Adobe 2005 Annual Report Download - page 81

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Profit Sharing Plan
We have a profit sharing plan that provides for profit sharing payments to all eligible employees
following each quarter in which we achieve at least 80% of our budgeted earnings for the quarter. The plan,
as well as the annual operating budget on which the plan is based, is approved by our Board of Directors.
We contributed approximately $45.7 million, $42.6 million and $28.8 million to the plan in fiscal 2005,
2004 and 2003, respectively.
Note 10. Employee and Director Stock Plans
Stock Options
Our stock option program is a long-term retention program that is intended to attract, retain and
provide incentives for talented employees, officers and directors, and to align stockholder and employee
interests.
Currently, we grant options from the 1) 2003 Equity Incentive Plan (“2003 Plan”), under which
options could be granted to all employees, including executive officers, and outside consultants and 2) 1996
Outside Directors Stock Option Plan (the “Directors Plan”), as amended, under which options are granted
automatically under a pre-determined formula to non-employee directors. The plans listed above are
collectively referred to in the following discussion as “the Plans.” We consider the Plans critical to our
operation and productivity. Option vesting periods are generally three years for the Plans. As of December
2, 2005, we had reserved 53.7 million and 5.2 million shares of common stock for issuance under our 2003
Plan and Directors Plan, respectively. As of December 2, 2005, we had 23.0 million and 1.3 million shares
available for grant under our 2003 Plan and Directors Plan, respectively.
All stock option grants to current executive officers are made after a review by and with the approval
of the Executive Compensation Committee of the Board of Directors. All members of the Executive
Compensation Committee are independent directors, as defined in the rules applicable to issuers traded on
the Nasdaq Stock Market.
The Directors Plan provides for the granting of nonqualified stock options to non-employee directors.
Option grants are limited to 25,000 shares per person in each fiscal year, except for a new non-employee
director to whom 50,000 shares are granted upon election as a director. Options have a ten-year term and
are exercisable and vest over three years: 25% on the day preceding each of Adobe’s next two annual
meetings of stockholders and 50% on the day preceding Adobe’s third annual meeting of stockholders after
the grant of the option. The exercise price of the options that are issued is equal to the fair market value of
our common stock on the date of grant.
Options granted to directors for fiscal 2005, 2004 and 2003 are as follows:
As of December 2, 2005, approximately 2.3 million shares were reserved for issuance upon exercise of
outstanding options under the Directors Plan. The Directors 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 plan
have been issued and restrictions on issued shares have lapsed.
2005 2004 2003
Options granted to existing directors............
.
400,000 350,000 560,000
Exercise price...............................................
.
$ 29.74 $ 20.83 $ 16.21
Options granted to new directors..................
.
50,000 100,000 —
Exercise price ..............................................
.
$ 26.83 $ 21.05 $ —