological  change,  a continuous  high level of expenditures is required for
the  enhancement of existing  products and the  development of new products.  We
primarily  develop our software  internally.  We occasionally  acquire  products
developed by others by  purchasing  the stock or assets of the  business  entity
that  held  ownership  rights to the  technology.  In other  instances,  we have
licensed or purchased the  intellectual  property  ownership  rights of programs
developed  by others with license or  technology  transfer  agreements  that may
obligate us to pay  royalties,  typically  based on a percentage of the revenues
generated by those programs.

     During fiscal years ended November 30, 2001,  December 1, 2000 and December
3, 1999,  our research and  development  expenses,  including  costs  related to
contract development,  were $224.1 million,  $240.2 million, and $197.5 million,
respectively.  During the first quarter of fiscal 2002, we acquired Fotiva, Inc.
for a total  consideration  of approximately  $5.3 million.  Fotiva is a digital
photography  software  company  developing  solutions to help consumers  manage,
store, enrich, and share digital  photographs.  Also during the first quarter of
fiscal 2002, we announced a proposed  agreement to acquire Ottawa,  Canada-based
Accelio Corporation ("Accelio").  Accelio is a provider of Web-enabled solutions
that help customers manage business  processes driven by electronic forms. Under
the terms of the agreement, Adobe's common stock valued at $72.0 (US) million on
closing will be exchanged for all Accelio equity securities. We expect to record
a $12.0-$15.0 million accrual related to the acquisition, which will be added to
the purchase  price.  The proposed  acquisition  is subject to the  execution of
customary  transaction  documents  and the  satisfaction  of  customary  closing
conditions,  including the approval of Accelio's  shareholders  and clearance of
the  acquisition  by U.S. and Canadian  regulatory  authorities.  Initially  the
transaction  was  expected  to close  in March  2002.  However,  due to  certain
regulatory and timing requirements, we are now targeting to close in April 2002.

     During fiscal 2000, we acquired  Glassbook,  Inc. for a total consideration
of approximately $28.0 million.  Based on an independent  appraiser's valuation,
$0.5 million was allocated to  in-process  research and  development  related to
this  acquisition.  The ongoing project at Glassbook at the time of the purchase
included the  development  of the  Glassbook  Reader and the  Glassbook  Content
Server  products.   We  released  new  products  that  contained  the  purchased
technology in April 2001, with Acrobat eBook Reader 2.1 and Adobe Content Server
2.0.

     During fiscal 1999, we also acquired substantially all of the assets of two
software  companies,  through separate purchase  transactions,  for an aggregate
consideration of approximately  $3.6 million,  which was allocated to in-process
research and development  and expensed at the time of  acquisition.  The ongoing
project  at  Attitude  Software  at  the  time  of  the  purchase  included  the
development  of the 3D  Anarchy  authoring  product.  We are  incorporating  the
purchased technology into one of our products,  which has not yet been released.
Additionally,  we  acquired  substantially  all of  the  assets,  consisting  of
intellectual property, of Photomerge. This purchased technology was incorporated
into our  Photoshop  Elements  product,  which we released  in April  2001.  See
Management's Discussion and Analysis for further information.


                               PRODUCT PROTECTION

     We regard our  software  as  proprietary  and  protect it with  copyrights,
patents,  trademarks,  trade  secret laws,  internal and external  nondisclosure
precautions,  and  restrictions  on  disclosure  and  transferability  that  are
incorporated into our software license agreements. We protect the source code of
our software  programs as trade secrets,  and make source code available to OEMs
only under  limited  circumstances  and specific  security  and  confidentiality
constraints.

     Our products are generally  licensed to end users on a "right to use" basis
pursuant  to a license  that is  nontransferable  and  restricts  the use of the
products to the customer's  internal purposes on a designated number of printers
or computers. We also rely on copyright laws and on "shrink wrap" and electronic
licenses  that are not  signed  by the end  user.  Copyright  protection  may be
unavailable under the laws of certain  countries.  The enforceability of "shrink
wrap" and electronic licenses has not


                                      F-15

<PAGE>

been conclusively determined.  We have obtained many patents and have registered
numerous  copyrights,  trademarks,  domain names, and logos in the United States
and foreign countries.

     Policing  unauthorized use of computer software is difficult,  and software
piracy is a  persistent  problem  for the  software  industry.  This  problem is
particularly  acute in international  markets.  We conduct vigorous  anti-piracy
programs.  However,  our products do not  currently  contain copy  protection or
network copy-detection features.

     We believe that, because computer software  technology changes and develops
rapidly,  patent,  trade secret,  and copyright  protection are less significant
than factors such as the  knowledge,  ability,  and experience of our personnel,
brand recognition, contractual relationships, and ongoing product development.


                                    EMPLOYEES

     As of  January  25,  2002,  we  employed  3,029  people,  none of whom  are
represented by a labor union. We have not experienced work stoppages and believe
our employee  relations are good.  Competition  in  recruiting  personnel in the
software industry,  especially highly skilled engineers,  is intense. We believe
our future  success will depend in part on our continued  ability to recruit and
retain highly skilled technical, management and marketing personnel.


                               EXECUTIVE OFFICERS

     Adobe's executive officers as of January 25, 2002 are as follows:

<TABLE>
<CAPTION>

     Name                                     Age     Positions
     -------------------------------------   -------  ------------------------------------------------------
     <S>                                     <C>      <C>
     Bruce R. Chizen                           46     President, Chief Executive Officer and Director

     Shantanu Narayen                          38     Executive Vice President, Worldwide Product
                                                      Marketing and Development

     Murray J. Demo                            40     Senior Vice President and
                                                      Chief Financial Officer

     Jim Stephens                              44     Senior Vice President, Worldwide Sales, Customer
                                                      Care and Field Marketing

</TABLE>

     A biography, including the principal occupations for the past five years of
each of the executive officers, is provided below.

     Mr.  Chizen  joined Adobe upon the closing of the  acquisition  of Aldus in
August 1994 as Vice President and General Manager,  Consumer Products  Division.
In December 1997, he was promoted to Senior Vice President and General  Manager,
Graphic  Products  Division  and in August  1998,  Mr.  Chizen was  promoted  to
Executive Vice President,  Products and Marketing. In April 2000, Mr. Chizen was
promoted to  President  of Adobe and in December  2000,  he also became  Adobe's
Chief Executive  Officer.  Prior to joining Adobe, Mr. Chizen was Vice President
and General Manager,  Consumer  Division of Aldus Corporation from February 1994
to August 1994,  and from November 1992 to February  1994, he was Vice President
and General  Manager,  Claris  Clear  Choice for Claris  Corp.,  a wholly  owned
subsidiary of Apple  Computer,  Inc., a manufacturer  of computers and software.
Mr. Chizen is a member of the Boards of Directors of Viewpoint  Corporation  and
Synopsis, Inc.

     Mr.  Narayen  joined Adobe in January 1998 as Vice President of Engineering
and has held various other  positions as vice  president and general  manager of
Adobe's engineering  technology group. He was promoted to Senior Vice President,
Worldwide  Product  Development  in January 1999 and Executive  Vice  President,
Worldwide  Product  Marketing and  Development  in March 2001.  Prior to joining
Adobe, Mr. Narayen co-founded Pictra Inc., a software internet company, in 1996.
He was Director of Desktop and  Collaboration  products at Silicon Graphics Inc.
and held various senior manager positions at Apple Computer Inc. before founding
Pictra.

     Mr. Demo joined Adobe in August 1996 as the Director of Operations Finance.
In July 1998 he was promoted to Corporate  Controller.  In October  1999, he was
promoted  to Vice  President  and  Corporate  Controller  and in June  2000  was
promoted to Senior Vice President and Chief Financial Officer. Prior to

                                      F-16

<PAGE>

joining Adobe,  Mr. Demo was the Director of Finance for Miller Freeman,  Inc, a
division of United News & Media,  London,  England  from June 1993 to July 1996.
Prior to Miller  Freeman,  Inc.,  Mr. Demo held a variety of senior  finance and
business  development  positions  at  First  Financial   Management,   Visionary
Corporate Technologies, and Hughes Electronics.

     Mr.  Stephens  joined  Adobe  in  February  1990 and  held  various  senior
management  positions  in sales and  marketing  for  Adobe's  Printing  System's
Division before joining the executive team in November 1997 as Vice President of
Change  Management.  In June 1998, he was promoted to Vice  President,  Investor
Relations  and in April 1999,  Mr.  Stephens  was  promoted  to Vice  President,
Corporate  Development.  In September  2000, Mr. Stephens was promoted to Senior
Vice President,  E-business  Development,  and in October 2001, Mr. Stephens was
promoted to Senior Vice  President,  Worldwide  Sales,  Customer  Care and Field
Marketing.  For ten years prior to joining  Adobe,  Mr.  Stephens held sales and
marketing   management   positions  at   Dataproducts   Corporation   and  Texas
Instruments.




                                      F-17

<PAGE>

Item 2. Properties

     The following  table sets forth the location,  approximate  square footage,
and use of each of the principal  properties used by Adobe. We lease or sublease
all of these  properties.  Such leases expire at various  times through  January
2025.  The annual base rent  expense  for all  facilities  (including  operating
expenses,  property taxes,  and  assessments) is currently  approximately  $22.0
million and is subject to annual adjustment.

<TABLE>
<CAPTION>

                                                      Approximate
                                                        Square
                             Location                   Footage                           Use
    ------------------------------------------    --------------------   ------------------------------------
    <S>                                           <C>                    <C>

    North America:                                     360,000          Research, product development, sales,
    345 Park Avenue                                                     marketing and administration
    San Jose, California, USA

    321 Park Avenue                                    280,000          Research, product development, sales,
    San Jose, California, USA                                           marketing and administration

    801 N. 34th Street-Waterfront                      254,328          Product development, sales, marketing,
    Seattle, WA 98103-88                                                technical support, and administration

    Japan:                                             37,531           Product development, sales, marketing,
    Gate City Ohsaki East Tower                                         and administration
    1-11-2 Ohsaki, Shinagawa-ku
    Tokyo 141-0032 Japan

    Ireland:                                           11,148           Administration
    National Digital Park, Citywest Business Campus
    Unit 3100, Block 3096-3100
    Dublin, Ireland 24

</TABLE>

     In general,  all  facilities  are in good  condition  and are  operating at
capacities that range from 65% to 100%.

     We also lease office space in the United States and various other countries
under operating leases.

     We have one leased office building in San Jose, California that was vacated
in connection with the restructuring program implemented in the third quarter of
fiscal 1998. We have  subleased  the building but still have a commitment  under
this lease agreement until 2007.

Item 3. Legal Proceedings

     On August 10, 2000, Adobe filed suit in the U.S. District Court of Delaware
against  Macromedia,  Inc.  ("Macromedia")  for  infringement of U.S. Patent No.
5,546,528  relating to Adobe's  tabbed  palette  patent.  On September 18, 2000,
Adobe amended its complaint to include an additional  claim of  infringement  of
U.S.  Patent No.  6,084,597  relating to a method of  rasterizing  and rendering
complex layered  compositions in a movie.  The complaint seeks a declaratory and
injunctive  relief as well as actual and treble  damages.  Macromedia  denies it
infringes Adobe's patents in its answer to Adobe's amended complaint.

     On September 27, 2000,  Macromedia filed counterclaims in the U.S. District
Court of Delaware for  infringement  of U.S. Patent No.  5,467,443,  relating to
changing of blended elements and U.S. Patent Nos. 5,151,998 and 5,204,969, which
relates to visual editing of sound  waveforms.  We believe that the  allegations
against Adobe are without merit and intend to  vigorously  defend  ourselves and
pursue  our  original  complaint.  The  counterclaim  seeks  a  declaratory  and
injunctive  relief as well as actual and treble damages.  This case is currently
in the discovery phase. The court has set a trial date for April 29, 2002. Adobe
has  denied   Macromedia's   counterclaims   in  its   answer  to   Macromedia's
counterclaims.

     On October 19, 2001,  Macromedia filed suit in the U.S.  District Court for
the Northern  District of  California  against  Adobe for  infringement  of U.S.
Patent  Nos.  5,845,299,  relating  to  draw-based  editors  for web pages,  and
5,911,145,   relating  to  hierarchical  structure  editors  for  websites.  The
complaint seeks  declaratory and injunctive  relief as well as actual and treble
damages. Adobe denied Macromedia's claims in its answer and asserted affirmative
defenses.

     Management  believes that the ultimate resolution of these matters will not
have a material impact on our financial position or results of operations.


                                      F-18

<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders

     Not applicable.


                                     PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters

     Our common stock is traded on The Nasdaq  National  Market under the symbol
"ADBE." On January 25,  2002,  there were 1,728  holders of record of our common
stock. Because many of such shares are held by brokers and other institutions on
behalf  of  stockholders,  we  are  unable  to  estimate  the  total  number  of
stockholders represented by these record holders. The following table sets forth
the  high  and low  sales  price  per  share of our  common  stock  and the cash
dividends paid per share, for the periods  indicated,  all of which are adjusted
for the two-for-one stock split in the form of a stock dividend effected October
2000.

<TABLE>
<CAPTION>

                                                                        Price Range            Cash
                                                                 --------------------------  Dividend
                                                                      High         Low       Per Share
                                                                 ------------- ------------ ------------
<S>                                                              <C>           <C>          <C>

Fiscal 2001:
   First Quarter.........................................        $   77.56     $  26.25      $0.0125
   Second Quarter........................................            48.80        24.56       0.0125
   Third Quarter.........................................            48.13        31.22       0.0125
   Fourth Quarter........................................            34.99        22.20       0.0125
   Fiscal Year...........................................            77.56        22.20         0.05

Fiscal 2000:
   First Quarter.........................................        $   53.31     $  26.72      $0.0125
   Second Quarter........................................            65.50        38.50       0.0125
   Third Quarter.........................................            71.66        51.50       0.0125
   Fourth Quarter........................................            87.31        60.75       0.0125
   Fiscal Year...........................................            87.31        26.72         0.05

</TABLE>

     We have paid cash  dividends  on our common  stock each  quarter  since the
second quarter of 1988. In March 1997, we established the venture stock dividend
program under which we may, from time to time,  distribute as a dividend-in-kind
shares of our equity holdings in investee companies to our stockholders.

     Under  the terms of our line of credit  agreement,  corporate  headquarters
lease agreements, and real estate financing agreement, we may pay cash dividends
unless an event of default  has  occurred  or we do not meet  certain  financial
ratios.  The  declaration of future  dividends,  whether in cash or in-kind,  is
within the  discretion  of  Adobe's  Board of  Directors  and will  depend  upon
business conditions,  our results of operations,  our financial  condition,  and
other factors.



                                      F-19

<PAGE>


Equity Compensation Plans

     The following table summarizes our equity compensation plans as of November
30, 2001:

<TABLE>
<CAPTION>

                                                               Equity Compensation Plan Information
                                         ---------------------------------------------------------------------------------------
                                                                                                  Number of securities remaining
                                          Number of securities to be     Weighted average         available for future issuance
                                           issued upon exercise of       exercise price of       under equity compensation plans
                                            outstanding options,         outstanding options,    (excluding securities reflected
                                            warrants and rights         warrants and rights                in column (a))
Plan Category                                      (a)                         (b)                               (c)
-------------                            -----------------------------  -----------------------  -------------------------------
<S>                                      <C>                            <C>                      <C>

Equity compensation plans approved by
security holders.......................         19,026,713                   $ 27.18                    26,811,909

Equity compensation plans not approved
by security holders*....................        35,257,604                   $ 41.76                    4,304,938
                                                ----------                                              ----------
Total                                           54,284,317                   $ 36.65                    31,116,847

</TABLE>

     *Please see Note 10 of our Notes to Consolidated Financial Statements for a
description of our 1999  Nonstatutory  Stock Option Plan, which does not require
the approval of and has not been approved by our stockholders.

Item 6. Selected Financial Data

     The following selected consolidated financial data (presented in thousands,
except  per  share   amounts  and  employee   data)  are  derived  from  Adobe's
consolidated financial statements.  This data should be read in conjunction with
the  consolidated  financial  statements  and  notes  thereto,  and with Item 7,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

<TABLE>
<CAPTION>
                                                                                   Years Ended
                                                      ----------------------------------------------------------------------
                                                        Nov. 30,         Dec. 1,       Dec. 3,       Nov. 27,       Nov. 28,
                                                          2001            2000          1999          1998           1997
                                                      -------------   -------------  ------------- -------------  -----------
<S>                                                   <C>             <C>            <C>           <C>            <C>
Operations:
   Revenue.....................................       $  1,229,720    $  1,266,378   $ 1,015,434   $  894,791     $  911,894
   Income before income taxes..................            306,931         443,739       374,427      167,694        296,090
   Net income(1)...............................            205,644         287,808       237,751      105,144        186,837
   Net income per share(1)
     Basic.....................................               0.86            1.21          0.98         0.40           0.65
     Diluted...................................               0.83            1.13          0.92         0.39           0.63
   Cash dividends declared per common share....               0.05            0.05          0.05         0.05           0.05

Financial position:
   Cash and short-term investments.............            581,613         679,853       498,716      272,547        502,956
   Working capital.............................            453,713         563,307       355,386      204,979        454,299
   Total assets................................            930,623       1,069,416       803,859      767,331        940,071
   Stockholders' equity........................            616,972         752,544       512,209      516,365        715,424

Additional data:
   Worldwide employees.........................              3,043           2,947         2,745        2,664          2,654
______________
       All share and per  share  amounts  referred  to in the  above  table  have  been  adjusted  to  reflect  the
       two-for-one stock splits in the form of stock dividends effected October 24, 2000 and October 26, 1999.

  (1)  In 2001,  includes investment loss of $93.4 million,  restructuring and other charges of $12.1 million,  and
       amortization of goodwill and purchased  intangibles of $14.3 million.  In 2000, includes investment gains of
       $14.3 million,  one-time gains from the sale of assets of $2.7 million,  restructuring  and other charges of
       $5.6  million,  in-process  research and  development  of $0.5  million,  and  amortization  of goodwill and
       purchased  intangibles of $7.0 million. In 1999, includes investment gains of $88.9 million,  one-time gains
       from the sale of  assets of $5.7  million,  restructuring  and  other  charges  of $23.0  million,  acquired
       in-process  research  and  development  of  $3.6  million,   and  amortization  of  goodwill  and  purchased
       intangibles of $4.8 million. In 1998,  includes  investment gains of $15.0 million,  restructuring and other
       charges of $38.2 million,  and amortization of goodwill and purchased  intangibles of $7.7 million. In 1997,
       includes  investment gains of $34.3 million,  other nonrecurring gains of $0.6 million,  acquired in-process
       research and development of $6.0 million,  and  amortization  of goodwill and purchased  intangibles of $2.6
       million.

</TABLE>



                                      F-20

<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     The following discussion (presented in millions,  except per share amounts)
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto.

     In  addition to  historical  information,  this Annual  Report on Form 10-K
contains  forward-looking  statements that involve risks and uncertainties  that
could cause  actual  results to differ  materially.  Factors that might cause or
contribute to such differences  include, but are not limited to, those discussed
in the section  entitled  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations - Factors That May Affect Future  Results of
Operations."  You should carefully review the risks described in other documents
we file from time to time with the Securities and Exchange Commission, including
the  Quarterly  Reports  on Form  10-Q to be filed in  2002.  When  used in this
report,  the words "expects,"  "anticipates,"  "intends,"  "plans,"  "believes,"
"seeks,"   "targets,"   "estimates,"   "looks  for,"  "looks  to,"  and  similar
expressions are generally intended to identify forward-looking  statements.  You
should not place undue reliance on these forward-looking statements, which speak
only  as of the  date of this  Annual  Report  on Form  10-K.  We  undertake  no
obligation to publicly release any revisions to the  forward-looking  statements
or reflect events or circumstances after the date of this document.

                              RESULTS OF OPERATIONS

Overview

     Founded in 1982, Adobe Systems Incorporated  ("Adobe") builds award-winning
software solutions for network publishing,  including Web, ePaper, print, video,
wireless and broadband applications.  Its graphic design, imaging, dynamic media
and  authoring   tools  enable   customers  to  create,   manage,   and  deliver
visually-rich,  reliable  content.  We license our  technology to major hardware
manufacturers,   software  developers,  and  service  providers,  and  we  offer
integrated  software  solutions to  businesses of all sizes.  We distribute  our
products  through  a  network  of  distributors  and  dealers,   VARs,   systems
integrators,  and OEMs;  direct to end users  through  Adobe call  centers;  and
through our own Web site at  www.adobe.com.  We have operations in the Americas;
Europe, Middle East, and Africa ("EMEA"); and Asia.

Revenue

<TABLE>
<CAPTION>
                                         2001       Change          2000       Change          1999
                                     ----------- -------------   ----------- -----------  -----------
<S>                                  <C>          <C>            <C>         <C>          <C>
Revenue...........................   $ 1,229.7       (3)%        $ 1,266.4       25%       $ 1,015.4

</TABLE>

     Revenue is categorized into four major operating segments:  Web Publishing,
Cross-media Publishing,  ePaper Solutions, and OEM PostScript and Other. The Web
Publishing,  Cross-media  Publishing,  and  ePaper  Solutions  segments  include
application  products  revenue that is derived  predominantly  from shipments of
application software programs marketed through retail, VAR, and OEM distribution
channels,  as well as direct to end users through Adobe call centers and our Web
site. The OEM PostScript and Other segment includes licensing revenue,  which is
made up of royalties  received from OEM  customers who ship products  containing
Adobe's PostScript technology.

     Beginning in the first quarter of fiscal year 2002,  we have  realigned our
business segments. A newly named Graphics segment will in the future replace the
former Web  Publishing  segment and will include  revenues  and direct  expenses
related to Adobe Illustrator.  The Adobe GoLive and Web Collection products will
be reported in the Cross-media  Publishing segment. The management's  discussion
and  analysis  that  follows is based on our old segment  reporting  that was in
effect  throughout fiscal 2001, 2000, and 1999. For more information on both our
old and  new  segment  reporting,  please  refer  to  Note  16 of our  Notes  to
Consolidated Financial Statements.

     Revenue  from our Web  Publishing  segment  is derived  primarily  from the
licensing of the following  application  products:  Photoshop,  Adobe  Premiere,
Photoshop Elements, Web Collection,  After Effects,  AlterCast,  GoLive, Digital
Video Collection, Adobe PhotoDeluxe,  Streamline,  Atmosphere, Adobe Dimensions,
Adobe Viewer,  and LiveMotion.  Cross-media  Publishing  revenue comes primarily
from the licensing of the following  application products:  Illustrator,  Design
Collection,  Adobe  Publishing  Collection,  PageMaker,  FrameMaker,  Adobe Type
products, InDesign, Adobe Acrobat InProduction,  Adobe Content Server, Adobe PDF
Transit, Adobe Studio,  eBooks, and PressReady.  The ePaper Solutions segment is
derived from the licensing of Adobe Acrobat  software and other Acrobat  related
technologies.


                                      F-21

<PAGE>

     During  fiscal  2001,  overall  revenue  decreased  3%,  or $36.7  million,
compared  to  fiscal  2000,   primarily  due  to  adverse  economic  conditions,
especially  in the US,  and a  decline  in  revenue  from  our  Web  Publishing,
Cross-media Publishing,  and OEM PostScript and Other segments. Revenue from our
Web Publishing  segment decreased 10%, or $54.1 million,  from $536.6 million in
fiscal 2000 to $482.5  million in fiscal 2001. The decrease in revenue from this
segment was primarily due to severe economic pressure on the creative publishing
professional  market,  which resulted in a decline in revenue from our Photoshop
product.  Also contributing to the decrease in revenue in this segment in fiscal
2001 compared to fiscal 2000 were the following factors:  decreased revenue from
our GoLive and Web  Collection  products,  due to declines in the web layout and
web animation  products market;  decreased revenue from our PhotoDeluxe  product
due to product  lifecycle  timing;  and  decreased  revenue from our  LiveMotion
product  due to  competitive  factors and product  lifecycle  timing.  Our After
Effects  product also  experienced a decline in revenue  despite its new version
release in the second  quarter of fiscal  2001.  The decrease in revenue in this
segment  was  partially  offset by an  increase  in revenue  from the  following
products:  Photoshop Elements, which was first released in April of fiscal 2001;
Digital Video  Collection,  due to the growth of the digital  video market;  and
Adobe Premiere,  due to the new version release of Adobe Premiere 6.0 in January
2001.

     Revenue from our  Cross-media  Publishing  segment  decreased 10%, or $40.0
million,  from $390.5  million in fiscal 2000 to $350.5  million in fiscal 2001.
The decrease was partially due to a decline in revenue from our  Illustrator and
Publishing  Collections  products  throughout  fiscal  year 2001 due to  product
lifecycle  timings,  which more than offset the  revenue  from their new version
releases in the fourth  quarter of fiscal  2001.  There were also  decreases  in
revenue from our  FrameMaker  and InDesign  products,  due to product  lifecycle
timing, and our Type product, due to decreased marketing activities.  Lastly, we
experienced a decline in revenue from our PageMaker product in the first half of
fiscal 2001,  which more than offset the revenue from the new version release of
PageMaker 7.0 in the third quarter of fiscal 2001.  The decrease in revenue from
this  segment was  partially  offset by an  increase  in revenue  from our Adobe
Design Collection product due to increased marketing and promotional  activities
throughout the year.

     Revenue from our OEM PostScript  and Other segment  decreased 20%, or $26.7
million,  from $131.5  million in fiscal 2000 to $104.8  million in fiscal 2001,
due to the following factors: continued weakness in the print business, customer
transition  from  paper-based  processes to electronic  workflows,  renegotiated
pricing with certain OEM customers,  and the outsourcing of certain OEM accounts
to a third party solution provider.

     The  decrease in revenue from the above  mentioned  segments in fiscal 2001
compared  to fiscal  2000 was  partially  offset by an increase of 40%, or $84.1
million, in our ePaper Solutions segment, as it increased from $207.8 million in
fiscal 2000 to $291.9  million in fiscal 2001, due to the release of Acrobat 5.0
in the second  quarter of fiscal 2001, as well as the  continuing  movement from
paper-based  processes  to  electronic  workflows  adopted  by  enterprises  and
government agencies.

     During fiscal 2000,  overall revenue increased 25% compared to fiscal 1999,
driven  primarily  by  increased  licensing  of products in our Web  Publishing,
ePaper  Solutions,  and  Cross-media  Publishing  segments.  Our Web  Publishing
segment  provided the majority of the revenue  growth in fiscal 2000, as it grew
36% from $394.1  million in fiscal 1999 to $536.6  million in fiscal  2000.  The
increase in revenue  from this segment was  primarily  driven by the strength of
our Photoshop 5.5 product during the first three quarters of fiscal 2000 and the
release of our Photoshop 6.0 product in the fourth quarter of fiscal 2000.  Also
contributing  to the growth in this  segment in fiscal  2000  compared to fiscal
1999  was the  increased  revenue  from  our Web and  Dynamic  Media  Collection
products,  which were first introduced in the fourth quarter of fiscal 1999, and
increased licensing of our LiveMotion,  Adobe Premiere,  After Effects,  GoLive,
and ActiveShare products.  The increase in revenue in this segment was partially
offset by a decline in revenue from our PageMill and PhotoDeluxe  products,  due
to product lifecycle timing and reduced pricing.

     Revenue from our ePaper Solutions segment increased 61% from $129.3 million
in  fiscal  1999  to  $207.8  million  in  fiscal  2000  due to  the  continuing
penetration of Acrobat and its related  technologies into major industry sectors
and various government agencies.

     Revenue from our Cross-media  Publishing  segment increased 10% from $353.9
million in fiscal  1999 to $390.5  million in fiscal  2000.  This $36.6  million
increase was  primarily due to the new release of  Illustrator  9.0 in the third
quarter of fiscal  2000.  This segment  also  benefited  from the new release of
FrameMaker  6.0 in the  second  quarter  of fiscal  2000,  as well as  increased
revenue  from  our  Adobe  Design  Collection,   Adobe  Type  Manager,   Acrobat
InProduction, and PressReady products. The increase in revenue from this segment
was  partially  offset  by a  decline  in  revenue  from  our  Adobe  Publishing
Collection  product,  primarily  due to the  introduction  of our new Adobe Web,
Dynamic Media, and Design Collection products,  and a decline in revenue in both
our  InDesign  product,  due to slower  adoption of this  product in fiscal 2000
compared to the adoption rate upon the initial release of this product in fiscal
1999, and our PageMaker products, due to product lifecycle timing.


                                      F-22

<PAGE>


     The  increase in revenue from the above  mentioned  segments in fiscal 2000
compared to fiscal 1999 was partially offset by a 5% decline in revenue from our
OEM PostScript and Other segment,  as it decreased from $138.2 million in fiscal
1999 to $131.5  million in fiscal 2000.  Revenue from this segment  decreased in
fiscal 2000  compared to fiscal 1999 due to lower royalty rates paid by our OEMs
and the ongoing  weakness in the monochrome  laser printer market as a result of
the following factors:  loss of royalty revenue from  Hewlett-Packard  Company's
("HP") desktop monochrome laser printer division, which has been incorporating a
clone version of Adobe  PostScript  software into its products since the fall of
1997; a decline in the average selling price of monochrome  laser printers;  and
an  increase  in the  use of  inkjet  printers,  resulting  in  weakness  in the
monochrome laser printer market.

     We categorize our geographic  results into three major market regions:  the
Americas,  EMEA,  and Asia. In fiscal 2001,  revenue  generated in the Americas,
EMEA, and Asia  represented  48%, 27%, and 25% of total  revenue,  respectively,
compared to 52%, 26%, and 22% of total revenue,  respectively  generated in both
fiscal 2000 and fiscal 1999.

     Overall,  revenue  from our  application  products on the Windows  platform
increased  9% in fiscal 2001  compared  to fiscal  2000,  and  revenue  from our
application  products on the Macintosh  platform decreased by 21% in fiscal 2001
over fiscal  2000.  In fiscal 2000  compared to fiscal  1999,  revenue  from our
application products on the Windows platform increased 39%, and revenue from our
application  products on the  Macintosh  platform  increased 15% during the same
period.  In fiscal 2001, the Windows and Macintosh  platforms  accounted for 70%
and   30%,   respectively,    of   application   products   revenue,   excluding
platform-independent  and UNIX products,  compared to 63% and 37%, respectively,
in fiscal 2000,  and 58% and 42%,  respectively,  in fiscal 1999.  We expect the
trend towards the Windows platform to continue in the foreseeable future.

Direct Costs
<TABLE>
<CAPTION>

                                                    2001         Change         2000        Change       1999
                                                --------------  ---------   -------------  ---------  -----------
<S>                                             <C>             <C>         <C>            <C>        <C>
Direct costs.................................   $    81.5         (7 )%      $  87.3         (8)%     $  94.5
Percentage of total revenue..................         6.6%                       6.9%                     9.3%

</TABLE>

     Direct costs include product packaging,  third-party royalties,  excess and
obsolete  inventory,  amortization  related to  localization  costs and acquired
technologies,   hosted  server  costs,   and  the  costs   associated  with  the
manufacturing of our products.

     Direct costs  decreased in absolute  dollars and as a percentage of revenue
in fiscal  2001  compared to fiscal  2000,  primarily  due to lower  third-party
royalties,  mainly associated with our PostScript and Type products revenue.  In
addition, direct costs also decreased in fiscal 2001 compared to fiscal 2000 due
to lower material costs. The decrease in direct costs in fiscal 2001 compared to
fiscal 2000 was partially  offset by an increase in hosted server costs,  due to
the launch of Adobe Studio in the fourth  quarter of fiscal  2001.  Direct costs
also decreased in absolute dollars and as a percentage of revenue in fiscal 2000
compared to fiscal 1999,  primarily due to lower localization and royalty costs,
as well as a  reduction  in  material  costs as a  result  of our  ongoing  cost
improvement program.

     For fiscal 2002, we anticipate that gross margin will be approximately  92%
of revenue after the proposed acquisition of Accelio Corporation (" Accelio").


                                      F-23

<PAGE>

Operating Expenses

Research and Development
<TABLE>
<CAPTION>
                                                       2001          Change         2000         Change        1999
                                                   --------------   ---------   --------------  ---------  -----------
<S>                                                <C>              <C>         <C>             <C>        <C>
Research and development........................     $   224.1         (7)%     $    240.2         22%     $   197.5
Percentage of total revenue.....................          18.2%                       19.0%                     19.4%

</TABLE>

     Research and development expenses consist principally of salary and benefit
expenses  for  software  developers,  contracted  development  efforts,  related
facilities  costs,  and expenses  associated  with  computer  equipment  used in
software development.

     Research and development expenses decreased $16.1 million, or 7%, in fiscal
2001 compared to fiscal 2000, primarily due to decreased incentive  compensation
expenses  and lower  company  bonuses.  In addition,  research  and  development
expenses also decreased due to lower  contractor and  professional  fees as less
development  work was performed  through outside  sources.  These decreases were
partially  offset by increased  salary and benefit expenses related to headcount
growth to support product development efforts.

     Research and  development  expenses  increased  $42.7  million,  or 22%, in
fiscal  2000  compared  to  fiscal  1999,  primarily  due  to  higher  incentive
compensation   expenses   associated  with  the  improvement  in  our  financial
performance  in fiscal  2000 over  fiscal  1999 and higher  salary  and  benefit
expenses as a result of headcount growth.

     We believe that  investments  in research and  development,  including  the
recruiting and hiring of software developers, are critical to remain competitive
in the marketplace and are directly related to continued  timely  development of
new and enhanced products. We will continue to focus on long-term  opportunities
available in the new Network Publishing economy and make significant investments
in the  development  of  our  application  software  products,  including  those
targeted for the growing digital imaging and digital video franchises. We expect
research  and  development  expenses to  increase in absolute  dollars in fiscal
2002.  As  communicated  on December 13,  2001,  we are  targeting  research and
development  expenses  in the  first  quarter  of  fiscal  2002 to be  20-21% of
revenue.  For fiscal year 2002, we are targeting  such  expenditures  also to be
20-21% of revenue.

Sales and Marketing
<TABLE>
<CAPTION>
                                                        2001         Change         2000         Change        1999
                                                    --------------  ---------   --------------  ---------  ------------
<S>                                                 <C>             <C>         <C>             <C>        <C>
Sales and marketing..............................   $   403.7         0.6%      $   401.2          22%     $   328.5
Percentage of total revenue......................        32.8%                       31.7%                      32.3%

</TABLE>

     Sales and marketing expenses include salary and benefit expenses,  bonuses,
sales commissions,  travel expenses, and related facilities costs for our sales,
marketing,  customer support,  and distribution  personnel.  Sales and marketing
expenses also include the costs of programs aimed at increasing revenue, such as
advertising,  trade  shows,  public  relations,  and  other  market  development
programs.

     Sales and marketing  expenses  increased  $2.5 million,  or 0.6%, in fiscal
2001 compared to fiscal 2000, as a result of higher salary and benefit  expenses
related  to  headcount  growth and  increased  investments  in  product-specific
marketing  activities.  These  increases  were offset by a decrease in incentive
compensation expenses and company bonuses.

     Sales and marketing  expenses  increased  $72.7 million,  or 22%, in fiscal
2000  compared  to  fiscal  1999 as a result of  higher  incentive  compensation
expenses and higher  outsourced  technical support and order management fees. In
addition,  sales and  marketing  expenses  increased in fiscal 2000  compared to
fiscal 1999 due to our focus on general corporate brand advertising,  as well as
higher marketing,  public relations,  and trade show activities  associated with
new product releases.

     We expect sales and marketing  expenses to increase in absolute  dollars in
fiscal 2002 to support  investments in certain areas including  digital imaging,
digital video,  and  ePaper-based  businesses.  As  communicated on December 13,
2001,  for the first  quarter of fiscal 2002,  our sales and  marketing  expense
target  is  approximately  34-35% of  revenue.  For  fiscal  year  2002,  we are
targeting such expenditures also to be approximately 34-35% of revenue.

General and Administrative
<TABLE>
<CAPTION>

                                                    2001         Change            2000         Change          1999
                                                ------------- -------------   ---------------- ---------   ---------------
<S>                                             <C>           <C>             <C>              <C>         <C>
General and administrative..................... $   115.6        (0.8)%       $    116.5          12%      $   103.6
Percentage of total revenue....................       9.4%                           9.2%                       10.2%

</TABLE>


                                      F-24

<PAGE>

     General  and  administrative  expenses  consist  principally  of salary and
benefit expenses, travel expenses, and related facilities costs for the finance,
human resources,  legal, information services, and executive personnel of Adobe.
General and  administrative  expenses also include  outside legal and accounting
fees,  provision for bad debts, and expenses  associated with computer equipment
and software used in the administration of the business.

     General and  administrative  expenses  decreased $0.9 million,  or 0.8%, in
fiscal 2001  compared to fiscal 2000,  due to decreased  incentive  compensation
expenses and lower bad debt  expense.  The decrease was  partially  offset by an
increase in salary and benefit expenses as a result of increased headcount.

     General and  administrative  expenses  increased $13.0 million,  or 12%, in
fiscal 2000 compared to fiscal 1999,  primarily due to higher salary and benefit
expenses as a result of  increased  headcount,  and higher bad debt  expense and
legal fees. The increase was partially offset by decreases in professional  fees
and depreciation expense.

     We expect  that  general  and  administrative  spending  will  increase  in
absolute  dollars in fiscal 2002. As  communicated on December 13, 2001, for the
first quarter of fiscal 2002, our general and  administrative  expense target is
approximately  10-11% of revenue.  For fiscal year 2002, we are  targeting  such
expenditures to be approximately 9-10% of revenue.

Restructuring and Other Charges
<TABLE>
<CAPTION>

                                                     2001          Change           2000        Change         1999
                                                ---------------  -----------   --------------- ----------  --------------
<S>                                             <C>              <C>           <C>             <C>         <C>
Restructuring and other charges................ $    12.1            114%      $    5.6            (76)%   $   23.0
Percentage of total revenue....................       1.0%                          0.4%                        2.3%

</TABLE>

     In the fourth quarter of fiscal 2001, we implemented a  restructuring  plan
to  realign  our  workforce  to our  future  strategic  goals  and to align  our
resources  with  our  fiscal  year  2002  revenue   targets.   We  believe  this
restructuring  will enable us to increase  our  investment  in digital  imaging,
digital  video,  and  ePaper-based  businesses  in fiscal  2002.  As part of the
restructuring  program,  we  implemented a reduction in force of 247  positions,
affecting   organizations   throughout   the  company.   The   reductions   came
predominantly from sales and marketing and in our North American operations, and
as of November 30, 2001, the majority of these terminations were completed.  The
total  restructuring and other charges was $12.1 million,  which was all related
to severance and related charges  associated with the reduction in force. Of the
$12.1 million in charges,  $9.6 million  remained  accrued at November 30, 2001.
The majority of these  severance  payments will be paid in early 2002.  For more
information, see Note 7 of our Notes to Consolidated Financial Statements.

     In fiscal 2000,  restructuring  and other charges consisted of $6.3 million
of other  charges  relating to the  disposal of certain  equipment  and one-time
litigation related expenses,  and a credit of $0.7 million related to the fiscal
1999 and fiscal 1998 restructuring programs.

     The $0.7 million  credit was recorded in the first  quarter of fiscal 2000,
as we revised our estimates of the total costs  associated  with the fiscal 1999
and 1998  restructuring  programs.  The credit  primarily  reflected  lower than
estimated  severance  and  related  charges   attributable  to  employees  whose
positions were eliminated as a result of the restructurings but who were able to
find alternative  employment within Adobe. The remaining credit was due to lower
than  expected  charges  related to vacating  leased  facilities.  (For detailed
information, see Note 7 of our Notes to Consolidated Financial Statements).

     During fiscal 1999 we  implemented  two different  restructuring  programs.
These  separate  restructuring  programs were directly  focused on improving our
competitive position as well as enhancing Adobe's allocation of resources.

     The two fiscal 1999  restructuring  programs  resulted in total  charges of
approximately  $19.7  million,  which  included  severance  and related  charges
associated  with  the  reduction  in  force  and  charges  for  vacating  leased
facilities.  During  fiscal  1999,  we revised  our  estimate of the total costs
associated  with  the  restructuring   programs  implemented  during  the  year,
resulting in an adjustment to the  restructuring  accrual of approximately  $3.2
million.  The adjustment  was due to lower than estimated  severance and related
charges attributable to employees whose positions were eliminated as a result of
the  restructurings  but who were  able to find  alternative  employment  within
Adobe, and lower than expected charges related to vacating leased facilities. In
addition,  we recorded  adjustments  during  fiscal  1999  related to prior year
restructuring  programs  in  the  amount  of  $1.9  million.  The  $1.9  million
adjustment  was  primarily  due to  both  our  success  in  terminating  a lease
agreement  earlier than the contract term  specified and the expiration of other
lease termination costs for two facilities.

     Other charges recorded in fiscal 1999 of $8.4 million included $2.0 million
associated with the  cancellation of a contract and $2.2 million for accelerated
depreciation related to the adjustment of the useful life of certain assets as a
result of decisions  made by  management as part of the  restructuring  program.
Additionally,  we incurred a  nonrecurring  compensation  charge  totaling  $2.6
million for a terminated  employee and incurred  consulting fees of $1.6 million
to assist in the restructuring of our operations.


                                      F-25

<PAGE>

     As of November 30, 2001 no obligations  existed  related to the fiscal 1999
and 1998 restructuring programs.


Acquired In-Process Research and Development
<TABLE>
<CAPTION>

                                                          2001          Change         2000         Change        1999
                                                      --------------   ---------   --------------  ----------   ---------
<S>                                                   <C>              <C>         <C>             <C>          <C>
Acquired in-process research and development.......   $     -            (100)%    $    0.5           (87)%     $  3.6
Percentage of total revenue........................         -%                           -%                        0.4%

</TABLE>

     In fiscal 2000,  we recorded $0.5 million of acquired  in-process  research
and development related to our acquisition of Glassbook, Inc. ("Glassbook"). The
acquisition  was  accounted  for under the  purchase  method  of  accounting  in
accordance with Accounting  Principles Board Opinion No. 16 ("APB 16"). Based on
an independent  appraiser's  valuation,  $0.5 million of the total $28.0 million
purchase price was allocated to in-process  research and  development due to the
state of the  development  and the  uncertainty of the  technology.  The ongoing
project at Glassbook at the time of the purchase included the development of the
Glassbook  Reader and the Glassbook  Content  Server  products.  We released new
products that  contained the  purchased  technology in April 2001,  with Acrobat
eBook Reader 2.1 and Adobe Content Server 2.0.

     Acquired in-process research and development of $3.6 million in fiscal 1999
included  $3.0  million and $0.6 million  associated  with the  acquisitions  of
Attitude  Software,   LLC  ("Attitude   Software")  and  Photomerge   Technology
("Photomerge"),  respectively.  The  following  is a  summary  of  the  projects
acquired in the  acquisitions  and the assumptions used in determining the value
of the in-process research and development costs.

     During the fourth quarter of fiscal 1999, we acquired  substantially all of
the assets,  consisting of  intellectual  property,  of Attitude  Software.  The
acquisition  was  accounted  for using the  purchase  method  of  accounting  in
accordance  with APB 16, and  substantially  all of the  purchase  price of $3.0
million cash was allocated to in-process  research and  development and expensed
at the time of acquisition. The ongoing project at Attitude Software at the time
of the purchase included the development of the 3D Anarchy authoring product. We
purchased this technology to incorporate it into future versions of our existing
Adobe products to further enhance the feature sets and user interface  contained
within the products.  We are incorporating the purchased  technology into one of
our products,  which has not yet been released. At the date we acquired Attitude
Software, it was estimated that 50% of the development effort had been completed
and that the remaining 50% of the development effort would take approximately 18
months to complete and would cost $1.8 million. The efforts required to complete
the development of the technology primarily related to additional design efforts
to integrate the technology  into several of Adobe's  products,  finalization of
coding,  and  completion  testing.  The value of the  in-process  technology was
determined  by  estimating  the projected net cash flows related to products the
technology would be integrated into, including costs to complete the development
of the  technology  and the  future  net  revenues  that may be earned  from the
products,  excluding the value  attributed to the existing  technology  with the
products prior to the integration of the purchased technology.  These cash flows
were  discounted  back to their net present  value using a discount rate of 20%,
exclusive of the value attributable to the use of the in-process technologies in
future products.

     Additionally,  during  the  fourth  quarter  of fiscal  1999,  we  acquired
substantially  all  of the  assets,  consisting  of  intellectual  property,  of
Photomerge.  In  connection  with the  acquisition  of  Photomerge,  100% of the
purchase price,  or $0.6 million cash, was allocated to in-process  research and
development  due to the early stage of  development  and the  uncertainty of the
technology.  This  purchased  technology  was  incorporated  into our  Photoshop
Elements product, which we released in April 2001.

Amortization of Goodwill and Purchased Intangibles
<TABLE>
<CAPTION>

                                                        2001         Change         2000         Change       1999
                                                    --------------  ---------   --------------  ---------  -----------
<S>                                                 <C>             <C>         <C>             <C>        <C>
Amortization of goodwill and purchased
 intangibles.....................................   $   14.3           104%     $    7.0            45%    $  4.8
Percentage of total revenue......................        1.2%                        0.6%                     0.5%

</TABLE>

     Amortization of goodwill and purchased  intangibles increased $7.3 million,
or  104%,  in  fiscal  2001  compared  to  fiscal  2000,  due to a full  year of
amortization of Glassbook goodwill and purchased intangibles.

     Amortization of goodwill and purchased  intangibles in fiscal 2000 and 1999
primarily  related  to the  acquisition  of  substantially  all of the assets of
GoLive Systems,  Inc. and a related  partnership  (together "GoLive Systems") in
December 1998.  Amortization of goodwill and purchased intangibles was higher in
fiscal 2000 compared to fiscal 1999 primarily due to the additional amortization
related  to the  acquisition  of  Glassbook  in  September  2000.  (For  further
information, see Note 2 of our Notes to Consolidated Financial Statements.)

