EXHIBIT
10.6


 


ADOBE
SYSTEMS INCORPORATED


 


NONSTATUTORY
STOCK OPTION AGREEMENT


 


FOR
OUTSIDE DIRECTORS


 


 


 


                THIS NONSTATUTORY STOCK OPTION
AGREEMENT FOR OUTSIDE DIRECTORS (ANNUAL OPTION) (the “Option Agreement”) is
made and entered into as of _____________________ by and between Adobe Systems
Incorporated and _______ (the “Optionee”).


 


                The Company has granted to the
Optionee an option to purchase certain shares of Stock, upon the terms and
conditions set forth in this Option Agreement (the “Option”).


1.             Definitions and Construction.


 


1.1.                              Definitions.  Whenever used herein, the following terms shall have their
respective meanings set forth below:


(a)                                  “Date of Option Grant” means
______________, 200____.


(b)                                 “Number of Option Shares” means
_____________ shares of Stock, as adjusted from time to time pursuant to
Section 9.


(c)                                  “Exercise Price” means $____________ per
share of Stock, as adjusted from time to time pursuant to Section 9.


(d)                                 “Initial Vesting Date” means the day
immediately preceding the day of the first annual meeting of the shareholders
of the Company following the Date of Option Grant.


(e)                                  “Option Expiration Date” means the date
ten (10) years after the Date of Option Grant.


(f)                                    “Vested Percentage” means, on any
relevant date, the percentage determined as follows:


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  Vested Percentage

  
	
   

  	
   

  	
   

  
	
  Prior to Initial
  Vesting Date.

  	
   

  	
  0%

  
	
   

  	
   

  	
   

  
	
  On and after
  Initial Vesting Date, provided Optionee’s Service is continuous from Date of
  Option Grant until Initial Vesting Date.

  	
   

  	
  25%

  
	
   

  	
   

  	
   

  
	
  On and after the
  day immediately preceding the day of the second annual meeting of the
  shareholders of the Company provided Optionee’s Service is continuous from
  Initial Vesting Date until such date.

  	
   

  	
  50%

  
	
   

  	
   

  	
   

  
	
  On and after the
  day immediately preceding the day of the third annual meeting of the
  shareholders of the Company provided Optionee’s Service is continuous from
  Initial Vesting Date until such date.

  	
   

  	
  100%

  



 


(a)                                  “Board” means the Board of Directors of
the Company. If one or more Committees have been appointed by the Board to
administer the Plan, “Board” shall also mean such Committee(s).


(b)                                 “Code” means the Internal Revenue Code of
1986, as amended, and any applicable regulations promulgated thereunder.


(c)                                  “Committee” means a committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted in the Plan, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.


(d)                                 “Company” means Adobe Systems
Incorporated, a California corporation, or any successor corporation thereto.


(e)                                  “Director” means a member of the Board or
of the board of directors of any other Participating Company.


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(f)                                    “Disability” means the permanent and
total disability of the Optionee within the meaning of Section 22(e)(3) of the
Code.


(g)                                 “Exchange Act” means the Securities
Exchange Act of 1934, as amended.


(h)                                 “Fair Market Value” means, as of any
date, if there is then a public market for the Stock, the closing price of the
Stock (or the mean of the closing bid and asked prices of the Stock if the
Stock is so reported instead) as reported on the National Association of
Securities Dealers Automated Quotation (“Nasdaq”) System, the Nasdaq National
Market System or such other national or regional securities exchange or market
system constituting the primary market for the Stock.  If the relevant date does not fall on a day on which the Stock is
trading on Nasdaq, the Nasdaq National Market System or other national or
regional securities exchange or market system, the date on which the Fair
Market Value shall be established shall be the last day on which the Stock was
so traded prior to the relevant date. 
If there is then no public market for the Stock, the Fair Market Value
on any relevant date shall be as determined by the Board without regard to any
restriction other than a restriction which, by its terms, will never lapse.


(i)                                     “Parent Corporation” means any present or
future “parent corporation” of the Company, as defined in Section 424(e)
of the Code.


(j)                                     “Participating Company” means the Company
or any Parent Corporation or Subsidiary Corporation.


(k)                                  “Participating Company Group” means, at
any point in time, all corporations collectively which are then Participating
Companies.


(l)                                     “Plan” means the Adobe Systems
Incorporated 1996 Outside Directors Stock Option Plan.


(m)                               “Rule 16b-3” means Rule 16b-3
as promulgated under the Exchange Act, as amended from time to time, or any
successor rule or regulation.


(n)                                 “Securities Act” means the Securities Act
of 1933, as amended.


(o)                                 “Service” means the Optionee’s service as
a Director.


(p)                                 “Stock” means the common stock of the
Company, as adjusted from time to time in accordance with Section 9.


(q)                                 “Subsidiary Corporation” means any
present or future “subsidiary corporation” of the Company, as defined in
Section 424(f) of the Code.


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1.2.                              Construction.  Captions and titles contained herein are for convenience only and
shall not affect the meaning or interpretation of any provision of this Option
Agreement.  Except when otherwise
indicated by the context, the singular shall include the plural, the plural
shall include the singular, and use of the term “or” shall not be exclusive.


