UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)

Filed by the Registrantýx

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Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials
o¨Soliciting Material under §240.14a-12


Adobe Systems Incorporated
(Name of Registrant as Specified In Its Charter)

 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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 (2)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.



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PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION

LOGO



Adobe Systems Incorporated
345 Park Avenue
San Jose, California 95110-2704

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 21, 2011

11, 2013

Dear Stockholders:

You are cordially invited to attend our 20112013 Annual Meeting of Stockholders to be held on Thursday, April 21, 201111, 2013 at 9:00 a.m. local time at our East Tower building located at 321 Park Avenue, San Jose, California 95110. We are holding the meeting to:

1.Elect thirteen members of our Board of Directors named herein to serve for a one-year term;
2.Approve an amended and restated 2003 Equity Incentive Plan, which includes an increase to the available share reserve of 17.5 million shares, an increase of the aggregate stock award and performance share limits, approval of new performance measures and an adjustment, and certain other modifications as described herein;
3.Ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year ending on November 29, 2013;
4.Approve, on an advisory basis, the compensation of our named executive officers; and
5.Transact any other business that may properly come before the meeting.
If you owned our common stock at the close of business on February 25, 2011,14, 2013, you may attend and vote at the meeting. A list of stockholders eligible to vote at the meeting will be available for review during our regular business hours at our headquarters in San Jose, California for the ten days prior to the meeting for any purpose related to the meeting.

We are pleased to continue to take advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders over the Internet.internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the "Notice"“Notice”) instead of a paper copy of this proxy statement and our 20102012 Annual Report. We believe that this process allows us to provide our stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. The Notice contains instructions on how to access those documents over the Internet.internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our 20102012 Annual Report and a form of proxy card or voting instruction card. All stockholders who have previously requested a paper copy of our proxy materials will continue to receive a paper copy of the proxy materials by mail.


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Your vote is important. Whether or not you plan to attend the meeting, Iwe hope that you will vote as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet.internet. If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card by completing, signing, dating and mailing your proxy card or voting instruction card in the envelope provided. Any stockholder attending the meeting may vote in person, even if you have already returned a proxy card or voting instruction card.

 Sincerely,
 SIGNATURE
 Karen Cottle
Michael Dillon
Senior Vice President, General Counsel &
Corporate Secretary

March 10, 2011
1, 2013
San Jose, California



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ADOBE SYSTEMS INCORPORATED

Proxy Statement
for the
Annual Meeting of Stockholders
To Be Held April 21, 2011

11, 2013

TABLE OF CONTENTS


Page

Information Concerning Solicitation and Voting

1

Questions and Answers

1

Proposal 1—Election of Directors

65

Proposal 2—Approval of the Amendment of the 1997 Employee Stock PurchaseAmended and Restated Adobe Systems Incorporated 2003 Equity Incentive Plan

1918

Proposal 3—Approval of the Adoption of the 2011 Executive Cash Performance Bonus Plan

23

Proposal 4—Ratification of Appointment of Independent Registered Public Accounting Firm

2732

Principal Accounting Fees and Services

2833

Audit Committee Pre-Approval of Services Performed by Our Independent Registered Public Accounting Firm

2833

Report of the Audit Committee

2934

Proposal 5—Amendment to Adobe's Restated Certificate of Incorporation to Eliminate our Classified Board Structure

30

Proposal 6—4—Advisory Vote on Executive Compensation

3235

Proposal 7—Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation

Corporate Governance
3540

Corporate Governance

36

Security Ownership of Certain Beneficial Owners and Management

3741

Section 16(a) Beneficial Ownership Reporting Compliance

3944

Equity Compensation Plan Information

4045

Compensation Discussion and Analysis

4348

Report of the Executive Compensation Committee

6770

Executive Compensation

6871

Summary Compensation Table

6871

Grants of Plan-Based Awards forin Fiscal Year 2010

2012
7073

Outstanding Equity Awards at 20102012 Fiscal Year End

7376

Option Exercises and Stock Vested in Fiscal Year 2010

2012
7680

Nonqualified Deferred Compensation

7680

Change of Control and Termination

7780

Director Compensation

8286

Compensation Committee Interlocks and Insider Participation

8691

Transactions with Related Persons

8691

Householding of Proxy Materials

8691

Annual Report

8792

Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on April 21, 2011

11, 2013
8792

Stockholder Proposals to be Presented at Next Annual Meeting

8893




i


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____________________
ADOBE SYSTEMS INCORPORATED


____________________
PROXY STATEMENT


____________________

INFORMATION CONCERNING SOLICITATION AND VOTING

Our Board of Directors (the "Board"“Board”) is soliciting proxies for our 20112013 Annual Meeting of Stockholders (the "2011“2013 Annual Meeting"Meeting”) to be held on Thursday, April 21, 201111, 2013, at 9:00 a.m. local time at our East Tower building located at 321 Park Avenue, San Jose, California 95110. Our principal executive offices are located at 345 Park Avenue, San Jose, California 95110, and our telephone number is (408) 536-6000.

The proxy materials, including this proxy statement, proxy card or voting instruction card and our 20102012 Annual Report, are being distributed and made available on or about March 10, 2011.1, 2013. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"“SEC”), we have elected to provide our stockholders access to our proxy materials over the Internet.internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the "Notice"“Notice”) will be mailed on or about March 10, 20111, 2013 to most of our stockholders who owned our common stock at the close of business on the record date, February 25, 2011.14, 2013. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them by following the instructions in the Notice.

The Notice will also provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.

Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.

We will bear the expense of soliciting proxies. In addition to these proxy materials, our directors and employees (who will receive no compensation in addition to their regular salaries) may solicit proxies in person, by telephone or email. We have also retained Innisfree M&A Incorporated to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Innisfree a fee of $12,500 for its services and will reimburse Innisfree for reasonable out-of-pocket expenses, estimated at $5,000.$20,000. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.


QUESTIONS AND ANSWERS

Q:Who may vote at the meeting?

A:
A:
Our Board set February 25, 201114, 2013 as the record date for the meeting. If you owned our common stock at the close of business on February 25, 2011,14, 2013, you may attend and vote at the meeting. Each stockholder is entitled to one vote for each share of common stock held on all matters to be voted on. As of February 25, 2011,14, 2013, there were 506,112,690501,548,019 shares of our common stock outstanding and entitled to vote at the meeting.

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Q:

What is the quorum requirement for the meeting?

A:
A:
A majority of our outstanding shares entitled to vote as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum.



Your shares will be counted as present at the meeting if you:



•

you are present and entitled to vote and you:
•are present in person at the meeting; or


•
•

have properly submitted a proxy card or voting instruction card, or voted by telephone or over the Internet.internet.



Both abstentions and broker non-votes (as described below) are counted for the purpose of determining the presence of a quorum.



Each proposal identifies the votes needed to approve or ratify the proposed action.


Q:

Q:

What proposals will be voted on at the meeting?

A:
A:
There are sevenfour proposals scheduled to be voted on at the meeting:



•

•
Election of the four Class IIthirteen members of our Board named herein to serve for a two-yearone-year term;



•

•
Approval of the amendment of the 1997 Employee Stock Purchase Plan to increase the share reserve by 17 million shares;amended and restated 2003 Equity Incentive Plan;



•

Approval of the adoption of the 2011 Executive Cash Performance Bonus Plan;


•
•

Ratification of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 2, 2011;November 29, 2013; and



•

•
Approval, on an advisory basis, of the Certificatecompensation of Amendment to the Adobe Systems Incorporated Restated Certificate of Incorporation to eliminate our classified Board structure;named executive officers.



•

Approve an advisory resolution on executive compensation; and



•

Hold an advisory vote on the frequency of the advisory vote on executive compensation.



We will also consider any other business that properly comes before the meeting. As of the record date, we are not aware of any other matters to be submitted for consideration at the meeting. If any other matters are properly brought before the meeting, the persons named in the enclosed proxy card or voter instruction card will vote the shares they represent using their best judgment.

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Q:
Q:
Why did I receive a Notice in the mail regarding the Internetinternet availability of proxy materials this year instead of a full set of proxy materials?

A:
A:
We are pleased to continue to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet.internet. Accordingly, we have sent to most of our stockholders of record and beneficial owners a Notice regarding Internetinternet availability of proxy materials. Instructions on how to access the proxy materials over the Internetinternet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically on an ongoing basis. A stockholder'sstockholder’s election to receive proxy materials by mail or electronically by email will remain in effect until the stockholder terminates such election.


Q:

Q:

Why did I receive a full set of proxy materials in the mail instead of a Notice regarding the Internetinternet availability of proxy materials?

A:
A:
We are providing stockholders who have previously requested to receive paper copies of the proxy materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future proxy materials electronically via email or the Internet.internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card, to vote using the Internetinternet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. Alternatively, you can go tohttps://www.icsdelivery.com/adobe/index.html and enroll for online delivery of annual meeting and proxy voting materials.

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Q:



Q:How can I get electronic access to the proxy materials?


A:

A:

You can view the proxy materials on the Internetinternet atwww.proxyvote.com. Please have your 12 digit control number available. Your 12 digit control number can be found on your Notice. If you received a paper copy of your proxy materials, your 12 digit control number can be found on your proxy card or voting instruction card.



Our proxy materials are also available on our Investor Relations website atwww.adobe.com/aboutadobe/invrelationsadbe.


Q:

Q:

Can I vote my shares by filling out and returning the Notice?


A:

A:

No. The Notice will, however, provide instructions on how to vote by Internet,internet, by telephone, by requesting and returning a paper proxy card or voting instruction card, or by submitting a ballot in person at the meeting.


Q:

Q:

How may I vote my shares in person at the meeting?


A:

A:

If your shares are registered directly in your name with our transfer agent, Computershare Investor Services LLC, you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are also invited to attend the meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a "legal proxy"“legal proxy” from your broker, nominee, or trustee that holds your shares, giving you the right to vote the shares at the meeting. The meeting will be held at our East Tower building located at 321 Park Avenue, San Jose, California 95110. If you need directions to the meeting, please visithttp://www.adobe.com/aboutadobe/maps/sj_map.html.

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Q:
Q:
How can I vote my shares without attending the meeting?

A:
A:
Whether you hold shares directly as a registered stockholder of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your stockbroker, trustee or nominee. In most cases, you will be able to do this by telephone, by using the Internetinternet or by mail if you received a printed set of the proxy materials.



By Telephone or InternetInternet.  - If you have telephone or Internetinternet access, you may submit your proxy by following the instructions provided in the Notice, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card.



By MailMail.  - If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your stockbroker, trustee or nominee, and mailing it in the enclosed envelope. If you provide specific voting instructions, your shares will be voted as you have instructed.

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Q:



Q:What happens if I do not give specific voting instructions?

A:
A:
Registered Stockholder of Record. If you are a registered stockholder of record and you indicate when voting on the Internetinternet or by telephone that you wish to vote as recommended by the Board, or sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the meeting.



Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of the New York Stock Exchange, the organization that holds your shares may generally vote at its discretion on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a "broker“broker non-vote."” In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal except Proposal 5. For Proposal 5, broker non-votes will have the same effect as an "Against" vote.proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting, except Proposal 5, assuming that a quorum is obtained.

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Q.
Q.
Which ballot measures are considered "routine"“routine” or "non-routine?"“non-routine?”

A.
A.
The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 2, 2011November 29, 2013 (Proposal 4)3), is considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 4.3. The election of directors (Proposal 1), the amendment of the 1997 Employee Stock Purchase2003 Equity Incentive Plan (Proposal 2), the adoption of the 2011 Executive Cash Performance Bonus Plan (Proposal 3), the approval of the Certificate of Amendment to the Adobe Systems Incorporated Restated Certificate of Incorporation (Proposal 5), and the advisory vote on executive compensation (Proposal 6) and the advisory vote on the frequency of the advisory vote on executive compensation (Proposal 7)4) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and, therefore, there may be broker non-votes on Proposals 1, 2 3, 5, 6 and 7.4.


Q:

Q:

How can I revoke my proxy and change my vote after I return my proxy card?

A:
A:
You may revoke your proxy and change your vote at any time before the final vote at the meeting. If you are a stockholder of record, you may do this by signing and submitting a new proxy card with a later date; by voting by telephone or by using the Internet,internet, either of which must be completed by 11:59 p.m. Eastern Time on April 20, 201110, 2013 (your latest telephone or Internetinternet proxy is counted); or by attending the meeting and voting in person. Attending the meeting alone will not revoke your proxy unless you specifically request your proxy to be revoked. If you hold shares through a bank or brokerage firm, you must contact that bank or firm directly to revoke any prior voting instructions.


Q:

Q:

Where can I find the voting results of the meeting?

A:
A:
The preliminary voting results will be announced at the meeting. The final voting results will be reported in a current report on Form 8-K, which will be filed with the SEC within four business days after the meeting. If our final voting results are not available within four business days after the meeting, we will file a current report on Form 8-K reporting the preliminary voting results and subsequently file the final voting results in an amendment to the current report on Form 8-K within four business days after the final voting results are known to us.


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PROPOSAL 1
ELECTION OF DIRECTORS

We currently have 10thirteen members of our Board, which is divided into two classes (Class I and Class II) with alternating two-year terms. Carol Mills, a Class II director, has elected not to stand for re-election. Immediately preceding this meeting,all of whose terms will expire at the authorized size2013 Annual Meeting of our Board will be reduced to nine members with the number of Class I directors set at five and the number of Class II directors set at four.Stockholders. Stockholders will vote for the four Class IIthirteen nominees listed below to serve until our 20132014 Annual Meeting of Stockholders and until such director'sdirector’s successor has been elected and qualified, or until such director'sdirector’s death, resignation or removal. The membersUnder the terms of our Board who are Class I directors will be considered for nomination for election in 2012. However, as explained in further detail in Proposal 5, our Board is proposing to amend our Restated Certificate of Incorporation, to move to annual electionsall directors of all our directors. If our stockholders approve the proposed amendment, directors who have been elected to two-year terms prior to the filing of the Certificate of Amendment to our Restated Certificate of Incorporation (including directors elected at this meeting) will complete those terms. Thereafter, their successors will be elected to one-year terms, andAdobe from and after the 2013 Annual Meeting of Stockholders all directorswill be elected to one-year terms and will stand for election annually.

Each of the nominees listed below is currently a director of Adobe, and hasall directors other than Ms. Banse, Mr. Barlow, Mr. Calderoni and Ms. Desmond have previously been elected by our stockholders. There are no family relationships among our directors or executive officers. If any nominee is unable or declines to serve as a director, the Board may designate another nominee to fill the vacancy and the proxy will be voted for that nominee.

Amy Banse, Frank Calderoni and Laura Desmond were appointed to our Board on May 14, 2012 to fill vacancies created by an increase in the size of the Board. The Nominating and Governance Committee has recommended to the Board that each of them be nominated for election at the 2013 Annual Meeting of Stockholders.    
Kelly Barlow was appointed to our Board on December 4, 2012. Mr. Barlow is an executive officer of ValueAct Capital, a significant Adobe stockholder, and his appointment to the Board resulted from discussions between Adobe’s management and Board and Mr. Barlow, in his capacity as a representative of ValueAct Capital. Adobe agreed to appoint Mr. Barlow to the Board in December 2012 and to nominate him for election at our 2013 Annual Meeting of Stockholders in accordance with a Nomination and Standstill Agreement, dated December 4, 2012 among Adobe, Mr. Barlow and the various members of the ValueAct group listed therein.
Vote Required and Board Recommendation

Our Bylaws require that each director be elected by the majority of votes cast with respect to such director in uncontested elections. Any nominee for director, in an uncontested election, who receives a greater number of votes "AGAINST"“AGAINST” his or her election than votes "FOR"“FOR” such election shall promptly tender his or her resignation to the Board, and the Board, after taking into consideration the recommendation of the Nominating and Governance Committee of the Board, will determine whether or not to accept the director'sdirector’s resignation. The election of directors pursuant to this Proposal is an uncontested election, and, therefore, the majority vote standard will apply. Abstentions and broker non-votes will not have any effect on the outcome of this Proposal. In tabulating the voting results for the election of directors, only "FOR"“FOR” and "AGAINST"“AGAINST” votes are counted.


THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL NOMINEES

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” ALL NOMINEES



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Our Board of Directors

The following tables set forth the name and age ofbiographical information listed below for each nominee, such as relevant experiences, qualifications, attributes and each director of Adobe whose term of office will continue after this meeting, the principal occupation during the past five years,skills, and including other directorships held in public companies and relevant experiences, qualifications, attributes or skills of each, and the year each began serving as a director of Adobe:


companies.

Nominees for Election as Class II Directors for a One-Year Term Expiring in 2013

2014

Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director
Since		Name Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since

Robert K. Burgess

 Mr. Burgess has been an independent consultant since December 2005. He served as Chief Executive Officer of Macromedia, Inc., a provider of Internet and multimedia software, from November 1996 to January 2005. He also served on the board of directors of Macromedia from November 1996 until December 2005, as Chairman of the Board of Macromedia from July 1998 until December 2005 and as Executive Chairman of Macromedia from January 2005 until December 2005, when Macromedia was acquired by Adobe. Prior to joining Macromedia, Mr. Burgess held key executive positions at Silicon Graphics, Inc., a graphics and computing company, and from 1991 to 1995 served as Chief Executive Officer and a member of the board of directors of Alias Research, Inc., a publicly traded 3D software company, prior to its acquisition by Silicon Graphics. Mr. Burgess currently serves on the board of IMRIS Inc., a provider of image guided therapy solutions. Mr. Burgess holds a B.Com. from McMaster University in Canada. 53 2005

 

As the former Executive Chairman, Chief Executive Officer and Chairman of the Board of Macromedia, as well as several other executive positions, Mr. Burgess has extensive executive leadership experience, as well as extensive knowledge of operational, financial and strategic issues. He also possesses significant experience with business issues in technology organizations as a result of his former executive roles. With more than 15 years experience as a board member of publicly traded companies, Mr. Burgess also has a broad understanding of the role and responsibilities of the board and valuable insight on a number of significant issues in the technology industry.

     
Amy L. BanseAmy L. Banse Ms. Banse serves as Managing Director and Head of Funds, Comcast Ventures and Senior Vice President, Comcast Corporation. Prior to this role, she was President of Comcast Interactive Media (CIM), a division of Comcast responsible for developing Comcast’s online strategy and operating Comcast’s digital properties, including Fandango, Xfinity.com and Xfinitytv.com. Banse joined Comcast in 1991 and spent the early part of her career at Comcast overseeing the development of Comcast’s cable network portfolio. She received a B.A. from Harvard and a J.D. from Temple University School of Law. 53 2012
   
 As the Managing Director and Head of Funds for Comcast Ventures and Senior Vice President, Comcast Corporation, as well as her prior executive positions, including President of CIM, Ms. Banse has extensive executive leadership experience, as well as extensive knowledge of operations, financial and strategic issues. She also brings to the Board a deep expertise in global media and technology organizations in online business.   
   
Kelly J. BarlowKelly J. Barlow Mr. Barlow has been a Partner of ValueAct Capital, an investment partnership engaged in public and private equity investing, since August 2003. Prior to joining ValueAct Capital, Mr. Barlow worked at EGM Capital from 1997 to 2003 where he served primarily as portfolio manager of the firm’s long/short equity fund. Prior to EGM Capital, Mr. Barlow worked at Wells Capital Management, a wholly owned subsidiary of Wells Fargo Bank, in the small capitalization equity department from 1993 to 1997. Mr. Barlow has served as a director of KAR Auction Services, Inc. since December 2011 and previously served as a director of Allscripts Healthcare Solutions, Inc. from October 2008 to August 2010 and of SIRVA, Inc. from September 2006 to December 2007. Mr. Barlow holds a B.S. from California State University, Chico and is a CFA Charterholder. 44 2012
   
 Mr. Barlow’s years of experience as a seasoned investor with financial expertise and public company board experience brings significant value to our Board. He also provides the Board a unique perspective as an affiliate of a major stockholder.   
   
Edward W. BarnholtEdward W. Barnholt Mr. Barnholt served as President and Chief Executive Officer of Agilent Technologies, Inc., a measurement company, from March 1999 to March 2005 and as its Chairman of the Board from November 2002 until his retirement in March 2005. From 1990 to 1999, Mr. Barnholt served in several executive positions at Hewlett-Packard Company, a computer and electronics company, including serving as Executive Vice President and General Manager of its Measurements Organization. Mr. Barnholt currently serves on the board of directors of eBay Inc., a global online marketplace and as Chairman of the Board of KLA-Tencor Corporation, a provider of process control and yield management solutions. Mr. Barnholt holds a B.S. and a M.S. in Electrical Engineering from Stanford University. 69 2005
   
 As the former President, Chief Executive Officer and Chairman of the Board of Agilent, as well as a former senior executive with Hewlett-Packard, Mr. Barnholt possesses significant leadership and operational experience, including on matters particularly relevant to companies with complex technology and international issues. As a board member of two other public companies, Mr. Barnholt also has strong corporate governance expertise and a global business perspective.   
   

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Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director
Since

Daniel Rosensweig

 

Mr. Rosensweig is currently President, Chief Executive Officer and a member of the board of directors of Chegg.com, an online textbook rental company. Prior to joining Chegg.com in February 2010, Mr. Rosensweig served as President and Chief Executive Officer of RedOctane, a business unit of Activision Publishing, Inc., a developer, publisher and distributor of interactive entertainment and leisure products. Prior to joining RedOctane in March 2009, Mr. Rosensweig was an Operating Principal at the Quadrangle Group, a private investment firm. Prior to joining the Quadrangle Group in August 2007, Mr. Rosensweig served as Chief Operating Officer of Yahoo! Inc., an Internet content and service provider, which he joined in April 2002. Prior to joining Yahoo!, Mr. Rosensweig was President of CNET Networks, Inc., an interactive media company, which he joined in October 2000. Mr. Rosensweig served for 18 years with Ziff-Davis, an integrated media and marketing services company, including roles as President and Chief Executive Officer of its subsidiary ZDNet, from 1997 until 2000 when ZDNet was acquired by CNET. Mr. Rosensweig holds a B.A. in Political Science from Hobart College.

 49 2009

 

As a result of his current executive position at Chegg.com, as well as his former positions as a senior executive at global media and technology organizations, Mr. Rosensweig provides the Board with extensive and relevant executive leadership, worldwide operations and technology industry experience.

    

Robert Sedgewick

 

Dr. Sedgewick has been a Professor of Computer Science at Princeton University since 1985, where he was the founding Chairman of the Department of Computer Science. He is the author of numerous research papers and a widely used series of textbooks on algorithms. Dr. Sedgewick holds a Ph.D. in Computer Science from Stanford University.

 
64		 
1990

 

As a Professor and the founding Chairman of the Department of Computer Science, Dr. Sedgewick brings to the Board extensive leadership experience and expertise on technology issues in the software industry. Also, as the holder of a Ph.D. degree in Computer Science from Stanford University, and the author of numerous research papers and widely used series of textbooks on algorithms, Dr. Sedgewick offers relevant expertise on a broad range of technology issues. As a member of Adobe's Board for over 20 years, Dr. Sedgewick also possesses experience with a range of corporate governance issues.

    
Name Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since
       
Robert K. Burgess Mr. Burgess has been an independent consultant since December 2005. He served as Chief Executive Officer of Macromedia, Inc., a provider of internet and multimedia software, from November 1996 to January 2005. He also served on the board of directors of Macromedia from November 1996 until December 2005, as Chairman of the Board of Macromedia from July 1998 until December 2005 and as Executive Chairman of Macromedia from January 2005 until December 2005, when Macromedia was acquired by Adobe. Prior to joining Macromedia, Mr. Burgess held key executive positions at Silicon Graphics, Inc., a graphics and computing company, and from 1991 to 1995 served as Chief Executive Officer and a member of the board of directors of Alias Research, Inc., a publicly traded 3D software company, prior to its acquisition by Silicon Graphics. Mr. Burgess currently serves on the boards of IMRIS Inc., a provider of image guided therapy solutions, and NVIDIA Corporation, a provider of programmable graphics processing technologies. Mr. Burgess holds a B.Com. from McMaster University in Canada. 55 2005
       
  As the former Executive Chairman, Chief Executive Officer and Chairman of the Board of Macromedia, as well as several other executive positions, Mr. Burgess has extensive executive leadership experience, as well as extensive knowledge of operational, financial and strategic issues. He also possesses significant experience with business issues in technology organizations as a result of his former executive roles. With more than 20 years experience as a board member of publicly traded companies, Mr. Burgess also has a broad understanding of the role and responsibilities of the Board and valuable insight on a number of significant issues in the technology industry.    
       
Frank A. Calderoni Mr. Calderoni serves as Executive Vice President and Chief Financial Officer at Cisco Systems, Inc., a designer, manufacturer and seller of Internet Protocol (IP)-based networking and other products related to the communications and information technology industry, managing the company’s financial strategy and operations. He joined Cisco in 2004 from QLogic Corporation, a storage networking company where he was Senior Vice President and Chief Financial Officer. Prior to that, he was Senior Vice President, Finance and Administration and Chief Financial Officer for SanDisk Corporation, a flash data storage company. Before joining SanDisk, Mr. Calderoni spent 21 years at IBM, where he became Vice President and held controller responsibilities for several divisions within the company. Mr. Calderoni holds a B.S. in Accounting and Finance from Fordham University and an M.B.A. in Finance from Pace University. 55 2012
       
  As a result of his current position at Cisco, as well as his past service as chief financial officer of publicly traded global technology companies, Mr. Calderoni brings to the Board abundant financial expertise that includes extensive knowledge of the complex financial and operational issues facing large global companies, and a deep understanding of accounting principles and financial reporting rules and regulations. He provides the Board and Audit Committee with significant insight into the preparation of financial statements and knowledge of audit procedures. Through his senior executive positions, Mr. Calderoni has demonstrated his global leadership and business acumen.    
       

