Document:

Exhibit
10.23

 

ADOBE
SYSTEMS INCORPORATED

2005 EQUITY INCENTIVE ASSUMPTION PLAN

(as amended January 24, 2008)

 

1.             ESTABLISHMENT, PURPOSE AND TERM
OF PLAN.

 

1.1         Establishment.  Adobe Systems Incorporated, a Delaware
corporation, hereby establishes the Adobe Systems Incorporated 2005 Equity
Incentive Assumption Plan (the “Plan”)
effective as of December 3, 2005  (the “Effective Date”).

 

1.2           Background and Purpose.  The Plan is established in connection with
the acquisition by the Company of Macromedia, Inc. and is intended to
comply with Rule 4350(i)(1)(A)(iii) of the Nasdaq Qualitative Listing
Requirements.  The purpose of the Plan is
to advance the interests of the Participating Company Group and its
stockholders by providing an incentive to attract, retain and reward persons
performing services for the Participating Company Group and by motivating such
persons to contribute to the growth and profitability of the Participating
Company Group.  The Plan seeks to achieve
this purpose by providing for Awards in the form of Options, Stock Appreciation
Rights, Stock Purchase Rights, Stock Bonuses, Performance Shares and
Performance Units.  Outstanding Awards
shall continue to be governed by and administered under the terms of the
Macromedia Plans pursuant to which they originally were granted.  Awards granted on or after the Effective Date
shall be subject to the terms of this Plan.

 

1.3           Term of Plan.  The
Plan shall continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Stock available for issuance under
the Plan have been issued and all restrictions on such shares under the terms
of the Plan and the agreements evidencing Awards granted under the Plan have
lapsed; provided, however, that no Awards may be
made from Reserve A after August 1, 2009, and no Awards may be made from
Reserve B after November 10, 2014.

 

2.             DEFINITIONS AND CONSTRUCTION.

 

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

 

(a)           “Affiliate” means (i) an
entity, other than a Parent Corporation, that directly, or indirectly through
one or more intermediary entities, controls the Company or (ii) an entity,
other than a Subsidiary Corporation, that is controlled by the Company
directly, or indirectly through one or more intermediary entities.  For this purpose, the term “control”
(including the term “controlled by”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.

 

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(b)           “Award” means any Option,
SAR, Stock Purchase Right, Stock Bonus, Performance Share or Performance Unit
granted under the Plan.

 

(c)           “Award Agreement” means a
written agreement between the Company and a Participant setting forth the terms,
conditions and restrictions of the Award granted to the Participant.  An Award Agreement may be an “Option
Agreement,” an “SAR Agreement,” a “Stock Purchase Agreement,” a “Stock Bonus
Agreement,” a “Performance Share Agreement” or a “Performance Unit Agreement.”

 

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

 

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

 

(f)            “Committee” means the Executive Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. 
If no committee of the Board has been appointed to administer the Plan,
the Board shall exercise all of the powers of the Committee granted herein,
and, in any event, the Board may in its discretion exercise any or all of such
powers.

 

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

 

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

 

(i)            “Dividend Equivalent” means a
credit, made at the discretion of the Committee or as otherwise provided by the
Plan, to the account of a Participant in an amount equal to the cash dividends
paid on one share of Stock for each share of Stock represented by an Award held
by such Participant.

 

(j)            “Employee” means any person treated as an employee in the records of
a Participating Company (including an Officer or a member of the Board who is
also an employee); provided, however,
that neither service as a member of the Board nor payment of a director’s fee
shall be sufficient to constitute employment for purposes of the Plan.

 

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

 

(l)            “Fair Market Value” means, as of any date, the value of a share of Stock or
other property as determined by the Committee, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:

 

(i)            If, on
such date, the Stock is listed on a national or regional securities exchange or
market system, the Fair Market Value of a share of Stock shall be the closing
price of a share of Stock (or the mean of the closing bid and asked prices of a
share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, The Nasdaq

 

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SmallCap Market or such other national or regional securities exchange
or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other
source as the Company deems reliable.  If
the relevant date does not fall on a day on which the Stock has traded on such
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, or such other appropriate day as shall be
determined by the Committee, in its discretion.

 

(ii)           If, on
such date, the Stock is not listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be
as determined by the Committee in good faith without regard to any restriction other
than a restriction which, by its terms, will never lapse.

 

(m)          “Insider”
means an Officer, a member of the Board or any other person whose transactions
in Stock are subject to Section 16 of the Exchange Act.

 

(n)           “Macromedia Plans” means the equity incentive
plans of Macromedia, Inc described in Section 4.1 of the Plan.

 

(o)           “Nonstatutory Stock Option” means an
Option not intended to be (as set forth in the Award Agreement) an incentive
stock option within the meaning of Section 422(b) of the Code.

 

(p)           “Officer” means any person designated by the Board
as an officer of the Company.

 

(q)           “Option” means the
right to purchase Stock at a stated price for a specified period of time
granted to a participant pursuant to Section 6 of the Plan.  All Options shall be Nonstatutory Stock
Options.

 

(r)            “Outstanding Award” means an
award outstanding immediately prior to the Effective Date under the Macromedia
Plans.

 

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

 

(t)            “Participant” means any eligible person who has
been granted one or more Awards.

 

(u)           “Participating Company” means the
Company or any Parent Corporation, Subsidiary Corporation or Affiliate.

 

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

 

(w)          “Performance Award” means an Award of Performance
Shares or Performance Units.

 

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(x)            “Performance Award Formula” means, for any
Performance Award, a formula or table established by the Committee pursuant to Section 9.3
of the Plan which provides the basis for computing the value of a Performance
Award at one or more threshold levels of attainment of the applicable
Performance Goal(s) measured as of the end of the applicable Performance
Period.

 

(y)           “Performance Goal” means a performance goal
established by the Committee pursuant to Section 9.3 of the Plan.

 

(z)            “Performance Period” means a period established by
the Committee pursuant to Section 9.3 of the Plan at the end of which one
or more Performance Goals are to be measured.

 

(aa)          “Performance Share” means a bookkeeping entry
representing a right granted to a Participant pursuant to Section 9 of the
Plan to receive a payment equal to the value of a Performance Share, as
determined by the Committee, based on performance.

 

(bb)         “Performance Unit” means a bookkeeping entry
representing a right granted to a Participant pursuant to Section 9 of the
Plan to receive a payment equal to the value of a Performance Unit, as
determined by the Committee, based upon performance.

 

(cc)          “Reserve A” means the shares of Stock described in
Section 4.1 of the Plan as being allocated to such reserve.

 

(dd)         “Reserve B” means the shares of Stock described in
Section 4.1 of the Plan as being allocated to such reserve.

 

(ee)          “Restriction Period” means the period established
in accordance with Section 8.5 of the Plan during which shares subject to
a Stock Award are subject to Vesting Conditions.

 

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

 

(gg)        “SAR” or “Stock
Appreciation Right” means a bookkeeping entry
representing, for each share of Stock subject to such SAR, a right granted to a
Participant pursuant to Section 7 of the Plan to receive payment of an
amount equal to the excess, if any, of the Fair Market Value of a share of
Stock on the date of exercise of the SAR over the exercise price.

 

(hh)        “Section 162(m)”
means Section 162(m) of the Code.

 

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

 

(jj)          “Service” means a
Participant’s employment with the Participating Company Group as an
Employee.  Unless otherwise determined by
the Board, a Participant’s Service shall be deemed to have terminated if the
Participant ceases to render service to the Participating Company Group as an
Employee.  However, a Participant’s
Service

 

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shall not be deemed to have terminated merely because of a change in
the Participating Company for which the Participant renders such Service as an
Employee, provided that there is no interruption or termination of the
Participant’s Service.  Furthermore, a Participant’s
Service shall not be deemed to have terminated if the Participant takes any
bona fide leave of absence approved by the Company of ninety (90) days or
less.  In the event of a leave in excess
of ninety (90) days, the Participant’s Service shall be deemed to terminate on
the ninety-first (91st) day of the leave unless the Participant’s right to
return to Service is guaranteed by statute or contract.  Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence
shall not be treated as Service for purposes of determining vesting under the
Participant’s Award Agreement.  A
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Participant
performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant’s Service has terminated
and the effective date of such termination.

 

(kk)        “Stock” means the
common stock of the Company, as adjusted from time to time in accordance with Section 4.2
of the Plan.

 

(ll)          “Stock Award” means an Award of a Stock Bonus or a
Stock Purchase Right.

 

(mm)      “Stock Bonus” means Stock granted to a Participant
pursuant to Section 8 of the Plan.

 

(nn)        “Stock Purchase Right” means a right to purchase
Stock granted to a Participant pursuant to Section 8 of the Plan.

 

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

 

(pp)        “Vesting Conditions” mean those conditions
established in accordance with Section 8.5 of the Plan prior to the
satisfaction of which shares subject to a Stock Award remain subject to
forfeiture or a repurchase option in favor of the Company.

 

2.2           Construction. 
Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular.  Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise.

 

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3.             ADMINISTRATION.

 

3.1           Administration by the Committee.  The Plan shall be administered by the
Committee.  All questions of
interpretation of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Award.

