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Form 8-K ADOBE SYSTEMS INC For: Jan 25

January 29, 2016 6:02 AM EST
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 
CURRENT REPORT

 Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (date of earliest event reported): January 28, 2016 (January 25, 2016)
 
Adobe Systems Incorporated
(Exact name of Registrant as specified in its charter)
 
Delaware
 
0-15175
 
77-0019522
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
345 Park Avenue
San Jose, California 95110-2704

(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code: (408) 536-6000
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e)    2016 Performance Share Program
On January 25, 2016, the Executive Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Adobe Systems Incorporated (“Adobe” or the “Company”) approved the 2016 Performance Share Program, including the Award Calculation Methodology (the “Program”), under the terms of the Company’s 2003 Equity Incentive Plan. The Committee established the Program to help focus key employees on building stockholder value, provide significant award potential for achieving outstanding Company performance, and enhance the ability of the Company to attract and retain highly talented individuals. Members of the Company’s executive management team and other key members of senior management were selected by the Committee to participate in the Program for fiscal year 2016. The Committee granted awards to the executive officers under the Program on January 25, 2016 in the form of a target award and a maximum award of performance shares (“Performance Shares”), approved pursuant to the terms of the Company’s 2003 Equity Incentive Plan.

Under the Program, shares may be earned based on the achievement of objective relative total stockholder return (“TSR”) measured over a three-year performance period (Adobe’s 2016 - 2018 fiscal years). The Committee will certify actual performance achievement following the Company’s 2018 fiscal year end and the corresponding number of Performance Shares earned for the three-year performance period, subject to specified change of control exceptions. In addition, as a condition to earning any Performance Shares, a participant must continue to provide service to Adobe (or an affiliate) through the later of the certification date and January 24, 2019. Accordingly, the Performance Shares will align our executives’ interests with those of our stockholders over the long term, while also providing key retention incentives.

Each participant can earn between 0% and 200% (the payout cap under the Program) of his or her target number of Performance Shares. The amount of Performance Shares actually earned is based on a relative three-year TSR measure, which objectively compares the TSR of Adobe’s common stock against the TSR of the companies included in the NASDAQ 100 Index as of November 28, 2015 (the first day of Adobe’s 2016 fiscal year) during the course of the three-year period. Generally, TSR will be compared using the 90-calendar day average ending at the beginning of Adobe’s 2016 fiscal year and ending at the end of Adobe’s 2018 fiscal year. The number of Performance Shares awarded will increase or decrease 2.5% for every percentile that Adobe’s TSR percentile rank is above or below, respectively, the NASDAQ 100 companies’ 50th percentile, and no shares will be awarded if the Company’s performance ranks below the 25th percentile for the three-year performance period. Additionally, regardless of Adobe’s relative position with respect to the NASDAQ 100 companies, the award will be capped at 100% of target in the case of Adobe having a negative absolute TSR over the measurement period.

The target awards and maximum awards for the Performance Shares granted to the Company’s principal executive officer, principal financial officer and other named executive officers* on January 25, 2016 are as set forth below. The target award for Mr. Rencher reflects his promotion from Senior Vice President to Executive Vice President, effective as of January 25, 2016.
Officer
Title
Target
Award
Maximum
Award
Shantanu Narayen
President and Chief Executive Officer
97,965
195,930
Mark Garrett
Executive Vice President and Chief Financial Officer
27,215
54,430
Matthew Thompson
Executive Vice President, Worldwide Field Operations
28,575
57,150
Bradley Rencher
Executive Vice President and General Manager, Digital Marketing
25,855
51,710



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* For purposes of this filing, the term “named executive officer” refers to executive officers for whom disclosure was required in our most recent filing with the Securities Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934 that required disclosure pursuant to Item 402(c) of Regulation S-K. David Wadhwani is no longer with the Company and, as such, is not a participant in the Company's 2016 Performance Share Program.

A participant may receive less than his or her target award, and in no event may actual shares earned exceed the maximum award. Any shares issued under the Program are subject to recoupment in accordance with the Company’s clawback policies.

The description of the Program contained herein is a summary of the material terms of the Program, does not purport to be complete and is qualified in its entirety by reference to the Program used in connection with the 2003 Equity Incentive Plan, which is incorporated herein by reference as Exhibit 10.1. Copies of the 2016 Performance Share Program and the form of Award Grant Notice and Performance Share Award Agreement for use in connection with grants under this Program are filed herewith as Exhibits 10.2 and 10.3, respectively, and are incorporated herein by reference.

2016 Executive Cash Performance Bonus Plan

On January 25, 2016, the Committee approved, subject to stockholder approval, a new 2016 Executive Cash Performance Bonus Plan (the “Master Bonus Plan”) and the Board of Directors directed that the Master Bonus Plan be submitted to the Company’s stockholders at the 2016 Annual Meeting of Stockholders in accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Stockholder approval of the Master Bonus Plan will allow bonuses paid under it to “covered employees” (as defined under Section 162(m) of the Code) to qualify as deductible “performance-based compensation” within the meaning of Section 162(m) of the Code. The Master Bonus Plan has substantially the same terms as the Company's 2011 Executive Cash Performance Bonus Plan.

The purpose of the Master Bonus Plan is to motivate eligible employees to achieve goals relating to the performance of the Company or one of its business units or other objectively determinable goals, and to reward them when those objectives are satisfied, thereby increasing stockholder value and the success of Adobe.

Participants in the Master Bonus Plan are members of senior management of Adobe who are chosen solely at the discretion of the Committee.

Under the Master Bonus Plan, participants will be eligible to receive cash awards based upon the attainment and certification of certain performance goals established by the Committee for the applicable performance period. The performance goals will be determined in accordance with United States generally accepted accounting principles (“GAAP”), unless the Committee determines that a non-GAAP measure can and will be used in a manner that complies with Section 162(m) of the Code.

The performance goals may be based on (i) absolute target values, (ii) growth, maintenance or limiting losses, or (iii) values relative to peers or indices, in each case in one or more such categories compared to a prior period, and may differ for each participant. Performance goals may apply to the Company or to one of its business units.

The Master Bonus Plan will first apply to fiscal year 2016; however, no payments will be made under the Master Bonus Plan to participants who are “covered employees” (as defined under Section 162(m) of the Code) in respect of performance in fiscal year 2016 if the Master Bonus Plan is not approved by stockholders at the 2016 Annual Meeting of Stockholders. The Master Bonus Plan will continue until the earlier of (i) the date as of which the Committee terminates the plan and (ii) the last day of the plan fiscal year ending in 2020 unless it is again approved by the Company’s stockholders prior to such day.


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The description of the Master Bonus Plan contained herein is a summary of the material terms of the Master Bonus Plan, does not purport to be complete and is qualified in its entirety by reference to the Master Bonus Plan, which is filed herewith as Exhibit 10.4 and is incorporated herein by reference.

2016 Executive Annual Incentive Plan

On January 25, 2016, the Committee approved the terms of the 2016 Executive Annual Incentive Plan (the “Incentive Plan”), adopted pursuant to the Master Bonus Plan. The Incentive Plan applies to certain executive officers of the Company and is designed to drive revenue growth, encourage accountability, drive execution of short-term priorities tied to long-term strategy and annual operating plan objectives, and recognize and reward the Company’s executives upon the achievement of certain objectives.

Executive officers designated by the Company’s Board of Directors as an officer for purposes of Section 16 of the Securities and Exchange Act of 1934, as amended, who are Senior Vice President level or above and who are employed by the Company during its 2016 fiscal year are eligible to participate in the Incentive Plan. Pursuant to the Incentive Plan, each participant is eligible to receive an incentive bonus calculated as a percentage of his or her base salary.

The Incentive Plan requires that the Company achieve at least 85% of the GAAP revenue target set forth in the annual operating plan for fiscal year 2016 as approved by the Board at the beginning of the fiscal year (the “FY16 Operating Plan”) as a minimum performance threshold before participants may earn any incentive bonus under the Incentive Plan. If the initial threshold is not achieved, no payments may be made under the Incentive Plan. If this initial threshold is achieved, each participant is eligible to earn a maximum bonus equal to 200% of such participant’s annual bonus target, up to a maximum of $5 million, subject to reduction as described below. The target bonus is calculated by multiplying a participant’s base salary in effect at the end of the performance period by a Committee-approved target bonus percentage.

For fiscal year 2016, the target bonus and maximum bonus, expressed as a percentage of base salary for the Company’s principal executive officer, principal financial officer and other named executive officers*, would be as follows:
Officer
Title
Target
Bonus
Maximum
Bonus
Shantanu Narayen
President and Chief Executive Officer
150%
300%
Mark Garrett
Executive Vice President and Chief Financial Officer
100%
200%
Matthew Thompson
Executive Vice President, Worldwide Field Operations
100%
200%
Bradley Rencher
Executive Vice President and General Manager, Digital Marketing
100%
200%
*David Wadhwani is no longer with the Company and, as such, is not a participant in the Company's 2016 Executive Annual Incentive Plan.

The maximum bonus for each participant is subject to reduction based on the Company’s or the participant’s performance. Fifty percent of a participant’s target award opportunity is tied to the Corporate Performance Result and fifty percent of a participant’s target award opportunity is tied to his or her Individual Performance Result, each as described below.

The actual bonus is comprised of:
Corporate Performance Result
(50%)
+
Individual Performance Result
(50%)


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The “Corporate Performance Result” (expressed as a percentage) is the product of: (1) Financial Performance and (2) Strategic Objectives.

The Company’s financial performance for the Performance Period (“Financial Performance”) is determined by a metric comprised of both (1) net new annualized recurring revenue in Digital Media and (2) bookings for the Adobe Marketing Cloud, in both cases as set forth in the FY16 Operating Plan.