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Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director
Since		Name Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since

John E. Warnock

 

Dr. Warnock was a founder of Adobe and has been our Chairman of the Board since April 1989. Since September 1997, he has shared the position of Chairman with Charles M. Geschke. Dr. Warnock served as our Chief Executive Officer from 1982 until December 2000. From December 2000 until his retirement in March 2001, Dr. Warnock served as our Chief Technical Officer. Dr. Warnock currently serves as Chairman of the Board of Salon Media Group, Inc. Dr. Warnock holds a Ph.D. in Electrical Engineering from the University of Utah.

 70 1983

 

As a co-founder of Adobe and its former Chief Executive Officer and Chief Technical Officer, Dr. Warnock has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provides the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Chairman of the Board of Directors of Adobe and Salon, Dr. Warnock has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.

     
Michael R. CannonMichael R. Cannon Mr. Cannon served as President, Global Operations of Dell Inc., a computer systems manufacturer and services provider, from February 2007 until his retirement in January 2009, and as a consultant to Dell from January 2009 until January 2011. Prior to joining Dell, Mr. Cannon was the President and Chief Executive Officer of Solectron Corporation, an electronic manufacturing services company, from January 2003 until February 2007. From July 1996 until January 2003, Mr. Cannon served as the Chief Executive Officer of Maxtor Corporation, a disk drive and storage systems manufacturer. Prior to joining Maxtor, Mr. Cannon held senior management positions at IBM, a global services, software and systems company. Mr. Cannon also serves on the board of directors of Seagate Technology Public Limited Company, a disk drive and storage solutions company, and Lam Research Corporation, a semiconductor wafer fabrication equipment company. He previously served as a director of Elster Group SE from October 2010 to August 2012. Mr. Cannon studied mechanical engineering at Michigan State University and completed the Advanced Management Program at Harvard Business School. 60 2003
   
 Mr. Cannon’s career spans more than 35 years in technology. As a result of his former senior executive positions at Dell, Solectron and Maxtor, Mr. Cannon possesses a significant amount of leadership and worldwide operational experience with companies in high technology industries. In addition, as Chief Executive Officer with financial oversight responsibilities at both Solectron and Maxtor, Mr. Cannon possesses extensive financial expertise. Also, from his service as a board member with three other public companies, Mr. Cannon offers our Board a deep understanding of corporate governance matters.   
   
James E. DaleyJames E. Daley Mr. Daley has been an independent consultant since his retirement in July 2003 from Electronic Data Systems Corporation (“EDS”), an information technology service company. Mr. Daley served as Executive Vice President and Chief Financial Officer of EDS from March 1999 to February 2003, and as its Executive Vice President of Client Solutions, Global Sales and Marketing from February 2003 to July 2003. From 1963 until his retirement in 1998, Mr. Daley was with Price Waterhouse, L.L.P., an accounting firm, where he served as Co-Chairman-Operations and Vice-Chairman-International from 1988 to 1998. Mr. Daley currently serves on the board of directors of The Guardian Life Insurance Company of America. Mr. Daley holds a B.B.A. from Ohio University. 71
 2001
   
 With more than 35 years of service with the international accounting firm Price Waterhouse, L.L.P., as well as his past service as the Chief Financial Officer of a publicly traded global technology company, Mr. Daley brings to the Board extensive financial expertise related to the business and financial issues facing large global technology corporations, as well as a comprehensive understanding of international business and corporate governance matters.   


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Incumbent Class I Directors with a Term Expiring in 2012


Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director SinceName Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since

Edward W. Barnholt

 Mr. Barnholt served as President and Chief Executive Officer of Agilent Technologies, Inc., a measurement company, from March 1999 to March 2005 and as its Chairman of the Board from November 2002 until his retirement in March 2005. From 1990 to 1999, Mr. Barnholt served in several executive positions at Hewlett-Packard Company, a computer and electronics company, including serving as Executive Vice President and General Manager of its Measurements Organization. Mr. Barnholt currently serves on the board of directors of eBay Inc. and as Chairman of the Board of KLA-Tencor Corporation. Mr. Barnholt holds a B.S. and a M.S. in Electrical Engineering from Stanford University. 67 2005

 

As the former President, Chief Executive Officer and Chairman of the Board of Agilent, as well as a former senior executive with Hewlett-Packard, Mr. Barnholt possesses significant leadership and operational experience, including on matters particularly relevant to companies with complex technology and international issues. As a board member of two other public companies, Mr. Barnholt also has strong corporate governance expertise and a global business perspective.

     
Laura B. DesmondLaura B. Desmond Ms. Desmond is the Global Chief Executive Officer of Starcom MediaVest Group (SMG), a global marketing services company which is part of the Publicis Groupe. She is also a member of the Publicis Groupe P12, an executive committee comprised of the company’s top global leaders. Prior to her appointment as Global Chief Executive Officer in 2008, Ms. Desmond was Chief Executive Officer of SMG–The Americas from 2007 to 2008 where she managed a network spanning the United States, Canada and Latin America. She was Chief Executive Officer of MediaVest, based in New York, from 2003 to 2007, and from 2000 to 2002 she was Chief Executive Officer of SMG’s Latin America group. In addition to Adobe, Ms. Desmond also serves on the board of directors of VivaKi, which is part of Publicis Groupe, and oversees SMG, as well as ZenithOptimedia, Digitas and Razorfish. She holds a B.B.A. in Marketing from the University of Iowa. 47 2012
   
 With her experience as Global Chief Executive Officer of SMG as well as her prior senior executive positions at SMG, Ms. Desmond brings to the Board a deep expertise in global media and marketing technology organizations, leadership capabilities and business acumen. In addition, her service on other boards gives her valuable knowledge and perspective.   
   
Charles M. GeschkeCharles M. Geschke Dr. Geschke was a founder of Adobe and has served as our Chairman of the Board since September 1997, sharing that office with John E. Warnock. He was our Chief Operating Officer from December 1986 until July 1994 and our President from April 1989 until his retirement in April 2000. Dr. Geschke holds a Ph.D. in Computer Science from Carnegie Mellon University. 73 1983
   
 As a co-founder of Adobe and its former President and Chief Operating Officer, Dr. Geschke has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provides the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Chairman of the Board of Directors of Adobe, Dr. Geschke has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.   
   

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Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director SinceName Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since

Michael R. Cannon

 

Mr. Cannon served as President, Global Operations for Dell Inc., a computer systems manufacturer and services provider, from February 2007 until his retirement in January 2009. Prior to joining Dell, Mr. Cannon was the President and Chief Executive Officer, and served on the board of directors, of Solectron Corporation, an electronic manufacturing services company, which he joined as Chief Executive Officer in January 2003. From July 1996 until joining Solectron, Mr. Cannon served as the President and Chief Executive Officer and member of the board of Maxtor Corporation, a disk drive and storage systems manufacturer. Prior to joining Maxtor, Mr. Cannon held senior management positions at IBM, a global services, software and systems company. Mr. Cannon currently serves on the board of directors of Elster Group, SE, a metering technology company, Seagate Technology Public Limited Company, a provider of hard disk drives and storage solutions, and Lam Research Corporation, a semiconductor equipment manufacturer. Mr. Cannon studied mechanical engineering at Michigan State University and completed the Advanced Management Program at Harvard Business School.

 58 2003

 

Mr. Cannon's career spans 35 years in technology. As a result of his former senior executive positions at Dell, Solectron and Maxtor, Mr. Cannon possesses a significant amount of leadership and worldwide operational experience with companies in high technology industries. In addition, as Chief Executive Officer with financial oversight responsibilities at both Solectron and Maxtor, Mr. Cannon possesses extensive financial expertise. Also, from his service as a board member with three other public companies, Mr. Cannon offers our Board a deep understanding of corporate governance matters.

     
Shantanu NarayenShantanu Narayen Mr. Narayen currently serves as our President and Chief Executive Officer. He joined Adobe in January 1998 as Vice President and General Manager of our engineering technology group. In January 1999, he was promoted to Senior Vice President, Worldwide Products, and in March 2001 he was promoted to Executive Vice President, Worldwide Product Marketing and Development. In January 2005, Mr. Narayen was promoted to President and Chief Operating Officer, and effective December 2007, he was appointed our Chief Executive Officer and joined our Board of Directors. Mr. Narayen serves on the board of directors of Dell Inc. Mr. Narayen holds a B.S. in Electronics Engineering from Osmania University in India, a M.S. in Computer Science from Bowling Green State University and an M.B.A. from the Haas School of Business, University of California, Berkeley. 49 2007
   
 As our President and Chief Executive Officer and as an Adobe employee for more than 15 years, Mr. Narayen brings to the Board extensive leadership and industry experience, including a deep knowledge and understanding of our business, operations and employees, the opportunities and risks faced by Adobe, and management’s current and future strategy and plans. As a member of the board of directors of Dell, he also has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.   
   
Daniel L. RosensweigDaniel L. Rosensweig Mr. Rosensweig is currently President, Chief Executive Officer and a member of the board of directors of Chegg.com, an online textbook rental company. Prior to joining Chegg.com in February 2010, Mr. Rosensweig served as President and Chief Executive Officer of RedOctane, a business unit of Activision Publishing, Inc., a developer, publisher and distributor of interactive entertainment and leisure products. Prior to joining RedOctane in March 2009, Mr. Rosensweig was an Operating Principal at the Quadrangle Group, a private investment firm. Prior to joining the Quadrangle Group in August 2007, Mr. Rosensweig served as Chief Operating Officer of Yahoo! Inc., an internet content and service provider, which he joined in April 2002. Prior to joining Yahoo!, Mr. Rosensweig was President of CNET Networks, Inc., an interactive media company, which he joined in October 2000. Mr. Rosensweig served for 18 years with Ziff-Davis, an integrated media and marketing services company, including roles as President and Chief Executive Officer of its subsidiary ZDNet, from 1997 until 2000 when ZDNet was acquired by CNET. Mr. Rosensweig holds a B.A. in Political Science from Hobart College. 51
 2009
   
 
As a result of his current executive position at Chegg.com, as well as his former positions as a senior executive at global media and technology organizations, Mr. Rosensweig provides the Board with extensive and relevant executive leadership, worldwide operations and technology industry experience.

   
   

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Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since

James E. Daley

 

Mr. Daley has been an independent consultant since his retirement in July 2003 from Electronic Data Systems Corporation ("EDS"), an information technology service company. Mr. Daley served as Executive Vice President and Chief Financial Officer of EDS from March 1999 to February 2003, and as its Executive Vice President of Client Solutions, Global Sales and Marketing from February 2003 to July 2003. From 1963 until his retirement in 1998, Mr. Daley was with Price Waterhouse, L.L.P., an accounting firm, where he served as Co-Chairman-Operations and Vice-Chairman- International from 1988 to 1998. Mr. Daley currently serves on the board of directors of The Guardian Life Insurance Company of America. Mr. Daley holds a B.B.A. from Ohio University.

 69 2001

 

With more than 35 years of service with the international accounting firm Price Waterhouse, L.L.P., as well as his past service as the Chief Financial Officer of a publicly traded global technology company, Mr. Daley brings to the Board extensive financial expertise related to the business and financial issues facing large global technology corporations, as well as a comprehensive understanding of international business and corporate governance matters.

    

Charles M. Geschke

 

Dr. Geschke was a founder of Adobe and has served as our Chairman of the Board since September 1997, sharing that office with John E. Warnock. He was our Chief Operating Officer from December 1986 until July 1994 and our President from April 1989 until his retirement in April 2000. Dr. Geschke holds a Ph.D. in Computer Science from Carnegie Mellon University.

 
71		 
1983

 

As a co-founder of Adobe and its former President and Chief Operating Officer, Dr. Geschke has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provides the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities.

    
Name Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since
       
Robert Sedgewick Dr. Sedgewick has been a Professor of Computer Science at Princeton University since 1985, where he was the founding Chairman of the Department of Computer Science and is now the William O. Baker Professor of Computer Science. From 1975 to 1985, he served on the faculty at Brown University. Dr. Sedgewick holds a Ph.D. in Computer Science from Stanford University. 66
 1990
       
  Professor Sedgewick has held visiting research positions at Xerox PARC in Palo Alto, Institute for Defense Analyses in Princeton and INRIA in Rocquencourt, France. He regularly serves on journal editorial boards and organizes program committees of conferences and workshops on data structures and the analysis of algorithms held throughout the world.    
       
  
Professor Sedgewick’s research interests include mathematical analysis of algorithms, design of data structures and algorithms and program visualization. He has published widely in these areas and is the author of several books. His latest books are “An Introduction to Programming in Java - An Interdisciplinary Approach” (with Kevin Wayne), “Analytic Combinatorics” (with Philippe Flajolet) and a new fourth edition of “Algorithms,” the latest in a series that has sold over one-half million copies.

    
       
  As a Professor and the founding Chairman of the Department of Computer Science, Dr. Sedgewick brings to the Board extensive leadership experience and expertise on technology issues in the software industry. Also, as the holder of a Ph.D. degree in Computer Science from Stanford University, and the author of numerous research papers and widely used series of textbooks on algorithms, Dr. Sedgewick offers relevant expertise on a broad range of technology issues. As a result of his membership on Adobe’s Board, Dr. Sedgewick also possesses experience with a range of corporate governance issues.    
       
John E. Warnock Dr. Warnock was a founder of Adobe and has been our Chairman of the Board since April 1989. Since September 1997, he has shared the position of Chairman with Charles M. Geschke. Dr. Warnock served as our Chief Executive Officer from 1982 until December 2000. From December 2000 until his retirement in March 2001, Dr. Warnock served as our Chief Technical Officer. Dr. Warnock currently serves as Chairman of the Board of Salon Media Group, Inc. Dr. Warnock holds a Ph.D. in Electrical Engineering from the University of Utah. 72
 1983
       
  As a co-founder of Adobe and its former Chief Executive Officer and Chief Technical Officer, Dr. Warnock has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provides the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Chairman of the Board of Directors of Adobe and Salon, Dr. Warnock has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.    


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Name
 Principal Occupation During Last Five Years and
Relevant Experiences, Qualifications, Attributes or Skills		 Age Director Since

Shantanu Narayen

 

Mr. Narayen currently serves as our President and Chief Executive Officer. He joined Adobe in January 1998 as Vice President and General Manager of our engineering technology group. In January 1999, he was promoted to Senior Vice President, Worldwide Products, and in March 2001 he was promoted to Executive Vice President, Worldwide Product Marketing and Development. In January 2005, Mr. Narayen was promoted to President and Chief Operating Officer, and effective December 2007, he was appointed our Chief Executive Officer and joined our Board of Directors. Mr. Narayen serves on the board of directors of Dell Inc. Mr. Narayen holds a B.S. in Electronics Engineering from Osmania University in India, a M.S. in Computer Science from Bowling Green State University and an M.B.A. from the Haas School of Business, University of California, Berkeley.

 47 2007

 

As our President and Chief Executive Officer and an Adobe employee for over a decade, Mr. Narayen brings to the Board extensive leadership and industry experience, including a deep knowledge and understanding of our business, operations and employees, the opportunities and risks faced by Adobe, and management's current and future strategy and plans. As a member of the board of directors of Dell, he also has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.

    

Independence of Directors

As required by the NASDAQ Global Select Market's ("NASDAQ"Market’s (“NASDAQ”) listing standards, a majority of the members of our Board must qualify as "independent,"“independent,” as affirmatively determined by our Board. Our Board consults with our legal counsel to ensure that its determinations are consistent with all relevant securities and other laws and regulations regarding the definition of "independent,"“independent,” including those set forth in the applicable NASDAQ listing standards.

        In determining Dr. Geschke's independence, the Board considered Dr. Geschke's son's partnership interest in the law firm of Cooley LLP prior to his son's departure from Cooley LLP in April 2010. In fiscal year 2010, Cooley LLP acted as our legal counsel on various matters. Adobe considers this business relationship to be at arms-length and in the ordinary course of business. Dr. Geschke's son did not have a material direct or indirect interest in such business relationship.

        In determining Dr. Warnock's independence, the Board considered Dr. Warnock's son's employment at Adobe as a project manager, a non-executive position, prior to his son's departure from Adobe in March 2010.

        Consistent with these considerations, after

After review of all relevant transactions and relationships between each director, any of his or hertheir family members, Adobe, our executive officers and our independent registered public accounting firm, the Board has affirmatively determined that a majority of our Board is comprised of independent directors. Our independent directors include: Ms. Banse, Mr. Barlow, Mr. Barnholt, Mr. Burgess, Mr. Calderoni, Mr. Cannon, Mr. Daley, Ms. Desmond, Dr. Geschke, Ms. Mills, Mr. Rosensweig, Dr. Sedgewick and Dr. Warnock.


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Committees of the Board

TheAudit Committee's’s role includes the oversight of our financial, accounting and reporting processes; our system of internal accounting and financial controls; our enterprise risk management program;program (in conjunction with the Board); and our compliance with related legal, regulatory and ethical requirements. The Audit Committee oversees the appointment, compensation, engagement, retention, termination and services of our independent registered public accounting firm, including conducting a review of its independence; reviewing and approving the planned scope of our annual audit; overseeing our independent registered public accounting firm'sfirm’s audit work; reviewing and pre-approving any audit and non-audit services that may be performed by our independent registered public accounting firm; reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls; reviewing our critical accounting policies and the application of accounting principles; and monitoring the rotation of partners of our independent registered public accounting firm on our audit engagement team as required by regulation.regulation; reviewing the company’s policies and practices with respect to swaps transactions; and overseeing the performance of our internal audit function. The Audit Committee establishes procedures, as required under applicable regulation, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the submission by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee'sCommittee’s role also includes meeting to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm. The Audit Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe'sAdobe’s expense. See "Report“Report of the Audit Committee"Committee” contained in this proxy statement.

Each member of the Audit Committee meets the independence criteria prescribed by applicable regulation and the rules of the SEC for audit committee membership and is an "independent director"“independent director” within the meaning of applicable NASDAQ listing standards. Each Audit Committee member meets NASDAQ'sNASDAQ’s financial literacysophistication requirements, and the Board has further determined that Messrs.Mr. Burgess, Mr. Calderoni, Mr. Cannon and Mr. Daley (i) are "audit“audit committee financial experts"experts” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC and (ii) also meet NASDAQ's financial sophistication requirements.SEC. The Audit Committee acts pursuant to a written charter, which complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and NASDAQ, a copy of which can be found on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html.

TheExecutive Compensation Committee sets and administers the policies governingthat govern, and reviews and approves all compensation of, our executive officers, including cash and non-cash compensation and equity compensation programs, andprograms. The Executive Compensation Committee is also responsible for making recommendations to the Board concerning Board and committee compensation. The Executive Compensation Committee may also reviewsreview and approvesapprove equity-based compensation grants to our non-executive officer employees and consultants, other thanconsultants; however, stock option, performance share and restricted stock unit grants to our non-executive officer employees that are generally approved by a Management Committee for Employee Equity Awards appointed by the Board and currently consisting of our Chief Executive Officer and Senior Vice President, HumanPeople Resources. In addition, the Executive Compensation Committee reviews and approves our stock ownership guidelines for senior management, which are described below in “Compensation Discussion and Analysis—Ownership Guidelines and Policies—Stock Ownership Guidelines”. The Executive Compensation Committee is also responsible for oversight of our overall compensation plans and benefit programs, as well as the approval of all employment, severance and change of control agreements and plans applicable to our executive officers. In connection with this oversight, the Executive Compensation Committee reviews and

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certifies annual performance objectives and goals relevant to executive officers. The Executive Compensation Committee oversees all matters related to stockholder approval of executive compensation and evaluates the risk-taking incentives and risk management of our compensation policies and practices. The Executive Compensation Committee also has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The Executive Compensation Committee assesses the independence and any potential conflicts of interest of compensation advisors in accordance with applicable law and NASDAQ listing standards. The members of the Executive Compensation Committee are all independent directors within the meaning of applicable NASDAQ listing standards, and all of the members are "non-employee directors"“non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”) and "outside directors"“outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”). The Executive Compensation Committee acts pursuant to a written charter, a copy of which can be found on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html.


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Risk Analysis of Performance-Based Compensation Plans

Our Executive Compensation Committee believes that our employee compensation programs do not encourage excessive and unnecessary risk-taking that would be reasonably likely to have a material adverse effect on Adobe. The Executive Compensation Committee oversaw the performance of a risk assessment of our compensation programs as generally applicable to our employees to ascertain any potential material risks that may be created by the compensation programs. The Executive Compensation Committee considered the findings of the assessment conducted internally and concluded that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy and do not encourage employees to take unnecessary or excessive risks, and that the level of risk that they do encourage is not reasonably likely to materially harm our business or financial condition.

condition, after considering mitigating controls.

Although the majority of target total direct compensation provided to our executive officers is typically performance based, the Executive Compensation Committee also believes that our executive compensation programs have been designed with appropriate controls and other mitigating measures to prevent excessive and unnecessary risk-taking.risk taking. Our other performance-based employee compensation programs typically make up a smaller percentage of our other employees'employees’ overall compensation and therefore provide even less incentive for risk-taking.risk taking. The design of these broad-based employee compensation programs is intended to encourage our employees to remain focused on both short-andshort- and long-term operational and financial goals of the company in several key respects:

The fiscal year 2012 Executive Bonus Plan (as described under "Compensation“Compensation Discussion and Analysis—Elements of Compensation—Cash Incentives—Annual Cash Incentive Plan"Plan”), and the similar bonus plan for employees who are not executive officers, measuredhad only one year,a one-year measurement period, but included both revenue and operating profit measures that must be achieved in order to provide balanced objectives emphasizing both revenue generation and expense management.

•
While our fiscal year 2013 Executive Bonus Plan focuses on the achievement of revenue and recurring revenue targets and customer advocacy goals, it also includes an individual goal component with objectives for many of our executives relating to both operating and profitability metrics; together with our long-term equity incentive program for fiscal year 2013 that motivates our executives to build stockholder value, our fiscal year 2013 compensation programs (which are described further below in Proposal 4 of this proxy statement) continue to provide balanced objectives while driving our short- and long-term business strategies.
Our system of internal controls over financial reporting, standards of business conduct, and compliance programs, among other things, reduce the likelihood of manipulation of our financial performance to enhance payments under our bonus and sales compensation plans.

•
Our performance-based plans include caps that in recent years have ranged from 110% to 200% of the target awards. We believe these caps limit the incentive for excessive risk-taking by our employees.

•
Equity incentive awards for our executive officers include threehave included different types of equity instruments, which helphelps to diversify the executive officers'officers’ interests and limit the potential value of excessive risk-taking.risk taking. For most of our non-executive employees, equity incentive awards are solely in the form of restricted stock units ("RSUs"(“RSUs”). Annual equity incentive awards for our executive officers and employees for fiscal year 20102012 vest 25%1/4 each year over four years for options and RSUs and 331/1/3% each year over three years for

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performance shares, encouraging executive officers and other employees to focus on sustained stock price appreciation over the long term.

•
Stock options were eliminated from the mix of equity incentive awards granted to our executive officers in fiscal year 2012, which our Executive Compensation Committee believes further mitigates the potential value to our executive officers of unnecessary or excessive risk-taking.
Our officers at the Senior Vice President level and above are all subject to, and in compliance with, our stock ownership guidelines, described under "Compensation“Compensation Discussion and Analysis—Ownership Guidelines and Policies—Stock Ownership Guidelines,"” which encourage a level of stock ownership that we believe appropriately aligns their interests with those of our stockholders.

TheNominating and Governance Committee's’s primary purpose is to evaluate candidates for membership on our Board and make recommendations to our Board regarding candidates; make recommendations with respect to the composition of our Board and its committees; review and make recommendations regarding the functioning of our Board as an entity; recommend corporate governance principles applicable to Adobe; manage periodic review, discussion and evaluation of the performance of


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our Board, its committees and its committees;members; assess the independence of our directors; and consider and approve or disapprove any related-person transaction as defined under Item 404 of Regulation S-K promulgated by the SEC, after examining each such transaction for potential conflicts of interest and other improprieties.improprieties; review the board memberships of other entities held by members of the Board and review and approve such memberships for our executive officers. The Nominating and Governance Committee also assists our Board in reviewing and assessing management development and succession planning for our executive officers. The Nominating and Governance Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe'sAdobe’s expense. The members of our Nominating and Governance Committee are all independent directors within the meaning of applicable NASDAQ listing standards. The Nominating and Governance Committee operates pursuant to a written charter, a copy of which can be found on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html.

In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the Board'sBoard’s mix of skills, experience, character, commitment and diversity—diversity being broadly construed to mean a variety of opinions, perspectives and backgrounds, such as gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements and needs of our Board at that point in time. In reviewing potential candidates, the Committee will also consider all relationships between any proposed nominee and any of Adobe’s stockholders, competitors, customers, suppliers or other persons with a relationship to Adobe. The Nominating and Governance Committee believes that each candidate should be an individual who has demonstrated integrity and ethics in such candidate'scandidate’s personal and professional life, has an understanding of elements relevant to the success of a publicly traded company and has established a record of professional accomplishment in such candidate'scandidate’s chosen field. Each candidate should be prepared to participate fully in Board activities, including attendance at, and active participation in, meetings of the Board, and not have other personal or professional commitments that would, in the Nominating and Governance Committee'sCommittee’s judgment, interfere with or limit such candidate'scandidate’s ability to do so. Each candidate should also be prepared to represent the best interests of all of our stockholders and not just one particular constituency. Additionally, in determining whether to recommend a director for re-election, the Nominating and Governance Committee also considers such director'sdirector’s past attendance at Board and committee meetings and participation in and contributions to the activities of our Board. The Nominating and Governance Committee has no stated specific minimum qualifications that must be met by a candidate for a position on our Board. The Nominating and Governance Committee does, however, believe it appropriate for at least one member of our Audit Committee to meet the criteria for an "audit“audit committee financial expert"expert” as defined by SEC rules, that at least two memberseach member of our Executive Compensation Committee are "non-employee directors"is a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and "outside directors"an “outside director” for purposes of Section 162(m) of the Code, and that a majority of the members of our Board meet the definition of "independent director"“independent director” within the meaning of applicable NASDAQ listing standards.