 

3.2           Authority of Officers. 
Any Officer shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination 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, determination or election. 
The Board may, in its discretion, delegate to a committee comprised of
one or more Officers the authority to grant one or more Options, without
further approval of the Board or the Committee, to any Employee, other than a
person who, at the time of such grant, is an Insider; provided, however, that (i) such
Awards shall not be granted for shares in excess of the maximum aggregate
number of shares of Stock authorized for issuance pursuant to Section 4.1,
(ii) the exercise price per share of each Option shall be not less than
the Fair Market Value per share of the Stock on the effective date of grant
(or, if the Stock has not traded on such date, on the last day preceding the
effective date of grant on which the Stock was traded, pursuant to Section 2.1(n)(1) above),
and (iii) each such Award shall be subject to the terms and conditions of
the appropriate standard form of Award Agreement approved by the Board or the
Committee and shall conform to the provisions of the Plan and such other
guidelines as shall be established from time to time by the Board or the
Committee.

 

3.3           Administration with Respect to Insiders.  With respect to participation by Insiders in
the Plan, at any time that any class of equity security of the Company is
registered pursuant to Section 12 of the Exchange Act, the Plan shall be
administered in compliance with the requirements, if any, of Rule 16b-3.

 

3.4           Powers of the Committee.  In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Committee shall have
the full and final power and authority, in its discretion:

 

(a)           to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock or units to be subject to each Award;

 

(b)           to
determine the type of Award granted;

 

(c)           to
determine the Fair Market Value of shares of Stock or other property;

 

(d)           to
determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of
shares purchased pursuant to any Award, (ii) the method of payment for
shares purchased pursuant to any Award, (iii) the method for satisfaction
of any tax withholding obligation arising in connection with Award, including
by the withholding or delivery of shares of Stock, (iv) the timing, terms
and conditions of the exercisability or vesting of any Award or any shares
acquired pursuant thereto, (v) the

 

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Performance Award Formula and Performance Goals applicable to any Award
and the extent to which such Performance Goals have been attained, (vi) the
time of the expiration of any Award, (vii) the effect of the Participant’s
termination of Service on any of the foregoing, and (viii) all other
terms, conditions and restrictions applicable to any Award or shares acquired
pursuant thereto not inconsistent with the terms of the Plan;

 

(e)           to
determine whether an Award of SARs, Performance Shares or Performance Units
will be settled in shares of Stock, cash, or in any combination thereof;

 

(f)            to
approve one or more forms of Award Agreement;

 

(g)           to
amend, modify, extend, cancel or renew any Award or to waive any restrictions
or conditions applicable to any Award or any shares acquired pursuant thereto;

 

(h)           to
accelerate, continue, extend or defer the exercisability or vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;

 

(i)            to
prescribe, amend or rescind rules, guidelines and policies relating to the
plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws of or to accommodate the laws, regulations,
tax or accounting effectiveness, accounting principles or custom of, foreign
jurisdictions whose citizens may be granted Awards; and

 

(j)            to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Committee may deem
advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.

 

3.5           Option Repricing.  Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (a) the cancellation of
outstanding Options and the grant in substitution therefore of new Options
having a lower exercise price or (b) the amendment of outstanding Options
to reduce the exercise price thereof. 
This paragraph shall not be construed to apply to “issuing or assuming a
stock option in a transaction to which section 424(a) applies,” within the
meaning of Section 424 of the Code.

 

3.6           Indemnification.  In
addition to such other rights of indemnification as they may have as members of
the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Board, the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys’ fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel

 

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selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the
Company, in writing, the opportunity at its own expense to handle and defend
the same.

 

4.             SHARES SUBJECT TO PLAN.

 

4.1           Maximum Number of Shares Issuable.  The Plan shall have two separate share
reserves (“Reserve A” and “Reserve B”) reflecting the unused
share reserves and potential reversions to such reserves, as of the Effective
Date, with respect to the following equity incentive plans that were maintained
by Macromedia, Inc. prior to the Effective Date:

 

Reserve A:    Andromedia, Inc. 1999
Stock Plan

 

Reserve B:     Macromedia, Inc. 2002
Equity Incentive Plan; Allaire Corp. 1997 Stock Incentive Plan; Allaire
Corporation 1998 Stock Incentive Plan; Allaire Corporation 2000 Stock Incentive
Plan

 

Accordingly, as of the Effective Date, Reserve A consists of 190,678
shares of Stock, of which there are Outstanding Awards covering 186,279 shares
of Stock and 4,399 shares of Stock remaining available for Awards; and Reserve
B consists of 8,648,196 shares of Stock, of which there are Outstanding Awards covering
8,382,090 shares of Stock and 266,106 shares of Stock remaining available for
Awards.  Outstanding Awards shall
continue to be governed by and administered under the terms of the Macromedia
Plans pursuant to which they originally were granted, but in the event of their
forfeiture or expiration unexercised, the shares of Stock associated with such
forfeited or expired Outstanding Awards shall become available for award
pursuant to the terms of this Plan from Reserve A or Reserve B, as applicable.  Reserve A and Reserve B shall both be subject
to adjustment as provided in Section 4.2 of the Plan.  Such shares shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof.  If an Award for any reason expires or is terminated
or canceled without having been exercised or settled in full, or if shares of
Stock acquired pursuant to an Award subject to forfeiture or repurchase are
forfeited or repurchased by the Company at the Participant’s purchase price to
effect a forfeiture of unvested shares upon termination of Service, the shares
of Stock allocable to the terminated portion of such Award or such forfeited or
repurchased shares of Stock shall again be available for issuance under the
Plan from Reserve A or Reserve B, as applicable.  Shares of Stock shall not be deemed to have
been issued pursuant to the Plan with respect to any portion of an Award (other
than an SAR that may be settled in shares of Stock or cash) that is settled in
cash.  Shares withheld in satisfaction of
tax withholding obligations pursuant to Section 13.2 shall not again
become available for issuance under the Plan. 
Upon payment in shares of Stock pursuant to the exercise of an SAR, the
number of shares available for issuance under the Plan shall be reduced by the
gross number of shares for which the SAR is exercised.  If the exercise price of an Option is paid by
tender to the Company, or attestation to the ownership, of shares of Stock
owned by the Participant, the number of shares available for issuance under the
Plan shall be reduced by the gross number of shares for which the Option is
exercised.

 

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4.2           Adjustments for Changes in Capital Structure.  In the event of any change in the Stock
through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting normal cash dividends) that has a material
effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and class of shares subject to the Plan, in the
Award limits set forth in Section 5.3 and in the number of shares of Stock
subject to, and the exercise or purchase price per share under, any Award then
outstanding under this Plan. 
Notwithstanding the foregoing, any fractional share resulting from an
adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise or purchase price under
any Award be decreased to an amount less than the par value, if any, of the
stock subject to such Award.  The
adjustments determined by the Committee pursuant to this Section 4.2 shall
be final, binding and conclusive.

 

5.             ELIGIBILITY AND AWARD LIMITATIONS.

 

5.1           Persons Eligible for Awards.  Awards may be granted only to
Employees who were not employed by or providing service to any Participating
Company (other than Macromedia, Inc. and its Affiliates and Subsidiaries)
prior to the Effective Date.  For
purposes of the foregoing sentence, “Employees”
shall include prospective Employees to whom Awards are granted in connection
with written offers of an employment with the Participating Company Group; provided, however, that no Stock subject to any such Award
shall vest, become exercisable or be issued prior to the date on which such
person commences Service.

 

5.2           Participation.  Awards are granted solely at the discretion
of the Committee.  Eligible persons may
be granted more than one (1) Award. 
However, eligibility in accordance with this Section shall not
entitle any person to be granted an Award, or, having been granted an Award, to
be granted an additional Award.

 

5.3           Award Limits.  Subject
to adjustment as provided in Section 4.2, in no event shall more than one
hundred thousand (100,000) shares of Stock in the aggregate be issued under the
Plan pursuant to the exercise or settlement of Stock Awards and Performance
Awards.

 

6.             TERMS AND CONDITIONS OF OPTIONS.

 

Options shall be
evidenced by Award Agreements specifying the number of shares of Stock covered
thereby, in such form as the Committee shall from time to time establish.  No Option or purported Option shall be a
valid and binding obligation of the Company unless evidenced by a fully executed
Award Agreement.  Award Agreements evidencing
Options may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:

 

6.1           Exercise Price.  The exercise price for each Option shall be
established in the discretion of the Committee; provided,
however, that the exercise price per share shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option.

 

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Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner qualifying under the provisions of Section 409A and 424(a) of
the Code.

 

6.2           Exercisability and Term of Options.  Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be
exercisable after the expiration of seven (7) years after the effective
date of grant of such Option, and (b) no Option granted to a prospective
Employee may become exercisable prior to the date on which such person
commences Service.  Subject to the
foregoing, unless otherwise specified by the Committee in the grant of an
Option, any Option granted hereunder shall terminate seven (7) years after
the effective date of grant of the Option, unless earlier terminated in
accordance with its provisions.

 

6.3           Payment of Exercise Price.

 

(a)           Forms of Consideration Authorized.  Except as otherwise provided below, payment
of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant having a Fair Market
Value not less than the exercise price, (iii) by delivery of a properly
executed notice of exercise together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the shares being acquired upon the exercise of
the Option (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) (a “Cashless Exercise”), (iv) by such other
consideration (including, without limitation, a net exercise) as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (v) by any combination thereof.  The Committee may at any time or from time to
time grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.