As described in our Annual Report on Form 10-K for the fiscal year ended November 27, 2015, we define annualized recurring revenue, or ARR, in our Digital Media business as the sum of Creative ARR and Document Cloud ARR. We define Creative ARR as the sum of: (1) the annual value of Creative Cloud subscriptions and services; plus (2) the annual contract value of Digital Publishing Suite; plus (3) the annual contract value of Creative Enterprise Term License Agreements. We define Document Cloud ARR as the sum of (1) the annual value of Document Cloud subscriptions and services; plus (2) the annual contract value of Document Cloud Enterprise Term License Agreements.

The bookings target for Adobe Marketing Cloud is also based on the target set forth in the FY16 Operating Plan. Our bookings measure is a proprietary formula that we use to monitor the value of our business in the Adobe Marketing Cloud.

Financial Performance measures net new ARR in our Digital Media business and Bookings for Adobe Marketing Cloud on a combined basis, with the actual percentage of Financial Performance achievement determining the Financial Performance payout percentage (with a maximum achievement of 200%), as shown on Exhibit A of the Incentive Plan. The Financial Performance is also subject to adjustment by the Committee by up to 20 percentage points up or down based on the Committee’s assessment of the Company’s qualitative performance during the fiscal year (with a maximum achievement of 200%).The Financial Performance payout percentage, after any adjustment as described in the preceding sentence, will cap the Corporate Performance Result. The Corporate Performance Result may be adjusted downward based on the outcome of Company strategic objectives (“Strategic Objectives”) established by the Committee in consultation with the Board at the outset of the fiscal year. The percentage achievement of the Strategic Objectives (assessed on a scale of 0% to 100%) is multiplied by the Financial Performance to determine the Corporate Performance Result.

The remaining 50% of each participant’s bonus opportunity under the Incentive Plan is based on individual performance including, without limitation, achievement of individual performance goals selected by the Committee at the outset of the performance period, which goals are specifically tailored to each participant and aligned with the achievement of strategic objectives contained in the FY16 Operating Plan (the “Individual Performance Result”). A participant’s Individual Performance Result may range from 0% to 200%.

Once each component described above is certified by the Committee, the actual bonus award earned by each participant under the Incentive Plan is determined using the following formula:

Actual
Award
($)
=
[(Corporate Performance Result % * 50%)
+
(Individual Performance Result % * 50%)]
x
Target
Award
($)

Any amounts paid under the Incentive Plan are subject to recoupment from participants in accordance with the Company’s clawback policies.

The description of the Incentive Plan contained herein is a summary of the material terms of the Incentive Plan, does not purport to be complete, and is qualified in its entirety by reference to the Incentive Plan, which is filed herewith as Exhibit 10.5 and is incorporated herein by reference.


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Item 9.01 Financial Statements and Exhibits.
 (d) Exhibits
Exhibit
 
 
 
Incorporated by Reference
 
Filed
 
 Number
 
Exhibit Description
 
Form
 
Date
 
Number
 
Herewith
 
10.1
 
2003 Equity Incentive Plan, as amended and restated
 
8-K
 
4/10/15
 
10.1
 
 
 
10.2
 
2016 Performance Share Program
 
 
 
 
 
 
 
X
 
10.3
 
Form of 2016 Performance Share Award Grant Notice and Award Agreement pursuant to 2016 Performance Share Program
 
 
 
 
 
 
 
X
 
10.4
 
2016 Executive Cash Performance Bonus Plan
 
 
 
 
 
 
 
X
 
10.5
 
2016 Executive Annual Incentive Plan
 
 
 
 
 
 
 
X
 

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SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ADOBE SYSTEMS INCORPORATED
 
 
 
 
 
 
 Date: January 28, 2016
By:
/s/ Michael Dillon
 
 
 
Michael Dillon
 
 
 
 
Executive Vice President, General Counsel and Corporate Secretary


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EXHIBIT INDEX



Exhibit
 
 
 
Incorporated by Reference
 
Filed
 
 Number
 
Exhibit Description
 
Form
 
Date
 
Number
 
Herewith
 
10.1
 
2003 Equity Incentive Plan, as amended and restated
 
8-K
 
4/10/15
 
10.1
 
 
 
10.2
 
2016 Performance Share Program
 
 
 
 
 
 
 
X
 
10.3
 
Form of 2016 Performance Share Award Grant Notice and Award Agreement pursuant to 2016 Performance Share Program
 
 
 
 
 
 
 
X
 
10.4
 
2016 Executive Cash Performance Bonus Plan
 
 
 
 
 
 
 
X
 
10.5
 
2016 Executive Annual Incentive Plan
 
 
 
 
 
 
 
X
 


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EXHIBIT 10.2

ADOBE SYSTEMS INCORPORATED
2003 EQUITY INCENTIVE PLAN
2016 PERFORMANCE SHARE PROGRAM
ADOPTED: JANUARY 25, 2016
1.Purpose. The Adobe Systems Incorporated 2016 Performance Share Program (the “Program”), established under the Adobe Systems Incorporated 2003 Equity Incentive Plan, as amended (the “Plan”), is intended to provide equity incentive compensation to individuals who make a significant contribution to the performance of Adobe Systems Incorporated (the “Company”). Program objectives are to: (a) focus key Employees on building stockholder value, (b) provide significant award potential for achieving outstanding Company performance, and (c) enhance the ability of the Company to attract and retain highly talented and competent individuals.
2.    Definitions.
Defined terms not explicitly defined in this Program but defined in the Plan will have the same definitions as in the Plan.
(a)    Actual Award” means the number of shares of Stock subject to an Award of Performance Shares credited under the Program to a Designated Participant following a Performance Period, based on achievement of applicable Performance Goals during a Performance Period.
(b)    Board” means the Board of Directors of the Company.
(c)    Certification Date” means the date on which the Committee certifies the achievement of the Performance Goal(s) following the applicable Performance Period with respect to an Award.
(d)    Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan; provided, however, that for purposes of administering the Plan with respect to Designated Participants who are or may be deemed “covered employees” (as defined for purposes of Section 162(m) of the Code), the “Committee” will be composed of two or more members of the Board, each of whom is an “outside director” for purposes of Section 162(m) of the Code.
(e)    Disability means, with respect to a Designated Participant, the inability of such Designated Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, as provided in Sections 22(e)(3) and 409A(a)(2)(C)(i) of the Code.
(f)    Designated Participant” means a key Employee of the Company or any other Participating Company who is designated by the Committee in writing to participate in the Program.
(g)    Performance Period” means the period of time selected by the Committee over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Designated Participant’s right to an Actual Award. At the discretion of the Committee, a Performance Period

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may be divided into shorter periods (for example, fiscal quarters of the Company) over which the attainment of one or more Performance Goals will be measured.
(h)    Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and any proposed, temporary or final Treasury Regulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time.
3.    How Awards Are Earned Under the Program.
(a)    General Program Description. The Program provides the opportunity for certain key Employees to earn shares of Stock based on the performance of the Company. In general, the Committee will select certain key Employees to participate in the Program at the beginning of a Performance Period. Upon selection to participate in the Program, each such Designated Participant will be granted an Award pursuant to which a specified number of shares of Stock can be earned as an Actual Award by such Designated Participant if (i) specified levels of applicable Performance Goals are achieved during the Performance Period, and (ii) the Designated Participant continues to render Service during the entire Performance Period and any applicable vesting period, as determined by the Committee. If the Performance Goal(s) require a specified threshold level of achievement and such threshold Performance Goal is not achieved during the Performance Period, the Designated Participant will not earn any shares of Stock under such Award. The methodology for determining the number of shares of Stock that may become eligible to be earned based on the levels of achievement of the Performance Goals under an Award and the Actual Award, if any, that will become payable to a Designated Participant in respect of a Performance Period is set forth in the attached Exhibit A. As required by Section 5.4(a)(iii) of the Plan and in accordance with Section 162(m) of the Code, in no event may an Award of Performance Shares be granted to a Designated Participant such that the number of shares of Stock that could be earned by such Designated Participant thereunder would exceed one million five hundred thousand (1,500,000) shares of Stock for each full fiscal year of the Company contained in the Performance Period for such Actual Award (subject to adjustment as provided in Section 4.2 of the Plan). For avoidance of doubt, if an Award of Performance Shares is granted with a Performance Period covering three fiscal years, then the Actual Award would be capped at four million five hundred thousand (4,500,000) shares of Stock.
(b)    Designated Participants. Each key Employee of the Company or any other Participating Company who is designated by the Committee in writing for participation in the Program for a particular Performance Period will be eligible to earn shares of Stock pursuant to Awards with respect to such Performance Period. The Committee may designate a key Employee who commences Service after the beginning of a particular Performance Period as eligible to receive a prorated Award for such Performance Period. The determination as to whether an individual is a Designated Participant will be made by the Committee, in its sole discretion, and such determination will be binding and conclusive on all persons.
No Employee will have any right to be a Designated Participant in the Program, to continue as a Designated Participant, or to be granted an Award or to earn an Actual Award under the Program. The Company is not obligated to give uniform treatment (e.g., number of shares subject to Awards) to Employees or Designated Participants under the Program. Participation in the Program as to a particular Performance Period does not convey any right to participate in the Program as to any other Performance Period.
(c)    Performance Goals. The Performance Goals for a particular Performance Period and their relative weights, if any, are determined by the Committee, in its sole discretion. The Committee also may establish, in its sole discretion, Performance Goals for annual, quarterly or other periods within