2.                                       Tax Status of the Option. 
This Option is intended to be a nonstatutory stock option and shall not
be treated as an incentive stock option within the meaning of
Section 422(b) of the Code.


3.                                       Administration. 
All questions of interpretation concerning this Option Agreement shall
be determined by the Board, including any duly appointed Committee of the
Board.  All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.  Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.


4.                                       Exercise of the Option.


4.1.                              Right to Exercise.


(a)                                  Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Vesting Date and prior to
the termination of the Option (as provided in Section 6) in an amount not
to exceed the Number of Option Shares multiplied by the Vested Percentage less
the number of shares previously acquired upon exercise of the Option.  In no event shall the Option be exercisable
for more shares than the Number of Option Shares.


(b)                                 Notwithstanding the foregoing, in the
event that the adoption of the Plan or any amendment of the Plan is subject to
the approval of the Company’s shareholders in order for the Plan or the grant
of the Option to comply with the requirements of Rule 16b-3, the Option
shall not be exercisable prior to such shareholder approval.


4.2.                              Method of Exercise.  Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and
such other representations and agreements as to the Optionee’s investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. 
The written notice must be signed by the Optionee and must be delivered
in person, by certified or registered mail, return receipt requested, by
confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized 


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representative of
the Participating Company Group, prior to the termination of the Option as set
forth in Section 6, accompanied by full payment of the aggregate Exercise
Price for the number of shares of Stock being purchased.  The Option shall be deemed to be exercised
upon receipt by the Company of such written notice and the aggregate Exercise
Price.


4.3.                              Payment of Exercise Price.


(a)                                  Forms of Consideration Authorized.  Except as otherwise provided below, payment
of the aggregate Exercise Price for the number of shares of Stock for which the
Option is being exercised shall be made (i) in cash, by check, or cash
equivalent, (ii) by tender to the Company of whole shares of Stock owned
by the Optionee having a Fair Market Value not less than the aggregate Exercise
Price, (iii) by means of a Cashless Exercise, as defined in
Section 4.3(c), or (iv) by any combination of the foregoing.


(b)                                 Tender of Stock.  Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock.  The Option may not be exercised by tender to
the Company of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.


(c)                                  Cashless Exercise.  A “Cashless Exercise” means the assignment
in a form acceptable to the Company of the proceeds of a sale or loan with
respect to some or all of the shares of Stock acquired upon the exercise of the
Option pursuant to a program or procedure approved by the Company (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of
the Federal Reserve System).  The
Company reserves, at any and all times, the right, in the Company’s sole and
absolute discretion, to decline to approve or terminate any such program or
procedure.


4.4.                              Tax Withholding.  At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee agrees to make adequate provision for any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (a) the exercise,
in whole or in part, of the Option, (b) the transfer, in whole or in part,
of any shares acquired upon exercise of the Option, or (c) the lapsing 


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of any restriction
with respect to any shares acquired upon exercise of the Option.


4.5.                              Certificate Registration.  Except in the event the Exercise Price is
paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, the heirs of the Optionee.


4.6.                              Restrictions on Grant of the Option and
Issuance of Shares.  The grant of the
Option and the issuance of shares of Stock upon exercise of the Option shall be
subject to compliance with all applicable requirements of federal, state or
foreign law with respect to such securities. 
The Option may not be exercised if the issuance of shares of Stock upon
exercise would constitute a violation of any applicable federal, state or
foreign securities laws 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, the Option may not be exercised
unless (a) a registration statement under the Securities Act shall at
the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (b) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act.  THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED
UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. 
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN
DESIRED EVEN THOUGH THE OPTION IS VESTED. 
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 subject to the Option
shall relieve the Company of any liability in respect of the failure to issue
or sell such shares as to which such requisite authority shall not have been
obtained.  As a condition to the
exercise of the Option, the Company may require the Optionee 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.


4.7.                              Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise of the Option.


5.                                       Nontransferability of the Option. 
The Option may be exercised during the lifetime of the Optionee only by
the Optionee or the Optionee’s guardian or legal representative and may not be
assigned or transferred in any manner except by will or by the laws of descent
and distribution.  Following the death
of the Optionee, the Option, to the extent provided in Section 7, may be
exercised by 


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the Optionee’s legal
representative or by any person empowered to do so under the deceased
Optionee’s will or under the then applicable laws of descent and distribution.


6.                                       Termination of the Option. 
The Option shall terminate and may no longer be exercised on the first
to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee’s Service as
described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.


7.                                       Effect of Termination of Service.


7.1.                              Option Exercisability.


(a)                                  Disability.  If the Optionee’s Service with the Participating Company Group is
terminated because of the Disability of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee’s Service
terminated, may be exercised by the Optionee (or the Optionee’s guardian or
legal representative) at any time prior to the expiration of twelve (12) months
after the date on which the Optionee’s Service terminated, but in any event no
later than the Option Expiration Date.


