Adobe 1998 Annual Report Download - page 58

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Continued)
NOTE 9. BENEFIT PLANS (CONTINUED)
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 vest on
a monthly basis over three years, such that the rights are 25% vested after one year, 50% vested after two
years, and fully vested at the end of three years. 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. Partnership interests may be allocated to designated officers only while the
investee company is still private. 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. and equity securities of privately held companies. At November 27, 1998, the cost basis and recorded
fair value of all investments included in AIP were $65.9 million and $56.3 million, respectively. In fiscal
1998, AIP recorded net income of $2.2 million. The participating officers received aggregate cash
distributions of $707,000 in fiscal 1998. The amount of cash distributed to the officers represents their
vested portion of investments that were liquidated by AIP. The participating officers receive quarterly cash
distributions as their partnership interests vest for investments that have been liquidated by AIP. At
November 27, 1998, the minority interest held by the participating officers was $1.5 million and is included
in accrued expenses on the Consolidated Balance Sheet.
NOTE 10. EMPLOYEE STOCK PLANS
Stock option plans
As of November 27, 1998, the Company has reserved 29,200,000 shares of common stock for issuance
under its 1994 Stock Option Plan (the ‘‘Option Plan’’) for employees which provides for the granting of
stock options to employees and officers at the fair market value of the Company’s common stock at the
grant date. Initial options granted under the 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; subsequent
options granted under the Option Plan generally vest ratably over the entire term such that 50% and 100%
are vested after the second and third year, respectively. Outstanding option terms under all of the
Company’s employee stock option plans range from five to ten years.
As of November 27, 1998, the Company has reserved, 500,000 shares of common stock for issuance
under its 1996 Outside Directors Stock Option Plan, which provides for the granting of nonqualified stock
options to nonemployee directors. Option grants are limited to 10,000 shares per person in each fiscal year,
except for a new nonemployee director, who is granted 15,000 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 the next two annual meetings of stockholders of the Company and 50% on the
day preceding the third annual meeting of stockholders of the Company 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 1998, the
Company granted options for 50,000 shares with exercise prices of $45.31 and an option for 15,000 shares
to a new director with an exercise price of $42.06. In fiscal 1997 and 1996, options for 50,000 shares were
granted each year with exercise prices of $41.94 and $32.75, respectively.
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