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the applicable Performance Period. The Performance Goals for a Performance Period or for shorter periods within a Performance Period are not required to be identical to the Performance Goals for any other Performance Period or shorter period within a Performance Period. The Committee may establish Performance Goals for the Company that differ from those established for one or more other Participating Companies and may establish different Performance Goals for each Designated Participant or for groups of Designated Participants.
4.    Other Program Provisions.
(a)    Distribution of Actual Awards. Assessment of actual performance, determination of Actual Awards and the distribution of shares of Stock in respect of Actual Awards will be subject to (i) certification by the Committee that the applicable Performance Goals and other terms of the Program have been met, and (ii) the Designated Participant’s continued Service through any applicable vesting period. Unless an Actual Award provides otherwise, shares of Stock that are credited to a Designated Participant as an Actual Award will be distributed to the Designated Participant (or the Designated Participant’s heirs in the case of death) within thirty (30) days following the applicable vesting date. Notwithstanding the foregoing, if the Company has provided a Designated Participant with a plan or program by which to defer distribution of such shares of Stock and the Designated Participant has made an effective election to defer such distribution under such plan or program, such shares will be distributed to the Designated Participant (or the Designated Participant’s heirs in the case of death) in accordance with such election. It is the intent that this Program comply with the requirements of Section 409A so that none of the payments to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.
(b)    Withholdings. Subject to Section 14 of the Plan and the applicable Award Agreement, the Company will withhold shares of Stock otherwise deliverable to the Designated Participant in satisfaction of any federal, state or local tax withholding obligation relating to the delivery of Stock under the Actual Award, but the Company will not withhold a number of shares with a fair market value in excess of the applicable tax withholdings determined by application of the minimum required statutory rates.
(c)    Employment and Termination. In order to receive shares of Stock in respect of an Actual Award under the Program, a Designated Participant must continue to render Service to the Company or any other Participating Company during the entire Performance Period, and for any applicable vesting period as determined by the Committee, except as otherwise provided under the terms of the applicable Award Agreement.
(d)    No Employment or Service Rights. Nothing in the Program or any instrument executed or Award granted pursuant to the Program will (i) confer upon any Employee or Designated Participant any right to continue to be retained in the employ or service of the Company or any other Participating Company, (ii) change the at-will employment relationship between the Company or any other Participating Company and an Employee or Designated Participant, or (iii) interfere with the right of the Company or any other Participating Company to discharge any Employee, Designated Participant or other person at any time, with or without cause, and with or without advance notice.
(e)    Program Administration. The Committee will be responsible for all decisions and recommendations regarding Program administration and retains final authority regarding all aspects of Program administration, the resolution of any disputes, and application of the Program in any respect to a Designated Participant. All determinations and interpretations made by the Committee in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons. The Committee

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may, without notice, amend, suspend or terminate the Program; provided, however, that no such action may adversely affect any then-outstanding Award unless (i) expressly provided by the Committee and (ii) with the consent of the Participant, unless such action is necessary to comply with any applicable law, regulation or rule.
(f)    Stockholder Rights. No Designated Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to an Award (including, without limitation, the right to receive dividends) unless and until such Designated Participant has received an Actual Award under the Program, has vested in the shares subject to the Actual Award and has received delivery of such shares; provided, however, that a plan or program by which receipt of shares of Stock in respect of an Actual Award may be deferred may provide for the crediting of dividend equivalent rights.
(g)    Recoupment. Any amounts paid, or Shares issued, under this Program will be subject to recoupment in accordance with any clawback policy that the Company adopts pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law or otherwise is adopted by the Board. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.
(h)    Validity. If any provision of the Program is held invalid, void, or unenforceable, the same will not affect, in any respect whatsoever, the validity of any other provision of the Program.
(i)    Governing Plan Document. The Program is subject to all the provisions of the Plan and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted by the Committee, the Board or the Company pursuant to the Plan. In the event of any conflict between the provisions of this Program and those of the Plan, the provisions of the Plan will control.

EXHIBIT A
2016 PERFORMANCE SHARE PROGRAM
AWARD CALCULATION METHODOLOGY

Parameter

Description

Designated Participants
Certain Vice Presidents and above (or equivalent) as designated by the Committee.
Award Agreements
Each Designated Participant will be eligible to earn shares of Stock pursuant to an Award of Performance Shares. Each Award will be approved by the Committee and set forth in each Award Agreement. Each Award Agreement will set forth the Award’s Target Number of Shares of Stock (the “Target Shares”).
Performance Share Award
Performance Period:  The Company’s fiscal years 2016 through 2018.

Performance Goal:  The number of shares of Stock that may be earned under an Award is determined by the level of achievement, over the Performance Period, of the total stockholder return (“TSR”) of the Company as compared to the TSR of the companies that, as of November 28, 2015, comprise the NASDAQ-100 Index (the “Index Companies,” as listed below), expressed in terms of the Company’s percentile rank (“Percentile Rank”) among the Index Companies. The TSR of the Company and each Index Company will be measured as: The average closing sale price of a share of the applicable company’s common stock for all trading days during the 90 consecutive calendar days ending on November 27, 2015, as adjusted for dividends, as applicable, compared to the average closing sale price of a share of the applicable company’s common stock for all trading days during the 90 consecutive calendar days ending on November 30, 2018, as adjusted for dividends and stock splits, as applicable.

Upon achievement of the Target Percentile Rank, which is the 50th Percentile, 100% of the Target Shares will become eligible to be earned. For each Percentile Rank achieved by the Company below the Target Percentile Rank (but not below the Threshold Percentile Rank, which is the 25th Percentile), the number of shares of Stock that will become eligible to be earned will be decreased by increments of two and one-half percent (2.5%), rounded up to the nearest whole percent. As an example, if the Company achieves the 43rd Percentile Rank, then 83% of the Target Shares will become eligible to be earned: 100%-((50‑43)*2.5%)=82.5%, rounded up to 83%.

If the Percentile Rank achieved by the Company is below the Threshold Percentile Rank, no shares of Stock subject to the Award will become eligible to be earned.

If the Company’s TSR is not positive, then the maximum number of shares of Stock that may become eligible to be earned will be capped at 100% of the Designated Participant’s Target Shares.

If the Company’s TSR is positive, the Company’s achievement of a Percentile Rank that exceeds the Target Percentile Rank will increase the number of shares of Stock that will become eligible to be earned by increments of two and one-half percent (2.5%), rounded up to the nearest whole percent; provided, however, that the maximum number of shares of Stock that may become eligible to be earned will be capped at 200% of the Designated Participant’s Target Shares.

The table below provides examples of the number of Shares that would be earned under an Award upon the Company’s achievement of TSR resulting in the following Percentile Rank as compared to each of the Index Companies’ TSRs:

Company Percentile Rank as Compared to Index Companies
Shares of Stock That May Be Earned
(as a Percentage of Target Shares)
Below 25th 
(“Threshold Percentile Rank”)
0%
25th 
38%
35th 
63%
50th 
(“Target Percentile Rank”)
100% (Maximum if Company TSR is not positive)
75th 
163% (Only if Company TSR is positive)
90th 
200% (Only if Company TSR is positive)
100th 
200% (Only if Company TSR is positive)
 
Actual Award Determination
Any partial share of an Actual Award will be rounded down to the next whole share.

In no event will an Actual Award exceed one million five hundred thousand (1,500,000) shares of Stock for each full fiscal year of the Company contained in the Performance Period for such Actual Award (subject to adjustment as provided in Section 4.2 of the Plan).
Index Companies
NASDAQ-100 Index Companies as of November 28, 2015:


If any of the Index Companies listed above no longer has a measurable TSR (e.g., delisted, acquired or underwent a material spin-out or other disposition) as of the date of calculation of the achievement of the Performance Goal by the Company following the Performance Period, such Index Company will be removed from the calculation.

There are 109 companies in the NASDAQ 100 as of November 28, 2015.



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EXHIBIT 10.3


ADOBE SYSTEMS INCORPORATED
2003 EQUITY INCENTIVE PLAN
2016 PERFORMANCE SHARE PROGRAM
PERFORMANCE SHARE AWARD GRANT NOTICE
Adobe Systems Incorporated (the “Company”), pursuant to its 2016 Performance Share Program (the “Program”) under its 2003 Equity Incentive Plan, as amended (the “Plan”), hereby awards to Participant the award (the “Award”) set forth below pursuant to Section 9 of the Plan. Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Plan or the Program, as applicable. This Award is subject to all of the terms and conditions as set forth herein and in the Performance Share Award Agreement, the Program and the Plan, each of which are incorporated herein in their entirety. It is the intent of the parties that this Award qualify as “performance-based compensation” under Section 162(m) with terms and conditions that are consistent with Section 162(m) and that of the Plan that relate to qualifying Awards as “performance based compensation” under Section 162(m) and any ambiguities herein will be interpreted to so comply with that intent.
Participant:    _____________________________________________
Date of Grant:    _____________________________________________
Vesting Commencement Date:    January 24, 2016    
Target Number of Shares of Stock:    _____________________________________________
Maximum Number of Shares of Stock:    200% of the Target Number of Shares of Stock    
Performance Period:    Company’s Fiscal Years 2016 through 2018    
Determination of Actual Award: On the Certification Date, and provided that (i) the applicable Performance Goal is attained during the Performance Period as described in the Program, and (ii) Participant continues to render Service through the Scheduled Vesting Date (as defined below), the Company shall credit Participant with an Actual Award representing the number of shares of Stock, as determined by the Committee based on the degree of achievement of the applicable Performance Goal, as determined by the Committee and the limitations set forth in the Performance Share Award Agreement.
Vesting Schedule: The Actual Award shall be scheduled to fully vest as of the later of (i) the third anniversary of the Vesting Commencement Date or (ii) the Certification Date (such later date, the “Scheduled Vesting Date”), subject to the Participant continuing to render Service through the Scheduled Vesting Date and subject to Section 1 of the Performance Share Award Agreement.
Delivery of Shares: Subject to the limitations contained herein and the provisions of the Plan and the Program, the Company shall deliver to the Participant the vested shares of Stock subject to the Actual Award as provided in Section 3 of the Performance Share Award Agreement.
Additional Terms/Acknowledgements: The Participant acknowledges receipt of, and understands and agrees to, this Award Grant Notice, the Performance Share Award Agreement, the Program and the Plan. Participant further acknowledges that as of the Date of Grant, this Performance Share Award Grant Notice, the Performance Share Award Agreement, the Program, and the Plan set forth the entire understanding between Participant and the Company regarding the Award and supersede all prior oral and written agreements on that subject, with the exception of any applicable change of control plan approved by the Board or a committee thereof and/or an applicable individual written retention agreement or severance provision between the Company, or a subsidiary of the Company, and the Participant, to the extent applicable to the Participant (such documents, the “Superseding Agreements”). This Award will be deemed a Performance Award for purposes of the Superseding Agreements.

