Exhibit 10.2

 

ADOBE SYSTEMS INCORPORATED

Amended 1994 Performance and Restricted Stock Plan

 

2006 Performance Share Program

 

Adopted:  February 2, 2006

 

1.             Purpose.  The Adobe Systems Incorporated 2006 Performance Share
Program (the “Program”), established under the Adobe Systems Incorporated
Amended 1994 Performance and Restricted Stock Plan (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:  (i) focus key Employees on achieving specific
performance targets, (ii) reinforce a team orientation, (iii) provide
significant award potential for achieving outstanding performance, and (iv)
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
shall have the same definitions as in the Plan.

 

(a)           “Actual Award” or “Award” means the number of shares of Stock
earned under the Program by a Designated Participant during a Performance
Period.

 

(b)           “Board” means the Board of Directors of the Company.

 

(c)           “Committee” means a committee of one or more members of the Board
appointed by the Board pursuant to the Plan.

 

(d)           “Covered Employee” means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

 

(e)           “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.

 

(f)            “Maximum Award” means the number of shares of Stock that may be
delivered to a Designated Participant under the Program in respect of a
specified Performance Period if applicable Performance Goals are achieved at the
levels set by the Committee during the applicable Performance Period and the
Designated Participant continues to render Service to the Company or any other
Participating Company in the position in effect on the date when such Employee
became a Designated Participant (or a higher position) during the entire
Performance Period.

 

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(g)           “Other Performance Goal” means a performance goal established by
the Committee that is not a Performance Goal established pursuant to Section
7(b) of the Plan.

 

(h)           “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 the
payment of an Award.  At the discretion of the Committee, a Performance Period
may be divided into shorter periods (for example, fiscal years of the Company)
over which the attainment of one or more Performance Goals will be measured.

 

3.             How Awards Are Earned Under the Program.

 

(a)           General Program Description.  The Program provides the opportunity
for certain key Employees to receive 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 a Maximum Award equal to the number of shares of Stock that will be
represented by an Actual Award to such Designated Participant if (i) specified
levels of applicable Performance Goals are achieved during the Performance
Period, (ii) the Committee does not reduce such Actual Award on account of the
degree of achievement of applicable Other Performance Goals, and (iii) the
Designated Participant continues to render Service to the Company or any other
Participating Company in the position in effect on the date when such Employee
became a Designated Participant (or a higher position) during the entire
Performance Period.  If the Committee does reduce the Actual Award on account of
the degree of achievement of applicable Other Performance Goals, the Designated
Participant will be awarded a portion (or none) of the shares of Stock subject
to the Maximum Award; provided, however, that (i) if a specified level of
Performance Goals is not achieved during the Performance Period, the Designated
Participant will not receive any shares of Stock, and (ii) the maximum number of
shares of Stock that a Designated Participant may receive as an Actual Award
will in no event exceed the Maximum Award.  The methodology for the operation of
the Program in terms of establishing the Maximum Award based on the levels of
achievement of the Performance Goals and the determination of whether the
Maximum Award, or some portion of it, will become payable to a Designated
Participant as an Actual Award in respect of a Performance Period is set forth
in the attached Exhibit A.  As required by Section 7(f) of the Plan and in
accordance with Section 162(m) of the Code, in no event may a Maximum Award be
granted to a Designated Participant such that the number of shares of Stock that
could be delivered to such Designated Participant as an Actual Award would
exceed one million six hundred thousand (1,600,000) shares of Stock with respect
to any Performance Period for such Actual Award.

 

(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 shall be
eligible for a Maximum Award 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 Maximum
Award for such Performance Period.  The determination as to whether an

 

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individual is a Designated Participant shall be made by the Committee, in its
sole discretion, and such determination shall be binding and conclusive on all
persons.

 

No Employee shall have any right to be a Designated Participant in the Program,
to continue as a Designated Participant, or to be granted a Maximum Award or
Actual Award under the Program.  The Company is not obligated to give uniform
treatment (e.g., number of shares subject to Maximum 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 and Other Performance Goals.  The Performance
Goals for a particular Performance Period and Other Performance Goals, if
applicable, and their relative weights, will be determined by the Committee, in
its sole discretion. The Committee also may establish, in its sole discretion,
Performance Goals and Other Performance Goals for annual, quarterly or other
periods within the applicable Performance Period.  The Performance Goals and
Other Performance Goals for a Performance Period or for shorter periods within a
Performance Period are not required to be identical to the Performance Goals and
Other Performance Goals for any other Performance Period or shorter period
within a Performance Period.  The Committee may establish Performance Goals and
Other Performance Goals for the Company that differ from those established for
one or more other Participating Companies and may establish different
Performance Goals and Other 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
and distribution of Actual Awards will be subject to (i) completion of an
independent audit and certification by the Committee that the applicable
Performance Goals and other terms of the Program have been met and (ii) the
Committee’s determination as to the appropriate reductions in the amounts of the
Maximum Awards in arriving at the amounts of the Actual Awards, based on the
levels of achievement of applicable Other Performance Goals.  Shares of Stock in
respect of the Actual Award that are earned by a Designated Participant will be
distributed to the Designated Participant (or the Designated Participant’s heirs
in the case of death) within thirty (30) days following the completion of such
independent audit and certification; provided, however, that 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.  The
Company shall 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.

