EXHIBIT 10.4

 

ADOBE SYSTEMS INCORPORATED
2011 EXECUTIVE CASH PERFORMANCE BONUS PLAN

 

1.             Purposes of the Plan.   This Adobe Systems Incorporated 2011
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 2011 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;

 

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·                  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 stockholder’s 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

 

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·                  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 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);

 

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·                  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 2011 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.

 

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(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.

 

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9.             Term of Plan.   The Plan shall first apply to the 2011 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 2011 Plan Year if the Plan is not approved at the first annual meeting of
the Company’s stockholders held in 2011. 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 2015 (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.

 

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