ADOBE SYSTEMS INCORPORATED


By:________________________________________
Shantanu Narayen
Chief Executive Officer
Address: 345 Park Avenue
San Jose, CA 95110-2704 USA


 


ADOBE SYSTEMS INCORPORATED
2003 EQUITY INCENTIVE PLAN
2016 PERFORMANCE SHARE PROGRAM
PERFORMANCE SHARE AWARD AGREEMENT
Pursuant to the Performance Share Award Grant Notice (“Grant Notice”) and this Performance Share Award Agreement, including the attached Appendix (“Award Agreement”), Adobe Systems Incorporated (the “Company”) has awarded you, pursuant to its 2016 Performance Share Program (the “Program”) under its 2003 Equity Incentive Plan, as amended (the “Plan”), the Award as indicated in the Grant Notice. Unless otherwise defined herein or in the Grant Notice, capitalized terms shall have the meanings set forth in the Plan or the Program, as applicable.
The details of your Award, in addition to those set forth in the Grant Notice, are as follows.
1.ENTITLEMENT TO SHARES.
(a)    Determination of Actual Award.
(i)    Generally. Provided that (A) the applicable Performance Goal is achieved during the Performance Period, and (B) you continue to render Service through the Scheduled Vesting Date, then, subject to the limitations contained herein and to the provisions of the Program and the Plan, you shall be credited with an Actual Award on the Certification Date equal to such number of shares of Stock as is determined by the Committee in accordance with the Award Calculation Methodology provisions of Exhibit A to the Program (the “Award Calculation Methodology”). In determining an Actual Award, (x) if the Threshold Percentile Rank (as defined in the Award Calculation Methodology) of the Performance Goal is not achieved during the Performance Period, you will not be credited with or receive any shares of Stock as an Actual Award, and (y) the maximum number of shares of Stock for which you may be credited as an Actual Award will in no event exceed four million five hundred thousand (4,500,000) shares of Stock for the Performance Period (subject to adjustment as provided in Section 4.2 of the Plan).
(ii)    Change of Control. If a Change of Control occurs prior to the Certification Date, then, provided that you continue to render Service until the Scheduled Vesting Date, you shall vest in a number of shares of Stock determined by (A) shortening the Performance Period to end on the date of the Change of Control, (B) adjusting the applicable Performance Goal as necessary and appropriate based on the shortened Performance Period, and (C) determining the level of achievement of such Performance Goal based on such shortened Performance Period and providing for payment of that number of shares of Stock based on such achievement. Upon a Change of Control, to the extent any shares of Stock are determined not eligible to vest, such shares of Stock will immediately be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company.
(b)    Vesting. The Actual Award shall be subject to vesting in accordance with the Vesting Schedule set forth on the Grant Notice, subject to such acceleration as provided in Section 1(a)(ii) or 1(d) of this Award Agreement or a Superseding Agreement, as applicable.
(c)    Forfeiture. Notwithstanding any contrary provision of this Award Agreement, and except as set forth in Section 1(d) or a Superseding Agreement, any shares of Stock subject to the Award that have not vested at the time of your termination of Service for any or no reason will be forfeited immediately and automatically transferred to and reacquired by the Company at no cost to the Company, and except as set forth in Section 1(a)(ii), any shares of Stock subject to the Award that never will vest due to the failure to achieve the applicable Performance Goal upon completion of the Performance Period automatically will be forfeited, transferred to and reacquired by the Company at no cost to the Company.

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(d)    Disability or Death.
(i)    Prorated Award. If your Service terminates prior to the Certification Date by reason of death or Disability, you (or your heirs in the case of death) will be credited with an Actual Award equal to the Target Number of Shares of Stock (as set forth in the Grant Notice) pro-rated based on the number of months of Service (rounded up for any partial months of Service) you provided in the Performance Period prior to your termination (but in no event shall you be credited with more than the number of months in the Performance Period).
(ii)    Delivery of Shares. The shares of Stock subject to an Actual Award that vest pursuant to this Section 1(d) shall be issued and delivered to you (or your heirs in the case of death) pursuant to Section 3.
2.    RIGHTS AS STOCKHOLDER. Neither you nor any person claiming under or through you will have any of the rights or privileges of a stockholder of the Company in respect of any shares of Stock hereunder unless and until certificates representing shares of Stock (or other evidence of ownership) will have been issued to you pursuant to Section 3. After such issuance, you will have all the rights of a stockholder of the Company with respect to voting such shares of Stock and receipt of dividends and other distributions on such shares of Stock.
3.    DELIVERY OF SHARES. Except as set forth below in this Section 3 and subject to Sections 4, 11 and 15, the Company shall issue and deposit in the applicable brokerage account the shares of Stock subject to a vested Actual Award within thirty (30) days following the later of the Scheduled Vesting Date or the Certification Date; provided further that in no event may the shares of Stock subject to a vested Actual Award be issued and delivered after the later of (i) the 15th day of the third month following the Company’s fiscal year in which the Actual Award is earned or (ii) March 15 of the calendar year following the calendar year in which the Actual Award is earned. Except as set forth in Section 4, in no event will you be permitted, directly or indirectly, to specify the taxable year of the payment of any shares of Stock payable to you under this Award.
(a)    Deferred Shares. If you elect to defer delivery of the shares of Stock as provided in Section 4 of this Award Agreement, such shares of Stock will be issued and delivered to you on the date or dates that you elect on your deferral election form. No shares of Stock shall be issued prior to vesting.
(b)    Delivery Following Death. If you are deceased at the time that shares of Stock under an Actual Award, if any, are to be delivered to you, such delivery will be made to your designated beneficiary, or if no beneficiary has survived you or been designated, or if the beneficiary designation is not enforceable and/or valid under the inheritance and other laws in your country (as determined by the Company in its sole discretion), to the administrator or executor of your estate. Any such transferee must furnish the Company with (i) written notice of his or her status as transferee, and (ii) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
4.    DEFERRAL ELECTION. If permitted by the Company to do so, you may elect to defer receipt of the shares of Stock that otherwise would be issued pursuant to the vesting of your Award in accordance with the terms and conditions, including the applicable eligibility requirements, of the Company’s Deferred Compensation Plan. The Board (or an appropriate committee thereof) will, in its sole discretion, establish the rules and procedures for such deferrals.
5.    CAPITALIZATION ADJUSTMENTS. The shares of Stock subject to your Award will be adjusted from time to time for capitalization adjustments, as provided in Section 4.2 of the Plan.
6.    COMPLIANCE WITH LAW. The grant of your Award and the issuance of any shares of Stock thereunder shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. You may not be issued any shares of Stock if such issuance of shares of Stock would constitute a violation of any applicable federal, state or foreign securities laws, any other governmental regulatory body, or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, you may not be issued any shares of Stock unless (i) a registration statement under the Securities

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Act shall at the time of issuance be in effect with respect to the shares of Stock or (ii) in the opinion of legal counsel to the Company, the shares of Stock may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. YOU ARE CAUTIONED THAT THE SHARES OF STOCK MAY NOT BE ISSUED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. Where the Company determines that the delivery of any shares of Stock to settle this Award would violate federal securities laws or other applicable laws or rules or regulations promulgated by any governmental agency, the Company will defer delivery until the earliest date at which the Company reasonably anticipates that delivery of shares of Stock will no longer cause such violation. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares of Stock shall relieve the Company of any liability in respect of the failure to issue or sell such shares of Stock as to which such requisite authority shall not have been obtained. As a condition to the issuance of any shares of Stock pursuant to this Award, the Company may require you to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Further, you agree that the Company shall have unilateral authority to amend the Plan or Program and the Award Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares of Stock.
7.    RESTRICTIVE LEGENDS. The shares of Stock issued pursuant to an Actual Award shall be endorsed with appropriate legends, if any, determined by the Company.
8.    TRANSFERABILITY. Except to the limited extent permitted under Section 3(b), this Award and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privileged conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this Award and the rights and privileges hereby immediately will become null and void.
9.    AWARD NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the service of the Participating Company Group, or on the part of the Participating Company Group to continue such service. In addition, nothing in your Award shall obligate the Participating Company Group, their respective stockholders, boards of directors, Officers or Employees to continue any relationship that you might have as an Employee, Director or Consultant for the Participating Company Group.
10.    UNSECURED OBLIGATION. Your Award is unfunded, and you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Stock pursuant to an Actual Award under this Award Agreement. You shall not have voting or any other rights as a stockholder of the Company with respect to the shares of Stock acquired pursuant to this Award Agreement until such shares of Stock are issued to you pursuant to this Award Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company with respect to the shares of Stock so issued. Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
11.    TAX OBLIGATIONS.
(a)    General. Regardless of any action taken by the Company or any other Participating Company with respect to any or all federal, state, local and foreign income, employment, social insurance, or payroll taxes, payment on account or other taxes related to your participation in the Plan and legally applicable to you or deemed by the Participating Company Group to be an appropriate charge to you even if technically due by the Participating Company Group (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items, is, and remains, your responsibility. You further acknowledge that the Participating Company Group (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of your Award, including, but not limited to, the grant, vesting or settlement of this Award, the subsequent sale of Stock acquired pursuant to this Award, or the receipt of any dividends and/or dividend equivalents and (ii) does not commit to and is

