Adobe 1999 Annual Report Download - page 67

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Continued)
NOTE 9. BENEFIT PLANS (Continued)
Profit sharing plan
The Company has a profit sharing plan that provides for profit sharing payments to all eligible
employees following each quarter in which the Company achieved at least 70% of its budgeted earnings for
the quarter. Beginning in fiscal 2000, the percentage of its budgeted earnings that the Company must
achieve increases to 80%. The plan, as well as the annual operating budget on which the plan is based, is
approved by the Company’s Board of Directors. The Company contributed approximately $23.2 million,
$6.8 million, and $11.8 million to the plan in fiscal 1999, 1998, and 1997, respectively.
Adobe Incentive Partners
In March 1997, as part of its venture investing program, the Company established an internal limited
partnership, Adobe Incentive Partners, L.P. (‘‘AIP’’), which allows certain of the Company’s 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 executive officers and former
executive officers of the Company who are or were involved in Adobe’s venture investing activities and
whose participation is deemed critical to the success of the program.
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 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. as well as equity securities of certain privately held companies. At December 3, 1999, the cost basis and
recorded fair value of all investments included in AIP were $114.2 million and $205.4 million, respectively.
In fiscal 1999, AIP recorded net income of $96.4 million. The participating officers received aggregate
distributions of $7.5 million in fiscal 1999. The distribution to the officers represents their vested portion of
nonmarketable securities that bec
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ome marketable as a result of a public offering, as well as their vested
portion of cash resulting from 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 December 3, 1999, the minority interest held by the participating officers was $17.7 million and is
included in accrued expenses on the Consolidated Balance Sheet.