 

(b)           Limitations on Forms of Consideration.

 

(i)            Tender of Stock. 
Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.  Unless otherwise
provided by the Committee, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for more than six (6) months
(and not used for another Option exercise by attestation during such period) or
were not acquired, directly or indirectly, from the Company.

 

(ii)           Cashless Exercise. 
The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to establish, decline to approve or terminate any
program or procedures for the exercise of Options by means of a Cashless
Exercise.

 

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6.4           Effect of Termination of Service. 
An Option shall be exercisable after a Participant’s
termination of Service to such extent and during such period as determined by
the Committee, in its discretion, and set forth in the Award Agreement evidencing
such Option.

 

6.5           Transferability of Options. 
During the lifetime of the Participant, an Option shall be exercisable
only by the Participant or the Participant’s guardian or legal
representative.  No Option shall be
assignable or transferable by the Participant, except by will or by the laws of
descent and distribution. 
Notwithstanding the foregoing, to the extent permitted by the Committee,
in its discretion, and set forth in the Award Agreement evidencing such Option,
an Option shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act.

 

7.             TERMS AND CONDITIONS OF STOCK
APPRECIATION RIGHTS.

 

SARs shall be
evidenced by Award Agreements specifying the number of shares of Stock subject
to the Award, in such form as the Committee shall from time to time
establish.  No SAR or purported SAR shall
be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement.  Award
Agreements evidencing SARs may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:

 

7.1           Types of SARs Authorized. 
SARs may be granted in tandem with all or any portion of a related
Option (a “Tandem SAR”)
or may be granted independently of any Option (a “Freestanding SAR”).  A Tandem SAR may be granted either
concurrently with the grant of the related Option or at any time thereafter
prior to the complete exercise, termination, expiration or cancellation of such
related Option.

 

7.2           Exercise Price.  The
exercise price for each SAR shall be established in the discretion of the
Committee; provided, however, that (a) the
exercise price per share subject to a Tandem SAR shall be the exercise price
per share under the related Option and (b) the exercise price per share
subject to a Freestanding SAR shall be not less than the Fair Market Value of a
share of Stock on the effective date of grant of the SAR.

 

7.3           Exercisability and Term of SARs.

 

(a)           Tandem SARs.  Tandem SARs shall be exercisable only at the
time and to the extent, and only to the extent, that the related Option is
exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of
Stock subject to the related Option.  The
Committee may, in its discretion, provide in any Award Agreement evidencing a
Tandem SAR that such SAR may not be exercised without the advance approval of
the Company and, if such approval is not given, then the Option shall
nevertheless remain exercisable in accordance with its terms.  A Tandem SAR shall terminate and cease to be
exercisable no later than the date on which the related Option expires or is
terminated or canceled.  Upon the
exercise of a Tandem SAR with

 

11

 

respect to some or all of the shares subject to such SAR, the related
Option shall be canceled automatically as to the number of shares with respect
to which the Tandem SAR was exercised. 
Upon the exercise of an Option related to a Tandem SAR as to some or all
of the shares subject to such Option, the related Tandem SAR shall be canceled automatically
as to the number of shares with respect to which the related Option was
exercised.

 

(b)           Freestanding SARs.  Freestanding SARs shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that no Freestanding SAR shall be
exercisable after the expiration of eight (8) years after the effective
date of grant of such SAR.

 

7.4           Exercise of SARs. 
Upon the exercise (or deemed exercise pursuant to Section 7.5) of
an SAR, the Participant (or the Participant’s legal representative or other
person who acquired the right to exercise the SAR by reason of the Participant’s
death) shall be entitled to receive payment of an amount for each share with
respect to which the SAR is exercised equal to the excess, if any, of the Fair
Market Value of a share of Stock on the date of exercise of the SAR over the
exercise price.  Payment of such amount
shall be made in cash, shares of Stock, or any combination thereof as
determined by the Committee.  Unless
otherwise provided in the Award Agreement evidencing such SAR, payment shall be
made in a lump sum as soon as practicable following the date of exercise of the
SAR.  The Award Agreement evidencing any
SAR may provide for deferred payment in a lump sum or in installments.  When payment is to be made in shares of
Stock, the number of shares to be issued shall be determined on the basis of
the Fair Market Value of a share of Stock on the date of exercise of the
SAR.  For purposes of Section 7, an
SAR shall be deemed exercised on the date on which the Company receives notice
of exercise from the Participant.

 

7.5           Deemed Exercise of SARs. 
If, on the date on which an SAR would otherwise terminate or expire, the
SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of
such SAR, then any portion of such SAR which has not previously been exercised
shall automatically be deemed to be exercised as of such date with respect to
such portion.

 

7.6           Effect of Termination of Service.  An SAR shall be exercisable after a
Participant’s termination of Service to such extent and during such period as
determined by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such SAR.

 

7.7           Nontransferability of SARs. 
SARs may not be assigned or transferred in any manner except by will or
the laws of descent and distribution, and, during the lifetime of the
Participant, shall be exercisable only by the Participant or the Participant’s
guardian or legal representative.

 

8.             TERMS AND CONDITIONS OF STOCK
AWARDS.

 

Stock Awards shall
be evidenced by Award Agreements specifying whether the Award is a Stock Bonus
or a Stock Purchase Right and the number of shares of Stock subject to the
Award, in such form as the Committee shall from time to time establish.  No Stock Award or

 

12

 

purported Stock Award shall be a valid and binding obligation of the
Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Stock Awards may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

 

8.1           Types of Stock Awards Authorized.  Stock Awards may be in the form of either a
Stock Bonus or a Stock Purchase Right. 
Stock Awards may be granted upon such conditions as the Committee shall
determine, including, without limitation, upon the attainment of one or more
Performance Goals described in Section 9.4.  If either the grant of a Stock Award or the
lapsing of the Restriction Period is to be contingent upon the attainment of
one or more Performance Goals, the Committee shall follow procedures
substantially equivalent to those set forth in Sections 9.3 through
9.5(a).

 

8.2           Purchase Price.  The purchase price for shares of Stock
issuable under each Stock Purchase Right shall be established by the Committee
in its discretion.  No monetary payment
(other than applicable tax withholding) shall be required as a condition of
receiving shares of Stock pursuant to a Stock Bonus, the consideration for
which shall be services actually rendered to a Participating Company or for its
benefit.  Notwithstanding the foregoing,
the Participant shall furnish consideration in the form of cash or past
services rendered to a Participating Company or for its benefit having a value
not less than the par value of the shares of Stock subject to such Stock Award.

 

8.3           Purchase Period.  A Stock Purchase Right shall be exercisable
within a period established by the Committee, which shall in no event exceed
thirty (30) days from the effective date of the grant of the Stock Purchase
Right; provided, however, that no Stock
Purchase Right granted to a prospective Employee may become exercisable prior
to the date on which such person commences Service.

 

8.4           Payment of Purchase Price.  Except
as otherwise provided below, payment of the purchase price for the number of
shares of Stock being purchased pursuant to any Stock Purchase Right shall be
made (i) in cash, by check, or cash equivalent, (ii) by such other
consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (iii) by any combination
thereof.  The Committee may at any time
or from time to time grant Stock Purchase Rights which do not permit all of the
foregoing forms of consideration to be used in payment of the purchase price or
which otherwise restrict one or more forms of consideration.  Stock Bonuses shall be issued in
consideration for past services actually rendered to a Participating Company or
for its benefit.

 

8.5           Vesting and Restrictions on Transfer.  Shares issued
pursuant to any Stock Award may or may not be made subject to vesting
conditioned upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 9.4 (the “Vesting Conditions”), as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award.  During any period (the “Restriction Period”) in which shares acquired
pursuant to a Stock Award remain subject to Vesting Conditions, such shares may
not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of
other than pursuant to a Change of Control as provided in Section 11, or
as provided in Section 8.8.  Upon
request by the Company,

 

13

 

each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

 

8.6           Voting Rights; Dividends and Distributions.  Except as provided in this Section, Section 8.5
and any Award Agreement, during the Restriction Period applicable to shares
subject to a Stock Award, the Participant shall have all of the rights of a
stockholder of the Company holding shares of Stock, including the right to vote
such shares and to receive all dividends and other distributions paid with
respect to such shares.  However, in the
event of a dividend or distribution paid in shares of Stock or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.2, then any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the
Participant is entitled by reason of the Participant’s Stock Award shall be
immediately subject to the same Vesting Conditions as the shares subject to the
Stock Award with respect to which such dividends or distributions were paid or
adjustments were made.

 

8.7           Effect of Termination of Service.  Unless otherwise
provided by the Committee in the grant of a Stock Award and set forth in the
Award Agreement, if a Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death or disability),
then (i) the Company shall have the option to repurchase for the purchase
price paid by the Participant any shares acquired by the Participant pursuant
to a Stock Purchase Right which remain subject to Vesting Conditions as of the
date of the Participant’s termination of Service and (ii) the Participant
shall forfeit to the Company any shares acquired by the Participant pursuant to
a Stock Bonus which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service. 
The Company shall have the right to assign at any time any repurchase
right it may have, whether or not such right is then exercisable, to one or
more persons as may be selected by the Company.

 

8.8           Nontransferability of Stock Award Rights.  Rights to acquire
shares of Stock pursuant to a Stock Award may not be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance or garnishment by creditors of the Participant or the Participant’s
beneficiary, except by will or the laws of descent and distribution, and,
during the lifetime of the Participant, shall be exercisable only by the
Participant or the Participant’s guardian or legal representative.