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under no obligation to structure the terms of the grant or any other aspect of your Award to reduce or eliminate your liability for Tax-Related Items. Further, if you have become subject to tax in more than one jurisdiction, as applicable, you acknowledge that the Participating Company Group may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b)    Withholding Arrangements. Prior to any relevant taxable or tax withholding event, as applicable, you will pay or make adequate arrangements satisfactory to the Participating Company Group to satisfy all Tax-Related Items. In this regard, you hereby authorize the Participating Company Group, or its respective agents, in their sole discretion and subject to any limitations under applicable law, to satisfy all Tax-Related Items by withholding of that number of whole vested shares of Stock otherwise deliverable to you pursuant to this Award Agreement having a Fair Market Value not in excess of the amount of the Tax-Related Items determined by the applicable minimum statutory rates. In no event may shares of Stock be withheld with a value exceeding the minimum amount of tax required to be withheld or paid. For tax purposes, you are deemed to have been issued the full number of shares of Stock subject to the vested Award, notwithstanding that a number of the shares of Stock are held back solely for the purpose of paying the Tax-Related Items. In the event that such withholding by sale of shares of Stock is problematic under applicable tax or securities law or has materially adverse accounting consequences, you authorize the Participating Company Group to satisfy the obligations with regard to all Tax-Related Items by the following methods:
(i)    withholding from proceeds of the sale of shares of Stock acquired upon vesting/settlement of the Award either through a voluntary sale or through a mandatory sale arranged by the Participating Company Group (on your behalf pursuant to this authorization);
(ii)    tender by you of a payment in cash or check to the Participating Company Group (as applicable) of any amount of the Tax-Related Items;
(iii)    withholding by the Participating Company of any amount of the Tax-Related Items from your wages or any other compensation owed to you by any Participating Company; and
(iv)    in the event this Award is settled in whole or in part in cash, withholding from the cash to be distributed to you in settlement of this Award.
(c)    Payment of Tax-Related Items. You shall pay to the Participating Company Group (as applicable) any amount of the Tax-Related Items that a Participating Company Group may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company shall have no obligation to issue or deliver shares of Stock, cash, or the proceeds of the sale of Stock until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
12.    NATURE OF AWARD. In accepting your Award, you acknowledge, understand and agree that:
(a)    the Plan is established voluntarily by the Company; it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b)    the grant of your Award is voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted in the past;
(c)    all decisions with respect to future Awards or other grants, if any, will be at the sole discretion of the Company;
(d)    you are voluntarily participating in the Plan;
(e)    the Award and the Stock subject to the Award are not intended to replace any pension rights or compensation;
(f)    the Award and the Stock subject to the Award, and the income from and value of same, are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination,

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redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(g)    the future value of the underlying shares of Stock subject to your Award is unknown, indeterminable and cannot be predicted with certainty;
(h)    no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the termination of your Service with the Company or any other Participating Company (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and in consideration of the grant of the Award to which you are otherwise not entitled, you irrevocably agree never to institute any claim against any Participating Company, waive your ability, if any to bring any such claim, and release the Participating Company Group from any such claim: if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such a claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(i)    unless otherwise provided in the Plan or by the Company in its discretion, the Award and the benefits evidenced by this Award Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company; and
(j)    the following provisions apply only if you are providing Service outside the United States:
(i)    the Award and the shares of Stock subject to the Award are not part of normal or expected compensation or salary for any purpose;
(ii)    unless otherwise agreed with the Company, the Award and the shares of Stock subject to the Award, and any income from and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of a Participating Company other than the Company; provided, however, that your continued Service shall be required for vesting of the Award as may be set forth in the Grant Notice and this Award Agreement; and
(iii)    you acknowledge and agree that the Participating Company Group shall not be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Award or of any amounts due to you pursuant to the settlement of the Award or the subsequent sale of any shares of Stock acquired upon settlement.
13.    DELIVERY OF DOCUMENTS AND NOTICES. Any document relating to participating in the Plan or Program and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Award Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, or with a nationally recognized courier designating express or expedited service with evidence of delivery, addressed to the other party at the e-mail address, if any, provided for you by the Company or a Participating Company or at such other address as such party may designate in writing from time to time to the other party.
(a)    Description of Electronic Delivery. The Plan and Program documents, which may include but do not necessarily include the Plan prospectus, Grant Notice, Award Agreement, and U.S. financial reports of the Company, may be delivered to you electronically by the Company or a third party designated by the Company. Such means of delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Committee’s discretion.
(b)    Consent to Electronic Delivery. You acknowledge that you have read Section 13 of this Award Agreement and consent to the electronic delivery of the Plan and Program documents by the Company or a third

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party designated by the Company and agree to participate in the Plan and Program through any online or electronic system established and maintained by the Company or a third party designated by the Company, as described in Section 13. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [email protected]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide the Company or any designated third party with a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [email protected]. Finally, you understand that you are not required to consent to electronic delivery.
14.    DATA PRIVACY CONSENT. You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Award Agreement, or any other Award materials (Data) by and among the members of the Participating Company Group for the exclusive purpose of implementing, administering and managing your participation in the Plan and Program.
You understand that the Participating Company Group holds certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of Stock or directorships held in the Company, details of all Awards or any other entitlement to shares of Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the exclusive purpose of implementing, administering and managing the Plan and Program. You understand that Data will be transferred to E*TRADE, or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan and Program. You understand that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than your country. You understand that if you reside outside the United States, you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the Company, E*TRADE and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan and Program to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that if you reside outside the United States, you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your employment status or service and career with your employer will not be adversely affected: the only consequence of refusing or withdrawing your consent is that the Company would not be able to grant you the Award or other equity awards or administer or maintain such awards. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan or Program. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.
15.    APPLICATION OF SECTION 409A. Absent a proper deferral election, it is intended that all of the benefits and payments provided under this Award satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under the “short-term deferral” rule set forth in United States Treasury Regulation Section 1.409A‑1(b)(4), and this Award will be construed to the greatest extent possible as consistent with those provisions. To the extent not so exempt, this Award and the payments and benefits to be provided hereunder are intended to, and will be construed and implemented so as to, comply in all respects with the applicable provisions of Code Section 409A, and any provisions calling for payments on a termination of employment or other service shall be read to mean a “separation from service” (as defined under Treasury Regulation Section 1.409-1(h) without reference to alternative definitions thereunder). For purposes of Code Section 409A, each payment, installment and benefit under this Award is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2).

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Notwithstanding any other provision of this Award, to the extent that (i) one or more of the payments or benefits received or to be received by you upon “separation from service” pursuant to this Plan would constitute deferred compensation subject to the requirements of Code Section 409A, and (ii) you are a “specified employee” within the meaning of Code Section 409A at the time of separation from service, then to the extent delayed commencement of any portion of such payments or benefits is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments and benefits shall not be provided to you prior to the earliest of (i) the expiration of the six-month period measured from the date of separation from service, (ii) the date of your death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation on you. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments and benefits deferred pursuant to this paragraph shall be paid in a lump sum to you, and any remaining payments and benefits due shall be paid as otherwise provided herein.
16.    BINDING AGREEMENT. Subject to the limitation on the transferability of this Award contained herein, the Award Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
17.    COMMITTEE AUTHORITY. The Committee will have the power to interpret the Plan, the Program and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan and the Program as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any shares of Stock have vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon you, the Company and all other interested persons. No member of the Committee will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, the Program or this Award Agreement.
18.    HEADINGS. The headings of the Sections in this Award Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Award Agreement or to affect the meaning of this Award Agreement.
19.    AMENDMENT. The Committee may, without notice, amend, suspend or terminate the Program; provided, however, that no such action may adversely affect any then outstanding Award unless (i) expressly provided by the Committee and (ii) with the consent of you, unless such action is necessary or advisable to comply with any applicable law, regulation, rule or administrative reasons.
20.    MISCELLANEOUS.
(a)    The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)    You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
(c)    You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.
21.    AGREEMENT SEVERABLE. In the event that any provision in this Award Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Award Agreement.
22.    GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan and the Program, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan or Program. In the event of any conflict between one or more provisions of your Award and one or more provisions of

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the Plan or Program, the provisions of the Plan or Program shall control. In the event of any conflict between one or more provisions of the Plan and one or more provisions of the Program, the provisions of the Plan shall control.
23.    APPLICABLE LAW AND VENUE. The Award and the provisions of this Award Agreement shall be governed by, and subject to, the laws of the State of California, United States of America. For purposes of any action, lawsuit or other proceedings brought to enforce this Award Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of Santa Clara County, California, or the federal courts of the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
24.    NO ADVICE REGARDING GRANT. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan or Program, or your acquisition or sale of the underlying shares of Stock. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan or Program before taking any action related to the Plan.
25.    LANGUAGE. If you received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.
26.    APPENDIX. Notwithstanding any provisions in this Award Agreement, the Award shall be subject to any special terms and conditions set forth in any Appendix to this Award Agreement for your country. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Award Agreement.
27.    IMPOSITION OF OTHER REQUIREMENTS. The Company reserves the right to impose other requirements on your participation in the Plan or Program, on the Award and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
28.    WAIVER. You acknowledge that a waiver by the Company of a breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by you or any other Participant.
29.    INSIDER TRADING RESTRICTIONS/MARKET ABUSE LAWS. You acknowledge that, depending on your country of residence, you may be subject to insider-trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell shares of Stock or rights to shares of Stock (e.g., the Award) during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You should consult your personal legal advisor for further details regarding any insider trading restrictions and/or market-abuse laws in your country.
30.    FOREIGN ASSET/ACCOUNT REPORTING REQUIREMENTS AND EXCHANGE CONTROLS. Your country may have certain foreign asset and/or account reporting requirements and exchange controls which may affect your ability to acquire or hold shares of Stock under the Plan or Program or cash received from participating in the Plan or Program (including from any dividends received or sale proceeds arising from the sale of shares of Stock) in a brokerage or bank account outside your country. You may be required to report such accounts, assets or transactions to the tax or other authorities in your country. You also may be required to repatriate sale proceeds or other funds received as a result of your participation in the Plan or Program to your country through a designated bank or broker and/or within a certain time after receipt. You acknowledge that it is your responsibility to be compliant with such regulations, and you are advised to speak to your personal legal advisor for any details.