                                      F-26

<PAGE>

Nonoperating Income (Loss)

     Investment Gain (Loss)
<TABLE>
<CAPTION>

                                                     2001          Change           2000         Change        1999
                                                 --------------   ----------    --------------  ---------  --------------
<S>                                              <C>              <C>           <C>             <C>        <C>
Investment gain (loss).......................... $   (93.4)          (751)%     $   14.3           (84)%   $   88.9
Percentage of total revenue.....................      (7.6)%                         1.1%                       8.8%

</TABLE>

     Investment  gain (loss)  consists  principally  of realized gains or losses
from the sale of marketable equity investments, other-than-temporary declines in
the value of marketable equity securities, and equity method gains and losses of
Adobe Ventures.

     During fiscal 2001,  investment  losses  consisted of  other-than-temporary
writedowns  related to our short-term  investments in Tumbleweed  Communications
Corp.  ("Tumbleweed"),  Salon.com,  Engage, Inc., Liquent,  Inc. (formerly ESPS,
Inc.), Avantgo,  Inc., Viewpoint Corp., and Virage, Inc. of $53.1 million. These
losses were  partially  offset by gains from the sale of our  marketable  equity
securities  totaling  $20.1  million,  of which $0.6  million of  premiums  were
recorded in interest and other income.  We also recorded net  investment  losses
related  to  investments  in  Adobe  Ventures  and our cost  method  investments
totaling  $59.8 million.  As of November 30, 2001,  our  short-term  investments
included  marketable  equity  securities  of  $37.8  million  and our  long-term
investments  included  investments  in Adobe  Ventures  and  other  cost  method
investments of $31.7 million.  These  securities are inherently risky and we may
experience further deterioration in fair value in the future.

     During fiscal 2000, we recorded  investment  gains related to the sale of a
portion of our investment in Tumbleweed  Communications Corp. ("Tumbleweed") and
Digimarc   Corporation  for  $10.4  million  and  $2.2  million,   respectively.
Additionally,  we  recorded  investment  gains  related  to  the  mark-to-market
valuation  adjustment  for AvantGo,  Inc.  totaling  $13.0 million and other net
gains related to various other Adobe Ventures  investments  activities  totaling
approximately  $15.0 million.  These gains were  partially  offset by investment
losses related to the writedown of our investments in Engage,  Inc.;  Classmates
Online, Inc. (formerly eCircles,  Inc.);  Salon.com;  and Impresse  Corporation,
totaling approximately $26.3 million.

     In fiscal 1999, we recorded a realized gain of $58.4 million related to the
sale of our  investment in Vignette  Corporation.  We also  recorded  investment
gains from mark-to-market adjustments totaling $17.8 million, $10.4 million, and
$7.0 million  related to  investments  in ESPS,  Inc.;  DigitalThink,  Inc.; and
Tumbleweed,  respectively.  These gains were  partially  offset by an investment
loss of $5.2 million  related to the  acquisition  of PointCast,  Inc., a former
investee of Adobe, by idealab!'s Launchpad Technologies,  Inc. ("idealab!").  In
connection with the acquisition,  we exchanged our shares of PointCast, Inc. for
approximately  542,000  shares of  idealab!  (which has since  become  InfoGate,
Inc.).  Additionally,  we recorded a net gain totaling  $0.5 million  related to
mark-to-market adjustments of various other Adobe Ventures investments.

     We are uncertain of future investment gains or losses as they are primarily
dependent upon the operations of the  underlying  investee  companies and market
valuations.

     Interest and Other Income
<TABLE>
<CAPTION>

                                                        2001         Change         2000         Change       1999
                                                    --------------  ----------  --------------  ---------  -----------
<S>                                                 <C>             <C>         <C>             <C>        <C>
Interest and other income........................   $   21.9            3%      $   21.3            (17)%  $   25.7
Percentage of total revenue......................        1.8%                        1.7%                       2.5%

</TABLE>

     Interest and other income consists  principally of interest earned on cash,
cash  equivalents,  and  short-term  investments,  as well as  foreign  exchange
transaction  gains and losses and  realized  gains or losses on the  disposal of
assets.

     Interest and other income  increased  $0.6  million,  or 3%, in fiscal 2001
compared to fiscal 2000 primarily due to realized gains  resulting from the sale
of fixed income investments.  Interest and other income also increased in fiscal
2001 compared to fiscal 2000 due to higher average cash  balances.  The increase
in  interest  and other  income  in  fiscal  2001  compared  to fiscal  2000 was
partially  offset by foreign  currency  losses.  These foreign  currency  losses
resulted from the implementation of Statement of Financial  Accounting Standards
No. 133  ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and  Hedging
Activities"  and subsequent  recording of the cost of hedging  foreign  currency
exposures in interest and other income.

     Interest and other income  decreased  $4.4 million,  or 17%, in fiscal 2000
compared to fiscal 1999 as a result of more investments being made in tax-exempt
securities, resulting in lower interest income on a comparative pretax basis. In
fiscal 2000, we also recorded  foreign exchange  transaction  losses compared to
foreign exchange transaction gains in fiscal 1999. In


                                      F-27

<PAGE>

addition,  other income was lower in fiscal 2000, as fiscal 1999 included a $5.7
million gain related to the sale of a corporate facility in Edinburgh, Scotland,
in connection with the restructuring  program announced in the second quarter of
fiscal 1999.

     We expect interest and other income to decrease  slightly to  approximately
$3.0-$4.0  million  per  quarter  in fiscal  2002 due to a lower  interest  rate
environment. We also believe that any increases in interest income may be offset
by the cost of  foreign  currency  purchased  options  as well as  market  price
volatility under our  implementation of SFAS 133.  Further,  we believe that our
cash balances could also be reduced in fiscal 2002 due to the strategic purchase
of  companies,  products,  or  technologies  and our  ongoing  stock  repurchase
programs.

Income Tax Provision
<TABLE>
<CAPTION>

                                                           2001         Change         2000         Change       1999
                                                        -----------    ---------   -------------   ----------  ----------
<S>                                                     <C>            <C>         <C>             <C>         <C>
Income tax provision.................................   $  101.3         (35)%     $   155.9           14%     $ 136.7
Percentage of total revenue..........................        8.2%                       12.3%                     13.5%
Effective tax rate...................................       33.0%                       35.1%                     36.5%

</TABLE>

     Our effective  tax rate  decreased in fiscal 2001 from fiscal 2000 and from
fiscal  1999  to  fiscal  2000,  due  to  tax  benefits   associated   with  the
restructuring of our international operations.

     As  communicated  on December 13, 2001,  we have targeted our effective tax
rate to decrease in fiscal 2002 to approximately 32%.

Factors That May Affect Future Results of Operations

We believe  that in the future our  results of  operations  could be affected by
various factors, including:

     o    adverse changes in general economic conditions in any of the countries
          in which we do business,  including the recent slow-down affecting the
          U.S.,  Europe,   Japan,  and  potentially  other  geographic  areas

     o    continuing  adverse  economic impact of the recent national tragedy on
          September 11, 2001

     o    delays in  shipment  of our new  products  and major new  versions  of
          existing products

     o    corporate  reductions  in marketing  expenditures  which may result in
          lower demand for professional content creation and layout products

     o    lack of market acceptance of new products and upgrades

     o    introduction of new products by major competitors

     o    weakness in demand for application software and printers

     o    lack of growth in worldwide  personal  computer and printer  sales and
          downward sales price adjustments

     o    renegotiation of royalty arrangements

     o    consolidation in the OEM printer business

     o    ongoing weakness in our printing business due to product transitions

     o    industry transitions to new business and information delivery models

     o    market risks  associated  with our equity  investments  (as  discussed
          later under  "Quantitative  and Qualitative  Disclosures  about Market
          Risk")

     On December 13, 2001,  we stated that we are  targeting our revenue for the
first quarter of fiscal 2002 to be in the range of $265 to $280 million. On that
day, we also stated the following  operating model targets for the first quarter
of fiscal 2002:  gross margin of 92-93%,  pro forma  operating  profit margin of
25-28%,  research  and  development  expenses  of 20-21% of  revenue,  sales and
marketing expenses of 34-35% of revenue, and general and administrative expenses
of 10-11% of revenue. We further stated on December 13, 2001, that we expect our
share count to be between 245 to 246 million shares,  which collectively results
in a pro forma  earnings per share target range of $0.20 to $0.22,  in the first
quarter of fiscal  2002.  On January 31,  2002,  we  reiterated  our revenue and
earnings per share  targets for the first quarter of fiscal 2002 of $265 to $280
million and $0.20 to $0.22,  respectively.  The  reaffirmation  of these targets
assumes that the third month of the quarter will be a typical  seasonally strong
February.


                                      F-28

<PAGE>

     Also on December 13, 2001, we reiterated  our annual revenue target of $1.3
billion,  gross margin target of 93%, and our pre-tax pro forma operating profit
margin  target of 28% for fiscal  year 2002 and a pro forma  earnings  per share
target of  approximately  $1.03.  Additionally,  we have stated,  the  following
operating model targets for fiscal 2002:  research and  development  expenses of
20-21% of  revenue,  sales and  marketing  expenses  of 34-35% of  revenue,  and
general  and  administrative  expenses  of 9-10% of  revenue.  We have stated an
effective  tax rate  target of 32%. We have also  previously  stated that we are
targeting other income to be approximately $4.0 million per quarter.  Due to the
current interest rate environment,  however, we have stated a revised target for
interest  and other  income of  approximately  $3.0-$4.0  million per quarter in
fiscal 2002.

     On February 1, 2002, we announced a proposed  agreement to acquire  Accelio
Corporation.  Based on an anticipated close date of March 2002, we are targeting
incremental   revenue   associated  with  this   acquisition  of   approximately
$30.0-$35.0  million.  In addition,  with the  acquisition  of Accelio,  we have
lowered our gross  margin  target from 93% to 92%,  and our pro forma  operating
profit  margin  target  from  28% to 27%.  Furthermore,  we  indicated  that the
acquisition would be dilutive to pro forma earnings per share of $0.02 per share
in fiscal year 2002.  The proposed  acquisition  is subject to the  execution of
customary  transaction  documents  and the  satisfaction  of  customary  closing
conditions,  including the approval of Accelio's  shareholders  and clearance of
the acquisition by U.S. and Canadian regulatory authorities. If these conditions
are  not  satisfied,  we  may  not  complete  the  acquisition.   Initially  the
transaction  was  expected  to close  in March  2002.  However,  due to  certain
regulatory and timing requirements, we are now targeting to close in April 2002.

     In connection with this proposed  acquisition,  we may not be successful in
integrating  Accelio or  developing  products  based on Accelio's  technology or
expertise.  We also  may  not be  successful  in  integrating  its  distribution
channels with ours. Additionally, we may face unanticipated expenses relating to
the integration of Accelio  personnel and its products,  distribution  channels,
and administrative functions.

     We use these targets to assist us in making  decisions about our allocation
of resources and investments,  not as predictions of future results. The targets
reflect a number of assumptions, including assumptions about:

     o    product pricing and demand

     o    manufacturing costs and volumes

     o    the mix of  application  products  and  licensing  revenue,  full  and
          upgrade products, distribution channels, and geographic distribution

     o    headcount increases

     These and many other factors  described in this report affect our financial
performance and may cause our future results,  including results for the current
quarter,  to vary  materially  from these  targets.  In  particular,  the recent
slow-down in some geographic areas,  primarily in the U.S.,  Europe,  and Japan,
has affected all of our product segments and may adversely affect our ability to
achieve our revenue targets. We attribute this slow-down, which is affecting all
of our  product  segments,  to  weakening  economic  conditions.  These  adverse
economic conditions in the U.S., Europe, Japan, and potentially other geographic
markets  may  continue  in the short term,  and they may  continue to  adversely
affect our revenue and earnings.  Although there were also adverse conditions in
other countries,  the countries affected represent a much smaller portion of our
revenue and thus have less impact on our operational  results.  Furthermore,  if
the economic  slow-down worsens or spreads to other geographic areas where we do
business,  it would likely cause our future results,  including  results for the
first quarter of fiscal 2002, to vary materially from our targets.

     We plan to  recruit  key  talent  for our  future  growth.  These  plans to
continue  to invest  in  certain  areas  will  require  us to  continue  to hire
additional employees.  Competition for high-quality personnel, especially highly
skilled engineers,  is extremely intense. Our ability to effectively manage this
growth will  require us to continue to improve  our  operational  and  financial
controls and information management systems, and to attract,  retain,  motivate,
and manage  employees  effectively;  otherwise  our business  could be seriously
harmed.

     Our ability to develop and market products,  including  upgrades of current
products that  successfully  adapt to changing  customer needs, may also have an
impact on our results of operations. Our ability to extend our core technologies
into new  applications  and to  anticipate or respond to  technological  changes
could  affect our  ability to develop  these  products.  A portion of our future
revenue  will come from  these new  applications.  Delays in  product or upgrade
introductions could cause a decline in our revenue, earnings, or stock price. We
cannot  determine  the ultimate  effect that these new products or upgrades will
have on our revenue or results of operations.

     We hold  equity  investments  that have  recently  experienced  significant
declines in market  value.  We also have  investments,  and may continue to make
future investments, in several privately held companies, many of which can still


                                      F-29

<PAGE>

be considered  in the start-up or  development  stages.  These  investments  are
inherently risky, as the market for the technologies or products they have under
development  is  typically in the early  stages and may never  materialize.  Our
investment  activities  can impact our net income.  For fiscal 2001, we recorded
pre-tax losses from  marketable  securities  and other  investments in privately
held  companies of $93.4  million,  compared to pre-tax  gains in fiscal 2000 of
$14.3 million.  These amounts reflect  realized gains or losses from the sale of
marketable  equity  investments,  other-than-temporary  declines in the value of
marketable  equity  securities,  and  equity  method  gains and  losses of Adobe
Ventures.  In fiscal 2001,  decreases in the market  prices of these  securities
resulted in a  significant  reduction  in our pre-tax  income,  and future price
fluctuations in these securities and any significant long-term declines in value
could  reduce  our net  income in future  periods.  We are  uncertain  of future
investment gains and losses, as they are primarily dependent upon the operations
of the underlying investee companies.

     The market  for our  graphics  and ePaper  applications  is  intensely  and
increasingly  competitive and is significantly affected by product introductions
and market  activities  of industry  competitors.  Additionally,  Microsoft  has
increased its presence in the low-end consumer digital  imaging/graphics  market
and the electronic document sharing markets. We believe that, due to Microsoft's
market  dominance,  any new  Microsoft  products in these markets will be highly
competitive  with our  products.  If competing new products  achieve  widespread
acceptance, our operating results would suffer.

     In addition, we continue to expand into third-party  distribution channels,
including  VARs and systems  integrators,  in our effort to further  broaden our
customer base. As a result,  the financial health of these third parties and our
continuing  relationships  with them are becoming more important to our success.
Some of these  companies are thinly  capitalized  and may be unable to withstand
changes in business  conditions.  Our business could be seriously  harmed if the
financial condition of some of these third parties  substantially  weakens or if
our relationships with them deteriorate. Also, as we seek to further broaden our
customer base in the enterprise, corporate business and consumer markets, we may
not successfully adapt our application  software  distribution  channels,  which
could  cause our  operating  results to suffer.  As we  currently  have  limited
experience  in these  markets,  we believe we will need to recruit,  train,  and
retain personnel with experience in these markets,  and our failure to do so may
harm our ability to penetrate these markets.  We could  experience  decreases in
average selling prices and some  transitions in our  distribution  channels that
could seriously harm our business.

     In some markets and for some products, we have adopted a strategy aiming to
increase our market share and therefore may receive  significantly  less revenue
from  certain  licensing  arrangements  than  we  otherwise  would  receive  for
licensing these products.  Therefore,  increased market  penetration may in fact
lead to  lower  revenue  growth  in these  areas.  While we  believe  that  this
potential market share increase will ultimately  benefit us, this strategy could
instead harm our business through reduced revenue growth.

     We generally offer our  application-based  products on Macintosh,  Windows,
and UNIX  platforms,  and we generally  offer our  server-based  products on the
Linux platform as well as these three  platforms.  To the extent that there is a
slow-down of customer  purchases of personal  computers on either the Windows or
Macintosh platform or in general, our business could be harmed.

     We distribute our  application  products  primarily  through  distributors,
resellers,  and  retailers  (collectively  referred  to  as  "distributors").  A
significant  amount  of  our  revenue  for  application  products  is  from  two
distributors.  One of these distributors  recently  restructured its operations,
reducing the number of facilities it operates,  including  those  handling Adobe
products, which may harm our operating results. In addition, we have revised our
channel program to reduce the overall number of our  distributors  worldwide and
focus our channel efforts on larger  distributors.  This revision of the channel
program has  resulted in an increase in our  dependence  on a smaller  number of
distributors selling through a larger amount of our products.  Additionally, one
of our goals is to increase our direct distribution of our products to end users
through  our online  store  located on our Web site at  www.adobe.com.  Any such
increase in our direct  revenue  efforts will place us in increased  competition
with our  channel  distributors  and with  newer  types of  distribution  of our
products  by  online,   Internet-based  resellers  of  our  products.  While  we
anticipate that the restructuring  and streamlining of our product  distribution
channels  and the  increase  in the  scope  of our  direct  sales  efforts  will
eventually  improve our  business by  decreasing  discounts  or rebate  programs
provided to distributors,  decreasing product returns,  and shortening inventory
cycles, these changes could instead seriously harm our business.

     We currently  rely on five turnkey  assemblers of our products,  located in
each major region we serve. If any turnkey assembler terminates its relationship
with us, or if our supply from any turnkey is  interrupted or terminated for any
other  reason,  we may not have  enough time or be able to replace the supply of
products  manufactured  by that turnkey  assembler to avoid  serious harm to our
business.

     Revenue from our OEM PostScript and Other segment experienced a 20% decline
in fiscal 2001  compared to fiscal  2000,  primarily as a result of a decline in
the print business. We expect this segment to continue to decline in fiscal 2002

                                      F-30

<PAGE>

relative to fiscal  2001,  which may harm our  business if the  magnitude of the
decline significantly  exceeds our expectations.  The continuing weakness in the
economy is  contributing  to the  decrease in revenue for the  monochrome  laser
printers  market  in  addition  to the  decline  in  average  selling  prices of
monochrome  laser  printers  and  the  increasing  use of  inkjet  printers.  In
addition,   customer   transition  from  paper-based   processes  to  electronic
workflows,  renegotiated pricing with certain OEM customers, and the outsourcing
of certain OEM accounts to a third party  solution  provider  contributed to the
decline in revenue in this segment.  If another  major  customer also decided to
incorporate a clone version  instead of Adobe  PostScript  technology,  it could
seriously  harm  our  business.  Further,  OEM  partners  on  occasion  seek  to
renegotiate  their  royalty  arrangements.  We  evaluate  these  requests  on  a
case-by-case  basis.  If an agreement  is not reached,  a customer may decide to
pursue other options, which could result in lower licensing revenue for us.

     The  Internet  market  is  rapidly  evolving  and  is  characterized  by an
increasing number of market entrants that have introduced or developed  products
addressing  authoring and communication over the Internet.  As is typical in the
case of a new and evolving  industry,  demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty. The
software industry  addressing  authoring and communications over the Internet is
still  developing.  Standards  defining  Web  graphics  have not yet been  fully
adopted.  In  addition,  new models  for  licensing  software  will be needed to
accommodate  new  information  delivery  practices.  Moreover,  critical  issues
concerning the commercial use of the Internet (including security,  reliability,
ease of use and access,  cost, and quality of service) remain unresolved and may
affect the growth of Internet  use,  together  with the software  standards  and
electronic media employed in such markets.

     We intend to increase our investment in e-business  and enhanced  marketing
activities  in an  effort to  achieve  revenue  growth,  but we can  provide  no
assurance that increased  investment in this new market will result in increased
revenue.

     We derive a significant  portion of our revenue and  operating  income from
our customers  located in Europe,  Japan,  Asia Pacific,  and Latin America.  We
generally  experience  lower  revenue from our European  operations in the third
quarter because many customers reduce their purchasing  activities in the summer
months.  Additionally,  we are uncertain whether the recent weakness experienced
in  Europe,  Asia  Pacific  and  Latin  America  markets  will  continue  in the
foreseeable  future due to possible currency  devaluation and liquidity problems
in these regions.  While most of the revenue of our European subsidiaries had in
the past been denominated in U.S. dollars, we now denominate revenue in euros in
certain  European  countries.  In addition,  the majority of our revenue derived
from Japan is  denominated  in yen,  and the  majority of all our  subsidiaries'
operating  expenses are denominated in their local currencies.  As a result, our
operating  results  are subject to  fluctuations  in foreign  currency  exchange
rates.  To  date,  the  financial  impact  of such  fluctuations  has  not  been
significant.  Our hedging policy attempts to mitigate some of these risks, based
on our best judgment of the appropriate trade-offs among risk, opportunity,  and
expense.  We have established a hedging program to hedge our exposure to foreign
currency exchange rate fluctuations, primarily of the Japanese yen and the euro.
We regularly review our hedging program and will make  adjustments  based on our
best judgment.  Our hedging activities may not offset more than a portion of the
adverse financial impact resulting from unfavorable movement in foreign currency
exchange rates.

     In connection with the enforcement of our own intellectual  property rights
or in connection with disputes relating to the validity or alleged  infringement
of third-party  rights,  we have been,  are currently,  and may in the future be
subject to complex,  protracted  litigation  as part of our policy to vigorously
defend our intellectual  property rights.  Intellectual  property  litigation is
typically  very  costly and can be  disruptive  to our  business  operations  by
diverting the attention and energies of management and key technical  personnel.
Although we have successfully  defended or resolved past litigation,  we may not
prevail  in  any  ongoing  or  future  litigation.  Adverse  decisions  in  such
litigation could have negative results,  including  subjecting us to significant
liabilities,  requiring  us to seek  licenses  from others,  preventing  us from
manufacturing  or  licensing   certain  of  our  products,   or  causing  severe
disruptions  to our  operations  or the markets in which we compete,  any one of
which could seriously harm our business.

     We  prepare  our  financial   statements  in  conformity   with  accounting
principles generally accepted in the United States of America.  These principles
are subject to  interpretation  by the American  Institute  of Certified  Public
Accountants (the "AICPA"),  the Securities and Exchange  Commission (the "SEC"),
and  various  bodies  formed to  interpret  and  create  appropriate  accounting
policies.  A change  in these  policies  can have a  significant  effect  on our
reported  results and may even affect the  reporting of  transactions  completed
before a change is announced.  Our  accounting  policies that may be affected by
changes in the accounting rules are as follows:

     o    rules relating to software revenue recognition

     o    accounting for business combinations

     o    the valuation of in-process research and development

     o    employee stock purchase plans


                                      F-31

<PAGE>

     o    stock option grants

     o    goodwill and other intangible assets accounting

     Changes to these rules or the  questioning of current  practices may have a
significant  adverse effect on our reported  financial  results or in the way in
which we conduct our business.  See the discussion  under  "Critical  Accounting
Policies"  below  for  additional  information  about  our  critical  accounting
policies and some risks associated with these policies.

     New FASB  guidelines  relating to  accounting  for goodwill  could make our
acquisition-related  charges less predictable in any given reporting  period. On
July 2001, the FASB issued Statement of Financial  Accounting  Standards No. 142
("SFAS 142"),  "Goodwill  and Other  Intangible  Assets" that  establishes a new
standard for accounting for goodwill  acquired in a business  combination.  This
Statement requires that goodwill and other intangibles with an indefinite useful
life not be amortized,  but be tested for impairment at least annually. It would
continue  to require  recognition  of  goodwill as an asset but would not permit
amortization  of  goodwill  as  previously  required  by  APB  Opinion  No.  17,
"Intangible  Assets."  Under SFAS 142,  goodwill will be  separately  tested for
impairment using a fair-value-based  approach.  Any required goodwill impairment
charges will be presented as a separate line item within the  operating  section
of  the  income  statement.  The  shift  from  an  amortization  approach  to an
impairment  approach  would  apply to  previously  recorded  goodwill as well as
goodwill  arising  from  acquisitions  completed  after  June 30,  2001.  We are
currently  evaluating the impact of this Statement on our financial position and
are planning to adopt this standard  beginning in fiscal year 2003, as required.
It is  possible  that in the  future,  we may incur less  frequent,  but larger,
impairment charges related to the goodwill already recorded, as well as goodwill
arising out of potential future acquisitions.

     Due to the factors noted above,  our future earnings and stock price may be
subject to  significant  volatility,  particularly  on a  quarterly  basis.  Any
shortfall in revenue or earnings,  or any delay in the release of any product or
upgrade,  compared to analysts' or investors'  expectations could cause, and has
caused in the past, an immediate and significant decline in the trading price of
our common stock.  Additionally,  we may not learn of such  shortfalls or delays
until late in the fiscal  quarter,  which could result in an even more immediate
and  greater  decline in the  trading  price of our common  stock.  Finally,  we
participate in a highly dynamic industry. In addition to factors specific to us,
changes in  analysts'  earnings  estimates  for us or our  industry  and factors
affecting the corporate environment,  our industry, or the securities markets in
general will often result in significant volatility of our common stock price.

Critical Accounting Policies

     We have  identified  the following as critical  accounting  policies to our
company:  revenue recognition,  accounting for our marketable and non-marketable
fixed income and equity  securities,  and  accounting for leases of property and
equipment.

     Revenue Recognition

     We recognize  application products revenue upon shipment,  net of estimated
returns,   provided  that  collection  is  determined  to  be  probable  and  no
significant obligations remain. Application product revenue from distributors is
subject to agreements  allowing  limited  rights of return,  rebates,  and price
protection.  Accordingly,  we reduce  revenue  recognized  for estimated  future
returns,  price  protection  when  given,  and  rebates at the time the  related
revenue is recorded.  The estimates for returns are adjusted  periodically based
upon historical rates of returns,  inventory levels in the distribution channel,
and other  related  factors.  The  estimates  and reserves for rebates and price
protection are based on historical rates. While management  believes it can make
reliable  estimates for these  matters,  nevertheless  unsold  products in these
distribution  channels are exposed to rapid changes in consumer  preferences  or
technological obsolescence due to new operating environments, product updates or
competing products. Accordingly, it is possible that these estimates will change
in the near future or that the actual  amounts  could vary  materially  from our
estimates  and  that  the  amounts  of such  changes  could  seriously  harm our
business.

     We provide free technical phone support to customers who are under warranty
for support.  We accrue the estimated cost of free technical  phone support upon
shipment of software  and amortize  the accrued  internal  and external  cost of
telephone support to sales and marketing expense.

     We also license  software with  post-contract  customer support ("PCS") for
two years.  PCS includes  rights to upgrades,  when and if available,  a limited
period of telephone support,  updates, and bug fixes. Statement of Position 97-2
("SOP 97-2"),  "Software Revenue  Recognition," as amended,  generally  requires
revenue  earned on  software  arrangements  involving  multiple  elements  to be
allocated to each element based on the relative fair value of the elements.  The
arrangement fee for  multiple-element  arrangements is allocated to each element
of the  arrangement,  such as  maintenance  and support  services,  based on the
relative  fair  values of the  elements.  We  determine  the fair  value of each
element in multi-element arrangements


                                      F-32

<PAGE>

based on vendor-specific  objective evidence ("VSOE").  VSOE for each element is
based on the price charged when the same element is sold separately. If evidence
of fair value of all undelivered elements exists but evidence does not exist for
one or more delivered  elements,  then revenue is recognized  using the residual
method. Under the residual method, the fair value of the undelivered elements is
deferred and the  remaining  portion of the  arrangement  fee is  recognized  as
revenue. Revenue allocated to maintenance and support is recognized ratably over
the maintenance term (typically two years).

     We record OEM licensing  revenue,  primarily  royalties,  when OEM partners
ship products incorporating Adobe software,  provided collection of such revenue
is  deemed  probable.  We have no  remaining  obligations  in  relation  to such
licensing revenue.

     We also recognize  revenue under a  subscription-based  model for our Adobe
Studio website,  which we launched in the fourth quarter of fiscal 2001. Revenue
is  recognized  on a monthly  basis from fees  received that month for providing
software subscriptions for our hosted application.


     Deferred revenue includes customer advances under OEM licensing  agreements
and  maintenance  revenue  for  application   products.  We  recognize  deferred
maintenance revenue ratably over the term of the contract, generally twenty-four
months.  In cases where we will provide a specified  free upgrade to an existing
product, we defer revenue until the future obligation is fulfilled.

     We perform ongoing credit evaluations of our customers' financial condition
and generally do not require  collateral.  We maintain  allowances for potential
credit losses and such losses have been within our expectations.


     Accounting for our Marketable  and  Non-marketable  Fixed Income and Equity
Securities

     We classify all of our cash equivalents and short-term investments that are
free of trading restrictions,  or become free of trading restrictions within one
year, as  "available-for-sale."  We carry these investments at fair value, based
on quoted market prices,  and  unrealized  gains and losses,  net of taxes,  are
included in  accumulated  other  comprehensive  income,  which is reflected as a
separate  component  of  stockholders'  equity.  Realized  gains and  losses are
recognized  when realized in our  consolidated  statements of income.  We have a
policy in place to review our equity  holdings  on a regular  basis to  evaluate
whether or not each security has experienced an other-than-temporary  decline in
fair value.  Our policy  includes,  but is not limited to, reviewing each of the
companies' cash position, earnings/revenue outlook, stock price performance over
the past six months, liquidity and  management/ownership.  If we believe that an
other-than-temporary  decline exists in one of our marketable equity securities,
it is our policy to write down these equity  investments to the market value and
record  the  related  writedown  as  an  investment  loss  on  our  consolidated
statements of income.  For more information on our cash, cash  equivalents,  and
short-term  investments,  please  refer to Note 3 of our  Notes to  Consolidated
Financial Statements.

     Our  long-term   investments   include  direct   investments  and  indirect
investments in privately-held companies. We own limited partnership interests in
four venture capital limited  partnerships,  Adobe Ventures L.P.; Adobe Ventures
II, L.P.;  Adobe Ventures III,  L.P., and Adobe Ventures IV, L.P.  (collectively
"Adobe  Ventures"),  that  invest  in  early  stage  companies  with  innovative
technologies.  In addition to the potential for financial  returns,  our venture
activities increase our knowledge of emerging markets and technologies,  as well
as expand our ecosystem of Adobe  products and services.  The  partnerships  are
managed  by Granite  Ventures,  an  independent  venture  capital  firm and sole
general partner of Adobe Ventures.

     The investments in Adobe Ventures are accounted for using the equity method
of accounting,  and  accordingly,  the  investments  are adjusted to reflect our
share of Adobe Ventures'  investment  income (loss) and dividend  distributions.
Adobe  Ventures carry their  investments in equity  securities at estimated fair
market value and unrealized  gains and losses are included in investment  income
(loss).  The stock of a number of  technology  investments  held by the  limited
partnerships at November 30, 2001 are not publicly traded, and, therefore, there
is no established market for their securities.  As such, the fair value of these
investments  are  determined by Granite  Ventures using the most recent round of
financing  involving new non-strategic  investors,  or estimates made by Granite
Ventures.  We have a  policy  in  place  to  review  the  fair  value  of  these
investments  held by Adobe  Ventures on a regular basis to evaluate the carrying
value of the investments in these companies.  This policy  includes,  but is not
limited to,  reviewing each of the companies'  cash position,  financing  needs,
earnings/revenue outlook, operational performance, management/ownership changes,
and competition.  The evaluation process is based on information that we request
from these privately-held companies. This information is not subject to the same
disclosure  regulations  as U.S.  public  companies,  and as such, the basis for
these evaluations is subject to the timing and the accuracy of the data received
from these  companies.  If we believe  that the  carrying  value of a company is
carried  at an  amount in excess  of fair  value,  it is our  policy to record a
reserve in addition to our equity method of accounting and the related writedown
is recorded as an  investment  loss on our  consolidated  statements  of income.
Estimating the fair value of  non-marketable  equity  investments in early-stage
technology companies is inherently  subjective and may contribute to significant
volatility in our reported results of operations.


                                      F-33

<PAGE>

     We  recognize  realized  gains and losses  upon sale or  maturity  of these
investments using the specific identification method. For further information on
our long-term  investments,  please refer to Note 5 of our Notes to Consolidated
Financial Statements.

     Accounting for Leases of Property and Equipment

     We entered into two operating lease  agreements in 1999 and 2001 related to
our  headquarter  office  buildings in San Jose, CA. The agreements  qualify for
operating lease  accounting  treatment  under SFAS 13,  "Accounting for Leases,"
and,  as such,  the  buildings  are not  included on our  balance  sheet.  These
agreements are subject to standard covenants, including liquidity, leverage, and
profitability  ratios that are reported to the lessors quarterly.  We believe we
will be able to meet our obligations under the agreements,  but if we default on
our commitments and are unable to remedy the default quickly enough, the lessors
may terminate all remaining  commitments,  demand  payment equal to the lessor's
investment, or require us to purchase, facilitate the sale of the buildings to a
third party,  or  surrender  the  buildings.  If we are required to purchase the
buildings, this will decrease our cash available for working capital and require
us to add the value of the buildings to our balance sheet.  If we facilitate the
sale or  surrender  the  buildings,  this  could  require  us to find  alternate
facilities on terms that may not be as favorable as the current arrangement.  As
of November 30, 2001,  we were in  compliance  with all  covenants.  For further
information  on these leases,  please refer to our  "Commitments"  section under
"Liquidity  and  Capital  Resources"  and Note 13 of our  Notes to  Consolidated
Financial Statements.

We Disclose Pro Forma Financial Information

     We prepare and release quarterly unaudited financial statements prepared in
accordance  with generally  accepted  accounting  principles  ("GAAP").  We also
disclose  and discuss  certain pro forma  financial  information  in the related
earnings  release  and  investor   conference  call.  Our  pro  forma  financial
information  does not include unusual or  non-recurring  events or transactions,
amortization  of  goodwill  and  purchased  intangibles,  or gains and losses on
investments  in equity  securities.  We believe the  disclosure of the pro forma
financial  information helps investors more meaningfully evaluate the results of
our ongoing operations.  However, we urge investors to carefully review the GAAP
financial  information  included as part of our Quarterly  Reports on Form 10-Q,
our Annual Reports on Form 10-K, and our quarterly earnings releases and compare
that GAAP financial  information with the pro forma financial  results disclosed
in our quarterly earnings releases and investor calls.

     The following table shows the Company's pro forma results reconciled to the
GAAP  Consolidated  Statement  of Income for the fiscal year ended  November 30,
2001. Our pro forma results for fiscal year 2001 exclude restructuring and other
charges,  amortization  of goodwill and purchased  intangibles,  and  investment
loss.

                                                                  Year ended
                                                                  November 30,
                                                                     2001
                                                               -----------------
    GAAP income before income taxes                            $         306,931

     Restructuring and other charges                                      12,063

     Amortization of goodwill and purchased intangibles                   14,281
     Investment loss                                                      93,414
                                                               -----------------
       Pro forma income before income taxes                              426,689
    Income tax provision                                                 140,807
                                                               -----------------
    Pro forma net income                                                 285,882

    Basic pro forma net income per share                       $            1.20
                                                               =================

    Shares used in computing basic net income per share                  238,461
                                                               =================

    Diluted net income per share                               $           1.15
                                                               =================

    Shares used in computing diluted net income per share                249,145
                                                               =================


                                      F-34

<PAGE>

Pro Forma Fair Value Disclosures on Employee Stock Plans

     We account for our employee  stock plans,  consisting of fixed stock option
plans, an employee stock purchase plan, and a performance  and restricted  stock
plan,  using the intrinsic value method.  Please see our Note 10 of the Notes to
Consolidated  Financial  Statements  for the pro forma amounts of net income and
net income per share that would have  resulted if we accounted  for our employee
stock plans under the fair value recognition provisions of SFAS 123, "Accounting
for Stock-Based Compensation."

Recent Accounting Pronouncements

     During  July  2001,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 141 ("SFAS 141"), "Business Combinations". This Statement requires
all  business  combinations  to be accounted  for using the  purchase  method of
accounting  and  redefines   goodwill  and  other  intangibles  that  should  be
recognized  separate  from  goodwill.  SFAS 141 is  effective  for all  business
combinations initiated after June 30, 2001.

     During  July  2001,  the FASB  issued  Statement  of  Financial  Accounting
Standards No. 142 ("SFAS 142"),  "Goodwill and Other  Intangible  Assets".  This
Statement requires that goodwill and other intangibles with an indefinite useful
life not be amortized,  but be tested for impairment at least annually. SFAS 142
is effective for fiscal years  beginning after December 15, 2001;  however,  for
new business  combinations that occur after June 30, 2001, SFAS 142 is effective
for those  transactions.  We will adopt SFAS 142  beginning  in our fiscal  year
2003.  We are  currently  evaluating  the  impact  of SFAS 142 on our  financial
statements and related disclosures.

     In June 2001, the FASB issued Statement of Financial  Accounting  Standards
No.  143 ("SFAS  143"),  "Accounting  for Asset  Retirement  Obligations".  This
Statement   addresses   financial   accounting  and  reporting  for  obligations
associated with the retirement of tangible  long-lived assets and the associated
asset retirement costs.  This Statement applies to legal obligations  associated
with the  retirement  of  long-lived  assets that  result from the  acquisition,
construction,  development,  or  normal  use of  the  asset.  As  used  in  this
Statement,  a legal obligation  results from existing law,  statute,  ordinance,
written or oral  contract,  or by legal  construction  of a  contract  under the
doctrine  of  promissory  estoppel.  SFAS  143 is  effective  for  fiscal  years
beginning after June 15, 2002. We do not expect the adoption of SFAS 143 to have
a material impact on our financial position or results of operations.

     In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 ("SFAS 144"),  "Accounting  for the Impairment or Disposal of Long-Lived
Assets".  This Statement  addresses  financial  accounting and reporting for the
impairment  or  disposal  of  long-lived  assets and  supersedes  SFAS No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed  Of," and the  accounting  and  reporting  provisions of APB No. 30,
"Reporting the Results of Operations for a Disposal of a Segment of a Business."
SFAS 144 is effective  for fiscal years  beginning  after  December 15, 2001. We
will adopt SFAS 144  beginning  in our  fiscal  year 2003.  We do not expect the
adoption  of SFAS 144 to have a material  impact on our  financial  position  or
results of operations.

     In  November  2001,  the  Emerging  Issues  Task Force  ("EITF")  reached a
consensus on EITF No. 01-09,  "Accounting for Consideration Given by a Vendor to
a Customer or a Reseller of the Vendor's Products." EITF No. 01-09 addresses the
accounting  for  consideration  given  by  a  vendor  to  a  customer  and  is a
codification of EITF No. 00-14,  "Accounting for Certain Sales Incentives," EITF
No. 00-22, "Accounting for 'Points' and Certain Other Time-Based or Volume-Based
Sales Incentives Offers and Offers for Free Products or Services to be Delivered
in the Future" and EITF No. 00-25, "Vendor Income Statement  Characterization of
Consideration  Paid to a Reseller of the Vendor's  Products." We are  evaluating
the  impact  of EITF No.  01-09  and do not  believe  the  adoption  will have a
material impact on our financial statements.


                                      F-35

<PAGE>

                         LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
                                                               2001       Change        2000       Change        1999
                                                            -----------  ---------   ------------ ---------   ------------
<S>                                                         <C>          <C>         <C>          <C>         <C>
Cash, cash equivalents, and short-term investments......    $  581.6       (14)%     $   679.9        36%     $   498.7
Working capital.........................................    $  453.7       (19)%     $   563.3        59%     $   355.4
Stockholders' equity....................................    $  617.0       (18)%     $   752.5        47%     $   512.2

</TABLE>

     Our cash, cash equivalents,  and short-term investments consist principally
of money market funds, municipal bonds, and marketable equity securities. All of
our  short-term  investments  are  classified  as  available-for-sale  under the
provisions of SFAS 115,  "Accounting for Certain  Investments in Debt and Equity
Securities." The securities are carried at fair market value with the unrealized
gains and  losses,  net of tax,  included  in  accumulated  other  comprehensive
income,  which is reflected as a separate  component  of  stockholders'  equity.
Realized  gains and losses are  recognized  when  realized  in our  consolidated
statements of income.

     Our cash,  cash  equivalents,  and short-term  investments  decreased $98.3
million,  or 14%,  from  December  1, 2000,  primarily  due to the  purchase  of
treasury  stock in the  amount of $485.1  million,  the  purchase  of  long-term
investments  and other assets for $32.0 million,  capital  expenditures of $46.6
million,  and the payment of dividends totaling $12.0 million. In addition,  our
short-term  investments  decreased  due to the  writedown of certain  short-term
marketable equity investments  totaling $53.1 million and the sale of marketable
equity investments with a cost basis of $7.8 million.

     These decreases were partially  offset by cash generated from operations of
$418.7  million and proceeds from the issuance of treasury  stock related to the
exercise of stock  options  under our stock option plans and sale of stock under
the  Employee  Stock  Purchase  Plan of $87.5  million.  Another  source of cash
included proceeds from the sale of equity securities of $31.5 million.

     Our existing cash,  cash  equivalent  and  investment  balances may decline
further  during  fiscal 2002,  although we believe  that our  existing  balances
together with our  anticipated  cash flows from operations will be sufficient to
meet our working capital and operating resource expenditure requirements for the
next 12 months. If the global economy weakens further, the decline in cash, cash
equivalents and investments balances may be greater than presently anticipated.

     We expect to continue our investing activities,  including expenditures for
computer  systems for research and  development,  sales and  marketing,  product
support,  and administrative  staff.  Furthermore,  cash reserves may be used to
purchase  treasury  stock and  strategically  acquire  companies,  products,  or
technologies.

     Adobe's Board of Directors  approved two separate  two-for-one stock splits
in the form of stock  dividends  of our common  stock to  stockholders  effected
October 24, 2000 and October 26, 1999. All share and per share amounts  referred
to in the consolidated  financial statements have been adjusted to reflect these
stock splits.


     We have paid cash  dividends  on our common  stock each  quarter  since the
second quarter of 1988.  Adobe's Board of Directors  declared a cash dividend on
our common  stock of $0.0125 per common  share for each of the four  quarters in
fiscal 2001,  2000, and 1999. 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.


     Stock Repurchase Program I - On-going Dilution Coverage

     To facilitate our stock repurchase  program,  which is designed to minimize
dilution from employee stock plans,  we sold put warrants to  independent  third
parties in fiscal 2001,  2000, and 1999. Each put warrant entitles 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.  Approximately  5.6  million,  7.0  million,  and 10.3
million put warrants were written in fiscal 2001, 2000, and 1999,  respectively.
At November 30, 2001,  approximately  3.8 million put warrants were  outstanding
that expire  through  July 2002,  with an average  exercise  price of $22.28 per
share, resulting in a total potential cash outlay of approximately $84.0 million
in fiscal 2002 if all puts warrants are exercised.

     In addition, in fiscal 2001, 2000, and 1999, we purchased call options from
independent third parties that entitled us to buy 3.9 million,  4.2 million, and
4.9 million  shares,  respectively,  of our  common  stock on  certain  dates at
specified prices. At November 30, 2001,  approximately  2.6 million call options
were  outstanding that expire on various dates through July 2002 with an average
exercise price of $24.09 per share,  resulting in a total  potential cash outlay
of  approximately  $63.3  million  in  fiscal  2002  if all  calls  options  are
exercised.


                                      F-36

<PAGE>

     Currently,  all put  warrants  have a  corresponding  call  option  with an
identical expiry date. Consequently,  either the call option or put warrant, but
not both, will be exercised.

     We repurchased  approximately  5.9 million,  7.2 million,  and 22.4 million
shares  in  fiscal  2001,  2000,  and  1999,  respectively,  at a cost of $319.9
million, $255.5 million, and $448.7 million, respectively.

     Stock  Repurchase  Program II -  Additional  Authorization  above  Dilution
Coverage

     In  September  1997,  Adobe's  Board of  Directors  authorized,  subject to
certain  business  and market  conditions,  the  purchase of up to 60.0  million
shares of our common stock over a two-year period. This program was completed in
the  first  quarter  of  fiscal  1999.   Under  this  program,   we  repurchased
approximately 3.3 million shares in fiscal 1999 at a cost of $30.5 million.

     In April 1999, the Board authorized a 5.0 million share repurchase program,
which allows us to purchase  shares in the open market and enter into  contracts
to repurchase  shares during future  quarters by selling put warrants and buying
call options.  During fiscal 2001,  approximately  4.9 million put warrants were
written and 3.5 million  call  options  were  purchased  at prices  ranging from
$32.60 to $39.58. As of November 30, 2001, there were no put warrants or options
outstanding in this program.  During fiscal 2001, we  repurchased  approximately
4.7 million shares at a cost of $165.2 million. We did not repurchase any shares
under this program in fiscal 2000.

     In addition to the April 1999 5.0 million  share  repurchase  program,  our
Board of Directors  authorized  in March 2001,  subject to certain  business and
market conditions, the purchase of up to an additional 5.0 million shares of our
common stock over a two-year  period.  We have not made any purchases under this
5.0 million share repurchase program.

     Combined Programs

     Our put and call  option  contracts  provide  that we, at our  option,  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.

     For more information on our puts and calls,  please see Note 1 of our Notes
to Consolidated Financial Statements.

Commitments

     Our principal  commitments  as of November 30, 2001 consist of  obligations
under operating  leases,  a line of credit  agreement,  a real estate  financing
agreement, venture investing activities, royalty agreements, and various service
agreements.  We expect to fulfill all of the below  commitments from our working
capital.


     Lease Commitments

     We  lease  certain  of our  facilities  and  some  of our  equipment  under
noncancelable  operating lease arrangements that expire at various dates through
2025. Rent expense,  net of sublease income,  for these leases  aggregated $22.0
million,  $25.6 million,  and $29.4 million during fiscal 2001,  2000, and 1999,
respectively.  As of November 30, 2001,  future  minimum  lease  payments  under
noncancelable  operating  leases,  net  of  sublease  income,  are  as  follows:
2002--$29.6  million;  2003--$32.3  million;  2004--$35.7  million;  2005--$28.5
million; 2006--$17.0 million; and $33.2 million thereafter.