 

9.             TERMS AND CONDITIONS OF
PERFORMANCE AWARDS.

 

Performance Awards
shall be evidenced by Award Agreements in such form as the Committee shall from
time to time establish.  No Performance
Award or purported Performance Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Performance
Awards may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:

 

14

 

9.1           Types of Performance Awards
Authorized.  Performance
Awards may be in the form of either Performance Shares or Performance
Units.  Each Award Agreement evidencing a
Performance Award shall specify the number of Performance Shares or Performance
Units subject thereto, the Performance Award Formula, the Performance Goal(s) and
Performance Period applicable to the Award, and the other terms, conditions and
restrictions of the Award.

 

9.2           Initial
Value of Performance Shares and Performance Units.  Unless otherwise provided by the Committee in
granting a Performance Award, each Performance Share shall have an initial
value equal to the Fair Market Value of one (1) share of Stock, subject to
adjustment as provided in Section 4.2, on the effective date of grant of
the Performance Share, and each Performance Unit shall have an initial value of
one hundred dollars ($100).  The final
value payable to the Participant in settlement of a Performance Award
determined on the basis of the applicable Performance Award Formula will depend
on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.

 

9.3           Establishment
of Performance Period, Performance Goals and Performance Award Formula.  In granting each Performance Award, the
Committee shall establish in writing the applicable Performance Period,
Performance Award Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of
the Performance Award Formula the final value of the Performance Award to be
paid to the Participant.  Although
Performance Awards under the Plan will not qualify as performance-based
compensation for purposes of Section 162(m) because stockholders of
the Company have not approved certain provisions of the Plan as required by Section 162(m),
the Committee shall seek to comply with Section 162(m) with respect
to Performance Awards, except as otherwise provided herein.  Accordingly, unless otherwise permitted in
compliance with the requirements under Section 162(m) with respect to
“performance-based compensation,” the Committee shall establish the Performance
Goal(s) and Performance Award Formula applicable to each Performance Award
no later than the earlier of (a) the date ninety (90) days after the
commencement of the applicable Performance Period or (b) the date on which
25% of the Performance Period has elapsed, and, in any event, at a time when
the outcome of the Performance Goals remains substantially uncertain.  Once established, the Performance Goals and
Performance Award Formula shall not be changed during the Performance
Period.  The Company shall notify each Participant
granted a Performance Award of the terms of such Award, including the
Performance Period, Performance Goal(s) and Performance Award Formula.

 

9.4           Measurement
of Performance Goals. 
Performance Goals shall be established by the Committee on the basis of
targets to be attained (“Performance
Targets”) with respect to one or more measures of
business or financial performance (each, a “Performance
Measure”), subject to the following:

 

(a)           Performance Measures.  Performance Measures shall have the same
meanings as used in the Company’s financial statements, or, if such terms are
not used in the Company’s financial statements, they shall have the meaning
applied pursuant to generally accepted accounting principles, or as used
generally in the Company’s industry. 
Performance Measures shall be calculated with respect to the Company and
each Subsidiary Corporation consolidated therewith for financial reporting
purposes or such division or other business unit as

 

15

 

may be selected by the
Committee.  For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the Committee, occurring after the establishment of the Performance Goals
applicable to the Performance Award. 
Performance Measures may be one or more of the following, as determined
by the Committee:

 

(i)            growth
in revenue;

 

(ii)           growth in
the market price of the Stock;

 

(iii)          operating
margin;

 

(iv)          gross
margin;

 

(v)           operating
income;

 

(vi)          pre-tax
profit;

 

(vii)        earnings before interest, taxes and
depreciation;

 

(viii)       net income;

 

(ix)          total
return on shares of Stock relative to the increase in an appropriate index as
may be selected by the Committee;

 

(x)           earnings
per share;

 

(xi)          return
on stockholder equity;

 

(xii)         return on net assets;

 

(xiii)       expenses;

 

(xiv)        return
on capital;

 

(xv)         economic
value added;

 

(xvi)        market
share; and

 

(xvii)       cash
flow, as indicated by book earnings before interest, taxes, depreciation and
amortization.

 

(b)           Performance Targets.  Performance Targets may include a minimum,
maximum, target level and intermediate levels of performance, with the final
value of a Performance Award determined under the applicable Performance Award
Formula by the level attained during the applicable Performance Period.  A Performance Target may be stated as an
absolute value or as a value determined relative to a standard selected by the
Committee.

 

16

 

9.5           Settlement
of Performance Awards.

 

(a)           Determination of Final Value.  As soon as practicable following the
completion of the Performance Period applicable to a Performance Award, the
Committee shall certify in writing the extent to which the applicable
Performance Goals have been attained and the resulting final value of the Award
earned by the Participant and to be paid upon its settlement in accordance with
the applicable Performance Award Formula.

 

(b)           Discretionary Adjustment of Award
Formula.  In its
discretion, the Committee may, either at the time it grants a Performance Award
or at any time thereafter, provide for the positive or negative adjustment of
the Performance Award Formula applicable to a Performance Award granted to any
Participant who is not a “covered employee” within the meaning of Section 162(m) (a
“Covered
Employee”) to reflect such Participant’s individual
performance in his or her position with the Company or such other factors as
the Committee may determine.  If
permitted under a Covered Employee’s Award Agreement, the Committee shall have
the discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of the Performance Award that
would otherwise be paid to the Covered Employee upon its settlement
notwithstanding the attainment of any Performance Goal and the resulting value
of the Performance Award determined in accordance with the Performance Award
Formula.  No such reduction may result in
an increase in the amount payable upon settlement of another Participant’s
Performance Award.

 

(c)           Effect of Leaves of Absence.  Unless otherwise required by law, payment of
the final value, if any, of a Performance Award held by a Participant who has
taken in excess of thirty (30) days of leaves of absence during a Performance
Period shall be prorated on the basis of the number of days of the Participant’s
Service during the Performance Period during which the Participant was not on a
leave of absence.

 

(d)           Notice to Participants.  As soon as practicable following the
Committee’s determination and certification in accordance with
Sections 9.5(a) and (b), the Company shall notify each Participant of
the determination of the Committee.

 

(e)           Payment in Settlement of Performance Awards.  As soon as practicable following the
Committee’s determination and certification in accordance with
Sections 9.5(a) and (b), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s
death) of the final value of the Participant’s Performance Award.  Payment of such amount shall be made in cash,
shares of Stock, or a combination thereof as determined by the Committee.  Unless otherwise provided in the Award
Agreement evidencing a Performance Award, payment shall be made in a lump
sum.  An Award Agreement may provide for
deferred payment in a lump sum or in installments.  If any payment is to be made on a deferred
basis, the Committee may, but shall not be obligated to, provide for the
payment during the deferral period of Dividend Equivalents or interest.

 

17

 

(f)            Provisions Applicable to Payment in Shares.  If payment is to be made in shares of Stock,
the number of such shares shall be determined by dividing the final value of
the Performance Award by the value of a share of Stock determined by the method
specified in the Award Agreement.  Such
methods may include, without limitation, the closing market price on a
specified date (such as the settlement date) or an average of market prices
over a series of trading days.  Shares of
Stock issued in payment of any Performance Award may be fully vested and freely
transferable shares or may be shares of Stock subject to Vesting Conditions as
provided in Section 8.5.  Any shares
subject to Vesting Conditions shall be evidenced by an appropriate Award
Agreement and shall be subject to the provisions of Sections 8.5 through
8.8 above.

 

9.6           Dividend
Equivalents.  In its
discretion, the Committee may provide in the Award Agreement evidencing any
Performance Share Award that the Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Stock
having a record date prior to the date on which the Performance Shares are
settled or forfeited.  Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the Committee.  Settlement of Dividend Equivalents may be
made in cash, shares of Stock, or a combination thereof as determined by the
Committee, and may be paid on the same basis as settlement of the related
Performance Share as provided in Section 9.5.  Dividend Equivalents shall not be paid with
respect to Performance Units.

 

9.7           Effect of
Termination of Service.  The
effect of a Participant’s termination of Service on the Participant’s
Performance Award shall be as determined by the Committee, in its discretion,
and set forth in the Award Agreement evidencing such Performance Award.

 

9.8           Nontransferability
of Performance Awards.  Prior
to settlement in accordance with the provisions of the Plan, no Performance
Award may be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except by will or by the laws of
descent and distribution.  All rights
with respect to a Performance Award granted to a Participant hereunder shall be
exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

 

10.           STANDARD FORMS OF AWARD AGREEMENT.

 

10.1         Award
Agreements.  Each Award shall comply with and be subject
to the terms and conditions set forth in the appropriate form of Award
Agreement approved by the Committee and as amended from time to time.  Any Award Agreement may consist of an
appropriate form of Notice of Grant and a form of Agreement incorporated
therein by reference, or such other form or forms as the Committee may approve
from time to time.

 

10.2         Authority to
Vary Terms.  The Committee shall have the authority from
time to time to vary the terms of any standard form of Award Agreement either
in connection with the grant or amendment of an individual Award or in
connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such
new, revised or amended standard form or forms of Award Agreement are not
inconsistent with the terms of the Plan.

