Adobe 2002 Annual Report Download - page 132

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101
Line of Credit
In August 1999, Adobe entered into an unsecured revolving credit facility of $100.0 million with a group of
banks, for general corporate purposes, subject to certain financial covenants. The facility expired in August 2002
and we elected not to renew the facility.
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, which was recorded under our cost of products revenue on our consolidated statements of income, was
approximately $14.4 million, $14.1 million, and $20.8 million in fiscal 2002, 2001, and 2000, 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 29, 2002:
Capital Commitment Capital Contributed
Adobe Ventures L.P. $ 40,000 $ 40,476
Adobe Ventures II, L.P. $ 40,000 $ 37,541
Adobe Ventures III, L.P. $ 60,000 $ 57,353
Adobe Ventures IV, L.P. $ 100,000 $ 35,418
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 contribute more
than the capital commitment, at our discretion. 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 29, 2002, we have invested $213.9 million through our venture partnerships and direct
investments. And as of November 29, 2002, net returns were $348.7 million, including stock dividends to
stockholders and net gains in market value of investments.
Legal Actions
On September 3, 2002, Adobe filed suit in the U.S. District Court, Northern District of California (“the
California Action”), against International Typeface Corporation (“ITC”) and Agfa Monotype Corporation (“AMT”),
companies which have common ownership and management, seeking a declaration that (a) Adobe’s distribution of
font software, which generates ITC typefaces, did not breach its contract pursuant to which Adobe licensed certain
rights with respect to ITC typefaces, and (b) Adobe did not violate the Digital Millennium Copyright Act
(“DMCA”) with respect to, or induce or contribute to the infringement of copyrights in, ITC’s and AMT’s TrueType
font software. AMT had previously asserted that Adobe had committed such breach of contract and violation of
the DMCA.
On September 4, 2002, Adobe initiated arbitration proceedings in London, England (“the London Arbitration”)
against AMT, seeking a declaration that Adobe’s distribution of font software that generates AMT typefaces did not
breach its contract pursuant to which it licensed certain rights with respect to AMT typefaces. AMT has made a
breach of contract claim in response to Adobe’s arbitration demand in the London Arbitration, asserting that Adobe
wrongfully granted and/or allowed third parties greater rights to distribute and embed AMT fonts than Adobe was
licensed to grant and/or allow.
If AMT prevails on its breach of contract claims, AMT may have the right to terminate Adobe’s right to
distribute any of its products that then still contain font software that generates AMT typefaces. Adobe asserts that it
negotiated for and obtained express, written licenses from both AMT and ITC approximately ten years ago
permitting Adobe to allow end users to embed AMT and ITC fonts in electronic documents for “print and view” and
disputes the other breach of contract claims. Adobe also asserts that Adobe Acrobat 5.0, which AMT and ITC