The Nominating and Governance Committee'sCommittee’s methods for identifying candidates for election to our Board include the solicitation of ideas for possible candidates from a number of sources, including from members of our Board, our executive officers, individuals who our executive officers or Board members believe would be aware of candidates who would add value to our Board and through other research. The Nominating and Governance Committee, may also, from time to time, retainretains for a fee one or more third-party search firms to identify suitable candidates.


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Any of our stockholders may nominate one or more persons for election as a director at our annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our Bylaws. In addition, the notice must include any other information required pursuant to Section 14 of the Exchange Act. In order for the director nomination to be timely for our 20122014 Annual Meeting of Stockholders, a stockholder'sstockholder’s notice to our Corporate Secretary must be delivered to our principal executive offices no later than November 11, 2011December 16, 2013 nor earlier than October 12, 2011.November 16, 2013. Our Bylaws specify additional requirements if stockholders wish to nominate directors at special meetings of stockholders.


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The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on the same criteria.

Meetings of the Board and Committees

During fiscal year 2010,2012, our Board held fourseven meetings, and its three standing committees—Audit Committee, Executive Compensation Committee, and Nominating and Governance Committee—collectively held 24 meetings. Each director attended at least 75% of the meetings (held during the period that such director served) of the Board and the committees on which such director served in fiscal year 2010.2012. Members of our Board are encouraged to attend our annual meetings of stockholders. SixSeven of our nine then Board members attended our 20102012 Annual Meeting of Stockholders.

The following table sets forth the three standing committees of our Board, the members of each committee, and the number of meetings held by our Board and the committees during fiscal year 2010:

2012:

Name
 Board Audit Executive
Compensation		 Nominating and
Governance

Mr. Barnholt

 X   X Chair

Mr. Burgess

 X      

Mr. Cannon

 X X    

Mr. Daley

 X Chair   X

Dr. Geschke

 Chair      

Ms. Mills

 X   Chair X

Mr. Narayen

 X      

Mr. Rosensweig

 X   X  

Dr. Sedgewick

 X X    

Dr. Warnock

 Chair      

Number of meetings held in fiscal year 2010

 4 11 8 5

        Effective April 20, 2011, our committees will be composed of the following members:

Name  Board 
Audit(1)
 
Executive
Compensation(2)
 
Nominating and
Governance(3)
          
Ms. Banse(4)
 X   X  
Mr. Barlow(5)
 X   X  
Mr. Barnholt X   X Chair
Mr. Burgess X X    
Mr. Calderoni(4)
 X X    
Mr. Cannon X X    
Mr. Daley X Chair   X
Ms. Desmond(4)
 X     X
Dr. Geschke Chair      
Mr. Narayen X      
Mr. Rosensweig X   Chair X
Dr. Sedgewick X   X  
Dr. Warnock Chair      
Number of meetings held in fiscal year 2012 7 11 7 6
_________________________
(1)
Prior to June 28, 2012, our Audit Committee for fiscal year 2012 was composed of Mr. Burgess, Mr. Cannon and Mr. Daley (Chair). Effective June 28, 2012 and for the remainder of fiscal year 2012, our Audit Committee was composed of Mr. Burgess, Mr. Calderoni, Mr. Cannon and Mr. Daley (Chair).
Audit(2)
Prior to June 28, 2012, our Executive Compensation Committee for fiscal year 2012 was composed of Mr. Barnholt, Mr. Rosensweig (Chair) and Dr. Sedgewick. Effective June 28, 2012 and for the remainder of fiscal year 2012, our Executive Compensation Committee was composed of Ms. Banse, Mr. Barnholt, Mr. Rosensweig (Chair) and Dr. Sedgewick. Effective December 4, 2012, our Executive Compensation Committee was composed of Ms. Banse, Mr. Barlow, Mr. Barnholt, Mr. Rosensweig (Chair) and Dr. Sedgewick.
(3)
Prior to June 28, 2012, our Nominating and Governance
Mr. BurgessMr. Barnholt Committee for fiscal year 2012 was composed of Mr. Barnholt (Chair), Mr. Daley and Mr. Rosensweig. Effective June 28, 2012 and for the remainder of fiscal year 2012, our Nominating and Governance Committee was composed of Mr. Barnholt (Chair), Mr. Daley, Ms. Desmond and Mr. Rosensweig.

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(4)
Ms. Banse, Mr. CannonCalderoni and Ms. Desmond were appointed to our Board on May 14, 2012.


Mr. Rosensweig (Chair)

Mr. Daley

(5)
Mr. Daley (Chair)

Dr. Sedgewick

Mr. RosensweigBarlow was appointed to our Board on December 4, 2012, following the close of our 2012 fiscal year.

        Following these changes to our committees, the

The members of the respective committees will satisfy the applicable qualification requirements of the SEC, NASDAQ and the Code.

Communications with the Board

Any stockholder who desires to contact our Board, or specific members of our Board, may do so electronically by sending an email to the following address:directors@adobe.com. Alternatively, a stockholder may contact our Board, or specific members of our Board, by writing to: Stockholder Communications, Adobe Systems Incorporated, 345 Park Avenue, San Jose, California 95110-2704 USA. All such communications will be initially received and processed by the office of our Corporate Secretary. Accounting, audit, internal accounting controls and other financial matters will be referred to the Chair of the Audit Committee. Other matters will be referred to the Board, the non-employee directors or individual directors as appropriate.


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Board Leadership Structure

We separate the roles of Chief Executive Officer and Chairmen of our Board. Our Board is currently chaired by Drs. Geschke and Warnock, Adobe'sAdobe’s founders and the former President and Chief Executive Officer, respectively. The duties of the Chairmen of our Board include:

presiding over all meetings of the Board;

•
preparing the agenda for Board meetings in consultation with the Chief Executive Officer, other members of our executive management and other members of our Board;

•
calling and presiding over meetings of the independent directors;

•
managing the Board's process for annual director self-assessment andBoard’s evaluation of the Board and of the Chief Executive Officer; and

•
presiding over all meetings of stockholders.

Accordingly, the Chairmen have substantial ability to shape the work of our Board. Our Board believesWe believe that separation of the positions of ChairmanChairmen and Chief Executive Officer reinforces the independence of our Board in its oversight of our business and affairs. In addition, such separation helps create an environment that is more conducive to objective evaluation and oversight of management'smanagement’s performance, increasing management accountability and improving the ability of our Board to monitor whether management'smanagement’s actions are in the best interests of Adobe and its stockholders.

Our Board also believes that there may be advantages to having independent chairmen for matters such as communications and relations between our Board, the Chief Executive Officer and other senior management, and in assisting our Board in reaching consensus on particular strategies and policies. Dr. Geschke'sGeschke’s and Dr. Warnock'sWarnock’s past service as executive officers helps ensure our Board and management act with a common purpose, making them best positioned to act as a bridge between management and the Board. Having Chairmen separate from the Chief Executive Officer also allows the Chairmen to focus on assisting the Chief Executive Officer and senior management in seeking and adopting successful business strategies and risk management policies and in making successful choices in management succession. The Board also believes that it is advantageous to have Chairmen with extensive history and knowledge of Adobe, as is the case with Drs. Geschke and Warnock.

The Board'sBoard’s Role in Risk Oversight

Risk assessment and oversight are an integral part of our governance and management processes. Our Board encourages management to promote a culture that incorporates risk management into Adobe'sactively manages risks as a part of Adobe’s corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing Adobe. Throughout the year, senior management reviews these risks with

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the Board at regular Board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.

Our Board does not have a standing risk management committee, but rather administers this oversight function directly through our Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to oversee our major financial risk exposures and the steps our management has taken to monitor and control these exposures as well as oversight of our enterprise risk management program. The Audit Committee also monitors compliance with legal and regulatory requirements and oversees the performance of our internal audit function. Our Nominating and Governance Committee monitors the effectiveness of our corporate governance guidelines and considers and approves or disapproves any related-persons transactions. Our Executive Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

risk-taking, which determination is reviewed by our Audit Committee.

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PROPOSAL 2
APPROVAL OF THE AMENDMENT OF THE
1997 EMPLOYEE STOCK PURCHASEAMENDED AND RESTATED
ADOBE SYSTEMS INCORPORATED 2003 EQUITY INCENTIVE PLAN

In February 2011,2013, the Executive Compensation Committee approved the amendment and restatement of the Adobe Systems Incorporated 2003 Equity Incentive Plan (the “2003 Plan”) subject to approval by our stockholders, which includes an amendmentincrease to the available share reserve, an increase to the maximum numberaggregate stock award and aggregate performance share limitations, the addition of new performance measures and an adjustment, as well as certain other clarifying amendments.
Our Board believes that the 2003 Plan is a vital component of our employee compensation programs, since it allows us the ability to compensate our employees based on company performance, while at the same time providing an incentive to build long-term stockholder value. Stockholder approval of the proposed amended and restated 2003 Plan, and especially our request for additional shares, is necessary to enable us to grant equity to new employees and continue with our annual grant program for existing employees in fiscal year 2014 and beyond. New hire grants are essential in helping us attract talented individuals and align their interests with our stockholders, and annual grants are essential in helping us retain our most valuable employees and keep their interests aligned with our stockholders. Our Board and management, therefore, recommend that stockholders approve the amended and restated 2003 Plan. If our stockholders do not approve the amended and restated 2003 Plan, it will remain in effect with its current terms and conditions.
The amended and restated 2003 Plan will allow us to continue to deduct in full for federal income tax purposes the compensation recognized by our executive officers in connection with certain awards granted under the plan. Section 162(m) of the Code generally denies a corporate tax deduction for annual compensation exceeding $1 million paid to the chief executive officer and other “covered employees” as determined under Section 162(m) and applicable guidance. However, certain types of compensation, including performance-based compensation, are able to be excluded from this deductibility limit. To enable compensation in connection with respect to awards granted under the amended and restated 2003 Plan to qualify as “performance based” within the meaning of Section 162(m), the plan limits the size of each type of award as further described below. While the amended and restated 2003 Plan will permit the grant of awards that can qualify as “performance-based compensation” under Section 162(m), the Executive Compensation Committee may determine not to do so in its discretion and will make those decisions as part of its overall executive compensation strategy. By approving the amended and restated 2003 Plan, the stockholders will be approving the material terms of the plan, which include, among other things, the eligibility requirements for participation in the amended and restated 2003 Plan, including the ability of the Chief Executive Officer and three most highly compensated officers (other than the Chief Financial Officer) to receive awards under the amended and restated 2003 Plan.
Amendments to the 2003 Plan
In addition to clarifying updates to the 2003 Plan, we submit for your consideration, the following amendments to the 2003 Plan:
an increase to the available share reserve by 17.5 million shares of our common stock that may be issued under the Adobe Systems Incorporated 1997 Employee Stock Purchase Plan (the "ESPP"), subject to approval by our stockholders. Our Board believes that the ESPP is an integral part(for a cumulative aggregate share authorization of our Total Rewards Program, which covers compensation and benefits for all levels of employees, and that the ESPP is particularly important for our non-executive employees.

General ESPP Information

        The ESPP was originally adopted by our Board in December 1996 and approved by our stockholders in April 1997 in contemplation of our previous stock purchase plan being terminated in December 1997. We have not requested 247,149,620 shares);

an increase to the ESPP share reserve since April 1999.

Amendmentaggregate stock award (i.e., stock bonus, stock purchase right and RSU) limitation intended to ESPP

        Our Board believes thatbe performance-based compensation under Section 162(m) to 1.5 million shares granted within any fiscal year;

an increase to the availabilityaggregate performance award limitation intended to be performance-based compensation under Section 162(m) to 1.5 million shares with respect to performance shares and $2.5 million with respect to any performance units to be received during any fiscal year; and
approval of new performance measures and an adequateadjustment as described in the “Performance Awards” section of this proposal.

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2003 Plan Share Reserve
The most significant of the proposed amendments to the 2003 Plan is an increase to the number of shares of our common stock in the reserve of the ESPP is an important factor in attracting, motivating and retaining qualified employees essential to our success. In February 2011, our Executive Compensation Committee approved, and our Board submitsavailable for your consideration, an amendment to the ESPP to increase the maximum number of shares of our common stock that may be issued under the ESPP by 17 million shares, for an aggregate reserve of 93 million shares.grant. As of February 4, 2011,January 31, 2013, an aggregate of 7,611,74525,371,663 shares of our common stock remained available for future purchasesgrants under our 2003 Plan. The Board believes that this share reserve amount is insufficient to meet the ESPP.

Vote Required and Board Recommendation

        Approvalfuture needs of the amendmentcompany, and without the requested share reserve increase, the company could be unable to sustain its current new hire and annual equity grant programs in fiscal 2014 and beyond.

Adobe is committed to effectively managing its employee equity compensation programs while minimizing stockholder dilution. For this reason, in administering our equity compensation program, we consider both our “burn rate” and our “overhang” in evaluating the impact of the ESPP requiresprogram on our stockholders. We define “burn rate” as the affirmative votenumber of equity awards granted during the holders of a majority of the votes cast in person or by proxyyear less equity awards canceled and entitled to vote at this meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal.


OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL

Summary of the ESPP

        The following paragraphs provide a summary of the principal features of the ESPP. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the ESPP, a copy of which, as proposed to be amended, has been filed with the SEC with this proxy statement.

        General.    The ESPP advances the interests of Adobe and our stockholders by providing an investment benefit for our employees as part of our Total Rewards Program that is necessary in today's competitive labor market to attract, reward and retain highly qualified employees. The ESPP allows us to achieve this purpose by providing our employees the ability to make a direct investment in our company. Our ESPP generally allows employees to purchase shares of our common stock at 85% of the lesser of the fair market value at the start of the offering period and the date of the purchase. This benefit is one of the most utilized rewards that we offer to our employees, with approximately 75% of our eligible employee population participating in the ESPP as of February 4, 2011.

        Eligibility.    Any regular employee of Adobe or any of its subsidiaries, excluding regular employees in certain countries such as Russia and China, where strict regulatory requirements make it difficult to administer, is eligible to participate in the ESPP, as long as (i) the employee is employed by us and enrolls priorreturned to the beginning of an offering period and (ii) is customarily employed for at least


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20 hours per week and more than five months each year, unless otherwise requiredplans (net equity grants), divided by local law. No employee may be granted a right to purchase shares under the ESPP if, immediately after such grant, the employee would own or hold options to purchase our common stock in an amount equal to 5% or more of the total combined voting power or value of all classes of our stock. As of February 4, 2011, approximately 9,460 employees were eligible to participate in the ESPP.

        Shares Subject to ESPP.    The maximum aggregate number of shares outstanding. The burn rate measures the potential dilutive effect of our equity grants. We define “total overhang” as the full value awards and stock options outstanding but not exercised (in the case of stock options), plus equity awards available to be granted (the “available equity award shares”), divided by the total shares of common stock outstanding. The overhang measures the potential dilutive effect of outstanding equity awards and future awards available for grant.

We endeavor to ensure that mayour burn rate and overhang approximate the average rates of our peer group, and that they are within the limits recommended by independent shareholder advisory groups. We calculate a burn rate of 3.8% for fiscal year 2012 using a fungible ratio of 1.77 for each full value share; from time to time, the Board also calculates the burn rate using other ratios as we evaluate our burn rate in comparison to our peers and industry standards. We estimate our burn rate for our fiscal year 2012 to be issuedbelow the 50th percentile and total overhang to be below the 65th percentile when compared to our peer group and using a 2:1 full value share multiple.  In addition, our average burn rate (gross equity grants) for fiscal years 2009 through 2011 was reasonable in relation to companies in our industry and within the guidelines recommended by certain independent shareholder advisory groups.  It is our current intention to continue to limit burn rate and total overhang to a level consistent with our historical usage. Additionally, purchases under our share repurchase program (as described in our Annual Report on Form 10-K) have enabled us to mitigate the ESPP is 76 million. We are proposingdilutive effect of past awards under our equity plans.
Beginning in fiscal year 2012, to help the company conserve shares, Adobe focused on its top performers and significantly reduced the percentage of employees eligible to receive annual grants (from approximately 50% of employees in fiscal year 2011 to approximately 35% of employees in fiscal year 2012).  In an effort to understand how we compared to our peer group, in fiscal year 2012 we conducted a full review of our broad-based equity strategy and adjusted our approach where we desired closer alignment. Specifically we made changes that allowed us to deliver value deeper into the organization with our fiscal year 2013 annual grants and offer higher value to new hire employees while still utilizing approximately the number of shares used in fiscal year 2012. However, even with this approach, given our current burn rate, as well as our anticipated new hire grants for fiscal year 2013, the Board anticipates that without an increase to the maximum numbershare reserve, the existing share reserve could be exhausted by the end of fiscal year 2014, especially in the case of circumstances not currently accounted for in our projections, such as a material acquisition.
The Board considers its share reserve on an annual basis, as the vast majority of our equity grants are made each January, as further discussed below under “Equity Awards Made in Fiscal Year 2013 and Future Equity Awards.” Notwithstanding customary headcount increases and market value fluctuations, our current projections anticipate a usage of shares of 17 million. If such increase is approved byin future years relatively consistent with share usage in fiscal year 2012 (as detailed below in the tables captioned “2003 Plan Grants During Fiscal Year 2012” and “2003 Plan Grants During Fiscal Year 2013”). Based on our stockholders at the 2011 Annual Meeting of Stockholders, the maximum aggregate number of sharesexpected annual share usage under all of our common stockequity plans (including those discussed below under “Our Other Equity Plans”), we believe our current reserve will be sufficient for our January 2014 grants, but would not be sufficient for our expected January 2015 grants. Our policy is to maintain a reserve at all times sufficient for at least two subsequent annual grant cycles. The Board believes that maythe request for an additional 17.5 million shares will allow us to replenish our share usage under all equity plans during fiscal year 2012 and to continue and maintain our current granting practices through our 2015 annual grants and until our annual meeting of shareholders to be issued under the ESPP would be 93 million.

        As of February 4, 2011, a total of 68,388,255 shares had been purchased under the ESPP and 7,611,745 shares remained available for purchase. held thereafter in 2015.

The closing market price of our common stock on February 4, 2011January 31, 2013 was $33.36.

        Purchase of Shares.    The ESPP permits eligible employees$37.83.

Our Other Equity Plans
While the 2003 Plan is the primary equity plan we use to purchase shares of our common stock through payroll withholding. Currently, each offering period commencing under the ESPP is approximately 24 months in duration and is divided into four consecutive six-month purchase periods. In no event may an offering period exceed 27 months. Purchase periods generally begin on January 1 and July 1 and generally end on June 30 and December 31 of each year, respectively. At the end of each purchase period, shares are issued based on payroll deductions accumulated during that period, not to exceed 25% ofgrant equity awards, we also have a participating employee's compensation during any calendar year or 5,000 shares per 24 month offering period.

        The purchase price per share at which the shares of common stock are sold under the ESPP generally will be equal to 85% of the lesser of the fair market value of our common stock on (i) the first day of the offering or (ii) the purchase date. No participant may purchase shares through the ESPP having a fair market value exceeding $25,000 in any calendar year or such other limit as may be imposed by Section 423 of the Code.

        Participation and Withdrawal from the ESPP.    Enrolled employees will automatically participate in the next offering period, provided the employee has not withdrawn from the ESPP, continues to meet the eligibility requirements, and has not terminated employment with us. A participant may withdraw from an offering at any time without affecting his/her eligibility to participate in future offerings. During an offering period, a participant may elect to decrease the rate of, or stop, deductions at any time. Increases to payroll deductions generally may only be made as to future offering periods.

        If the fair market value of the shares at the end of a purchase period of an offering (other than the final purchase period of any offering) is less than the fair market value of the shares on the first day of such offering, then every participant in the offering will automatically (i) be withdrawn from the offering at the close of such purchase period and after the acquisitionsmall number of shares and (ii) be enrolled in a new offering commencing on the first business day subsequent to such purchase period.

        Termination of Employment.    Purchase rights granted pursuant to any offering under the ESPP terminate immediately upon cessation of employment for any reason, and we will refund all accumulated payroll deductions to the terminated employee without interest.

        Restrictions on Transfer and Sales.    Purchase rights granted under the ESPP are not transferable and may be exercised only by the person to whom such rights are granted.

        Changes in Capitalization.    In the event that there is any change to our outstanding common stock (stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar changeavailable in our capital structure, or in the event of any merger, sale of assets or other reorganization in2005 Equity Incentive Assumption Plan and our 1994 Performance and Restricted Stock Plan. The


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which Adobe is


burn rate and overhang figures included above take into account equity awards available for grant under these plans. As of January 31, 2013, we had a party), appropriate adjustments will be made tototal of 616,700 shares available in our 2005 Equity Incentive Assumption Plan. This plan has four separate share reserves. Three of the class and numberreserves, representing 545,638 of the available shares, require that each full value award reduces the share reserve by 1.77 shares. The final reserve, representing 71,062 of common stock subject to the ESPP and each outstanding purchase right.

        Effect of Certain Corporate Transactions.    In the event of certain significant corporate transactions, any surviving or acquiring corporation (or its parent company) may assume or substitute similar purchase rights for those outstanding under the ESPP. If the surviving or acquiring corporation (or its parent company)available shares, does not assume suchhave a fungible ratio provision (so each full value share reduces the share reserve by one share). Additional information regarding our 2005 Equity Incentive Assumption Plan and its various reserves can be found in “Equity Compensation Plan Information” below. In addition, as of January 31, 2013, we had a total of 18,716 shares available in our 1994 Performance and Restricted Stock Plan. This plan does not have a fungible ratio provision.

As of January 31, 2013, under our three equity incentive plans described above and equity plans and other grants assumed as the result of acquisitions, we had an aggregate of 19,803,731 outstanding stock options and stock appreciation rights or substitute similar rights, then(“SARs”), with a weighted average exercise price of $32.72 and a weighted average remaining term of 2.73 years, as well as 21,081,490 outstanding full value awards.
Given the next purchase datesmall share reserve and limited use of these other plans, we do not believe that these plans are a viable option for maintaining our equity award programs if the 2003 Plan share reserve increase is not approved by our stockholders.
Vote Required and Board Recommendation
Stockholders are requested to approve the adoption of the amended and restated 2003 Plan in the then-current purchase period shall be acceleratedform attached to a date before the consummation of the transaction specified by the Board, the participants' accumulated payroll deductions will be applied to the purchase of shares of our common stock on such date and such purchase rights will terminate immediately thereafter.

        A significant corporate transaction will be deemed to occur in the event of (a) a sale or other disposition of all or substantially all of our assets, (b) the direct or indirect sale or other disposition of at least 50% of our outstanding voting power or voting stock, (c) a merger or consolidation in which we are a party, or (d) a liquidation or dissolution of Adobe, provided in the case of (a), (b) and (c), our stockholders do not retain direct or indirect beneficial ownership in substantially the same proportions as their ownership immediately before such transaction.

        Administration.    The ESPP is administered by the Board and the Executive Compensation Committee. The Executive Compensation Committee is authorized by the Board to adopt, amend, interpret and terminate the ESPP.

        Termination or Amendment.    The Board, or the Executive Compensation Committee, may at any time amend or terminate the ESPP, except that stockholder approval is required to increase the number of shares authorized for issuance under the ESPP. No amendment to the ESPP may adversely affect the purchase rights previously granted a participant under the ESPP, except as required by law or regulation.

Summary of Federal Income Tax Consequences

        The following summary is intended only as a general guide to the current U.S. federal income tax consequences of participation in the ESPP and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances. Furthermore, the tax consequences are complex and subject to change, and a taxpayer's particular situation may be such that some variation of the described rules is applicable.

        Shares under the ESPP are purchased using after-tax employee contributions. A participant recognizes no taxable income either as a result of commencing participation in the ESPP or purchasing shares of our common stock under the terms of the ESPP.

        If a participant does not hold shares purchased under the ESPP for more than two years from the first day of the applicable offering period and more than one year from the date of purchase (which is the last business day of a purchase period) (a "disqualifying disposition"), the participant will recognize ordinary income in the year of such disposition equal to the amount by which the fair market value of the shares on the date the shares were purchased exceeds the purchase price. The amount of ordinary income will be added to the participant's basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares will be a capital gain or loss. A capital gain or loss will be long-term if the participant's holding period is more than one year; otherwise it will be short-term.

        If the participant disposes of shares purchased under the ESPP more than two years after the first day of the applicable offering period and more than one year after the date of purchase, the participant will recognize ordinary income in the year of disposition equal to the lesser of (i) the excess of the fair market value of the shares on the date of disposition over the purchase price, or (ii) 15% of the fair


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market value of the shares on the first day of the applicable offering period. The amount of any ordinary income will be added to the participant's basis in the shares, and any additional gain recognized upon the disposition after such basis adjustment will be long-term capital gain. If the fair market value of the shares on the date of disposition is less than the purchase price, there will be no ordinary income and any loss recognized will be a long-term capital loss.

        Adobe is generally entitled to a deduction in the year of a disqualifying disposition equal to the amount of ordinary income recognized by the participant as a result of the disposition. In all other cases, no deduction is allowed by us.

New Plan Benefits

        Participation in the ESPP is voluntary and each eligible employee will make his or her own decision whether and to what extent to participate in the ESPP. It is therefore not possible to determine the benefits or amounts that will be received in the future by individual employees or groups of employees under the ESPP. However, the table below sets forth certain information regarding the number of shares purchased during fiscal year 2010 pursuant to our ESPP by each of (i) the named executive officers identified in the "Executive Compensation—Summary Compensation Table" contained in this proxy statement, (ii) all current executive officers as a group, (iii) our current non-executive directors as a group and (iv) all employees, other than executive officers, as a group.


Purchases Under our ESPP During Fiscal Year 2010

Name
No. of Shares
Purchased
(#)

Shantanu Narayen, President and Chief Executive Officer

1,086

Mark Garrett, Executive Vice President and Chief Financial Officer

1,086

Kevin Lynch, Senior Vice President, Chief Technology Officer

1,086

Robert Tarkoff, Senior Vice President, Digital Enterprise Solutions Business Unit

1,086

Matthew Thompson, Senior Vice President, Worldwide Field Operations

1,086

Joshua James, Former Senior Vice President, Omniture Business Unit

674

Executive Group (9 persons)

9,774

Non-Executive Director Group

—(1)

Non-Executive Officer Employee Group (9,186 persons)

3,282,348
(1)
Non-executive members of our Board are not eligible to participate in the ESPP.