 

18

 

11.           CHANGE OF CONTROL.

 

11.1         Awards
Granted Prior to January 24, 2008.  The following provisions shall control for
Awards granted prior to January 24, 2008:

 

(a)   Except
as otherwise provided in a Participant’s Award Agreement:

 

(i)            An
“Ownership Change Event” shall be deemed to have occurred if
any of the following occurs with respect to the Company:  (i) the direct or indirect sale or
exchange by the stockholders of the Company of all or substantially all of the
voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) 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 subsidiaries of the Company); or (iv) a
liquidation or dissolution of the Company.

 

(ii)           A
“Change in Control” shall mean an Ownership Change Event or series of related
Ownership Change Events (collectively, a “Transaction”) in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of an Ownership
Change Event described in Section 11.1(a)(iii), the entity to which the
assets of the Company were transferred.

 

(b)   Effect of Change in Control on Options, SARs and Restricted Stock Units.  In the
event of a Change in Control, the surviving, continuing, successor, or
purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, either
assume the Company’s rights and obligations under outstanding Options, SARs and
Restricted Stock Units or substitute for outstanding Options, SARs and
Restricted Stock Units substantially equivalent equity awards for the Acquiror’s
stock.  In the event the Acquiror elects
not to assume or substitute for outstanding Options, SARs or Restricted Stock
Units in connection with a Change in Control, the Committee shall provide that
any unexercised and/or unvested portions of such outstanding Awards shall be
immediately exercisable and vested in full as of the date thirty (30) days
prior to the date of the Change in Control. 
The exercise and/or vesting of any Option, SAR or Restricted Stock Unit
that was permissible solely by reason of this paragraph shall be conditioned
upon the consummation of the Change in Control. 
Any Options, SARs or Restricted Stock Units which are not assumed or
replaced by the Acquiror in connection with the Change in Control nor exercised
as of the time of consummation of the Change in Control shall terminate and
cease to be outstanding effective as of the time of consummation of the Change
in Control.

 

(c)   Effect of Change in Control on Stock Awards.  The Committee may, in its discretion, provide
in any Award Agreement evidencing a Stock Award that, in the event of a Change
in Control, the lapsing of the Restriction Period applicable to the shares
subject to the Stock Award held by a Participant whose Service has not
terminated prior to such

 

19

 

date shall be accelerated
effective as of the date of the Change in Control to such extent as specified
in such Award Agreement.  Any
acceleration of the lapsing of the Restriction Period that was permissible
solely by reason of this Section 11.1(c) and the provisions of such
Award Agreement shall be conditioned upon the consummation of the Change in
Control.

 

(d)   Effect of Change in Control on Performance Awards.  The Committee may, in its discretion, provide
in any Award Agreement evidencing a Performance Award that, in the event of a
Change in Control, the Performance Award held by a Participant whose Service
has not terminated prior to such date shall become payable effective as of the
date of the Change in Control to such extent as specified in such Award
Agreement.

 

11.2         Awards
Granted On or After January 24, 2008.  The following provisions shall control for
Awards granted on or after January 24, 2008:

 

(a)   Except
as otherwise provided in a Participant’s Award Agreement, “Change
of Control” shall mean a change of control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or
not the Company is then subject to such reporting requirement; provided, however, that anything in this Plan to the
contrary notwithstanding, a Change of Control shall be deemed to have occurred
if:

 

(i)            any
individual, partnership, firm, corporation, association, trust, unincorporated
organization or other entity or person, or any syndicate or group deemed to be
a person under Section 14(d)(2) of the Exchange Act, is or becomes
the “beneficial owner” (as defined in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of the
Company’s then outstanding securities entitled to vote in the election of
directors of the Company;

 

(ii)           during
any period of two (2) consecutive years, individuals who at the beginning
of such period constituted the Board and any new directors, whose election by
the Board or nomination for election by the Company’s stockholders was approved
by a vote of at least three-fourths (3/4ths) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (the “Incumbent Directors”), cease for any
reason to constitute a majority thereof;

 

(iii)          there occurs a reorganization, merger,
consolidation or other corporate transaction involving the Company (a “Transaction”), in each case with
respect to which the stockholders of the Company immediately prior to such
Transaction do not, immediately after the Transaction, own securities
representing more than 50% of the combined voting power of the Company, a
parent of the Company or other corporation resulting from such Transaction
(counting, for this purpose, only those securities held by the Company’s
stockholders immediately after the Transaction that were received in exchange
for, or represent their continuing ownership of, securities of the Company held
by them immediately prior to the Transaction);

 

20

 

(iv)          all
or substantially all of the assets of the Company are sold, liquidated or
distributed; or

 

(v)           there
is a “Change of Control” or a “change in the effective control” of the Company
within the meaning of Section 280G of the Code and the regulations
promulgated thereunder.

 

(b)   The
Committee or the Board may, in its discretion, provide in any Award Agreement,
severance plan or other individual agreement, that, in the event of a Change of
Control of the Company, the Award held by a Participant shall become vested,
exercisable and/or payable to such extent as specified in such document.

 

(c)   In
the event of a Change of Control, the surviving, continuing, successor, or
purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, either
assume the Company’s rights and obligations under outstanding Awards or
substitute for outstanding Awards substantially equivalent equity awards for
the Acquiror’s stock.  In the event the
Acquiror elects not to assume or substitute for outstanding Awards in
connection with a Change of Control, any unexercised and/or unvested portions
of such outstanding Awards shall become immediately exercisable and vested in
full as of immediately prior to the effective date of the Change of
Control.  The exercise and/or vesting of
any Award that was permissible solely by reason of this paragraph 11.2 shall be
conditioned upon the consummation of the Change in Control.  Any Awards which are not assumed or replaced
by the Acquiror in connection with the Change of Control nor exercised as of
the time of consummation of the Change of Control shall terminate and cease to
be outstanding effective as of the time of consummation of the Change of
Control.

 

12.           COMPLIANCE WITH SECURITIES LAW.

 

The grant of
Awards and the issuance of shares of Stock pursuant to any Award shall be
subject to compliance with all applicable requirements of federal, state and
foreign law with respect to such securities and the requirements of any stock
exchange or market system upon which the Stock may then be listed.  In addition, no Award may be exercised or
shares issued pursuant to an Award unless (i) a registration statement
under the Securities Act shall at the time of such exercise or issuance be in
effect with respect to the shares issuable pursuant to the Award or (ii) in
the opinion of legal counsel to the Company, the shares issuable pursuant to
the Award may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act.  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 hereunder 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 issuance of any Stock, the Company may require the Participant 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.

 

21

 

13.           TAX WITHHOLDING.

 

13.1         Tax
Withholding in General.  The
Company shall have the right to deduct from any and all payments made under the
Plan, or to require the Participant, through payroll withholding, cash payment
or otherwise, including by means of a Cashless Exercise of an Option, to make
adequate provision for, the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to an Award or the shares acquired pursuant thereto.  The Company shall have no obligation to
deliver shares of Stock, to release shares of Stock from an escrow established
pursuant to an Award Agreement, or to make any payment in cash under the Plan
until the Participating Company Group’s tax withholding obligations have been
satisfied by the Participant.

 

13.2         Withholding
in Shares.  The Company shall
have the right, but not the obligation, to deduct from the shares of Stock
issuable to a Participant upon the exercise or settlement of an Award, or to
accept from the Participant the tender of, a number of whole shares of Stock
having a Fair Market Value, as determined by the Company, equal to all or any
part of the tax withholding obligations of the Participating Company
Group.  The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

 

14.           TERMINATION OR AMENDMENT OF PLAN.

 

The Committee may
terminate or amend the Plan at any time. 
However, without the approval of the Company’s stockholders, there shall
be (a) no increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Awards, and (c) 
no other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule; provided, however,
that the maximum aggregate number of shares of Stock that may be issued under
the Plan may be increased without stockholder approval in accordance with Rule 4350(i)(1)(A)(iii) of
the Nasdaq Qualitative Listing Requirements (or any other applicable rule of
the securities exchange on which shares of Stock are then trading) in
connection with business acquisitions by the Company following the Effective
Date.  No termination or amendment of the
Plan shall affect any then outstanding Award unless expressly provided by the
Committee.  In any event, no termination
or amendment of the Plan may adversely affect any then outstanding Award
without the consent of the Participant, unless such termination or amendment is
necessary to comply with any applicable law, regulation or rule.

 

15.           MISCELLANEOUS PROVISIONS.

 

15.1         Repurchase
Rights.  Shares issued under the Plan may be subject
to one or more repurchase options, or other conditions and restrictions as
determined by the Committee in its discretion at the time the Award is
granted.  The Company shall have the
right to assign at any time any repurchase right it may have, whether or not
such right is then exercisable, to one or more persons as may be selected by
the Company.  Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

 

22

 

15.2         Provision of
Information.  Each Participant
shall be given access to information concerning the Company equivalent to that
information generally made available to the Company’s common stockholders.

 

15.3         Rights as
Employee.  No person, even
though eligible pursuant to Section 5, shall have a right to be selected
as a Participant, or, having been so selected, to be selected again as a
Participant.  Nothing in the Plan or any
Award granted under the Plan shall confer on any Participant a right to remain
an Employee, or interfere with or limit in any way any right of a Participating
Company to terminate the Participant’s Service at any time.  To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan,
that Award can in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.

