Adobe 2002 Annual Report Download - page 124

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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 allowed certain of Adobe’s executive officers to participate in cash or stock
distributions from Adobe’s venture investments. In November 2002, the partnership was liquidated. Immediately
prior to the liquidation, assets held by AIP included Adobe’s entire interests in Adobe Ventures L.P. and Adobe
Ventures II, L.P. and certain equity securities of privately-held companies. Adobe was both the general partner and a
limited partner of AIP. Other limited partners were executive officers and former executive officers of Adobe who
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 2002, 2001, or 2000.
Adobe’s Class A senior limited partnership interest in AIP included 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 qualified for partnership distributions only after (a) Adobe had fully recovered the cost basis of
its investment in the specific investee company for which a distribution was made; and (b) the participating
executive had 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 were restricted to investments in Adobe Ventures or in companies that were private at the
time of the establishment of AIP, or when the investment was made, whichever was later. In fiscal 2002, the
participating officers received cash distributions with an aggregate fair value of $0.6 million, including a $0.3
million distribution related to the partnership liquidation. At November 29, 2002, due to the partnership liquidation,
there was no minority interest held by the participating officers.
Note 11. Employee and Director Stock Plans
Equity Compensation
As of November 29, 2002, our equity compensation plans consist of the 1984 Stock Option Plan, as amended,
the Aldus 1984 Restated Stock Option Plan, the 1994 Stock Option Plan (the “1994 Plan”), and the 1999 Equity
Incentive Plan (the “1999 Plan”), formerly called the 1999 Nonstatutory Stock Option 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 on the grant date. Additionally, the 1999 Plan provides for
awards in the form of stock appreciation rights, stock purchase rights, stock bonuses, performance shares and
performance units, although no awards of these types have been made from the 1999 Plan to date. Currently, we
grant options from the 1994 Plan and the 1999 Plan. Initial options and 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, although some subsequent options
granted under the Option Plans vest ratably over the entire term such that 50% and 100% are vested after the second
and third year, respectively. Options granted under the 1984 Restated Stock Option Plan have a five year vesting
period and 20% vest after the first year and monthly thereafter; all such options are fully vested or have ceased
vesting. Outstanding option terms under the Option Plans range from five to ten years. Option terms under the 1999
Plan are generally eight years under existing options. 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 (the milestones were met). Those options expire in September 2003. As of
November 29, 2002, approximately 57.0 million shares were reserved for issuance upon exercise of outstanding
options under the Option Plans and approximately 4.6 million shares were available for grant under the Option
Plans. The Company’s 1994 Plan expires on December 17, 2003. The Company’s 1999 Plan will continue until the
earlier of (i) termination by the Board or (ii) the date on which all of the shares available for issuance under the 1999
Plan have been issued and restrictions on issued shares have lapsed. Neither the Nasdaq current listing standards nor
federal law has required stockholder approval of this 1999 Equity Incentive Plan, and accordingly it has not been
approved by our stockholders.