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PROPOSAL 3
APPROVAL OF THE ADOPTION OF THE
2011 EXECUTIVE CASH PERFORMANCE BONUS PLAN

        In January 2011, our Executive Compensation Committee unanimously approved a new Executive Cash Performance Bonus Plan (the "2011 Executive Master Bonus Plan"), subject to approval by our stockholders. Stockholder approval of the 2011 Executive Master Bonus Plan will allow bonuses paid under it to "covered employees" to qualify as deductible "performance-based compensation" within the meaning of Section 162(m) of the Code.

        Our previous Executive Cash Performance Bonus Plan (referred to in this proxy statement as Annex A.


We firmly believe that the "Master Bonus Plan"), which was substantially similarapproval of the amended and restated 2003 Plan is essential to continue to grow our business. The Board believes that equity awards in meaningful amounts motivate high levels of performance, align the interests of our employees and stockholders by giving employees the perspective of an owner with an equity stake in the company, and provide an effective means of recognizing employee contributions to the 2011 Executive Master Bonus Plan, was approved bysuccess of the company. The Board believes that equity awards are a competitive necessity in the environment in which we operate, and are essential to our stockholders in February 2006,continued success at recruiting and expired on December 3, 2010 (subjectretaining the highly qualified technical and other key personnel who help the company meet its goals, as well as rewarding and encouraging current employees. The Board believes that the ability to payments of bonus amounts earned priorcontinue to such date). See "Compensation Discussion and Analysis—Elements of Compensation—Cash Incentives—Annual Cash Incentive Plan" for a description ofgrant meaningful equity awards will be important to our previous Master Bonus Plan.

Vote Required and Board Recommendation

future success.


Approval of the 2011 Executive Master Bonusamended and restated 2003 Plan requires the affirmative vote of the holders of a majority of the votes cast in person or by proxy and entitled to vote at thisthe meeting. Abstentions and broker non-votes will not have noany effect on the outcome of this Proposal.

proposal.


THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL

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OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL

Summary of the 2011 Executive Master Bonus2003 Plan

The following paragraphs provide a summary of the principal features of the 2011 Executive Master Bonusamended and restated 2003 Plan. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the 2011 Executive Master Bonusamended and restated 2003 Plan, a copy of which has been filed with the SEC with this proxy statement.

        General.statement as     The purposeAnnex A.

History. Our 2003 Plan was originally adopted by our Board in January 2003 and approved by our stockholders in April 2003 as a successor plan to our 1994 Stock Option Plan and our 1999 Equity Incentive Plan. On April 9, 2008, our stockholders approved the expansion of the 2011 Executive Master Bonuseligible class of participants under the 2003 Plan to include non-employee directors, and our 2003 Plan became a successor plan to the 1996 Outside Directors Stock Option Plan. Since 2003, our Board, or a committee thereof, with stockholder approval as required, has amended the terms and conditions of our 2003 Plan from time to time.
General. Our 2003 Plan advances the interests of Adobe and our stockholders by providing equity-based incentives that are necessary in today’s competitive labor market to attract, reward and retain employees, consultants, directors and other advisors upon whose judgment and contributions we depend for our success. The 2003 Plan allows us to achieve these purposes by providing for grants of stock options, stock appreciation rights, stock purchase rights, stock bonuses, RSUs, performance shares and performance units in consideration for services rendered by the participant to Adobe.
Eligibility. Under the 2003 Plan, we may grant awards to employees (including executive officers) and consultants of Adobe, our subsidiary corporations or other affiliated entities of Adobe, and members of our Board. Pursuant to applicable tax law, we may grant incentive stock options only to employees; however, we may grant nonstatutory stock options, stock appreciation rights, stock bonuses, stock purchase rights, RSUs, performance shares and performance units to any eligible participant. As of January 31, 2013, we had a total of 11,280 employees and consultants and twelve non-employee directors who would be eligible to be granted awards from the 2003 Plan.
Shares Subject to the 2003 Plan. We are proposing an increase in the available share reserve under the 2003 Plan by 17.5 million shares of our common stock. If this increase is not approved, we may not have enough shares available to sustain our current new hire and annual equity grant programs in fiscal 2014 and beyond to help us retain our top employees. If such increase is approved by our stockholders, the cumulative aggregate share authorization under our 2003 Plan will increase from 229,649,620 (the “Existing Share Reserve”) to 247,149,620 shares. As of January 31, 2013, awards covering 34,156,504 shares were outstanding under the Existing Share Reserve, and 25,371,663 shares remained available for future awards under the Existing Share Reserve.
The share reserve for the 2003 Plan is reduced:
by one share for each share granted upon the exercise of stock options or stock appreciation rights awarded at any time under the 2003 Plan;
by 1.77 shares for each share granted pursuant to motivate eligible employees to achieve goals relating to the performance of Adobeall awards other than stock options or one of our business units, and to reward them when those goals are satisfied, thereby increasing stockholder value and the success of Adobe. If certain requirements are satisfied, bonusesstock appreciation rights awarded under the 2011 Executive Master Bonus2003 Plan on or after April 1, 2009;
by 2.4 shares for each share granted pursuant to all awards other than stock options or stock appreciation rights awarded under the 2003 Plan from April 10, 2008 through March 31, 2009;
by 2.1 shares for each share granted pursuant to all awards other than stock options or stock appreciation rights awarded under the 2003 Plan from April 5, 2007 through April 9, 2008; and
by one share for each share granted pursuant to all awards granted under the 2003 Plan prior to April 5, 2007.

If any award granted under the 2003 Plan expires, lapses or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase upon failure to vest at termination are forfeited or repurchased, such shares will again become available for issuance under the 2003 Plan in proportion to the number of shares by which the reserve was originally reduced at the time of grant or issuance. Shares will not be treated as having been issued under the 2003 Plan, and will therefore not reduce the number of shares available for grant, to the extent an award is settled in cash (other than cash settled stock appreciation rights). Shares will be treated as having been issued under the 2003 Plan to "covered employees"the extent such shares are withheld in satisfaction of tax withholding obligations or the payment of the awards exercise or purchase price.

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Appropriate adjustments will qualifybe made to the share reserve, to the other numerical limits described in the 2003 Plan (such as deductible "performance-based compensation" within the meaninglimit on the number of shares that may be issued as incentive stock options and the limit on the number of shares that may be awarded to any one person in any fiscal year for purposes of Section 162(m) of the Code.Code) and to outstanding awards in the event of any change in our common 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 our capital structure, or if we make a distribution in a form other than common stock (excluding normal cash dividends) that has a material effect on the fair market value of our common stock.
Administration. The 2011 Executive Master Bonus2003 Plan is substantially similar to our previous Master Bonus Plan; in accordance withadministered by the provisions of Section 162(m) ofBoard and by two committees duly appointed by the Code, that plan expired on December 3, 2010.

        Eligibility.    Participants inBoard: the 2011 Executive Master Bonus Plan are members of senior management of Adobe who are selected solely at the discretion of our Executive Compensation Committee. Generally, selected participants are employees who are or are likelyCommittee and the Management Committee for Employee Equity Awards. The Board authorizes grants of awards to become "covered employees" byits directors pursuant to the terms of Section 162(m) of the Code. No person is automatically entitled to participate in the 2011 Executive Master Bonus Plan in any plan year. For fiscal year 2011, eight of our executive officers will participate under the 2011 Executive Master Bonus2003 Plan.

        If the 2011 Executive Master Bonus Plan is not approved by stockholders, no awards will be earned or paid under the Plan in respect of fiscal year 2011 performance to our participating "covered employees." The Executive Compensation Committee retains the authority to pay discretionary bonuses or other types of compensation outside of the 2011 Executive Master Bonus Plan; however, such bonuses will not qualify as deductible "performance-based compensation" within the meaning of Section 162(m) of the Code.


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        Administration.    The 2011 Executive Master Bonus Plan will generally be administered by the Executive Compensation Committee, which consists of at least two directors each of whom is both a "non-employee director"who are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and an "outside director"“outside directors” for purposes of Section 162(m) of the Code.Code, is authorized to grant all types of awards to employees, executive officers and consultants. The Management Committee for Employee Equity Awards, which currently consists of our Chief Executive Officer and our Senior Vice President, People Resources, is authorized by the Board to grant stock options, performance shares and RSUs to eligible employees who are not executive officers, directors or consultants. For purposes of this proposal, the term “Committee” refers to either of such duly appointed committees of the Board, unless the context or applicable law requires otherwise.

Subject to the provisions of the 2003 Plan and the authority delegated to it by the Board, the Committee determines, in its discretion, the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. The Executive Compensation Committee will be responsible for the general administration and interpretationmay (subject to certain limitations required by Section 162(m) of the 2011 Executive Master BonusCode and the express language in the 2003 Plan that prohibits a reduction in the exercise price of outstanding awards without stockholder approval), amend, modify, extend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and for carrying out its provisions.accelerate, continue, extend or defer the vesting of any award. The Executive Compensation Committee has the authority to select persons to receive awards from among the eligible employees and set the terms and conditions of each award consistent with the terms of the 2011 Executive Master Bonus Plan. The Executive Compensation Committee may also establish rules and policies for administration of the 2011 Executive Master Bonus2003 Plan and adopt one or more forms of agreement to evidence awards made under the 2011 Executive Master Bonus2003 Plan. The Executive Compensation Committee interprets the 2011 Executive Master Bonus2003 Plan and any agreement used under the 2011 Executive Master Bonus2003 Plan, and all determinations of the Executive Compensation Committee that are not inconsistent with the 2011 Executive Master Bonus Plan will be final and binding on all persons.

        Determinationpersons having an interest in the 2003 Plan or any award issued under the 2003 Plan. The 2003 Plan provides, subject to certain limitations, for indemnification by Adobe of Awards.any officer, employee or director against all reasonable expenses, including attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the 2003 Plan.

Stock Options    Under. The Committee may grant nonstatutory stock options, incentive stock options or a combination of each. Subject to appropriate adjustment in the 2011event of a change in our capital structure, we may not grant to any one employee in any fiscal year stock options which, together with Freestanding SARs (as defined below) granted that year, cover more than 4,000,000 shares in the aggregate.
The terms of the 2003 Plan limit the shares of our common stock available for issuance pursuant to the exercise of incentive stock options. As part of the amendment of the 2003 Plan, however, we revised the incentive stock option limitation to be equal to the then-current share reserve number at any point in time, so that the limitation will always automatically equal the aggregate share reserve amount, subject to the requirements of the Code.
Each stock option granted under the 2003 Plan must be evidenced by a written agreement between us and the optionee specifying the number of shares subject to the stock option and the other terms and conditions of the stock option, consistent with the requirements of the 2003 Plan. The exercise price of each stock option may not be less than the fair market value of a share of our common stock on the date of grant (except in connection with the assumption or substitution for another stock option in a manner qualifying under Sections 409A and 424(a) of the Code). In addition, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of our stock or any subsidiary corporation of Adobe (a “Ten Percent Stockholder”) must have an exercise price equal to at least 110% of the fair market value of a share of our common stock on the date of grant.
The 2003 Plan provides that the stock option exercise price may be paid in cash, by check or in cash equivalent; by means of a broker-assisted cashless exercise; by means of a “net exercise” arrangement; by tender of shares of common stock owned by the optionee having a fair market value not less than the exercise price; by such other lawful consideration as approved by the Committee; or by any combination of these. Nevertheless, the Committee may restrict the forms of payment permitted in connection with any stock option award. No stock option may be exercised unless the optionee has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the stock option, including, if permitted or required by us, through the optionee’s surrender of a portion of the stock option shares to Adobe.

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Stock options become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. At the outset of our 2012 fiscal year, after weighing a variety of factors (including employee retention, recruitment, feedback from our stockholders and stockholder advisory firms), our Executive Master BonusCompensation Committee determined to discontinue the granting of stock options to our employees as part of our equity grant program. Historically, however, our employee stock options have vested in monthly installments over a period of four years after the date of grant, except for new-hire grants, which vested 1/4 on the first anniversary of the grant date and then monthly thereafter for the following three years. Stock options granted to our directors generally vest 100% on the day immediately preceding the date of the next annual meeting of stockholders.
Stock options granted to our employees and directors will expire not later than seven years from the date of grant and in no event will the term of an incentive stock option granted to a Ten Percent Stockholder exceed five years. Subject to the term of the stock option, a stock option generally will remain exercisable for three months following the optionee's termination of service, except that if service terminates at or after an optionee has reached 65 years of age (or, for directors, after four years of service), or as a result of an optionee’s death or disability, the stock option generally will remain exercisable for one year, and, if an employee optionee’s service is terminated for cause, the stock option will terminate immediately. The Committee, in its discretion, may provide different post-termination exercise periods, but in any event the stock option must be exercised no later than the original expiration of its term. In addition, as part of the amendment of the 2003 Plan, participantswe are clarifying that for purposes of incentive stock options, if a participant is on a leave of absence that exceeds three months without a guaranteed right to reemployment, then six months following the first day of the leave, the incentive stock option will cease to be treated as such and will instead be treated for tax purposes as a nonstatutory stock option.
Stock options are not assignable or transferable by the optionee other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and as set forth in the stock option award agreement, a stock option is assignable or transferable subject to the applicable limitations described in the General Instructions to Form S-8 Registration Statement under the Securities Act of 1933, as amended (which includes transfers to family members, family trusts or pursuant to domestic relations orders, but excludes transfers of stock options for consideration).
Stock Appreciation Rights. The Committee may grant stock appreciation rights either in tandem with a related stock option (a “Tandem SAR”) or independently of any stock option (a “Freestanding SAR”). A Tandem SAR requires the stock option holder to elect either the exercise of the underlying stock option for shares of common stock, the surrender of the stock option or the exercise of the related stock appreciation right. A Tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a Freestanding SAR is exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The exercise price of a stock appreciation right may not be less than the fair market value of a share of our common stock on the date of grant. Subject to appropriate adjustment in the event of any change in our capital structure, we may not grant to any one employee in any fiscal year Freestanding SARs which, together with any stock options granted that year, cover in the aggregate more than 4,000,000 shares.
Upon the exercise of a stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for such shares. At the Committee’s discretion, we may pay this stock price appreciation in cash or in shares of common stock whose fair market value on the exercise date equals the payment amount. Payment is made in a lump sum as soon as possible following exercise. The maximum term of any stock appreciation right granted under the 2003 Plan is eight years.
Repricing Prohibition. The 2003 Plan expressly provides that, without the approval of a majority of the votes cast in person or by proxy at a meeting of our stockholders, the Committee may not provide for either the cancellation of stock options or stock appreciation rights outstanding under the 2003 Plan in exchange for the grant of a new award at a lower exercise price or the amendment of outstanding stock options or stock appreciation rights to reduce the exercise price.
Stock Awards. Stock awards may be granted under the 2003 Plan in the form of a stock bonus, a stock purchase right or an RSU. No monetary payment is required for receipt of shares pursuant to a stock bonus, the consideration for which is services rendered by the participant, except that the participant must furnish consideration in the form of cash or past services rendered having a value not less than the par value of the shares acquired, to the extent required by law. The purchase price for shares issuable under each stock purchase right (and, if applicable, each RSU) will be eligibleestablished by the Committee in its discretion and may be paid in cash, by check, in cash equivalent or by such other lawful consideration as approved by the Committee.

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Stock awards may be granted by the Committee subject to receive cash awards based uponsuch restrictions for such periods as determined by the Committee and set forth in a written agreement between Adobe and the participant, and neither the award nor the shares acquired pursuant to the award may be sold or otherwise transferred or pledged until the restrictions lapse or are terminated. Restrictions may lapse in full or in installments on the basis of the participant's continued service or other factors, such as the attainment and certification of certainone or more performance goals established by the Committee (see discussion of permitted performance goals under “Performance Awards” below). In the past, employee new hire and annual RSU awards vested 1/4 each year on the anniversary of the grant date over a four-year period; however, as to the annual grants made on January 24, 2013, the annual RSU awards to our broad-based employees will vest 1/3 on the anniversary of the grant date over a three-year period. As we transition to a three-year performance period under our 2013 Performance Share Program, annual RSU awards to our senior executives for fiscal year 2013 will vest 1/2 on the anniversary of the grant date over a two-year period. We expect that in future years, all annual RSU grants will vest over a three-year period. New hire RSU awards are expected to continue to vest over a four-year period. Initial RSU awards for new directors will vest 50% each year over a two-year period on the anniversary of the grant date, and annual RSU awards granted to our directors will vest 100% on the day immediately preceding the date of the next annual meeting of stockholders. Unless otherwise provided by the Committee, a participant will generally forfeit any shares acquired (and any rights to acquire shares) under a stock award to the extent any vesting restrictions have not lapsed prior to the participant’s termination of service, except that if service terminates as a result of a death or disability or in some cases, if the termination occurs when the participant is 65 or older, the participant will be given credit for an additional 12 months of continued service. Participants holding restricted stock will have the right to vote the shares and to receive all dividends and other distributions, except that any dividends or other distributions in shares will be subject to the same restrictions on transferability as the original award. Participants holding RSUs will not have the right to vote the shares until such shares have been issued and the Committee may, in its sole discretion, provide that dividend equivalents will not be paid or provide for either current or deferred payment of dividend equivalents.
Subject to appropriate adjustment in the event of any change in our capital structure, the 2003 Plan currently limits the granting to any one employee within any fiscal year stock awards subject to restrictions based on the attainment of performance goals for more than 200,000 shares. The company believes this current limitation to be exceptionally low, and given our recent shift away from granting stock options to our executive officers in favor of performance-based stock awards (as described in our definitive proxy statement dated March 1, 2012), such limitation severely impedes the company from making competitive grants to, currently, our chief executive officer, and, in the possible near future, to other executive officers. As a result, as part of this proposal, we are asking our stockholders to approve an increase to the stock award limitation such that the cap on awards intended to be “performance based” under Section 162(m) granted to any one employee in any fiscal year is 1.5 million shares in the aggregate.
Performance Awards. The Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between Adobe and the participant. These awards may be designated as performance shares or performance units. Performance shares and performance units are unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of one share of common stock and $100 per unit, respectively. Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more predetermined performance goals are attained within a predetermined performance period. We may settle performance awards to the extent earned in cash, shares of our common stock (including shares of restricted stock) or any combination thereof.
Subject to appropriate adjustment in the event of any change in our capital structure, the 2003 Plan currently limits the granting of performance shares to any one employee that could result in the employee receiving more than 200,000 shares of common stock for each full fiscal year contained in the performance period, or performance units to any one employee that could result in the employee receiving more than $2,500,000 for each full fiscal year contained in the performance period. Similar to our stock award limitation, the Company believes this current limitation to be exceptionally low, and such limitation severely impedes the company from making competitive grants to, currently, our chief executive officer, and, in the possible near future, to other executive officers. As a result, as part of this proposal, we are asking our stockholders to approve an increase in the limit of the granting of performance shares intended to be “performance based” under Section 162(m) to any one employee that could result in the employee receiving more than 1.5 million shares in the aggregate during any fiscal year, or performance units intending to qualify as performance-based compensation under Section 162(m) of the Code to any one employee that could result in the employee receiving more than $2,500,000 during any fiscal year of the company.
Our current 2003 Plan states that no participant may be granted more than one performance award for the same performance period; however, the amended 2003 Plan amends this provision in order to clarify that award limits in

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previous fiscal years will not count toward award limits in subsequent years, even if the awards settle in future years, and that more than one award of the same type can be granted in a fiscal year, as long as the aggregate number of shares of common stock granted pursuant to all awards of that type (and that are intended to qualify as performance-based compensation under Section 162(m) of the Code) do not exceed the fiscal year limit applicable to that award type.
Prior to the beginning of the applicable performance period or such later date as permitted under applicable law (such as Section 162(m) of the Code if deductibility under Section 162(m) is desired with respect to a specific award), the Executive Compensation Committee for the applicable performance period. Thewill establish one or more performance goals that mayapplicable to the award. These goals will be selectedbased on the achievement of company-wide, divisional or individual goals, applicable federal or state securities laws, or any other basis determined by the Executive Compensation Committee includein its discretion. As provided under the current 2003 Plan, in order to qualify as performance-based compensation under Section 162(m) of the Code, the Executive Compensation Committee must base performance goals on one or more of the following:following measures: growth in revenue or product revenue; growth in the market price of the stock; operating margin; margin, including gross margin; operating income; operating income after taxes; operating profit or net operating profit; pre-tax profit; earnings before interest, taxes and depreciation; earnings before interest, taxes, depreciation and amortization; income, before or after taxes (including net income); total return on shares of stock or total stockholder return; earnings, including but not limited to earnings per share and net earnings; return on stockholder equity or average stockholder'sstockholders’ equity; return on net assets; return on assets, investment or capital employed; expenses; cost reduction goals; return on capital; economic value added; market share; operating cash flow; cash flow, as indicated by book earnings before interest, taxes, depreciation and amortization; cash flow per share; improvement in or attainment of working capital levels; debt reduction; debt levels; capital expenditures; sales or revenue targets, including product or product family targets; billings; workforce diversity; customer satisfaction; implementation or completion of projects or processes; improvement in or attainment of working capital levels; stockholders'stockholders’ equity; and other measures of performance selected by the Executive Compensation Committee to the extent consistent with Section 162(m) of the Code.

As a consequence of significant changes during fiscal year 2012 to Adobe’s business model, including a shift in business focus to the Creative Cloud, subscriptions and recurring revenue, we are asking, as part of this proposal, that our stockholders approve the addition of “annualized recurring revenue” and “bookings” as measures on which to base future performance goals.
The performance goals may be based on (i) absolute target values, (ii) growth, maintenance or limiting losses or (iii) values relative to peers or indices, in each case in one or more goal categories compared to a prior period, and may differ for each participant. Performance goals may apply to Adobe or to one of our business units.

        Our2003 Plan currently provides the Executive Compensation Committee may provide that attainment of a performance goal will be measured by adjustingwith the evaluationability to make adjustments to the calculation of performance, as may be necessary in accordanceconnection with U.S. generally accepted accounting principles ("GAAP")the establishment of the above performance goals, as follows: to include or exclude restructuring and/or other nonrecurring charges; to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated performance goals; to include or exclude the effects of changes to GAAPgenerally accepted accounting principles required by the Financial Accounting Standards Board; to include or exclude the effects of any statutory adjustments to corporate tax rates; to include or exclude the effects of any "extraordinary items"“extraordinary items” as determined under GAAP;generally accepted accounting principles; to include or exclude the effect of payment of the bonuses under the 2011 Executive Master Bonus Plan and any otherAdobe cash bonus plans of Adobe;plan; to include or exclude the effect of stock-based compensation and/or deferred compensation; to include or exclude any other unusual, non-recurring gain or loss or other extraordinary item; to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; to include or


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exclude the effects of divestitures, acquisitions or joint ventures; to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP;generally accepted accounting principles; to assume that any business divested by Adobe achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; to include or exclude the effect of any change in the outstanding shares of common stock of Adobe by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholdersshareholders other than regular cash dividends; to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); to reflect any partial or complete corporate liquidation; to reflect shippable backlog; and to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.

        Our

For the same reasons noted above, we are asking, as part of this proposal, that our stockholders approve the addition of “to include or exclude the effects on reported financial results of changes in accounting treatment for certain transactions as a result of business model changes” as an adjustment to performance in connection with the establishment of a performance goal.

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The target levels with respect to these performance goals, including the new goals, if approved by our stockholders at our 2013 Annual Meeting of Stockholders, may be expressed as an absolute value or as a value determined relative to a standard selected by the Executive Compensation Committee. In establishing a performance goal, the Executive Compensation Committee may provide that performance will be appropriately adjusted for changes in accounting standards, restructuring charges, and similar extraordinary items as outlined in the 2003 Plan.
Following completion of the applicable performance period, the Executive Compensation Committee will determine the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant. The Executive Compensation Committee may otherwise make positive or negative adjustments to performance award payments to participants to reflect the participant’s individual job performance or other factors determined by the Executive Compensation Committee; however, if the award intends to qualify as performance-based compensation under Section 162(m) of the Code, the Executive Compensation Committee retains the discretion to eliminate or reduce, or eliminate any awardbut not increase, the amount that would otherwise be payable pursuant toon the 2011 Executive Master Bonus Plan.

        Payment of Awards.    All awards will be paid in cash as soon as is practicable following their determination, but in no event later than March 15basis of the year afterperformance goals attained and to determine the end of the applicable performance period, unless the Executive Compensation Committee choosesactual award to defer the payment of awards, as it determines, in its discretion, may be necessary or desirable to preserve the deductibility of such awards under Section 162(m) of the Code. In addition, the Executive Compensation Committee, in its sole discretion, may permit a participant to defer receipt of the payment of cash that would otherwise be deliveredawarded to a participant underupon termination of employment with the 2011 Executive Master Bonus Plan pursuant to our Deferred Compensation Plan (as described under "Executive Compensation—Nonqualified Deferred Compensation").

        Maximum Award.    The amounts that will be paid pursuant to the 2011 Executive Master Bonus Plan are not currently determinable. The maximum bonus payment that any participant may receive under the 2011 Executive Master Bonus Plan for any performance period is $5,000,000 multiplied by the number of our complete fiscal years contained within the performance period.

        Term of 2011 Executive Master Bonus Plan.    The 2011 Executive Master Bonus Plan shall first apply to fiscal year 2011; however, no payments shall be made under the Executive Bonus Plan to individuals who are "covered employees" (as defined under 162(m) of the Code) in respect of performance in fiscal year 2011 if the 2011Executive Master Bonus Plan is not approved at this meeting. The 2011 Executive Master Bonus Plan shall continue until the earlier of (i) the date as of which the Executive Compensation Committee terminates the Plan and (ii) the last day of the Plan fiscal year ending in 2015 unless it is again approved by our stockholders prior to such day.