8


APPENDIX TO
ADOBE SYSTEMS INCORPORATED
2003 EQUITY INCENTIVE PLAN
2016 PERFORMANCE SHARE PROGRAM
PERFORMANCE SHARE AWARD AGREEMENT

This Appendix includes special country-specific terms that apply if you are residing and/or working in one of the countries covered by the Appendix. This Appendix is part of the Award Agreement. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan or Program and the Award Agreement.

This Appendix also includes information of which you should be aware with respect to your participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of January 2016 and is provided solely for informational purposes. Such laws are often complex, change frequently, and results may differ based on the particular facts and circumstances. As a result, the Company strongly recommends that you do not rely on the information noted herein as the only source of information relating to the consequences of your participation in the Plan or Program because the information may be out of date at the time your Award vests or you sell Stock acquired under the Plan.

In addition, the information is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result. Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.

Note that if you are a citizen or resident of a country other than the country in which you are residing and/or working, or you transfer employment or residency after the Award is granted to you, the information contained in this Appendix may not be applicable to you.

Australia
Securities Law Information
If you acquire shares pursuant to your Award and you offer your shares of Stock for sale to a person or entity resident in Australia, your offer may be subject to disclosure requirements under Australian law. You should obtain legal advice on your disclosure obligations prior to making any such offer.

France

Language Acknowledgment
By accepting the Award and the Award Agreement, which provides for the terms and conditions of your Award, you confirm having read and understood the documents relating to this Award (the Plan and the Award Agreement, including this Appendix) which were provided to you in English. You accept the terms of those documents accordingly.

En acceptant l’Attribution d'Actions Attribuées et ce Contrat d’Attribution qui contient les termes et conditions de vos Actions Attribuées, vous confirmez avoir lu et compris les documents relatifs à cette attribution (le Plan et le Contrat d’Attribution, ainsi que la présente Annexe) qui vous ont été transmis en langue anglaise. Vous acceptez ainsi les conditions et termes de ces documents.

Type of Award
The Awards are not intended to be French tax-qualified Awards.

Foreign Asset/Account Reporting Information
If you are a French resident and you hold cash or Stock outside of France, you must declare all foreign bank and brokerage accounts (including any accounts that were opened or closed during the tax year) on an annual basis on a special form, No. 3916, together with your income tax return. Further, if you are a French resident with foreign account balances exceeding €1,000,000, you may have additional monthly reporting obligations.

9



India
Exchange Control Information
You must repatriate all proceeds received from your participation in the Plan to India within 90 days of receipt for sale of Stock proceeds and within 180 days of receipt for dividends. You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or the Participating Company Group requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.

Foreign Asset/Account Reporting Information
You are required to declare in your annual tax return (a) any foreign assets held by you (e.g., shares of stock acquired under the Plan and, possibly, the Award), and (b) any foreign bank accounts for which you have signing authority. It is your responsibility to comply with this requirement.

Japan
Foreign Asset/Account Reporting Information
You will be required to report details of any assets (including any shares of Stock acquired under the Plan) held outside of Japan as of December 31st of each year, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th of the following year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to report details of any outstanding Awards held by you in the report.

Switzerland
Securities Law Information
The Award and the issuance of any shares of Stock thereunder is not intended to be publicly offered in or from Switzerland. Neither this Award Agreement nor any other materials relating to the Award constitute a prospectus as such term is understood pursuant to article 652a of the Swiss Code of Obligations, and neither this Award Agreement nor any other materials relating to the Award may be publicly distributed nor otherwise made publicly available in Switzerland.

United Kingdom
Tax Obligations
The following supplements Section 11 of the Award Agreement:
You agree that, if you do not pay or the Participating Company Group does not withhold from you the full amount of income tax due in connection with the Award within 90 days after the end of the U.K. tax year in which the income tax liability arises, or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected income tax shall constitute a loan owed by you to the Participating Company Group, effective on the Due Date. You agree that the loan will bear interest at Her Majesty’s Revenue & Customs’ (“HMRC”) official rate and will be immediately due and repayable by you, and the Participating Company Group may recover it at any time thereafter by any of the means referred to in Section 11 of the Award Agreement.
Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that you are an executive officer or director and the income tax is not collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable. You will be responsible for reporting and paying any income tax due on this additional benefit directly to the HMRC under the self-assessment regime and for pay the Participating Company Group) for the value of any employee national insurance contributions due on this additional benefit. You acknowledge that the

10


Participating Company Group may recover any such national insurance contributions from you by any of the means referred to in Section 11 of the Award Agreement.


11

EXHIBIT 10.4

ADOBE SYSTEMS INCORPORATED
2016 EXECUTIVE CASH PERFORMANCE BONUS PLAN
1.    Purposes of the Plan.   This Adobe Systems Incorporated 2016 Executive Cash Performance Bonus Plan sets forth the plan for payment of cash bonuses to those Participants designated for participation and is intended to increase stockholder value and the success of the Company by motivating Participants to perform to the best of their abilities and to achieve the Company’s objectives. The Plan’s goals are to be achieved by providing such Participants with incentive awards based on the achievement of goals relating to the performance of the Company or one of its business units or upon the achievement of objectively determinable performance goals. The Plan is intended to permit the payment of bonuses that may qualify as performance-based compensation under Code Section 162(m) for Performance Periods starting on or after the commencement of the Company’s 2016 Fiscal Year.
2.    Definitions.
(a)    Award” means, with respect to each Participant, the award determined pursuant to Section 8(a) below for a Performance Period. Each Award is determined by a Payout Formula for a Performance Period, subject to the Committee’s authority under Section 8(a) to eliminate or reduce the Award otherwise payable.
(b)    Base Salary” means, as to any Performance Period, the Participant’s annualized salary rate on the last day of the Performance Period. Such Base Salary shall be before both (a) deductions for taxes or benefits, and (b) deferrals of compensation pursuant to Company-sponsored plans.
(c)    Board” means the Board of Directors of the Company.
(d)    Code” means the Internal Revenue Code of 1986, as amended.
(e)    Committee” means the Executive Compensation Committee of the Board, or another committee or subcommittee of the Board, which shall, with respect to payments hereunder intended to qualify as performance-based compensation under Code Section 162(m), consist, to the extent required by Section 162(m), solely of two or more members of the Board who qualify as “outside directors” within the meaning of Section 162(m).
(f)    Company” means Adobe Systems Incorporated or any of its subsidiaries (as such term is defined in Code Section 424(f)).
(g)    Fiscal Year” means a fiscal year of the Company.
(h)    Maximum Award” means, as to any Participant for any Performance Period, the maximum award that may be granted to the Participant under the Plan. In no event may the Maximum Award exceed $5 million multiplied by the number of complete Fiscal Years contained within the Performance Period, or, for any Performance Period of less than one complete Fiscal Year, $5 million.
(i)    Participant” means an eligible executive or member of senior management of the Company selected by the Committee, in its sole discretion, to participate in the Plan for a Performance Period.
(j)    Payout Determination Date” means the date upon which the Committee determines the amounts payable pursuant to the Target Award and the Payout Formula with respect to any previously completed Performance Period, in accordance with Section 8(a).
(k)    Payout Formula” means, as to any Performance Period, the formula or payout matrix established by the Committee pursuant to Section 7 in order to determine the Awards (if any) to be paid to Participants, which is generally expressed as a percentage (which may be more than 100%) of the Target Award. The formula or matrix may differ from Participant to Participant.
(l)    Performance-Based Compensation” means compensation that is intended to qualify as “performance-based compensation” within the meaning of Section 162(m).
(m)    Performance Goals” means the goal(s) (or combined goal(s)) determined by the Committee (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Committee, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures:



growth in revenue or product revenue;
recurring revenue;
annualized recurring revenue;
growth in the market price of stock;
operating margin;
margin, including gross margin;
operating income;
operating income after taxes;
operating profit or net operating profit;
pre-tax profit;
earnings before interest, taxes and depreciation;
earnings before interest, taxes, depreciation and amortization;
income, before or after taxes (including net income);
total return on shares of stock or total stockholder return;
earnings, including but not limited to earnings per share and net earnings;
return on stockholder equity or average stockholders’ equity;
return on net assets;
return on assets, investment or capital employed;
expenses;
cost reduction goals;
return on capital;
economic value added;
market share;
operating cash flow;
cash flow, as indicated by book earnings before interest, taxes, depreciation and amortization;
cash flow per share;
improvement in or attainment of working capital levels;
debt reduction;
debt levels;
capital expenditures;
sales or revenue targets, including product or product family targets;
billings;
workforce diversity;
customer satisfaction;
implementation or completion of projects or processes;



improvement in or attainment of working capital levels;
stockholders’ equity; and
other measures of performance selected by the Committee to the extent consistent with Section 162(m).
The Performance Goals may be based on (i) absolute target values, (ii) growth, maintenance or limiting losses, as compared to a prior period, or (iii) values relative to the performance of one or more comparable companies or to the performance of one or more relevant indices. The Performance Goals may be measured on a Company-wide basis or solely with respect to one or more business units, divisions, affiliates, or business segments. The Performance Goals may differ from Participant to Participant and from Award to Award.
In establishing a Performance Goal on the Target Determination Date, the Committee shall define, in an objective fashion, the manner of calculating the Performance Goal it selects to use for such Performance Period. The Performance Goals shall be determined in accordance with United States generally accepted accounting principles (“GAAP”), unless the Committee determines that a non-GAAP measure can and will be used in a manner that complies with Section 162(m). The Committee may provide that the attainment of the Performance Goal shall be measured by appropriately adjusting the evaluation of Performance Goal performance as follows:
to include or exclude restructuring and/or other nonrecurring charges;
to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated Performance Goals;
to include or exclude the effects of changes to GAAP required by the Financial Accounting Standards Board;
to include or exclude the effects of any statutory adjustments to corporate tax rates;
to include or exclude the effects of any “extraordinary items” as determined under GAAP;
to include or exclude the effect of payment of the bonuses under this Plan and any other bonus plans of the Company;
to include or exclude the effect of stock based compensation and/or deferred compensation;
to include or exclude any other unusual, non-recurring gain or loss or other extraordinary item;
to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development;
to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions;
to include or exclude the effects of divestitures, acquisitions or joint ventures;
to include or exclude the effects on reported financial results of changes in accounting treatment for certain transactions as a result of business model changes;
to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP;
to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture;
to include or exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase,



reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends;
to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code);
to reflect any partial or complete corporate liquidation;
to reflect shippable backlog; and
to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.
The amount of any adjustment made pursuant to the prior sentence shall be determined in accordance with GAAP, unless the Committee determines that a non-GAAP adjustment can and will be used in a manner that complies with Section 162(m).
(n)    Performance Period’ means any Fiscal Year or such other period as determined by the Committee in its sole discretion.
(o)    Plan” means this Adobe Systems Incorporated 2016 Executive Cash Performance Bonus Plan.
(p)    Plan Year” means the Company’s fiscal year.
(q)    Section 162(m)” means Section 162(m) of the Code, or any successor to Section 162(m), as that Section may be interpreted from time to time by the Internal Revenue Service, whether by regulation, notice or otherwise.
(r)    Target Award’ means the target award payable under the Plan to a Participant for the Performance Period, expressed as a percentage of Participant’s Base Salary (or any other measure of the Participant’s base salary determined by the Committee) or a specific dollar amount, as determined by the Committee in accordance with Section 6.
(s)    Target Determination Cutoff Date” means the latest possible date that will not jeopardize a Target Award’s qualification as Performance-Based Compensation.
(t)    Target Determination Date” means the date or dates upon which the Committee sets the Target Award and Payout Formula with respect to any Performance Period, in accordance with Section 7.
(u)    “Threshold Award” means the minimum award payable under the Plan to a Participant for the Performance Period, expressed as a percentage of Participant’s Base Salary (or any other measure of the Participant’s base salary determined by the Committee) or a specific dollar amount, as determined by the Committee in accordance with Section 6.
3.    Plan Administration.
(a)    The Committee shall be responsible for the general administration and interpretation of the Plan and for carrying out its provisions. Subject to the requirements for qualifying compensation as Performance-Based Compensation, the Committee may delegate specific administrative tasks to Company employees or others as appropriate for proper administration of the Plan. Subject to the limitations on Committee discretion imposed under Section 162(m), the Committee shall have such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following powers and duties, but subject to the terms of the Plan:
(i)    discretionary authority to adopt Target Awards and Payout Formulae under this Plan for a given Performance Period on or prior to the Target Determination Cutoff Date;



(ii)    discretionary authority to construe and interpret the terms of the Plan, and to determine eligibility and the amount, manner and time of payment of any Awards hereunder;
(iii)    to prescribe forms and procedures for purposes of Plan participation and distribution of Awards; and
(iv)    to adopt rules, regulations and bylaws and to take such actions as it deems necessary or desirable for the proper administration of the Plan.
(b)    Any rule or decision by the Committee that is not inconsistent with the provisions of the Plan shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
4.    Eligibility.   The employees eligible to participate in the Plan for a given Performance Period shall be determined by the Committee, and are generally expected to include executive officers of the Company who are subject to Section 16 of the Securities and Exchange Act of 1934 and any other members of senior management of the Company who are specifically designated by the Committee, in its sole discretion, for participation in the Plan. Unless specifically excepted under terms that are consistent with Section 162(m), a Participant must be actively employed on the last day of the Performance Period to be eligible to receive a payment hereunder. No person shall be automatically entitled to participate in the Plan.
5.    Performance Goal Determination.   On the Target Determination Date, the Committee, in its sole discretion, shall establish the Performance Goals for each Participant for the Performance Period. Such Performance Goals shall be set forth in writing on or prior to the Target Determination Cutoff Date, and the achievement of such Performance Goals shall be substantially uncertain at such time.
6.    Target Award Determination.   On the Target Determination Date, the Committee, in its sole discretion, shall establish a Target Award and a Maximum Award for each Participant. Each Participant’s Target Award and Maximum Award (and any Threshold Award, as applicable) shall be set forth in writing on or prior to the Target Determination Cutoff Date.
7.    Determination of Payout Formula.   On the Target Determination Date, the Committee, in its sole discretion, shall establish a Payout Formula for purposes of determining the Award (if any) payable to each Participant. Each Payout Formula (a) shall be set forth in writing on or prior to the Target Determination Cutoff Date, (b) shall provide for the payment of a Participant’s Award if the Performance Goals for the Performance Period are achieved, and (c) may provide for an Award payment greater than or less than the Participant’s Target Award, depending upon the extent to which the Performance Goals are achieved. Notwithstanding the preceding, in no event shall a Participant’s Award for any Performance Period exceed the Maximum Award.
8.    Payout Determination; Award Payment.
(a)    Payout Determination and Certification.   On the Payout Determination Date, the Committee shall certify in writing (which may be by approval of the minutes from the meeting in which the certification was made or by a written certification signed by a duly authorized officer of the Company who attended the Committee meeting of the certifications made by the Committee in its meeting) the extent to which the Performance Goals applicable to each Participant for the Performance Period were achieved or exceeded. The Award for each Participant shall be determined by applying the Payout Formula to the level of actual performance that has been certified by the Committee. Notwithstanding any contrary provision of the Plan, the Committee, in its sole discretion, may eliminate or reduce the Award payable to any Participant below that which otherwise would be payable under the Payout Formula.
(b)    Right to Receive Payment.   Each Award under the Plan shall be paid solely from the general assets of the Company. Nothing in this Plan shall be construed to create a trust or to establish or evidence any Participant’s claim of any right to payment of an Award other than as an unsecured general creditor with respect to any payment to which he or she may be entitled.
(c)    Form of Distributions.   The Company shall distribute all Awards to the Participant in cash. All payments under this Plan will be subject to applicable tax withholdings.
(d)    Timing of Distributions.   Subject to Section 8(e) below, the Company shall distribute amounts payable to Participants as soon as is practicable following the determination and written certification of the



Award for a Performance Period, but in no event later than March 15 of the year following the year of performance so that all such payments comply with Treasury Regulation Section 1.409A-1(b)(4).
(e)    Deferral.   The Committee may defer payment of Awards, or any portion thereof, to Participants as the Committee, in its discretion, determines to be necessary or desirable to preserve the deductibility of such amounts under Section 162(m). In addition, the Committee, in its sole discretion, may permit a Participant to defer receipt of the payment of cash that would otherwise be delivered to a Participant under the Plan. Any such deferral elections shall be subject to such rules and procedures as shall be determined by the Committee in its sole discretion.
9.    Term of Plan.   The Plan shall first apply to the 2016 Plan Year; however, no payments shall be made under the Plan to individuals who are “covered employees” (as defined under Section 162(m)) in respect of performance in the 2016 Plan Year if the Plan is not approved at the first annual meeting of the Company’s stockholders held in 2016. The Plan shall continue until the earlier of (a) the date as of which the Committee terminates the Plan and (b) the last day of the Plan Year ending in 2020 (provided that Awards, if any, for such Plan Year shall be paid in accordance with the terms of the Plan).
10.    Amendment and Termination of the Plan.   The Committee may amend, modify, suspend or terminate the Plan, in whole or in part, at any time, including adopting amendments deemed necessary or desirable to correct any defect or to supply omitted data or to reconcile any inconsistency in the Plan or in any Award granted hereunder; provided, however, that no amendment, alteration, suspension or discontinuation shall be made which would (i) increase the amount of compensation payable pursuant to such Award or (ii) cause compensation that is, or may become, payable hereunder to any “covered employee” to fail to qualify as Performance-Based Compensation. To the extent necessary or advisable under applicable law, including Section 162(m), Plan amendments shall be subject to stockholder approval. At no time before the actual distribution of funds to Participants under the Plan shall any Participant accrue any vested interest or right whatsoever under the Plan except as otherwise stated in this Plan.
11.    Bifurcation of the Plan.   It is the intent of the Company that the Plan, and all payments made hereunder, satisfy and be interpreted in a manner that, in the case of Participants who are persons whose compensation is subject to the limitations on deductibility of compensation provided under Section 162(m), qualify as Performance-Based Compensation under Section 162(m). Any provision, application or interpretation of the Plan inconsistent with this intent to satisfy the requirements of Section 162(m) shall be disregarded. However, notwithstanding anything to the contrary in the Plan, the provisions of the Plan may at any time be bifurcated by the Board or the Committee in any manner so that certain provisions of the Plan or any payment intended (or required in order) to satisfy the applicable requirements of Section 162(m) are only applicable to persons whose compensation is subject to the limitations on deductibility of compensation provided under Section 162(m).
12.    No Guarantee of Employment. The Plan is intended to provide a financial incentive to Participants and is not intended to confer any rights to continued employment upon Participants whose employment will remain at-will and subject to termination by either the Company or Participant at any time, with or without cause or notice.
13.    Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Committee may impose such other clawback, recovery or recoupment provisions in an Award as the Committee determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired cash upon the occurrence of cause as determined by the Committee.




EXHIBIT 10.5

ADOBE SYSTEMS INCORPORATED
FISCAL YEAR 2016 EXECUTIVE ANNUAL INCENTIVE PLAN

PURPOSE AND ELIGIBILITY

Purpose
As part of its total compensation program, Adobe Systems Incorporated (“Adobe” or the “Company”) has designed an annual cash-based incentive plan for its 2016 fiscal year (the “Performance Period”) for certain executive officers. This Fiscal Year 2016 Executive Annual Incentive Plan (“AIP”) is designed to drive revenue growth, encourage accountability, drive execution of short-term priorities tied to long-term strategy and annual operating plan objectives, and recognize and reward executives upon the achievement of our objectives. This AIP operates under, and is subject to the terms of, the Adobe Systems Incorporated Executive Cash Performance Bonus Plan (the “Master Bonus Plan”) that was approved by Adobe’s Executive Compensation Committee (the “Committee”) in January 2016 and is being submitted for approval by Adobe’s stockholders in April 2016. Capitalized terms not defined herein have the meanings set forth in the Master Bonus Plan.