     In September 2001, we entered into a real estate development  agreement for
the construction of an office building in downtown San Jose,  California.  Under
the  agreement,  the lessor will  finance up to $117.0  million  over a two-year
period, toward the construction and associated costs of the building. As part of
the agreement,  we entered into a five-year  lease  beginning upon completion of
the building.  We have an option to purchase the building at any time during the
term for an amount equal to the total  investment  of the lessor.  The agreement
and lease are subject to standard covenants  including  liquidity,  leverage and
profitability  ratios that are reported to the lessor quarterly.  As of November
30, 2001, we were in compliance  with all covenants.  In case of a default,  the
lessor may  terminate  all remaining  commitments,  demand  payment equal to the
lessor's  investment,  or require that we purchase,  facilitate  the sale of the
building to a third party,  or surrender the building.  The agreement  qualifies
for  operating  lease  accounting  treatment  under SFAS 13, and,  as such,  the
building and the related  obligation are not included on our balance sheet,  but
the lease  payments  are  reflected  in the  schedule  of future  minimum  lease
payments.  At the end of the lease term, we can either purchase the building for
an amount equal to the lessor's  investment,  which will be approximately $117.0
million,  request  to extend  the  maturity  date of the lease or  remarket  the
building.  If we elect to remarket the building, we are obligated to arrange the
sale of the  building  to an  unrelated  party and will be  required  to pay the
lessor any  shortfall  between the net  remarketing  proceeds  and the  lessor's
investment,  up to a maximum  recourse  amount as set  forth in the  lease.  The
lessor is a  multi-asset  leasing  company with a substantive  net worth,  not a
special purpose entity.


                                      F-37

<PAGE>

     In August 1999,  Adobe  entered into a five-year  lease  agreement  for our
corporate  headquarters  office  buildings  in San Jose,  California.  Under the
agreement,  we have an option to purchase  the  buildings at any time during the
lease term for $142.5 million,  which is the total investment of the lessor. The
lease is  subject  to  standard  covenants  including  liquidity,  leverage  and
profitability  ratios that are reported to the lessor quarterly.  As of November
30, 2001, we were in compliance  with all covenants.  In case of a default,  the
lessor may demand payment equal to the lessor's  investment or that we surrender
the buildings.  The agreement qualifies for operating lease accounting treatment
under SFAS 13 and, as such,  the  buildings and the related  obligation  are not
included on our balance  sheet,  but the lease  payments  are  reflected  in the
schedule of future minimum lease payments.  At the end of the lease term, we can
either  purchase the buildings  for an amount equal to the lessor's  investment,
which is  approximately  $142.5 million,  or terminate the lease. If we elect to
terminate,  we are  obligated to use our best efforts to arrange the sale of the
buildings  to an  unrelated  party and will be  required  to pay the  lessor any
shortfall between the net remarketing proceeds and the lessor's  investment,  up
to a maximum guaranteed residual amount as set forth in the lease. The lessor is
a  multi-asset  leasing  company  with a  substantive  net worth,  not a special
purpose entity.

     Line of Credit

     In  August  1999,  Adobe  entered  into  two  unsecured   revolving  credit
facilities of $100.0 million each, with a group of banks, for general  corporate
purposes,  subject to certain financial covenants. One of the facilities expired
in August  2001 and was not  renewed,  and the  other  $100.0  million  facility
expires in August 2002.  Outstanding  balances  would accrue  interest at London
Interbank  Offered Rate  ("LIBOR")  plus a margin that is based on our financial
ratios. There were no outstanding balances on the credit facility as of November
30, 2001. In addition,  as of November 30, 2001, we were in compliance  with all
financial covenants.

     We  believe  that if our line of  credit is  canceled  or  amounts  are not
available under the line, our financial results, liquidity, or capital resources
would not be adversely impacted.

     Under  the terms of our line of credit  agreement,  corporate  headquarters
lease agreements, and real estate financing agreement, we may pay cash dividends
unless an event of default  has  occurred  or we do not meet  certain  financial
ratios.

     Royalties

     We have  certain  royalty  commitments  associated  with the  shipment  and
licensing of certain  products.  Royalty  expense is generally based on a dollar
amount per unit  shipped or a  percentage  of the  underlying  revenue.  Royalty
expense was  approximately  $14.1 million,  $20.8 million,  and $24.5 million in
fiscal 2001, 2000, and 1999, respectively.


                                      F-38

<PAGE>

     Adobe Ventures

     We  have  commitments  to  the  Adobe  Venture  limited  partnerships.  The
following table shows the capital  commitments and the capital contributed as of
November 30, 2001:

                                     Capital Commitment      Capital Contributed
                                     ------------------      -------------------
      Adobe Ventures L.P.               $ 40,000,000             $ 40,475,757
      Adobe Ventures II, L.P.           $ 40,000,000             $ 36,947,363
      Adobe Ventures III, L.P.          $ 60,000,000             $ 56,162,222
      Adobe Ventures IV, L.P.           $100,000,000             $ 18,292,333

     The capital commitment is the amount that Adobe has agreed to contribute to
the Partnership.  The capital  commitment amount is contributed over the term of
each Partnership, which is ten years. We can cease funding at any time after the
earlier of: a) two years after the effective  date of the  Partnership or b) the
date on which the Company has made capital  contributions  to the Partnership in
an amount in excess of $10.0 million,  $10.0 million,  $20.0 million,  and $33.0
million for Adobe  Ventures L.P.,  Adobe Ventures II, L.P.,  Adobe Ventures III,
L.P., and Adobe Ventures IV, L.P., respectively.

     In addition to these venture  partnerships,  we have direct  investments in
public and privately-held  companies. In total, as of November 30, 2001, we have
invested $194.9 million through our venture partnerships and direct investments.
As of November  30,  2001,  net returns  were $354.3  million,  including  stock
dividends and net gains in market value of investments.

     Legal Actions

     We are engaged in certain legal actions  arising in the ordinary  course of
business.  We believe that we have adequate legal defenses and that the ultimate
outcome  of these  actions  will  not  have a  material  adverse  effect  on our
financial position and results of operations.

Derivatives and Financial Instruments
(Item 7a. Quantitative and Qualitative Disclosures About Market Risk)

     Foreign Currency Hedging Instruments

     We transact  business in various foreign  currencies,  primarily in certain
European  countries  and Japan.  Accordingly,  we are subject to  exposure  from
movements in foreign currency exchange rates. This exposure is primarily related
to yen  denominated  licenses  in Japan,  and  beginning  in fiscal  2001,  euro
denominated licenses in certain European countries.

     Our Japanese  operating  expenses  are in yen,  and our European  operating
expenses are in euro,  which mitigates a portion of the exposure  related to yen
and  euro  denominated   licenses.   In  addition,  we  hedge  firmly  committed
transactions using forward  contracts.  We also hedge a percentage of forecasted
international  revenue with forward and purchased option contracts.  At November
30, 2001, total outstanding contracts included $98.3 million in foreign currency
forward  exchange  contracts and purchased put option  contracts with a notional
value of $82.3 million.  All contracts expire at various times through May 2002.
Our hedging policy is designed to reduce the impact of foreign currency exchange
rate  movements,  and we expect any gain or loss in the hedging  portfolio to be
offset by a corresponding gain or loss in the underlying  exposure being hedged.
These contracts do subject us to risk of accounting  gains and losses;  however,
the gains and losses on these  contracts  offset gains and losses on the assets,
liabilities,  and transactions  being hedged.  The bank  counterparties in these
contracts   expose   us  to   credit-related   losses  in  the  event  of  their
nonperformance.  However,  to  mitigate  that  risk we only  contract  with high
quality  counterparties with specific minimum rating requirements.  In addition,
our hedging policy establishes maximum limits for each counterparty.


                                      F-39

<PAGE>

     Economic Hedging - Hedges of Forecasted Transactions

     We use option and  forward  foreign  exchange  contracts  to hedge  certain
operational  ("cash flow") exposures  resulting from changes in foreign currency
exchange rates. These foreign exchange contracts,  carried at fair value, have a
duration  between three to twelve months.  Such cash flow exposures  result from
portions of our forecasted  revenues  denominated  in currencies  other than the
U.S.  dollar  ("USD"),  primarily  the Japanese yen and the euro.  We enter into
these foreign exchange  contracts to hedge forecasted  product licensing revenue
in the normal course of business,  and accordingly,  they are not speculative in
nature.

     We  record  changes  in the  fair  value  of  these  cash  flow  hedges  in
accumulated other comprehensive income (loss), until the forecasted  transaction
occurs.  When the forecasted  transaction occurs, we reclassify the related gain
or loss  on the  cash  flow  hedge  to  revenue.  In the  event  the  underlying
forecasted  transaction  does not occur, or it becomes probable that it will not
occur,  we  reclassify  the gain or loss on the  related  cash flow  hedge  from
accumulated  other  comprehensive  income  (loss) to interest  and other  income
(loss) on the consolidated statement of income at that time. For the fiscal year
ended  November 30, 2001,  there were no such net gains or losses  recognized in
other income relating to hedges of forecasted transactions that did not occur.

     The critical terms of the cash flow hedging instruments are the same as the
underlying forecasted transactions. The changes in fair value of the derivatives
are intended to offset  changes in the expected  cash flows from the  forecasted
transactions.  We record any ineffective  portion of the hedging  instruments in
other  income  on the  consolidated  statement  of  income.  The  time  value of
purchased derivative  instruments is deemed to be ineffective and is recorded in
other income over the life of the contract.


     Balance Sheet Hedging - Hedging of Foreign Currency Assets and Liabilities

     We hedge our net recognized  foreign  currency assets and liabilities  with
forward foreign exchange contracts to reduce the risk that our earnings and cash
flows will be adversely  affected by changes in foreign currency exchange rates.
These derivative  instruments  hedge assets and liabilities that are denominated
in foreign  currencies  and are  carried at fair value with  changes in the fair
value  recorded as other income  (loss).  These  derivative  instruments  do not
subject us to material balance sheet risk due to exchange rate movements because
gains and losses on these derivatives  offset gains and losses on the assets and
liabilities  being hedged.  At November 30, 2001, the outstanding  balance sheet
hedging derivatives had maturities of 60 days or less.

     A  sensitivity  analysis  was  performed  on all of  our  foreign  exchange
derivatives as of November 30, 2001.  This  sensitivity  analysis was based on a
modeling technique that measures the hypothetical  market value resulting from a
10% and 15% shift in the value of exchange rates relative to the U.S.  dollar. A
10% and 15%  increase  in the  value of the  U.S.  dollar  (and a  corresponding
decrease in the value of the hedged  foreign  currency  asset)  would lead to an
increase in the fair value of our financial hedging instruments by $16.0 million
and $23.9 million, respectively. Conversely, a 10% and 15% decrease in the value
of the U.S.  dollar  would  result  in a  decrease  in the  fair  value of these
financial instruments by $12.5 million and $18.1 million, respectively.

     We do not use derivative  financial  instruments  for  speculative  trading
purposes,  nor do we hedge  our  foreign  currency  exposure  in a  manner  that
entirely offsets the effects of changes in foreign exchange rates.

     As a general  rule,  we do not use  financial  instruments  to hedge  local
currency  denominated  operating  expenses in  countries  where a natural  hedge
exists.  For example,  in many  countries the local  currency  product  licenses
substantially  offsets the local currency  denominated  operating  expenses.  We
assess the need to utilize  financial  instruments to hedge currency  exposures,
primarily related to operating expenses, on an ongoing basis.


                                      F-40

<PAGE>

     We  regularly  review our  hedging  program  and may as part of this review
determine at any time to change our hedging program.

     Equity Investments

     We are exposed to equity price risk on our portfolio of  marketable  equity
securities.  As of November  30,  2001,  our total  equity  holdings in publicly
traded  companies  were valued at $37.8  million  compared  to $90.2  million at
December 1, 2000, a decrease of 58%. We believe that it is  reasonably  possible
that the fair  values  of these  securities  could  experience  further  adverse
changes  in the near  term.  We have a policy  in place  to  review  our  equity
holdings  on a  regular  basis to  evaluate  whether  or not each  security  has
experienced an other-than-temporary  decline in fair value. Our policy includes,
but  is  not  limited  to,  reviewing  each  of the  companies'  cash  position,
earnings/revenue  outlook,  stock  price  performance  over the past six months,
liquidity and  management/ownership.  If we believe that an other-than-temporary
decline exists in one of our marketable equity  securities,  it is our policy to
write down these equity  investments  to the market value and record the related
writedown in our consolidated statements of income.

     The following table represents the potential decrease in fair values of our
marketable  equity securities that are sensitive to changes in the stock market.
Fair value  deteriorations of minus 50%, 35%, and 15% were selected based on the
probability of their occurrence.

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------

   Potential decrease to the value of securities given X% decrease in each stock's price
-------------------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>               <C>               <C>
                                                                                         Fair Value as of
                                    (50%)             (35%)             (15%)            November 30, 2001
-------------------------------------------------------------------------------------------------------------
Marketable equity securities      $ (18.9)           $ (13.2)           $ (5.7)                 $37.8
-------------------------------------------------------------------------------------------------------------

</TABLE>

     Equity Forward Contracts

     We also have a policy to hedge a certain  portion of our equity holdings in
publicly  traded  companies.  From time to time,  we have  entered  into forward
contracts to sell portions of our equity holdings in future periods.  We account
for these forward  contracts as "Fair Value Hedges," in accordance with SFAS 133
and mark them to market at the end of each  period,  offsetting  changes  in the
fair market value of the equities  being hedged.  An increase  (decrease) in the
market value of the underlying equities will result in a corresponding  decrease
(increase) in the value of the forward contract.  We have no outstanding forward
contracts  hedging  marketable  equity  securities  remaining as of November 30,
2001. As of December 1, 2000, the value of our forward  contracts hedging equity
securities was $10.7 million.

     Fixed Income Investments

     At November  30,  2001,  we had an  investment  portfolio  of fixed  income
securities,  including those classified as cash  equivalents,  of $404.1 million
compared  to $369.7  million at  December  1, 2000,  an  increase  of 9%.  These
securities are subject to interest rate fluctuations.  Changes in interest rates
could adversely affect the market value of our fixed income investments.

     A  sensitivity  analysis was  performed on our  investment  portfolio as of
November 30, 2001. This sensitivity  analysis was based on a modeling  technique
that  measures the  hypothetical  market value  changes that would result from a
parallel  shift in the yield  curve of plus 50,  100,  or 150 basis  points over
six-month and twelve-month time horizons.

<TABLE>
<CAPTION>

   Potential decrease to the value of fixed income securities given X% increase in interest rates.
-------------------------------------------------------------------------------------------------------
<S>                                <C>                     <C>                      <C>
                                        0.5%                   1.0%                    1.5%
-------------------------------------------------------------------------------------------------------
6 - month horizon                     $  (2.3)                $  (4.5)                 $  (6.8)
-------------------------------------------------------------------------------------------------------
12 - month horizon                    $  (2.1)                $  (4.1)                 $  (6.2)
-------------------------------------------------------------------------------------------------------

</TABLE>


     We do not currently have any derivative financial  instruments  outstanding
to manage  interest  rate  risks.  However,  we have  established  policies  and
procedures to allow  entering into  derivative  financial  instruments  to hedge
interest rate risk if  appropriate.  We also limit our exposure to interest rate
and credit risk by  establishing  and  strictly  monitoring  clear  policies and
guidelines  for our fixed income  portfolios.  At the present time,  the maximum
duration of all portfolios is limited to 2.3 years. The


                                      F-41

<PAGE>

guidelines also establish  credit quality  standards,  limits on exposure to any
one security issue, limits on exposure to any one issuer, and limits on exposure
to the type of instrument.  Due to the limited duration and credit risk criteria
established  in our  guidelines,  we do not expect the exposure to interest rate
risk and credit risk to be material.

     Privately Held Investments

     We have direct investments,  as well as indirect  investments through Adobe
Ventures,  in  several  privately  held  companies,  many of which  can still be
considered  in  the  start-up  or  development  stages.  These  investments  are
inherently  risky, as the  technologies or products they have under  development
are typically in the early stages and may never materialize, and we could lose a
substantial part of our entire initial investment in these companies.

     We have a policy in place to review privately-held investments on a regular
basis to evaluate the carrying amount and economic viability of these companies.
This policy  includes,  but is not limited to,  reviewing each of the companies'
cash  position,   financing   needs,   earnings/revenue   outlook,   operational
performance,  management/ownership  changes,  and  competition.  The  evaluation
process  is based on  information  that we  request  from  these  privately-held
companies. This information is not subject to the same disclosure regulations as
U.S. public  companies,  and as such, the basis for these evaluations is subject
to the timing and the accuracy of the data received from these companies.  If we
believe  that the  carrying  value of an  investment  is carried at an amount in
excess of fair  value,  it is our policy to record a reserve in  addition to our
equity  method  of  accounting  and the  related  writedown  is  recorded  as an
investment loss on our consolidated statements of income.

     Facility Leases

     We are  exposed  to  interest  rate  risk  associated  with  leases  of our
facilities  whose  payments  are  tied  to the  LIBOR  and  have  evaluated  the
hypothetical  changes in lease  obligations  arising from selected  hypothetical
changes in LIBOR.  Market  changes  reflected  immediate  hypothetical  parallel
increases  in the LIBOR curve of plus or minus 50, 100, and 150 basis points for
a  twelve-month  period.  Based on this  analysis,  such  charges  would  not be
material to our results of operations or financial position.

Item 8. Financial Statements and Supplementary Data


                              FINANCIAL STATEMENTS

     Our financial  statements required by this item are submitted as a separate
section  of this Form  10-K.  See Item 14  (a)(1)  for a  listing  of  financial
statements provided in the section titled "FINANCIAL STATEMENTS".


                               SUPPLEMENTARY DATA

     The following tables (presented in thousands, except per share amounts) set
forth quarterly  supplementary data for each of the years in the two-year period
ended  November 30,  2001.  All share and per share  amounts  referred to in the
table below have been  adjusted to reflect  the  two-for-one  stock split in the
form of a stock dividend of our common stock effected October 24, 2000.

<TABLE>
<CAPTION>
                                                                                 2001
                                               ---------------------------------------------------------------------------
                                                                     Quarter Ended
                                               -----------------------------------------------------------   Year Ended
                                                  Mar. 2         June 1          Aug. 31        Nov. 30        Nov. 30
                                               -------------  --------------  --------------  ------------  --------------
<S>                                            <C>            <C>             <C>             <C>           <C>
Revenue.................................       $   328,969    $    344,093    $    292,118    $  264,540    $  1,229,720
Gross profit............................           308,953         321,734         272,077       245,505       1,148,269
Income before income taxes..............           104,113          91,500          60,140        51,178         306,931
Net income (1)..........................            69,756          61,305          40,294        34,289         205,644
Basic net income per share (1)..........              0.29            0.26            0.17          0.15            0.86
Shares used in computing basic net income
   per share............................           240,078         238,163         238,051       236,361         238,461
Diluted net income per share............              0.28            0.25            0.16          0.14            0.83
Shares used in computing diluted net
   income per share.....................           253,609         250,127         248,566       243,411         249,145


                                      F-42

<PAGE>

                                                                                  2000
                                               ---------------------------------------------------------------------------
                                                                     Quarter Ended
                                               -----------------------------------------------------------   Year Ended
                                                  Mar. 3         June 2          Sep. 1         Dec. 1         Dec. 1
                                               -------------  --------------  --------------  ------------  --------------
Revenue.................................       $   282,232    $    300,085    $    328,867    $   355,194   $  1,266,378
Gross profit............................           261,510         279,481         305,199        332,933      1,179,123
Income before income taxes .............            99,331         101,195         120,429        122,785        443,739
Net income (2)..........................            64,565          65,777          78,270         79,196        287,808
Basic net income per share (2)..........              0.27            0.28            0.33           0.33           1.21
Shares used in computing basic net income
   per share............................           237,256         237,516         238,464        239,640        238,292
Diluted net income per share............              0.26            0.26            0.31           0.31           1.13
Shares used in computing diluted net
   income per share.....................           252,978         255,348         255,828        257,294        255,774

(1)      In 2001,  net income and net income per share includes the following:  first quarter  includes  investment
         loss of $17.0 million and amortization of goodwill and purchased  intangibles of $3.6 million;  the second
         quarter includes  investment loss of $31.0 million and amortization of goodwill and purchased  intangibles
         of $3.6  million;  the third  quarter  includes  investment  loss of $39.4  million  and  amortization  of
         goodwill and purchased  intangibles of $3.6 million;  the fourth quarter includes  investment loss of $5.9
         million,  restructuring  and other charges of $12.1 million,  and  amortization  of goodwill and purchased
         intangibles of $3.6 million.

(2)      In 2000,  net  income  and net  income  per share  includes  the  following:  the first  quarter  includes
         investment  gain of $4.7 million,  one-time  gain from the sale of assets of $2.7  million,  gain from the
         reversal of a previous  restructuring  charge of $0.7 million,  and amortization of goodwill and purchased
         intangibles of $1.2 million;  the second quarter includes  investment gain of $7.7 million,  restructuring
         and other  charges of $6.3  million,  and  amortization  of goodwill  and  purchased  intangibles  of $1.2
         million;  the third quarter  includes  investment  gain of $9.4 million and  amortization  of goodwill and
         purchased  intangibles  of $1.2 million;  the fourth  quarter  includes  investment  loss of $7.4 million,
         acquired in-process  research and development of $0.5 million,  and amortization of goodwill and purchased
         intangibles of $3.4 million.

</TABLE>

Item 9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure

     Not applicable.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     For  information  regarding our Directors and compliance with Section 16(a)
of the Securities  Exchange Act of 1934, we direct you to the sections  entitled
"Proposal 1 - Election of Directors,"  and "Section 16(a)  Beneficial  Ownership
Reporting Compliance,"  respectively,  in the Proxy Statement we will deliver to
our  stockholders  in connection  with our Annual Meeting of  Stockholders to be
held on  April  11,  2002.  Information  regarding  our  Executive  Officers  is
contained in Item 1 Business of this report.

     We are  incorporating  the  information  contained in those sections of our
Proxy Statement here by reference.

Item 11. Executive Compensation

     For information regarding our Executive Compensation,  we direct you to the
section entitled "Executive Compensation" in the Proxy Statement we will deliver
to our  stockholders in connection with our Annual Meeting of Stockholders to be
held on April 11, 2002.

     We are incorporating the information contained in that section of our Proxy
Statement here by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     You will find this information in the section captioned "Security Ownership
of Certain  Beneficial  Owners and  Management,"  which will appear in the Proxy
Statement  we will deliver to our  stockholders  in  connection  with our Annual
Meeting of Stockholders to be held on April 11, 2002. We are incorporating  that
information here by reference.


                                      F-43

<PAGE>

Item 13. Certain Relationships and Related Transactions

     During  fiscal  1999,  we entered into two separate  loan  agreements  with
Graham Freeman, an executive officer, to assist with his relocation to San Jose,
California.  The first loan in the amount of $550,000,  with an interest rate of
8.25% per annum, was repaid on December 31, 1999. The second loan, in the amount
of $1.0 million,  is  interest-free  and is secured by Mr.  Freeman's  principal
residence.  Under the terms of the  agreement,  Mr. Freeman is required to repay
this loan at $200,000 per year over the five years beginning  December 2000. His
second  payment was made in December  2001,  leaving a balance of $600,000 as of
January 25, 2002.  The loan was amended in November 2001 in connection  with Mr.
Freeman's  resignation  from the Company to include an  agreement by the Company
that it would  not  exercise  its  right to  accelerate  the  payment  of unpaid
principal  because of Mr.  Freeman's  termination  of  employment.  The  Company
reserved the right to accelerate  payment for any other reason authorized by the
agreement.

     Also in connection with Mr. Freeman's  resignation from his employment with
us, which was effective November 30, 2001, we entered into an agreement with him
to: (i) pay him a lump sum equal to his total target  compensation (base pay and
management  incentive  plan  bonuses) for twelve (12)  months,  (ii) pay for his
COBRA  premiums  until the  earlier of  November 1, 2002 or the date he receives
coverage under another group health  insurance plan, and (iii) allow him to keep
his laptop computer. We also amended his loan agreement with us, as described in
the previous paragraph. In addition, he remained eligible for any bonuses earned
through his resignation date, although no bonuses were earned or paid.

     Adobe has entered  into  indemnity  agreements  with  certain  officers and
directors  which  provide,  among other things,  that Adobe will  indemnify such
officer or director,  under the  circumstances and to the extent provided for in
the agreements, for expenses,  damages,  judgments, fines, and settlements he or
she may be required to pay in actions or  proceedings  which he or she is or may
be a party to by reason of his or her  position as director,  officer,  or other
agent of Adobe,  and otherwise to the full extent  permitted  under Delaware law
and Adobe's Bylaws.



                                      F-44

<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

    (a)   Documents filed as part of this report

          1.   Financial statements

               o   Management's Report

               o   Independent Auditors' Report

               o   Consolidated Balance Sheets
                   November 30, 2001 and December 1, 2000

               o   Consolidated Statements of Income
                   Years Ended November 30, 2001, December 1, 2000, and
                   December 3, 1999

               o   Consolidated Statements of Stockholders' Equity and Other
                   Comprehensive Income
                   Years Ended November 30, 2001, December 1, 2000, and
                   December 3, 1999

               o   Consolidated Statements of Cash Flows
                   Years Ended November 30, 2001, December 1, 2000, and
                   December 3, 1999

               o   Notes to Consolidated Financial Statements

          2.   Financial statement schedule

               o   Schedule II-Valuation and Qualifying Accounts

          3.   Exhibits



                                      F-45

<PAGE>



<TABLE>
<CAPTION>
Index to Exhibits

     Exhibit                                                     Incorporated by Reference              Filed
     Number         Exhibit Description                            Form       Date         Number      Herewith

     <S>            <C>                                            <C>        <C>          <C>         <C>

     3.2.11         Amended and Restated Bylaws as currently in     10-Q      7/16/01      3.2.11
                    effect
      3.4           Agreement and Plan of Merger effective          10-Q      05/30/97       2.1
                    5/30/97 (by virtue of a reincorporation),
                    by and between Adobe Systems Incorporated,
                    a California corporation and Adobe Systems
                    (Delaware) Incorporated, a Delaware
                    corporation
      3.6           Restated Certificate of Incorporation, as       10-Q      7/16/01        3.6
                    filed with the Secretary of State of the
                    State of Delaware on 5/22/01
      4.2           Fourth Amended and Restated Agreement           8-K        7/3/00         1
                    between the Company and Computershare
                    Investor Services, LLC
     10.1.6         1984 Stock Option Plan, as amended*             10-Q      07/02/93     10.1.6
    10.21.3         Revised Bonus Plan*                             10-Q      02/28/97     10.21.3
     10.23          Amended 1994 Performance and Restricted         10-Q      05/29/98     10.24.2
                    Stock Plan*
     10.24          1994 Stock Option Plan*                         10-Q      5/27/94      10.1.7
     10.25          1994 Stock Option Plan, as amended*             S-8       05/30/97      10.40
     10.26          1997 Employee Stock Purchase Plan, as           10-K      12/1/00       10.70
                    amended*
     10.27          Amended 1997 Employee Stock Purchase Plan*      S-8       6/21/99       10.51
     10.28          1996 Outside Directors Stock Option Plan*       10-Q      05/31/96      10.36
     10.29          1996 Outside Directors' Stock Option Plan,      S-8       6/16/00        4.7
                    as amended*
     10.30          Forms of Stock Option Agreements used in        S-8       6/16/00        4.8
                    connection with the 1996 Outside Directors'
                    Stock Option Plan*
     10.31          1996 Outside Directors Stock Option Plan,       10-Q      7/16/01       10.75
                    as amended*
     10.32          1999 Nonstatutory Stock Option Plan*            S-8       9/15/99        4.6
     10.33          1999 Nonstatutory Stock Option Plan,            S-8       12/22/00       4.6
                    as amended*
     10.34          1999 Nonstatutory Stock Option Plan, as         S-8       3/15/01        4.7
                    amended*
     10.35          1999 Nonstatutory Stock Option Plan, as         S-8       10/29/01       4.6
                    amended*
     10.40          Form of Indemnity Agreement*                    10-K      11/30/90     10.17.2
     10.41          Form of Indemnity Agreement*                    10-Q      05/30/97     10.25.1
     10.42          Amended and Restated Limited                    10-Q      8/28/98       10.42
                    Partnership Agreement of Adobe Incentive
                    Partners, L.P.*
     10.43          Amendment to Limited Partnership Agreement      10-Q       6/4/99       10.52
                    of Adobe Incentive Partners, L.P.*
     10.44          Forms of Retention Agreement*                   10-K      11/28/97      10.44
     10.48          Letter of Release and Waiver*                   10-K      11/27/98      10.48


                                      F-46

<PAGE>


    Exhibit                                                      Incorporated by reference                  Filed
     Number         Exhibit Description                             Form        Date          Number      Herewith
     10.53          Amended, Restated and Consolidated Master       10-Q        9/3/99        10.53
                    Lease of Land and Improvements by and
                    between Sumitomo Bank Leasing and Finance,
                    Inc. and Adobe Systems Incorporated
     10.54          Credit Agreement among Adobe Systems            10-Q        9/3/99        10.54
                    Incorporated, Lenders named therein and ABN
                    AMRO Bank N.V., as Administrative Agent,
                    with certain related Credit Documents
     10.56          Note Secured by Deed of Trust and               10-K        12/3/99       10.56
                    Promissory Note*
     10.66          Credit Agreement among Adobe Systems            10-Q        9/1/00        10.66
                    Incorporated, Lenders Named therein and ABN
                    Amro Bank N.V., as Administrative Agent,
                    with Certain Related Credit Documents
     10.67          Amendment No. 1 to 1999 Credit Agreement        10-Q        9/1/00        10.67
                    among Adobe Systems Incorporated, Lenders
                    Named Therein and ABN Amro Bank N.V., as
                    Administrative Agent, with Certain Related
                    Credit Documents
     10.68          Amendment No. 1 to Amended, Restated and        10-Q        7/16/01       10.68
                    Consolidated Master Lease of Land and
                    Improvements between Adobe Systems
                    Incorporated and Sumitomo Bank Leasing and
                    Finance, Inc.
     10.69          Amendment No. 2 to Amended, Restated, and       10-Q        9/1/00        10.68
                    Consolidated Master Lease of Land and
                    Improvements between Adobe Systems
                    Incorporated and Sumitomo Bank Leasing and
                    Finance, Inc.
     10.77          Lease agreement between Adobe Systems and                                                 X
                    Selco Service Corporation
     10.78          Participation agreement among Adobe                                                       X
                    Systems, Selco Service Corporation, et al.
     10.79          Confidential Resignation Agreement*                                                       X
     10.80          Executive Severance Plan in the Event of a                                                X
                    Change of Control*
       21           Subsidiaries of the Registrant                                                            X
       23           Consent of KPMG LLP                                                                       X

</TABLE>

______________
    *  Compensatory plan or arrangement



                                      F-47

<PAGE>

     We will furnish any exhibit  listed above that is not  included  here.  You
must  specifically  request  the  exhibit  you would like to receive and pay our
reasonable expenses in furnishing it to you. You should call or write:

                          Investor Relations Department
                                 345 Park Avenue
                             San Jose, CA 95110-2704
                                  408-536-4416
                                Fax 408-537-4034
                              E-mail: ir@adobe.com

     Many of the above exhibits are also available  through our EDGAR filings at
www.sec.gov.


                                      F-48

<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                           ADOBE SYSTEMS INCORPORATED



                           By:  /s/ Murray J. Demo
                               -----------------------
                               Murray J. Demo,
                               Senior Vice President and Chief Financial Officer
                               (Principal Financial and Accounting Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated on the 19th day of February, 2002.

Signature                                 Title


/s/ John E. Warnock
--------------------------
John E. Warnock                           Chairman of the Board of Directors

/s/ Charles M. Geschke
--------------------------
Charles M. Geschke                        Chairman of the Board of Directors

/s/ Bruce R. Chizen
--------------------------
Bruce R. Chizen                          Director, President and Chief Executive
                                         Officer (Principal Executive Officer)
/s/ Carol Mills Baldwin
--------------------------
Carol Mills Baldwin                      Director

/s/ James Daley
--------------------------
James Daley                              Director

/s/ Antonio Perez
--------------------------
Antonio Perez                            Director

/s/ Colleen M. Pouliot
--------------------------
Colleen M. Pouliot                       Director and Senior Vice President

/s/ Robert Sedgewick
--------------------------
Robert Sedgewick                         Director

/s/ Delbert W. Yocam
--------------------------
Delbert W. Yocam                         Director

/s/ Murray J. Demo
--------------------------
Murray J. Demo                           Senior Vice President and Chief
                                         Financial Officer (Principal Financial
                                         and Accounting Officer)



                                      F-49

<PAGE>


                              SUMMARY OF TRADEMARKS

     The following trademarks of Adobe Systems Incorporated or its subsidiaries,
which may be registered in certain  jurisdictions,  are  referenced in this Form
10-K:

       Adobe
       Acrobat
       Acrobat Capture
       Acrobat eBook Reader
       Acrobat Reader
       Acrobat Messenger
       ActiveShare
       Adobe Dimensions
       Adobe Font Folio
       Adobe PhotoDeluxe
       Adobe Premiere
       Adobe Studio
       Adobe Type Manager
       After Effects
       AlterCast
       Atmosphere
       Distiller
       ePaper
       Extreme
       FrameMaker
       GoLive
       Illustrator
       InCopy
       InDesign
       InProduction
       LiveMotion
       PageMaker
       PageMill
       PDF Transit
       Photomerge
       Photoshop
       PostScript
       PostScript 3
       PressReady
       Streamline


All other brand or product names are trademarks or registered trademarks of
their respective holders.


                                      F-50

<PAGE>




                              FINANCIAL STATEMENTS

     As required under Item 8.  Financial  Statements  and  Supplementary  Data,
Adobe's consolidated financial statements are provided in this separate section.
The consolidated financial statements included in this section are as follows:


                                                                            Page

       o     Management's Report...........................................   52
       o     Independent Auditors' Report..................................   53
       o     Consolidated Balance Sheets
               November 30, 2001 and December 1, 2000......................   54
       o     Consolidated Statements of Income
               Years Ended November 30, 2001, December 1, 2000, and
               December 3, 1999............................................   55
       o     Consolidated Statements of Stockholders' Equity and Other
               Comprehensive Income
               Years Ended November 30, 2001, December 1, 2000, and
               December 3, 1999............................................   56
       o     Consolidated Statements of Cash Flows
               Years Ended November 30, 2001, December 1, 2000, and
               December 3, 1999............................................   58
       o     Notes to Consolidated Financial Statements....................   60




                                      F-51

<PAGE>


                               MANAGEMENT'S REPORT

     Management  is  responsible  for all the  information  and  representations
contained in the  consolidated  financial  statements and other sections of this
Form 10-K.  Management believes that the consolidated  financial statements have
been prepared in conformity with accounting principles generally accepted in the
United States of America  appropriate in the  circumstances  to reflect,  in all
material  respects,  the  substance  of events and  transactions  that should be
included,  and that the other  information in this Form 10-K is consistent  with
those statements. In preparing the consolidated financial statements, management
makes  informed  judgments and  estimates of the expected  effects of events and
transactions that are currently being accounted for.

     In meeting  its  responsibility  for the  reliability  of the  consolidated
financial  statements,  management  depends on the Company's  system of internal
accounting  controls.  This system is designed to provide  reasonable  assurance
that assets are  safeguarded  and  transactions  are executed in accordance with
management's authorization,  and are recorded properly to permit the preparation
of consolidated  financial  statements in accordance with accounting  principles
generally  accepted  in the  United  States of  America.  In  designing  control
procedures, management recognizes that errors or irregularities may nevertheless
occur.  Also,  estimates  and  judgments  are required to assess and balance the
relative cost and expected  benefits of the controls.  Management  believes that
the Company's  accounting  controls provide reasonable  assurance that errors or
irregularities that could be material to the consolidated  financial  statements
are  prevented or would be detected  within a timely  period by employees in the
normal course of performing their assigned functions.

     The Board of Directors  pursues its oversight  role for these  consolidated
financial  statements through the Audit Committee,  which is comprised solely of
Directors who are not officers or employees of the Company.  The Audit Committee
meets with  management  periodically  to review  their  work and to monitor  the
discharge  of each of their  responsibilities.  The Audit  Committee  also meets
periodically  with KPMG LLP, the independent  auditors,  who have free access to
the Audit Committee or the Board of Directors,  without management  present,  to
discuss internal accounting control, auditing, and financial reporting matters.

     KPMG LLP is engaged to  express  an opinion on our  consolidated  financial
statements.  Their  opinion  is  based  on  procedures  believed  by  them to be
sufficient  to provide  reasonable  assurance  that the  consolidated  financial
statements are not materially misleading and do not contain material errors.


December 11, 2001               By: /s/ Murray J. Demo
                                    --------------------
                                    Murray J. Demo,
                                    Senior Vice President and
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


                                      F-52

<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Adobe Systems Incorporated:

     We have audited the accompanying consolidated financial statements of Adobe
Systems  Incorporated and  subsidiaries as listed in the accompanying  index. In
connection with our audits of the  consolidated  financial  statements,  we also
have audited the accompanying  financial statement schedule.  These consolidated
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated  financial statements and financial statement schedule based on our
audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position of Adobe
Systems  Incorporated  and  subsidiaries as of November 30, 2001 and December 1,
2000,  and the results of their  operations and their cash flows for each of the
years in the  three-year  period ended  November 30, 2001,  in  conformity  with
accounting principles generally accepted in the United States of America.  Also,
in our opinion,  the related financial  statement  schedule,  when considered in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly, in all material respects, the information set forth therein.



KPMG LLP
Mountain View, California
December 11, 2001




                                      F-53

<PAGE>


                           ADOBE SYSTEMS INCORPORATED
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                     November 30,       December 1,
                                                                                        2001               2000
                                                                                     ------------      --------------


                                        ASSETS
<S>                                                                                    <C>               <C>
Current assets:
   Cash and cash equivalents....................................................     $  218,662         $  236,866
   Short-term investments.......................................................        362,951            442,987
   Trade receivables, net of allowances for
     doubtful accounts of $10,099 and $8,788, respectively......................        124,106            140,514
   Other receivables...........................................................          18,299             19,599
   Deferred income taxes........................................................         22,726             23,460
   Other current assets.........................................................         20,620             14,486
                                                                                         ------             ------
     Total current assets.......................................................        767,364            877,912
Property and equipment, net.....................................................         80,993             64,268
Other assets....................................................................         70,672            127,236
Deferred income taxes, long-term................................................         11,594                 --
                                                                                         ------             ------
                                                                                     $  930,623         $1,069,416
                                                                                     ==========         ==========
                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Trade and other payables.....................................................     $   30,891         $   40,280
   Accrued expenses.............................................................        119,258            181,861
   Accrued restructuring charges................................................          9,573               --
   Income taxes payable.........................................................        132,228             74,768
   Deferred revenue.............................................................         21,701             17,696
                                                                                       --------             ------
     Total current liabilities..................................................        313,651            314,605
                                                                                       --------            -------


Deferred income taxes...........................................................             --              2,267
                                                                                       --------            -------


Stockholders' equity:
   Preferred stock, $0.0001 par value; 2,000 shares authorized; none issued.....              --                --
   Common stock, $0.0001 par value; Authorized: 900,000 shares; Issued: 295,764
     shares in 2001 and 2000; and additional paid-in capital....................        625,386            530,801
   Retained earnings............................................................      1,366,205          1,172,504
   Accumulated other comprehensive income (loss)................................          3,918               (698)
   Treasury stock, at cost (59,745 and 54,818 shares in 2001 and 2000,
     respectively), net of reissuances..........................................     (1,378,537)          (950,063)
                                                                                     -----------         ----------
     Total stockholders' equity.................................................        616,972            752,544
                                                                                     -----------         ----------
                                                                                     $   930,623       $ 1,069,416
                                                                                     ===========       ===========
</TABLE>


          See accompanying Notes to Consolidated Financial Statements.



                                      F-54

<PAGE>


                                            ADOBE SYSTEMS INCORPORATED
                                         CONSOLIDATED STATEMENTS OF INCOME
                                       (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                             Years Ended
                                                                  --------------------------------------------------
                                                                   November 30,     December 1,      December 3,
                                                                       2001            2000              1999
                                                                  --------------- ---------------- -----------------
<S>                                                                  <C>             <C>               <C>

Revenue..........................................................    $ 1,229,720     $  1,266,378      $  1,015,434
Direct costs.....................................................         81,451           87,255            94,540
                                                                     ------------    ------------      ------------
Gross profit.....................................................      1,148,269        1,179,123           920,894
                                                                     -----------     ------------      ------------

Operating expenses:
   Research and development......................................        224,122          240,212           197,476
   Sales and marketing...........................................        403,720          401,188           328,505
   General and administrative....................................        115,626          116,528           103,622
   Restructuring and other charges...............................         12,063            5,629            23,028
   Amortization of goodwill and purchased intangibles............         14,281            7,013             4,830
   Acquired in-process research and development..................             --              470             3,580
                                                                     -----------     ------------      ------------

Total operating expenses.........................................        769,812          771,040           661,041
                                                                     -----------     ------------      ------------


Operating income.................................................        378,457          408,083           259,853
                                                                     -----------     ------------      ------------


Nonoperating income (loss), net:
   Investment gain (loss), net...................................        (93,414)          14,345            88,891
   Interest and other income.....................................         21,888           21,311            25,683
                                                                     -----------     ------------      ------------

Total nonoperating income (loss), net............................        (71,526)          35,656           114,574
                                                                     -----------     ------------      ------------

Income before income taxes.......................................        306,931          443,739           374,427
Income tax provision.............................................        101,287          155,931           136,676
                                                                     -----------     ------------      ------------
Net income.......................................................    $   205,644     $    287,808      $    237,751
                                                                     ===========     =============     =============

Basic net income per share......................................     $      0.86     $       1.21      $       0.98
                                                                     ===========     ============      =============


Shares used in computing basic net income per share..............        238,461          238,292           241,572
                                                                     ===========     ============      =============

Diluted net income per share.....................................    $      0.83     $       1.13       $      0.92
                                                                     ===========     ============      =============

Shares used in computing diluted net income per share............        249,145          255,774           258,410
                                                                     ===========     ============      =============

         See accompanying Notes to Consolidated Financial Statements.

</TABLE>
                                      F-55

<PAGE>


                           ADOBE SYSTEMS INCORPORATED
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         AND OTHER COMPREHENSIVE INCOME
                                 (In thousands)

<TABLE>
<CAPTION>

                                  Common Stock and
                                  Additional Paid-in                               Accumulated
                                      Capital                                          Other        Treasury Stock
                                  ------------------    Retained     Comprehensive Comprehensive  --------------------
                                  Shares    Amount      Earnings        Income      Income(Loss)     Shares   Amount         Total
                                  ------    ------      --------     ------------- -------------  ----------- --------     ---------
<S>                              <C>        <C>          <C>          <C>            <C>           <C>       <C>           <C>
Balances as of November 27,
   1998........................  295,764    $ 306,859    $ 732,730            --        (1,879)     (52,200) $(521,345)    $516,365
Comprehensive income:
   Net income..................       --           --      237,751    $  237,751            --            --         --     237,751
   Other comprehensive income,
     net of tax:
   Net unrealized gain on
     investments...............       --           --           --       128,076       128,076            --         --     128,076
   Reclassification adjustment.       --           --           --       (58,570)      (58,570)           --         --     (58,570)
   Tax provision  on above.....       --           --           --       (26,698)      (26,698)           --         --     (26,698)
   Foreign currency
     translation adjustments...       --           --           --          (597)         (597)           --         --        (597)
                                                                      -----------
   Other comprehensive income..       --           --           --        42,211            --            --         --          --
                                                                      -----------
Comprehensive income, net of          --           --           --    $  279,962            --            --         --          --
tax............................                                       ===========
Tax benefit from employee             --       58,478           --            --            --            --         --      58,478
   stock option plans..........
Stock compensation expense.....       --        2,742           --            --            --           278      2,530       5,272
Dividends declared.............       --           --      (12,623)           --            --            --         --     (12,623)
Purchase of treasury stock.....       --           --           --            --            --       (26,212)  (479,161)   (479,161)
Reissuance of treasury stock
   under employee stock and
   stock option plans..........       --           --      (61,619)           --            --        19,448    204,557     142,938
Proceeds from sale of put
   warrants....................       --          978           --            --            --            --         --         978
                                 -------    ---------    ---------      --------       -------       -------- ---------    ---------
Balances as of December 3, 1999  295,764    $ 369,057    $ 896,239            --        40,332       (58,686) $(793,419)   $512,209
Comprehensive income:
   Net income..................       --           --      287,808       287,808            --            --         --     287,808
   Other comprehensive income,
     net of tax:
   Net unrealized loss on
     investments...............       --           --           --       (66,840)      (66,840)           --         --     (66,840)
   Reclassification adjustment.       --           --           --         4,282         4,282            --         --       4,282
   Tax provision on  above.....       --           --           --        24,073        24,073            --         --      24,073
   Foreign currency
     translation adjustments...       --           --           --        (2,545)       (2,545)           --         --      (2,545)
                                                                      ----------
   Other comprehensive loss....       --           --         --         (41,030)           --            --         --          --
                                                                      ----------
Comprehensive income, net of          --           --         --     $  246,778             --            --         --          --
tax............................                                       ==========
Tax benefit from employee             --      124,922        --              --             --            --         --     124,922
   stock option plans..........
Stock compensation expense.....       --       10,896        --              --             --           569      5,603      16,499
Dividends declared.............       --           --   (11,543)             --             --            --         --     (11,543)
Purchase of treasury stock.....       --           --        --              --             --        (7,184)  (255,456)   (255,456)
Reissuance of treasury stock
   under employee stock and
   stock option plans..........       --       25,926                        --             --        10,483     93,209     119,135
                                 --------  ---------- ---------- -------------- --------------     ---------   --------
Balances as of December 1, 2000  295,764    $ 530,801 $1,172,504             --  $        (698)      (54,818) $(950,063)   $752,544
                                 ========  ========== ==========                ==============     =========  =========   =========

</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      F-56

<PAGE>





                           ADOBE SYSTEMS INCORPORATED
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         AND OTHER COMPREHENSIVE INCOME
                                 (In thousands)
                                   (Continued)



<TABLE>
<CAPTION>


                                  Common Stock and
                                  Additional Paid-in                               Accumulated
                                      Capital                                          Other        Treasury Stock
                                  ------------------     Retained     Comprehensive Comprehensive  --------------------
                                  Shares    Amount       Earnings        Income      Income(Loss)     Shares   Amount         Total
                                  ------    ------       --------     ------------- -------------  ----------- --------    ---------
<S>                              <C>        <C>          <C>          <C>           <C>              <C>       <C>         <C>

Balances as of December 1, 2000  295,764   $530,801     $1,172,504            --  $    (698)        (54,818)  $(950,063)   $752,544
Comprehensive income:
   Net income..................       --         --        205,644     $ 205,644         --              --          --     205,644
   Other comprehensive income,
     net of tax:
   Net unrealized loss on
     investments...............       --         --            --        (28,884)    (28,884)            --          --     (28,884)
   Reclassification adjustment.       --         --            --         33,571      33,571             --          --      33,571
   Tax provision on above......       --         --            --         (1,759)     (1,759)            --          --      (1,759)
   Foreign currency translation
     adjustments...............       --         --            --           (894)       (894)            --          --        (894)
   Net gain on derivative
     instruments, net of taxes.       --         --            --          2,582       2,582             --          --       2,582
                                                                         -------
   Other comprehensive income..       --         --            --          4,616          --             --          --          --
                                                                        --------
Comprehensive income, net of tax      --         --            --      $ 210,260          --             --          --          --
                                                                       =========
Tax benefit from employee stock       --     45,692           --              --          --             --          --      45,692
   option plans................
Stock compensation expense.....       --     13,494           --              --          --            458       4,503      17,997
Dividends declared.............       --         --     (11,943)              --          --             --          --     (11,943)
Purchase of treasury stock.....       --         --           --              --          --        (10,598)    (485,115)  (485,115)
Reissuance of treasury stock
   under employee stock and
   stock option plans..........       --     35,399                           --          --          5,213       52,138     87,537
                                 -------  ---------  -----------    -------------- ----------      --------- -----------   --------
Balances as of November 30, 2001 295,764  $ 625,386  $1,366,205               --   $   3,918        (59,745) $(1,378,537)  $616,972
                                 =======  =========  ===========                   ==========      ========= ===========   ========

</TABLE>

          See accompanying Notes to Consolidated Financial Statements.