        Amendment and Termination.company. The Executive Compensation Committee may amend, modify, suspendprovide for performance award payments in lump sums or terminateinstallments. The Executive Compensation Committee may also provide for the 2011payment of dividend equivalents with respect to cash dividends paid on the common stock subject to the performance award. Generally, performance awards may not be sold or transferred other than by will or the laws of descent and distribution.

Performance Shares granted prior to fiscal year 2010 vest 1/4 on the later of the certification by the Executive Master BonusCompensation Committee of the achievement of the performance goals and the one-year anniversary of the grant date. The remaining 3/4 is subject to time-based annual vesting in equal installments over the next three years. Performance Shares granted in fiscal years 2010 through 2012 vest 1/3 upon the later of the certification by our Executive Compensation Committee of the achievement of the performance goals and the one-year anniversary of the grant date. The remaining 2/3 is subject to time-based annual vesting in equal installments over the next two years. Performance Shares granted in our 2013 fiscal year vest in full upon the Executive Compensation Committee’s certification of achievement following the three-year anniversary of the grant date.
Change of Control. For awards granted prior to January 24, 2008, a “Change of Control” under the 2003 Plan means any of the following events (or series of related events) in wholewhich Adobe’s stockholders, immediately prior to the event, do not retain, immediately after the event, direct or indirect beneficial ownership of more than 50% of the total combined voting power of the outstanding voting securities of Adobe or the entity to which Adobe’s assets were transferred: the direct or indirect sale or exchange by the stockholders of all or substantially all of the voting stock of Adobe; a merger or consolidation in part, at any time and in any respect, includingwhich Adobe is a party; the adoptionsale, exchange, or transfer of amendments deemed necessaryall or desirable to correct any defectsubstantially all of Adobe’s assets; or supply omitted dataa liquidation or to reconcile any inconsistency indissolution of Adobe. If a Change of Control occurs, the 2011 Executive Master Bonus Plansurviving, continuing, successor or in any award granted thereunder. Any such amendment, modification, suspensionpurchasing entity or terminationits parent may, be made without the consent of any affected participant. However,participant, either assume all outstanding stock options, RSUs and stock appreciation rights or substitute substantially equivalent stock options, RSUs or stock appreciation rights for its stock. If the outstanding stock options, RSUs and stock appreciation rights are not assumed or substituted, then all unexercised and unvested portions of such outstanding awards will become immediately exercisable and vested in no event mayfull. Any stock options, RSUs or stock appreciation rights which are not assumed in connection with a Change of Control or exercised prior to the Change of Control will terminate effective as of the time of the Change of Control.
For awards granted on or after January 24, 2008, a “Change of Control” under the 2003 Plan means a change of control of Adobe 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; provided, however, that a Change of Control shall be deemed to have occurred if: any such amendment, modification, suspensionindividual, partnership, firm, corporation, association, trust, unincorporated organization or termination resultother 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 an increaseRule 13d‑3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of Adobe representing 30% or more of the combined voting power of Adobe’s then outstanding securities entitled to vote in the amountelection of compensation payable pursuantdirectors of Adobe; during any period of two 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 Adobe’s stockholders was approved by a vote of at least three‑fourths 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, cease for any reason to any award underconstitute a majority thereof; there occurs a reorganization, merger, consolidation or other corporate transaction involving Adobe, in each case with respect to which the 2011 Executive Master Bonus Planstockholders of Adobe immediately prior to such transaction do not, immediately after the transaction, own securities representing more than 50% of the combined voting power of Adobe, a parent of Adobe or cause compensationother corporation resulting from such transaction (counting, for this purpose, only those securities held by Adobe’s stockholders immediately after the transaction that were received in

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exchange for, or represent their continuing ownership of, securities of Adobe held by them immediately prior to the transaction); all or substantially all of the assets of Adobe are sold, liquidated or distributed; or there is a “Change of Control” or may become, payable undera “change in the 2011 Executive Master Bonus Plan to "covered employees" to fail to qualify as deductible "performance-based compensation"effective control” of Adobe within the meaning of Section 162(m)280G of the Code.
If a Change of Control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume Adobe’s rights and obligations under outstanding awards or substitute substantially equivalent equity awards. If the acquiring entity elects not to do so, then all unexercised and unvested portions of all outstanding awards will become immediately exercisable and vested in full. Any awards which are not assumed or replaced in connection with a Change of Control or exercised prior to the Change of Control will terminate effective as of the time of the Change of Control.
Equity awards granted to directors will fully accelerate immediately prior to the effective date of a Change of Control, subject to the consummation of the Change of Control.
The Executive Compensation Committee has provided, and may provide in the future, additional benefits upon a Change of Control or other similar transactions. For example, our executive officers are either covered by the terms of a separate retention agreement or an Executive Severance Plan in the Event of a Change of Control, which provide for certain acceleration benefits applicable to equity compensation awards in the event of a Change of Control (see “Compensation Discussion and Analysis—Severance and Change of Control Compensation” and “Executive Compensation—Change of Control” contained in this proxy statement for more information).
Termination or Amendment

. The 2003 Plan will continue in effect until the first to occur of (i) its termination by the Executive Compensation Committee, or (ii) the date on which all shares available for issuance under the 2003 Plan have been issued and all restrictions on such shares under the terms of the 2003 Plan and the agreements evidencing awards granted under the 2003 Plan have lapsed. All incentive stock options must be granted, if at all, within ten years from the earlier of the date the 2003 Plan is adopted, as amended, by the Board (or the Executive Compensation Committee) or the date the 2003 Plan is duly approved, as amended, by our stockholders. Therefore, currently no incentive stock option may be granted under the 2003 Plan on or after April 12, 2022, the 10th anniversary of the last amendment to the 2003 Plan approved by our stockholders.
The Executive Compensation Committee may terminate or amend the 2003 Plan at any time, provided that without stockholder approval the 2003 Plan cannot be amended to increase the share reserve, change the class of persons eligible to receive incentive stock options or effect any other change that would require stockholder approval under any applicable law. No termination or amendment may affect any outstanding award unless expressly provided by the Executive Compensation Committee, and, in any event, may not adversely affect an outstanding award without the consent of the participant unless necessary to comply with any applicable law.

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Summary of Federal Income Tax Consequences

        Under present

The following summary is intended only as a general guide to the current U.S. federal income tax law, participantsconsequences of participation in the 2003 Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances. Furthermore, the tax consequences are complex and subject to change, and a taxpayer's particular situation may be such that some variation of the described rules is applicable.
Incentive Stock Options. A participant recognizes no taxable ordinary income as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. However, the exercise of an incentive stock option may increase the participant’s alternative minimum tax liability, if any.
If a participant holds stock acquired through the exercise of an incentive stock option for more than two years from the date on which the stock option was granted and more than one year after the date the stock option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) will generally recognizebe a long-term capital gain or loss. Upon such a qualifying disposition, Adobe will not be entitled to any income tax deduction.
Generally, if the participant disposes of the stock before the expiration of either of those holding periods (a “disqualifying disposition”), then at the time of such disqualifying disposition the participant will realize taxable ordinary income equal to the lesser of (i) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (ii) the participant’s actual gain, if any, on the purchase and sale. The participant’s additional gain or any loss upon the disqualifying disposition will be a capital gain or loss, which will be long term or short term depending on whether the stock was held for more than one year. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, generally Adobe will be entitled (subject to the requirement of reasonableness, the provisions of

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Section 162(m) of the Code, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Stock options not designated or qualifying as incentive stock options are nonstatutory stock options having no special tax status. A participant generally recognizes no taxable ordinary income as the result of the grant of such a stock option. Upon exercise of a nonstatutory stock option, the participant normally recognizes ordinary income in the amount of the award received indifference between the yearstock option exercise price and the fair market value of receipt. That incomethe shares on the date of purchase. Generally, Adobe will be subject to applicable income and employment tax withholding by Adobe. If, andentitled (subject to the extent that,requirement of reasonableness, the 2011 Executive Master Bonus Plan payments satisfy the requirementsprovisions of Section 162(m) of the Code, and otherwise satisfy the requirements for deductibility under federalsatisfaction of a tax reporting obligation) to an income tax law, wededuction in the tax year in which such ordinary income is recognized by the participant.
Upon the disposition of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will receivebe taxed as capital gain or loss.
Stock Appreciation Rights. A participant recognizes no taxable ordinary income upon the receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Adobe generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.
Stock Bonuses and Stock Purchase Rights. A participant acquiring restricted stock generally will recognize ordinary income equal to the difference between the fair market value of the shares on the “determination date” (as defined below) and the participant’s purchase price, if any. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The “determination date” is the date on which the participant acquires the shares unless they are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable, or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will be taxed as a capital gain or loss. Such gain or loss will be long term or short term depending on whether the stock was held for more than one year. Adobe will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the year in which ordinary income is recognized by the participant.
Restricted Stock Units. No taxable income is recognized upon receipt of an RSU award. In general, the participant will recognize ordinary income in the year in which the shares subject to that award vest and are actually issued to the participant in an amount equal to the fair market value of the shares on the date of issuance. Adobe will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income recognized by the participant at the time the shares are issued. In general, the deduction will be allowed for the amount constitutingtaxable year in which such ordinary income is recognized by the participant.
Performance Awards. A participant generally will recognize no income upon the grant of a performance share or a performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the participant.

New Plan Benefits

        We cannot determine at this timecash received, if any, and the actual awards thatfair market value of any unrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above in “Stock Bonuses and Stock Purchase Rights.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the “determination date,” will be taxed as a capital gain or loss. Adobe generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Potential Limitation on Deductions. Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to each covered employee exceeds $1 million. It is possible that compensation attributable to awards granted under the 2011 Executive Master Bonus2003 Plan, as awards will depend upon the individuals selected for participation

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when combined with all other types of compensation received by a covered employee from Adobe, may cause this limitation to be exceeded in any given year,particular year. However, certain kinds of compensation, including qualified “performance-based compensation,” are disregarded for purposes of the bonus amounts thatdeduction limitation.
In accordance with Treasury Regulations issued under Section 162(m) of the Code, compensation attributable to stock options and stock appreciation rights will qualify as performance-based compensation if: (i) such awards are approved by a compensation committee comprised solely of “outside directors,” (ii) the plan contains a per-employee limitation on the number of shares for which such awards may be earnedgranted during a specified period, (iii) the terms of the plan, including the per-employee limitation on grant size, are approved by themthe stockholders, and (iv) the exercise or strike price of the award is no less than the fair market value of the stock on the date of grant. In reliance on this rule, as determined byfurther described in the Compensation Discussion and Analysis below, it is intended that the Executive Compensation Committee may grant stock options and stock appreciation rights under the 2003 Plan that qualify as performance-based compensation that is exempt from the $1 million deduction limitation.
Compensation attributable to stock bonus awards, stock purchase rights, RSUs, performance shares and performance units will qualify as performance-based compensation, provided that: (i) the award is approved by a compensation committee comprised solely of “outside directors”; (ii) the award is granted (or vests) based upon the achievement of an objective performance goal established in any given yearwriting by the compensation committee while the outcome is substantially uncertain; (iii) the compensation committee certifies in writing prior to the grant (or vesting, as applicable) of the award that the performance goal has been satisfied; and our actual performance.

        In January 2011, our(iv) prior to the issuance, stockholders have approved the material terms of the plan (including the class of employees eligible for awards, the business criteria on which the performance goals may be based, and the maximum amount, or formula used to calculate the amount, payable upon attainment of performance goals). It is intended that the Executive Compensation Committee approvedmay grant stock bonus awards, stock purchase rights, RSUs, performance shares and performance units under the 2011 Executive Annual Incentive2003 Plan a cash incentive bonus planthat qualify as performance-based compensation that is exempt from the $1 million deduction limitation.

New Plan Benefits
Equity Awards Made in Fiscal Year 2012. We cannot currently determine the benefits or number of shares subject to reward 2011awards that may be granted in the future to participants under the 2003 Plan; therefore, the following table sets forth information with respect to equity awards made in fiscal year performance of designated executive officers, the terms of which are pursuant to the umbrella terms of the 2011 Executive Master Bonus Plan. If this Proposal 3 to approve the 2011 Executive Master Bonus Plan is not approved by our stockholders, no payments will be made2012 under the 2011 Executive Annual Incentive2003 Plan as if the amended 2003 Plan was in effect to individuals who are "covered employees" (as defined under 162(m)each of the Code). However, if this Proposal 3 is approved by our stockholders (for "covered employees"), and the established fiscal year 2011 goals are achieved under the 2011 Executive Annual Incentive Plan, designated participants may earn a maximum bonus award equal to 200% of their annual base salary, which potential maximum amounts are set forth in the table below for: (i) the named executive officers identified in the "Executive“Executive Compensation—Summary Compensation Table"Table” contained in this proxy statement, (ii) all current executive officers as a group, (iii) our current non-executive officer directors as a group, and (iv) all employees other than executive officers as a group.


2011 Fiscal Year Bonus Awards to be Earned under the 2011 Executive Annual Incentive Plan
Pursuant to the Terms of the
2011 Executive Cash Performance Bonus Plan

2003 Plan Grants During Fiscal Year 2012
Stock Options(#)
Restricted Stock Units
(#)
NamePerformance Shares(1)
Maximum Bonus
Award
($)

Name

Threshold
(#)
Target
(#)
Maximum
(#)
Shantanu Narayen, President and Chief Executive Officer

— 2,241,085
157,500(2)
 —
157,500(3)
200,000(3)

Mark Garrett, Executive Vice President and Chief Financial Officer

— 1,137,687
287,500(2)
 —
62,500(3)
93,750(3)

Kevin Lynch, SeniorExecutive Vice President, Chief Technology Officer

— 733,067

Robert Tarkoff, Senior Vice President, Digital Enterprise Solutions Business Unit62,500

(2)
 737,720— 
62,500(3)
93,750(3)

Matthew Thompson, SeniorExecutive Vice President, Worldwide Field Operations

— 1,038,083

Joshua James, Former Senior Vice President, Omniture Business Unit62,500(1)(2)

 — 
62,500(3)
93,750(3)

David Wadhwani, Senior Vice President and General Manager, Digital Media Business Unit

—
55,000(2)
—
55,000(3)
82,500(3)
Executive Group (9(8 persons)—
677,150

(2)
—
452,150(3)
641,975(3)
Non-Executive Director Group (11 persons)
42,516(4)
83,433(4)
———
Non-Executive Officer Employee Group (11,136persons as of fiscal year end)
—
7,182,325(5)
—
673,300(5)
1,009,950(5)
_________________________
(1)
Represents the target and maximum (150% of target, up to the plan maximum of 200,000 shares) number of shares of our common stock that could have been earned at the respective performance levels in accordance with the terms of our 2012 Performance Share Program. After the 2012 fiscal year end, it was determined that 116% of

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target performance share awards were earned under the terms of the 2012 Performance Share Program. One-third of the performance shares vested on January 24, 2013, and the remainder will vest in equal installments over two additional years. See “Compensation Discussion and Analysis” and the “Equity Awards Granted by the Committee at the outset of Fiscal Year 2012” table in this proxy statement for award achievement and a discussion of actual results under the 2012 Performance Share Program.
(2)
Granted on January 24, 2012 with a fair market value of $30.95 per share. Mr. Garrett was granted additional RSUs on August 16, 2012 with a fair market value of $33.65 per share. These RSUs vest 25% on each anniversary of the grant date over four years.
(3)
Granted on January 24, 2012 with a fair market value of $30.95 per share.
(4)
Granted pursuant to the terms of our 2012 Non-Employee Director Compensation Policy. Weighted average exercise price of $33.18 per share for stock options, and weighted average fair market value of $32.71 per share for RSUs. For additional information regarding equity awards made pursuant to our Non-Employee Director Compensation Policy, see “Director Compensation” in this proxy statement.
(5)
These equity awards represent various new hire, annual, promotion and retention grants with a weighted average fair market value of $30.97 and $31.09 per share for performance shares and RSUs, respectively. For additional information regarding the terms and conditions of our equity awards, including standard vesting provisions, see “Summary of the 2003 Plan” above.
Equity Awards Made in Fiscal Year 2013 and Future Equity Awards. Although we cannot currently determine the benefits or number of shares subject to awards that may be granted during the remainder of the 2013 fiscal year to participants under the 2003 Plan, we did award our annual equity grants for fiscal year 2013 on January 24, 2013 to our employees, including our executive officers, under the 2003 Plan. The largest portion of our grants under the 2003 Plan are typically made during this annual January grant process, and if the proposed increase in the share limit for the 2003 Plan had been in effect in January 2013, we believe that the awards granted to our executive officers and employees would not have been different. We also issued certain promotion and new hire grants in fiscal year 2013 through January 24, 2013. In addition, pursuant to the terms of our current Non-Employee Director Compensation Policy, our directors will each receive, on the first business day after the 2013 Annual Meeting of Stockholders, an annual grant of stock options, RSUs or a 50% combination of each (elected by each director in his or her discretion prior to the end of the previous fiscal year), which will vest 100% on the day immediately preceding our next annual meeting of stockholders. The annual grant is valued at $240,000 (on the date of grant) and is converted into RSUs and/or options as described in “Director Compensation—Equity Awards” in this proxy statement. The following table sets forth information with respect to grants made in fiscal year 2013 through January 24, 2013 under the 2003 Plan to each of (i) the named executive officers identified in the “Executive Compensation—Summary Compensation Table” contained in this proxy statement, (ii) all current executive officers as a group, and (iii) all current employees, other than executive officers, as a group. It also includes the dollar value of the anticipated awards to be made to our non-executive officer directors on the first business day after the scheduled date of the 2013 Annual Meeting of Stockholders.

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2003 Plan Grants During Fiscal Year 2013
��
Restricted Stock Units
(#)
Performance Shares(1)
Non-Executive Director Award Dollar Value ($)
Name  7,935,382
Threshold
(#)
Target
(#)
Maximum
(#)
 

Non-Executive Director Group

  —(2)

Non-Executive Officer Employee Group

  —
Shantanu Narayen, President and Chief Executive Officer
157,500(2)
—
157,500(3)
315,000(3)
—
Mark Garrett, Executive Vice President and Chief Financial Officer
35,000(2)
—
35,000(3)
70,000(3)
—
Kevin Lynch, Executive Vice President, Chief Technology Officer
55,000(2)
—
55,000(3)
110,000(3)
—
Matthew Thompson, Executive Vice President, Worldwide Field Operations
55,000(2)
—
55,000(3)
110,000(3)
—
David Wadhwani, Senior Vice President and General Manager, Digital Media Business Unit
47,500(2)
—
47,500(3)
95,000(3)
—
Executive Group (8 persons)
422,825(2)
—
422,825(3)
845,650(3)
—
Non-Executive Director Group (12 persons)(4)
————
1,920,000(4)(5)
Non-Executive Officer Employee Group (11,272 persons as of January 31, 2013)
4,763,000(6)
—
510,150(3)
1,020,300(3)
—
_________________________
(1)
Represents the target and maximum (200% of target) number of shares of our common stock that may be earned by our employees under the 2003 Plan in accordance with the terms of our 2013 Performance Share Program. Performance shares will be earned, if at all, following our 2015 fiscal year end, subject to the achievement of a performance goal. The actual award of any earned performance shares would fully vest upon the certification by our Executive Compensation Committee of the level of achievement following the three-year anniversary of the grant date (January 24, 2016).
(2)
Granted on January 24, 2013 with a fair market value of $38.10 per share. RSUs granted as part of our fiscal year 2013 annual award process vest 1/2 on each anniversary of the grant date over two years.
(3)
Granted on January 24, 2013 with a fair market value of $38.10 per share.
(4)
Ms. Banse, Mr. Calderoni and Ms. Desmond joined our Board on May 14, 2012. Mr. Barlow joined our Board on December 4, 2012 and received an initial grant of 13,507 RSUs in an amount valued (based on the estimated value on the grant date) at $450,000 according to our 2013 Non-Employee Director Compensation Policy. Ms. Banse, Mr. Calderoni, Ms. Desmond and Mr. Barlow are not eligible for additional equity awards until their second Annual Meeting of Stockholders after joining the Board under the terms of the Non-Employee Director Compensation Policy.
(5)
Represents the aggregate dollar value of anticipated awards to be made to our eight non-employee directors eligible to receive awards under the 2003 Plan on April 12, 2013 (the first business day after the scheduled date of the 2013 Annual Meeting of Stockholders), pursuant to the terms of our 2013 Non-Employee Director Compensation Policy, based on the valuation method described under “Director Compensation—Equity Awards” in this proxy statement.
(6)
These equity awards represent various new hire, annual, promotion and retention grants granted during fiscal year 2013 with a weighted average fair market value of $38.09 per share for performance shares and RSUs. For additional information regarding the terms and conditions of our equity awards, including standard vesting provisions, see “Summary of the 2003 Plan” above.

31
(1)
Mr. James resigned from his employment with us effective July 30, 2010 and is no longer eligible to receive bonus awards.

(2)
Non-executive members of our Board are not eligible for awards under the 2011 Executive Master Bonus Plan. Of our non-executive officer group, only members of senior management are eligible; for fiscal year 2011, no non-executive officers were selected for participation.

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PROPOSAL 4
3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending on December 2, 2011,November 29, 2013, and urges you to vote for ratification of KPMG'sKPMG’s appointment. KPMG has audited our financial statements since fiscal year 1983. Although we are not required to seek your approval of this appointment, we believe it is good corporate governance to do so. No determination has been made as to what action our Audit Committee would take if you fail todo not ratify the appointment. Even if the appointment is ratified, the Audit Committee retains discretion to appoint a new independent registered public accounting firm if the Audit Committee concludes such a change would be in the best interests of Adobe and its stockholders.

We expect representatives of KPMG to be present at the meeting and available to respond to appropriate questions by stockholders. Additionally, the representatives of KPMG will have the opportunity to make a statement if they so desire.

Vote Required and Board Recommendation

Stockholder ratification of KPMG as our independent registered public accounting firm requires the affirmative vote of the holders of a majority of the votes cast in person or by proxy and entitled to vote at this meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL



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PRINCIPAL ACCOUNTING FEES AND SERVICES

During fiscal years 20102012 and 2009,2011, we retained KPMG to provide services in the following categories and amounts:

Fee Category
Fee Category
 2010 2009  2012 2011
    

Audit Fees

Audit Fees

 $3,190,337 $3,168,785 Audit Fees$3,438,258
 $3,668,085

Audit-Related Fees

 30,000 94,354 

Tax Fees

Tax Fees

 463,289 97,089 Tax Fees531,231
 333,613

All Other Fees

All Other Fees

 391,258 660,142 All Other Fees463,884
 123,200
     

Total

 $4,074,884 $4,020,370 
TotalTotal$4,433,373
 $4,124,898

Audit fees include the audit of Adobe'sAdobe’s annual financial statements, review of financial statements included in each of our Quarterly Reports on Form 10-Q, and services that are normally provided by KPMG in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. This category includes fees related tofor accounting-related consulting services.

Tax fees consist of fees for professional services for tax compliance, tax advice and tax planning. This category includes fees primarily related to the preparation and review of federal, state and international tax returns and assistance with tax audits.

All other fees include assurance services not related to the audit or review of our financial statements. This category includes fees primarily related to due diligence in connection with proposed acquisitions.

Our Audit Committee determined that the rendering of non-audit services by KPMG is compatible with maintaining the independence of KPMG.


AUDIT COMMITTEE PRE-APPROVAL OF SERVICES PERFORMED BY OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

It is the policy of our Audit Committee to pre-approve all audit and permissible non-audit services to be performed by KPMG. Our Audit Committee pre-approves services by authorizing specific projects within the categories outlined above, subject to a budget for each category. Our Audit Committee'sCommittee’s charter delegates to a subcommittee when appropriate, or to one or more members of the Audit Committee, the authority to address any requests for pre-approval of services between Audit Committee meetings, and the subcommittee or such member or members must report any pre-approval decisions to our Audit Committee at its next scheduled meeting.

All services related to audit fees, audit-related fees, tax fees and all other fees provided by KPMG during fiscal years 20102012 and 20092011 were pre-approved by the Audit Committee in accordance with the pre-approval policy described above.

For more information on KPMG, please see "Report“Report of the Audit Committee."

”

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REPORT OF THE AUDIT COMMITTEE*

The Audit Committee'sCommittee’s role includes the oversight of our financial, accounting and reporting processes; our system of internal accounting and financial controls; our enterprise risk management program; and our compliance with related legal, regulatory and ethical requirements. The Audit Committee oversees the appointment, compensation, engagement, retention, termination and services of our independent registered public accounting firm, including conducting a review of its independence; reviewing and approving the planned scope of our annual audit; overseeing our independent registered public accounting firm'sfirm’s audit work; reviewing and pre-approving any audit and non-audit services that may be performed by it; reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls; reviewing our critical accounting policies and the application of accounting principles; and monitoring the rotation of partners of our independent registered public accounting firm on our audit engagement team as required by regulation.regulation; reviewing the company’s policies and practices with respect to swaps transactions; and overseeing the performance of our internal audit function. The Audit Committee establishes procedures, as required under applicable regulation, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the submission by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee'sCommittee’s role also includes meeting to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm. The Audit Committee held 11 meetings during fiscal year 2010.

2012.

Each member of the Audit Committee meets the independence criteria prescribed by applicable regulation and the rules of the SEC for audit committee membership and is an "independent director"“independent director” within the meaning of applicable NASDAQ listing standards. Each Audit Committee member meets NASDAQ'sNASDAQ’s financial literacysophistication requirements, and the Board has further determined that Messrs.Mr. Burgess, Mr. Calderoni, Mr. Cannon and Mr. Daley (i) are "audit“audit committee financial experts"experts” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC and (ii) also meet NASDAQ's financial sophistication requirements.SEC. The Audit Committee acts pursuant to a written charter, which complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and NASDAQ, a copy of which can be found on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html.

We have reviewed and discussed with management and KPMG our audited financial statements. We discussed with KPMG and Adobe'sAdobe’s internal auditors the overall scope and plans of their audits. We met with KPMG, with and without management present, to discuss results of its examinations, its evaluation of Adobe'sAdobe’s internal controls, and the overall quality of Adobe'sAdobe’s financial reporting.