 

15.4         Rights as a
Stockholder.  A Participant
shall have no rights as a stockholder with respect to any shares covered by an
Award until the date of the issuance of such shares (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 shares are issued, except as provided in Section 4.2
or another provision of the Plan.

 

15.5         Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.

 

15.6         Beneficiary
Designation.  Subject to local
laws and procedures, each Participant may file with the Company a written
designation of a beneficiary who is to receive any benefit under the Plan to
which the Participant is entitled in the event of such Participant’s death
before he or she receives any or all of such benefit.  Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime.  If a married Participant designates a
beneficiary other than the Participant’s spouse, the effectiveness of such
designation may be subject to the consent of the Participant’s spouse.  If a Participant dies without an effective
designation of a beneficiary who is living at the time of the Participant’s
death, the Company will pay any remaining unpaid benefits to the Participant’s
legal representative.

 

15.7         Unfunded
Obligation.  Participants
shall have the status of general unsecured creditors of the Company.  Any amounts payable to Participants pursuant
to the Plan shall be unfunded and unsecured obligations for all purposes,
including, without limitation, Title I of the Employee Retirement Income
Security Act of 1974.  No Participating
Company shall be required to segregate any monies from its general funds, or to
create any trusts, or establish any special accounts with respect to such
obligations.  The Company shall retain at
all times beneficial ownership of any investments, including trust investments,
which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or

 

23

 

maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary
relationship between the Committee or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s creditors in any assets of any Participating
Company.  The Participants shall have no
claim against any Participating Company for any changes in the value of any
assets which may be invested or reinvested by the Company with respect to the
Plan.

 

15.8         Section 409A.
To the extent that the Committee determines that any Award granted under the
Plan is, or may reasonably be, subject to Section 409A of the Code
(together, with any state law of similar effect, “Section 409A”), the Award Agreement
evidencing such Award shall incorporate the terms and conditions necessary to
avoid the consequences described in Section 409A(a)(1) of the Code
(or any similar provision).  To the
extent applicable and permitted by law, the Plan and Award Agreements shall be
interpreted in accordance with Section 409A and Department of Treasury
regulations and other interpretive guidance issued thereunder, including
without limitation any such regulations or other guidance that may be issued or
amended after the date of grant of any Award hereunder.

 

Notwithstanding any
provision of the Plan to the contrary, in the event that the Committee determines that any Award is, or may
reasonably be, subject to Section 409A and related Department of Treasury
guidance (including such Department of Treasury guidance issued from time to
time), the Committee may,
without the Participant’s consent, adopt such amendments to the Plan and the
applicable Award Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other
actions, that the Committee determines
are necessary or appropriate to (A) exempt the Award from Section 409A
and/or preserve the intended tax treatment of the benefits provided with
respect to the Award, or (B) comply with the requirements of Section 409A
and related Department of Treasury guidance.

 

In addition, and except as
otherwise set forth in the applicable Award Agreement, if the Company
determines that any Award granted under this Plan constitutes, or may
reasonably constitute, “deferred compensation” under Section 409A and the
Participant is a “specified employee” of the Company at the relevant date, as
such term is defined in Section 409A(a)(2)(B)(i), then any payment or
benefit resulting from such Award will be delayed until the earliest date
following the Participant’s “separation from service” with the Participating
Company Group within the meaning of Section 409A on which the Company can
provide such payment or benefit to the Participant without the Participant’s
incurrence of any additional tax or interest pursuant to Section 409A,
with all payments or benefits due thereafter occurring in accordance with the
original schedule.  In addition, this
Plan and the benefits to be provided hereunder are intended to comply in all
respects with the applicable provisions of Section 409A.

 

Notwithstanding anything to
the contrary contained herein, neither the Company nor any of its Affiliates
shall be responsible for, or required to reimburse or otherwise make any
Participant whole for, any tax or penalty imposed on, or losses incurred by,
any Participant that arises in connection with the potential or actual
application of Section 409A to any Award granted hereunder.

 

24

 

IN WITNESS
WHEREOF, the undersigned Secretary of the Company certifies that the foregoing
Adobe Systems Incorporated Amended 2005 Equity Incentive Assumption Plan, as
amended, was duly adopted by the Executive Compensation Committee of the Board
of Directors of the Company on January 24, 2008.

 

 

	
   

  	
  /s/ Karen
  Cottle

  
	
   

  	
  Karen
  Cottle, Secretary

  

 

25Exhibit
10.24

 

ADOBE SYSTEMS INCORPORATED

NONSTATUTORY
STOCK OPTION AGREEMENT

(STANDARD
U.S.)

 

THIS NONSTATUTORY STOCK
OPTION AGREEMENT (the “Option
Agreement”) is made and entered into as of the Date of
Option Grant by and between Adobe Systems Incorporated and

 

%%FIRST_NAME%-%
%%LAST_NAME%-%                           (the “Participant”).  The Company has granted to the Participant
pursuant to the Adobe Systems Incorporated Adobe Systems Incorporated 2005
Equity Incentive Assumption Plan (the “Plan”)
an option to purchase certain shares of Stock (the “Option”),
upon the terms and conditions set forth in this Option Agreement, but subject
in any event to the Superseding Agreement, if any, described below.

 

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 %%OPTION_DATE,’Month DD, YYYY’%-%

 

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

 

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

 

(d)           “Initial Vesting Date”
means the date occurring one (1) year after the Date of Option Grant.

 

(e)           “Vested Shares”
means, on any relevant date, that portion (disregarding any fractional share)
of the Number of Option Shares determined by multiplying the Number of Option
Shares by the “Vested
Percentage” determined as of such date as follows:

 

	
   

  	
   

  	
  Vested Percentage

  	
   

  
	
  Prior to Initial
  Vesting Date

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On Initial
  Vesting Date, provided the Participant’s Service has not terminated prior to
  such date

  	
   

  	
  25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  For each of the
  next 36 full months of the Participant’s continuous Service from the Initial
  Vesting Date until the Vested Percentage equals 100%

  	
   

  	
  2.08

  	
  %

  

 

(f)            “Affiliate”
means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an
entity, other than a Subsidiary Corporation, that is controlled by the Company
directly, or indirectly through one or more intermediary entities.  For this purpose, the term “control”
(including the term “controlled by”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration in the United States (“U.S.”) on Form S-8
under the Securities Act.

 

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

 

 

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

 

(i)            “Committee” means the Executive Compensation
Committee or other committee of the Board duly appointed to administer the Plan
and having such powers as shall be specified by the Board.  If no committee of the Board has been
appointed to administer the Plan, the Board shall exercise all of the powers of
the Committee granted herein, and, in any event, the Board may in its
discretion exercise any or all of such powers.

 

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

 

(k)           “Consultant” means a person engaged to provide
consulting or advisory services (other than as an Employee or a member of the
Board) to a Participating Company, provided that the identity of such person,
the nature of such services or the entity to which such services are provided
would not preclude the Company from offering or selling securities to such
person pursuant to the Plan in reliance on registration on a Form S-8
Registration Statement under the Securities Act.

 

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

 

(m)          “Employee” means any person treated as an employee
(including an Officer or a member of the Board who is also treated as an
employee) in the records of a Participating Company; provided, however, that
neither service as a member of the Board nor payment of a director’s fee shall
be sufficient to constitute employment.

 

(n)           “Exchange Act” means the U.S. Securities Exchange Act
of 1934, as amended.

 

(o)           “Fair Market Value” means, as of any date, the value of a
share of Stock or other property as determined by the Committee, in its
discretion, or by the Company, in its discretion, if such determination is expressly
allocated to the Company herein, subject to the following:

 

(i)            If,
on such date, the Stock is listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be the
closing price of a share of Stock (or the mean of the closing bid and asked
prices of a share of Stock if the Stock is so quoted instead) as quoted on the
Nasdaq Global Select Market, the Nasdaq SmallCap Market or such other national
or regional securities exchange or market system constituting the primary
market for the Stock, as reported on www.Nasdaq.com
or such other source as the Company deems reliable.  If the relevant date does not fall on a day
on which the Stock has traded on such 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, or such other
appropriate day as shall be determined by the Committee, in its discretion.

 

If, on such date, the
Stock is not listed on a national or regional securities exchange or market
system, the Fair Market Value of a share of Stock shall be as determined by the
Committee in good faith without regard to any restriction other than a
restriction which, by its terms, will never lapse.

 

(p)           “Officer” means any person
designated by the Board as an officer of the Company.

 

(q)           “Option Expiration Date”
means the date seven (7) years after the Date of Option Grant.

 

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

 

2

 

(s)           “Participating Company” means the
Company or any Parent Corporation, Subsidiary Corporation or Affiliate.

 

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

 

(u)           “Securities Act” means the U.S. Securities Act of 1933,
as amended.

 

(v)           “Service” means the Participant’s employment or
service with the Participating Company Group as an Employee or a Consultant,
whichever such capacity the Participant held on the Date of Option Grant or, if
later, the date on which the Participant commenced Service.  The Participant’s Service shall be deemed to
have terminated if the Participant ceases to render Service to the
Participating Company Group in such initial capacity.  However, the Participant’s Service shall not
be deemed to have terminated merely because of a change in the Participating
Company for which the Participant renders Service in such initial capacity,
provided that there is no interruption or termination of the Participant’s
Service.  Furthermore, the Participant’s
Service with the Participating Company Group shall not be deemed to have
terminated if the Participant takes any bona fide leave of absence approved by
the Company of ninety (90) days or less. 
In the event of a leave in excess of ninety (90) days, the Participant’s
Service shall be deemed to terminate on the ninety-first (91st) day of the
leave unless the Participant’s right to return to Service with the
Participating Company Group is guaranteed by statute or contract.  Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence
shall not be treated as Service for purposes of determining vesting under the
Participant’s Option Agreement.  The
Participant’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Participant
performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in its
discretion, shall determine whether the Participant’s Service has terminated
and the effective date of such termination.