                                      F-57

<PAGE>

                                            ADOBE SYSTEMS INCORPORATED
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)
<TABLE>
<CAPTION>

                                                                                         Years Ended
                                                                               --------------------------------------
                                                                               November 30,  December 1,  December 3,
                                                                                   2001         2000        1999
                                                                               ------------  -----------  -----------
<S>                                                                             <C>          <C>          <C>
Cash flows from operating activities:
   Net income.......................................................            $ 205,644    $287,808     $237,751
   Adjustments to reconcile net income to net cash provided by operating
     activities:
    Depreciation and amortization...................................               56,645      43,275       50,770
     Stock compensation expense.....................................               17,997      16,499        5,272
     Deferred income taxes..........................................              (17,600)      1,398          694
     Provision for losses on receivables............................                1,435       7,140       (3,319)
     Tax benefit from employee stock option plans...................               45,692     124,922       58,478
     Equity method (gains) loss of Adobe Ventures and cost method
       investments..................................................               59,873     (33,258)     (30,600)
     Loss on other-than-temporary declines of equity securities.....               53,068      26,342           --
     Gains on sales of equity securities............................              (20,054)    (12,660)     (59,377)
     Gain on sale of buildings......................................                   --      (1,052)      (5,729)
     Noncash restructuring and other charges........................                   --       1,011       14,379
     Changes in operating assets and liabilities:
       Receivables..................................................               16,273     (88,487)      65,733
       Other current assets.........................................               (3,552)     (5,407)         842
       Trade and other payables.....................................               (9,389)      4,588      (12,989)
       Accrued expenses.............................................              (61,083)     46,760       21,265
       Accrued restructuring charges................................                9,573      (8,003)     (14,571)
       Income taxes payable.........................................               60,175      31,730        1,257
       Deferred revenue.............................................                4,005       2,020        4,343
                                                                                ---------     -------      -------
Net cash provided by operating activities...........................              418,702     444,626      334,199
                                                                                ---------     -------      -------
Cash flows from investing activities:
   Purchases of short-term investments..............................             (817,173)   (443,875)    (270,960)
   Maturities and sales of short-term investments...................              837,755     305,950      232,973
   Proceeds from the release of restricted funds....................                  --           --      130,260
   Acquisitions of property and equipment...........................              (46,556)    (29,836)     (42,206)
   Purchases of long-term investments and other assets..............              (31,956)    (59,059)     (43,474)
   Acquisitions, net of cash acquired...............................                   --     (24,448)     (36,932)
   Proceeds from sales of buildings.................................                   --       5,420       40,613
   Proceeds from sales of equity securities.........................               31,505      17,788       63,876
                                                                                ----------   ---------     -------
   Net cash provided by (used for) investing activities.............              (26,425)   (228,060)      74,150
                                                                                ----------   ---------     -------

</TABLE>


          See accompanying Notes to Consolidated Financial Statements.


                                      G-58

<PAGE>

                           ADOBE SYSTEMS INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Continued)

<TABLE>
<CAPTION>

                                                                                         Years Ended
                                                                          -----------------------------------------------
                                                                              November 30,    December 1,   December 3,
                                                                                   2001         2000            1999
                                                                          ----------------- ------------- ---------------
<S>                                                                             <C>          <C>           <C>
Cash flows from financing activities:
   Purchase of treasury stock.......................................            (485,115)        (255,456)       (479,161)
   Proceeds from reissuance of treasury stock.......................              87,536          119,135         142,938
   Proceeds from sale of put warrants...............................                  --               --             978
   Payment of dividends.............................................             (12,007)         (11,979)        (12,233)
                                                                          --------------- ---------------- ---------------
Net cash used for financing activities..............................            (409,586)        (148,300)       (347,478)
Effect of foreign currency exchange rates on cash and cash equivalents              (895)          (2,545)           (597)
                                                                          --------------- ---------------- ---------------
Net increase (decrease) in cash and cash equivalents................             (18,204)          65,721          60,274
Cash and cash equivalents at beginning of year......................             236,866          171,145         110,871
                                                                          --------------- ---------------- ---------------
Cash and cash equivalents at end of year............................      $      218,662  $     236,866    $     171,145
                                                                          =============== ================ ===============
Supplemental disclosures:
   Cash paid during the year for income taxes.......................      $       16,862  $      13,195    $      68,770
                                                                          =============== ================ ===============
   Noncash investing and financing activities:
     Cash dividends declared but not paid...........................      $        2,952  $       3,016    $       3,452
                                                                          =============== ================ ===============
       Unrealized gains (losses) on available-for-sale securities, net    $        2,928  $     (38,485)   $      42,808
       of taxes.....................................................
                                                                          =============== ================ ===============

</TABLE>

          See accompanying Notes to Consolidated Financial Statements.



                                      F-59

<PAGE>

                           ADOBE SYSTEMS INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (In thousands, except share and per share data)

Note 1.   Significant Accounting Policies

     Operations

     Founded in 1982, Adobe Systems Incorporated  ("Adobe") builds award-winning
software solutions for Network Publishing, including Web, print, video, wireless
and  broadband  applications.  Its graphic  design,  imaging,  dynamic media and
authoring tools enable customers to create,  manage, and deliver  visually-rich,
reliable  content.  We license our technology to major  hardware  manufacturers,
software  developers,  and service providers,  and we offer integrated  software
solutions to  businesses  of all sizes.  We  distribute  our products  through a
network of distributors and dealers,  value-added  resellers  ("VARs"),  systems
integrators,  and original equipment manufacturers ("OEMs"); direct to end users
through Adobe call centers;  and through our own Web site at  www.adobe.com.  We
have operations in the Americas;  Europe, Middle East, and Africa ("EMEA");  and
Asia.

     Fiscal Year

     Our  fiscal  year is a  52/53-week  year  ending on the  Friday  closest to
November 30.

     Basis of Consolidation

     The accompanying  consolidated  financial statements include those of Adobe
and  our  subsidiaries,  after  elimination  of all  intercompany  accounts  and
transactions.

     The accompanying  consolidated  financial  statements also include those of
Adobe Incentive Partners,  L.P. ("AIP"). AIP holds limited partnership interests
in Adobe  Ventures  L.P. and Adobe  Ventures II, L.P.,  which are  accounted for
using the equity method of accounting.

     Use of Estimates

     In the  preparation of financial  statements in conformity  with accounting
principles  generally  accepted in the United  States of  America,  we must make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and  disclosure  of  contingent  liabilities,  at the  date  of the
financial  statements,  and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

     Cash Equivalents and Short-term Investments

     Cash equivalents  consist of instruments with maturities of three months or
less at the time of purchase.

     We classify all of our cash equivalents and short-term investments that are
free of trading  restrictions or become free of trading  restrictions within one
year as "available-for-sale." We carry these investments at fair value, based on
quoted  market  prices,  and  unrealized  gains and  losses,  net of taxes,  are
included in  accumulated  other  comprehensive  income,  which is reflected as a
separate  component  of  stockholders'  equity.  Realized  gains and  losses are
recognized  when realized in our  consolidated  statements of income.  We have a
policy in place to review our equity  holdings  on a regular  basis to  evaluate
whether or not each security has experienced an other-than-temporary  decline in
fair value.  Our policy  includes,  but is not limited to, reviewing each of the
companies' cash position, earnings/revenue outlook, stock price performance over
the past six months, liquidity and  management/ownership.  If we believe that an
other-than-temporary  decline exists in one of our marketable equity securities,
it is our policy to write down these equity  investments to the market value and
record  the  related  writedown  as  an  investment  loss  on  our  consolidated
statements of income.

     Foreign Currency Translation

     We  translate  assets  and  liabilities  of  foreign  subsidiaries,   whose
functional  currency is the local  currency,  at exchange rates in effect at the
balance  sheet date. We translate  revenues and expenses at the monthly  average
rates of  exchange  prevailing  during  the  year.  We  include  the  adjustment
resulting from translating the financial statements of such foreign subsidiaries
in  accumulated  other  comprehensive  income,  which is reflected as a separate
component of stockholders' equity.  Foreign currency transaction gains or losses
are reported in interest and other income. For the years ended November 30, 2001
and December 1, 2000, we reported  foreign exchange  transaction  losses of $3.2
million  and $1.6  million,  respectively.

                                      F-60

<PAGE>

We also reported net gains on our foreign currency hedges of these  transactions
of $3.2 million and $0.5 million for fiscal years 2001 and 2000, respectively.

     Property and Equipment

     We record property and equipment at cost. Depreciation and amortization are
calculated  using the  straight-line  method over the  shorter of the  estimated
useful lives (thirty-five years for buildings;  two to seven years for furniture
and equipment) or lease terms (five to ten years for leasehold  improvements) of
the respective  assets. We also capitalize  certain costs related to our website
development  in  accordance  with  Statement  of  Position  98-1  ("SOP  98-1"),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use." Amortization on a straight-line  basis begins once the website is
ready for its intended use.

     Other Assets

     Other  assets  includes  goodwill,  purchased  technology,   certain  other
intangible assets, and long-term investments.

     Goodwill,  purchased  technology,  and certain other intangible  assets are
stated at cost less accumulated  amortization.  We record amortization utilizing
the  straight-line  method over the  estimated  useful  lives of the  respective
assets,  generally up to thirteen  years.  Capitalization  of computer  software
development costs, when material, begins upon the establishment of technological
feasibility,  which is generally the completion of a working  prototype that has
been certified as having no critical bugs and is a release  candidate.  To date,
software  development  costs incurred between  completion of a working prototype
and general availability of the related product have not been material.

     Our  long-term   investments   include  direct   investments  and  indirect
investments in privately-held companies. We own limited partnership interests in
four venture capital limited  partnerships,  Adobe Ventures L.P.; Adobe Ventures
II, L.P.;  Adobe Ventures III,  L.P., and Adobe Ventures IV, L.P.  (collectively
"Adobe  Ventures"),  that  invest  in  early  stage  companies  with  innovative
technologies.  In addition to the potential for financial  returns,  our venture
activities increase our knowledge of emerging markets and technologies,  as well
as expand our ecosystem of Adobe  products and services.  The  partnerships  are
managed  by Granite  Ventures,  an  independent  venture  capital  firm and sole
general partner of Adobe Ventures.

     The investments in Adobe Ventures are accounted for using the equity method
of accounting,  and  accordingly,  the  investments  are adjusted to reflect our
share of Adobe Ventures'  investment  income (loss) and dividend  distributions.
Adobe  Ventures carry their  investments in equity  securities at estimated fair
market value and unrealized  gains and losses are included in investment  income
(loss).  The stock of a number of  technology  investments  held by the  limited
partnerships at November 30, 2001 are not publicly traded, and, therefore, there
is no established market for their securities.  As such, the fair value of these
investments  are  determined by Granite  Ventures using the most recent round of
financing  involving new  non-strategic  investors or estimates  made by Granite
Ventures.  We have a  policy  in  place  to  review  the  fair  value  of  these
investments  held by Adobe  Ventures on a regular basis to evaluate the carrying
value of the investments in these companies.  This policy  includes,  but is not
limited to,  reviewing each of the companies'  cash position,  financing  needs,
earnings/revenue outlook, operational performance, management/ownership changes,
and competition.  The evaluation process is based on information that we request
from these privately-held companies. This information is not subject to the same
disclosure  regulations  as U.S.  public  companies,  and as such, the basis for
these evaluations is subject to the timing and the accuracy of the data received
from these  companies.  If we believe  that the  carrying  value of a company is
carried  at an  amount in excess  of fair  value,  it is our  policy to record a
reserve in addition to our equity method of accounting and the related writedown
is recorded as an investment loss on our consolidated statements of income.

     We  recognize  realized  gains and losses  upon sale or  maturity  of these
investments using the specific identification method.



     Impairment of Long-lived Assets

     We currently evaluate our long-lived assets, including goodwill and certain
identifiable  intangibles,  in  accordance  with the  provisions of Statement of
Financial  Accounting  Standards  No.  121  ("SFAS  121"),  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of,"
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying  amount  of such  assets  or  intangibles  may not be  recoverable.  We
consider  factors  such as  significant  changes  in the  business  climate  and
projected discounted cash flows from the respective asset. Impairment

                                      F-61

<PAGE>

losses  are  measured  as the amount by which the  carrying  amount of the asset
exceeds its fair value. In July 2001, the Financial  Accounting  Standards Board
("FASB")  issued  Statement of  Financial  Accounting  Standards  No. 142 ("SFAS
142"),  "Goodwill and Other Intangible Assets." SFAS 142 requires goodwill to be
tested for impairment at least annually,  and written off when impaired,  rather
than being  amortized  as previous  standards  required.  We will adopt SFAS 142
beginning in our fiscal year 2003. We are currently assessing the impact of SFAS
142 on our operating results and financial  condition.  In August 2001, the FASB
issued  Statement  of  Financial  Accounting  Standards  No. 144  ("SFAS  144"),
"Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to be  Disposed  Of,"  and the
accounting  and reporting  provisions of APB No. 30,  "Reporting  the Results of
Operations  for a Disposal of a Segment of a  Business".  We will adopt SFAS 144
beginning in our fiscal year 2003.  We do not expect the adoption of SFAS 144 to
have a material impact on our financial position or results of operations.

     Stock Splits

     Adobe's Board of Directors  approved two separate  two-for-one stock splits
in the form of stock  dividends  of our common  stock to  stockholders  effected
October 24, 2000 and October 26, 1999. All share and per share amounts  referred
to in the consolidated  financial statements have been adjusted to reflect these
stock splits.

     Employee Stock Plans

     We account  for our  employee  stock  plans,  which  consist of fixed stock
option plans,  an employee stock purchase plan, and a performance and restricted
stock plan, using the intrinsic value method.

     Revenue Recognition

     In fiscal 2000,  we adopted  Statement  of Position No. 98-9 ("SOP  98-9"),
"Modifications  of SOP 97-2,  Software  Revenue  Recognition,  With  Respect  to
Certain  Transactions."  The  adoption  of SOP 98-9  did not have a  significant
impact on our financial position or results of operations.

     We recognize  application products revenue upon shipment,  net of estimated
returns,   provided  that  collection  is  determined  to  be  probable  and  no
significant obligations remain. Application product revenue from distributors is
subject to agreements  allowing  limited  rights of return,  rebates,  and price
protection.  Accordingly,  we reduce  revenue  recognized  for estimated  future
returns,  price  protection  when  given,  and  rebates at the time the  related
revenue is recorded.  The estimates for returns are adjusted  periodically based
upon historical rates of returns,  inventory levels in the distribution channel,
and other  related  factors.  The  estimates  and reserves for rebates and price
protection are based on historical rates.

     We provide free technical phone support to customers who are under warranty
for support.  We accrue the estimated cost of free technical  phone support upon
shipment of software  and amortize  the accrued  internal  and external  cost of
telephone support to sales and marketing expense.

     We also license  software with  post-contract  customer support ("PCS") for
two years.  PCS includes  rights to upgrades,  when and if available,  a limited
period of telephone support,  updates, and bug fixes. Statement of Position 97-2
("SOP 97-2"),  "Software Revenue  Recognition," as amended,  generally  requires
revenue  earned on  software  arrangements  involving  multiple  elements  to be
allocated to each element based on the relative fair value of the elements.  The
arrangement fee for  multiple-element  arrangements is allocated to each element
of the  arrangement,  such as  maintenance  and support  services,  based on the
relative  fair  values of the  elements.  We  determine  the fair  value of each
element  in  multi-element   arrangements  based  on  vendor-specific  objective
evidence ("VSOE").  VSOE for each element is based on the price charged when the
same element is sold  separately.  If evidence of fair value of all  undelivered
elements exists but evidence does not exist for one or more delivered  elements,
then revenue is recognized using the residual method. Under the residual method,
the fair value of the undelivered elements is deferred and the remaining portion
of  the  arrangement  fee  is  recognized  as  revenue.   Revenue  allocated  to
maintenance  and  support  is  recognized  ratably  over  the  maintenance  term
(typically two years).

     We record OEM licensing  revenue,  primarily  royalties,  when OEM partners
ship products incorporating Adobe software,  provided collection of such revenue
is  deemed  probable.  We have no  remaining  obligations  in  relation  to such
licensing revenue.

     We also recognize  revenue under a  subscription-based  model for our Adobe
Studio website,  which we launched in the fourth quarter of fiscal 2001. Revenue
is  recognized  on a monthly  basis from fees  received that month for providing
software subscriptions for our hosted application.


                                      F-62
<PAGE>


     Deferred revenue includes customer advances under OEM licensing  agreements
and  maintenance  revenue  for  application   products.  We  recognize  deferred
maintenance revenue ratably over the term of the contract, generally twenty-four
months.  In cases where we will provide a specified  free upgrade to an existing
product, we defer revenue until the future obligation is fulfilled.

     We perform ongoing credit evaluations of our customers' financial condition
and generally do not require  collateral.  We maintain  allowances for potential
credit losses and such losses have been within our expectations.

     Direct Costs

     Direct costs include the costs  associated  with the  manufacturing  of our
products,  product  packaging,   third-party  royalties,   excess  and  obsolete
inventory, amortization related to localization costs and acquired technologies,
and hosted server costs.

     Advertising Costs

     We expense all advertising costs as incurred and classify these costs under
sales and marketing expense.

     Advertising costs for fiscal years 2001, 2000, and 1999 were $30.5 million,
$32.9 million, and $22.4 million, respectively.

     Income Taxes

     We use the asset and liability method of accounting for income taxes. Under
the asset and liability method, we recognize deferred tax assets and liabilities
for  the  future  tax  consequences  attributable  to  differences  between  the
financial  statement  carrying  amounts and the tax basis of existing assets and
liabilities. We record a valuation allowance to reduce deferred tax assets to an
amount whose realization is more likely than not.

     Foreign Currency and Other Hedging Instruments

     On December 2, 2000, we adopted Statement of Financial Accounting Standards
No. 133  ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and  Hedging
Activities."  SFAS  133  establishes  accounting  and  reporting  standards  for
derivative instruments and hedging activities and requires us to recognize these
as either  assets or  liabilities  on the balance sheet and measure them at fair
value. As described in Note 15, gains and losses  resulting from changes in fair
value are accounted for depending on the use of the derivative and whether it is
designated and qualifies for hedge  accounting.  The adoption of this accounting
standard did not have a material impact on our financial  position or results of
operations.

     Prior to our adoption of SFAS 133, we accounted for our  derivatives  under
SFAS 52, "Foreign Currency Translation."

     Put Warrants and Call Options

     We utilize put warrants and call options  ("puts and calls") to  facilitate
the repurchase of our common stock.  Our put and call option  contracts  provide
that we, at our option, 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.  Accordingly,  these  investments  are  initially
measured  at fair  value and  reported  in  stockholders'  equity as  additional
paid-in-capital.  Subsequent changes in fair value are not recognized.  If these
instruments  are  settled  through  the  payment or receipt of cash,  additional
paid-in-capital is adjusted.

     Comprehensive Income

     Statement  of  Financial   Accounting   Standards  No.  130  "(SFAS  130"),
"Reporting  Comprehensive  Income," establishes  standards for the reporting and
display of comprehensive income and its components in the financial  statements.
Items of  comprehensive  income (loss) that we currently  report are  unrealized
gains and losses on marketable  securities  categorized  as  available-for-sale,
foreign  currency  translation  adjustments,  and gains and losses on derivative
instruments  qualifying  as cash flow  hedges,  such as (i) hedging a forecasted
transaction,  (ii) the  variability of cash flows to be received or paid related
to a  recognized  asset or  liability  ("cash flow  hedge"),  or (iii) a foreign
currency cash-flow hedge. We display  comprehensive income and its components on
our  Consolidated  Statements of  Stockholders'  Equity and Other  Comprehensive
Income.

                                      F-63
<PAGE>

     Recent Accounting Pronouncements

     In July 2001, the Financial  Accounting Standards Board (the "FASB") issued
Statement of Financial  Accounting  Standards  No. 141 ("SFAS  141"),  "Business
Combinations." This Statement requires all business combinations to be accounted
for using the purchase  method of accounting  and  redefines  goodwill and other
intangibles  that  should be  recognized  separate  from  goodwill.  SFAS 141 is
effective for all business combinations initiated after June 30, 2001.

     In July 2001,  the FASB  issued  SFAS 142.  This  Statement  requires  that
goodwill and other  intangibles with an indefinite useful life not be amortized,
but be tested for impairment at least annually. SFAS 142 is effective for fiscal
years beginning after December 15, 2001; however, for new business  combinations
that occur after June 30, 2001, SFAS 142 is effective for those transactions. We
will  adopt  SFAS 142  beginning  in our  fiscal  year  2003.  We are  currently
evaluating  the  impact  of SFAS 142 on our  financial  statements  and  related
disclosures.

     In June 2001, the FASB issued Statement of Financial  Accounting  Standards
No.  143 ("SFAS  143"),  "Accounting  for Asset  Retirement  Obligations."  This
Statement   addresses   financial   accounting  and  reporting  for  obligations
associated with the retirement of tangible  long-lived assets and the associated
asset retirement costs.  This Statement applies to legal obligations  associated
with the  retirement  of  long-lived  assets that  result from the  acquisition,
construction,  development,  or  normal  use of  the  asset.  As  used  in  this
Statement,  a legal obligation  results from existing law,  statute,  ordinance,
written or oral  contract,  or by legal  construction  of a  contract  under the
doctrine  of  promissory  estoppel.  SFAS  143 is  effective  for  fiscal  years
beginning after June 15, 2002. We do not expect the adoption of SFAS 143 to have
a material impact on our financial position or results of operations.

     In  August  2001,  the FASB  issued  SFAS  144.  This  Statement  addresses
financial  accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to be Disposed  Of," and the  accounting  and
reporting  provisions of APB No. 30,  "Reporting the Results of Operations for a
Disposal of a Segment of a  Business."  SFAS 144 is  effective  for fiscal years
beginning  after  December  15,  2001.  We will adopt SFAS 144  beginning in our
fiscal year 2003.  We do not expect the  adoption of SFAS 144 to have a material
impact on our financial position or results of operations.

     In  November  2001,  the  Emerging  Issues  Task Force  ("EITF")  reached a
consensus on EITF No. 01-09,  "Accounting for Consideration Given by a Vendor to
a Customer or a Reseller of the Vendor's  Products." EITF No. 01-9 addresses the
accounting  for  consideration  given  by  a  vendor  to  a  customer  and  is a
codification of EITF No. 00-14,  "Accounting for Certain Sales Incentives," EITF
No. 00-22, "Accounting for 'Points' and Certain Other Time-Based or Volume-Based
Sales Incentives Offers and Offers for Free Products or Services to be Delivered
in the Future," and EITF No. 00-25, "Vendor Income Statement Characterization of
Consideration  Paid to a Reseller of the Vendor's  Products." We are  evaluating
the  impact  of EITF No.  01-09  and do not  believe  the  adoption  will have a
material impact on our financial statements.

                                      F-64

<PAGE>

Reclassifications

     We made certain  reclassifications to our fiscal 2000 presentation of other
assets by reclassifying  certain intangible assets from purchased technology and
licensing  agreements to intangibles and other assets,  to conform to the fiscal
2001 presentation. These reclassifications did not impact total assets in fiscal
2000.

     We made certain  reclassifications to our fiscal 2000 and 1999 reporting of
our Comprehensive Income on our Consolidated  Statements of Stockholder's Equity
and Other Comprehensive Income to comply with SFAS 130. These  reclassifications
did not impact our total stockholder's equity in fiscal 2000 or 1999.

Note 2.   Acquisitions

     During  the  fourth   quarter  of  fiscal   2000,   we   acquired   Boston,
Massachusetts-based  Glassbook, Inc. ("Glassbook").  Glassbook is a developer of
consumer and  commercial  software for the eBook market,  automating  the supply
chain for publishers, booksellers,  distributors, and libraries. The acquisition
was  accounted for using the purchase  method of  accounting in accordance  with
Accounting Principles Board Opinion No. 16 ("APB 16"), "Business  Combinations."
The purchase price of the acquisition was approximately  $24.4 million cash plus
additional  liabilities  assumed  of  approximately  $3.6  million.  Based on an
independent  appraiser's  valuation,  $0.5  million  of the  purchase  price was
allocated  to  in-process  research  and  development  due to the  state  of the
development and the uncertainty of the technology and expensed upon acquisition.
The  remaining  $27.5  million was  allocated  $26.9  million to goodwill,  $0.4
million to intangible assets, and $0.2 million to other assets. The goodwill and
intangible  assets are  amortized  on a  straight-line  basis over a  three-year
period.  The ongoing  project at Glassbook at the time of the purchase  included
the  development  of the  Glassbook  Reader  and the  Glassbook  Content  Server
products.  We released new products that  contained the purchased  technology in
April 2001, with Acrobat eBook Reader 2.1 and Adobe Content Server 2.0.

     During the fourth quarter of fiscal 1999, we acquired  substantially all of
the assets,  consisting of  intellectual  property,  of Attitude  Software,  LLC
("Attitude  Software").  The  acquisition  was  accounted for using the purchase
method of  accounting in accordance  with APB 16, and  substantially  all of the
purchase  price of $3.0 million cash was  allocated to  in-process  research and
development  and  expensed at the time of  acquisition.  The ongoing  project at
Attitude Software at the time of the purchase included the development of the 3D
Anarchy authoring  product.  We purchased this technology to incorporate it into
future  versions of existing Adobe products to further  enhance the feature sets
and user  interface  contained  within the products.  We are  incorporating  the
purchased technology into one of our products,  which has not yet been released.
At the date we acquired  Attitude  Software,  it was  estimated  that 50% of the
development  effort  had  been  completed  and  that  the  remaining  50% of the
development  effort  would take  approximately  eighteen  months to complete and
would cost $1.8 million. The efforts required to complete the development of the
technology  primarily  related to  additional  design  efforts to integrate  the
technology into several of our products,  finalization of coding, and completion
testing. The value of the in-process technology was determined by estimating the
projected net cash flows related to products the  technology  will be integrated
into,  including  costs to complete the  development  of the  technology and the
future net revenues  that may be earned from the  products,  excluding the value
attributed to the existing technology with the products prior to the integration
of the purchased technology.  These cash flows were discounted back to their net
present value using a discount rate of 20%,  exclusive of the value attributable
to the use of the in-process technologies in future products.

     Additionally,  during  the  fourth  quarter  of fiscal  1999,  we  acquired
substantially  all  of the  assets,  consisting  of  intellectual  property,  of
Photomerge  Technology.   In  connection  with  the  acquisition  of  Photomerge
Technology,  100% of the purchase  price, or $0.6 million cash, was allocated to
in-process  research and  development,  due to the state of  completion  and the
uncertainty of the technology.  The purchased  technology was incorporated  into
our Photoshop Elements product, which we released in April 2001.

     On  December  22,  1998,  we  acquired  substantially  all of  the  assets,
consisting of  intellectual  property and a minimal  amount of fixed assets,  of
both GoLive Systems,  Inc., a Delaware corporation,  and GoLive Systems GmbH and
Co. KG, a German limited partnership (together "GoLive Systems"). GoLive Systems
creates Web site  development  software,  which enables users to effectively use
the Internet for professional publishing and communication.  The acquisition was
accounted for under the purchase method of accounting in accordance with APB 16.
The initial  purchase price of the acquisition was  approximately  $31.0 million
cash,  plus  additional  contingency  payments  of up to $8.0  million  based on
achieving  certain  technical and  employment  milestones.  We  determined  that
certain  milestones  had been  reached  as of March 5, 1999,  and as such,  $4.0
million in contingent  payments were recorded as additional  purchase  price and
paid throughout fiscal 1999.  Approximately  $11.4 million of the purchase price
was allocated to the developed  technology,  and the remaining $23.6 million was
allocated to  trademark,  the value of the  assembled  workforce,  and goodwill.
These are amortized on a straight-line basis over a five-year period.


                                      F-65
<PAGE>


Note 3.   Cash, cash equivalents, and short-term investments

          Cash, cash equivalents,  and short-term  investments consisted of  the
following:


<TABLE>
<CAPTION>
                                                                                    As of November 30, 2001
                                                                      ----------------------------------------------------
                                                                       Carrying    Unrealized   Unrealized     Estimated
                                                                         Value       Gains        Losses      Fair Value
                                                                      ------------ -----------  ------------  ------------

<S>                                                                  <C>           <C>          <C>           <C>
Classified as current assets:
   Cash........................................................       $   22,039   $       --   $        --    $   22,039
                                                                      ------------ -----------  ------------   ----------
   Cash equivalents:
     Money market mutual funds.................................          120,699           --           --        120,699
     State and municipal bonds and notes.......................           75,910           14                      75,924
                                                                      ------------ -----------  ------------   ----------
        Total cash equivalents..................................         196,609           14            --       196,623
                                                                      ------------ -----------  ------------   ----------
       Total cash and cash equivalents...........................        218,648           14            --       218,662
                                                                      ------------ -----------  ------------   ----------
   Short-term investments:
     State and municipal bonds.................................          319,392        2,947           (253)     322,086
     United States Treasury Notes..............................            3,079            8             --        3,087
     Other marketable equity securities, including
       equity hedging instruments*.............................           26,339       11,439             --       37,778
                                                                      ------------ -----------  ------------  -----------
       Total short-term investments............................          348,810       14,394           (253)     362,951
                                                                      ------------ -----------  ------------  -----------
Total cash, cash equivalents, and                                     $  567,458   $   14,408   $       (253)  $  581,613
     short-term investments....................................       ============ ===========  ============  ===========

</TABLE>

<TABLE>
<CAPTION>
                                                                                    As of December 1, 2000
                                                                      ----------------------------------------------------
                                                                       Carrying    Unrealized   Unrealized     Estimated
                                                                         Value       Gains        Losses      Fair Value
                                                                      ------------ -----------  ------------  ------------
 <S>                                                                  <C>           <C>          <C>           <C>
Classified as current assets:
   Cash........................................................       $   11,997   $        --   $        --  $     11,997
                                                                      ------------ -----------  ------------ -------------
   Cash equivalents:
     Money market mutual funds.................................          198,629            --            --       198,629
     State and municipal bonds and notes.......................           26,240            --            --        26,240
                                                                      ------------ -----------  ------------ -------------
       Total cash equivalents..................................          224,869            --            --       224,869
                                                                      ------------ -----------  ------------ -------------
     Total cash and cash equivalents...........................          236,866            --            --       236,866

   Short-term investments:
     State and municipal bonds.................................           340,091          536          (589)      340,038
     Other marketable equity securities, including
       equity hedging instruments*.............................            92,527       31,629       (23,211)      100,945
     Corporate notes...........................................             1,994           10            --         2,004
                                                                      ------------ -----------  ------------ -------------
         Total short-term investments............................         434,612       32,175       (23,800)      442,987
                                                                      ------------ -----------  ------------ -------------
 Total cash, cash equivalents, and                                     $  671,478   $   32,175   $   (23,800) $   679,853
     short-term investments....................................       ============ ===========  ============ =============

</TABLE>

*    The  carrying  value  of  other  marketable  equity   securities   includes
     other-than-temporary declines in the fair value of these securities.

     Approximately   $196.6  million  and  $224.9  million  in  investments  are
classified  as cash  equivalents  as of November  30, 2001 and December 1, 2000,
respectively.  Unrealized  gains  (losses)  on  securities,  net of  taxes,  are
included  in  accumulated  other  comprehensive  income,  which  is  a  separate
component of stockholders'  equity, and totaled $8.1 million and $5.1 million as
of November 30, 2001 and December 1, 2000, respectively.

     We recorded  net  realized  gains  (losses)  from the sale of fixed  income
investments  for the year ended  November  30, 2001 and December 1, 2000 of $5.8
million and  $(70,000),  respectively.  We also recorded net realized gains from
the sale of our short-term  equity  investments for the years ended November 30,
2001 and December 1, 2000 of $19.5 million and $12.7 million,  respectively.  In
addition,  we recorded  losses related to  other-than-temporary  declines in the
fair value of our marketable  equity  securities  totaling $53.1 million for the
year ended  November 30, 2001 and $16.9  million for the year ended  December 1,
2000. (See Note 1 for our policy on recording  other-than- temporary declines in
our  marketable  equity

                                      F-66

<PAGE>

securities.)  All of the above gains and losses were included in investment gain
(loss) on our consolidated statements of income.

     As of November 30, 2001,  the cost and estimated fair value of current debt
securities  and money  market  mutual  funds with a maturity of one year or less
were $287.9 million and $288.8 million, respectively, and the cost and estimated
fair value of current debt securities  with maturities  ranging from one to five
years was $225.9 million and $227.8 million, respectively.  These securities are
classified as current  assets based on the  Company's  intent and ability to use
these  securities  as  necessary  to satisfy  significant  short-term  liquidity
requirements that may arise.

Note 4.   Property and Equipment

     Property and equipment consisted of the following:

                                                   November 30,     December 1,
                                                      2001             2000
                                                   ------------     ------------

Land.............................................. $  3,382          $     --
Equipment.........................................  139,850           140,205
Furniture and fixtures............................   25,150            24,824
Capital projects in-progress......................   12,593             7,915
Leasehold improvements............................   38,384            27,013
                                                   --------          --------
                                                    219,359           199,957
Less accumulated depreciation and amortization....  138,366           135,689
                                                   $ 80,993          $ 64,268
                                                   ========          ========

     We  capitalize  certain  costs  related  to  our  website   development  in
accordance with SOP 98-1. We amortize on a straight-line  basis over eighteen to
thirty-six  months once the website is ready for its  intended  use. We launched
Adobe Studio in fiscal 2001, and subsequently  recorded  amortization expense of
$0.9  million.  As of  November  30,  2001,  the amount of  unamortized  website
development cost was $8.5 million.

     Depreciation, which includes the amortization for website development cost,
for the years ended  November 30, 2001,  December 1, 2000,  and December 3, 1999
was $29.8 million, $29.3 million, and $32.6 million, respectively.


Note 5.   Other Assets

     Other assets consisted of the following:


                                                     November 30,   December 1,
                                                         2001          2000
                                                     ------------  -------------
Investments........................................   $   31,703    $     72,490
Goodwill...........................................       53,679          53,679
Purchased technology and licensing agreements......       16,754          16,703
Intangibles and other assets.......................       13,603           7,719
                                                     ------------  -------------
                                                         115,739         150,591
Less accumulated amortization......................       45,067          23,355
                                                     ------------  -------------
                                                      $   70,672    $    127,236
                                                     ============  =============

     We own a minority  interest in certain  companies  and limited  partnership
interests in Adobe Ventures.  The limited partnership  investments are accounted
for under the equity method, as contractually the partnerships are controlled by
Granite Ventures,  an independent  venture capital firm and sole general partner
of Adobe Ventures.

     In March 1997, as part of our venture investing program,  we established an
internal limited  partnership,  Adobe Incentive  Partners,  L.P. ("AIP"),  which
allows  certain of Adobe's  executive  officers to  participate in cash or stock
distributions  from  Adobe's  venture  investments.  Assets  held by AIP include
Adobe's entire  interests in Adobe Ventures L.P. and Adobe Ventures II, L.P. and
certain equity securities of privately-held companies. Adobe is both the general
partner and a limited  partner of AIP.  Other  limited  partners  are  executive
officers  and former  executive  officers  of Adobe who are or were  involved in
Adobe's venture investing activities and whose participation was deemed critical
to the success of the program.

     The  investments  in Adobe Ventures  L.P.;  Adobe Ventures II, L.P.;  Adobe
Ventures III,  L.P.;  and Adobe  Ventures IV, L.P.,  which were  established  to
invest in emerging technology  companies strategic to Adobe's software business,
totaled  $4.2

                                      F-67

<PAGE>

million,  $7.8 million,  $12.8 million, and $11.7 million,  respectively,  as of
November 30, 2001, and totaled $4.8 million,  $15.7 million,  $44.2 million, and
$4.1  million,  respectively,  as of December 1, 2000.  Our  investments  in the
limited  partnerships  are  adjusted  to reflect  our equity  interest  in Adobe
Ventures  L.P.;  Adobe  Ventures II, L.P.;  Adobe  Ventures III, L.P.; and Adobe
Ventures IV, L.P.'s investment income (loss) and dividend  distributions,  which
totaled $(49.2) million,  $0.4 million,  and $12.4 million in fiscal years 2001,
2000, and 1999, respectively.

     We  have  commitments  to  the  Adobe  Venture  limited  partnerships.  The
following table shows the capital  commitments and the capital contributed as of
November 30, 2001:

                              Capital Commitment          Capital Contributed
                              ------------------          -------------------
   Adobe Ventures L.P.           $ 40,000,000                $ 40,475,757
   Adobe Ventures II, L.P.       $ 40,000,000                $ 36,947,363
   Adobe Ventures III, L.P.      $ 60,000,000                $ 56,162,222
   Adobe Ventures IV, L.P.       $ 100,000,000               $ 18,292,333

     The capital commitment is the amount that Adobe has agreed to contribute to
the Partnership.  The capital  commitment amount is contributed over the term of
each Partnership, which is ten years. We can cease funding at any time after the
earlier of: a) two years after the effective  date of the  Partnership or b) the
date on which the Company has made capital  contributions  to the Partnership in
an amount in excess of $10.0 million,  $10.0 million,  $20.0 million,  and $33.0
million for Adobe  Ventures L.P.,  Adobe Ventures II, L.P.,  Adobe Ventures III,
L.P., and Adobe Ventures IV, L.P., respectively.

     In addition to these venture  partnerships,  we have direct  investments in
public and privately-held  companies. In total, as of November 30, 2001, we have
invested $194.9 million through our venture partnerships and direct investments.
And as of November 30, 2001, net returns were $354.3  million,  including  stock
dividends and net gains in market value of investments.

     The investments in Adobe Ventures are accounted for using the equity method
of accounting,  and  accordingly,  the  investments  are adjusted to reflect our
share of Adobe Ventures'  investment  income (loss) and dividend  distributions.
Adobe  Ventures carry their  investments in equity  securities at estimated fair
market value and unrealized  gains and losses are included in investment  income
(loss).  The stock of a number of  technology  investments  held by the  limited
partnerships at November 30, 2001 are not publicly traded, and, therefore, there
is no established market for their securities.  As such, the fair value of these
investments  are  determined by Granite  Ventures using the most recent round of
financing  involving new  non-strategic  investors or estimates  made by Granite
Ventures.  We have a  policy  in  place  to  review  the  fair  value  of  these
investments  held by Adobe  Ventures on a regular basis to evaluate the carrying
value of the investments in these companies.  This policy  includes,  but is not
limited to,  reviewing each of the companies'  cash position,  financing  needs,
earnings/revenue outlook, operational performance, management/ownership changes,
and competition.  The evaluation process is based on information that we request
from these privately-held companies. This information is not subject to the same
disclosure  regulations  as U.S.  public  companies,  and as such, the basis for
these evaluations is subject to the timing and the accuracy of the data received
from these  companies.  If we believe  that the  carrying  value of a company is
carried  at an  amount in excess  of fair  value,  it is our  policy to record a
reserve in addition to our equity method of accounting and the related writedown
is recorded as an investment loss on our consolidated statements of income.

     We own minority  interests in certain  technology  companies  totaling $0.7
million  and $3.8  million  as of  November  30,  2001  and  December  1,  2000,
respectively.

     As of November 30, 2001,  our  portfolio of  investments  included in Other
Assets had an estimated fair market value of $31.7 million.

     As of November 30, 2001,  intangibles and other assets consisted  primarily
of capitalized localization costs of $9.1 million and other intangible assets of
$4.5  million.  As of December 1, 2000,  intangibles  and other  assets  consist
primarily of capitalized localization costs of $4.5 million and other intangible
assets of $3.2  million.  Amortization  expense  related to goodwill,  purchased
technology,  capitalized  localization,  and other  intangible  assets was $26.8
million and $14.0 million in fiscal 2001 and 2000, respectively.


Note 6.   Accrued Expenses

     Accrued expenses consisted of the following:


                                                 November 30,     December 1,
                                                    2001             2000
                                                --------------  ---------------

                                      F-68

<PAGE>

                                                --------------  ---------------

Accrued compensation and benefits......        $       44,555    $      96,162
Sales and marketing allowances.........                 4,956            6,435
Minority interest......................                   544            1,999
Other..................................                69,203           77,265
                                                ---------------  -------------
                                                $     119,258    $     181,861
                                                ===============  =============

Note 7.   Restructuring and Other Charges

     Fiscal 2001 restructuring program

     In the fourth quarter of fiscal 2001, we implemented a  restructuring  plan
to  realign  our  workforce  to our  future  strategic  goals  and to align  our
resources with our fiscal 2002 revenue  targets.  We believe this  restructuring
will enable us to increase our investment in digital imaging, digital video, and
ePaper-based businesses in fiscal 2002. As part of the restructuring program, we
implemented  a  reduction  in force of 247  positions,  affecting  organizations
throughout  the  company.  The  reductions  came  predominantly  from  sales and
marketing and in our North American operations, and as of November 30, 2001, the
majority of these  terminations  were completed.  Total  restructuring and other
charges was $12.1 million, of which all related to severance and related charges
associated  with the reduction in force.  Of the $12.1 million in charges,  $9.6
million  remains  accrued at November 30, 2001. The majority of these  severance
payments will be paid in early 2002.

     The following table depicts the restructuring and other charges at November
30, 2001:

<TABLE>
<CAPTION>

                                                Accrual Balance                                         Accrued Balance
                                                       at             Total Charges                           at
                                                December 1, 2000        (Credits)          Cash         November 30, 2001
                                                -----------------   ------------------   ------------   -----------------
<S>                                             <C>                  <C>                  <C>            <C>
Severance and related charges.................. $             --     $         12,063     $    (2,490)   $         9,573
                                                =================   ==================   =============  =================


</TABLE>

     During fiscal 1999 and 1998, we implemented  three different  restructuring
programs.  These  separate  restructuring  programs  were  directly  focused  on
improving  our  competitive  position as well as  enhancing  our  allocation  of
resources.

     During  the  second   quarter  of  fiscal  2000,   we  paid  our  remaining
obligations,  totaling $8.0 million, related to the three fiscal 1999 and fiscal
1998 restructuring  programs.  In addition to the cash payments made, we revised
our  estimate of the total costs  associated  with the  restructuring  programs,
resulting  in an  adjustment  of  approximately  $0.7  million.  The  adjustment
primarily   reflected  lower  than  estimated   severance  and  related  charges
attributable  to employees  whose  positions were  eliminated as a result of the
restructurings  but who were able to find alternative  employment  within Adobe.
The  remaining  adjustment  was due to lower than  expected  charges  related to
vacating leased  facilities.  As of December 1, 2000, there was no restructuring
liability  remaining for our fiscal 1999 and 1998  restructuring  programs.  The
tables below show the  breakdown of the cash  payments and  adjustments  made in
fiscal 2000 for the three separate restructuring programs.

     Fiscal 1999 restructuring programs

     The fourth quarter 1999  restructuring  program was  implemented to enhance
our  worldwide   customer   support  activity  and  to  streamline  the  product
distribution  and warehouse  operations  in North  America.  This  restructuring
program  included a reduction  in force of 86  positions  and the closure of the
North American  distribution  warehouse as a result of our decision to outsource
our North  American  distribution  operation  and the  majority of our  customer
support  services.  The  reduction  in force  primarily  affected  employees  in
Seattle,  Washington  and Santa Clara,  California.  We incurred $2.1 million in
total  charges  in  the  fourth  quarter  of  fiscal  1999  as a  result  of the
restructuring,  which included severance and related charges associated with the
reduction in force and charges  related to vacating  leased  facilities.  During
fiscal 2000,  we paid our remaining  obligation,  and as of December 1, 2000, no
restructuring liability existed.