(b)                                 Death. 
If the Optionee’s Service with the Participating Company Group is
terminated because of the death of the Optionee, the Option, to the extent unexercised
and exercisable on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee (or the Optionee’s legal representative or other
person who acquired the right to exercise the Option by reason of the
Optionee’s death) at any time prior to the expiration of twelve (12) months
after the date on which the Optionee’s Service terminated, but in any event no
later than the Option Expiration Date. 
The Optionee’s Service shall be deemed to have terminated on account of
death if the Optionee dies within three (3) months after the Optionee’s
termination of Service.


(c)                                  Other Termination of Service.  If the Optionee’s Service with the
Participating Company Group terminates for any reason, except Disability or
death, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee’s Service terminated, may be exercised by the
Optionee within three (3) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date.


7.2.                              Extension if Exercise Prevented by
Law.  Notwithstanding the foregoing, if
the exercise of the Option within the applicable time periods set forth in
Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall 


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remain exercisable
until three (3) months after the date the Optionee is notified by the Company
that the Option is exercisable, but in any event no later than the Option
Expiration Date.


7.3.                              Extension if Optionee Subject to
Section 16(b).  Notwithstanding the
foregoing, if a sale, within the applicable time periods set forth in
Section 7.1, of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (a) the
tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (b) the one hundred and
ninetieth (190th) day after the Optionee’s termination of Service, or
(c) the Option Expiration Date.


8.                                       Transfer of Control.


8.1.                              Definition.  A “Transfer of Control” shall be deemed to have occurred in the
event any of the following occurs with respect to the Company:


(a)                                  the direct or indirect sale or exchange
by the shareholders of the Company of all or substantially all of the stock of
the Company where the shareholders of the Company before such sale or exchange
do not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company;


(b)                                 a merger or consolidation in which the
shareholders of the Company before such merger or consolidation do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Company;


(c)                                  the sale, exchange, or transfer of all or
substantially all of the assets of the Company (other than a sale, exchange, or
transfer to one or more corporations where the shareholders of the Company
before such sale, exchange or transfer retain, directly or indirectly, at least
a majority of the beneficial interest in the voting stock of the corporations
to which the assets were transferred); or


(d)                                 a liquidation or dissolution of the
Company.


8.2.                              Effect of Transfer of Control on
Option.  In the event of a Transfer of
Control, any unexercised portion of the Option shall be immediately exercisable
and vested in full as of the date thirty (30) days prior to the date of the
Transfer of Control.  Any exercise of
the Option that was permissible solely by reason of this Section 8.2 shall
be conditioned upon the consummation of the Transfer of Control.  In addition, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the “Acquiring Corporation”), may either assume the Company’s rights
and obligations under the Option or substitute for the Option a substantially
equivalent option for the 


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Acquiring
Corporation’s stock.  The Option shall
terminate and cease to be outstanding effective as of the date of the Transfer
of Control to the extent that the Option is neither assumed or substituted for
by the Acquiring Corporation in connection with the Transfer of Control nor exercised
as of the date of the Transfer of Control.


9.                                       Adjustments for Changes in Capital
Structure.  In the event of any stock dividend, stock
split, reverse stock split, recapitalization, combination, reclassification, or
similar change in the capital structure of the Company, appropriate adjustments
shall be made in the number, Exercise Price and class of shares of stock
subject to the Option.  If a majority of
the shares which are of the same class as the shares that are subject to the
Option are exchanged for, converted into, or otherwise become (whether or not
pursuant to a Transfer of Control) shares of another corporation (the “New
Shares”), the Board may unilaterally amend the Option to provide that the
Option is exercisable for New Shares. 
In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. 
Notwithstanding the foregoing, any fractional share resulting from an
adjustment pursuant to this Section 9 shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount
less than the par value, if any, of the stock subject to the Option.


10.                                 Rights as a Shareholder. 
The Optionee shall have no rights as a shareholder with respect to any
shares covered by the Option until the date of the issuance of a certificate
for the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company).  No adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date such certificate is issued, except as provided in
Section 9.


11.                                 Legends.  The Company
may at any time place legends referencing any applicable federal, state or
foreign securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement.  The Optionee shall, at the request of the
Company, promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in
order to carry out the provisions of this Section.


12.                                 Binding Effect. 
Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and assigns.


13.                                 Termination or Amendment. 
The Board may terminate or amend the Plan or the Option at any time;
provided, however, that no such termination or amendment may adversely affect
the Option or any unexercised portion hereof without the consent of the
Optionee unless such termination or amendment is necessary to 


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comply with any
applicable law or government regulation. 
No amendment or addition to this Option Agreement shall be effective
unless in writing.


14.                                 Integrated Agreement. 
This Option Agreement constitutes the entire understanding and agreement
of the Optionee and the Participating Company Group with respect to the subject
matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than
those as set forth or provided for herein. 
To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.


15.                                 Applicable Law. 
This Option Agreement shall be governed by the laws of the State of
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within the State of California.


 


	
   

  	
  ADOBE SYSTEMS INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Murray J. Demo

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  	
  Chief Financial Officer

  



 


                The
Optionee represents that the Optionee is familiar with the terms and provisions
of this Option Agreement and hereby accepts the Option subject to all of the
terms and provisions thereof.  The
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under this Option
Agreement.


 


	
   

  	
   

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  



 


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