We have reviewed and discussed with KPMG matters required to be discussed pursuant to Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. We have received from KPMG the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG'sKPMG’s communications with the Audit Committee concerning independence. We have discussed with KPMG matters relating to its independence, including a review of both audit and non-audit fees, and considered the compatibility of non-audit services with KPMG'sKPMG’s independence.

Based on the reviews and discussions referred to above and our review of Adobe'sAdobe’s audited financial statements for fiscal year 2010,2012, we recommended to the Board that Adobe'sAdobe’s audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 3, 2010,November 30, 2012, for filing with the SEC.

Respectfully submitted,

AUDIT COMMITTEE
James E. Daley, Chair
Robert K. Burgess
Frank A. Calderoni
Michael R. Cannon
_________________________
*The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Robert Sedgewick

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*
The material in this report is not "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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PROPOSAL 5
AMENDMENT TO ADOBE'S RESTATED CERTIFICATE OF INCORPORATION
TO ELIMINATE OUR CLASSIFIED BOARD STRUCTURE

        After careful consideration and upon the recommendation of the Nominating and Governance Committee, the Board has unanimously determined that it would be in the best interests of Adobe and our stockholders to amend our Restated Certificate of Incorporation to declassify the Board and provide for the annual election of all directors, as described below. The Board is now asking Adobe's stockholders to approve this amendment to the Restated Certificate of Incorporation.

Adobe's Current Classified Board Structure

        Our Restated Certificate of Incorporation and Amended and Restated Bylaws provide that our Board be divided into two classes, with each class having a two-year term. Consequently, at any given annual meeting of stockholders, our stockholders have the ability to elect only one class of directors, constituting roughly one-half of our entire Board.

Proposed Declassification of the Board

        In January 2011, the Board voted to approve, and to recommend that our stockholders approve at this meeting, an amendment to Section V.A (2) of our Restated Certificate of Incorporation that upon filing with the Secretary of State of the State of Delaware will eliminate the Board's classified structure. If our stockholders approve the proposed amendment, directors who have been elected to two-year terms prior to the filing of the Restated Certificate of Incorporation (including directors elected at this meeting) will complete those terms. Thereafter their successors will be elected to one-year terms and from and after the 2013 Annual Meeting of Stockholders, all directors will stand for election annually.

Rationale for Declassification

        Our Board is committed to good corporate governance. Accordingly, in determining whether to propose the declassification of our Board as described above, our Board carefully reviewed the various arguments for and against a classified Board structure.

        Our Board recognizes that a classified structure may offer several advantages, such as promoting Board continuity and stability, encouraging directors to take a long-term perspective, and reducing a company's vulnerability to coercive takeover tactics. Our Board also recognizes, however, that a classified structure may appear to reduce directors' accountability to stockholders, since such a structure does not enable stockholders to express a view on each director's performance by means of an annual vote. Our Board also believes that implementing annual elections for all directors would support our ongoing effort to adopt "best practices" in corporate governance.

        In view of the considerations described above, our Board, upon the recommendation of the Nominating and Governance Committee, unanimously determined that it is in the best interests of Adobe and our stockholders to eliminate the classified board structure as proposed. Therefore, the Board has unanimously approved the proposed amendment to Section V.A (2) of our Restated Certificate of Incorporation. A copy of the Certificate of Amendment to the Restated Certificate of Incorporation is attached to this proxy statement asAppendix A. Our Board has also approved an amendment to our Amended and Restated Bylaws to eliminate the Board's classified structure, effective upon the filing of the Certificate of Amendment to the Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.


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Vote Required and Board Recommendation

        Under the Restated Certificate of Incorporation, this Proposal must be approved by the affirmative vote of the holders of a majority of the voting power of all the outstanding shares of common stock of Adobe. Abstentions and broker non-votes will have the effect of "AGAINST" votes on this Proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL



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PROPOSAL 6
4

ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14 of the Exchange Act, Adobe is asking its stockholders to cast an advisory vote to approve the 2010fiscal year 2012 compensation of our named executive officers as disclosed in this proxy statement (our "NEOs"“NEOs”). This Proposal, commonly known as a "say-on-pay" proposal,“say-on-pay,” gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation programs.

As described in detail under the heading "Compensation“Compensation Discussion and Analysis,"” our executive compensation programs are designed to attract, inspire,align the interests of our executive officers with those of our stockholders, as well as attracting, motivating, and retain our NEOs,retaining key employees who are critical to our success. Under these programs, our executive officers, including our NEOs, are rewarded for the achievement of bothmotivated to achieve specific financial and strategic goals, whichobjectives that are expected to result in increasedincrease stockholder value. Please read the "Compensation“Compensation Discussion and Analysis"Analysis” and the accompanying tables and narrative that followdiscussion for additional details about our executive compensation programs, including information about the fiscal year 20102012 compensation of our NEOs.

Biographical information regarding our executive officers is contained in the section titled “Executive Officers” in our 2012 Annual Report on Form 10-K and is incorporated herein by reference.

Fiscal Year 20102012 Business Highlights

        Our and Compensation Decisions

In fiscal year 2012 our executive team hasofficers successfully managedexecuted on the promise of a vital transformation of our company throughbusiness model. By launching Creative Cloud, a subscription-based offering that reimagines the recent dramatic economic downturn, and we believe the compensation programcreative process for our customers, Adobe’s leadership team is driving a shift in our core business toward subscription revenue that is recognized over time, increasing the predictability of our revenues and financial results. Creative Cloud is a comprehensive offering of our Creative Suite desktop applications combined with creative services and community features that together are redefining the content creation process, enabling Adobe to reach a broader customer base by lowering the cost of entry and providing frequent product and feature enhancements as soon as they become available. At the same time, our NEOs was instrumentalhave continued to invest in helping us achievethe high-growth digital marketing area—including our strategic acquisitions of Omniture, Day Software, Demdex, Auditude and Efficient Frontier—building a business that has quickly become a market leader in analytics and digital marketing. In the midst of navigating these transformations successfully and at a pace that exceeded our expectations, our NEOs have continued to deliver strong financial performance.results and achieve target financial milestones. For the fiscal year ending December 3, 2010,November 30, 2012, we reported:

•
record revenue of $3.8 billion(1);$4.4 billion;
•

•
29% year-over-year revenue growth;record GAAP operating income of $1.18 billion; and


•
•
GAAP diluted earnings-per-share of $1.66.
During the year, our executive officers also exceeded expectations in their achievement of key strategic performance objectives established by the Executive Compensation Committee for fiscal year 2012. These achievements included:
launching the groundbreaking Creative Cloud and Creative Suite 6 release, and achieving approximately 326,000 Creative Cloud paid memberships and over one million free members, exceeding targeted rates of subscription growth and resulting in our annual GAAP operating profit to $1.0 billion from $0.7 billion inCreative business exiting fiscal year 2009 (a 44% increase).

        We are positioned2012 with $153 million in annualized recurring revenue (“ARR”), and enabling us to continue our delivery of strong performance for our stockholders, our customers and the communities we operate in and to continue to develop an engaged, innovative workforce.

Fiscal Year 2010 Compensation Program Highlights

        We believe that our executive compensation programs are structured in the best manner possible to support our company and our business objectives.

    •
    Our cash and equity incentive compensation programs are substantially tied to our key business objectives.

    •
    Consistent with our pay-for-performance philosophy, based on our outstandinggrow total Creative units sold by 13% over fiscal year 2010 results,2011;
releasing Adobe Marketing Cloud and delivering 35% year-over-year growth of related revenues, including outstanding Adobe CQ growth above forecasted rates;by consolidating 30 distinct offerings into five Adobe Marketing Cloud solutions, we have simplified our NEOs received 190%products and made it easier for customers to license and implement our solutions;
executing a strategic business acquisition of their target cash incentive awardsEfficient Frontier and 135% of their target performance shares.

•
In contrast, however, in fiscal year 2009, when we did not achieve our financial goals due to the global economic recession, our NEOs did not earn any cash incentive awards, nor did they earn any of the performance shares that had been awarded that year,successful integration, resulting in significantly reduced compensation actually being realized by our NEOs. In addition, our NEOs did not receive any base salary increase in fiscal year 2009 due to the economic recession.
(1)
All financial resultslaunches of Adobe included in this proxy statement that are presented in accordance with GAAP reflect the impact of acquisitions bySocial and Adobe during the relevant fiscal periods. For additional information regarding our financial results, please see our 2010 Annual Report, including Management's Discussion and Analysis of Financial Condition and Results of Operations.
AdLens;

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    •
    We continue


the successful launch of Project Primetime, a unified video platform that helps customers achieve broadcast audience reach, lower operating costs, and boost revenue from ad sales, enabling NBC to emphasizedeliver live video streams of the London 2012 Olympic Games to its viewers on all major device types;
outstanding growth in our Digital Publishing Suite business, ahead of forecasted growth rates;
driving consistent, measurable improvement in customer satisfaction and retention;
increasing awareness of Adobe’s leadership in digital marketing through social media engagements and the successful launch of the “Metrics Not Myths” brand campaign in the U.S.;
executing upon key people objectives specific to internal hiring and growth, key talent integration and retention, and transforming the Company’s performance management approach; and
driving total returns to our stockholders that exceeded those of the NASDAQ 100 index.
Consistent with these results, the Executive Compensation Committee took the following actions with respect to the incentive compensation of our NEOs for fiscal year 2012:
determined that, based on strong GAAP revenue results, operating income and the acceleration of our business transformation, their annual cash incentive awards were paid out at 100% of their target award opportunity (for more discussion of cash awards, see “Compensation Discussion and Analysis—Cash Incentives—Other Cash Incentives” below); and
determined that, based on our achievement of the pre-determined key strategic performance objectives related to our transformation, including the performance of Adobe’s stock optionsprice and total stockholder return (“TSR”), overachievement in Creative Cloud subscription adoption and strong year-over-year growth of Adobe Marketing Cloud, their performance share awards as key elementswere earned at 116% of their target award opportunity.
These decisions were primarily based on our NEOs’ success in achieving annual strategic and financial objectives that are intended to further our long-term business objectives and create sustainable long-term stockholder value in a cost-effective manner.
These decisions were also consistent with our objectives of tying the outcomes of our equityincentive compensation programs, so thatawards for our executive officers, including our NEOs, are rewarded when our stock price increases and when they achieve identified goals that contribute to our long-term success.

•
The "earned value" of2/3 of an NEO's annual equity incentives is contingent on stock price appreciation (in the case of the stock options) and the achievement of pre-establishedour key strategic performance objectives (inand the casereturns to our stockholders. As a practical matter, because approximately 80% of our NEOs’ target compensation is comprised of equity awards, this means that, unless we achieve our financial and key strategic performance objectives each year and over the performance shares). In addition, eachlong-term, our executive officers do not realize the potential value of their annual and long-term incentive compensation. Further, because Adobe common stock underlies our equity-based compensation awards, the equity incentivesimmediate value of these awards is wholly subject to a service-based vesting requirement.

•
Our Executive Compensation Committee maintainsfluctuations in our stock ownership guidelines that state that our NEOs should hold a specified minimum amountprice—thereby strongly aligning the interests of our common stock to align theirexecutive officers with the interests with those of our stockholders.

•
We do not generally enter into employment agreements with our NEOs (except in connection with acquisitions, for limited periods, as in the case of Mr. James); our NEOs are employed at will and are expected
Key Changes to demonstrate exceptional personal performance.Fiscal Year 2013 Compensation Program


•
We do not generally provide for tax "gross ups" for compensation or severance paid to our NEOs (except where pre-existing obligations may exist in connection with acquisitions, for limited periods, as in the case of Mr. James).

•
Our NEOs are provided with a very limited number of company "perquisites" that are not otherwise provided to all employees of Adobe.

The Executive Compensation Committee regularly reviews the compensation programs for our executive officers, including our NEOs, to ensure they achieve the desired goalsgoal of aligning our executive compensation structure with our stockholders' interests and current market practices.stockholders’interests. This includes establishing performance targets based onusing our incentive compensation awards to support our strategic and operating plans. We also closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity, so that we may ensure that our compensation programs are within the norm of market practices. This enables us to retainaids in the retention of our executive officersNEOs in a competitive market for executive talent.

We believe that our executive compensation programs haveprogram has been effective at encouragingdriving the achievement of positiveour target financial and strategic results, appropriately aligning executive pay and corporate performance, and in enabling us to attract and retain very talentedtop executives within our industry.

Additionally, during fiscal year 2012, the Executive Compensation Committee engaged in an extended campaign to collect feedback from our stockholders about the


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effectiveness of our “pay-for-performance” philosophy (discussed further in “Compensation Discussion and Analysis—Response to 2012 Say-on-Pay Vote”).
In addition to taking stockholder feedback into account, the Executive Compensation Committee evaluated our compensation philosophy in light of our long-term objectives, competitive issues we face in the marketplace, and compensation trends identified by Compensia, the Committee’s independent consultant. Taking these considerations together, and in order to motivate our executives to drive the Company’s long-term strategic priorities and build stockholder value, the Committee made several changes to our executive compensation programs for fiscal year 2013, including:
Eliminating the supplemental cash bonus pool that, per Executive Compensation Committee delegation, was previously awardable at the discretion of our CEO to executive officers (no such bonuses were awarded by the CEO in fiscal year 2012);
Making fundamental changes to our 2013 Performance Share Program to better link our NEOs’ target total direct compensation to the longer-term performance of the company, based on a single objective financial measure—total stockholder return—over a three-year performance period, as described in greater detail below; and
Overhauling our Executive Annual Incentive Plan in order to align our NEOs’ cash bonus incentives with the company’s strategic priorities of driving annualized recurring revenue growth in Digital Media and new business bookings in Digital Marketing in order to build significant recurring revenue streams as we continue to transition our business towards subscriptions and cloud-based services, such as Creative Cloud and Adobe Marketing Cloud; as well as tying portions of the cash bonus opportunity to a customer satisfaction objective and an individual goal component tailored to each executive, including in appropriate circumstances, objectives related to profitability.
Additional information regarding our FY2013 Executive Annual Incentive Plan is available in our Current Report on Form 8-K filed with the SEC on January 28, 2013.
Additionally, following discussions with an institutional investor holding over five percent of our stock regarding potential changes to our compensation programs, our Board of Directors increased the size of our board and appointed a representative of the stockholder as a director and member of our Executive Compensation Committee. We believe this addition has brought a key stockholder voice into our executive compensation process, enabling us to better align the incentives of our NEOs with our stockholders’ long-term interests as we finalized our fiscal year 2013 executive compensation programs in January.
Equity Compensation Mix
Each year, the Executive Compensation Committee, with input from our stockholders, management, our Chief Executive Officer, legal counsel and Compensia, determines the mix of annual equity incentive awards. For fiscal year 2013, 50% of the target value of our NEOs’ equity awards will be based on an objective performance measure, and 50% of the target value will be time based. The Executive Compensation Committee determined that this mix of equity compensation would appropriately balance and meet our compensation objectives, as described in the table below.

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Fiscal Year 2013 Mix of Annual Equity Incentive Awards
Type of
Equity
DescriptionObjectives/Dilutive Effect
Vesting(1)
Performance SharesStock-settled awards subject to long-term performance conditions; three-year performance period determines the total number of shares eligible to be earned, with significant benefits for overachievement and significant consequences for underachievement, including the potential for no award being earned; no purchase cost to executive, so awards always have value if earnedFocus NEOs on a three-year performance goal tied to long-term stockholder returns while also providing a strong retention incentive, requiring continuous employment to vest; provide significant incentive to grow our stock priceVest 100% after three years upon the certification of performance results
RSUsStock-settled awards subject to time-based vesting conditions; no purchase cost to executive, so awards always have valueProvide a strong incentive for our NEOs to remain employed with us, requiring continuous employment while vesting; provide moderate reward for growth in our stock price
Vest in equal annual installments over a period of two years(2)
_________________________
(1)
Our equity awards are also subject to certain acceleration provisions as described below under “Severance and Change of Control Compensation” below and “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2012—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2012 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards.”
(2)
As we transition to a three-year performance period under our 2013 Performance Share Program, annual RSU awards to our senior executives for fiscal year 2013 will vest 1/2 on the anniversary of the grant date over a two-year period. We expect that in future years, all annual RSU grants will vest over a three-year period.
2013 Performance Share Program
Our Executive Compensation Committee fundamentally modified our Performance Share Program for fiscal year 2013, eliminating the use of qualitative performance objectives, with 100% of shares to be earned based on the achievement of an objective total stockholder return measure over a three-year performance period. All performance share awards will vest upon the Executive Compensation Committee’s certification of results, which will be three years following the date of grant. Accordingly, the performance shares will align our NEOs’ interests with those of our stockholders over the long term, while also providing key retention incentives, as the shares will only be awarded if an NEO remains providing service to Adobe (or an affiliate) three years following the date of grant.
The participants can earn between 0% and 200% (the payout cap under our program) of the target amount of Performance Share awards, and the amount of Performance Shares actually awarded is based on a cumulative three-year TSR measure, which would compare the TSR of our common stock against the TSR of the companies included in the NASDAQ 100 Index as of December 1, 2012 during the course of the three-year period. The number of Performance Shares awarded will increase or decrease 2.5% for every percentile that Adobe’s TSR percentile rank is above or below, respectively, the NASDAQ 100 companies’ 50th percentile, and no shares will be awarded if our performance ranks below the 25th percentile for the three-year performance period. Additionally, regardless of our relative position with respect to the NASDAQ 100 companies, the award will be capped at 100% of target in the case of Adobe having a negative absolute TSR over the measurement period.
Advisory Vote and Board Recommendation

We request stockholder approval of the 2010fiscal year 2012 compensation of our NEOs as disclosed in this proxy statement pursuant to the SEC'sSEC’s compensation disclosure rules (which disclosure includes the "Compensation“Compensation Discussion and Analysis,"” the compensation tables, and the narrative disclosuresdiscussion that accompanyaccompanies the compensation

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tables within the Executive Compensation section of this proxy statement). We encourage you to review the Compensation Discussion and Analysis and accompanying compensation tables and narrative discussion elsewhere in this proxy statement for a description and analysis of our principal executive compensation actions and decisions for fiscal year 2012.
This vote is not intended to address any specific element of compensation, but rather the overall compensation of our NEOs and the compensation philosophy, policies, practices and practicesdisclosures described in this proxy statement.

Accordingly, we ask that you vote "FOR"“FOR” the following resolution at this meeting:

“RESOLVED, that the stockholders of Adobe Systems Incorporated approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the company'scompany’s proxy statement for the 20112013 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20102012 Summary Compensation Table and the other relatedaccompanying compensation tables and disclosurenarrative discussion within the Executive Compensation section of this proxy statement."

”

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Approval of the above resolution requires the affirmative vote of the holders of a majority of the votes cast in person or by proxy and entitled to vote at this meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal.

As an advisory vote, the outcome of the vote on this Proposal is not binding upon us.us or our Board. However, our Executive Compensation Committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by our stockholders in their vote on this Proposal and will consider the outcome of this vote when making future compensation decisions for our NEOs.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL

executive officers. We hold such advisory votes on executive compensation each year and will hold another advisory vote at our 2014 Annual Meeting of Stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL



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PROPOSAL 7
ADVISORY VOTE ON THE FREQUENCY OF
THE ADVISORY VOTE ON EXECUTIVE COMPENSATION

        As described in our "say-on-pay" Proposal 6 above, our stockholders are being asked to cast an advisory vote on the compensation of our NEOs, as disclosed in this proxy statement. In addition, we are asking our stockholders to cast an advisory vote on how often we should include a say-on-pay vote in our proxy materials for future stockholder meetings. Stockholders may vote to request the say-on-pay vote every year, every two years or every three years, or may abstain from voting.

Advisory Vote and Board Recommendation

        Our Board believes that say-on-pay votes should be conducted every year so that our stockholders may provide us with their direct input on our compensation philosophy, policies and practices, as disclosed in our proxy statement each year. Our Board's determination was based upon the premise that NEO compensation is evaluated, adjusted and approved on an annual basis by our Executive Compensation Committee and that the metrics that are used in determining performance-based award achievements are annual metrics. Our Executive Compensation Committee, which administers our executive compensation programs, values the opinions expressed by our stockholders in these votes and will consider the outcome of these votes in making its decisions on executive compensation.

        You may cast your vote on your preferred voting frequency by choosing one year, two years, three years or abstain from voting when you vote in response to the resolution set forth below.

        The option of one year, two years or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting will be the frequency for the advisory vote on executive compensation that has been recommended by stockholders. Abstentions and broker non-votes will have no effect on the outcome of this Proposal. However, because this vote is advisory and not binding on the Board or Adobe in any way, the Board may decide that it is in the best interests of our stockholders and Adobe to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.

OUR BOARD UNANIMOUSLY RECOMMENDS AN ANNUAL ADVISORY VOTE ON THE COMPENSATION OF OUR EXECUTIVE OFFICERS


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CORPORATE GOVERNANCE

Corporate Governance Guidelines

We believe in sound corporate governance practices and have adopted formal Corporate Governance Guidelines to enhance our effectiveness. Our Board adopted these Corporate Governance Guidelines in order to ensure that it has the necessary practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices our Board follows with respect to Board and committee composition and selection, Board meetings, Chief Executive Officer performance evaluation and management development and succession planning for senior management, including the Chief Executive Officer position. A copy of our Corporate Governance Guidelines is available on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html.

Code of Ethics

We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer and certain other finance department executives, which is a "code“code of ethics"ethics” as defined by applicable SEC rules. The Code of Ethics is publicly available on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html. If we make any amendments to the Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this Code of Ethics to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer or certain other finance department executives, we will disclose the nature of the amendment or waiver, its effective date, and to whom it applies, on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html or in a current report on Form 8-K filed with the SEC. There were no waivers of the Code of Ethics during fiscal year 2010.2012.

Code of Business Conduct

We have also adopted a Code of Business Conduct applicable to all officers, directors and employees of Adobe as required by applicable NASDAQ listing standards. The Code of Business Conduct includes an enforcement mechanism, and any waivers for directors or executive officers must be approved by our Board and disclosed in a current report on Form 8-K with the SEC. This Code of Business Conduct is publicly available on our website athttp://www.adobe.com/corporateresponsibility/corporate.htmlcorporate-responsibility/governance-policies-guidelines.html. There were no waivers of the Code of Business Conduct for any of our directors or executive officers during fiscal year 2010.2012.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of February 25, 201114, 2013 by each entity or person who is known to beneficially own 5% or more of our common stock, each of our directors, each NEO identified in "Executive“Executive Compensation—Summary Compensation Table"Table” contained in this proxy statement and all of our directors and current executive officers as a group.

Name of Beneficial Owner(1)
 Amount and Nature of
Beneficial Ownership(2)		 Percent of Class 

PRIMECAP Management Company
225 South Lake Avenue, No. 400
Pasadena, CA 91101

  38,952,416(3) 7.70%

Shantanu Narayen

  
1,877,414
(4)		 
*		 

Mark Garrett

  
516,407
(5)		 
*		 

Kevin Lynch

  
608,601
(6)		 
*		 

Robert Tarkoff

  
394,651
(7)		 
*		 

Matthew Thompson

  
444,832
(8)		 
*		 

Joshua James

  
455,288
(9)		 
*		 

Edward W. Barnholt

  
136,583
(10)		 
*		 

Robert K. Burgess

  
230,053
(11)		 
*		 

Michael R. Cannon

  
125,325
(12)		 
*		 

James E. Daley

  
256,477
(13)		 
*		 

Charles M. Geschke

  
459,514
 14)		 
*		 

Carol Mills

  
107,203
(15)		 
*		 

Daniel L. Rosensweig

  
26,250
(16)		 
*		 

Robert Sedgewick

  
243,953
(17)		 
*		 

John E. Warnock

  
1,411,459
(18)		 
*		 

All directors and current executive officers as a group (18 persons)

  
7,987,204
(19)		 
1.56
%
Name of Beneficial Owner(1)
  
Amount and Nature of
Beneficial Ownership(2)
  Percent of Class
       
PRIMECAP Management Company41,990,090
(3) 
 8.37%
225 South Lake Avenue, No. 400
Pasadena, CA 91101

    
ValueAct Capital Master Fund, L.P. and related entities31,303,362
(4) 
 6.24%
435 Pacific Avenue, Fourth Floor
San Francisco, California 94133

    
The Bank of New York Mellon Corporation28,972,829
(5) 
 5.78%
One Wall Street, 31st Floor
New York, New York 10286
    
Shantanu Narayen1,989,013
(6) 
 *
Mark Garrett634,580
(7) 
 *
Kevin Lynch377,558
(8) 
 *
Matthew Thompson558,892
(9) 
 *
David Wadhwani174,627
(10) 
 *
Amy L. Banse5,000
(11) 
 *
Kelly J. Barlow—
(12) 
  
Edward W. Barnholt157,011
(13) 
 *
Robert K. Burgess247,801
(14) 
 *
Frank A. Calderoni—
(15) 
  
Michael R. Cannon145,753
(16) 
 *
James E. Daley211,089
(17) 
 *
Laura B. Desmond—
(18) 
  
Charles M. Geschke508,298
(19) 
 *
Daniel L. Rosensweig40,428
(20) 
 *
Robert Sedgewick228,565
(21) 
 *
John E. Warnock1,070,087
(22) 
 *
All directors and current executive officers as a group (20 persons)6,591,612
(23) 
 1.30%
_________________________
*Less than 1%.
(1)
The address of each person named in the table, unless otherwise indicated, is c/o Adobe Systems Incorporated, 345 Park Avenue, San Jose, California 95110.
(2)
This table is based upon information supplied by executive officers, directors and principal stockholders. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. None of the shares beneficially owned by our executive officers and directors are pledged as security. Applicable percentages are based on 501,548,019 shares outstanding on February 14, 2013, adjusted as required by rules promulgated by the SEC.
(3)
Includes 41,990,090 shares beneficially held by PRIMECAP Management Company (“PRIMECAP”) as of December 31, 2012, with sole dispositive power as to all shares and sole voting power as to 11,561,450

41
*
Less than 1%.