     The  following  table  depicts  the  activity  for the 1999  fourth-quarter
restructuring program through December 1, 2000:

<TABLE>
<CAPTION>

                                                         Accrued Balance at                                  Accrued Balance at
                                                          December 3, 1999           Cash Payments           December 1, 2000
                                                        ---------------------   -----------------------    --------------------
<S>                                                     <C>                     <C>                             <C>
Severance and related charges...................        $          1,953        $       (1,953)                  $  --
Lease termination costs.........................                     103                  (103)                     --
                                                        ---------------------   ------------------------   --------------------
                                                        $          2,056        $       (2,056)                  $  --
                                                        =====================   ========================   ====================

</TABLE>

                                      F-69

<PAGE>

     The 1999  restructuring  program that we implemented  throughout the second
and third quarters of fiscal 1999 was directly related to the  centralization of
our worldwide sales and administrative  organizations and the realignment of our
Printing Solutions  business.  This program included a reduction in force of 198
positions,  two of  which  were  executive  positions.  The  reduction  in force
primarily  affected our European  headquarters  in  Edinburgh,  Scotland and our
North American  headquarters in San Jose,  California.  In addition to severance
and related charges  associated with the reduction in force,  the  restructuring
program included  charges for vacating leased  facilities.  These  restructuring
actions  in the second  and third  quarters  of fiscal  1999  resulted  in total
charges of $17.6  million,  of which  approximately  $0.1  million  were noncash
charges.  During fiscal 2000, we paid our remaining  obligation  related to this
restructuring  program,  and as of December 1, 2000, no restructuring  liability
existed.

     The  following  table  depicts  the  activity  for the 1999  second-quarter
restructuring program through December 1, 2000:

<TABLE>
<CAPTION>

                                                             Accrued                                         Accrued
                                                            Balance at                                      Balance at
                                                            December 3,       Cash                          December 1,
                                                               1999         Payments      Adjustments          2000
                                                          ---------------  ------------  ---------------   --------------
<S>                                                       <C>              <C>            <C>              <C>

Severance and related charges......................       $      5,207     $   (4,787)    $      (420)      $     --
Lease termination costs............................                435           (426)             (9)            --
Other charges......................................                205           (205)              --            --
                                                          ---------------  ------------  ---------------   --------------
                                                          $      5,847     $   (5,418)    $       (429)     $     --
                                                          ===============  ============  ===============   ==============
</TABLE>

                                      F-70

<PAGE>

     Fiscal 1998 restructuring program

     The 1998  restructuring  program  was  implemented  to refocus  our product
development   efforts  and  to   eliminate   management   redundancies   in  our
organization.  This program  consisted of severance and related  charges for 364
positions,  four of which were executive positions. In addition, we divested two
business units, canceled certain contracts, and vacated leased facilities. These
restructuring actions in fiscal 1998 resulted in total charges of $38.2 million,
of which approximately $9.1 million were noncash charges. During fiscal 2000, we
paid our remaining  obligation related to this restructuring  program, and as of
December 1, 2000, no restructuring liability existed.

<TABLE>
<CAPTION>

                                                              Accrued                                        Accrued
                                                            Balance at                                      Balance at
                                                            December 3,      Cash                           December 1,
                                                               1999         Payments      Adjustments          2000
                                                          ---------------- ------------  ---------------   --------------
<S>                                                       <C>              <C>           <C>               <C>
Severance and related charges......................       $        259     $    (87)     $      (172)      $        --
Lease termination costs............................                 78           (7)             (71)               --
Other charges......................................                435         (435)              --                --
                                                          ---------------- ------------  ---------------   --------------
                                                          $        772     $   (529)  $         (243)       $       --
                                                          ================ ============  ===============   ==============
</TABLE>

     Other Charges

     During the second  quarter of fiscal  2000,  we recorded  other  charges of
approximately $6.3 million that were unusual in nature. These charges related to
the disposal of certain equipment and one-time litigation-related expenses.

     During the third and fourth  quarters of fiscal  1999,  we  recorded  other
charges of approximately $8.4 million that were unusual in nature. These charges
included $2.0 million  associated  with the  cancellation of a contract and $2.2
million for  accelerated  depreciation  related to the  adjustment of the useful
life of certain  assets as a result of decisions  made by our management as part
of the  restructuring  program.  We also  incurred a  nonrecurring  compensation
charge of $2.6 million for a terminated  employee  and  consulting  fees of $1.6
million to assist in the restructuring of our operations.

     As of November 30, 2001 no obligations  existed  related to the fiscal 1999
and 1998 restructuring programs.

Note 8.  Income Taxes

     Income before income taxes  includes net income from foreign  operations of
approximately  $90.0  million,  $39.0  million,  and $23.1 million for the years
ended November 30, 2001; December 1, 2000; and December 3, 1999, respectively.

     The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                                        Years Ended
                                                                      ------------------------------------------------
                                                                       November 30,      December 1,      December 3,
                                                                          2001             2000             1999
                                                                      --------------   --------------   --------------
<S>                                                                    <C>               <C>              <C>
Current:
   United States federal.........................................     $      52,355     $     13,096     $     54,097
   Foreign.......................................................            16,087           11,452           11,346
   State and local...............................................             4,753            5,063           12,061
                                                                      --------------   --------------   --------------
 Total current....................................................           73,195           29,611           77,504
                                                                      --------------   --------------   --------------
 Deferred:
   United States federal.........................................           (14,494)          (1,569)            (569)
   Foreign.......................................................              (767)           3,568            1,810
   State and local...............................................            (2,339)            (601)            (547)
                                                                      --------------   --------------   --------------
  Total deferred.................................................           (17,600)           1,398              694
                                                                      --------------   --------------   --------------
  Charge in lieu of taxes attributable to employee stock plans...            45,692          124,922           58,478
                                                                      --------------   --------------   --------------
                                                                        $   101,287     $    155,931      $   136,676
                                                                      ==============   ==============   ==============
</TABLE>

     Total income tax expense differs from the expected tax expense (computed by
multiplying  the United  States  federal  statutory  rate of 35% for fiscal year
2001,  2000,  and  1999 by  income  before  income  taxes)  as a  result  of the
following:

                                      F-71
<PAGE>



<TABLE>
<CAPTION>
                                                                                            Years Ended
                                                                          ------------------------------------------------
                                                                              November 30,     December 1,    December 3,
                                                                                 2001             2000            1999
                                                                         -----------------  --------------  -------------
<S>                                                                       <C>             <C>             <C>
Computed "expected" tax expense..................................         $     107,426   $     155,309    $     131,050
State tax expense, net of federal benefit........................                 6,983          12,403           14,419
Nondeductible goodwill...........................................                 3,178             958               --
Tax-exempt income................................................                (4,496)         (3,868)          (2,650)
Tax credits......................................................                (8,000)         (8,000)          (2,450)
Foreign tax rate differential....................................                (2,653)           (571)              --
Other, net.......................................................                (1,151)           (300)          (3,693)
                                                                          --------------  --------------   ---------------
                                                                          $     101,287   $     155,931    $     136,676
                                                                          ==============  ==============   ===============
</TABLE>


     The tax effects of the temporary  differences that give rise to significant
portions of the deferred tax assets and  liabilities  as of fiscal 2001 and 2000
are presented below:


                                              November 30,  December 1,
                                                  2001         2000
                                              ------------  -----------
Deferred tax assets:
   Acquired technology...................... $    12,980   $     11,920
   Reserves and deferred revenue............      28,738         29,625
   Unrealized losses on investments.........       1,886              -
   Other..........................                     -            608
                                              ----------   ------------

     Total gross deferred tax assets.........     43,604         42,153
     Deferred tax asset valuation allowance..       (525)          (525)
                                              ----------   ------------

     Total deferred tax assets...............     43,079         41,628
                                              ----------   ------------

Deferred tax liabilities:
   Depreciation and amortization.............     (6,041)        (5,164)
   Unrealized gains on investments...........         --        (14,379)
   Other.....................................     (2,718)          (892)
                                              ----------   ------------
     Total deferred tax liabilities..........     (8,759)       (20,435)
                                              ----------  -------------
Net deferred tax assets......................  $  34,320   $     21,193
                                              =========== =============

     We  provide   United  States  income  taxes  on  the  earnings  of  foreign
subsidiaries  unless  the  subsidiaries'  earnings  are  considered  permanently
reinvested outside the United States.

     For  financial   reporting   purposes,   a  valuation  allowance  has  been
established for certain deferred assets related to the writedown of investments.
Management  believes  that it is more likely than not that the results of future
operations will generate  sufficient  taxable income to realize the net deferred
tax assets.

Note 9.   Benefit Plans

     Pretax Savings Plan

     In 1987, we adopted an Employee  Investment  Plan,  qualified under Section
401(k) of the Internal  Revenue  Code,  which is a pretax  savings plan covering
substantially  all of our  United  States  employees.  Under the plan,  eligible
employees  may  contribute  up to 18% of their  pretax  salary,  subject  to the
Internal Revenue Service annual contribution  limits. In fiscal 2001, we matched
50% of the first 6% of the employee's contribution. We contributed approximately
$5.8 million,  $4.5 million,  and $2.2 million in fiscal 2001,  2000,  and 1999,
respectively. We can terminate matching contributions at our discretion.

     Profit Sharing Plan

     We have a profit sharing plan that provides for profit sharing  payments to
all eligible  employees  following each quarter in which we achieve at least 80%
of our  budgeted  earnings  for the  quarter.  The plan,  as well as the  annual
operating  budget  on which  the plan is  based,  is  approved  by our  Board of
Directors. We contributed  approximately $10.3 million, $21.4 million, and $23.2
million to the plan in fiscal 2001, 2000, and 1999, respectively.

     Adobe Incentive Partners

     In March 1997, as part of our venture investing program,  we established an
internal limited  partnership,  Adobe Incentive  Partners,  L.P. ("AIP"),  which
allows  certain  of our  executive  officers  to  participate  in cash or  stock
distributions  from  Adobe's  venture  investments.  Adobe is both  the  general
partner and a limited  partner of AIP.  Other  limited  partners  are


                                      -72-


<PAGE>

executive  officers  and  former  executive  officers  of Adobe  who are or were
involved in Adobe's venture  investing  activities and whose  participation  was
deemed critical to the success of the program. No limited partnership  interests
were granted in fiscal 2001, 2000, or 1999.

     Adobe's  Class  A  senior  limited  partnership  interest  includes  both a
liquidation  preference  and a preference  in recovery of the cost basis of each
specific investment. The executives' Class B junior limited partnership interest
qualifies for partnership distributions only after (a) Adobe has fully recovered
the cost basis of our  investment in the specific  investee  company for which a
distribution is made, and (b) the  participating  executive has vested in his or
her distribution  rights. The distribution  rights generally vested on a monthly
basis over three years, such that the rights were 25% vested after one year, 50%
vested after two years,  and fully vested at the end of three years.  As of June
30, 2000, all existing partnership interests had fully vested or ceased vesting.
The limited  partnership  investments are restricted to investments in companies
that are private at the time of the  establishment of AIP or when the investment
is made,  whichever is later.  Class B interests may not exceed a maximum of 20%
of the venture investments included in AIP.

     Assets held by AIP include Adobe's entire  interests in Adobe Ventures L.P.
and Adobe  Ventures II, L.P., as well as securities  of certain  privately  held
companies.  At November 30, 2001,  the cost basis and recorded fair value of all
investments included in AIP were $24.9 million and $12.7 million,  respectively.
In fiscal  2001,  AIP recorded net loss of $30.1  million.  In fiscal 2001,  the
participating  officers  received  aggregate   distributions  of  $0.6  million,
consisting  primarily of equity  securities.  The  distribution  to the officers
represents their share of nonmarketable  securities that become  marketable as a
result  of a public  offering,  as well as their  share of cash  resulting  from
investments  that were  liquidated  by AIP. At November 30,  2001,  the minority
interest held by the participating  officers was $0.5 million and is included in
accrued expenses on the Consolidated Balance Sheet.

Note 10.  Employee Stock Plans

     Stock Option Plans

     As of November 30, 2001,  we had reserved  176.2  million  shares of common
stock for issuance, under the 1983 Stock Option Plan, 1984 Stock Option Plan, as
amended,  1984  Restated  Stock Option  Plan,  1994 Stock Option Plan (the "1994
Plan"),   and  the  1999  Nonstatutory  Stock  Option  Plan  (the  "1999  Plan")
(collectively,  the "Option Plans"), for employees. The Option Plans provide for
the granting of stock options to employees and officers at the fair market value
of our common stock at the grant date. Currently, we grant options only from the
1994 Plan and the 1999 Plan. Initial options and some subsequent options granted
under  the  Option  Plans,  except  for the 1984  Restated  Stock  Option  Plan,
generally vest 25% after the first year and ratably thereafter such that 50% and
100% are vested  after the second and third year,  respectively;  the  remaining
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.  Options in the 1984 Restated Stock Option Plan have a five
year vest and 20% vest after the first year and monthly thereafter.  Outstanding
option terms under the Option Plans range from five to ten years.  The 1999 Plan
generally  has option terms under  existing  options of eight  years.  A limited
number of the  options  granted in fiscal 2000 under the 1999 Plan had a vesting
acceleration feature so that they would vest in full in November 2000 if certain
milestones  were met by Adobe; if the milestones were not met, the options would
have vested in full in September 2002 (the milestones  were met).  Those options
expire in September  2003. As of November 30, 2001,  approximately  53.6 million
shares are  reserved  for  issuance  upon  exercise of  outstanding  options and
approximately  11.6  million  shares are  available  for grant  under the Option
Plans.  The  Company's  1999  Plan  has  not  been  approved  by  the  Company's
stockholders.


                                      F-73

<PAGE>

     As of November 30, 2001, we had reserved 2.9 million shares of common stock
for issuance under our 1996 Outside Directors Stock Option Plan, as amended (the
"1996  Plan") and the 1987  Restricted  Stock  Option  Plan  (collectively,  the
"Outside Directors Plans"). The Outside Directors Plans provide for the granting
of  nonqualified  stock options to nonemployee  directors.  Currently,  we grant
options only from the 1996 Plan.  Option grants are limited to 40,000 shares per
person in each  fiscal  year,  except for a new  non-employee  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 2001, we granted options
for an aggregate of 200,000  shares with an exercise price of $41.06 to existing
directors. In fiscal 2000, we granted options for an aggregate of 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 an  aggregate  of 80,000  shares with an exercise  price of
$14.86 to existing directors. As of November 30, 2001, approximately 0.6 million
shares are reserved for issuance upon exercise of outstanding  options under the
Outside  Directors Plans and  approximately 0.5 million shares are available for
grant under the 1996 Plan.

     Stock option activity for fiscal 2001, 2000, and 1999 is presented below:

<TABLE>
<CAPTION>

                                                                           Years Ended
                                      --------------------------------------------------------------------------------------
                                           November 30, 2001           December 1, 2000               December 3, 1999
                                      --------------------------------------------------------------------------------------
                                                       Weighted                   Weighted                         Weighted
                                                        Average                   Average                           Average
                                        Number of      Exercise      Number of    Exercise       Number of         Exercise
                                          Shares         Price        Shares       Price           Shares           Price
                                      --------------- --------------------------------------- -----------------  --------------

<S>                                      <C>          <C>          <C>            <C>            <C>
Outstanding, beginning of year...        45,017,400   $    38.26      38,149,038  $   18.56        41,763,280   $       7.92
Granted..........................        19,177,315        28.38      19,669,375      60.90        18,588,080          29.68
Exercised........................        (4,826,823)       12.55      (8,724,580)     11.17       (17,042,800)          7.50
Canceled.........................        (5,083,575)       44.89      (4,076,433)     21.15        (5,159,522)          9.06
                                     ---------------             ----------------            -----------------
Outstanding, end of year.........        54,284,317        36.66      45,017,400      38.26        38,149,038          18.56
                                     ===============             ================            =================

Exercisable, end of year.........        20,844,567        29.27      11,478,693      18.53         9,799,482           7.92
                                     ===============             ================            =================

Weighted average fair value of                       $     15.20                 $    29.89                     $      11.66
   options granted during
   the year......................

</TABLE>

     Information regarding the stock options outstanding at November 30, 2001 is
summarized below:

<TABLE>
<CAPTION>
                                                 Options Outstanding                             Options Exercisable
                                ------------------------------------------------------ ----------------------------------------
                                                     Weighted Average     Weighted
                                    Shares             Remaining          Average           Shares           Weighted Average
  Range of Exercise Prices        Outstanding       Contractual Life   Exercise Price     Exercisable         Exercise Price
------------------------------  -----------------  ------------------- --------------- ------------------   -------------------
<S>                               <C>                 <C>              <C>                <C>                <C>
$2.56--$3.66...............            135,368         0.87 years      $    3.62            135,368          $      3.62
$4.06--$5.97...............             43,810         1.69 years           5.04             43,810                 5.04
$6.22--$8.44...............          1,372,986         3.55 years           7.66          1,370,751                 7.66
$8.45.....................          5,794,010         4.49 years           8.45           5,774,608                 8.45
$9.66--$14.09..............          1,193,142         5.24 years          11.62          1,026,050                11.49
$14.86--$21.34.............            774,346         5.64 years          17.85            506,370                17.62
$24.11--$26.16.............            399,326         6.48 years          24.83            146,091                24.75
$26.95.....................          7,144,750         7.91 years          26.95                   0                    0
$27.14--$27.69.............          9,341,105         7.24 years          27.68          1,538,033                27.69
$27.94--$41.78.............         11,029,903         6.11 years          35.55          4,664,443                35.48
$44.05--$65.81.............         15,595,038         6.56 years          60.24          5,223,815                59.14
$66.63--$83.19.............          1,460,533         6.95 years          74.86            415,228                75.96
                                --------------                                         --------------
                                    54,284,317         6.42 years      $   36.66         20,844,567           $    29.27
                                ==============                                         ==============
</TABLE>


                                      F-74

<PAGE>

Performance and Restricted Stock Plan

     The  Performance  and Restricted  Stock Plan ("the Plan")  provides for the
granting of  restricted  stock  and/or  performance  awards to officers  and key
employees.  As of November 30, 2001,  we had reserved 8.0 million  shares of our
common stock for issuance under the Plan.

     Restricted shares issued under the Plan generally vest annually between two
to three  years but are  considered  outstanding  at the time of  grant,  as the
stockholders  are entitled to dividends  and voting  rights.  As of November 30,
2001,  316,474 shares were outstanding and not yet vested. In fiscal 2001, 2000,
and 1999, we granted 56,146,  453,885, and 1,047,920 shares of restricted stock,
respectively,  and the  weighted  average  fair value of the shares was  $39.44,
$58.66, and $22.71, respectively.  Additionally, we charged $18.0 million, $16.5
million,  and $5.3 million to expense associated with restricted stock in fiscal
2001, 2000, and 1999,  respectively.  As of November 30, 2001, approximately 2.8
million shares are available for grant under this Plan.

     Performance  awards issued under the Plan entitle the recipient to receive,
at our  discretion,  shares or cash upon  completion of the  performance  period
subject  to  attaining  identified  performance  goals.  Performance  awards are
generally  measured  over a  three-year  period and cliff vest at the end of the
three-year period. We accrue the projected value of these awards and charge this
amount to  expense  over the  three-year  performance  period.  We did not grant
performance  awards in fiscal  2001,  2000 or 1999.  As of November 30, 2001 and
December 1, 2000, there were no performance awards  outstanding.  As of December
3, 1999, performance awards for 640,720 shares were outstanding and $0.4 million
was credited to expense in fiscal 1999.

     Employee Stock Purchase Plan

     Our Employee Stock Purchase Plan allows eligible  employee  participants to
purchase shares of our common stock at a discount  through  payroll  deductions.
For  offerings   commencing   before  September  2000,  the  plan  consisted  of
twelve-month  offerings  with two  six-month  purchase  periods in each offering
period; in September 2000, the plan was amended to increase the offering periods
for offerings commencing after that date to  twenty-four-month  offering periods
with four six-month  purchase periods in each offering period.  As of January 1,
2001, all employees  participating in the plan have  twenty-four-month  offering
periods.  Employees  purchase  shares at 85% of the  market  value at either the
beginning of the offering  period or the end of the purchase  period,  whichever
price is lower.  As of November 30, 2001, we had reserved 38.0 million shares of
our common stock for issuance  under this plan, and  approximately  16.3 million
shares remain available for future issuance.

     The weighted  average fair value of the purchase  rights  granted in fiscal
2001, 2000, and 1999 were $22.91, $21.34, and $5.19, respectively.

     Cash Incentive Awards

     We grant  Cash  Incentive  Awards  ("CIAs"),  a form of phantom  stock,  to
designated  key  employees  to reward  them  based on their  contributions  to a
project.  The cash value of the CIA is structured to mirror our Restricted Stock
Plan. We grant CIAs to designated  employees that generally vest annually over a
three-year period. Upon each vest date, the employee is paid the market value of
the stock on the date of vest  multiplied  by the  number of vested  shares.  In
fiscal 2001, due to the reduction of market value of our stock,  CIA expense was
approximately  ($2.5) million.  We charged  approximately $12.8 million and $7.9
million to expense for shares vested in fiscal 2000 and 1999,  respectively.  We
currently do not intend to grant cash incentive awards in the future.

     Stock Appreciation Rights

     In fiscal 2000 and 1999, we granted 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 award any stock appreciation rights in fiscal 2001.
We awarded 800 rights in fiscal 2000 with an exercise price of $50.19 and 28,200
rights in fiscal 1999 with an exercise price of $35.69. We charged $0.5 million,


                                      F-75

<PAGE>

$23.2  million,  and $9.8  million  to expense  in fiscal  2001,  2000 and 1999,
respectively.  We currently do not intend to grant stock appreciation  rights in
the  future,  except to  certain  employees  outside of the U.S in lieu of stock
options.

     Pro Forma Fair Value Disclosures

     We account for our employee  stock plans,  consisting of fixed stock option
plans, an employee stock purchase plan, and a performance  and restricted  stock
plan,  using the intrinsic value method.  The following table sets forth the pro
forma amounts of net income and net income per share that would have resulted if
we  accounted  for our  employee  stock plans  under the fair value  recognition
provisions of SFAS 123, "Accounting for Stock-Based Compensation."

<TABLE>
<CAPTION>
                                                   Years Ended
                                 -----------------------------------------------
                                  November 30,      December 1,      December 3,
                                     2001             2000             1999
                                 --------------   --------------   -------------
<S>                               <C>               <C>              <C>

Net income:
   As reported..............     $  205,644        $  287,808       $  237,751
   Pro forma................     $   30,225        $  196,153       $  198,787

Net income per share:
   As reported:
     Basic..................     $     0.86        $     1.21       $     0.98
     Diluted................     $     0.83        $     1.13       $     0.92

   Pro forma:
     Basic..................     $     0.13        $     0.82       $     0.82
     Diluted................     $     0.12        $     0.77       $     0.78
</TABLE>


     For purposes of computing pro forma net income,  we estimate the fair value
of each option grant,  restricted  stock grant, and Employee Stock Purchase Plan
purchase  right on the date of grant  using  the  Black-Scholes  option  pricing
model.  The assumptions  used to value the option grants and purchase rights are
stated as follows:

<TABLE>
<CAPTION>
                                                                   Years Ended
                                                 ------------------------------------------------
                                                  November 30,      December 1,      December 3,
                                                     2001             2000             1999
                                                 --------------   --------------   --------------
<S>                                                <C>               <C>              <C>

Expected life of options..................             3 years          3 years          3 years
Expected life of restricted stock.........             3 years          3 years          3 years
Expected life of purchase rights..........          1.23 years       0.75 years       0.75 years
Volatility................................                  80%              68%              51%
Risk-free interest rate...................            2.9--5.3%        5.7--6.8%        4.5--5.9%
Dividend yield............................               0.125%           0.125%           0.125%

</TABLE>

     Options and restricted stock grants vest over several years, and new option
and restricted  stock grants are generally made each year.  Because of this, the
pro forma amounts shown above may not be  representative of the pro forma effect
on reported net income in future years.

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 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  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 us 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

                                      F-76

<PAGE>

     To facilitate our stock repurchase  program,  which is designed to minimize
dilution from employee stock plans,  we sold put warrants to  independent  third
parties in fiscal 2001,  2000, and 1999. Each put warrant entitles 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.  Approximately  5.6  million,  7.0  million,  and 10.3
million put warrants were written in fiscal 2001, 2000, and 1999,  respectively.
At November 30, 2001,  approximately  3.8 million put warrants were  outstanding
that expire  through  July 2002,  with an average  exercise  price of $22.28 per
share, resulting in a total potential cash outlay of approximately $84.0 million
in fiscal 2002 if all put warrants are exercised.

     In addition, in fiscal 2001, 2000, and 1999, we purchased call options from
independent third parties that entitled us to buy 3.9 million,  4.2 million, and
4.9  million  shares,  respectively,  of our common  stock on  certain  dates at
specified prices.  At November 30, 2001,  approximately 2.6 million call options
were  outstanding that expire on various dates through July 2002 with an average
exercise price of $24.09 per share,  resulting in a total  potential cash outlay
of approximately $63.3 million in fiscal 2002 if all call options are exercised.

     Currently,  all put  warrants  have a  corresponding  call  option  with an
identical expiry date. Consequently,  either the call option or put warrant, but
not both, will be exercised.

     We repurchased  approximately  5.9 million,  7.2 million,  and 22.4 million
shares  in  fiscal  2001,  2000,  and  1999,  respectively,  at a cost of $319.9
million, $255.5 million, and $448.7 million, respectively.

     Stock  Repurchase  Program II -  Additional  Authorization  above  Dilution
Coverage.

     In  September  1997,  Adobe's  Board of  Directors  authorized,  subject to
certain  business  and market  conditions,  the  purchase of up to 60.0  million
shares of our common stock over a two-year period. This program was completed in
the  first  quarter  of  fiscal  1999.   Under  this  program,   we  repurchased
approximately 3.3 million shares in fiscal 1999 at a cost of $30.5 million.

     In April 1999, the Board authorized a 5.0 million share repurchase program,
which allows us to purchase  shares in the open market and enter into  contracts
to repurchase  shares during future  quarters by selling put warrants and buying
call options.  During fiscal 2001,  approximately  4.9 million put warrants were
written and 3.5 million  call  options  were  purchased  at prices  ranging from
$32.60 to $39.58. As of November 30, 2001, there were no put warrants or options
outstanding in this program.  During fiscal 2001, we  repurchased  approximately
4.7 million shares at a cost of $165.2 million. We did not repurchase any shares
under this program in fiscal 2000.

     In addition to the April 1999 5.0 million  share  repurchase  program,  our
Board of Directors  authorized  in March 2001,  subject to certain  business and
market conditions, the purchase of up to an additional 5.0 million shares of our
common stock over a two-year  period.  We have not made any purchases under this
5.0 million share repurchase program.

     Combined Programs

     Our put and call  option  contracts  provide  that we, at our  option,  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.


                                      F-77

<PAGE>

Note 12.  Net Income Per Share

     Basic net income per share is computed using the weighted average number of
common shares outstanding for the period,  excluding unvested  restricted stock.
Diluted net income per share is based upon the weighted  average  common  shares
outstanding for the period plus dilutive  common  equivalent  shares,  including
unvested restricted common stock, stock options using the treasury stock method,
and put warrants using the reverse treasury stock method.

<TABLE>
<CAPTION>

                                                                                         Years Ended
                                                                               --------------------------------------
                                                                                November 30,    December 1,     December 3,
                                                                                    2001           2000            1999
                                                                                ------------    -----------    -----------
                                                                                  (in thousands except per share data)
<S>                                                                             <C>           <C>              <C>
Net income.........................................................             $   205,644   $    287,808     $   237,751
                                                                                ==========================================

Shares used to compute basic net income per share (weighted average
    shares outstanding during the period, excluding unvested restricted
   stock)..........................................................                 238,461        238,292         241,572
Dilutive common equivalent shares:
   Unvested restricted stock.......................................                     318            930           1,130
   Stock options...................................................                  10,366         16,539          15,636
   Put warrants....................................................                      --             13              72
                                                                                ------------------------------------------
Shares used to compute diluted net income per share................                 249,145        255,774         258,410
                                                                                ==========================================
Basic net income per share.........................................             $      0.86   $       1.21     $      0.98
                                                                                ==========================================
Diluted net income per share.......................................             $      0.83   $       1.13     $      0.92
                                                                                ==========================================
</TABLE>

     For the years ended  November 30, 2001,  December 1, 2000,  and December 3,
1999,  options to purchase  approximately  17.7 million,  12.1 million,  and 7.2
million shares, respectively,  of common stock with exercise prices greater than
the average fair market value of our stock for the period of $39.57, $56.63, and
$39.75,  respectively,  were not included in the calculation  because the effect
would have been antidilutive.

Note 13.  Commitments and Contingencies

     Lease Commitments

     We  lease  certain  of our  facilities  and  some  of our  equipment  under
noncancelable  operating lease arrangements that expire at various dates through
2025. Rent expense,  net of sublease income,  for these leases  aggregated $22.0
million,  $25.6 million,  and $29.4 million during fiscal 2001,  2000, and 1999,
respectively.  As of November 30, 2001,  future  minimum  lease  payments  under
noncancelable  operating  leases,  net  of  sublease  income,  are  as  follows:
2002-$29.6 million;  2003-$32.3 million; 2004-$35.7 million; 2005-$28.5 million;
2006-$17.0 million; and $33.2 million thereafter.

     In September 2001, we entered into a real estate development  agreement for
the construction of an office building in downtown San Jose,  California.  Under
the  agreement  the lessor  will  finance up to $117.0  million  over a two-year
period, toward the construction and associated costs of the building. As part of
the agreement,  we entered into a five-year  lease  beginning upon completion of
the building.  We have an option to purchase the building at any time during the
term for an amount equal to the total  investment  of the lessor.  The agreement
and lease are subject to standard covenants  including  liquidity,  leverage and
profitability  ratios that are reported to the lessor quarterly.  As of November
30, 2001, we were in compliance  with all covenants.  In case of a default,  the
lessor may  terminate  all remaining  commitments,  demand  payment equal to the
lessor's  investment,  or require that we purchase,  facilitate  the sale of the
building to a third party,  or surrender the building.  The agreement  qualifies
for operating lease accounting treatment under SFAS 13, "Accounting for Leases,"
and, as such,  the building and the related  obligation  are not included on our
balance  sheet,  but the future  minimum  lease  payments  are  reflected in the
schedule of future minimum lease payments.  At the end of the lease term, we can
either  purchase the  building  for an amount equal to the lessor's  investment,
which will be approximately $117.0 million,  request to extend the maturity date
of the lease or remarket the building.  If we elect to remarket the building, we
are obligated to arrange the sale of the building to an unrelated party and will
be required to pay the lessor any shortfall between the net remarketing proceeds
and the lessor's investment, up to a maximum recourse amount as set forth in the
lease. The lessor is a multi-asset leasing company with a substantive net worth,
not a special purpose entity.

     In August 1999,  Adobe  entered into a five-year  lease  agreement  for our
corporate  headquarters  office  buildings  in San Jose,  California.  Under the
agreement,  we have an option to purchase  the  buildings at any time during the
lease term for $142.5 million,  which is the total investment of the lessor. The
lease is  subject  to  standard  covenants  including  liquidity,  leverage  and
profitability  ratios that are reported to the lessor quarterly.  As of November
30, 2001, we were in compliance

                                      F-78

<PAGE>

with all covenants. In case of a default, the lessor may demand payment equal to
the  lessor's  investment  or  require  that we  surrender  the  buildings.  The
agreement qualifies for operating lease accounting  treatment under SFAS 13 and,
as such, the buildings and the related obligation is not included on our balance
sheet,  but the future  minimum lease  payments are reflected in the schedule of
future  minimum  lease  payments.  At the end of the lease  term,  we can either
purchase the buildings for an amount equal to the lessor's investment,  which is
approximately  $142.5 million, or terminate the lease. If we elect to terminate,
we are obligated to use our best efforts to arrange the sale of the buildings to
an unrelated party and will be required to pay the lessor any shortfall  between
the net  remarketing  proceeds  and the  lessor's  investment,  up to a  maximum
guaranteed  residual  amount  as  set  forth  in  the  lease.  The  lessor  is a
multi-asset  leasing company with a substantive net worth, not a special purpose
entity.

     Line of Credit

     In  August  1999,  Adobe  entered  into  two  unsecured   revolving  credit
facilities of $100.0 million each, with a group of banks, for general  corporate
purposes,  subject to certain financial covenants. One of the facilities expired
in August  2001 and was not  renewed,  and the  other  $100.0  million  facility
expires in August 2002. Outstanding balances accrue interest at London Interbank
Offered  Rate  ("LIBOR")  plus a margin that is based on our  financial  ratios.
There were no  outstanding  balances on the credit  facility as of November  30,
2001.  In  addition,  as of November 30, 2001,  we were in  compliance  with all
financial covenants.

     Royalties

     We have  certain  royalty  commitments  associated  with the  shipment  and
licensing of certain  products.  Royalty  expense is generally based on a dollar
amount per unit  shipped or a  percentage  of the  underlying  revenue.  Royalty
expense was  approximately  $14.1 million,  $20.8 million,  and $24.5 million in
fiscal 2001, 2000, and 1999, respectively.

     Adobe Ventures

     We  have  commitments  to  the  Adobe  Venture  limited  partnerships.  The
following table shows the capital  commitments and the capital contributed as of
November 30, 2001:

                                       Capital Commitment    Capital Contributed
                                       ------------------    -------------------
      Adobe Ventures L.P.                $ 40,000,000           $ 40,475,757
      Adobe Ventures II, L.P.            $ 40,000,000           $ 36,947,363
      Adobe Ventures III, L.P.           $ 60,000,000           $ 56,162,222
      Adobe Ventures IV, L.P.            $100,000,000           $ 18,292,333

     The capital commitment is the amount that Adobe has agreed to contribute to
the Partnership.  The capital  commitment amount is contributed over the term of
each Partnership, which is ten years. We can cease funding at any time after the
earlier of: a) two years after the effective  date of the  Partnership or b) the
date on which the Company has made capital  contributions  to the Partnership in
an amount in excess of $10.0 million,  $10.0 million,  $20.0 million,  and $33.0
million for Adobe  Ventures L.P.,  Adobe Ventures II, L.P.,  Adobe Ventures III,
L.P., and Adobe Ventures IV, L.P., respectively.

     In addition to these venture  partnerships,  we have direct  investments in
public and privately-held  companies. In total, as of November 30, 2001, we have
invested $194.9 million through our venture partnerships and direct investments.
And as of November 30, 2001, net returns were $354.3  million,  including  stock
dividends to stockholders and net gains in market value of investments.

     Legal Actions

     We are engaged in certain legal actions  arising in the ordinary  course of
business.  We believe that we have adequate legal defenses and that the ultimate
outcome  of these  actions  will  not  have a  material  adverse  effect  on our
financial position and results of operations.

Note 14.  Related Party Transactions

     During fiscal 1999, we entered into two separate  loan  agreements  with an
executive  officer to assist with his  relocation to San Jose,  California.  The
first loan in the amount of $550,000,  with an interest rate of 8.25% per annum,
was repaid on December 31, 1999. The second loan, in the amount of $1.0 million,
is interest-free and is secured by his principal  residence.  Under the terms of
the  agreement,  he is required to repay this loan at $200,000 per year over the
five years  beginning  December  2000.  His second  payment was made in December
2001, leaving a balance of $600,000 as of January 25, 2002.

                                      F-79

<PAGE>

The loan was amended in November 2001 in connection  with his  resignation  from
the Company to include an  agreement  by the Company  that it would not exercise
its  right  to  accelerate  the  payment  of  unpaid  principal  because  of his
termination of employment.  The Company reserved the right to accelerate payment
for any other reason authorized by the agreement.

     Also in connection with his resignation  from his employment with us, which
was effective  November 30, 2001, we entered into an agreement  with him to: (i)
pay  him a lump  sum  equal  to his  total  target  compensation  (base  pay and
management  incentive  plan  bonuses) for twelve (12)  months,  (ii) pay for his
COBRA  premiums  until the  earlier of  November 1, 2002 or the date he receives
coverage under another group health  insurance plan, and (iii) allow him to keep
his laptop computer. We also amended his loan agreement with us, as described in
the previous paragraph. In addition, he remained eligible for any bonuses earned
through his resignation date, although no bonuses were earned or paid.

Note 15.  Financial Instruments

     Fair Value of Financial Instruments

     Our  cash  equivalents,   short-term  investments,  and  marketable  equity
securities,  are carried at fair value,  based on quoted market prices for these
or similar investments. Our total cash equivalents,  short-term investments, and
marketable  equity  securities  had a cost  basis of $567.5  million  and a fair
market value of $581.6 million.  Our portfolio of marketable  equity  securities
included in our short-term  investments  had a cost basis of $26.3 million and a
fair market value of $37.8 million. (For further information, see Note 3.)

     Our portfolio of investments included in Other Assets at November 30, 2001,
which includes our direct investments,  as well as indirect  investments through
Adobe  Ventures,  had an  estimated  fair market  value of $31.7  million.  (For
further information, see Note 5.)

     Foreign Currency Hedging Instruments

     We  enter  into  forward  exchange  contracts  to  hedge  foreign  currency
exposures  on a  continuing  basis for  periods  consistent  with our  committed
exposures.  These  transactions  do subject us to risk of  accounting  gains and
losses; however, the gains and losses on these contracts offset gains and losses
on  the  assets,   liabilities,   and  transactions   being  hedged.   The  bank
counterparties  in these  contracts  expose us to  credit-related  losses in the
event of their  nonperformance.  However, to mitigate that risk we only contract
with high quality  counterparties with specific minimum rating requirements.  In
addition,  our hedging policy establishes  maximum limits for each counterparty.
As of November  30, 2001 and December 1, 2000,  we held $98.3  million and $23.2
million, respectively, of aggregate foreign currency forward exchange contracts.
As of November  30, 2001 and December 1, 2000,  we held $82.3  million and $43.3
million, respectively, in foreign currency option contracts.

     Economic Hedging - Hedges of Forecasted Transactions

     We use option and  forward  foreign  exchange  contracts  to hedge  certain
operational  ("cash flow") exposures  resulting from changes in foreign currency
exchange rates. These foreign exchange contracts,  carried at fair value, have a
duration  between three to twelve months.  Such cash flow exposures  result from
portions of our forecasted  revenues  denominated  in currencies  other than the
U.S.  dollar  ("USD"),  primarily  the Japanese yen and the euro.  We enter into
these foreign exchange  contracts to hedge forecasted  product licensing revenue
in the normal course of business,  and accordingly,  they are not speculative in
nature.

     We  record  changes  in the  fair  value  of  these  cash  flow  hedges  in
accumulated other comprehensive income (loss), until the forecasted  transaction
occurs.  When the forecasted  transaction occurs, we reclassify the related gain
or loss  on the  cash  flow  hedge  to  revenue.  In the  event  the  underlying
forecasted  transaction  does not occur, or it becomes probable that it will not
occur,  we  reclassify  the gain or loss on the  related  cash flow  hedge  from
accumulated  other  comprehensive  income  (loss) to interest  and other  income
(loss) on the consolidated statement of income at that time. For the fiscal year
ended  November 30, 2001,  there were no such net gains or losses  recognized in
other income relating to hedges of forecasted transactions that did not occur.

     The critical terms of the cash flow hedging instruments are the same as the
underlying forecasted transactions. The changes in fair value of the derivatives
are intended to offset  changes in the expected  cash flows from the  forecasted
transactions.  We record any ineffective  portion of the hedging  instruments in
other  income  on the  consolidated  statement  of  income.  The  time  value of
purchased derivative  instruments is deemed to be ineffective and is recorded in
other income over the life of the contract.

                                      F-80

<PAGE>

     The following table depicts the activity for the fiscal year ended November
30, 2001.

Gain (Loss) on Hedges of Forecasted Transactions:

<TABLE>
<CAPTION>


                                                     Balance Sheet             Income Statement
                                                -------------------------  --------------------------
                                                         As of                    Year ended
                                                   November 30, 2001          November 30, 2001
                                                -------------------------  --------------------------
                                                  Other Comprehensive                  Other Income
                                                         Income             Revenue        (Loss)
                                                -------------------------  ----------  --------------
<S>                                                <C>                     <C>            <C>
Realized - Closed Transactions:
Realized net gain reclassified from other
    comprehensive income to revenue                $           --          $ 7,848        $    --
Realized net loss from ineffective portion of
    hedges and time value degradation                          --               --         (4,786)
Recognized but Unrealized - Open Transactions:
Unrealized gain remaining in other
    comprehensive income                                    2,582               --             --
Unrealized loss from ineffective portion of
    hedges and time value degradation                          --               --           (730)
                                                   --------------          ---------      --------
                                                   $        2,582          $ 7,848        $(5,516)
                                                   ==============          =========      ========
</TABLE>

     As of  November  30,  2001,  $2.6  million  in other  comprehensive  income
represents  the total  intrinsic  value of our  economic  hedges  on  forecasted
revenue.

     During the fiscal year ended November 30, 2001, $7.8 million was recognized
in revenue relating to hedged transactions which occurred; total loss recognized
in other income was $5.5 million, which consisted of a $4.8 million realized net
loss  related  to the cost of  matured  purchased  options,  and a $0.7  million
unrealized  loss that was recognized  for the  ineffective  portion  relating to
hedges for forecasted transactions and the time value degradation of outstanding
purchased options.

     Balance Sheet Hedging - Hedging of Foreign Currency Assets and Liabilities

     We hedge our net recognized  foreign  currency assets and liabilities  with
forward foreign exchange contracts to reduce the risk that our earnings and cash
flows will be adversely  affected by changes in foreign currency exchange rates.
These derivative  instruments  hedge assets and liabilities that are denominated
in foreign  currencies  and are  carried at fair value with  changes in the fair
value  recorded as other income  (loss).  These  derivative  instruments  do not
subject us to material balance sheet risk due to exchange rate movements because
gains and losses on these derivatives  offset gains and losses on the assets and
liabilities  being hedged.  At November 30, 2001, the outstanding  balance sheet
hedging derivatives had maturities of 60 days or less.

                                      F-81

<PAGE>

Net Gain (Loss) Recognized in Other Income Relating to Balance Sheet Hedging:

<TABLE>
<CAPTION>

                                                                        Year ended         Year ended
                                                                     November 30, 2001   December 1, 2000
                                                                     ------------------  ----------------
<S>                                                                  <C>                 <C>
Loss on foreign currency assets and liabilities:
    Realized net gain (loss) recognized in other income              $     (3,288)       $        240
    Unrealized net gain (loss) recognized in other income                     109              (1,803)
                                                                     -------------       -------------
                                                                           (3,179)             (1,563)
Gain on hedges of foreign currency assets and liabilities:
    Realized net gain recognized in other income                            3,834                  33
    Unrealized net gain (loss) recognized in other income                    (622)                491
                                                                     -------------       -------------
                                                                            3,212                 524
                                                                     -------------       -------------
      Net gain (loss) recognized in other income                     $         33        $     (1,039)
                                                                     =============       =============

</TABLE>

     Equity Hedging Instruments

     We also hedge  market  value  fluctuations  of certain  equity  holdings in
publicly  traded  companies with forward  contracts.  These are accounted for as
"Fair Value Hedges" in accordance with SFAS 133. The difference between the cost
and market  value of the equity  investments  prior to entering  into fair value
hedges  remains  in other  comprehensive  income  until  the hedge  contract  is
settled; at which time it is reclassified to investment gain (loss).  Subsequent
gains and losses on the forward contract and the equity  securities being hedged
are recorded in investment gain (loss) on the consolidated  statement of income.
We have no outstanding forward contracts hedging equity investments remaining as
of November 30, 2001.

     Concentration of Risk

     Financial  instruments that  potentially  subject us to  concentrations  of
credit risk are primarily cash, cash equivalents,  short-term  investments,  and
accounts receivable.

     Our   investment   portfolio   consists  of   investment-grade   securities
diversified among security types,  industries,  and issuers. Our investments are
managed by recognized  financial  institutions  that follow  Adobe's  investment
policy.  Our policy  limits the amount of credit  exposure  to any one  security
issue or issuer,  and we believe no  significant  concentration  of credit  risk
exists with respect to these investments.

     Credit risk in  receivables  is limited to OEM  partners and to dealers and
distributors  of hardware and software  products to the retail market.  We adopt
credit policies and standards to keep pace with the evolving software  industry.
Management  believes that any risk of accounting loss is  significantly  reduced
due to the diversity of our products,  end users, and geographic sales areas. We
perform  ongoing credit  evaluations of our customers'  financial  condition and
require letters of credit or other guarantees,  whenever deemed  necessary.  For
discussion of significant customers as of November 30, 2001, see Note 16.

     We distribute our  application  products  primarily  through  distributors,
resellers,  and  retailers  (collectively  referred  to  as  "distributors").  A
significant  amount  of  our  revenue  for  application  products  is  from  two
distributors.  One of these distributors  recently  restructured its operations,
reducing the number of facilities it operates,  including  those  handling Adobe
products, which may harm our operating results. In addition, we have revised our
channel program to reduce the overall number of our  distributors  worldwide and
focus our channel efforts on larger  distributors.  This revision of the channel
program has  resulted in an increase in our  dependence  on a smaller  number of
distributors selling through a larger amount of our products.  Additionally, one
of our goals is to increase our direct distribution of our products to end users
through  our online  store  located on our Web site at  www.adobe.com.  Any such
increase in our direct  revenue  efforts will place us in increased  competition
with our  channel  distributors  and with  newer  types of  distribution  of our
products  by  online,   Internet-based  resellers  of  our  products.  While  we
anticipate that the restructuring  and streamlining of our product  distribution
channels  and the  increase  in the  scope  of our  direct  sales  efforts  will
eventually  improve our  business by  decreasing  discounts  or rebate  programs
provided to distributors,  decreasing product returns,  and shortening inventory
cycles, these changes could instead seriously harm our business.

                                      F-82

<PAGE>

     We derive a significant  portion of our OEM PostScript and Other  licensing
revenue from a small number of OEM  partners.  Our OEM partners on occasion seek
to  renegotiate  their royalty  arrangements.  We evaluate  these  requests on a
case-by-case  basis.  If an agreement  is not reached,  a customer may decide to
pursue other options, which could result in lower licensing revenue for us.

Note 16.  Industry Segment and Geographic Information

     Beginning  in fiscal  2002,  we have  realigned  our  business  segments to
reflect the way we will manage our  business.  Please see Item 1 of our business
section for details on our new  segments.  During  fiscal 2001, we evaluated our
business using our old segments.