 

(b)           Employment and Termination.  In order to receive an Actual Award
under the Program, a Designated Participant must continue to render Service to
the Company or any other Participating Company in the position in effect on the
date when such Employee became a Designated Participant (or a higher position)
during the entire Performance Period, except as otherwise provided in this
Section 4(b).

 

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If a Designated Participant terminates Service prior to the end of the
Performance Period by reason of death or Disability, the Designated Participant
(or the Designated Participant’s heirs in the case of death) will be eligible to
receive a pro rata Actual Award based on the time employed while a Designated
Participant and the Performance Goals and Other Performance Goals achieved for
the Performance Period.  Designated Participants (or the Designated
Participant’s heirs in the case of death) who have earned an Actual Award on
this basis will receive payment on the same schedule as other Designated
Participants.  The amount of such prorated Actual Award will be equal to (i) the
amount of the Actual Award if the Participant had not terminated Service
multiplied by (ii) a fraction, the numerator of which is the number of completed
months of Service during the Performance Period and the denominator of which is
the total number of whole months of potential Service during the Performance
Period.

 

(c)           No Employment or Service Rights.  Nothing in the Program or any
instrument executed or Award granted pursuant to the Program shall (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.

 

(d)           Program Administration.  The Committee shall 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 shall not be subject to review by any person and shall be final,
binding and conclusive on all persons.  The Committee may, without notice,
amend, suspend or terminate the Program; provided, however, that no such action
may adversely affect any then outstanding Maximum 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.

 

(e)           Stockholder Rights.  No Designated Participant shall 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 such Maximum Award (including, without limitation,
the right to receive dividends) unless and until such Designated Participant has
received an Actual Award under the Program; provided, however, that a plan or
program by which receipt of an Actual Award may be deferred may provide for the
crediting of dividend equivalent rights.

 

(f)            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.

 

(g)           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

 

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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
shall control.

 

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Exhibit A

 

2006 Performance Share Program

Award Calculation Methodology

 

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2006 Performance Share Program

 

Program Summary

 

February  2006

 

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*Note: The complete terms and conditions of the Performance Share Program are
contained in your individual award agreement. To the extent any provisions
contained in this summary conflict with the provisions of the award agreement,
the award agreement shall control.

 

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2006 Performance Share Program – Summary of Key Terms and Provisions

 

Parameter

 

Description

1.

 

Program Objectives

 

•      Promote the successful integration of Macromedia and reinforce a “one
firm” – firm mentality

•      Align new leadership team to achieve key integration milestones and
create stockholder value

•      Support/enhance retention of key executives

 

 

 

 

 

2.

 

Participants

 

•      All members of Adobe’s executive management team and other key members of
senior management

 

 

 

 

 

3.

 

Award Type/ Award Size

 

•      Participants will receive performance shares which are stock units that
vest based on the achievement of specified performance metrics (discussed in
Sections 6 and 7)

•      Individual award amount is specified in award letter

 

 

 

 

 

4.

 

Date of Grant

 

•      Awards will be granted in February 2006 on the first day the trading
window opens

 

 

 

 

 

5.

 

Performance Period

 

•      Performance, for purposes of determining the actual number of shares to
be earned, will be measured at the end of FY 2007 based on performance over FY
2006-07

•      Performance shares will be settled in Adobe shares after the end of FY
2007 and audited financial statements for FY 2007 are completed; if earned, the
shares will be fully vested and distributed to participants at this time, unless
a deferral election is made (see Section 9)

 

 

 

 

 

6.

 

Performance Gate

 

•      Adobe must achieve, in the aggregate, 90% of the Board-approved operating
income targets for FY 2006-07 or no awards will be earned

•      Ensures threshold level of profitability before shares are issued

•      Enables awards to be fully deductible by the Company under IRC Section
162(m)

 

•      If the gate is achieved, the actual number of performance shares awarded
will be based on achievement of specific integration metrics during FY 2006-07
described below

 

 

 

 

 

7.

 

Integration Metrics

 

•      FY 2006 Integration Metrics

•      Achievement of total strategic products revenue targets

•      Achievement of specified product readiness goals

•      Achievement of specified engineering goals

•      Commitment of select strategic partners

•      FY 2007 Integration Metrics

•      Growth rate of strategic products revenue

•      Growth of specified product revenue

•      Achievement of specified product shipment goals

•      Achievement of specified engineering goals and delivery of strategic
partner objectives

 

 

 

 

 

 

 

 

 

Note: All metrics will be weighted equally (i.e., 12.5% per metric)

 

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Parameter

 

Description

8.