(1)
The address of each person named in the table, unless otherwise indicated, is c/o Adobe Systems Incorporated, 345 Park Avenue, San Jose, California 95110.

(2)
This table is based upon information supplied by executive officers, directors and principal stockholders. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. None of the shares beneficially owned by our executive officers and directors are pledged as security. Applicable percentages are based on 506,112,690 shares outstanding on February 25, 2011, adjusted as required by rules promulgated by the SEC.

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(3)
Includes 38,952,416 shares beneficially held by PRIMECAP Management Company ("PRIMECAP") as of December 31, 2010, with sole dispositive power as to all shares and sole voting power as to 10,340,402


shares. Of those shares beneficially held by PRIMECAP, as of February 14, 2011, Vanguard-related entities have sole voting power over 27,720,30030,428,640 shares. This information is based on a Schedule 13G13G/A filed with the SEC on February 14, 20112013 by PRIMECAP and additional information provided by a representative of PRIMECAP on February 15, 2011.14, 2013.
(4)
Reflects shared voting and dispositive power with respect to 31,303,362 shares (and sole voting and dispositive power with respect to 0 shares) for each of (a) ValueAct Capital Master Fund, L.P. (“ValueAct Master Fund”), (b) VA Partners I, LLC (“VA Partners I”), (c) ValueAct Capital Management, L.P. (“ValueAct Management L.P.”), (d) ValueAct Capital Management, LLC (“ValueAct Management LLC”), (e) ValueAct Holdings, L.P. (“ValueAct Holdings”) and (f) ValueAct Holdings GP, LLC (“ValueAct Holdings GP”) (collectively, “ValueAct”). ValueAct Master Fund is a limited partnership organized under the laws of the British Virgin Islands. VA Partners I is a Delaware limited liability company, the principal business of which is to serve as the General Partner to ValueAct Master Fund. ValueAct Management L.P. is a Delaware limited partnership which renders management services to ValueAct Master Fund. ValueAct Management LLC is a Delaware limited liability company, the principal business of which is to serve as the General Partner to ValueAct Management L.P. ValueAct Holdings is a Delaware limited partnership and is the sole owner of the limited partnership interests of ValueAct Management L.P. and the membership interests of VA Partners I. ValueAct Holdings GP is a Delaware limited liability company, the principal business of which is to serve as the General Partner to ValueAct Holdings. Shares reported as beneficially owned by ValueAct Master Fund are also reported as beneficially owned by: (i) ValueAct Management L.P. as the manager of each such investment partnership; (ii) ValueAct Management LLC, as General Partner of ValueAct Management L.P.; (iii) ValueAct Holdings, as the sole owner of the limited partnership interests of ValueAct Management L.P. and the membership interests of ValueAct Management LLC and as the majority owner of the membership interests of VA Partners I; and (iv) ValueAct Holdings GP, as General Partner of ValueAct Holdings. Shares reported as beneficially owned by ValueAct Master Fund are also reported as beneficially owned by VA Partners I, as General Partner of ValueAct Master Fund. VA Partners I, ValueAct Management L.P., ValueAct Management LLC, ValueAct Holdings and ValueAct Holdings GP also, directly or indirectly, may own interests in one or more than one of the partnerships from time to time. By reason of such relationship ValueAct Master Fund is reported as having shared power to vote or to direct the vote, and shared power to dispose or direct the disposition of, such shares of common stock, with VA Partners I (only with respect to ValueAct Master Fund), ValueAct Management L.P., ValueAct Management LLC, ValueAct Holdings and ValueAct Holdings GP. The foregoing information is based solely on Amendment No. 2 to Schedule 13D jointly filed by the ValueAct entities with the SEC on December 6, 2012 that reported beneficial ownership as of December 4, 2012.
(5)
Reflects the beneficial ownership of The Bank of New York Mellon Corporation as of December 31, 2012, with sole dispositive power as to 28,033,905 shares and shared dispositive power as to 17,433 shares, and with sole voting power as to 22,174,390 shares and shared voting power as to 416,540 shares. The beneficial ownership of MBC Investments Corporation consisted of 26,442,171 shares, with sole dispositive power as to all shares, sole voting power as to 18,785,784 shares and shared voting power as to 410,666 shares. The shares reported are beneficially owned by the following direct or indirect subsidiaries of The Bank of New York Mellon Corporation: The Bank of New York Mellon, BNY Mellon, National Association, BNY Mellon Trust of Delaware, The Dreyfus Corporation, Lockwood Advisors, Inc., Mellon Capital Management Corporation, Newton Capital Management Limited, Newton Investment Management Limited, Walter Scott & Partners Limited, MBSC Securities Corporation, Pershing LLC, The Bank of New York Mellon Corporation, B.N.Y. Holdings (Delaware) Corporation, MBC Investments Corporation, BNY Mellon Investment Management Holdings LLC, Mellon International Holdings S.A.R.L., BNY Mellon International Asset Management Group Limited, Newton Management Limited, Pershing Group LLC and The Bank of New York Mellon SA/NV. The foregoing information is based on a Schedule 13G filed by The Bank of New York Mellon corporation on February 4, 2013 reporting beneficial ownership as of December 31, 2012.
(6)
Consists of 230,797 shares held by the Narayen Family Trust, of which Mr. Narayen is a trustee, and 1,758,216 shares issuable upon exercise of outstanding options held by Mr. Narayen exercisable within 60 days of the date of this table.
(7)
Consists of 147,847 shares held by the Garrett Living Trust, of which Mr. Garrett is a trustee, and 486,733 shares issuable upon exercise of outstanding options held by Mr. Garrett exercisable within 60 days of the date of this table.

42
(4)
Consists of 204,818 shares held by the Narayen Family Trust, of which Mr. Narayen is a trustee, and 1,672,596 shares issuable upon exercise of outstanding options held by Mr. Narayen exercisable within 60 days of the date of this table.

(5)
Consists of 57,384 shares held by the Garrett Living Trust, of which Mr. Garrett is a trustee, and 459,023 shares issuable upon exercise of outstanding options held by Mr. Garrett exercisable within 60 days of the date of this table.

(6)
Includes 540,402 shares issuable upon exercise of outstanding options held by Mr. Lynch exercisable within 60 days of the date of this table.

(7)
Includes 359,350 shares issuable upon exercise of outstanding options held by Mr. Tarkoff exercisable within 60 days of the date of this table.

(8)
Includes 395,498 shares issuable upon exercise of outstanding options held by Mr. Thompson exercisable within 60 days of the date of this table.

(9)
Includes 454,614 shares issuable upon exercise of outstanding options held by Mr. James exercisable within 60 days of the date of this table. Mr. James resigned from his employment with Adobe effective July 30, 2010. The information with regards to his holdings other than shares issuable upon exercise of outstanding options is what was known to Adobe as of July 30, 2010.

(10)
Includes 131,583 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Mr. Barnholt.

(11)
Consists of 96,850 shares held by the Burgess Family Trust, of which Mr. Burgess is a trustee; 1,620 shares, for which Mr. Burgess has shared voting and dispositive power, held in trust for the benefit of his children; and 131,583 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Mr. Burgess.

(12)
Consists of 15,629 shares held by the Michael Cannon 2004 Trust, of which Mr. Cannon is a trustee; and 109,696 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Mr. Cannon.

(13)
Includes 248,477 shares issuable upon exercise of outstanding options held by Mr. Daley exercisable within 60 days of the date of this table.

(14)
Consists of 224,500 shares held by the Geschke Family Trust, of which Dr. Geschke is a trustee; 36,000 shares held in a grantor retained annuity trust of which Dr. Geschke is a trustee; 36,000 shares held in a grantor retained annuity trust of which Dr. Geschke's spouse is a trustee; 6,431 shares held in a foundation, of which Dr. Geschke is president and Dr. Geschke's spouse is secretary, and as to which Dr. Geschke disclaims any beneficial ownership; and 156,583 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Dr. Geschke.

(15)
Includes 96,888 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Ms. Mills as all outstanding unvested options issued to Ms. Mills shall become fully vested and exercisable on April 21, 2011, provided Ms. Mills continues to serve as a director on the Board until such time.

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(16)
Includes 5,946


(8)
Includes 328,398 shares issuable upon exercise of outstanding options held by Mr. Lynch exercisable within 60 days of the date of this table.
(9)
Includes 518,747 shares issuable upon exercise of outstanding options held by Mr. Thompson exercisable within 60 days of the date of this table.
(10)
Includes 151,046 shares issuable upon exercise of outstanding options held by Mr. Wadhwani exercisable within 60 days of the date of this table.
(11)
Ms. Banse was appointed to our Board on May 14, 2012.
(12)
Mr. Barlow was appointed to our Board on December 4, 2012. As a partner of ValueAct Capital, Mr. Barlow may be deemed to be the beneficial owner of shares held by the ValueAct entities as described in footnote 4. Mr. Barlow disclaims beneficial ownership except to the extent of his pecuniary interest in each applicable ValueAct entity.
(13)
Includes 138,973 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Barnholt.
(14)
Consists of 107,208 shares held by the Burgess Family Trust, of which Mr. Burgess is a trustee; 1,620 shares, for which Mr. Burgess has shared voting and dispositive power, held in trust for the benefit of his children; and 138,973 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Burgess.
(15)
Mr. Calderoni was appointed to our Board on May 14, 2012.
(16)
Consists of 28,667 shares held by the Michael Cannon 2004 Trust, of which Mr. Cannon is a trustee; and 117,086 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Cannon.
(17)
Includes 203,089 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Daley.
(18)
Ms. Desmond was appointed to our Board on May 14, 2012.
(19)
Consists of 302,446 shares held by the Geschke Family Trust, of which Dr. Geschke is a trustee; 6,431 shares held in the Charles M Geschke and Nancy A Geschke foundation, a 501(c)(3) private non-operating foundation, of which Dr. Geschke is president and Dr. Geschke’s spouse is secretary, and as to which Dr. Geschke disclaims any beneficial ownership; and 199,421 shares issuable upon exercise of outstanding options held by Dr. Geschke exercisable within 60 days of the date of this table.
(20)
Includes 7,086 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Rosensweig.
(21)
Includes 169,304 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Dr. Sedgewick.
(22)
Consists of 820,523 shares held by the Warnock Family Trust, of which Dr. Warnock is a trustee; 16,088 shares held by Dr. Warnock; and 233,476 shares issuable upon exercise of outstanding options held by Dr. Warnock exercisable within 60 days of the date of this table.
(23)
Includes 4,649,207 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by our directors and current executive officers. See also footnotes 6-22.

43
Table of the date of this table upon vesting of restricted stock units held by Mr. Rosensweig.Contents


(17)
Includes 190,638 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Dr. Sedgewick.

(18)
Includes 270,638 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by Dr. Warnock.

(19)
Includes 5,768,686 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding options held by our directors and current executive officers. See also Notes 4-8 and 10-18.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our executive officers and directors, andas well as any person or entity who owns more than 10% of a registered class of our common stock or other equity securities, to file with the SEC certain reports of ownership and changes in ownership of our securities. Executive officers, directors and stockholders who hold more than 10% of our outstanding common stock are required by the SEC to furnish us with copies of all required forms filed under Section 16(a). We prepare Section 16(a) forms on behalf of our executive officers and directors based on the information provided by them.

Based solely on review of this information and written representations by our executive officers and directors that no other reports were required, we believe that, during fiscal year 2010,2012, no reporting person failed to file the forms required by Section 16(a) of the Exchange Act on a timely basis.


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EQUITY COMPENSATION PLAN INFORMATION

The following table shows information related to our common stock which may be issued under our existing equity compensation plans as of December 3, 2010,November 30, 2012, including our 1997 Employee Stock Purchase Plan, 2003 Equity Incentive Plan, and 1994 Performance and Restricted Stock Plan, plus certain non-stockholder-approved equity compensation plans and awards assumed by us (and which were not subsequently voted on by Adobe'sAdobe’s stockholders) in connection with our acquisitions of Macromedia, Inc. in December 2005, Omniture, Inc. in October 2009, and Day Software Holding AG in October 2010:

2010, Demdex, Inc. in January 2011, EchoSign, Inc. in July 2011, Typekit, Inc. in September 2011, Auditude, Inc. in October 2011, and Efficient Frontier, Inc. in January 2012:

Plan Category
 Number of
securities to be
issued upon exercise
of outstanding
options,
performance shares
and restricted
stock units		 Weighted-average
exercise price of
outstanding
options,
performance
shares
and restricted
stock units		 Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in first
column)		  Number of
securities to be
issued upon exercise
of outstanding
options,
performance shares
and restricted
stock units		 Weighted-average
exercise price of
outstanding
options,
performance
shares
and restricted
stock units		 Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in first
column)

Equity compensation plans approved by Adobe's stockholders

 44,407,047(1)$22.28 55,428,270(2)

Equity compensation plans not approved by Adobe's stockholders(3)

 7,491,840 18.05 3,899,856 
           
Equity compensation plans approved by
Adobe’s stockholders
Equity compensation plans approved by
Adobe’s stockholders
38,830,731(1)

 $18.43 
55,776,065(2)

Equity compensation plans not approved by
Adobe’s stockholders(3)
Equity compensation plans not approved by
Adobe’s stockholders(3)
6,143,193
 11.59 1,392,089

Total

 51,898,887 $21.67 59,328,126 Total44,973,924
 $17.49 57,168,154
       
(1)
Includes 374,882 shares of common stock issuable pursuant to the terms of our 2010 Performance Share Program at maximum levels (150%) as of December 3, 2010. However, after the 2010 fiscal year end, it was determined that 135% of the target awards (337,394 shares) were earned under the terms of this program and the balance (37,488 shares) were forfeited as of January 24, 2011. See "Compensation Discussion and Analysis" in this proxy statement for a discussion of actual results under the 2010 Performance Share Program.

(2)
Includes 9,044,971 shares which are reserved for issuance under the 1997 Employee Stock Purchase Plan as of December 3, 2010 for which no weighted average exercise price has been assumed in the table above.

(3)
On December 3, 2005, in connection with our acquisition of Macromedia, we assumed the outstanding stock awards and the shares remaining available for future issuance under various equity incentive plans maintained by Macromedia. On October 23, 2009, in connection with our acquisition of Omniture, we assumed the outstanding stock awards and the shares remaining available for future issuance under various equity incentive plans maintained by Omniture. On October 28, 2010, in connection with our acquisition of Day Software, we assumed the outstanding unvested stock options issued under various equity incentive plans maintained by Day Software.
(1)
Includes 1,688,175 shares of common stock issuable pursuant to the terms of our 2012 Performance Share Program at maximum levels (150%) as of November 30, 2012. However, after the 2012 fiscal year end, it was determined that 116% of the target awards (1,305,522 shares) were earned under the terms of this program and the balance (382,653 shares) were forfeited as of January 24, 2013; in addition, 49,518 shares were forfeited due to participants’ departure from Adobe prior to the certification date. See “Compensation Discussion and Analysis” in this proxy statement for a discussion of actual results under the 2012 Performance Share Program.
(2)
Includes 19,205,921 shares that are reserved for issuance under the 1997 Employee Stock Purchase Plan as of November 30, 2012.
(3)
We assumed the outstanding stock awards and shares remaining available for future issuance under various equity incentive plans maintained by companies we acquired, as follows:
CompanyDate of Acquisition
Macromedia, Inc.December 3, 2005
Omniture, Inc.October 23, 2009
Day Software Holding AGOctober 28, 2010
Demdex, Inc.January 18, 2011
EchoSign, Inc.July 15, 2011
Typekit, Inc.September 28, 2011
Auditude, Inc.October 18, 2011
Efficient Frontier, Inc.January 13, 2012
We also assumed certain non-stockholder approved grants made outside of the assumed equity compensation plans described above. As of December 3, 2010,November 30, 2012, these assumed grants covered a total of 41,43212,247 shares of our common stock at a weighted average exercise price of $10.50.$9.06. The shares to be issued upon exercise of these grants are included in the "Equity“Equity compensation plans not approved by stockholders"stockholders” row of the table.

As part of the assumption of the Macromedia plans, effective December 3, 2005, our Board adopted the Adobe Systems Incorporated 2005 Equity Incentive Assumption Plan (the "Assumption Plan"“Assumption Plan”). The Assumption Plan

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permits the grant of non-statutory stock options, stock appreciation rights, stock purchase rights, stock bonuses, restricted stock, restricted stock units, performance shares and performance units using shares reserved under certain of the assumed Macromedia plans (as described below). In connection with our assumption of the Omniture plans, on November 16, 2009,


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the Assumption Plan was amended by the Board to include shares reserved under certain of the assumed Omniture plans (as described below). The Assumption Plan has not been approved by our stockholders. The terms and conditions of stock awards under the Assumption Plan are substantially similar to those under our 2003 Equity Incentive Plan. In accordance with applicable NASDAQ listing requirements, we may grant new stock awards under the Assumption Plan to our employees who were not employed by or providing services to us or any of our affiliates prior to December 3, 2005 (other than employees of Macromedia before December 3, 2005, and Omniture before October 23, 2009, and their respective affiliates and subsidiaries).

Under the Assumption Plan, an aggregate of 3,899,8561,392,089 shares of our common stock is reserved for issuance. Such share reserve consists solely of the unused and converted share reserves and potential reversions to the share reserves with respect to certain Macromedia and Omniture plans (as described below). The share reserve is divided into Reserves A through E. As of December 3, 2010,November 30, 2012, the reserves were as follows:

Reserve(1)
Shares of
Common Stock,
Including Unused
Share Reserve
and Reversions
(#)		Acquired Plans from which Unused Share Reserve
and Reversions Are Comprised		Last Day Stock Can Be
Awarded from Reserve
B  1,040,934
B54,072
 Macromedia, Inc. 2002 Equity Incentive Plan November 10, 2014
   Allaire Corporation 1997 Stock Incentive Plan  
   Allaire Corporation 1998 Stock Incentive Plan  
   Allaire Corporation 2000 Stock Incentive Plan  

C		692,109

 
2,298,363

Omniture, Inc. 2006 Equity Incentive Plan
 
March 23, 2016
D27,69525,120
 Omniture, Inc. 2007 Equity Incentive Plan June 30, 2015
E618,213535,439
 Omniture, Inc. 2008 Equity Incentive Plan July 14, 2014
(1)_________________________________________
Reserve A, which comprised shares from the Andromedia, Inc. 1999 Stock Plan acquired in connection with the Macromedia acquisition, expired on August 1, 2009.

(1)
Reserve A, which comprised shares from the Andromedia, Inc. 1999 Stock Plan acquired in connection with the Macromedia acquisition, expired on August 1, 2009.

The Assumption Plan limits the number of shares that may be issued from Reserve B in the form of stock purchase rights, stock bonuses, restricted stock units, performance shares, or performance units to 100,000 shares of our common stock. For each award granted under Reserves C, D or E, the applicable reserve will be reduced by one share of common stock for each stock option or stock appreciation right, and by 1.77 shares of common stock for all other awards. If an award for any reason expires, terminates or is canceled without having been exercised or settled in full, or if shares of stock acquired pursuant to an award are forfeited or repurchased by us, those shares will be added back to the applicable reserve in the amount corresponding to the original reduction and will again be available for issuance under the Assumption Plan.

Our Board may terminate or amend the Assumption Plan at any time subject to applicable rules. In the event of a sale of substantially all of our voting stock, a merger involving us, the sale of substantially all of our assets, or a liquidation or dissolution of us, stock awards covered by the Assumption Plan may be assumed or substituted by a successor entity. In the event that a successor entity elects not to assume or substitute for such stock awards, the stock awards will become fully vested.

In addition to the Assumption Plan, as of the fiscal year ended December 3, 2010,November 30, 2012, we maintained seveneight equity compensation plans assumed by us in connection with the Macromedia acquisition, tennine plans assumed by us in connection with the Omniture acquisition, and two plans assumed by us in connection with the Day Software acquisition, one plan assumed by us in connection with the Demdex acquisition, two plans assumed by us in connection with the EchoSign acquisition, one plan assumed by us in connection with the Typekit acquisition, two plans assumed by us in connection with the Auditude acquisition, and one plan and one non-plan stock option agreement assumed by us in connection with the Efficient Frontier acquisition under which stock awards had been granted by these predecessor entities that remained outstanding at the time of the Macromedia, Omniture, and Day Software, Demdex, EchoSign, Typekit, Auditude and Efficient Frontier acquisitions, respectively. The "Equity“Equity compensation plans not approved by stockholders"stockholders” row


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in the "Equity“Equity Compensation Plan Information"Information” table above shows aggregated share reserve


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information for these plans and awards. Other than through the Assumption Plan, no future awards may be granted under theseany of our acquired plans.

Please see Part II, Item 8 "Financial“Financial Statements and Supplementary Data"Data” of our 20102012 Annual Report on Form 10-K in the notes to Consolidated Financial Statements at Note 13, "Stock-based Compensation"12, “Stock-based Compensation” for further information regarding our equity compensation plans and awards.


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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information regarding our Total Rewards Program during fiscal year 20102012 for the following executive officers and one former executive officer of Adobe:

Shantanu Narayen, President and Chief Executive Officer
Mark Garrett, Executive Vice President and Chief Financial Officer
Kevin Lynch, SeniorExecutive Vice President, Chief Technology Officer
Robert Tarkoff, Senior Vice President, Digital Enterprise Solutions Business Unit
Matthew Thompson, SeniorExecutive Vice President, Worldwide Field Operations
Joshua James, Former
David Wadhwani, Senior Vice President Omniture Business Unit

and General Manager, Digital Media

These executive officers are referred to in this Compensation Discussion and Analysis and in the subsequentaccompanying compensation tables as our named executive officers, or "NEOs."

        Mr. James's employment terminated effective as of his resignation on July 30, 2010. We provided certain severance payments and benefits to Mr. James as described in further detail under "Executive Compensation—Potential Payments upon Termination and/or a Change of Control" below.

“NEOs.”

This Compensation Discussion and Analysis describes the material elements of our Total Rewards Program for our executive officers during fiscal year 2010.2012. It also provides an overview of our executive compensation philosophy, including our principal compensation policies and practices. Finally, it analyzes how and why the Executive Compensation Committee of our Board arrived at the specificmaterial compensation decisions for our executive officers, including our NEOs, in fiscal year 2010, and discusses the key factors that the Executive Compensation Committee considered in determining NEO compensation.

2012.

Executive Summary

Adobe's vision is to change the world through digital experiences. To support our product and technical innovation with strong execution, we strive to create a dynamic work environment that attracts and retains great people who contribute directly to organizational priorities, innovation, customer focus and growth for Adobe. Our Total Rewards Program plays a fundamental role in creating this environment by rewarding all levels of employees, including our NEOs, for the successful execution of our short-termshort- and long-term business objectives.

Total Rewards Program for Our NEOs

        Under our Total Rewards Program:


Business and RSUs), health and welfare benefits (provided on the same terms as generally available to all employees) and change of control benefits.

•
Competitive Positioning.  Generally, we target the total direct compensation ("TDC") (which includes base salary, annual cash incentive award and equity incentives) of our NEOs between the 50th and 75th percentile of our competitive market, which we define using a peer group of similarly sized software companies (which is reviewed and updated annually). Nonetheless, an individual executive officer's target TDC for a given year may be above or below this target range depending on his or her tenure, company and individual performance, anticipated future contributions, internal equity, importance to Adobe, and historical pay levels, as well as the level of unvested incentive awards and opportunities that we believe would enable us to retain our NEOs in light of potential competing offers from other companies.

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Mr. Narayen's Historical Cash Incentive Actual Earnings
and Adobe Financial Performance

Compensation Highlights
Fiscal Year
 Adobe Adjusted
Revenue(1)
($)		 Adobe Adjusted
Operating
Profit(1)
($)		 Annual Cash
Incentive
Target
($)		 Annual Cash
Incentive
Earnings
($)		 

2008

 3.6 billion 1.6 billion  1,093,750  1,257,812 

2009

 3.0 billion 1.1 billion  1,089,543  — 

2010

 3.9 billion 1.6 billion  1,136,978  2,160,259 
(1)
See the "Fiscal Year 2010 Executive Bonus Plan Measures" table below for information on how the Adjusted Revenue and Adjusted Operating Profit measures differ from equivalent GAAP measures.

Position
Shares
(#)

Chief Executive Officer

150,000

President, Executive Vice President or Chief Financial Officer

50,000

Senior Vice President

25,000

Fiscal Year 2010 Business Highlights

        Our executive officers have successfully managed our company through the recent dramatic global economic downturn.continued to deliver strong financial results and achieve target financial milestones. For the fiscal year ending December 3, 2010,November 30, 2012, we reported:

record revenue of $3.8$4.4 billion;

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        We believe we are positioned to continue our deliverytheir achievement of strongkey strategic performance for our stockholders, our customers and the communities we operate in and to continue to develop an engaged, innovative workforce.

Fiscal Year 2010 Compensation Decisions for Our NEOs

        Consistent with our compensation philosophy (as discussed below),objectives established by the Executive Compensation Committee set the compensation of our executive officers, including our NEOs, substantially based on their ability to achieve annual financial and operational objectives that further our long-term business objectives and to create sustainable long-term stockholder value in a cost-effective manner. Accordingly, ourfor fiscal year 2010 compensation actions2012. These achievements included:

launching the groundbreaking Creative Cloud and decisions were substantially based onCreative Suite 6 release, and achieving approximately 326,000 Creative Cloud paid memberships and over one million free members, exceeding targeted rates of subscription growth and resulting in our NEOs' accomplishments in these areas.