     During fiscal 2001,  2000, and 1999, we had four  reportable  segments that
offered different product lines: Web Publishing,  Cross-media Publishing, ePaper
Solutions,  and OEM PostScript and Other.  The Web Publishing  segment  provides
users with software for creating Web page layouts and Web animations and editing
and enhancing digital images, photographs, and video. The Cross-media Publishing
segment provides software for professional page layout,  illustration,  business
publishing,  and printing.  The ePaper Solutions  segment provides software that
allows users to speed the distribution of information with documents that can be
viewed,  approved  and printed  across a broad range of  hardware  and  software
platforms.  The OEM PostScript and Other segment includes printing technology to
create and print simple or visually rich documents with precision.

     During and prior to fiscal  2000,  we evaluated  our business  based on the
contribution margins of each of our four segments.  During fiscal year 2001, our
executive  management  team changed the way it evaluates the  performance of our
business and revised their focus on evaluating  the gross margins of each of our
segments. Our prior period segment disclosures have been revised here to reflect
that change.  In addition,  we  reclassified  certain  direct costs  between our
operating  segments  in fiscal  year 2000 to  conform  to the  fiscal  year 2001
presentation.

     The  accounting  policies of the  operating  segments are the same as those
described in the summary of significant  accounting policies. We do not identify
or allocate our assets by operating segments. As such, segment asset information
is not disclosed.

     During  the  second  quarter  of fiscal  2001,  we  reclassified  our eBook
business-related  revenue and related expenses from our ePaper Solutions segment
to our  Cross-media  segment in order to better align our eBooks  business goals
with our Cross-media segment strategy.  These  reclassifications  did not impact
total gross profit.

     The following results are broken out by our old operating  segments for the
fiscal years 2001, 2000, and 1999:

<TABLE>
<CAPTION>

                                                                                                    OEM
                                                                  Cross-media      ePaper       PostScript
                                               Web Publishing      Publishing     Solutions      and Other          Total
                                               ----------------  -------------  -------------- --------------  ----------------
<S>                                            <C>               <C>            <C>            <C>
Fiscal 2001
   Revenue..................................   $       482,535   $    350,477   $    291,917   $    104,791    $     1,229,720
   Direct costs.............................            34,859         25,519         15,847          5,226            81,451
                                               ----------------  -------------  -------------- --------------  ----------------
   Gross profit.............................   $       447,676   $    324,958   $    276,070   $     99,565    $     1,148,269
                                               ================  =============  ============== ==============  ================
                                                            93%            93%             95%           95%               93%
Fiscal 2000
   Revenue..................................   $       536,614   $    390,497   $    207,780   $    131,487    $     1,266,378
   Direct costs.............................            35,870         30,239         12,860          8,286            87,255
                                               ----------------  -------------  -------------- --------------  ----------------
   Gross profit.............................   $       500,744   $    360,258   $    194,920   $    123,201    $     1,179,123
                                               ================  =============  ============== ==============  ================
                                                            93%            92%             94%           94%               93%
Fiscal 1999
   Revenue..................................   $       394,073   $    353,863   $    129,333   $    138,165    $     1,015,434
   Direct costs.............................            33,505         33,792         14,533         12,710            94,540
                                               ----------------  -------------  -------------- --------------  ----------------
   Gross profit.............................   $       360,568   $    320,071   $    114,800   $    125,455    $       920,894
                                               ================  =============  ============== ==============  ================
                                                            91%            90%             89%           91%               91%

</TABLE>

     A reconciliation  of the totals reported for the operating  segments to the
applicable line items in the  consolidated  financial  statements for the fiscal
years 2001, 2000, and 1999 is as follows:


                                      F-83
<PAGE>

<TABLE>
<CAPTION>
                                                                                            Years Ended
                                                                    ----------------------------------------------
                                                                     November 30,      December 1,     December 3,
                                                                        2001             2000             1999
                                                                    --------------   --------------   ------------
<S>                                                                 <C>              <C>              <C>
Total gross profit from operating segments above...........          $ 1,148,269     $  1,179,123     $   920,894
Total operating expenses (a) ..............................              769,812          771,040         661,041
                                                                     -------------   ------------     -----------
Total operating income.....................................              378,457          408,083         259,853
Non-operating income (loss)................................              (71,526)          35,656         114,574
                                                                     -------------   ------------     -----------

Income before taxes........................................           $   306,931    $    443,739    $    374,427
                                                                     =============  =============    ============
</TABLE>
______________
  (a)   Total operating  expenses include  research and  development,  sales and
        marketing, general and administrative,  restructuring and other charges,
        amortization  of  goodwill  and  purchased  intangibles,   and  acquired
        in-process research and development expenses.

     Beginning  in the first  quarter of fiscal  year  2002,  we  realigned  our
business segments to reflect the way we will manage our business.  A newly named
Graphics  segment will in the future replace the former Web  Publishing  segment
and will include Adobe Illustrator. The Adobe GoLive and Web Collection products
will be reported in the Cross-media  Publishing segment. For more information on
our new segments, please see Item 1 of our business section.

     The following results are broken out by our new operating  segments for the
fiscal years 2001, 2000, and 1999.

<TABLE>
<CAPTION>
New Segments                                                                                        OEM
                                                                 Cross-media       ePaper       PostScript
                                                  Graphics        Publishing      Solutions      and Other          Total
                                               ----------------  -------------  -------------- --------------  ----------------
<S>                                            <C>               <C>            <C>            <C>             <C>
Fiscal 2001
   Revenue..................................   $       543,419   $    289,624   $    291,886   $    104,791    $     1,229,720
   Direct costs.............................            33,366         27,024         15,835          5,226            81,451
                                               ----------------  -------------  -------------- --------------  ----------------
   Gross profit.............................   $       510,053   $    262,600   $    276,051   $     99,565    $     1,148,269
                                               ================  =============  ============== ==============  ================
                                                            94%            91%             95%            95%               93%
Fiscal 2000
   Revenue..................................   $       602,101   $    325,162   $    207,628   $    131,487    $     1,266,378
   Direct costs.............................            36,400         29,539         12,445          8,871            87,255
                                               ----------------  -------------  -------------- --------------  ----------------
   Gross profit.............................   $       565,701   $    295,623   $    195,183   $    122,616    $     1,179,123
                                               ================  =============  ============== ==============  ================
                                                            94%            91%             94%            93%               93%
Fiscal 1999
   Revenue..................................   $       442,220   $    305,716   $     129,333   $    138,165    $     1,015,434
   Direct costs.............................            37,810         31,364          12,883         12,483            94,540
                                               ----------------  -------------  -------------- --------------  ----------------
   Gross profit.............................   $       404,410   $    274,352   $     116,450   $    125,682    $       920,894
                                               ================  =============  ============== ==============  ================
                                                            91%            90%             90%            91%               91%

</TABLE>

     We categorize our geographic  information  into three major market regions:
the Americas,  EMEA, and Asia. The Americas  region  includes the U.S.,  Canada,
Latin America,  and Central  America.  The EMEA region includes  Europe,  Middle
East,  and  Africa.  The  Asia  region  includes  Japan  and the  Asian  Pacific
countries.

                                      F-84

<PAGE>

     Revenue and long-lived  asset  information by geographic  areas for each of
the years in the three-year period ended November 30, 2001 is presented below:

<TABLE>
<CAPTION>
 Revenue
                                                        Years Ended
                                      -----------------------------------------------------
                                          November 30,      December 1,       December 3,
                                              2001             2000               1999
                                      -----------------  ------------------  --------------
<S>                                   <C>                <C>                 <C>
Americas:
   United States.................      $      547,630    $      616,733    $       497,842
   Other.........................              43,878            42,334             32,311
                                     ----------------  ----------------   ----------------
        Total Americas...........             591,508           659,067            530,153
                                     ----------------  ----------------   ----------------

EMEA.............................             326,499           323,037            265,981
                                      ---------------  ----------------   ----------------
Asia:
   Japan.........................             228,744           224,326            175,122
   Other.........................              82,969            59,948             44,178
                                      ---------------  ----------------   ----------------
      Total Asia..................            311,713           284,274            219,300
                                      ---------------  ----------------   ----------------

Total revenue                         $     1,229,720    $    1,266,378    $     1,015,434
                                      ===============  ================   ================
</TABLE>

<TABLE>
<CAPTION>

Long-Lived Assets
                                                           Years Ended
                                      -----------------------------------------------------
                                       November 30,        December 1,        December 3,
                                           2001               2000               1999
                                      ---------------- -----------------   ----------------
<S>                                   <C>                <C>                 <C>
Americas:
   United States.................     $        67,303   $        56,894     $        53,890
                                      ---------------- -----------------   ----------------
     Total Americas..............              67,303            56,894              53,890

EMEA.............................               6,470             3,182               8,706
                                      ---------------- -----------------   ----------------
 Asia:
     Japan.......................               1,796             2,868               4,616
     India.......................               4,828               876               1,096
     Other.......................                 596               448                 830
                                      ---------------- -----------------   -----------------
          Total Asia.............               7,220             4,192               6,542
                                      ---------------- -----------------   -----------------

Total long-lived assets               $        80,993   $        64,268     $        69,138
                                      ================ =================   =================
</TABLE>


     In fiscal 2001,  licenses of  application  products to Ingram  Micro,  Inc.
("Ingram") and Tech Data Corporation  ("Tech Data"),  including their respective
affiliates,  accounted for 24% and 15%,  respectively,  of our total revenue. In
fiscal 2000, licenses of application  products to Ingram and Tech Data accounted
for 30% and 14%,  respectively,  of our total  revenue,  and in 1999 licenses of
application products to Ingram accounted for 27% of our total revenue.

     Receivables   from  Ingram  and  Tech  Data  accounted  for  31%  and  21%,
respectively,  of our total  receivables at November 30, 2001. As of December 1,
2000,  receivables  from  Ingram  and  Tech  Data  accounted  for 32%  and  18%,
respectively, of our total receivables, and in fiscal 1999 receivables from Tech
Data accounted for 11% of our total receivables.

                                      F-85

<PAGE>


Note 17. Subsequent Events (Unaudited)

     During  the  first  quarter  of  fiscal  2002,  we  acquired   Santa  Rosa,
California-based  Fotiva,  Inc.  ("Fotiva").  Fotiva  is a  digital  photography
software company developing  solutions to help consumers manage,  store, enrich,
and share  digital  photographs.  The  acquisition  was  accounted for using the
purchase  method of accounting.  The cash purchase price of the  acquisition was
approximately $5.3 million.

     Also  during the first  quarter of fiscal  2002,  we  announced  a proposed
agreement  to acquire  Ottawa,  Canada-based  Accelio  Corporation  ("Accelio").
Accelio  is a provider  of  Web-enabled  solutions  that help  customers  manage
business processes driven by electronic forms. Under the terms of the agreement,
Adobe's  common  stock valued at $72.0 (US) million on closing will be exchanged
for all Accelio equity securities.  The Accelio business will be integrated into
our operations. We expect to record a $12.0-$15.0 million accrual related to the
acquisition, which will be added to the purchase price. The proposed acquisition
is  subject  to  the  execution  of  customary  transaction  documents  and  the
satisfaction  of  customary  closing  conditions,   including  the  approval  of
Accelio's  shareholders  and clearance of the  acquisition  by U.S. and Canadian
regulatory authorities. Initially the transaction was expected to close in March
2002.  However,  due to certain regulatory and timing  requirements,  we are now
targeting to close in April 2002.

                                      F-86

<PAGE>

                          FINANCIAL STATEMENT SCHEDULE

     As required under Item 8,  Financial  Statements  and  Supplementary  Data,
Adobe's financial  statement schedule is provided in this separate section.  The
financial statement schedule included in this section is as follows:

          Schedule
           Number            Financial Statement Schedule Description
          ---------          ----------------------------------------
          Schedule II        Valuation and Qualifying Accounts

                                      F-87

<PAGE>


                           ADOBE SYSTEMS INCORPORATED

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)

           Valuation and Qualifying Accounts which are Deducted in the
                Balance Sheet from the Assets to which They Apply

<TABLE>
<CAPTION>
                                                            Balance at     Charged to
                                                            Beginning      Operating       Charged to                  Balance at
                                                            of Period      Expenses        Revenue      Deductions*    End of Period
                                                            -----------    ------------    ----------   -----------    -------------
<S>                                                         <C>            <C>             <C>          <C>            <C>
Allowance for doubtful accounts:
   Year Ended:
     November 30, 2001...............................       $    8,788     $    1,435      $      --    $       124    $     10,099
     December 1, 2000................................       $    5,170     $    7,140      $      --    $     3,522    $      8,788
     December 3, 1999................................       $    6,399     $   (3,319)     $   2,090    $        --    $      5,170

</TABLE>
______________

*       Deductions  related to the  allowance  for doubtful  accounts  represent
amounts written off against the allowance.

     In fiscal 2001, the increase in the allowance for doubtful accounts was due
to the overall deterioration in the economic environment globally,  resulting in
higher estimated bad debt write-offs. The decreased charge to operating expenses
in fiscal 2001 as compared to the charge in fiscal 2000  reflects the results of
enhanced  global  credit  evaluation,  on-going  risk  mitigation  efforts (e.g.
letters of credit,  guarantees,  and credit  insurance)  in Asia,  and  improved
collections of our Royalty accounts.

     In fiscal 2000, the charge to operating  expenses related  primarily to two
separate  bankruptcy  filings,  one  involving  a U.S.  and the other a European
distributor,  an  insolvent  royalty  customer,  and higher  potential  bad debt
expense as a result of higher accounts  receivable balances at the end of fiscal
2000. The deductions represent amounts written off against the allowance.

     In fiscal 1999, the overall reserve  decreased due to reduced credit risks,
mainly in Asia.  In  addition,  we  invoiced  certain  royalty  customers  whose
accounts were deemed  potentially  uncollectible.  Consequently,  we recorded an
increase  to the  allowance  for  doubtful  accounts  and  recorded  a charge to
revenue. As such we did not recognize revenue associated with these accounts.

                                      F-88

<PAGE>

                                    EXHIBITS

     As required  under Item 14.  Exhibits,  Financial  Statement  Schedules and
Reports on Form 8-K, the  exhibits  filed as part of this report are provided in
this separate section. The exhibits included in this section are as follows:

 Exhibit
 Number    Description
-------    -----------
  10.77    Lease agreement between Adobe Systems and Selco Service Corporation
  10.78    Participation agreement among Adobe Systems, Selco Service
           Corporation, et al.
  10.79    Confidential Resignation Agreement
  10.80    Executive Severance Plan in the Event of a Change of Control
  21       Subsidiaries of the Registrant
  23       Consent of KPMG LLP

                                      F-89

<PAGE>


                           ADOBE SYSTEMS INCORPORATED
                                   EXHIBIT 21
                         SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
Subsidiary Legal Name                                 Jurisdiction of Incorporation/Formation
---------------------                                 ---------------------------------------
<S>                                                       <C>
The Americas:
   Adobe Incentive Partners, L.P.                         California
   Adobe International, Inc.                              Delaware
   Adobe Systems Brasil Limitada                          Brazil
   Adobe Systems FSC, Inc.                                Territory of Guam
   Adobe Systems International Limited Partnership        Cayman Islands
   Glassbook, Inc.                                        Delaware
   Fotiva, Inc.                                           Delaware

Europe:
   Adobe Systems Benelux BV                               The Netherlands
   Adobe Systems Danmark ApS                              Denmark
   Adobe Systems Direct Ltd.                              Scotland
   Adobe Systems Engineering GmbH                         Federal Republic of Germany
   Adobe Systems Europe Ltd.                              Scotland
   Adobe Systems France SARL                              France
   Adobe Systems GmbH                                     Federal Republic of Germany
   Adobe Systems (Schweiz) GmbH                           Federal Republic of Switzerland
   Adobe Systems Iberica SL                               Spain
   Adobe Systems Italia SRL                               Italy
   Adobe Systems Nordic AB                                Sweden
   Adobe Systems Norge AS                                 Norway
   Adobe Systems Software Ireland Limited                 Ireland
   Frame Technology International Limited                 Ireland

Asia:
   Adobe Systems Company Ltd.                             Japan
   Adobe Systems India Pvt. Ltd.                          India
   Adobe Systems Korea Ltd.                               Korea
   Adobe Systems Pte. Ltd.                                Singapore
   Adobe Systems Pty. Ltd.                                Australia

</TABLE>

     All subsidiaries of the registrant are wholly owned, directly or indirectly
by Adobe,  and do  business  under their legal  names  (although  Adobe  Systems
Benelux BV also does business as Adobe Direct).

                                      F-90

<PAGE>


                           ADOBE SYSTEMS INCORPORATED

                                   EXHIBIT 23

                               CONSENT OF KPMG LLP

To the Board of Directors and Stockholders of Adobe Systems Incorporated:

We consent to the incorporation by reference in the Registration Statements (No.
33-10753,  No. 33-18986, No. 33-23171, No. 33-30976, No. 33-36501, No. 33-38387,
No. 33-48210,  No.  33-63518,  No. 33-78506,  No.  33-83030,  No. 33-83502,  No.
33-83504,  No. 33-84396, No. 33-86482, No. 33-59335, No. 33-63849, No. 33-63851,
No. 333-28195,  No. 333-28203,  No. 333-28207, No. 333-57589, No. 333-81191, No.
333-87165,  No. 333-39524,  No. 333-52214,  No. 333-57074, and No. 333-72424) on
Form S-8 of Adobe Systems  Incorporated  of our report dated  December 11, 2001,
relating to the  consolidated  balance sheets of Adobe Systems  Incorporated and
subsidiaries  as of  November  30, 2001 and  December  1, 2000,  and the related
consolidated statements of income,  stockholders' equity and other comprehensive
income,  and cash  flows for each of the years in the  three-year  period  ended
November 30, 2001, and related schedule, appearing elsewhere on this Form 10-K.


KPMG LLP
Mountain View, California
February 19, 2002


                                      F-91

<PAGE>

                                   APPENDIX G


                        ADOBE DEFINITIVE PROXY STATEMENT




                                      G-1

<PAGE>


                           Adobe Systems Incorporated

                                 345 Park Avenue
                         San Jose, California 95110-2704

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                            To Be Held April 11, 2002


Dear Stockholders:

     You are  cordially  invited  to  attend  our  2002  Annual  Meeting  of the
Stockholders  to be held on April 11, 2002 at 3:30 p.m. at Adobe's  headquarters
located at 321 Park Avenue, San Jose, California 95110 in the East Tower. At the
meeting we will:

     1.   Elect four (4) Class I members of the Board of  Directors to serve for
          a two-year term;

     2.   Approve an amendment to the Company's  1996 Outside  Directors'  Stock
          Option Plan (the "1996 Plan") to increase the share reserve by 750,000
          shares;

     3.   Ratify the appointment of KPMG LLP as Adobe's independent auditors for
          the current fiscal year which ends on November 29, 2002; and

     4.   Transact any other business that may properly come before the meeting.

     Stockholders  who owned  Adobe  stock at the close of  business on Tuesday,
February 19, 2002 may attend and vote at the meeting.  If you cannot  attend the
meeting, you may vote by telephone or by using the Internet as instructed on the
enclosed  Proxy Card or by mailing the Proxy Card in the  enclosed  postage-paid
envelope.  Any stockholder attending the meeting may vote in person, even if you
have already  returned a Proxy Card. A list of stockholders  eligible to vote at
the meeting will be available for review during Adobe's  regular  business hours
at our  headquarters  in San Jose ten days prior to the  meeting for any purpose
related to the meeting.

     We look forward to seeing you at the meeting.

                              Sincerely,

                              Karen O. Cottle
                              Senior Vice President, General Counsel & Secretary



San Jose, California March 5, 2002

Please vote by telephone or by using the Internet as  instructed on the enclosed
Proxy Card or complete, sign and date the Proxy Card as promptly as possible and
return it in the enclosed envelope.


                                      G-2

<PAGE>
                           ADOBE SYSTEMS INCORPORATED


                                 Proxy Statement
                                       for
                         Annual Meeting of Stockholders
                            To Be Held April 11, 2002

                                TABLE OF CONTENTS

                                                                            Page

Information Concerning Solicitation and Voting..............................   1
Proposal 1--Election of Directors...........................................   4
Proposal 2--Approval of an Amendment to Increase Share
  Reserve Under the 1996 Outside Directors' Stock Option Plan...............   8
Proposal 3--Ratification of Appointment of Auditors.........................  12
Report of the Audit Committee...............................................  13
Security Ownership of Certain Beneficial Owners and Management..............  14
Executive Compensation......................................................  16
Report of the Executive Compensation Committee..............................  22
Director Compensation.......................................................  26
Certain Transactions........................................................  26
Performance Graph...........................................................  28
Other Business..............................................................  29
Stockholder Proposals to be Presented at Next Annual Meeting................  29


                                      G-3

<PAGE>
                                   ___________

                           ADOBE SYSTEMS INCORPORATED
                                   ___________

                                 PROXY STATEMENT
                                   ___________

                 INFORMATION CONCERNING SOLICITATION AND VOTING

     Our Board of Directors is soliciting proxies for the 2002 Annual Meeting of
Stockholders.  This Proxy Statement  contains  important  information for you to
consider  when deciding how to vote on the matters  brought  before the meeting.
Please read it carefully.

     Voting  materials,  which include the Proxy Statement,  Proxy Card and 2001
Annual Report to Stockholders,  will be mailed to stockholders on or about March
5, 2002.  Our principal  executive  offices are located at 345 Park Avenue,  San
Jose, California 95110. Our telephone number is (408) 536-6000.

     Adobe will pay the costs of soliciting proxies from  stockholders.  We have
hired Innisfree M&A,  Incorporated to help us solicit proxies from brokers, bank
nominees and other  institutional  owners.  We expect to pay  Innisfree a fee of
$7,500  for  its  services  and  will   reimburse   Innisfree   for   reasonable
out-of-pocket  estimated  at about  $12,500.  Directors,  officers  and  regular
employees may solicit proxies,  either personally or by telephone,  on behalf of
Adobe, without additional compensation.

                              Questions and Answers

Q:   Who may vote at the meeting?
A:   The Board set  February  19, 2002 as the record date for the  meeting.  All
     stockholders  who owned  Adobe  Common  Stock at the close of  business  on
     February 19, 2002 may attend and vote at the meeting.  Each  stockholder is
     entitled to one vote for each share of Common  Stock held on all matters to
     be voted on,  other than the election of  Directors.  On February 19, 2002,
     approximately 236,987,442 shares of Adobe Common Stock were outstanding.
Q:   How many votes do you need at the meeting?
A:   A majority  of  Adobe's  outstanding  shares as of the record  date must be
     present at the meeting in order to hold the  meeting and conduct  business.
     This is called a quorum.
     Shares are  counted as present at the  meeting if you:
     - are present and vote in person at the meeting; or
     - have  properly  submitted a Proxy Card or voted by telephone or using the
       Internet.
Q:   What proposals will be voted on at the meeting?
A:   There are three board proposals scheduled to be voted on at the meeting:
     - Election of the Class I members of the Board of Directors
     - Approval of the Amendment to Adobe's 1996 Outside Directors' Stock Option
       Plan
     - Ratification of KPMG LLP as Adobe's independent auditors
Q:   What is the voting requirement to approve each of the proposals?
A:   For the election of the Class I Directors,  those four nominees who receive
     "FOR"  votes from a majority of the shares  voting at the  meeting  will be
     elected.  You may give  each  candidate  one vote for each  share of Common
     Stock you hold.  To be passed,  Proposals 2 and 3 require  the  affirmative
     "FOR" vote of a majority of the shares cast at the meeting and  entitled to
     vote.
Q:   How are votes counted?
A:   In the  election of  Directors,  you may vote "FOR" all of the  nominees or
     your vote may be  "WITHHELD"  with respect to one or more of the  nominees.
     You may vote "FOR," "AGAINST" or "ABSTAIN" on the other  proposals.  If you
     abstain from voting on Proposal 1, the  election of Class I  directors,  it
     has no effect on Proposals 2 or 3, which are the approval of the  amendment
     to the 1996 Outside  Directors'  Stock Option Plan and the  ratification of
     the appointment of KPMG LLP, respectively. If you just sign your Proxy Card
     with no further  instructions,  your shares will be counted as a vote "FOR"
     each  Director  and "FOR" both the  approval of the  amendment  to the 1996
     Outside  Directors'  Stock Option Plan and the  ratification of KPMG LLP as
     Adobe's  independent  public  accountants.  If you do not vote and you hold
     your shares in a brokerage  account in your  broker's  name (this is called
     "street name"), your broker will have discretionary  authority to vote your
     shares "FOR" each director or to withhold votes for each or every director.
     Your broker will also have the discretionary  authority to vote your shares
     "FOR" or "AGAINST"  Proposals 2 and 3, the approval of the amendment to the
     1996  Outside  Directors'  Stock  Option Plan and the  ratification  of the
     appointment  of KPMG LLP,  respectively.  These  shares,  however,  will be
     counted for the purpose of  establishing  a quorum for the meeting.  Voting
     results are tabulated and  certified by our transfer  agent,  Computershare
     Investor Services, LLC.

                                      G-4

<PAGE>

Q:   How may I vote my shares in person at the meeting?
A:   Shares held directly in your name as the stockholder of record may be voted
     in person at the meeting. If you choose to attend the meeting, please bring
     the  enclosed  Proxy Card or proof of  identification  for  entrance to the
     meeting.  If you hold your shares in street name,  you must request a legal
     proxy from your stockbroker in order to vote at the meeting.
Q:   How can I vote my shares without attending the meeting?
A:   Whether you hold shares directly as a stockholder of record or beneficially
     in street name, you may vote without attending the meeting. You may vote by
     granting a proxy or, for shares held in street name, by  submitting  voting
     instructions  to your  stockbroker or nominee.  In most cases,  you will be
     able to do this by telephone,  using the Internet or by mail.  Please refer
     to the summary instructions included on your Proxy Card. For shares held in
     street  name,  the  voting  instruction  card  will  be  included  by  your
     stockbroker or nominee.
     BY TELEPHONE OR THE INTERNET - If you have  telephone or Internet  access,
     you may submit  your  proxy from  anywhere  in the world by  following  the
     instructions on the Proxy Card.
     BY MAIL - You may submit your proxy by mail by signing  your Proxy Card or,
     for shares held in street name,  by following the voting  instruction  card
     included by your  stockbroker  or nominee  and mailing it in the  enclosed,
     postage-paid  envelope.  If you provide specific voting instructions,  your
     shares will be voted as you have instructed.
Q:   How can I change my vote after I return my Proxy Card?
A:   You may revoke your proxy and change your vote at any time before the final
     vote at the meeting.  You may do this by signing and submitting a new Proxy
     Card with a later  date,  voting by  telephone  or using  the  Internet  as
     instructed above (your latest telephone or Internet proxy is counted) or by
     attending the meeting and voting in person (as described above).  Attending
     the meeting will not revoke your proxy unless you specifically request it.
Q:   What is Adobe's voting recommendation?
A:   Our Board of Directors  recommends  that you vote your shares "FOR" each of
     the nominees to the Board and "FOR" both the  approval of the  amendment to
     Adobe's 1996 Outside  Directors'  Stock Option Plan and the ratification of
     KPMG LLP as Adobe's independent auditors for fiscal 2002.
Q:   Where can I find the voting results of the meeting?
A:   The preliminary voting results will be announced at the meeting.  The final
     results  will be  published  in our  quarterly  report on Form 10-Q for the
     second quarter of fiscal 2002.

                                      G-5

<PAGE>
                                   PROPOSAL 1

                              ELECTION OF DIRECTORS

General

     We  currently  have nine (9)  members on our Board of  Directors,  which is
divided into two classes (Class I and Class II) with alternating two-year terms.
Proxy holders will vote for the four (4) Class I nominees  listed below to serve
a two-year term ending in 2004. Antonio M. Perez, a current Class I director, is
not  seeking  re-election;  the Board may elect to reduce  the size of the Board
effective  after Mr.  Perez's term ends,  rather than appoint a director to fill
the vacancy.  Those  members of the Board who are Class II Directors  will be up
for election in 2003.

     If any nominee is unable or  declines  to serve as a Director,  the current
Board may  designate  a nominee  to fill the  vacancy.  The term of each  person
elected as a Class I Director  will  continue  until the 2004 Annual  Meeting or
until his or her successor has been elected and qualified.

     The  following  tables set forth the name and age of each  nominee and each
director of the Company whose term of office continues after the Annual Meeting,
the principal  occupation of each during the past five years,  and the year each
began serving as a director of the Company:


         Nominees for Election as Class I Directors for a Term Expiring in 2004:

<TABLE>
<CAPTION>
Name                   Principal Occupation During Last Five Years                  Age   Director Since

<S>                                                                                  <C>       <C>
Bruce R. Chizen....... In April 2000, Mr. Chizen  was  named  President  and  in     47        2000
                       December  2000,  he  was  also   named   Chief  Executive
                       Officer of the  Company.  Mr.  Chizen  joined the Company
                       upon the  closing of the  acquisition  of Aldus in August
                       1994 as Vice  President  and  General  Manager,  Consumer
                       Products Division. From December 1997 to August 1998, Mr.
                       Chizen  served  as  Senior  Vice  President  and  General
                       Manager,  Graphic Products Division, and from August 1998
                       to April 2000,  he served as  Executive  Vice  President,
                       Products and Marketing. Prior to joining the Company, Mr.
                       Chizen was Vice President and General  Manager,  Consumer
                       Division  of  Aldus  Corporation  from  February  1994 to
                       August 1994,  and from November 1992 to February 1994, he
                       was Vice  President  and General  Manager,  Claris  Clear
                       Choice for Claris  Corp.,  a wholly owned  subsidiary  of
                       Apple  Computer,  Inc., a  manufacturer  of computers and
                       software.  Mr.  Chizen  also  serves  as  a  director  of
                       Viewpoint  Corporation  and Synopsys,  Inc. He holds a BS
                       from Brooklyn College, City University of New York.
James E. Daley........ Mr. Daley has been  Executive  Vice  President  and Chief     60        2001
                       Financial Officer of Electronic Data Systems  Corporation
                       (EDS) since March 1999.  Before  joining EDS, he had been
                       with Price Waterhouse,  L.L.P. from 1963 to 1998, when he
                       retired  from the firm.  During the  period  from 1988 to
                       1998,     Mr.     Daley     served    as    the    firm's
                       Cochairman--Operations and  Vice-chairman--International.
                       He was also a  member  of the  firm's  Policy  Board  and
                       Management  Committee  and a member of the  World  Firm's
                       Policy Board and Management Committee.  Mr. Daley is also
                       a director of The Guardian Life Insurance  Company in New
                       York City. He holds a BBA from Ohio University.
Charles M. Geschke.... Dr. Geschke was a founder of the Company and has been its     63        1983
                       Chairman of the Board since September 1997,  sharing that
                       office  with  John E.  Warnock.  He was  Chief  Operating
                       Officer  of the  Company  from  December  1986 until July
                       1994.  He served as  President  of the Company from April
                       1989 until his retirement in April 2000. He is a director
                       of  Rambus  Incorporated.  Dr.  Geschke  holds  a PhD  in
                       computer science from Carnegie Mellon University.
Delbert W. Yocam...... Mr.  Yocam is an  independent  consultant.  Mr. Yocam was     59        1991
                       Chairman  of the  Board and Chief  Executive  Officer  of
                       Inprise  Corporation,   formerly  Borland  International,
                       Inc.,  from December  1996 through  April 1999.  Prior to
                       joining Inprise, Mr. Yocam was an independent  consultant
                       from November 1994 through  November 1996. From September
                       1992 until  November  1994,  he served as  President  and
                       Chief  Operating  Officer and as a director of Tektronix,
                       Inc.   Mr.   Yocam  is  also  a   director   of   several
                       privately-held  technology  companies.  He  holds  a  MBA
                       degree from California State University, Long Beach,  and


                                      G-6

<PAGE>



                       a BA  degree in  Business Administration from  California
                       State University, Fullerton.

</TABLE>
                                      G-7

<PAGE>


           Incumbent Class II Directors with a Term Expiring in 2003:

<TABLE>
<CAPTION>
Name                   Principal Occupation During the Past Five Years              Age        Year
<S>                    <C>                                                         <C>        <C>
Carol Mills Baldwin... Ms. Baldwin is the President and Chief Executive  Officer     49        1998
                       of Acta Technology, Inc., a privately held company. Prior
                       to joining Acta in July 1998, Ms. Baldwin was the General
                       Manager   in   the   Enterprise   Systems   Division   of
                       Hewlett-Packard  since  1992.  From  1981  to  1992,  Ms.
                       Baldwin  held  several  other  general   management   and
                       marketing  management  positions at Hewlett-Packard.  She
                       holds  a MBA  degree  from  Harvard  University  and a BA
                       degree from Smith College.
Colleen M. Pouliot.... Ms.  Pouliot joined the Company in July 1988 as Associate     43        2001
                       General  Counsel and became the  Corporate  Secretary  in
                       April 1989. In December 1990, she was promoted to General
                       Counsel.  In  December  1992,  she was  promoted  to Vice
                       President and in December 1997, to Senior Vice President.
                       Ms.  Pouliot was an  associate  at the law firm of Ware &
                       Freidenrich  from  November  1983  until she  joined  the
                       Company.  Effective  December  2001, she retired from her
                       position as General  Counsel,  but she continues to serve
                       as a Senior Vice  President  during the transition to her
                       successor.  Ms.  Pouliot  holds a JD from  University  of
                       California,  Davis  School  of Law and a BS in  Economics
                       from Santa Clara University.
Robert Sedgewick...... Since  1985,  Dr.  Sedgewick  has  been  a  Professor  of     56        1990
                       Computer  Science at Princeton  University,  where he was
                       the  founding  Chairman  of the  Department  of  Computer
                       Science  from 1985 to 1994.  He is the author of a widely
                       used series of textbooks  on  algorithms.  Dr.  Sedgewick
                       holds a PhD in computer science from Stanford University.
John E. Warnock....... Dr. Warnock was a founder of the Company and has been its     62        1982
                       Chairman of the Board since April 1989.  Since  September
                       1997, he has shared the position of Chairman of the Board
                       with  Charles M.  Geschke.  Dr.  Warnock  served as Chief
                       Executive  Officer  of  the  Company  from  1982  through
                       December 2000. From December 2000 until his retirement in
                       March  2001,  Dr.  Warnock  served  as  Chief   Technical
                       Officer. Dr. Warnock is a director of Knight Ridder, Inc.
                       and  Salon.com.  Dr.  Warnock  holds a PhD in  electrical
                       engineering from the University of Utah.
</TABLE>

Board and Committees Meetings

     The Board held 22 meetings in fiscal 2001. Each Director during fiscal 2001
attended at least 75% of the meetings of the Board and respective  Committees of
each member held during the year except for Mr.  Perez who  attended  46% of the
aggregate number of the meetings of the Board and Audit Committee. The Board has
an Audit Committee, Executive Compensation Committee,  Investment Committee, and
Employee  Grant  Committee.  Adobe does not have a nominating  committee nor any
committee performing such functions.


                                      G-8

<PAGE>

     The  following  table sets  forth the  current  Committees  of the Board of
Directors,  the members of each  Committee  during fiscal 2001 and the number of
meetings  held by the  Board  and the  Committees,  including  meetings  held by
telephone:

                                Membership Roster

<TABLE>
<CAPTION>
                                                                  Executive                     Employee
Name                                          Board    Audit     Compensation     Investment      Grant
<S>                                            <C>      <C>        <C>              <C>          <C>
Ms. Baldwin..................................     X                         X              X
Mr. Chizen(1)................................     X                                                    X
Mr. Daley(2).................................     X        X
Dr. Geschke(3)...............................     X                                        X
Mr. Perez....................................     X        X
Ms. Pouliot(4)...............................     X                                        X
Dr. Sedgewick................................     X        X                X              X
Dr. Warnock..................................     X
Mr. Yocam....................................     X        X                X              X
Number of meetings held in fiscal 2001.......     7        6                5              4           *
</TABLE>
___________

(1)  Mr.  Chizen  became a director  and was  appointed  the sole  member of the
     Employee  Grant  Committee on December 13, 2000.  Dr. Warnock served on the
     Employee Grant Committee until December 13, 2000.

(2)  Mr. Daley became a director and joined the Audit  Committee on December 18,
     2001.

(3)  Dr. Geschke joined the Investment Committee on April 12, 2001.

(4)  Ms.  Pouliot  became a  director  and joined the  Investment  Committee  on
     November 29, 2001.

*    The Employee  Grant  Committee  held no meetings  during  fiscal 2001.  All
     actions  taken by the  Employee  Grant  Committee  were taken by  Unanimous
     Written Consent.

     The Audit Committee meets with the Company's independent auditors quarterly
and reviews the scope of the audit performed by KPMG LLP as Adobe's  independent
auditors.  The Audit Committee and KPMG review Adobe's accounting principles and
internal accounting  controls.  See "Report of the Audit Committee" contained in
this proxy  statement.  The members of the Audit Committee are all  non-employee
directors.

     The Executive  Compensation  Committee  sets and  administers  the policies
governing  the  annual  compensation  of  executive  officers,   including  cash
compensation  and  stock  ownership  programs.  See  "Report  on  the  Executive
Compensation  Committee"  contained in this proxy statement.  The members of the
Executive Compensation Committee are all non-employee directors.

     The Investment Committee evaluates the advisability of Adobe's investing in
outside-managed  venture capital funds and direct investments by Adobe, focusing
on startup companies in businesses  strategically related to Adobe's markets and
technology.  The  Investment  Committee  monitors  the  performance  of  Adobe's
investments.  The Investment  Committee  reviews and approves any transaction in
excess of $1 million  between  Adobe and any entity in which Adobe,  directly or
indirectly,  owns an equity interest.  The Investment Committee also reviews and
approves any investment in excess of $3 million by Adobe in any investee company
in the first two of its  outside-managed  funds,  Adobe  Ventures L.P. and Adobe
Ventures II L.P., any investment in excess of $5 million in any investee company
in the third fund,  Adobe  Ventures III L.P., and any investment in excess of $6
million in any investee company in the fourth fund, Adobe Ventures IV L.P.

     The Employee Grant  Committee  reviews and approves grants of stock options
and restricted  stock to non-officer  employees  under Adobe's 1994 Stock Option
Plan,  1999  Nonstatutory  Stock  Option Plan and Amended 1994  Performance  and
Restricted Stock Plan.


                                       G-9

<PAGE>

                                   PROPOSAL 2

                                 APPROVAL OF AN
                       AMENDMENT TO INCREASE SHARE RESERVE
               UNDER THE 1996 OUTSIDE DIRECTORS' STOCK OPTION PLAN

     The Board of Directors  and the  stockholders  approved the adoption of the
1996 Outside Directors' Stock Option Plan (the "1996 Plan") in December 1995 and
April  1996,  respectively.  The  Board  subsequently  amended  the 1996 Plan in
December  1999  increasing  the 1996 Plan's share  reserve and the  stockholders
approved such  amendment in April 2000. In April 2001,  the Board made a further
amendment to the 1996 Plan removing certain automatic adjustment provisions.  No
stockholder approval was required for the April 2001 amendment.

     As of February  19, 2002,  an  aggregate of 1,102,500  shares of our Common
Stock remain  reserved for issuance under the 1996 Plan. The Board believes that
the  availability  of an adequate  number of shares in the share  reserve of the
1996  Plan is an  important  factor  in  attracting,  motivating  and  retaining
qualified non-employee directors essential to the success of the Company.

     On February 12, 2002, subject to stockholder approval,  the Board increased
the share reserve under the 1996 Plan by 750,000  shares to a total of 3,250,000
shares in contemplation of using these shares to grant options over the next few
years. In light of historical  usage and expected future grants,  we expect that
the increase will be adequate to meet these foreseeable requirements.

     We  intend  to  register  the  750,000  share  increase  on a  Registration
Statement on Form S-8 under the Securities Act of 1933 as soon as is practicable
after receiving stockholder approval.

          THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

Summary of the 1996 Outside Directors' Stock Option Plan Terms

     The following  summary of the 1996 Plan is qualified in its entirety by the
specific  language of the 1996 Plan,  a copy of which will be  available  to any
stockholder upon written request.

General. The 1996 Plan will continue until terminated by the Board, or until all
of the shares  reserved under the 1996 Plan have been issued,  whichever  occurs
first. Options granted under the 1996 Plan terminate and cease to be exercisable
on the date ten years after the date of grant unless earlier terminated pursuant
to the terms of the 1996 Plan or the option agreement.

Eligibility.  Only  non-employee  directors  of Adobe are  eligible  to  receive
options to purchase  shares of our Common Stock under the 1996 Plan. All options
granted under the 1996 Plan are  nonqualified  stock  options.  Upon joining the
Board,  a new  non-employee  director  is granted an initial  option to purchase
60,000 shares.  On the date following our annual meeting of  stockholders,  each
non-employee  director  who has not  received  an initial  grant  since the last
annual meeting of stockholders,  is automatically  granted an option to purchase
40,000 shares.  However, the Board may also exercise its discretion with respect
to the  number of shares to be  granted  under any  initial  option or under the
annual  option.  As of February  15, 2002,  seven  non-employee  directors  were
eligible  to  participate  in the 1996 Plan.  Consultants  are not  eligible  to
participate  in the 1996 Plan although they may be granted  options  pursuant to
the Company's 1994 Stock Option Plan.

     As of February 19, 2002,  2,097,500  option  shares have been granted under
the 1996 Plan of which 700,000 option shares remain unexercised.  Options for an
aggregate of 402,500 shares remain  available for grant under the 1996 Plan. The
closing  market  price for the  Company's  Common Stock on February 19, 2002 was
$34.56.

Vesting and  Change-in-Control  or  Capitalization.  The  shares are exercisable
and vest (i) 25% on the day  immediately  preceding each of the first and second
annual  meetings  of  stockholders  following  the date of  grant;  and (ii) the
remaining  50% on the day  immediately  preceding  the third  annual  meeting of
stockholders  following  the  date  of  grant.  In  the  event  of  any  merger,
reorganization,  or sale of substantially  all of the Company's assets, in which
there is a  change-in-control  of the  Company,  all Outside  Directors'  option
shares shall be immediately and fully vested.  If an Outside Director becomes an
employee of the  Company,  the shares  shall  continue  to vest on the  schedule
listed above during the recipient's employment. Appropriate adjustments are made
to any  outstanding  options in the event of a stock  dividend,  stock split, or
other change in the capital  structure of the Company;  however,  no adjustments
will be made in the number and class of shares  subject to future initial option
or annual option grants.

Administration.  The 1996 Plan is  administered  by the Board of  Directors or a
committee duly appointed by the Board.

                                      G-10

<PAGE>

Amendments.  The Board may at any time amend or terminate the 1996 Plan,  except
that  stockholder  approval  is  required  to  increase  the  number  of  shares
authorized  for issuance  under the 1996 Plan, or to expand the class of persons
eligible to receive an option grant under the 1996 Plan. In addition, the rights
of a  recipient  of a grant  under the 1996 Plan prior to any such action by the
Board may not be impaired without the recipient's consent.

Summary of Federal Income Tax Consequences of the 1996 Outside  Directors' Stock
Option Plan

     The following summary is intended only as a general guide as to the federal
income tax  consequences  under current law of options  granted  pursuant to the
1996 Plan and does not  attempt to  describe  all  potential  tax  consequences.
Furthermore,  the tax  consequences  are complex  and  subject to change,  and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.

     Options granted pursuant to the 1996 Plan are  nonqualified  stock options.
Nonqualified  stock  options have no special tax status.  An optionee  generally
recognizes no taxable income as the result of the grant of such an option.  Upon
exercise of a  nonqualified  stock  option,  the  optionee  normally  recognizes
ordinary  income on the excess of the fair market  value on the date of exercise
over the option exercise price.  Upon the sale of stock acquired by the exercise
of a  nonqualified  stock  option,  any  gain or loss,  based on the  difference
between the sale price and the fair market value on the date of  recognition  of
income,  will be taxed as a capital gain or loss. A capital gain or loss will be
long-term if the optionee's  holding  period is more than twelve months.  In the
event of a same-day sale of the option, the optionee  recognizes ordinary income
on the difference  between the option  exercise price and the sale price. No tax
deduction is available to the Company with respect to the grant of the option or
the sale of stock  acquired upon exercise of the option.  The Company  should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee  as a  result  of  the  exercise  of  the  nonqualified  stock  option.
Generally,  the recipients will be subject to the  restrictions of Section 16(b)
of the Securities Exchange Act of 1934.

                                      G-11

<PAGE>

                                New Plan Benefits


                  1996 Outside Directors' Stock Option Plan(1)

<TABLE>
<CAPTION>
                                                                                                   Number of
Name and Position                                                           Dollar Value($)(2)      Units(3)
<S>                                                                                <C>               <C>
Bruce R. Chizen
President and Chief Executive Officer                                                N/A              N/A
Murray J. Demo
Senior Vice President and Chief Financial Officer                                    N/A              N/A
Shantanu Narayen
Executive Vice President, Worldwide Products Marketing and Development               N/A              N/A
Colleen M. Pouliot
Senior Vice President                                                                N/A              N/A
Jimmie E. Stephens
Senior Vice President, Worldwide Sales, Customer Care and Field Marketing            N/A              N/A
John E. Warnock
Former Chief Executive Officer, Former Chief Technical Officer                       N/A              N/A
Graham K. Freeman
Former Senior Vice President of Worldwide Sales                                      N/A              N/A
All Executive Officers as a Group..........................................          N/A              N/A
All Non-Executive Directors as a Group.....................................   $6,912,000          200,000
All Non-Executive Officer Employees as a Group.............................          N/A              N/A
</TABLE>
___________

(1)  Only non-employee  directors  (Outside  Directors) of Adobe are eligible to
     participate in the Company's 1996 Outside Directors' Stock Option Plan. New
     Outside  Directors are awarded an initial  option grant to purchase  60,000
     shares (Initial Grant) while current Outside  Directors who did not receive
     an Initial Grant since the last annual meeting of  stockholders  receive an
     annual  stock  option  grant to  purchase  40,000  shares  (Annual  Grant).
     Directors  who are  employees  of Adobe  and  subsequently  become  Outside
     Directors  are eligible to receive  Annual  Grants but not Initial  Grants.
     Both the  Initial  Grants and  Annual  Grants  are  subject to the  vesting
     provisions described herein (See "Director Compensation"). Currently, Adobe
     has seven (7) Outside  Directors,  one of whom received an Initial Grant in
     December  2001 and five of whom  are  eligible  to  receive  Annual  Grants
     following the 2002 Annual  Meeting of  Stockholders.  Mr. Perez,  a current
     Outside Director is not seeking  re-election and will therefore not receive
     an Annual Grant this year.