 

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

 

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

 

(y)           “Superseding Agreement” means
the Adobe Systems Incorporated Executive Severance Plan in the Event of a
Change of Control and/or the individual written retention agreement in effect
on the Date of Option Grant between the Company and the Participant, to the
extent applicable to the Participant.

 

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 and the plural
shall include the singular.  Use of the
term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

 

2.             TAX
STATUS OF 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
Committee.  All determinations by the
Committee shall be final and binding upon all persons having an interest in the
Option.  Any Officer 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.

 

3

 

4.             EXERCISE OF THE OPTION.

 

4.1           Right to Exercise.  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 7) in an amount not
to exceed the number of Vested Shares 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.

 

4.2           Method of Exercise.  Exercise of the Option shall be by means of
electronic notice in a form authorized by the Company, which shall be digitally
signed or authenticated by the Participant in such manner as required by the
notice and transmitted to the Equity Compensation Department of the Company or
other authorized representative of the Company (including a third-party administrator
designated by the Company).  In the event
that the Participant is not authorized or is unable to provide electronic
notice of exercise, the Option shall be exercised by written notice to the
Company, which shall be signed by the Participant and 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 Equity
Compensation Department of the Company, or other authorized representative of
the Company (including a third-party administrator designated by the
Company).  Each such notice, whether
electronic or written, must state the Participant’s 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 Participant’s
investment intent with respect to such shares as may be required pursuant to
the provisions of this Option Agreement. 
Further, each such notice must be received by the Company prior to the
termination of the Option as set forth in Section 7 and must be
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
electronic or 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 by cash
equivalent or (ii) by means of a Cashless Exercise, as defined in Section 4.3(b).

 

(b)           Cashless Exercise.  A “Cashless Exercise”
means the delivery of a properly executed notice of exercise together with
irrevocable instructions to a broker in a form acceptable to the Company
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the shares being 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 establish, decline to approve or terminate any
such program or procedure, including with respect to the Participant
notwithstanding that such program or procedures may be available to others.

 

4.4           Tax Withholding.  Regardless of any action taken by the
Participating Company Group with respect to any or all income tax, social
insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”),
the Participant acknowledges that the ultimate liability for all Tax-Related
Items legally due by the Participant is and remains the Participant’s
responsibility and 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 the Option, including the grant, vesting or exercise of the
Option, the subsequent sale of shares acquired pursuant to such exercise, or
the receipt of any dividends and (ii) does not commit to structure the
terms of the grant or any other aspect of the Option to reduce or eliminate the
Participant’s liability for Tax-Related Items. 
At the time of exercise of the Option, the Participant shall pay or make
adequate arrangements satisfactory to the Participating Company Group to
satisfy all withholding obligations of the Participating Company Group.  In this regard, at the time the Option is
exercised, in whole or in part, or at any other time as reasonably requested by
the Company, the Participant hereby authorizes withholding of all applicable
Tax-Related Items from payroll and any other amounts payable to the
Participant, and otherwise agrees to make adequate provision for withholding of
all applicable Tax Related Items by the Participating Company Group, if any,
which arise in connection with the Option. 
Alternatively, or in addition, if permissible under applicable law, the
Participating Company Group may 

 

4

 

(i) sell or
arrange for the sale of shares acquired by the Participant to meet the
withholding obligation of Tax-Related Items and/or (ii) withhold in
shares, provided that only the amount of shares necessary to satisfy the
minimum withholding amount are withheld. 
Finally, the Participant shall pay to the Participating Company Group
any amount of the Tax-Related Items that the Participating Company Group may be
required to withhold as a result of the Participant’s participation in the Plan
that cannot be satisfied by the means previously described.  The Company shall have no obligation to
process the exercise of the Option or to deliver shares of Stock until the
obligations in connection with the Tax-Related Items as described in this
section have been satisfied by the Participant.

 

4.5           Beneficial Ownership of Shares; Certificate Registration.  The
Participant hereby authorizes the Company, in its sole discretion, to deposit
for the benefit of the Participant with any broker with which the Participant
has an account relationship of which the Company has notice any or all shares
acquired by the Participant pursuant to the exercise of the Option.  Except as provided by the preceding sentence,
a certificate for the shares as to which the Option is exercised shall be
registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

 

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 (i) 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
(ii) 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 PARTICIPANT IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED.  ACCORDINGLY, THE PARTICIPANT 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 Participant 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 Participant only by the Participant or the
Participant’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
Participant, the Option, to the extent provided in Section 8, may be
exercised by the Participant’s legal representative or by any person empowered
to do so under the deceased Participant’s will or under the then applicable
laws of descent and distribution.

 

6.             NATURE OF OPTION.

 

In accepting the Option,
the Participant acknowledges that:

 

6.1           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, unless otherwise provided in the Plan
and this Option Agreement;

 

5

 

6.2           the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future
grants of Options, or benefits in lieu of Options, even if Options have been
granted repeatedly in the past;

 

6.3           all decisions with respect to future Option grants, if any, will be at the sole discretion of
the Company;

 

6.4           the Participant’s participation in the Plan shall not create a right to further employment with the
Participating Company Group and shall
not interfere with any ability of the Participating Company Group to terminate
the Participant’s employment relationship at any time with or without cause;

 

6.5           the Participant is voluntarily participating in the Plan;

 

6.6           the Option is not part of normal or expected
compensation or salary for any purpose, including, but not limited to,
calculating any severance, resignation, termination, redundancy,
end-of-service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments;

 

6.7           in the event that the Participant is not an employee
of the Company, the Option grant will not be interpreted to form an employment
contract or relationship with the
Company; and furthermore, the Option grant will not be interpreted to form an
employment contract with the other members of the Participating Company Group;

 

6.8           the future value of the underlying shares is unknown
and cannot be predicted with certainty;

 

6.9           if the underlying shares do not increase in value,
the Option will have no value;

 

6.10         if the Participant exercises the Option and obtains
shares, the value of those shares acquired upon exercise may increase or
decrease in value, even below the Option price; and

 

6.11         in
consideration of the grant of the Option, no
claim or entitlement to compensation or damages arises from termination of the
Option or diminution in value of the Option or shares purchased through
exercise of the Option resulting from termination of the Participant’s Service
with the Participating Company Group (for any reason whether or not in breach
of applicable labor laws) and the Participant irrevocably releases the
Participating Company Group from any such claim that may arise.  If, notwithstanding the foregoing, any such
claim is found by a court of competent jurisdiction to have arisen then, by
signing this Option Agreement, the Participant shall be deemed irrevocably to
have waived his or her entitlement to pursue such a claim.

 

7.             TERMINATION OF THE OPTION.

 

The Option shall
terminate and may no longer be exercised after the first to occur of (a) the
Option Expiration Date, (b) the last date for exercising the Option
following termination of the Participant’s Service as described in Section 8,
or (c) a Change of Control to the extent provided in Section 11.2(c) of
the Plan.

 

8.             EFFECT OF TERMINATION OF SERVICE.

 

8.1           Option Exercisability.

 

(a)           Normal Retirement.  If
the Participant’s Service terminates at or after the normal retirement age
sixty-five (65) years (“Normal
Retirement”),
then (i) the Option, to the extent unexercised and exercisable on the date
on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of twelve (12) months after the
date on which the Participant’s Service terminated, but in any event no later
than the Option Expiration Date, and (ii) solely for the purpose of
computing the Vested Percentage, the Participant will be given credit for an
additional twelve (12) months of continuous Service; provided, however, that in
no event shall the Vested Percentage exceed 100%.

 

6

 

(b)           Early Retirement.  If
the Participant’s Service terminates by reason of the early retirement of the
Participant pursuant to an early retirement program established by the
Participating Company to which the Participant renders Service (“Early Retirement”),
then (i) the Option, to the extent unexercised and exercisable on the date
on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months (or
such longer period as shall be established pursuant to such early retirement
program) after the date on which the Participant’s Service terminated, but in
any event no later than the Option Expiration Date, and (ii) solely for
the purpose of computing the Vested Percentage, the Participant will be given
credit for such additional months of continuous Service, if any, as shall be
established pursuant to the early retirement program; provided, however, that
in no event shall the Vested Percentage exceed 100%.

 

(c)           Disability.  If the Participant’s Service terminates
because of the Disability of the Participant, then (i) the Option, to the
extent unexercised and exercisable on the date on which the Participant’s
Service terminated, may be exercised by the Participant (or the Participant’s
guardian or legal representative) at any time prior to the expiration of twelve
(12) months after the date on which the Participant’s Service terminated, but
in any event no later than the Option Expiration Date, and (ii) solely for
the purpose of computing the Vested Percentage, the Participant will be given
credit for an additional twelve (12) months of continuous Service; provided,
however, that in no event shall the Vested Percentage exceed 100%.