 

Award Determination

 

•      If the gate is not achieved, then no performance shares will be paid
regardless of performance against the integration metrics

 

•      If the gate is achieved, actual shares earned will be determined after
the completion of FY 2007 as follows:

 

Step 1: Determine the number of performance shares earned for achievement of the
five non-revenue integration metrics (partial share amounts will be rounded up
to the next share)

 

•      For each non-revenue integration metric achieved multiply:

 

12.5% X Target Number of Performance Shares X Modifier

 

•      The Compensation Committee (with input from the CEO and President & COO)
retain the discretion to apply a modifier (up or down) to the achievement of
non-revenue metrics based on various factors (such as market reception, revenue,
commitment of strategic partners, quality of product shipped, etc.)

 

•      The modifier may not result in payout for an individual goal that exceeds
150% of target

 

Step 2: Determine the number of performance shares earned for the achievement of
the FY 2006 total strategic products revenue metric (partial share amounts will
be rounded up to the next share)

 

•      The number of shares earned will correlate to the percent of metric
achievement, subject to the minimum and maximum below

 

Percent of Revenue Metric Achievement

 

Performance Shares Earned

 

< 90% of Target

 

0%

 

90% of Target

 

90% x 12.5% x Target Shares

 

100% of Target

 

100% x 12.5% x Target Shares

 

125% of Target

 

125% x 12.5% x Target Shares

 

150% of Target

 

150% x 12.5% x Target Shares

 

> 150% of Target

 

150% x 12.5% x Target Shares

 

 

 

 

 

 

Step 3: Repeat Step 2 for the FY 2007 total strategic products revenue metric
and FY 2007 specified product revenue metric

 

 

 

 

 

 

 

 

 

Step 4: Calculate the total number of shares earned through Steps 1-3

 

9.

 

Deferral Provisions

 

•      A participant may make a one-time election to defer receipt of all or a
portion of earned performance shares to a date beyond the end of the performance
period

 

•      Election to defer must be made by May 30, 2007

 

•      Details regarding deferral election will follow in late 2006/early 2007

 

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Parameter

 

Description

10.

 

Termination Provisions

 

•      Termination that is not due to Death or Long-Term Disability

 

•      Participant forfeits right to any portion of performance share award

 

•      Termination due to Death or Long-Term Disability

 

•      At the end of the performance period, the participant or participant’s
estate will receive a prorated portion of the award expressed as the product of
the actual performance share grant earned for the performance period and the
number of full or partial months of the performance period that has elapsed upon
the participant’s death or disability, divided by 24

 

•      Awards will be settled and shares delivered to the participant or
participant’s estate in accordance with Section 5 above

 

 

 

 

 

11.

 

Change-in-Control Provisions

 

•      Upon a change in control, as defined in Adobe’s Executive Severance Plan
in Event of a Change in Control, the program shall terminate and a number of
performance shares will be deemed earned by each participant expressed as the
product of the target performance share grant for the entire performance period
and the number of full or partial months of the performance period that has
elapsed upon the change in control, divided by 24

 

•      The shares earned will be delivered to the participant as soon as
administratively practical following the change in control; provided, however,
the Company may delay payment for six-months if required to avoid penalties
under IRC Section 409A (deferred compensation regulations)

 

•      Participant acknowledges that these awards are considered “performance
share units” as this term is used in Adobe’s Executive Severance in Event of a
Change-in-Control Plan and any individual change-in-control agreements

 

 

 

 

 

12.

 

Tax Withholding

 

•      Upon distribution of the shares to a Participant, the Company will deduct
from the actual performance shares earned a number of performance shares equal
in value to satisfy the participant’s tax withholding obligation

 

 

 

 

 

13.

 

Dividend Equivalent Rights

 

•      During the performance period, participants will not receive dividend
equivalent rights on performance shares should Adobe pay a cash or stock
dividend to stockholders

 

•      Should Adobe pay a cash or stock dividend after the end of the
performance period, dividend equivalent rights will be paid on deferred
performance shares in the same form issued to other stockholders and be subject
to the same election/distribution provisions as the underlying unit

 

 

 

 

 

14.

 

Miscellaneous Provisions

 

•      Award is not transferable

 

•      Award does not constitute an express or implied right of continued
employment nor a guarantee of participation in any subsequent plans, if any,
similar to this program

 

•      Participant does not have any rights of a stockholder (except as
described in Section 15) until awards are settled in Adobe stock

 

•      Compensation Committee (as Administrator) has the power to interpret,
amend and modify the program; provided, however, that no such action shall
adversely affect a participant with respect to outstanding awards

 

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