(2)  Value based on the closing  price of Adobe's  Common  Stock on February 19,
     2002 ($34.56).

(3)  Includes  shares  underlying  Annual Grants to be made to five (5) eligible
     Outside Directors in April 2002.

EQUITY COMPENSATION PLAN INFORMATION

     The following  table gives  information  about our Common Stock that may be
issued  upon the  exercise  of  options,  warrants  and rights  under all of our
existing equity  compensation  plans as of November 30, 2001,  including Adobe's
1994 Stock Option Plan, 1994 Performance and Restricted Stock Plan, 1996 Outside
Directors'   Stock  Option  Plan,   1997  Employee  Stock  Purchase  Plan,  1999
Nonstatutory  Stock Option Plan,  and the Aldus 1984 Restated  Stock Option Plan
(together, the "Option Plans"):

                                      G-12

<PAGE>
<TABLE>
<CAPTION>

                                                            Equity Compensation Plan Information
                              Number of securities to be     Weighted average exercise     Number of securities remaining available
                                 issued upon exercise of          price of outstanding             for future issuance under equity
                           outstanding options, warrants         options, warrants and     compensation plans (excluding securities
Plan Category                               and rights(a)                     rights(b)                  reflected in column (a))(c)
<S>                                         <C>                              <C>                                         <C>
Equity compensation
   plans approved by
   security holders...                         19,026,713                        $27.18                                   26,811,909
Equity compensation
   plans not approved
   by security holders                      35,257,604(1)                        $41.76                                    4,304,938
Total.................                         54,284,317                        $36.65                                   31,116,847
</TABLE>
___________

(1)  Issued under our 1999 Nonstatutory  Stock Option Plan above, which does not
     require the approval of and has not been approved by our stockholders.  See
     the description below of the 1999 Nonstatutory Stock Option Plan.

1999 Nonstatutory Stock Option Plan

     As of November 30,  2001,  we had  reserved  39.6 million  shares of Common
Stock for  issuance  under the 1999  Nonstatutory  Stock  Option Plan (the "1999
Plan") for employees.  The 1999 Plan provides for the granting of  non-qualified
stock  options to employees  and officers at the fair market value of our Common
Stock at the grant date.  Initial  options and some  subsequent  options granted
under  the 1999  Plan  generally  vest 25%  after  the  first  year and  ratably
thereafter  such that 50% and 100% are vested  after the second and third  year,
respectively;  the  remaining  subsequent  options  granted  under the 1999 Plan
generally  vest  ratably  over the entire term such that 50% and 100% are vested
after the second  and third  year,  respectively.  The 1999 Plan  generally  has
option  terms under  existing  options of eight years.  A limited  number of the
options  granted in fiscal  2000 under the 1999 Plan had a vesting  acceleration
feature so that they would vest in full in November  2000 if certain  milestones
were met by Adobe; if the milestones were not met, the options would have vested
in full in September  2002 (the  milestones  were met).  These options expire in
September 2003. As of November 30, 2001,  approximately  35.3 million shares are
reserved for issuance upon exercise of outstanding options and approximately 4.3
million shares are available for grant under the 1999 Plans.  The Company's 1999
Plan  is  not  required  to be and  has  not  been  approved  by  the  Company's
stockholders.

                                      G-13

<PAGE>

                                   PROPOSAL 3

                     RATIFICATION OF APPOINTMENT OF AUDITORS

     The  Board  of  Directors  has  selected  KPMG LLP as  Adobe's  independent
auditors for fiscal 2002, and urges  stockholders  to vote for  ratification  of
KPMG's  appointment.  Ratification  of the  selection  of KPMG  by  stockholders
ratification  is not required by Adobe's  Bylaws.  However,  as a matter of good
corporate  practice,   the  Board  is  submitting  the  selection  of  KPMG  for
stockholder approval.  KPMG has audited Adobe's financial statements since 1983.
Though KPMG's appointment may have been ratified,  at its discretion,  the Board
may  appointment  a new  independent  audit  firm if it feels that such a change
would  be in the  best  interests  of  Adobe  and its  stockholders.  We  expect
representatives  of KPMG to be present at the Annual  Meeting  and will have the
opportunity  to make a statement if they desire and will be available to respond
to appropriate questions.

          THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

Relationship with Independent Auditors

     The firm of KPMG LLP has served as Adobe's  independent  auditors since our
inception  in 1982 and was our  independent  auditor  for the fiscal  year ended
November 30, 2001. As stated in Proposal 3, the Board has selected KPMG to serve
as our independent auditors for the fiscal year ending November 29, 2002.

     Audit  services  performed  by  KPMG  for  fiscal  2001  consisted  of  the
examination of Adobe's financial statements and services related to filings with
the Securities and Exchange Commission (SEC).

                       Fiscal 2001 Audit Firm Fee Summary

     During  fiscal year 2001,  we retained  our  principal  auditor,  KPMG,  to
provide services in the following categories and amounts:


    Audit Fees....................................................   $985,000
    Financial information systems design and implementation.......         $0
    Internal Audit Services.......................................         $0
    All Other Fees:
       Statutory audits...........................................    $151,227
       Tax Compliance.............................................     629,151
       Other......................................................     109,092
    Total all other fees..........................................    $889,470

     The Audit  Committee  considers at least annually  whether the provision of
non-audit services by KPMG is compatible with maintaining auditor independence.


                                      G-14

<PAGE>

                          REPORT OF THE AUDIT COMMITTEE

     The Audit Committee oversees Adobe's financial  reporting process on behalf
of the Board of Directors.  Management  has the primary  responsibility  for the
financial  statements  and the  reporting  process,  including  the  systems  of
internal controls.  We reviewed with KPMG, who are responsible for expressing an
opinion on the  conformity of our audited  financial  statements  with generally
accepted  accounting  principles,  and with management,  our critical accounting
policies,  and the  clarity of  disclosures  in the  financial  statements.  Our
reviews  included  discussions  with KPMG of matters  required  to be  discussed
pursuant to Statement on Auditing  Standards No. 61  (Communications  with Audit
Committees).  In  addition,  we  discussed  with KPMG  matters  relating  to its
independence,   including  a  review  of  both  audit  and  non-audit  fees  and
disclosures made to the Audit Committee pursuant to Independence Standards Board
Standard No. 1 and considered the  compatibility of non-audit  services with the
auditors'  independence.  Furthermore,  we discussed Adobe's critical accounting
policies with management and KPMG.

     We discussed  with KPMG and internal  audit the overall  scope and plans of
their  audits.  We met with KPMG,  as  Adobe's  independent  auditors,  with and
without management present, to discuss results of their audits, their evaluation
of Adobe's  internal  controls,  and the  overall  quality of Adobe's  financial
reporting. We held six meetings during fiscal 2001.

     Relying  on both the  reviews  and  discussions  referred  to above and our
review of Adobe's audited  financial  statements for fiscal 2001, we recommended
to the Board that the  audited  financial  statements  be included in the Annual
Report on Form 10-K for the fiscal year ended November 30, 2001, for filing with
the Securities and Exchange Commission (SEC).

Respectfully submitted,

AUDIT COMMITTEE

James E. Daley
Antonio M. Perez
Robert Sedgewick
Delbert W. Yocam

                                  Annual Report

     Accompanying this proxy statement is Adobe's Annual Report for fiscal 2001.
The Annual Report  contains  audited  financial  statements  covering our fiscal
years ended November 30, 2001, December 1, 2000 and December 3, 1999.

                                      G-15

<PAGE>

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  shows  how much  Adobe  Common  Stock is owned as of
February  19,  2002 by each  entity or person  who is known to own 5% or more of
Adobe's Common Stock, each Director, each executive officer named in the Summary
Compensation  Table and all Directors and executive  officers as a group.  As of
February 19, 2002, there were 236,987,442  shares of Adobe's Common Stock issued
and outstanding.

                             BENEFICIAL OWNERSHIP(1)

<TABLE>
<CAPTION>
Beneficial Owner                                                                Number of Shares     Percent of Totals
<S>                                                                             <C>                   <C>
PRIMECAP Management Company
225 South Lake Ave., Suite 400
Pasadena, CA 91101-3005                                                            23,342,800(2)          9.85%
FMR Corp.
82 Devonshire Street
Boston, MA 02109                                                                   13,848,753(3)          5.84%
Bruce R. Chizen.................................................................      957,775(4)              *
Murray J. Demo..................................................................      286,304(5)              *
Shantanu Narayen................................................................      548,825(6)              *
Colleen M. Pouliot..............................................................      412,900(7)              *
Jimmie E. Stephens, Jr..........................................................      343,330(8)              *
Carol Mills Baldwin.............................................................       80,000(9)              *
James E. Daley..................................................................               0
Charles M. Geschke..............................................................     966,681(10)              *
Antonio M. Perez................................................................      30,000(11)              *
Robert Sedgewick................................................................     154,600(12)              *
John E. Warnock.................................................................   2,753,285(13)          1.16%
Delbert W. Yocam................................................................      40,000(14)              *
Graham K. Freeman...............................................................     144,732(15)              *
All directors and current executive officers as a group (12 persons)............   6,588,700(16)          2.74%
</TABLE>
___________

*    Less than 1%.

(1)  This table is based upon  information  supplied by officers,  directors and
     principal stockholders. Unless otherwise indicated in the footnotes to this
     table and subject to community property laws where applicable,  each of the
     stockholders  named in this table has sole voting and investment power with
     respect  to  the  shares  indicated  as  beneficially   owned.   Applicable
     percentages  are based on  236,987,442  shares  outstanding on February 19,
     2002, adjusted as required by rules promulgated by the SEC.

(2)  Of the 23,342,800 shares attributed to PRIMECAP  Management Company, it has
     sole voting power over 2,844,100 shares and sole dispositive power over all
     23,342,800  shares.  These shares include  19,010,000  shares attributed to
     Vanguard PRIMECAP Fund, which has sole voting power and shared  dispositive
     power over all 19,010,000 shares. This information was provided pursuant to
     Schedules 13G and is as of February 4, 2002.

(3)  Of the 13,848,753  shares attributed to FMR Corp., it has sole voting power
     over 2,761,159 shares and sole dispositive power of all 13,848,753  shares.
     Such voting and dispositive power is also attributable to Edward C. Johnson
     III and  Abigail P.  Johnson  by virtue of their  positions,  Chairman  and
     Director,   respectively,   and  ownership  interests  in  FMR  Corp.  This
     information was provided pursuant to Schedule 13G and is as of February 14,
     2002.

(4)  Includes  2,025  shares held by the Chizen  Trust of which Mr.  Chizen is a
     trustee;  and 946,137 shares issuable upon exercise of outstanding  options
     held by Mr. Chizen exercisable within 60 days of the date of this table.

(5)  Includes 262,470 shares issuable upon exercise of outstanding  options held
     by Mr.  Demo  exercisable  within  60 days of the date of this  table;  and
     15,000 shares of restricted securities subject to vesting.

(6)  Includes 2 shares held in the name of the Narayen Family Trust of which Mr.
     Narayen is a trustee;  533,823 shares issuable upon exercise of outstanding
     options held by Mr. Narayen  exercisable within 60 days of the date of this
     table; and 15,000 shares of restricted securities subject to vesting.

                                      G-16

<PAGE>


(7)  Includes  342,268 shares issuable upon the exercise of outstanding  options
     held by Ms. Pouliot  exercisable  within 60 days of the date of this table;
     and 10,000 shares of restricted stock subject to vesting.

(8)  Includes  331,202 shares issuable upon the exercise of outstanding  options
     held by Mr. Stephens  exercisable within 60 days of the date of this table;
     and 10,000 shares of restricted stock subject to vesting.

(9)  Consists of 80,000 shares issuable upon the exercise of outstanding options
     held by Ms. Baldwin exercisable within 60 days of the date of this table.

(10) Includes  946,681  shares held in the name of the Geschke  Family  Trust of
     which Dr.  Geschke  is a  trustee;  and  20,000  shares  issuable  upon the
     exercise of  outstanding  options held by Dr. Geschke within 60 days of the
     date of this table.

(11) Consists of 30,000 shares issuable upon the exercise of outstanding options
     held by Mr. Perez exercisable within 60 days of the date of this table.

(12) Includes 600 shares held by Dr.  Sedgewick's  minor children,  all of which
     Dr. Sedgewick disclaims beneficial  ownership;  and 150,000 shares issuable
     upon  exercise of  outstanding  options held by Dr.  Sedgewick  exercisable
     within 60 days of the date of this table.

(13) Includes  33,600 shares held in trusts for the benefit of his children over
     which Dr. Warnock  shares voting and  investment  power with his spouse and
     Charles M.  Geschke;  and  10,000  shares  issuable  upon the  exercise  of
     outstanding  options held by Dr. Warnock  exercisable within 60 days of the
     date of this table.

(14) Consists of 40,000 shares issuable upon the exercise of outstanding options
     held by Mr. Yocam exercisable within 60 days of the date of this table.

(15) Includes 144,732 shares issuable upon exercise of outstanding  options held
     by Mr. Freeman  exercisable  within 60 days of the date of this table.  Mr.
     Freeman's vested but unexercised  options will be cancelled effective March
     1, 2002. Mr.  Freeman's  employment  with the Company ended on November 30,
     2001.

(16) Includes  2,745,900  shares  issuable upon exercise of outstanding  options
     held by directors and current executive officers exercisable within 60 days
     of the date of this  table;  and  50,000  shares of  restricted  securities
     subject to vesting. See also Notes 4 through 14.

                                      G-17

<PAGE>

                             EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

     The following table provides information about the compensation for Adobe's
last three fiscal years (2001,  2000 and 1999) of each  individual who served as
Adobe's Chief Executive  Officer during fiscal 2001,  including the former Chief
Executive  Officer,  plus the  four  other  most  highly  compensated  executive
officers as of the end of fiscal  2001,  as well as one other  person who was no
longer an officer as of the end of fiscal 2001 but who otherwise would have been
one of the four other most highly compensated executive officers.  This group is
referred to in this Proxy Statement as the Named Executive Officers.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                    Long-Term
                                        Annual Compensation                    Compensation Awards
                                                                        Restricted Stock     Securities Underlying      All Other
Name and Principal Position         Year       Salary       Bonus(1)       Awards ($)(2)        Options/SARs (#)     Compensation(3)
<S>                                 <C>        <C>          <C>           <C>                   <C>                    <C>
Bruce R. Chizen(4)                  2001     $820,834       $308,663               $0            $850,000               $32,113
President and Chief                 2000      609,356        456,952                0           1,250,000               324,068
Executive Officer                   1999      436,794        337,825        1,000,502             476,000                32,328
Shantanu Narayen
Executive Vice President            2001      456,253        126,535                0             500,000                 6,472
Worldwide Products                  2000      313,764        198,789        1,669,689             599,000                 6,344
Marketing and Development           1999      273,139        248,066          917,500          290,000(5)                 2,400
Murray J. Demo                      2001      405,000         94,331                0             350,000                 6,470
Senior Vice President               2000      263,549        202,945        1,901,876             575,000                 5,430
and Chief Financial Officer         1999      190,674        105,179          275,250              66,000                 2,400
Colleen M. Pouliot(6)
Senior Vice President,              2001      310,006         87,076                0             125,000                73,421
General Counsel and                 2000      290,461        168,318        1,113,126             275,000             2,494,976
Secretary                           1999      259,385        193,410          833,752             332,000               614,145
Jimmie E. Stephens
Senior Vice President,              2001      304,036         82,722                0             300,000                 5,520
Worldwide Sales, Customer           2000      277,510        160,763        1,113,126             325,000                 5,460
Care and Field Marketing            1999      236,259        166,034          833,752             280,000                 2,760
Former Officers
John E. Warnock(4)
Former Chief Executive              2001    66,669(7)              0                0           40,000(8)               232,649
Officer, Former                     2000      760,201        583,039            6,274           1,000,000            10,778,433
Chief Technical Officer             1999      622,524        612,509        1,167,252             620,000             2,893,078
Graham K. Freeman(9)                2001      404,170        135,363                0             125,000                 7,234
Former Senior Vice President        2000      400,140        266,887        1,113,126              75,000            37,649(10)
of Worldwide Sales                  1999      253,429        214,347          833,752             493,520            83,960(11)

</TABLE>
___________

(1)  The  amounts  shown in this column  include  payments  under the  Company's
     Profit Sharing Plan*,  in which all employees of the Company  participated,
     as follows:


                                      G-18

<PAGE>


                          Profit Sharing Plan Payments


Name                                          2001        2000        1999

Bruce R. Chizen............................ $39,583     $69,610     $58,585
Shantanu Narayen...........................  19,375      35,439      39,960
Murray J. Demo.............................  16,250      30,199      28,379
Colleen M. Pouliot.........................  15,001      32,796      38,902
Jimmie E. Stephens, Jr.....................  14,251      31,313      35,434
Former Officers
John E. Warnock............................      --      85,987      93,363
Graham K. Freeman..........................  20,007      43,137      26,597
___________

*    See  "Report   of  the   Executive   Compensation   Committee--Compensation
     Components" for a description of the Profit Sharing Plan.

(2)  The total number of restricted  stock holdings held by the Named  Executive
     Officers at the end of fiscal 2001 was 50,000 shares.  The closing price of
     Adobe's Common Stock on November 30, 2001 was $32.08 per share,  giving the
     Named  Executive  Officers  restricted  stock  holdings  a total  value  of
     $1,604,000  at the  fiscal  year end.  No shares of  restricted  stock were
     awarded to the Named Executive  Officers in fiscal 2001.  Restricted  stock
     awarded to the Named Executive  Officers vests annually over two years at a
     rate of 50% vesting one year from the initial grant date with the remaining
     50% vesting two years after the initial  grant date.  Holders of restricted
     stock are entitled to the same dividend that Adobe pays on its  outstanding
     Common Stock.

(3)  The amounts disclosed in this column for fiscal 2001, 2000 and 1999 include
     life  insurance  premiums,  the dollar  value of the  remainder of the life
     insurance premiums,  disability insurance premiums,  Adobe's  contributions
     under its 401(k) Retirement Savings Plan, pension  contributions,  physical
     examinations,   distributions   in  connection  with  the  Named  Executive
     Officers'  respective  partnership  interests in Adobe Incentive  Partners,
     L.P.  (AIP) and  deemed  compensation  recognized  by the  Named  Executive
     Officers  pursuant to the Internal  Revenue  Code of 1986,  as amended (the
     "Code"),  Section 83(b) elections made in connection with their  respective
     partnership  interests  in AIP for  fiscal  2001,  2000  and  1999,  all as
     described below:

                             All Other Compensation

<TABLE>
<CAPTION>
                                               Remainder
                                  Life        Value of      Company                                         AIP
                                  Insurance   Insurance   401(k)/Pension    Physical         AIP           Deemed       Total Other
Name                      Year    Premiums    Premiums   Contributions(a)    Exams    Distributions(b) Compensation(c)  Compensation
<S>                       <C>     <C>         <C>        <C>                <C>          <C>                <C>           <C>

                          2001      $9,614      $8,948       $5,100         $1,448         $7,003             $0          $32,113
                          2000       9,230       8,968        5,100          1,087        299,265            418          324,068
Bruce R. Chizen.........  1999       9,230       8,994        2,400              0          2,155          9,549           32,328
                          2001         330           0        5,100          1,042            N/A            N/A            6,472
                          2000         330           0        5,100            914            N/A            N/A            6,344
Shantanu Narayen........  1999           0           0        2,400              0            N/A            N/A            2,400
                          2001         600           0        5,100            770            N/A            N/A            6,470
                          2000         330           0        5,100              0            N/A            N/A            5,430
Murray J. Demo..........  1999           0           0        2,400              0            N/A            N/A            2,400
                          2001       5,955       5,364        5,100          1,042         55,960              0           73,421
                          2000       5,955       5,430        5,100              0      2,478,073            418        2,494,976
Colleen M. Pouliot......  1999       5,955       5,491        2,400            914        588,841         10,544          614,145
                          2001         420           0        5,100              0            N/A            N/A            5,520
                          2000         360           0        5,100              0            N/A            N/A            5,460
Jimmie E. Stephens, Jr..  1999         360           0        2,400              0            N/A            N/A            2,760

Former Officers
                          2001      13,630      11,272        5,100              0        202,647              0          232,649
                          2000      13,630      11,636        5,100              0     10,746,814          1,253       10,778,433
John E. Warnock.........  1999      13,630      11,962        2,400              0      2,836,439         28,647        2,893,078(d)

<PAGE>
</TABLE>
                                      G-19

<TABLE>
<S>                       <C>     <C>         <C>        <C>                <C>          <C>                <C>           <C>

                          2001         960           0        5,100          1,174            N/A            N/A            7,234
                          2000         960           0        5,100              0            N/A            N/A            6,060
Graham K. Freeman.......  1999           0           0       27,608              0            N/A            N/A           54,860(d)
</TABLE>
___________

     (a)  Amounts listed are 401(k)  Retirement  Savings Plan  contributions for
          all Named  Executive  Officers except that for Mr. Freeman in 1999 the
          amount  shown  represents  Adobe's  contribution  to  his  pension  in
          Australia.

     (b)  Distributions  of cash and  stock  made in  connection  with the Named
          Executive  Officers'  respective  partnership  interests in AIP. Stock
          distributions are calculated using the number of shares distributed to
          the Named Executive Officer at the stock's current market value on the
          date of distribution.

     (c)  Deemed  compensation   recognized  by  the  Named  Executive  Officers
          pursuant to the Code Section 83(b)  elections made in connection  with
          their  respective  partnership  interests in AIP for fiscal 2001, 2000
          and   1999.    See    "Report    of   the    Executive    Compensation
          Committee--Compensation  Components." Pursuant to the  requirements of
          the Code,  the  amounts in this  footnote  are  included in "All Other
          Compensation,"  but the  individuals  listed did not  receive any cash
          payment or securities of any venture investment;  instead, the amounts
          shown reflect the value of the partnership interest they received.

     (d)  Dr. Warnock and Mr. Freeman received  reimbursement  (inclusive of tax
          liability) for President's  Club trips in 1999 of $24,133 and $27,252,
          respectively.  Amounts are  included  in the Total Other  Compensation
          amount.

(4)  In December 2000 (fiscal 2001),  Mr. Chizen was promoted to the position of
     Chief Executive Officer,  at which time Dr. Warnock assumed the position of
     Chief Technical Officer. Dr. Warnock subsequently retired from his position
     as Chief Technical Officer in March 2001.

(5)  Includes stock option to purchase  24,000 shares granted in connection with
     the fixing of gains from certain stock  appreciation  rights (SARs) granted
     to Mr. Narayen, vested on November 30, 2000.

(6)  Ms. Pouliot retired as General Counsel,  Secretary and an executive officer
     of the Company on November 30, 2001; she remains as a Senior Vice President
     in a transition role.

(7)  Dr. Warnock elected to have his salary reduced to $1.00  beginning  January
     2001 until his retirement in March 2001.

(8)  Option  grant  pursuant to 1996  Outside  Directors'  Stock  Option Plan in
     connection with Dr. Warnock's status as a non-employee director.

(9)  All amounts  attributed to Mr.  Freeman prior to November 1, 1999 have been
     converted into U.S. dollars from the Australian dollar currency in which he
     was  paid  using  the  exchange  rate at the end of the  fiscal  1999  year
     ($.6353).

(10) Includes  $31,589  for  additional  expenses  incurred  as a result  of Mr.
     Freeman's relocation from Australia to the United States.

(11) Includes  $29,100  for  expenses  incurred  as a  result  of Mr.  Freeman's
     relocation from Australia to the United States.

Stock Options

     The following table provides details regarding stock options granted to the
Named Executive  Officers in fiscal 2001 under the Company's  Amended 1994 Stock
Option Plan (and, for Dr.  Warnock's  grant,  under the 1996 Outside  Directors'
Stock Option Plan). In addition,  in accordance with the Securities and Exchange
Commission  (SEC)  rules,  there  are shown the  hypothetical  gains or  "option
spreads" that would exist for the respective  options.  These gains are based on
assumed rates of annual compound stock price appreciation of 5% and 10% from the
date the  options  were  granted  over the full  option  term of eight (8) years
(except Dr.  Warnock's  grant,  which is calculated over the full option term of
ten (10) years).  The actual value, if any, an executive may realize will depend
on the spread  between the market price and the  exercise  price on the date the
option is exercised.

                                      G-20

<PAGE>

                        OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                                                        Potential Realizable Value
                                                                                                        at Assumed Annual Rates of
                                                                                                       Stock Price Appreciation for
                                                         Individual Grants(1)                                 Option Term(3)
                                      Number of
                                     Securities          % of Total
                                     Underlying        Options Granted
                                        Options        to Employees in    Exercise Price    Expiration
Granted                              Granted (#)         Fiscal Year         ($/Sh)(2)         Date         5% ($)        10% ($)
<S>                                     <C>                 <C>                 <C>            <C>         <C>           <C>
                                         350,000            1.86%            $27.6875         3/2/09     $4,626,842    $11,082,090
Bruce R. Chizen...............           500,000             2.66             26.9500        11/2/09      6,433,712     15,409,859
                                         250,000             1.33             27.6875         3/2/09      3,304,887      7,915,779
Shantanu Narayen..............           250,000             1.33             26.9500        11/2/09      3,216,856      7,704,930
                                         175,000              .93             27.6875         3/2/09      2,313,421      5,541,045
Murray J. Demo................           175,000              .93             26.9500        11/2/09      2,251,799      5,393,451
Colleen M. Pouliot............           125,000              .67             27.6875         3/2/09      1,652,443      3,957,889
                                         125,000              .67             27.6875         3/2/09      1,652,443      3,957,889
Jimmie E. Stephens, Jr........           175,000              .93             26.9500        11/2/09      2,251,799      5,393,451
Former Officers
John E. Warnock...............         40,000(4)              .21             41.0600        4/13/11      1,032,896      2,617,563
Graham K. Freeman.............        125,000(5)              .67             27.6875         3/2/09      1,652,443      3,957,889
</TABLE>
___________

(1)  All of the options permit  withholding of shares to satisfy tax obligations
     upon  exercise.  The  price  of each  option  share,  paid  at the  time of
     exercise,  is the fair market  value of a share of Adobe's  Common Stock on
     the date of grant,  which was equal to the  closing  price per share of our
     Common Stock as quoted on the Nasdaq  National  Market.  Under the terms of
     the applicable option agreements (except Dr. Warnock's option), as modified
     by  the   retention   agreement   terms   described   in   "Severance   and
     Change-in-Control   Arrangements"   below,   if  the  optionee   terminates
     employment with Adobe, the option term will change as follows:

     (a)  if the termination is due to the optionee's normal  retirement,  death
          or disability, the exercise period is twelve months from such date; or

     (b)  if the termination is due to the optionee's early retirement  pursuant
          to an early  retirement  program,  the exercise period is three months
          from  the  date  of  early   retirement  or  such  greater  period  as
          established pursuant to the early retirement program; or

     (c) if there is a  transfer  of  control  of Adobe in which we are not the
          surviving  corporation,   and  termination  occurs  within  24  months
          thereafter  due to (i)  constructive  termination  or (ii) any  reason
          other than termination for cause, the exercise period is twelve months
          from the date on which the optionee's employment terminated,  and this
          vesting will  accelerate such that all option shares will vest in full
          with  the  exception  of Mr.  Chizen.  Pursuant  to the  terms  of his
          Retention Agreement,  Mr. Chizen is entitled to accelerated vesting of
          all his option  shares  such that they vest in full upon a transfer of
          control of Adobe in which we are not the surviving corporation; or

     (d)  if the termination is for cause,  the option shall terminate and cease
          to be exercisable on the date of termination; or

     (e)  if the  termination  is for any reason  other than stated  above,  the
          exercise period is three months from the date of such termination.

     Options granted under Adobe's Amended 1994 Stock Option Plan typically vest
     over a  three-year  period  at a rate of 2.08%  per  month for the first 24
     months and 4.17% per month for the  remaining 12 months;  however,  options
     granted in November 2001 vest over a three-year  period at a rate of 25% at
     the end of the first 12 months from the date of grant,  2.08% per month for
     the  following 12 months,  and 4.17% per month for the remaining 12 months.
     See note 4 below for a description of the terms of Dr. Warnock's option.

                                      G-21

<PAGE>


(2)  The exercise price may be paid in cash, by delivery of already-owned shares
     subject to certain conditions, or pursuant to a cashless exercise procedure
     under which the optionee provides  irrevocable  instructions to a brokerage
     firm to sell the purchased  shares and to remit to the Company,  out of the
     sale  proceeds,  an amount equal to the exercise  price plus all applicable
     withholding taxes.

(3)  The potential  gain is  calculated  from the closing price of the Company's
     Common Stock on the date of grant to the Named Executive  Officer (see Note
     1 above regarding option expiration terms).

     For all of the grants,  the potential gains represent certain assumed rates
     of  appreciation  only, as set by the SEC.  Actual gains,  if any, on stock
     option  exercises and Common Stock  holdings are dependent  upon the future
     performance of the Company and overall stock market condition. There can be
     no assurance that the amounts reflected in this table will be achieved.

     Using the same analysis,  over the full option term of eight years (for the
     grants  under the  Amended  1994 Stock  Option  Plan) all holders of Common
     Stock  as of the  Company's  fiscal  year-end  would  potentially  gain  an
     aggregate of  approximately  $13.81 billion at 5% and $20.03 billion at 10%
     rates of stock price appreciation.

(4)  Option  grant  pursuant to 1996  Outside  Directors'  Stock  Option Plan in
     connection with Dr.  Warnock's status as a non-employee  director.  Options
     granted under the 1996 Outside Directors' Stock Option Plan vest and become
     exercisable at a rate of 25% on the day  immediately  preceding each of the
     first  and  second  annual  meetings  following  the date of grant  and the
     remaining 50% on the day  immediately  preceding  the third annual  meeting
     following  the  date  of  grant.  See  "Director  Compensation"  below  for
     additional information about the terms of this grant.

(5)  As a  result  of Mr.  Freeman's  resignation,  his  unvested  options  were
     cancelled effective December 1, 2001. Any unexercised vested options of Mr.
     Freeman's will be cancelled effective March 1, 2002.

Stock Option Exercises and Holdings

     The following  table shows stock options  exercised by the Named  Executive
Officers  during fiscal 2001,  including the total value of gains on the date of
exercise  based on actual sale  prices or on the closing  price that day, if the
shares were not sold that day. In addition, the number of shares covered by both
exercisable and non-exercisable  stock options, as of fiscal year-end, is shown.
Also  reported are the values for  "in-the-money"  options.  The dollar  amounts
shown in the  "in-the-money"  column  represent the positive  spread between the
exercise  price of any such existing stock options and the year-end price of the
Company's Common Stock.

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
                                                                                                          Value of Unexercised
                                                                   Number of Securities Underlying       In-the-Money Options at
                                                                    Unexercised Options at FY-End              FY-End ($)(1)
                                 Shares Acquired       Value
Name                              on Exercise (#)     Realized ($)    Exercisable     Unexercisable    Exercisable     Unexercisable
<S>                                  <C>             <C>               <C>             <C>             <C>               <C>

Bruce R. Chizen..............          101,045       $3,825,172        739,656         1,719,835       $2,753,979        $4,001,550
Shantanu Narayen.............        65,300(2)     3,012,398(2)        429,782           927,918        1,505,732         2,675,553
Murray J. Demo...............           10,208          393,486        270,074           730,918          364,191         1,538,326
Colleen M. Pouliot...........           49,348        2,121,614        376,815           390,919        3,676,421           574,116
Jimmie E. Stephens, Jr.......           47,110        2,135,670        248,749           592,919        1,163,771         1,425,949
Former Officers
John E. Warnock..............        1,012,313       30,986,384              0            40,000                0                 0
Graham K. Freeman(3).........          105,142        2,761,910        273,964                 0        2,268,037                 0
</TABLE>

___________

(1)  Fiscal year ended  November 30, 2001. The closing market price on that date
     for the Company's Common Stock was $32.08.

(2)  Includes  cash payout in fiscal  2001 of 24,000  SARs that fully  vested on
     November 30, 2000.

(3)  Mr. Freeman  resigned from Adobe effective  November 30, 2001,  pursuant to
     which all of his unvested options were cancelled.

                                      G-22

<PAGE>

Severance and Change-in-Control Arrangements

Change-in-Control Arrangements

     In December 2000, Adobe entered into a retention agreement with Mr. Chizen,
which  superseded  his prior  agreement.  Mr.  Chizen's  agreement  provides for
certain cash payments in the event of termination of his employment  following a
change in  control  of Adobe.  Adobe has also  entered  into  current  retention
agreements  with certain  other  executive  officers,  including:  Mr.  Narayen,
January 1998;  Ms.  Pouliot,  December  1997;  Mr.  Stephens,  August 1998;  Mr.
Freeman,  April 1999; and Mr. Demo,  June 2000.  Retention  agreements  with the
above individuals  provide for certain cash payments in the event of termination
of such  individuals'  employment  following  a change in control of Adobe.  Mr.
Freeman's  retention  agreement  terminated upon his departure from Adobe at the
end of fiscal 2001.

     In  September  1997,  Adobe  entered  into a retention  agreement  with Dr.
Warnock,  superceding prior agreements, which provided for certain cash payments
in the event of termination  of his employment  following a change in control of
Adobe. Dr. Warnock's retention agreement terminated upon his retirement in March
2001.

     As used in the retention  agreements  mentioned above (the  Agreements),  a
"change in control" is defined as: (i) the  beneficial  ownership of 30% or more
of the combined voting power of Adobe's securities by any person or entity; (ii)
when Incumbent  Directors (as defined in the  Agreements)  cease to constitute a
majority of the Board of Directors;  (iii) a merger or  consolidation  involving
Adobe or one of our  subsidiaries  and the  stockholders  of Adobe prior to such
transaction  own less  than 50% of the  combined  voting  power of Adobe (or the
resulting  entity)  after  the  transaction;   (iv)  the  sale,  liquidation  or
distribution  of all or  substantially  all of the  assets of  Adobe;  or (iv) a
"change in control"  within the meaning of Section 280G of the Code.  If, within
two years  after a change in  control  (the  Covered  Period),  the  executive's
employment is terminated  without  Cause,  or if the executive  resigns for Good
Reason  or  Disability   (as  defined  in  the   Agreements)   (an   Involuntary
Termination),  such executive  officer will receive a cash severance  payment as
follows:

          (1)  earned but unpaid salary and the cash  equivalent for accrued but
     unused  Personal Time Off through the date of  termination;  plus,  (2) pro
     rata portion of the annual bonus for the year in which  termination  occurs
     (calculated  on  the  basis  of  the  officer's  target  bonus  and  on the
     assumption  that all  performance  targets have been or will be  achieved);
     plus,  (3) an amount  equal to the product of (i) the sum of the  officer's
     Reference  Salary  and  Reference  Bonus (as  defined  in the  Agreements),
     multiplied by (ii) two plus one-twelfth for each year of completed  service
     with the Company (not in excess of twelve years) (the Severance Multiple).

     For  the  Chief  Executive  Officer  (and,  as  applied  to  Dr.  Warnock's
terminated agreement, for Chairman and Chief Technical Officer), all outstanding
options,  performance grants,  restricted stock awards and partnership interests
in AIP (see "Report of the Executive  Compensation  Committee" for a description
of AIP) will accelerate and vest 100% on the date of the change in control.  For
other  executive  officers,   all  outstanding   options,   performance  grants,
restricted stock awards and his/her partnership  interest in AIP will accelerate
and vest 100% on the date of his/her Involuntary  Termination during the Covered
Period. Also, the exercise period of all such options will be extended to twelve
months  from  termination.  A change  in  control  will  not  alter  the  payout
provisions of the Performance Plan.

     In addition, the executive officer will receive continued medical,  dental,
vision and life  insurance  coverage for himself or herself and dependents for a
period of years equal to the Severance Multiple.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
Exchange Act) requires Adobe's officers and directors,  and any person or entity
who own more than ten percent of a registered class of our Common Stock or other
equity securities, to file with the SEC certain reports of ownership and changes
in ownership of our securities.  Officers,  directors and  stockholders who hold
more than ten percent of our outstanding Common Stock are required by the SEC to
furnish us with  copies of all  required  forms filed under  Section  16(a).  We
prepare Section 16(a) forms on behalf of our officers and directors based on the
information provided by them.

     Based   solely   on   review  of  this   information,   including   written
representations  from our  officers  and  directors  that no other  reports were
required, we believe that, during the 2001 fiscal year, all Section 16(a) filing
requirements applicable to our officers,  directors and greater than ten percent
beneficial owners were met except as follows: Mr. Narayen  inadvertently omitted
one  transaction  and  ownership of two shares  acquired  through the  Company's
employee  stock purchase plan after a transaction on his Form 4 for January 2001
due to  administrative  error;  Mr. Demo and Ms. Pouliot  inadvertently  did not
report one  transaction  each on their  respective  Forms 4 for July 2001 due to
administrative  error; and Drs. Geschke and Warnock inadvertently did not report
dispositions,  in one  transaction  each,  to

                                     G-23

<PAGE>

certain exchange funds made in November 2001 due to administrative  error. These
omissions were corrected by the reporting of these  securities and  transactions
on amended Forms 4 or on Forms 5.

                                     G-24

<PAGE>

                 REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE

     The Executive  Compensation Committee of the Board of Directors is composed
entirely of outside,  non-management  directors.  No one on the  Committee  is a
former or current  officer of Adobe.  The  Committee  sets and  administers  the
policies  governing annual  compensation of executive  officers,  including cash
compensation and stock ownership programs.

Compensation Policies


     Adobe operates in the competitive and rapidly  changing high technology and
Internet business environment.  The goals of our executive  compensation program
are  to  motivate   executives  to  achieve  our  business  objectives  in  this
environment and reward them for their achievement,  foster teamwork, and attract
and retain executive  officers who contribute to our long-term  success.  During
fiscal 2001, we used salary,  bonus,  and stock options to meet these goals.  In
addition, as part of our venture investing program, we previously established an
internal  limited  partnership,  Adobe  Incentive  Partners  (AIP) which enables
certain  executives of Adobe to participate in cash or stock  distributions from
venture investments made prior to July 15, 1999.

     Our philosophy and guiding  principles are to provide  compensation  levels
that are comparable to those offered by other leading high technology companies.
Our compensation policies align the interests of our officers with the long-term
interests of our stockholders through stock compensation. For example, in fiscal
2001,  compensation  included  options to purchase shares granted under our 1994
Stock Option Plan that vest and become  exercisable  over a  three-year  period.
Another principle is that a substantial portion of each executive's compensation
be in the form of an incentive  bonus.  Receipt of this bonus,  which is payable
quarterly, is contingent upon our revenue and operating profit levels as well as
revenue  from  specific  targeted  products  during the  relevant  fiscal  year.
However,  we retain the authority to alter the bonus amounts because qualitative
factors and  long-term  results need to be  evaluated as well as the  short-term
operating results. In 2001, we considered additional factors such as achievement
of certain management goals, market share increases and decreases,  and level of
revenue achievement from certain identified products.

     We have  considered  the  potential  impact of  Section  162(m) of the Code
adopted under the Federal  Reconciliation  Act of 1993. This section disallows a
tax deduction for any  publicly-held  corporation  for  individual  compensation
exceeding  $1  million in any  taxable  year for the Named  Executive  Officers,
unless  compensation  is  performance-based.  Any options granted under our 1994
Stock Option Plan will meet the requirement of being performance-based.  For Mr.
Chizen  (President  during all of fiscal 2001 and Chief Executive Officer during
substantially  all of fiscal 2001) and certain other Named  Executive  Officers,
their targeted (and/or  attained) cash  compensation in fiscal 2001 exceeded the
$1 million threshold, and Mr. Chizen's targeted cash compensation in fiscal 2002
also  exceeds  this  threshold.  There  was a  reduction  in the  tax  deduction
available  to us in fiscal  2001,  and it will  continue  in fiscal  2002 if the
targeted  compensation is achieved;  however,  we believe such reduction was and
will continue to be  immaterial.  Our policy is to qualify to the maximum extent
possible our executives'  compensation  for  deductibility  under applicable tax
laws.

Compensation Components

Annual  Compensation.  The salary portion of executive  compensation,  including
that of the Chief  Executive  Officer,  is  determined  annually by reference to
multiple  surveys of high  technology  companies.  The  executive  officers  are
matched to each  position  by  comparing  their  responsibilities  to the survey
description most accurately  representing  their position with Adobe by content,
organizational  level and revenue.  Given the officers' levels of responsibility
and our past  performance,  we target a median  or  slightly  higher  percentile
competitive  position  as stated by the  survey in  determining  salary for each
executive  officer.  As the executives mature in their respective  positions for
the size of Adobe,  we expect to target a high percentile  competitive  position
for salary compensation.

     A substantial  portion of the annual compensation of each executive officer
is in the form of an  incentive  bonus,  which  becomes a greater  portion of an
officer's   potential   total   compensation   as  the   executive's   level  of
responsibility  increases.  The bonus is computed as a percentage of base salary
and is established annually at the beginning of the fiscal year. In fiscal 2001,
the  target  level of bonus  equaled or  exceeded  50% of salary for each of the
Named  Executive  Officers.  The actual  amount of each bonus was  determined by
reference to the  management  incentive  bonus program,  which contains  targets
specifically  tied to revenue and operating  profit levels on a quarterly basis,
including  revenue from certain  identified  products.  We have the authority to
alter  the  incentive   payout  based  on  other  factors   related  to  Adobe's
performance,  such as  achievement  of certain  revenue  levels,  achievement of
certain management goals, market share increases,  new product  development.  We
did  not  assign  weights  to each  of  these  factors  but  considered  overall
profitability  and operating  results as measured against the annual budget more
important than the other  performance  measures  listed.  In 2001, we determined
incentive bonuses on a quarterly basis.  Based on our overall  profitability and
operating  results,  as measured against budget,  no incentive bonuses were paid
for the third or fourth quarters of fiscal 2001. Bonuses were paid in accordance
with the Plan terms for the first and second quarters of fiscal 2001.


                                     G-25

<PAGE>

     All executive officers also participated with all of Adobe's U.S. employees
in our corporate profit sharing plan, under which a target bonus of up to 10% of
each employee's base salary,  payable  quarterly,  is awarded depending upon our
overall  performance  based on operating  profit.  Based on our operating profit
versus  budget,  in the third and  fourth  quarters  of fiscal  2001,  no profit
sharing  bonus was paid. A profit  sharing  bonus was paid in full for the first
and second quarters of fiscal 2001.

Long-term  Compensation.  The Committee has utilized stock  options,  restricted
stock,  and for  those  executives  deemed  critical  to its  venture  investing
activities,  limited  partnership  units in AIP to motivate and retain executive
officers  for  the  long-term.  The  Committee  believes  that  these  forms  of
compensation  closely align the officers'  interests with those of  stockholders
and provide a major incentive to officers in building stockholder value.

     Options are typically granted annually,  although occasionally supplemental
grants are made as well,  and are  subject to vesting  provisions  to  encourage
officers to remain  employed with Adobe.  The Committee  considered  fiscal 2001
annual  grants in November  2000 and,  responding  to market trends and external
competitive  data,  accelerated  consideration  of fiscal 2002 annual  grants to
March  2001.  In November  2001,  because of employee  retention  concerns,  the
Committee, along with the Board, considered various repricing options due to the
significant  number of option  shares  "under  water,' but  determined  that any
repricing would not be in the best interests of stockholders.  Subsequently,  it
was determined that employee  retention  required some action,  so the Committee
(and  the  Employee  Grant  Committee,   for  non-officers)   therefore  granted
supplemental  stock  options  to a limited  number of key  employees  to balance
stockholder  interests with the need to retain such  employees.  See the "OPTION
GRANTS IN LAST FISCAL YEAR" table.

     Each  executive  officer  receives  stock options based upon that officer's
relative position,  responsibilities  and performance by the individual over the
previous   fiscal   year  and  the   officer's   anticipated   performance   and
responsibilities.  Additionally,  we consider the net present value of the grant
compared to typical  grants at high  technology  companies  of a similar size to
Adobe.  We also  review the prior level of grants to the  officers  and to other
members of senior  management,  including the number of shares which continue to
be subject to vesting under outstanding options, in setting the level of options
to be granted to the  executive  officers.  The size of the option grants is not
related  to  Adobe's  performance.   In  addition,   we  use  data  compiled  by
iQuantic-Buck  (an independent  compensation  consulting  firm) on stock options
granted in comparable companies in the technology-based  industry and comparable
companies from a revenue perspective. We grant these stock options at the market
price on the date of grant.  They will provide value to the officers only if the
price of our Common Stock increases over the exercise price.

     As  part  of  its  venture  investment  program,  the  Board  of  Directors
established Adobe Incentive Partners to provide long-term  compensation to those
executive  officers  of Adobe who are  involved  in  Adobe's  venture  investing
activities  and whose  participation  is deemed  critical  to the success of the
program.   The  limited  partnership   investments  are  restricted  to  venture
investments  in companies that are private at the time of the  establishment  of
AIP, or when the investment is made,  whichever is later.  Distributions  to the
partners are made when an investment  is  marketable or sold for cash.  Adobe is
both the general partner and a limited partner.  Our senior partnership interest
includes both a liquidation  preference and a preference in recovery of the cost
basis of each specific investment.  The executives' junior (Class B) partnership
interests qualify for partnership  distributions only after: (a) Adobe has fully
recovered  the cost  basis of the  specific  investment;  and (b) the  executive
officer has met the vesting  requirement.  Vesting is over a three-year  period:
2.08% per month for the first 24 months and 4.17% per month for the remaining 12
months. All existing partnership  interests have fully vested or ceased vesting.
No AIP  partnership  interests  were granted in fiscal 2001,  2000 or 1999.  The
total amount allocated to the junior partnership interests is 20% of the venture
investments  included  in  Adobe  Incentive  Partners.  As Adobe  makes  venture
investments,  the  executive  officers  are  deemed to receive  compensation  in
proportion to their  interests.  In addition,  in fiscal 2001,  distributions in
cash and  stock to  current  executive  officers  valued at  $62,963  and to Dr.
Warnock  valued at $202,647  were made by AIP.  Mr.  Chizen is the only  current
executive  officer who is a partner in AIP. Future venture  investments by Adobe
are not expected to be made through AIP.

