Adobe 1999 Annual Report Download - page 71

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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Continued)
70
NOTE 10. EMPLOYEE STOCK PLANS (Continued)
Cash Incentive Awards
The Company grants 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 the Company’s Restricted Stock Plan. Designated employees are granted CIAs 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. The Company charged
approximately $7.9 million, $2.3 million, and $0.1 million to expense for shares vested in fiscal 1999, 1998,
and 1997.
Stock Appreciation Rights
In fiscal 1999 and 1998, the Company granted Stock Appreciation Rights (‘‘SARs’’), a form of
phantom stock, to designated key employees based on their performance in the Company. Additionally,
SARs are granted to employees in certain countries outside of the U.S. in lieu of stock options, generally
with similar vesting schedules to the Company’s option vesting schedule; these SARs generally expire eight
years after the grant date. The performance-based SARs generally vest over a period of four years from the
date of grant, but contain an acceleration feature that allows for a two-year vesting period based on the
Company achieving predetermined performance goals. These performance-based SARs expire five years
from the date of grant. Under the Company’s SARs, designated employees are awarded rights that are
equal to one share of common stock of the Company for each right awarded with an exercise price based
on the fair market value on the grant date. When the award vests, employees 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 the Company’s common stock. The Company awarded 14,100 rights in fiscal
1999 with an exercise price of $71.38 and awarded 482,660 rights in fiscal 1998 with exercise prices ranging
from $16.91 to $17.50. In fiscal 1999, the Company charged $9.8 million to expense based on the two-year
vesting schedule as the Company achieved the performance goals set forth in the performance-based
SARs, and in fiscal 1998, $0.3 million was charged to expense. The Company did not grant SARs to
employees in fiscal 1997.