Eligibility
Eligible participants in this AIP include executive officers of the Company who (i) are specifically designated by the Committee, (ii) are employed (full time or part time) during the Performance Period, (iii) are at least Senior Vice President level and (iv) are regular employees of Adobe at the end of the Performance Period (the “Participants”). Participation in the AIP is at the discretion of the Committee, in consultation with Company management.
Employment Status
If an executive officer is hired after the beginning of the Performance Period and the Committee determines that such executive officer should be eligible to participate in the AIP, the Participant’s Target Award (as defined below) will be calculated by reference to the annual base salary rate in effect at the end of the Performance Period (“Base Salary”) and be prorated based on the number of calendar days in the Performance Period during which the individual was employed as an executive officer. Unless the Committee explicitly determines otherwise in a manner that complies with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) (in which case such determination shall govern), if a Participant’s AIP annual bonus target percentage changes during the Performance Period, the Participant’s Target Award will be prorated as follows: the Target Award will be based on the number of calendar days in the Performance Period with the former AIP annual bonus target percentage and the number of calendar days in the Performance Period with the new AIP annual bonus target percentage. If a Participant’s employment terminates before the date the Actual Award (as defined below) is paid, the Participant will not be eligible for a bonus payment, or any portion of a bonus payment, except as provided in an applicable severance plan or in an individual retention agreement with the Participant. If a Participant is on a leave of absence for the entire Performance Period, the Participant is not eligible for an AIP bonus payment.

Employees Covered by Internal Revenue Code Section 162(m)
Notwithstanding the foregoing eligibility provisions, to the extent the Committee determines it to be necessary or desirable to achieve full deductibility of bonus compensation awarded under the AIP, the Committee, in its sole discretion, (i) may exclude from participation under the AIP those individuals who are or who may




likely be “covered employees” under Section 162(m) whose employment in an eligible position commenced after the Committee established the Threshold Goal (as defined below), which generally will be a date not later than the 90th day of the Performance Period and (ii) may take other actions as necessary to ensure deductibility of the compensation paid under the AIP.
HOW THE AIP WORKS
Summary
Subject to the terms of this AIP, provided that the Company achieves a revenue-based Threshold Goal for the Performance Period, each Participant will be credited with (subject to the employment requirements set forth herein) a cash bonus payment equal to 200% of his or her Target Award (as defined below) and in no event greater than $5 million, subject to reduction pursuant to the metrics set forth in this AIP. Such potentially reduced amount is the Participant’s Actual Award and will be determined by multiplying the Participant’s Target Award by a Corporate Performance Result (as set forth below and determining 50% of the Actual Award) and by an Individual Performance Result (as set forth below and determining 50% of the Actual Award).

The Actual Award is comprised of:

Corporate Performance Result
(50%)
+
Individual Performance Result
(50%)

Part 1: Determination of Target Award

The “Target Award” equals the product of the annual bonus target percentage (as designated by the Committee) and the Participant’s Base Salary. For example, a Senior Vice President whose annual bonus target percentage is 75% and whose Base Salary is $500,000 has a Target Award of $375,000 ($500,000 x 75%). The Target Award is the amount that would be earned and payable under the AIP upon achievement at the 100% level of both the Corporate Performance Result and the Individual Performance Result (provided the Threshold Goal is attained and employment requirements are satisfied).
The maximum bonus a Participant may earn for the Performance Period is the lesser of: (i) 200% of his or her Target Award (regardless of the level of achievement of the Corporate Performance Result and the Individual Performance Result) and (ii) $5 million (the “Maximum Award”).

Part 2: Achievement of Threshold Goal

In order for any Participant to earn any bonus under this AIP, Adobe must first achieve a “Threshold Goal” of at least 85% of its annual revenue target for the 2016 fiscal year, determined in accordance with Generally Accepted Accounting Principles, as set forth in the annual operating plan for the 2016 fiscal year approved by Adobe’s Board of Directors at the beginning of the fiscal year (the “Operating Plan”), disregarding the effects of any material acquisitions not incorporated into the Operating Plan. For purposes of clarification, if a material acquisition is incorporated into the Operating Plan, the Threshold Goal will not be decreased.

If the Company achieves the Threshold Goal, the AIP will be funded at 200% of the Target Award for all Participants, and each Participant will be credited with his or her Maximum Award, and the Maximum Award will then be subject to the metrics below to determine the Actual Award, which may result in a downward




adjustment of the Maximum Award. If the Company does not achieve the Threshold Goal, the AIP will not be funded and Participants will earn no bonus under the AIP. The Company is under no obligation to pay out the entire funded or credited amount to Participants.

Part 3: Determination of Actual Award

The Committee will determine the actual award earned and payable to that Participant (the “Actual Award”) by reducing the Maximum Award based on (i) achievement of certain Company objectives, as reflected by the calculation of the Corporate Performance Result, and (ii) individual performance including, without limitation, achievement of individual performance objectives selected for each Participant, as described below.

Step 1: Calculate Corporate Performance Result

The Corporate Performance Result is based on the company’s financial performance, as adjusted based on a number of goals related to the Company’s strategic corporate priorities, using the following formula:

Corporate Performance Result
(%)*
=
Financial Performance Result
(%)*
*
Strategic Objectives Result
(%)**
*    May range from zero to 200 percent
**    May range from zero to 100 percent

Step 1A: Determine Financial Performance. The Company’s financial performance for the Performance Period (“Financial Performance Result”) is determined as set forth on the matrix attached as Exhibit A, based on metric comprised of (1) net new annualized recurring revenue in Digital Media and (2) bookings for the Adobe Marketing Cloud, in both cases as set forth in the Operating Plan. The Financial Performance Result percentage (after potential adjustment in Step 1B below) will cap the Corporate Performance Result, which may be adjusted downward based on the outcome of certain strategic company objectives (as discussed in Step 1C). In determining the achievement of the Financial Performance metric, the Committee will disregard the effects of any material acquisitions not incorporated into the Operating Plan; however, the Committee may adjust the Financial Performance metric (either upward or downward) to include the effects of a material acquisition if Adobe’s Board of Directors determines that such corporate transaction is material to the Company and results in a modification to the Operating Plan.

Step 1B: Optional Discretionary Adjustment. The Committee, in its sole discretion, may add to or subtract from the Financial Performance Result up to 20 percentage points based on the Committee’s assessment of the Company’s qualitative performance for the Performance Period (including with respect to potential over-achievement or under-achievement of the Company’s strategic objectives); provided, however, that the maximum Financial Performance Result may not exceed 200%.

Step 1C: Determine Strategic Objectives Result. The “Strategic Objectives Result” is determined by the Committee, in its sole discretion, based on quantitative and qualitative analysis of the Company’s achievement of a number of strategic Company priorities established by the Committee in consultation with Adobe’s Board of Directors at the outset of the Company’s 2016




fiscal year. The Committee will assess the Strategic Objectives Result on a scale of zero to 100 percent.

Step 1D: Determine Company Objectives Result. Following the Committee’s determination of the Financial Performance Result and the Strategic Objectives Result (as adjusted), the final Corporate Performance Result will be determined by the formula shown above.

Step 2: Calculate Individual Performance Result

At the outset of the Performance Period, the Committee, in consultation with the CEO (other than with respect to his own goals), sets individual performance goals for each Participant. Following the Performance Period, the Committee, in consultation with the CEO (other than with respect to his own performance) assesses each Participant’s performance, including, without limitation, achievement of these goals (expressed as a percentage) (the “Individual Performance Result”). The Individual Performance Result is determined independently for each Participant, although the Committee may take the Company’s Financial or Corporate Performance into account in determining payouts.

A Participant’s Individual Performance Result may range from 0% to 200%.
Step 3: Calculate Actual Award
Each Participant’s Actual Award is determined using the following formula based on the achievement determinations described in the above steps.
Actual Award
($)
=
[(Corporate Performance Result * 50%)
+
(Individual Performance Result * 50%)]
*
Target Award
($)

GENERAL

Administration
Actual Awards earned are paid on an annual basis approximately 45-60 days after the end of the Performance Period, but in no event after the later of (i) March 15th of the year following the calendar year in which the Actual Award is earned, or (ii) the 15th day of the third month following the fiscal year of the Company in which the Actual Award is earned, and in all cases in compliance with the short term deferral exception from Section 409A of the Internal Revenue Code of 1986, as amended. The Company reserves the right to interpret and to make changes to or withdraw the AIP at any time, subject to applicable legal requirements. All terms and conditions of the AIP are subject to compliance with applicable law. Pursuant to Section 8(a) of the Master Bonus Plan, notwithstanding any contrary provision of the Master Bonus Plan or this AIP, the Committee, in its sole discretion, may eliminate or reduce the Actual Award payable to any Participant below that which otherwise would be payable in accordance with the provisions set forth above.
Recoupment




Any amounts paid under the AIP will be subject to recoupment in accordance with any clawback policy that Adobe adopts pursuant to the listing standards of any national securities exchange or association on which Adobe’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law or otherwise is adopted by Adobe’s Board of Directors. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with Adobe.





Exhibit A

FY16 Annual Incentive Plan –Financial Performance Result & Payout Scale

Financial Performance as % of Operating Plan Targets
(rounded)
Financial Performance Result 
(%)
85% and below
0%
86%
15%
87%
30%
88%
50%
89%
65%
90%
75%
91%
85%
92%
88%
93%
91%
94%
93%
95%
95%
96%
96%
97%
97%
98%
98%
99%
99%
100%
100%
101%
110%
102%
120%
103%
130%
104%
140%
105%
150%
106%
160%
107%
170%
108%
180%
109%
190%
110% and above
200%

NOTE: The financial performance (as a percentage of operating plan target) will be rounded to the nearest whole number.





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