 

(d)           Death.  If the Participant’s Service terminates
because of the death of the Participant, then (i) the Option, to the
extent unexercised and exercisable on the date on which the Participant’s
Service terminated, may be exercised by the Participant’s legal representative
or other person who acquired the right to exercise the Option by reason of the
Participant’s death at any time prior to the expiration of twelve (12) months
after the date on which the Participant’s Service terminated, but in any event
no later than the Option Expiration Date, and (ii) solely for the purpose
of computing the Vested Percentage, the Participant will be given credit for an
additional twelve (12) months of continuous Service; provided, however, that in
no event shall the Vested Percentage exceed 100%.  The Participant’s Service shall be deemed to
have terminated on account of death if the Participant dies within three (3) months
after the Participant’s termination of Service.

 

(e)           Other Termination of Service.  If the Participant’s Service terminates for
any reason, except Normal Retirement, Early Retirement, Disability, or death,
the Option, to the extent unexercised and exercisable by the Participant on the
date on which the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months (or
such other longer period of time as determined by the Committee, in its
discretion) after the date on which the Participant’s Service terminated, but
in any event no later than the Option Expiration Date.

 

8.2           Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the
exercise of the Option within the applicable time periods set forth in Section 8.1
is prevented by the provisions of Section 4.6, the Option shall remain
exercisable until three (3) months after the date the Participant is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

 

8.3           Extension if Participant Subject to Section 16(b). 
Notwithstanding the foregoing, if a sale within the applicable time
periods set forth in Section 8.1 of shares acquired upon the exercise of
the Option would subject the Participant to suit under Section 16(b) of
the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of
such shares by the Participant would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Participant’s termination of
Service, or (iii) the Option Expiration Date.

 

8.4           Termination for Cause. 
Notwithstanding any other provision of this Option Agreement, if the
Participant’s Service is terminated for Cause, the Option shall terminate and
cease to be exercisable on the effective date of such termination of Service. “Cause” shall mean any of the
following: (i) the Participant’s conviction of a felony; (ii) the
Participant’s material act of fraud, dishonesty or other malfeasance; or (iii) the
Participant’s willful, improper disclosure of a Participating Company’s
confidential or proprietary information.

 

7

 

9.             ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

 

In
the event of any change in the Stock through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Stock
(excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate adjustments shall be made in the number,
Exercise Price and class of shares 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 an Ownership
Change Event) shares of another corporation (the “New Shares”), the Committee 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 Committee, in its 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. The adjustments determined by the Committee pursuant to
this Section 9 shall be final, binding and conclusive.

 

10.           RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.

 

The
Participant shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of 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 shares are issued, except as provided in Section 9.  If the Participant is an Employee, the
Participant understands and acknowledges that, except as otherwise provided in
a separate, written employment agreement between a Participating Company and
the Participant, the Participant’s employment is “at will” and is for no
specified term.  Nothing in this Option
Agreement shall confer upon the Participant any right to continue in the
Service of a Participating Company or interfere in any way with any right of
the Participating Company Group to terminate the Participant’s Service as an
Employee or Consultant, as the case may be, at any time.

 

11.           MISCELLANEOUS PROVISIONS.

 

11.1         Designation of Beneficiary.  Subject to local laws and procedures, the
Participant may file with the Company a written designation of a beneficiary
who, in the event of the death of the Participant, shall thereafter be entitled
to exercise the Option to the extent that it remains exercisable in accordance
with this Option Agreement.  Each
designation will revoke all prior designations by the Participant, shall be in
a form prescribed by the Company, and shall be effective only when filed by the
Participant in writing with the Company during the Participant’s lifetime.  If the Participant is married and designates
a beneficiary other than the Participant’s spouse, the effectiveness of such
designation may be subject to the consent of the Participant’s spouse.  If the Participant dies without an effective
designation of a beneficiary who is living at the time of the Participant’s
death, the Option may be exercised by the Participant’s legal representative to
the extent that it remains exercisable in accordance with this Option
Agreement.  If the designated beneficiary
survives the Participant but dies before exercising the Option to the full
extent that it remains exercisable in accordance with this Option Agreement,
then the Option shall be exercisable by the legal representative of such
deceased designated beneficiary to the extent that it remains exercisable in
accordance with this Option Agreement. 
The determination of the Company as to which person, if any, qualifies
as a designated beneficiary shall be final, conclusive and binding on all
persons.

 

11.2         Binding Effect.  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.

 

11.3         Termination or Amendment. 
The Committee may terminate or amend the Plan or the Option at any time;
provided, however, that except as provided in connection with a Change of
Control, no such termination or amendment may adversely affect the Option or
any unexercised portion hereof without the consent of the Participant unless
such termination or amendment is necessary to comply with any applicable law or
government regulation.  No amendment or
addition to this Option Agreement shall be effective unless in writing.

 

8

 

11.4         Delivery of Documents and Notices.  Any document relating to participating in the
Plan and/or notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Option
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, addressed to the other party at the e-mail address, if any,
provided for the Participant by a Participating Company or at the address shown
below that party’s signature to this Option Agreement 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
documents, which may include but do not necessarily include: the Plan
Prospectus, this Option Agreement and U.S. financial reports of the Company,
may be delivered to the Participant electronically.  In addition, the Participant may deliver
electronically the notice called for by Section 4.2 (the “Notice of
Exercise”) to the Company or to such third party involved in administering the
Plan as the Company may designate from time to time.  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.  The
Participant acknowledges that the Participant has read Section 11.4 of
this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Notice of Exercise, as described in Section 11.4(a) of
this Option Agreement.  The Participant
acknowledges that he or she may receive from the Company a paper copy of any
documents delivered electronically at no cost if the Participant contacts the
Company by telephone, through a postal service or electronic mail at
equity@adobe.com.  The Participant
further acknowledges that the Participant will be provided with a paper copy of
any documents delivered electronically if electronic delivery fails; similarly,
the Participant understands that the
Participant must provide the Company or any designated third party with a paper
copy of any documents delivered electronically if electronic delivery
fails.  Also, the Participant understands
that the Participant’s consent may be revoked or changed, including any change
in the electronic mail address to which documents are delivered (if Participant
has 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 equity@adobe.com.  Finally, the
Participant understands that he or she is not required to consent to electronic
delivery.

 

11.5         Data Privacy Consent.  The Participant hereby
explicitly and unambiguously consents to the collection, use and transfer, in
electronic or other form, of the Participant’s personal data as described in
this document by and among the members of the Participating Company Group for
the exclusive purpose of implementing, administering and managing the
Participant’s participation in the Plan.

 

The Participant
understands that the Company and the Participating Company Group hold certain
personal information about the Participant, including, but not limited to, the
Participant’s 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
Options or any other entitlement to shares of Stock awarded, canceled,
exercised, vested, unvested or outstanding in the Participant’s favor, for the
purpose of implementing, administering and managing the Plan (“Data”).  The Participant understands that Data may be
transferred to any third parties assisting in the implementation,
administration and management of the Plan, that these recipients may be located
in the Participant’s country or elsewhere, and that the recipient’s country may
have different data privacy laws and protections than the Participant’s
country.  The Participant understands
that he or she may request a list with the names and addresses of any potential
recipients of the Data by contacting the Participant’s local human resources
representative.  The Participant
authorizes the recipients to receive, possess, use, retain and transfer the
Data, in electronic or other form, for the purposes of implementing,
administering and managing the Participant’s participation in the Plan, including
any requisite transfer of such Data as may be required to a broker or other
third party with whom the Participant may elect to deposit any shares of Stock
acquired upon exercise of the Option. 
The Participant understands that Data
will be held only as long as is necessary to implement, administer and manage
the Participant’s participation in the Plan. 
The Participant understands that he or she 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 the Participant’s local human
resources representative.  The
Participant understands, however, that refusing or withdrawing the Participant’s
consent may affect the Participant’s ability to participate in the Plan.  For more information on the consequences of
the Participant’s refusal to consent or withdrawal of consent, the Participant
understands that he or she may contact the Participant’s local human resources
representative.

 

9

 

11.6         Headings.  The
headings of the Sections in this Option Agreement are inserted for convenience
only and shall not be deemed to constitute a part of this Option Agreement or
to affect the meaning of this Option Agreement.

 

11.7         Integrated Agreement. 
This Option Agreement, together with the Superseding Agreement, if any,
and the Plan constitutes the entire understanding and agreement of the Participant
and the Participating Company Group with respect to the subject matter
contained herein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Participant 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. Any capitalized terms not defined herein shall have the
definition as set forth in the Plan and/or the Superseding Agreement. In the
event of any conflict between the provisions of this Option Agreement and those
of the Plan, the provisions of the Plan shall control.

 

11.8         Applicable Law and Venue. 
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. For purposes
of litigating any dispute that arises directly or indirectly from the
relationship of the parties as evidenced by this Option Agreement, the parties
herby submit to and consent to the jurisdiction of the State of California and
agree that such litigation shall be conducted only in the courts 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 Option Agreement is
made and/or performed.

 

 

	
   

  	
  ADOBE SYSTEMS INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shantanu Narayen

  
	
   

  	
   

  	
  Shantanu Narayen

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  345 Park Avenue

  
	
   

  	
   

  	
  San Jose, CA 95110-2704

  
	
   

  	
   

  	
   

  

 

The Participant
represents that the Participant 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 Participant
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under this Option
Agreement.

 

10

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