Chief Executive Officer Compensation

     The Committee  established the Chief Executive  Officer's salary and target
bonus  levels at the  beginning  of fiscal  2001.  Consistent  with the analysis
described above, and with Mr. Chizen's assumption of the role of Chief Executive
Officer,  the Committee  increased the base salary of Mr. Chizen and  maintained
his  target  bonus  percentage  (percentage  of base  salary) at 70% of his base
salary.  The target bonus is based on a combination  of corporate  results (80%)
and revenue  results from certain  products  (20%).  The Committee  approved the
payment of Mr.  Chizen's target bonus for each quarter of fiscal 2001as follows:
first quarter, 70% of target bonus based on corporate result and 140% on revenue
from certain identified products;  second quarter, 104% of target bonus based on
corporate  result and 125% on new  product  result;  and no payment for third or
fourth quarter due to Adobe's failure to achieve  targeted  corporate  result or
revenue from certain identified products.

     For Mr.  Chizen's  long-term  compensation,  the  Committee  granted  stock
options under the Company's 1994 Stock Option Plan (the "1994 Plan") for 350,000
shares of  Common  Stock in March  2001 and  500,000  shares of Common  Stock in
November 2001 as part of the annual and  supplemental  grants  described  above.
Each option vests over a three-year  period. The first option vests at a rate of

                                     G-26
<PAGE>

2.08% per month for the first 24 months and 4.17% per month for the remaining 12
months; and the second option vests at a rate of 25% on the first anniversary of
the  grant,  2.08% per month for the next 12 months  and 4.17% per month for the
remaining 12 months.  Mr. Chizen  received  distributions  in stock from his AIP
partnership interest valued at $7,003 in fiscal 2001.

     Dr.  Warnock's  brief  term as Chief  Executive  Officer  and then as Chief
Technical  Officer in fiscal 2001 resulted in compensation  which was limited to
his base salary  through March 31, 2001. At his request,  Dr.  Warnock's  salary
during  most of his  term as Chief  Technical  Officer  was  reduced  to  $1.00,
beginning in January 2001, and remained such until his retirement in March 2001.

EXECUTIVE COMPENSATION COMMITTEE

Carol Mills Baldwin
Robert Sedgewick
Delbert W. Yocam


                                     G-27
<PAGE>

                              DIRECTOR COMPENSATION


     Directors  who are not  employees  of Adobe  receive  annual  retainers  of
$24,000,  meeting fees of $1,500 for each Board of Directors  Meeting and $1,000
for each  Committee  Meeting they attend.  There are no fees paid for telephonic
meetings.  Directors are also  entitled to  reimbursement  of reasonable  travel
expenses  associated  with  Board and  Committee  Meetings.  In  addition,  each
non-employee  director is  automatically  granted a stock option,  under Adobe's
1996 Outside  Directors' Stock Option Plan, to purchase 40,000 shares of Adobe's
Common Stock at a price per share equal to the closing  price of Adobe's  Common
Stock on the grant date.  These  options are granted on the day after the annual
meeting of stockholders  of Adobe and they are subject to vesting  provisions as
described  below.  New non-employee  directors  joining the Board  automatically
receive an option to purchase  60,000  shares of Adobe's  Common Stock under the
Outside  Directors'  Plan,  subject to the same vesting  terms,  on the day they
become a director,  but do not receive an annual  grant after their first Annual
Meeting as a director.  However, the Outside Directors' Plan also provides that,
pursuant to Rule 16b-3 of the Exchange Act, if certain  conditions  are met, the
Board may  exercise  its  discretion  with respect to the number of shares to be
granted under any initial option or under the annual option.

     Options  granted  under  the  Outside   Directors'  Plan  vest  and  become
exercisable at a rate of 25% on the day immediately  preceding each of the first
and second annual meetings  following the date of grant and the remaining 50% on
the day  immediately  preceding the third annual  meeting  following the date of
grant. In the event of any merger, reorganization,  or sale of substantially all
of Adobe's  assets in which  there is a change in  control of Adobe,  all option
shares become  immediately and fully vested.  If an Outside  Director becomes an
employee of Adobe,  the shares  would  continue to vest on the  schedule  listed
above during the person's  employment.  Appropriate  adjustments are made to any
outstanding  options in the event of a stock  dividend,  stock  split,  or other
change in the capital structure of Adobe.

     Holders of  options  granted  under the  Outside  Directors'  Plan may only
exercise the options once they vest.  Options are no longer  exercisable 90 days
after  termination of director  status (except in the case of termination due to
death or disability).  However,  if such an exercise would subject the resigning
director to a forfeiture  of profits under Section 16(b) of the Exchange Act the
exercise period may be increased. In such an event, the timeframe for exercising
vested options would be extended until the earlier of (i) the 10th day following
the date on which  the  resigning  director  would no  longer  be  subject  to a
forfeiture  of  profits  under  Section  16(b),  or (ii)  the  190th  day  after
termination  of services as director or (iii)  expiration of the option.  In the
event of a change of control,  any  unexercisable  portion of an option  becomes
fully exercisable thirty days prior to the transaction  resulting in a change of
control. The option will terminate to the extent it is not exercised on the date
of such a  transaction  to the extent it is not  assumed or  substituted  by the
acquiring company.

                              CERTAIN TRANSACTIONS

     During fiscal 1999,  Adobe entered into two separate loan  agreements  with
Graham Freeman, an executive officer, to assist with his relocation to San Jose,
California.  The first loan in the amount of  $550,000,  at an interest  rate of
8.25% per annum, was repaid on December 31, 1999. The second loan, in the amount
of $1  million,  is  interest-free  and is  secured by Mr.  Freeman's  principal
residence.  Under the terms of the  agreement,  Mr. Freeman is required to repay
this loan at $200,000 per year over the five years beginning  December 2000. His
second  payment was made in November  2001,  leaving a balance of $600,000 as of
January 25, 2002.  The loan was amended in November 2001 in connection  with Mr.
Freeman's  resignation from Adobe to include an agreement by Adobe that it would
not exercise its right to accelerate the payment of unpaid principal  because of
Mr. Freeman's termination of employment.  Adobe reserved the right to accelerate
payment for any other reason authorized by the agreement.

     Also in connection with Mr. Freeman's  resignation from his employment with
us, which was effective November 30, 2001, we entered into an agreement with him
to: (i) pay him a lump sum equal to his total target  compensation  (base salary
and management  incentive plan bonuses) for twelve (12) months, (ii) pay for his
COBRA  premiums  until the  earlier of  November 1, 2002 or the date he receives
coverage under another group health  insurance plan, and (iii) allow him to keep
his laptop computer. We also amended his loan agreement with us, as described in
the previous paragraph. In addition, he remained eligible for any bonuses earned
through his resignation date, although no bonuses were earned or paid.

     Adobe has entered  into  indemnity  agreements  with  certain  officers and
directors  which  provide,  among other things,  that Adobe will  indemnify such
officer or director,  under the  circumstances and to the extent provided for in
the agreements,  for expenses,  damages,  judgments, fines and settlements he or
she may be required to pay in actions or proceedings  which he is or may be made
a party to by reason of his or her  position  as a  director,  officer  or other
agent of Adobe,  and otherwise to the full extent  permitted  under Delaware law
and Adobe's Bylaws.


                                     G-28
<PAGE>

                                PERFORMANCE GRAPH

Five-Year Stockholder Return Comparison

     In  accordance  with SEC rules,  the  following  table  shows a  line-graph
presentation  comparing cumulative,  five-year stockholder returns on an indexed
basis  with a broad  equity  market  index and  either a  nationally  recognized
industry  standard or an index of peer  companies  selected by Adobe.  Adobe has
selected  the Standard & Poor 500 (S&P 500) Index for the broad equity index and
the JP Morgan H&Q Technology  Index as an industry  standard for the five fiscal
year period commencing November 29, 1996 and ending November 30, 2001. The stock
price  information  shown on the graph below is not  necessarily  indicative  of
future price performance.

     Although  including a stock performance graph in this proxy statement seems
to suggest  that  executive  compensation  should be based on stock  performance
alone,  the  Executive   Compensation   Committee   considers  many  factors  in
determining  compensation.  These factors  include  Adobe's  operating  results,
overall  profitability,  revenue from certain identified  products,  new product
development,  increases in market share and growth in stockholders'  equity. See
"Report of the Executive Compensation Committee."

                Comparison of Five Year Cumulative Total Return*

__________

*    Assumes $100 invested on November 29, 1996 in Adobe's Common Stock, the S&P
     500 Index and the JPMorgan  H&Q  Technology  Index,  with  reinvestment  of
     dividends.

**   For each reported year,  Adobe's  reported dates are the last trading dates
     of its fiscal year (which ends on the Friday  closest to November  30), and
     the S&P 500 and JP Morgan H&Q  Technology  index dates are the last trading
     date of November.


                                     G-29

<PAGE>

     OTHER BUSINESS

     We are not aware of any other matters to be submitted for  consideration at
the  Annual  Meeting.  If any other  matters  are  properly  brought  before the
meeting,  the  persons  named in the  enclosed  proxy will vote the shares  they
represent using their best judgment.

          STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING

     Pursuant to Adobe's Amended and Restated Bylaws, any proposal to be brought
before next year's annual meeting by a stockholder  must be received by Adobe at
its offices not later than November 5, 2002 and, to be included in Adobe's proxy
statement  for that  meeting,  must satisfy the  conditions  established  by the
Securities and Exchange Commission for stockholder proposals; provided, however,
that if no annual  meeting  is held in the prior  year or the date of the annual
meeting is changed by more than 30 days from the date contemplated at this time,
notice by a stockholder must be so received not later than the close of business
on the 10th day  following  the day on which a notice of the date of the meeting
is mailed or a public announcement thereof is made.

                                                  Karen O. Cottle
                                                  Senior Vice President, General
                                                  Counsel & Secretary

San Jose, California
March 5, 2002

                                     G-30

<PAGE>


                           ADOBE SYSTEMS INCORPORATED

                    1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
                       (as amended through April 11, 2002)

1.   Establishment, Purpose and Term of Plan.

          1.1  Establishment.  The Adobe Systems  Incorporated  Restricted Stock
     Option Plan was initially  established effective March 27, 1987 and amended
     from time to time  thereafter  (the "Initial  Plan").  The Initial Plan was
     amended and restated in its entirety as the Adobe Systems Incorporated 1996
     Outside  Directors Stock Option Plan (the "Plan")  effective as of the date
     of its  approval by the  stockholders  of the  Company,  April 5, 1995 (the
     "Effective Date").

          1.2  Purpose.  The purpose of the Plan is to advance the  interests of
     the  Participating  Company  Group and its  stockholders  by  providing  an
     incentive  to  attract  and  retain  highly  qualified  persons to serve as
     Outside Directors of the Company and by creating  additional  incentive for
     Outside   Directors  to  promote  the  growth  and   profitability  of  the
     Participating Company Group.

          1.3 Term of Plan.  The Plan shall continue in effect until the earlier
     of its  termination  by the Board or the date on which all of the shares of
     Stock  available  for  issuance  under the Plan have  been  issued  and all
     restrictions  on such shares under the terms of the Plan and the agreements
     evidencing Options granted under the Plan have lapsed.

2.   Definitions and Construction.

          2.1 Definitions.  Whenever used herein, the following terms shall have
     their respective meanings set forth below:

               (a) "Board"  means the Board of Directors of the Company.  If one
          or more  Committees have been appointed by the Board to administer the
          Plan, "Board" also means such Committee(s).

               (b) "Code" means the Internal  Revenue Code of 1986,  as amended,
          and any applicable regulations promulgated thereunder.

               (c) "Committee"  means a committee of the Board duly appointed to
          administer  the Plan and having such powers as shall be  specified  by
          the Board.  Unless the powers of the Committee have been  specifically
          limited,  the  Committee  shall  have all of the  powers  of the Board
          granted herein, including,  without limitation,  the power to amend or
          terminate  the Plan at any time,  subject to the terms of the Plan and
          any applicable limitations imposed by law.

               (d)  "Company"  means  Adobe  Systems  Incorporated,  a  Delaware
          corporation, or any successor corporation thereto.

               (e) "Consultant" means any person,  including an advisor, engaged
          by a  Participating  Company  to  render  services  other  than  as an
          Employee or a Director.

               (f)  "Director"  means a  member  of the  Board  or the  board of
          directors of any other Participating Company.

               (g) "Employee" means any person treated as an employee (including
          an officer or a Director  who is also  treated as an  employee) in the
          records of a Participating  Company;  provided,  however, that neither
          service  as a  Director  nor  payment  of a  director's  fee  shall be
          sufficient to constitute employment for purposes of the Plan.

               (h) "Exchange Act" means the Securities  Exchange Act of 1934, as
          amended.

               (i) "Fair Market Value" means, as of any date, if there is then a
          public  market for the Stock,  the closing  price of the Stock (or the
          mean of the closing bid and asked  prices of the Stock if the Stock is
          so  reported  instead)  as reported  on the  National  Association  of
          Securities Dealers Automated  Quotation  ("Nasdaq") System, the Nasdaq
          National  Market System or such other national or regional  securities
          exchange or market  system  constituting  the  primary  market for the
          Stock.  If the relevant date does not fall on a day on which the Stock
          is trading  on Nasdaq,  the  Nasdaq  National  Market  System or other
          national or regional securities exchange or market system, the date on
          which the Fair Market Value shall be established shall be the last day
          on which the Stock was so traded prior to the

                                     G-31

<PAGE>

          relevant  date. If there is then no public  market for the Stock,  the
          Fair Market Value on any relevant  date shall be as  determined by the
          Board  without  regard to any  restriction  other  than a  restriction
          which, by its terms, will never lapse.

               (j)  "Option"  means  a  right  to  purchase  Stock  (subject  to
          adjustment  as  provided  in Section  4.2)  pursuant  to the terms and
          conditions of the Plan.

               (k)  "Optionee"  means a person who has been  granted one or more
          Options.

               (l)  "Option  Agreement"  means a written  agreement  between the
          Company  and an  Optionee  setting  forth the  terms,  conditions  and
          restrictions of the Option granted to the Optionee.

               (m) "Outside Director" means a Director of the Company who is not
          an officer of the Company, an Employee, or a Consultant.

               (n)  "Parent  Corporation"  means any  present or future  "parent
          corporation" of the Company, as defined in Section 424(e) of the Code.

               (o)  "Participating  Company"  means the  Company  or any  Parent
          Corporation or Subsidiary Corporation.

               (p)  "Participating  Company Group" means,  at any point in time,
          all corporations collectively which are then Participating Companies.

               (q)  "Rule  16b-3"  means  Rule  16b-3 as  promulgated  under the
          Exchange Act, as amended from time to time,  or any successor  rule or
          regulation.

               (r) "Service" means the Optionee's service as a Director.

               (s) "Stock"  means the common stock of the  Company,  as adjusted
          from time to time in accordance with Section 4.2.

               (t)  "Subsidiary   Corporation"   means  any  present  or  future
          "subsidiary  corporation" of the Company, as defined in Section 424(f)
          of the Code.

          2.2  Construction.  Captions  and  titles  contained  herein  are  for
     convenience only and shall not affect the meaning or  interpretation of any
     provision of the Plan. Except when otherwise indicated by the context,  the
     singular  shall include the plural,  the plural shall include the singular,
     and use of the term "or" shall not be exclusive.

3.  Administration.

          3.1 Administration by the Board. The Plan shall be administered by the
     Board,  including any duly appointed  Committee of the Board. All questions
     of  interpretation  of the Plan or of any Option shall be determined by the
     Board, and such determinations  shall be final and binding upon all persons
     having  an  interest  in  the  Plan  or  such  Option.  Any  officer  of  a
     Participating  Company  shall  have the  authority  to act on behalf of the
     Company with respect to any matter,  right,  obligation,  determination  or
     election  which  is the  responsibility  of or which  is  allocated  to the
     Company herein, provided the officer has apparent authority with respect to
     such matter, right, obligation, determination or election.

          3.2  Limitations  on  Authority  of the  Board.  Except  as  otherwise
     provided herein, the Board shall have no authority, discretion, or power to
     select the Outside Directors who will receive Options,  to set the exercise
     price of the  Options,  to  determine  the  number of shares of Stock to be
     subject to an Option or the time at which an Option  shall be  granted,  to
     establish  the  duration  of an  Option,  or to alter  any  other  terms or
     conditions  specified in the Plan, except in the sense of administering the
     Plan subject to the provisions of the Plan.

4.  Shares Subject to Plan.

          4.1  Maximum  Number of Shares  Issuable.  Subject  to  adjustment  as
     provided in Section  4.2, the maximum  aggregate  number of shares of Stock
     that may be issued under the Plan shall be three  million two hundred fifty
     thousand (3,250,000) and shall consist of authorized but unissued shares or
     reacquired  shares of Stock or any combination  thereof.  If an outstanding

                                      G-32

<PAGE>

     Option for any reason  expires or is  terminated  or  canceled or shares of
     Stock acquired,  subject to repurchase,  upon the exercise of an Option are
     repurchased  by  the  Company,   the  shares  of  Stock  allocable  to  the
     unexercised  portion of such Option,  or such repurchased  shares of Stock,
     shall again be available for issuance under the Plan.

          4.2 Adjustments for Changes in Capital Structure.  In the event of any
     stock  dividend,  stock  split,  reverse  stock  split,   recapitalization,
     combination, reclassification or similar change in the capital structure of
     the Company,  appropriate adjustments shall be made in the number and class
     of shares subject to the Plan, and to any outstanding  Options,  and in the
     exercise  price of any  outstanding  Options.  For any  changes  in capital
     structure  made after April 12, 2001, no  adjustments  shall be made in the
     number  and class of shares  subject  to the  "Initial  Option"  or "Annual
     Option" (as defined in Section  6.1). If a majority of the shares which are
     of the same class as the shares that are subject to outstanding Options are
     exchanged for, converted into, or otherwise become (whether or not pursuant
     to a Transfer  of Control  as  defined  in Section  8.1)  shares of another
     corporation  (the  "New  Shares"),  the Board  may  unilaterally  amend the
     outstanding  Options to provide that such Options are  exercisable  for New
     Shares.  In the event of any such  amendment,  the number of shares subject
     to, and the exercise price of, the outstanding Options shall be adjusted in
     a fair  and  equitable  manner  as  determined  by the  Board,  in its sole
     discretion.  Notwithstanding the foregoing,  any fractional share resulting
     from an  adjustment  pursuant to this  Section 4.2 shall be rounded down to
     the nearest  whole  number,  and in no event may the exercise  price of any
     Option be  decreased  to an amount less than the par value,  if any, of the
     stock subject to the Option.

5.  Eligibility and Type of Options.

          5.1 Persons Eligible for Options. An Option shall be granted only to a
     person who, at the time of grant, is an Outside Director.

          5.2 Options  Authorized.  Options shall be nonstatutory stock options;
     that is,  options which are not treated as incentive  stock options  within
     the meaning of Section 422(b) of the Code.

6.  Terms and  Conditions  of  Options.  Options  shall be  evidenced  by Option
Agreements  specifying  the number of shares of Stock covered  thereby,  in such
form as the Board  shall  from time to time  establish.  Option  Agreements  may
incorporate  all or any of the terms of the Plan by  reference  and shall comply
with and be subject to the following terms and conditions:

          6.1  Automatic  Grant of Options.  Subject to  execution by an Outside
     Director of the  appropriate  Option  Agreement,  Options  shall be granted
     automatically and without further action of the Board, as follows:

               (a) Initial Option. Each person who is first elected or appointed
          as an Outside  Director  after the Effective  Date shall be granted an
          Option to purchase sixty thousand (60,000) shares of Stock on the date
          of  such  initial  election  or  appointment  (an  "Initial  Option").
          Notwithstanding  anything  herein to the  contrary,  a Director of the
          Company who  previously  did not qualify as an Outside  Director shall
          not  receive  an  Initial  Option  in the  event  that  such  Director
          subsequently becomes an Outside Director.

               (b) Annual Option.  Each Outside Director (including any Director
          of the Company who previously  did not qualify as an Outside  Director
          but who subsequently becomes an Outside Director) shall be granted, on
          the day  immediately  following the day of each annual  meeting of the
          stockholders of the Company (an "Annual Meeting") following which such
          person  remains  an  Outside  Director,  an Option to  purchase  forty
          thousand    (40,000)   shares   of   Stock   (an   "Annual   Option").
          Notwithstanding  the  foregoing,  an Outside  Director who received an
          Initial Option subsequent to the preceding year's Annual Meeting shall
          not receive an Annual Option with respect to the current year's Annual
          Meeting.

               (c) Right to Decline Option.  Notwithstanding the foregoing,  any
          person may elect not to receive an Option by delivering written notice
          of such  election to the Board no later than the day prior to the date
          such Option  would  otherwise  be granted.  A person so  declining  an
          Option shall receive no payment or other consideration in lieu of such
          declined  Option.  A person who has declined an Option may revoke such
          election by delivering  written notice of such revocation to the Board
          no later than the day prior to the date such  Option  would be granted
          pursuant to Section 6.1(a) or (b), as the case may be.

          6.2 Discretion to Vary Option Size.  Notwithstanding  any provision of
     the Plan to the contrary,  the Board may, in its sole discretion,  increase
     or decrease  the number of shares of Stock that would  otherwise be subject
     to one or more Initial Options or Annual Options to be granted  pursuant to
     Section  6.1 if,  at the  time  of such  exercise  of  discretion,  (a) the
     "disinterested  administration" provisions contained in paragraph (c)(2)(i)
     of Rule  16b-3  are no  longer  applicable  to any  employee  benefit  plan

                                      G-33

<PAGE>

     maintained  by a  Participating  Company  and  (b)  the  exercise  of  such
     discretion  would  not  otherwise  preclude  any  transaction  in an equity
     security  of the  Company  by an  officer or  Director  of a  Participating
     Company from being  exempt from Section  16(b) of the Exchange Act pursuant
     to Rule 16b-3.

          6.3 Exercise  Price.  The exercise price per share of Stock subject to
     an Option  shall be the Fair  Market  Value of a share of Stock on the date
     the Option is granted.

          6.4  Exercise  Period.  Each Option  shall  terminate  and cease to be
     exercisable  on the  date  ten (10)  years  after  the date of grant of the
     Option unless earlier  terminated  pursuant to the terms of the Plan or the
     Option Agreement.

          6.5 Right to Exercise  Options.  Except as  otherwise  provided in the
     Plan or in the Option  Agreement and provided that the  Optionee's  Service
     has been  continuous  from the date of Option grant until the relevant date
     set forth  below,  each  Option,  whether  an  Initial  Option or an Annual
     Option,  shall become  vested and  exercisable  cumulatively  for shares of
     Stock subject to the Option (the "Option Shares") as follows:

               (a)  25% of  the  Option  Shares  shall  vest  and  first  become
          exercisable  on the day  immediately  preceding  the day of the  first
          Annual Meeting following the date of Option grant.

               (b)  25% of  the  Option  Shares  shall  vest  and  first  become
          exercisable  on the day  immediately  preceding  the day of the second
          Annual Meeting following the date of Option grant.

               (c)  50% of  the  Option  Shares  shall  vest  and  first  become
          exercisable  on the day  immediately  preceding  the day of the  third
          Annual Meeting following the date of Option grant.

          6.6 Payment of Exercise Price.

               (a)  Forms  of  Consideration  Authorized.  Except  as  otherwise
          provided below, payment of the exercise price for the number of shares
          of Stock being  purchased  pursuant to any Option shall be made (i) in
          cash, by check, or cash  equivalent,  (ii) by tender to the Company of
          shares of Stock owned by the  Optionee  having a Fair Market Value not
          less than the exercise price,  (iii) by the assignment of the proceeds
          of a sale or loan  with  respect  to some or all of the  shares  being
          acquired  upon  the  exercise  of  the  Option   (including,   without
          limitation,  through an  exercise  complying  with the  provisions  of
          Regulation  T as  promulgated  from  time  to  time  by the  Board  of
          Governors of the Federal Reserve System) (a "Cashless  Exercise"),  or
          (iv) by any combination thereof.

               (b) Tender of Stock. Notwithstanding the foregoing, an Option may
          not be  exercised  by tender to the  Company of shares of Stock to the
          extent  such  tender of Stock  would  constitute  a  violation  of the
          provisions  of  any  law,  regulation  or  agreement  restricting  the
          redemption of the Company's stock.  Unless  otherwise  provided by the
          Board,  an Option  may not be  exercised  by tender to the  Company of
          shares of Stock  unless  such  shares  either  have been  owned by the
          Optionee for more than six (6) months or were not  acquired,  directly
          or indirectly, from the Company.

               (c)  Cashless  Exercise.  The  Company  reserves,  at any and all
          times,  the right, in the Company's sole and absolute  discretion,  to
          establish,  decline to approve or terminate  any program or procedures
          for the exercise of Options by means of a Cashless Exercise.

          6.7 Tax  Withholding.  The Company  shall have the right,  but not the
     obligation,  to deduct from the shares of Stock  issuable upon the exercise
     of an Option,  or to accept  from the  Optionee  the tender of, a number of
     whole  shares of Stock  having a Fair Market Value equal to all or any part
     of the federal,  state, local and foreign taxes, if any, required by law to
     be withheld by the Participating  Company Group with respect to such Option
     or the shares acquired upon exercise thereof. Alternatively or in addition,
     in its sole  discretion,  the  Company  shall have the right to require the
     Optionee  to  make  adequate   provision  for  any  such  tax   withholding
     obligations of the  Participating  Company Group arising in connection with
     the Option or the shares acquired upon exercise thereof.  The Company shall
     have no  obligation  to  deliver  shares of Stock  until the  Participating
     Company Group's tax withholding obligations have been satisfied.

7.  Standard Form of Option Agreement.


                                      G-34

<PAGE>

          7.1 Initial Option.  Unless otherwise provided for by the Board at the
     time an Initial  Option is granted,  each Initial  Option shall comply with
     and be  subject  to the  terms  and  conditions  set  forth  in the form of
     Nonstatutory  Stock Option Agreement for Outside Directors (Initial Option)
     adopted  by the Board  concurrently  with its  adoption  of the Plan and as
     amended from time to time.

          7.2 Annual Option.  Unless otherwise  provided for by the Board at the
     time an Annual Option is granted,  each Annual Option shall comply with and
     be  subject  to  the  terms  and  conditions  set  forth  in  the  form  of
     Nonstatutory  Stock Option Agreement for Outside  Directors (Annual Option)
     adopted  by the Board  concurrently  with its  adoption  of the Plan and as
     amended from time to time.

          7.3 Authority to Vary Terms.  Subject to the  limitations set forth in
     Section 3.2, the Board shall have the  authority  from time to time to vary
     the terms of any of the  standard  forms of Option  Agreement  described in
     this  Section 7 either in  connection  with the  grant or  amendment  of an
     individual Option or in connection with the authorization of a new standard
     form or forms; provided, however, that the terms and conditions of any such
     new,  revised or amended standard form or forms of Option Agreement are not
     inconsistent with the terms of the Plan. Such authority shall include,  but
     not by way  of  limitation,  the  authority  to  grant  Options  which  are
     immediately  exercisable  subject to the Company's  right to repurchase any
     unvested  shares of Stock  acquired by the Optionee upon the exercise of an
     Option in the event such Optionee's Service is terminated for any reason.

8.  Transfer of Control.

          8.1  Definition.  A  "Transfer  of  Control"  shall be  deemed to have
     occurred  in the event any of the  following  occurs  with  respect  to the
     Company:

               (a) the direct or indirect  sale or exchange by the  stockholders
          of the Company of all or substantially all of the stock of the Company
          where the  stockholders of the Company before such sale or exchange do
          not  retain,  directly  or  indirectly,  at  least a  majority  of the
          beneficial interest in the voting stock of the Company;

               (b) a merger or  consolidation  in which the  stockholders of the
          Company before such merger or consolidation do not retain, directly or
          indirectly  at least a  majority  of the  beneficial  interest  in the
          voting stock of the Company;

               (c) the sale,  exchange,  or transfer of all or substantially all
          of the assets of the Company (other than a sale, exchange, or transfer
          to one or more  corporations  where the  stockholders  of the  Company
          before such sale, exchange or transfer retain, directly or indirectly,
          at least a majority of the beneficial  interest in the voting stock of
          the corporations to which the assets were transferred); or

               (d) a liquidation or dissolution of the Company.

          8.2  Effect of  Transfer  of  Control  on  Options.  In the event of a
     Transfer  of  Control,   any  unexercisable  or  unvested  portion  of  the
     outstanding Options shall be immediately  exercisable and vested in full as
     of the date thirty (30) days prior to the date of the  Transfer of Control.
     The exercise or vesting of any Option that was permissible solely by reason
     of this  Section  8.2 shall be  conditioned  upon the  consummation  of the
     Transfer of Control. In addition, the surviving, continuing,  successor, or
     purchasing  corporation or parent corporation  thereof,  as the case may be
     (the "Acquiring  Corporation"),  may either assume the Company's rights and
     obligations under outstanding Options or substitute for outstanding Options
     substantially equivalent options for the Acquiring Corporation's stock. Any
     Options  which are  neither  assumed or  substituted  for by the  Acquiring
     Corporation in connection  with the Transfer of Control nor exercised as of
     the  date of the  Transfer  of  Control  shall  terminate  and  cease to be
     outstanding effective as of the date of the Transfer of Control.

9. Nontransferability of Options. During the lifetime of the Optionee, an Option
shall be exercisable  only by the Optionee or the  Optionee's  guardian or legal
representative.  No Option shall be assignable or  transferable by the Optionee,
except by will or by the laws of descent and distribution.

10.  Termination or Amendment of Plan. The Board may terminate or amend the Plan
at any time. However,  subject to changes in the law or other legal requirements
that would permit otherwise, without the approval of the Company's stockholders,
there shall be (a) no  increase in the total  number of shares of Stock that may
be issued under the Plan (except by operation of the provisions of Section 4.2),
and (b) no  expansion  in the class of  persons  eligible  to  receive  Options.
Furthermore,  to the  extent  required  by Rule  16b-3,  provisions  of the Plan
addressing  eligibility  to  participate  in the Plan and the amount,  price and
timing of  Options  shall not be amended  more than once



                                      G-35

<PAGE>

every six (6)  months,  other than to  comport  with  changes  in the Code,  the
Employee  Retirement  Income  Security  Act of 1974,  as  amended,  or the rules
hereunder.  In any event,  no termination or amendment of the Plan may adversely
affect any then outstanding Option, or any unexercised portion thereof,  without
the consent of the Optionee,  unless such  termination or amendment is necessary
to comply with any applicable law or government regulation.

11. Continuation of Initial Plan as to Outstanding  Options. Any other provision
of the Plan to the contrary notwithstanding, the terms of the Initial Plan shall
remain in effect and apply to all Options granted pursuant to the Initial Plan.

     IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing  Adobe Systems  Incorporated  1996 Outside  Directors Stock Option
Plan was duly adopted by the Board on December  20, 1995 and further  amended on
December 17, 1999, April 12, 2001 and February 12, 2002.

                                             /s/ Karen O. Cottle

                                             Secretary

                                      G-36

<PAGE>


PROXY


                           ADOBE SYSTEMS INCORPORATED
                    Proxy for Annual Meeting of Stockholders

   THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.

     The undersigned  hereby  appoints John E. Warnock and Bruce R. Chizen,  and
each of them, with full power of substitution,  to represent the undersigned and
to vote all of the shares of stock in Adobe Systems Incorporated (the "Company")
which the  undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company, to be held at the Company's headquarters,  321 Park Avenue, East
Tower, San Jose, California 95110-2704 on Thursday, April 11, 2002 at 3:30 p.m.,
local time, and at any adjournment or postponement  thereof:  (1) as hereinafter
specified upon the proposals listed below and as more particularly  described in
the Company's Proxy Statement, receipt of which is hereby acknowledged,  and (2)
in their  discretion  upon such other  matters as may  properly  come before the
meeting.

     The  shares  represented  hereby  shall  be  voted  as  specified.   If  no
specification  is made,  such shares  shall be voted FOR  proposals 1 through 3.
Whether  or not you are able to attend  the  meeting,  you are urged to sign and
mail the Proxy in the return  envelope so that your stock may be  represented at
the meeting.

             NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
              QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY *
                                  7 DAYS A WEEK

     The Company encourages you to take advantage of the new and convenient ways
to vote your  shares.  If voting  by proxy,  this year you may vote by mail,  or
choose one of the two methods  described below.  Your telephone or Internet vote
authorizes  the named  proxies to vote your  shares in the same manner as if you
marked,  signed, and returned your proxy card. To vote by telephone or Internet,
read the accompanying proxy statement, then follow these easy steps:

TO VOTE BY PHONE:

     Call toll free 1-877-292-5646 any time on a touch tone telephone.  There is
     NO CHARGE to you for the call.  Enter the 6-digit Control Number located on
     the other side of this card.
     Option #1:     To  vote  as  the  Board  of  Directors  recommends  on  ALL
                    proposals:  Press 1
                    If you choose to vote on each proposal  separately,  press 0
     Option #2      and follow the simple recorded instructions.


TO VOTE BY INTERNET:

     Go to the following website: http://www.computershare/us/proxy
     Enter the  information  requested on your computer  screen,  including your
       6-digit Control Number located on the other side of this card.
     Follow the simple instructions on the screen.

IF YOU ELECT TO VOTE BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE

             (Continued and to be signed on reverse side)


                                      G-37

<PAGE>

                           ADOBE SYSTEMS INCORPORATED
   PLEASE MARK VOTE [IN OVAL] IN THE FOLLOWING MANNER USING DARK INK ONLY [X]

A vote FOR the following proposals is recommended by the Board of Directors:

1.   Election  of the four (4) Class I directors  proposed  in the  accompanying
     Proxy  Statement to serve for a two-year  term.  (INSTRUCTION:  to withhold
     authority  to vote for any  individual  nominee,  strike a line through the
     nominee's name in the list below.)

       FOR ALL /_/              AGAINST ALL /_/              FOR ALL EXCEPT /_/


  Bruce R. Chizen      James E. Daley     Charles M. Geschke    Delbert W. Yocam

2.   Approval of amendment to the Company's 1996 Outside Directors' Stock Option
     Plan to increase the share reserve by 750,000 shares.

       FOR /_/                  AGAINST /_/                   ABSTAIN /_/

3.   Ratification  of the  appointment of KPMG LLP as the Company's  independent
     public accountants for the fiscal year ending November 29, 2002.

       FOR /_/                  AGAINST /_/                   ABSTAIN /_/

4.   Transacting  of such other business as may properly come before the meeting
     or any adjournment or postponement thereof.

Sign exactly as your  name(s)  appears on your stock  certificate.  If shares of
stock  stand of record in the  names of two or more  persons,  or in the name of
husband and wife,  whether as joint  tenants or  otherwise,  both or all of such
persons  should  sign the  Proxy.  If  shares  of stock  are held of record by a
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant  Secretary,  and the corporate seal should be affixed
thereto.  Executors or administrators or other fiduciaries who execute the Proxy
for a deceased stockholder should give their full title. Please date the Proxy.

Signature(s):


Date                                                                   , 2002
                            (be sure to date your Proxy)
          CONSENT/HOUSEHOLDING ELECTION
          Please do not mail future Annual Reports/Proxy                 /_/
          Statements/Information Statements to this account. Multiple
          copies are received at this address/household (see back for
          details)

                                      G-38

<PAGE>


                              HOUSEHOLDING ELECTION

To Our Stockholders:

IMPORTANT NOTICE
MULTIPLE COPIES OF MAILINGS
TO HOUSEHOLD

     In December 2000, the Securities and Exchange Commission enacted a new rule
that allows multiple  stockholders  residing at the same address the convenience
of  receiving  a single  copy of proxy  statements,  annual  reports  and  other
stockholder   information   if  they   consent  to  do  so.  This  is  known  as
"Householding."  This will  allow us to save  money by  reducing  the  number of
documents we must print and mail, and will help protect the environment as well.

     By  checking  this  box,  you  are  consenting  to  our  mailing  of  proxy
statements,  annual reports and other  stockholder  information  only to the one
account in your household for which the box was not checked. We will continue to
separately  mail a proxy  card for each  registered  stockholder  account.  Your
consent will be perpetual  unless you revoke it, which you may do at any time by
calling us at  877-360-5348  (toll  free),  or  writing  to us at  Computershare
Investor Services,  Attn: Proxy Unit, P.O. Box 1878, Chicago, IL 60690-1878.  If
you revoke your consent,  we will begin sending you individual  copies of future
mailings  of these  documents  within 30 days after we receive  your  revocation
notice.

     We  encourage  you  to   participate   in  this  program  by  checking  the
"Consent/Householding  Election" box on the proxy card,  for all but one of your
stockholder accounts.

                                      G-39

<PAGE>

                                   APPENDIX H

                          DISSENTING SHAREHOLDER RIGHTS

THE PROVISIONS  GOVERNING  DISSENTING  SHAREHOLDER  RIGHTS IN SECTION 190 OF THE
CBCA ARE REPRINTED IN THEIR  ENTIRETY  BELOW.  FOR PURPOSES OF THE  ARRANGEMENT,
SUCH RIGHTS ARE SUBJECT TO VARIATION AND  MODIFICATION  IN  ACCORDANCE  WITH THE
TERMS OF THE PLAN OF  ARRANGEMENT,  THE INTERIM  ORDER AND THE FINAL  ORDER,  AS
DESCRIBED IN THE CIRCULAR.

190.  (1) Subject to sections  191 and 241, a holder of shares of any class of a
corporation  may  dissent  if the  corporation  is  subject  to an  order  under
paragraph 192(4)(d) that affects the holder or if the corporation resolves to

     (a)  amend its articles  under section 173 or 174 to add,  change or remove
          any provisions  restricting  or  constraining  the issue,  transfer or
          ownership of shares of that class;
     (b)  amend its  articles  under  section  173 to add,  change or remove any
          restriction  on the business or businesses  that the  corporation  may
          carry on;
     (c)  amalgamate otherwise than under section 184;
     (d)  be continued under section 188;
     (e)  sell,  lease or exchange all or  substantially  all its property under
          subsection 189(3); or
     (f)  carry out a going-private transaction or a squeeze-out transaction.

Further right

(2)  A holder of shares of any class or series of shares  entitled to vote under
section 176 may dissent if the  corporation  resolves to amend its articles in a
manner described in that section.

If one class of shares

(2.1)    The right to dissent described in subsection (2) applies even if there
is only one class of shares.

Payment for shares

(3)  In  addition to any other right the  shareholder  may have,  but subject to
subsection (26), a shareholder who complies with this section is entitled,  when
the action approved by the resolution from which the shareholder  dissents or an
order  made  under  subsection  192(4)  becomes  effective,  to be  paid  by the
corporation  the fair value of the  shares in  respect of which the  shareholder
dissents,  determined  as of the  close  of  business  on  the  day  before  the
resolution was adopted or the order was made.

No partial dissent

(4)  A dissenting  shareholder may only claim under this section with respect to
all the  shares  of a class  held on  behalf  of any one  beneficial  owner  and
registered in the name of the dissenting shareholder.

Objection

(5)  A dissenting  shareholder  shall send to the corporation,  at or before any
meeting of shareholders  at which a resolution  referred to in subsection (1) or
(2) is to be  voted  on, a  written  objection  to the  resolution,  unless  the
corporation did not give notice to the shareholder of the purpose of the meeting
and of their right to dissent.

Notice of resolution

(6)  The corporation  shall,  within ten days after the shareholders  adopt
the resolution, send to each shareholder who has filed the objection referred to
in subsection (5) notice that the  resolution has been adopted,  but such notice
is not required to be sent to any  shareholder  who voted for the  resolution or
who has withdrawn their objection.

Demand for payment

(7)  A dissenting shareholder shall, within twenty days after receiving a notice
under subsection (6) or, if the shareholder does not receive such notice, within
twenty days after  learning that the  resolution  has been adopted,  send to the
corporation a written notice containing

                                      H-1

<PAGE>

     (a)  the shareholder's name and address;
     (b)  the number  and class of shares in  respect  of which the  shareholder
          dissents; and
     (c)  a demand for payment of the fair value of such shares.

Share certificate

(8)  A dissenting  shareholder shall,  within thirty days after sending a notice
under subsection (7), send the  certificates  representing the shares in respect
of which the shareholder dissents to the corporation or its transfer agent.

Forfeiture

(9)  A dissenting  shareholder  who fails to comply with  subsection  (8) has no
right to make a claim under this section.

Endorsing certificate

(10) A corporation or its transfer agent shall endorse on any share  certificate
received  under  subsection  (8)  a  notice  that  the  holder  is a  dissenting
shareholder under this section and shall forthwith return the share certificates
to the dissenting shareholder.

Suspension of rights

(11) On sending a notice under subsection (7), a dissenting  shareholder  ceases
to have any  rights as a  shareholder  other  than to be paid the fair  value of
their shares as determined under this section except where

     (a)  the shareholder  withdraws that notice before the corporation makes an
          offer under subsection (12),
     (b)  the  corporation  fails to make an offer in accordance with subsection
          (12) and the shareholder withdraws the notice, or
     (c)  the  directors  revoke  a  resolution  to  amend  the  articles  under
          subsection 173(2) or 174(5), terminate an amalgamation agreement under
          subsection  183(6) or an application for continuance  under subsection
          188(6), or abandon a sale, lease or exchange under subsection 189(9),

in which case the shareholder's  rights are reinstated as of the date the notice
was sent.

Offer to pay

(12) A corporation  shall,  not later than seven days after the later of the day
on which the action  approved  by the  resolution  is  effective  or the day the
corporation  received the notice  referred to in  subsection  (7),  send to each
dissenting shareholder who has sent such notice

     (a)  a written offer to pay for their shares in an amount considered by the
          directors of the  corporation  to be the fair value,  accompanied by a
          statement showing how the fair value was determined; or
     (b)  if subsection (26) applies,  a notification that it is unable lawfully
          to pay dissenting shareholders for their shares.

Same terms

(13) Every  offer  made  under  subsection  (12) for shares of the same class or
series shall be on the same terms.

Payment

(14) Subject to  subsection  (26), a  corporation  shall pay for the shares of a
dissenting shareholder within ten days after an offer made under subsection (12)
has been accepted, but any such offer lapses if the corporation does not receive
an acceptance thereof within thirty days after the offer has been made.

Corporation may apply to court

(15) Where a corporation  fails to make an offer under  subsection (12), or if a
dissenting  shareholder  fails to accept an offer,  the corporation  may, within
fifty days after the action  approved by the  resolution  is effective or within
such further  period as a court may allow,  apply to a court to fix a fair value
for the shares of any dissenting shareholder.

                                        H-2

<PAGE>


Shareholder application to court

(16) If a  corporation  fails to  apply  to a court  under  subsection  (15),  a
dissenting  shareholder  may  apply  to a court  for the same  purpose  within a
further  period of  twenty  days or within  such  further  period as a court may
allow.

Venue

(17) An  application  under  subsection  (15) or (16)  shall  be made to a court
having jurisdiction in the place where the corporation has its registered office
or in the province where the dissenting  shareholder  resides if the corporation
carries on business in that province.

No security for costs

(18) A dissenting  shareholder  is not required to give security for costs in an
application made under subsection (15) or (16).

Parties

(19) On an application to a court under subsection (15) or (16),

     (a)  all  dissenting  shareholders  whose shares have not been purchased by
          the  corporation  shall be  joined  as  parties  and are  bound by the
          decision  of the court;  and
     (b)  the corporation shall notify each affected  dissenting  shareholder of
          the date, place and consequences of the application and of their right
          to appear and be heard in person or by counsel.

Powers of court

(20) On an application to a court under  subsection  (15) or (16), the court may
determine  whether any other  person is a dissenting  shareholder  who should be
joined as a party,  and the court  shall then fix a fair value for the shares of
all dissenting shareholders.

Appraisers

(21) A court may in its discretion  appoint one or more appraisers to assist the
court to fix a fair value for the shares of the dissenting shareholders.

Final order

(22) The final  order of a court shall be rendered  against the  corporation  in
favour of each dissenting  shareholder and for the amount of the shares as fixed
by the court.

Interest

(23) A court may in its  discretion  allow a reasonable  rate of interest on the
amount payable to each dissenting  shareholder from the date the action approved
by the resolution is effective until the date of payment.

Notice that subsection (26) applies

(24) If subsection (26) applies,  the corporation  shall,  within ten days after
the  pronouncement  of an order under  subsection  (22),  notify each dissenting
shareholder that it is unable lawfully to pay dissenting  shareholders for their
shares.

Effect where subsection (26) applies

(25) If subsection  (26) applies,  a dissenting  shareholder,  by written notice
delivered to the  corporation  within thirty days after receiving a notice under
subsection (24), may

(a)  withdraw their notice of dissent,  in which case the  corporation is deemed
     to consent to the  withdrawal  and the  shareholder  is reinstated to their
     full rights as a shareholder; or

(b)  retain a status as a claimant against the  corporation,  to be paid as soon
     as the  corporation is lawfully able to

                                      H-3

<PAGE>

     do so or, in a  liquidation,  to be  ranked  subordinate  to the  rights of
     creditors  of  the  corporation  but  in  priority  to  its   shareholders.
     Limitation

(26) A corporation  shall not make a payment to a dissenting  shareholder  under
this section if there are reasonable grounds for believing that

     (a)  the  corporation  is or would  after the  payment be unable to pay its
          liabilities as they become due; or
     (b)  the realizable value of the corporation's assets would thereby be less
          than the aggregate of its liabilities.


                                      H-4

<PAGE>