        ForCreative business exiting fiscal year 2010,2012 with $153 million in annualized recurring revenue (“ARR”), and enabling us to grow total Creative units sold by 13% over fiscal year 2011;


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releasing Adobe Marketing Cloud and delivering 35% year-over-year growth of related revenues, including outstanding Adobe CQ growth above forecasted rates;by consolidating 30 distinct offerings into five Adobe Marketing Cloud solutions, we have simplified our products and made it easier for customers to license and implement our solutions;
executing a strategic business acquisition of Efficient Frontier and successful integration, resulting in launches of Adobe Social and Adobe AdLens;
the successful launch of Project Primetime, a unified video platform that helps customers achieve broadcast audience reach, lower operating costs, and boost revenue from ad sales, enabling NBC to deliver live video streams of the London 2012 Olympic Games to its viewers on all major device types;
outstanding growth in our Digital Publishing Suite business, ahead of forecasted growth rates;
driving consistent, measurable improvement in customer satisfaction and retention;
increasing awareness of Adobe’s leadership in digital marketing through social media engagements and the successful launch of the “Metrics Not Myths” brand campaign in the U.S.;
executing upon key people objectives specific to internal hiring and growth, key talent integration and retention, and transforming the Company’s performance management approach; and
driving total returns to our stockholders that exceeded those of the NASDAQ 100 Index.
Consistent with these results, the Executive Compensation Committee took the following actions with respect to the incentive compensation of our NEOs:

determined that, based on strong GAAP revenue results, operating income and the acceleration of our President and Chief Executive Officer, received a 3% increase to his base salary.

•
Their actualbusiness transformation, their annual cash incentive award paymentsawards were eachpaid out at 190%100% of their target award opportunity (for more discussion of cash awards, see section captioned “Other Cash Incentives” below); and
determined that, based on our achievement of the pre-determined key strategic performance objectives related to our transformation, including Mr. Narayen's. These payments reflected the team's achievements resultingperformance of Adobe’s stock price and total stockholder return (“TSR”), overachievement in outstanding GAAP revenueCreative Cloud subscription adoption and operating profitstrong year-over-year growth of 29% and 44%, respectively, in fiscal year 2010 from fiscal year 2009, as compared to decreases of 18% and 33%, respectively, in fiscal year 2009 compared to fiscal year 2008.

•
In the case ofAdobe Marketing Cloud, their equity incentives:

•
The Executive Compensation Committee revised the features of the performance share awards for fiscal year 2010 to (i) establish a threshold GAAP revenue measure of $2.8 billion that had to be achieved before any NEO would be eligible to earn any shares under his award and (ii) provide other performance measures to more directly align the awards with our long-term strategic objectives.

•
The overall value of Mr. Narayen's fiscal year 2010 target annual equity incentives was approximately 83% of his target TDC, and target annual equity incentives for our other NEOs averaged approximately 64%were earned at 116% of their target TDCs.

•
The Executive Compensation Committee awarded special retention RSU grants (the "Retention RSU Awards"), in addition to the annual equity incentives referred to above, to enhance the retention ofaward opportunity.
These decisions were primarily based on our key employees, including several NEOs (as described below).

•
Mr. Narayen's aggregate equity incentive award, which had a "Target Value" (determined as described in footnote 1 to the "Mr. Narayen's Target Pay Mix" chart below) of approximately $10 million in fiscal year 2010, was significantly larger than the awards of the other NEOs due, in large part, to the decision of the Executive Compensation Committee not to make a special Retention RSU Award (as described below) to him. Instead the Executive Compensation Committee elected to address its retention concerns with respect to him by targeting his TDC and his equity award at the 90th percentile of our competitive market, as the types of awards making up the annual equity award reward future company performance more directly than the time-based Retention RSU Awards. The Executive Compensation Committee believed that this was the appropriate way to recognize

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These decisions were also consistent with our objectives of tying the recent acquisition of Omniture, Inc., and in navigating us through the global economic recession to align us for future growth.

Retention RSU Awards

        In response to serious attempts during fiscal years 2009 and 2010 to recruit manyoutcomes of our employees withincentive compensation offers containing equity awards with higher values than their current unvested Adobe equity award holdings, the Executive Compensation Committee granted special one-time RSU awards (the "Retention RSU Awards") to key talent within Adobe, including several NEOs, to enable us to retain the continued service of these individuals.

        The Retention RSU Awards for certain of our NEOs, which were granted at the same time that the Executive Compensation Committee considered its annual equity awards for fiscal year 2010 for our executive officers, were valued at approximately $1.8 million to each recipient NEO. To ensure that the Retention RSU Awards emphasize retention, they vest with respect to 50% of the underlying shares of our common stock on the second anniversary of the grant date and then, as to the remaining shares, 25% in equal annual installments on the third and fourth anniversaries of the grant date.

Pay-for-Performance Compensation Philosophy

        We have structured our executive compensation program so that the compensation of our executive officers, including our NEOs, is substantially tied to the achievement of our key businessstrategic performance objectives and the successreturns to our stockholders. As a practical matter, because approximately 80% of our stockholders. Accordingly,NEOs’ target compensation is comprised of equity awards, this means that, unless we achieve our financial and key strategic performance objectives each year and over the variablelong-term, our executive officers do not realize the potential value of their annual and long-term incentive compensation. Further, because Adobe common stock underlies our equity-based compensation awards, the immediate value of these awards is wholly subject to fluctuations in our stock price—thereby strongly aligning the interests of our executive officers (annual cash incentive opportunitywith our stockholders.

Response to 2012 Say-on-Pay Vote
Adobe and equity incentive awards) is designedthe Executive Compensation Committee value the input of our stockholders on our Total Rewards Program. We regularly communicate with our stockholders to directly alignbetter understand their opinions on our business strategy and objectives, as well as feedback regarding other matters of investor interest, such as executive compensation. In addition, throughout 2012 we engaged in a focused outreach effort to many of our institutional stockholders to solicit their feedback on our pay programs as well as potential changes for fiscal year 2013. The Executive Compensation Committee carefully considers this feedback as part of its annual review of our Total Rewards Program for our NEOs. In addition, stockholders are invited to express their views to the interestsExecutive

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Compensation Committee as described under the heading “Communications with the interestsBoard” in Proposal 1 of our stockholders.

        For example, in fiscal year 2009, when Adobe did not achieve its financial objectives, our executive officers did not earn any ofthis proxy statement. Finally, the performance shares that had been awarded for that year, nor did they receive any annual cash incentive award payments. In addition, our executive officers did not receive any base salary increase in fiscal year 2009 due toadvisory vote on the economic recession.

        Even in fiscal year 2010, when we significantly exceeded our short-term financial performance objectives and, accordingly, made payments under our annual cash incentive plan and under our performance share program, the overall compensation of our NEOs contained in Proposal 4 of this proxy statement provides stockholders with an opportunity to communicate their views on our executive officers was impacted bycompensation policies and practices under our Total Rewards Program.

In April 2012, we held an advisory vote on the performancecompensation of our stock price. This result canNEOs. While a majority of the votes cast on the proposal voted in support of the compensation paid to our NEOs for fiscal year 2011, a significant portion of our stockholders voted against the proposal. In view of this outcome, as well as the feedback that we gathered through our engagement efforts with many of our stockholders both before and after our 2012 Annual Meeting of Stockholders and as we spoke with stockholders throughout the calendar year, the Executive Compensation Committee has redesigned significant aspects of our Total Rewards Program, including as it pertains to our executive officers. Because the principal actions and decisions with respect to our Total Rewards Program for fiscal year 2012 had already been completed in January, the programs redesigned by our Executive Compensation Committee will initially apply to our fiscal year 2013 Total Rewards Program.
During its deliberations, the Executive Compensation Committee noted that investor feedback centered generally on three themes: (1) desiring a longer performance period for our Performance Share Program; (2) basing our Performance Share Program on objective metrics, such as TSR, to more closely align the compensation opportunity of our NEOs to stockholder interests; and (3) basing our short-term cash incentive program on financial metrics that are distinct from those underlying our long-term equity incentive programs.
In addition to taking stockholder feedback into account, the Executive Compensation Committee evaluated our compensation philosophy in light of our long-term objectives, competitive issues we face in the marketplace, and compensation trends identified by Compensia. Taking these considerations together, the Committee took the following actions for fiscal year 2013 to motivate our executives to drive the Company’s strategic priorities, and to more closely link our NEOs’ target total direct compensation (“TDC”) to longer-term company performance and risk outcomes:
Redesigned our fiscal year 2013 Performance Share Program to (1) measure performance over a three-year period (as opposed to the one-year period under the fiscal year 2012 program), (2) eliminate the use of multiple strategic objectives, instead measuring long-term performance based on a single measure—relative TSR, and (3) provide that all Performance Shares earned would vest following the Executive Compensation Committee’s certification of results following the three-year performance period.
Overhauled our Executive Annual Incentive Plan in order to align our NEOs’ cash bonus incentives with the company’s strategic priorities of driving annualized recurring revenue growth in Digital Media and new business bookings in Digital Marketing in order to build significant recurring revenue streams as we continue to transition our business towards subscriptions and cloud-based services, such as Creative Cloud and Adobe Marketing Cloud; as well as tying portions of the cash bonus opportunity to a customer satisfaction objective and an individual goal component tailored to each executive, including in appropriate circumstances, objectives related to profitability.
Eliminated the $60,000 supplemental cash bonus pool that could previously be illustratedawarded by evaluatingour Chief Executive Officer to other executive officers.
Continued to set the aggregate target value of Mr. Narayen’s annual equity award to comprise approximately 80% of his target TDC opportunity, and the average aggregate target value of the TDCannual equity awards for our other NEOs at approximately 78% of Mr. Narayen,their target TDC.
We believe focusing increasingly on our Presidenttransformation to recurring revenue and Chief Executive Officer,the company’s long-term stock performance will (1) better align our executive officers’ interests with those of our stockholders, and (2) motivate our management to drive the Company’s ongoing business model transformation for our Creative business from perpetual licenses to a subscription-based cloud offering, as well as focusing our investment in the areas of the end of fiscal year 2010:

digital media and digital marketing.

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Mr. Narayen's Fiscal Year 2010 Total Direct Compensation Value as of Fiscal Year End


Compensation Component
 Award(1) Summary
Compensation
Table Value(3)
($)		 Value as
of Fiscal
Year End
($)		 

Base Salary

 $900,000(2) 909,583(4) 909,583(4)

Executive Bonus Plan

 $1,136,978  2,160,259  2,160,259 

Performance Share Awards

  95,000  3,245,200  3,737,205(5)(6)

Option Awards

  290,000  2,660,286  —(5)(7)

RSU Awards

  95,000  3,245,200  2,768,300(5)
         

Total Value

     12,220,528  9,575,347 
(1)
At target amount, where applicable.

(2)
New salary effective February 1, 2011.

(3)
Reflects values shown in "Executive Compensation—Summary Compensation Table" below.

(4)
Our fiscal year 2010 included 53 weeks.

(5)
Equity values are based on $29.14 per share, the closing market price of our common stock as reported on NASDAQ on December 3, 2010, our fiscal year end, but shares remain subject to vesting requirements.

(6)
As shown in the "Equity Awards during Fiscal Year 2010" table below, 128,250 performance shares were earned, subject to vesting requirements.

(7)
Based on an option exercise price of $34.16 per share.

Role of Our Executive Compensation Committee, External Compensation Consultants and Management

Executive Compensation Committee

The Executive Compensation Committee (the “Committee”) oversees and provides strategic direction to management regarding many elements of our Total Rewards Program. It also reviews and approves the compensation and severance benefits of Adobe'sAdobe’s executive officers, including our NEOs. As part of this review, the Executive Compensation Committee regularly solicits input from its independent executive compensation consultant. In fiscal year 2010,2012, the Executive Compensation Committee met regularly in executive session with its independent compensation consultant and without management present, and thepresent. The Chair of the Executive Compensation Committee regularlyalso met separately with the consultant, both with and without management present. The Executive Compensation Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe's expense. The Executive Compensation Committee may also delegate duties or responsibilities to subcommittees or to one member of the Executive Compensation Committee, as appropriate. The Executive Compensation Committee also discusses Mr. Narayen'sNarayen’s performance with the Board of Directors. The Executive Compensation Committeeand remains solely responsible for making the final decisions on compensation for our executive officers, including our NEOs.


Executive Compensation Consultant

Since 2008, the Executive Compensation Committee has engaged Compensia, Inc. to advise it on executive compensation matters due to Compensia'sCompensia’s expertise in the software industry, its knowledge of our peer group, and its geographical proximity, enabling frequent in-person attendance at Executive


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Compensation Committee meetings. Compensia provided the following services on behalf of the Executive Compensation Committee during fiscal year 2010:

    •
    2012:
reviewed and provided recommendations on the composition of theour peer group, and provided compensation data relating to executives at the selected companies in theour peer group;

•
conducted a comprehensive review of the total compensation arrangements for all of our executive officers;

•
provided advice on our executive officers'officers’ compensation;

•
assisted with executive equity program design, including analysis of equity mix, aggregate share usage and target grant levels;

•
assisted with design changes for our fiscal year 2013 equity program and Executive Annual Incentive Plan;
provided updates on NASDAQ listing standards, Say on Pay results, and Dodd-Frank regulatory developments;
conducted Boarda comprehensive review of compensation reviewpaid to the Board and provided recommendations to the Executive Compensation Committee and the Board regarding future director pay structure;

•
updated the Executive Compensation Committee on emerging trends/best practices in the area of executive and board compensation; and

•
reviewed the Compensation Discussion and Analysis for inclusion in thisthe 2012 proxy statement.

The Executive Compensation Committee conducted a formal review of Compensia’s independence and is satisfied with the qualifications, performance and independence of Compensia. Other than providing limited guidance to theour Human Resources department regarding Adobe’s broad-based equity compensation modelsdesign for Adobe's non-executiveall employees (as authorizedapproved by the Chair of the Executive Compensation Committee), Compensia does not provide any other services to Adobe. Adobe pays for the cost for Compensia'sCompensia’s services.

Management

Our Human Resources, Finance and Legal departments work with our Chief Executive Officer and Compensia to design and develop new compensation programs applicable to our NEOs and other executive officers, to recommend changes to existing compensation programs, to recommend financial and other performance targets to be

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achieved under those programs, to prepare analyses of financial data, to prepare peer group compensation comparisons and other committee briefing materials and, ultimately, to implement the decisions of the Executive Compensation Committee. Our Human Resources department also conducted the key talent assessment and compensation review in connection with the Retention RSU Awards. Members of these departments and our Chief Executive Officer also meet separately with Compensia separately from the Committee to convey information on proposals that management may make to the Executive Compensation Committee, as well as to allow Compensia to collect information about Adobe to develop its own proposals.

In addition, our Chief Executive Officer conducted reviews of the performance and compensation of the other NEOs, and based on these reviews, made his recommendations for fiscal year 20102012 target compensation levels (including adjustments to base salary and target cash and equity incentive levels) directly to the Executive Compensation Committee. No NEO was present or participated in the final determinations or deliberations of the Executive Compensation Committee regarding the amount of any component of his own fiscal year 20102012 compensation package.


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Comparative Framework

Adobe regularly reviews relevant market and industry practices on executive compensation. We do so to balance our need to compete for talent with the need to maintain a reasonable and responsible cost structure while aligning our executive officers'officers’ interests with those of our stockholders.

Peer Group

        To

Each year, to assist the Executive Compensation Committee in its deliberations on executive compensation, Compensia collects and analyzes data using the Executive Compensation Committee's criteria, as described in the table below, to provide recommendations on the composition of our "peer group."

        Each year, the Executive Compensation Committee reviews and updates our peer group, as necessary, to ensure that the comparisons are meaningful. Compensia, using the Committee’s criteria (described in the table below for fiscal year 2012), provides recommendations on the composition of our “peer group.” Based on the factors described in the table below and management'smanagement’s input, for fiscal year 2010,2012, Compensia recommended, and the Executive Compensation Committee approved, adding Activision Blizzard,removing McAfee, Inc.; CA, Inc.; Citrix Systems Inc.; and VMWare, Inc. (due to theits acquisition by Intel) from our peer group, and removing VeriSign, Inc.


group.Peer Group

Peer Group

General DescriptionCriteria ConsideredPeer Group List
High-technology companies at which our NEOs'NEOs’ positions would be analogous in scope and complexity, which operate in similar or related businesses to Adobe, and with which Adobe competes for talent Companies with revenues less than $10 billion and at least three of the following within 0.5x to 2.0x of Adobe'sAdobe’s comparable metric (for quantitative criteria): (i) global multi-faceted software/Internetinternet company; (ii) revenue; (iii) profit margin; (iv) market capitalizationcapitalization; and (v) number of employees 
Activision Blizzard, Inc.
Autodesk, Inc.
BMC Software, Inc.
CA, Inc.
Citrix Systems Inc.
eBay, Inc.
Electronic Arts Inc.
Intuit, Inc.
Juniper Networks, Inc.
McAfee, Inc.
NetApp, Inc.
NVIDIA Corporation
salesforce.com, inc.
Symantec Corporation
VMWare, Inc.
Yahoo! Inc.

Compensia then prepares a compensation analysis compiled from both executive compensation surveys and data gathered from publicly available information regarding the companies that the Executive Compensation Committee has selected as members offor our peer group.group companies. As this reported compensation data may be up to two fiscal years old (that is, based on reportedit may reflect decisions made by peer companies 24 months before the Committee is making its decisions), Compensia adjusts the cash compensation data from prior years instead of current data, the data is adjusted in order to bring it to presumed current market levels that our peer companies will be awarding for the peer group; forcoming year. For fiscal year 2010,2012, Compensia adjusted it by increasing itthe cash compensation data using an annualized factor of 3%. based on industry surveys and market projection. The Executive Compensation Committee uses this data to compare the current compensation of our NEOs to the peer group and to determine the relative market value for each NEO position, based on direct, quantitative comparisons of pay levels.


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Elements of Compensation

Our Total Rewards Program includes base salary, an annual cash incentive opportunity, equity incentive awards benefits and perquisites,employee benefits, as well as potential severance benefits upon or followingin connection with a change of control. Within the Total Rewards Program, the percentage of performance-based compensation, or "at-risk"“at-risk” pay, increases with job responsibility, reflecting our view of internal pay equity and the ability of a given employee to contribute to our results, and consistent with the practices of theour peer group. At the executive officer level, we place the greatest emphasis on linking pay to


Table performance, which also reinforces the alignment of Contents


performance so as to align the interests of these individuals directly with those of our stockholders. Under this compensation structure,our Total Rewards Program, when results do not meet our expectations, our NEOs may receive compensation that is below our target levels and may be below market in comparison to theour peer group. Similarly, when superior results are achieved, our NEOs may receive above-market rewards.


Compensation Objectives

compensation that is above our target levels and above market. For more information, see the section captioned “Realizable Pay” below.

Compensation Objectives


Objectives
Compensation
Element		DescriptionCompete
in the
Market		Attract/Retain Key PerformersReward
Short-Term
Performance		Reward
Long-Term
Performance
Base Salary
 Base salary provides market competitive compensation in recognition of role and responsibilities. ü ü   

Cash Incentives

 
Cash incentives are earned in full or in part only if (i) we achieve certain pre-established one-year company performance targets, (ii) the recipient achieves individual performance levels or objectives, and (iii) the recipient remains employed with Adobe for the performance period.
 
ü
 
ü
 
ü

 

Equity Incentives

 
Equity incentives are awarded upon hire and then typically annually thereafter. Awards vest over multiple years of employment, providing both short-and long-term retention incentives, while also aligning employee interests with stockholder interests by providing an opportunity for increased rewards as stockholder return increases.interests.
 
ü
 
ü
 
ü

ü

Employee Benefits
and Perquisites

 
Benefits programs for all Adobe employees provide protection for health, welfare and retirement.
 
ü
 
ü
 


 

Change of Control Benefits

 
Change of control benefits are to be provided to recipients in the eventform of a change of control of Adobeseverance and are intendedaccelerated vesting provide some certainty to minimize the distraction caused by a potential transaction and allow executives toso that they can remain focused on normal business operations reducingand transactions that are in the risk that an employee departs Adobe before a transaction is consummated or the business transitions are completed.best interests of our stockholders.
 
ü
 
ü
 


 

Competitive Positioning

The fiscal year 20102012 target TDC (excluding the Retention RSU Awards) for each of our NEOs except Mr. Narayen was set at approximatelyby the 50th to 75th percentile of our peer group for target performance,Committee based predominantly on the factors described under "Executive Summary—Total Rewards Program for our NEOs—Competitive Positioning" above. Of these factors, competitive pay practices, as reflected in the peer group data, waswith additional adjustments made based on an individual NEO’s importance to Adobe, tenure, company and individual performance, anticipated future contributions, internal pay equity and historical pay levels, as well as the primary determinantlevel of unvested equity awards and opportunities that we believed were necessary to enable us to retain the range within which individual compensation was set.NEO in light of potential competing offers from other companies. We also reviewed the positioning of the total target cash and equity elements of compensation, but these individual elements of NEO compensation may vary above or below this range based on the importance of the other factors in any given year with respect to any given NEO. Because our fiscal year begins earlier than most of our peer companies, our target TDC attempts to foresee what the competitive compensation positioning for each role will be for the coming fiscal year.

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        In addition, the Executive Compensation Committee reviewed the value of outstanding unvested equity incentive awards held by an NEO and the unvested gains realizable from previous equity awards to the NEOs, to help determine the level of incentive needed to retain these individuals and to achieve success. Based on this review, the Executive Compensation Committee also granted Retention RSU Awards to certain NEOs as described below under "2010 Retention RSU Awards." Including these special awards, the fiscal year 2010 target TDC and target equity value for these NEOs was generally set at approximately the 75th to 90th percentile.

        Rather than granting a Retention RSU Award to Mr. Narayen, the Executive Compensation Committee chose to target his equity compensation and TDC at the 90th percentile. Increasing his annual equity awards rather than granting a Retention RSU Award placed more emphasis on future company performance, as2/3 of the annual awards depend on future stock appreciation or the achievement of performance-based goals, rather than simply providing the time-based retention benefits of the Retention RSU Awards. The Executive Compensation Committee also made these larger annual equity awards after recognizing that, despite its attempt to set fiscal year 2009 compensation within our target range, when the fiscal year 2009 compensation decisions for our peer group were disclosed, Mr. Narayen's target fiscal year 2009 compensation had actually been set well below our desired range, and therefore would not provide the desired retention.


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Pay Mix

In setting the mix among the different elements of executive compensation, we do not target specific allocations, but generally weight target TDC more heavily toward performance-based compensation, which includes elements of both cash and equity. In determining base salary, cash incentive opportunity and equity incentives, the total target cash compensation opportunity (base salary and cash incentive opportunity) was generally weighted less than the total target equity compensation opportunity, based on the estimated value determined as described in the "Equity Awards during Fiscal Year 2010" table below. Demonstrating these general weightings and their emphasis on performance, theto increase alignment with our stockholders’ interests. The target compensation mix for our Chief Executive Officer and the average compensation mix for the other NEOs that resulted from the fiscal year 2010 determinations, at target is illustrated in the following table:
Mr. Narayen’s and including Retention RSU Awards, were approximately:


Mr. Narayen'sOther NEOs’ Target Pay Mix(1)

GRAPHIC


Other NEOs' Average Target Pay Mix(1)

GRAPHIC

(1)
The Target Values were calculated for equity based on a price of $35.57 per share, the 30-day average of our stock price during November 2009, which was just prior to the development of the equity compensation award recommendations. For the annual awards, this number was then used to determine the total number of "option equivalent" shares by (i) multiplying the $35.57 price by 32.4% (the value ratio of one stock option share to an RSU share under Adobe's Black-Scholes option pricing model), then (ii) dividing the desired equity value by this number. The total option equivalent shares were then allocated to the three different types of equity according to our equity mix, and the RSU and performance share allocations were each divided by three, as that approximates the value ratio of a stock option share to an RSU or performance share. Finally, shares in each equity category were rounded to the nearest thousand. Equity values for the Retention RSU Awards were calculated by dividing the desired equity value by $35.57. See the "Equity Awards during Fiscal Year 2010" table for the Target Value amounts.

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(1)
The mechanism for calculating the target equity award values is described in detail below under “Equity Incentives—Equity Compensation Mix.” The amounts shown for our other NEOs presents their average target pay mix.
These allocations reflect our belief that a significant portion of our NEOs'NEOs’ compensation should be performance based and therefore "at-risk"“at risk” based on ourcompany and individual performance, although the one-time Retention RSU Awards reduced the average proportion of "at-risk" compensation for fiscal year 2010 for the NEOs other than Mr. Narayen.as well as NEO service requirements. Since our cash incentive opportunities and equity incentive awards have both upside opportunities and downside risks and our actual performance can deviate from the target percentages set atgoals, the beginning of a fiscal year and reflected in the charts above may not reflect the percentageamount of compensation actually earned.

earned will differ from the target allocations.

Base Salary

For fiscal year 2010,2012, the Executive Compensation Committee reviewed the base salaries of our NEOs, and approved a base salary increase for each of our NEOs except Mr. James (whose compensation had been recently set as part of our acquisition of Omniture in October 2009), based on comparing these salaries to the base salary levels at the companies in our peer group, as well as considering the roles and responsibilities and potential performance of the individual NEO,NEOs and their positioning in the range for other elements of their compensation. Prior toFollowing its review, the increases,Committee did not increase the total target cash (base salary plus cash incentive target as a percentage of base salary) for Messrs. Thompson and Tarkoff were below the target ranges and for the other NEOs (except Mr. James) were in the lower part of the target ranges. The Executive Compensation Committee also considered that none of these NEOs' base salaries had been increased in fiscal year 2009, due to the global economic recession.

of any of our NEOs.


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Fiscal Years 2009 and 2010 Base Salaries

Fiscal Years 2011 and 2012 Base SalariesFiscal Years 2011 and 2012 Base Salaries
Name
 2009
Salary
($)		 Increase
(%)		 2010
Salary(1)
($)		  2011
Salary
($)		 Increase
(%)		 
2012
Salary(1) ($)
 

Shantanu Narayen

 875,000 2.9 900,000 Shantanu Narayen900,000 — 900,000

Mark Garrett

 510,000 7.8 550,000 Mark Garrett575,000 — 575,000

Kevin Lynch

 421,000 4.5 440,000 Kevin Lynch500,000 — 500,000

Robert Tarkoff

 425,000 8.2 460,000 

Matthew Thompson

 450,500 11.0 500,000 Matthew Thompson525,000 — 525,000

Joshua James

 480,000 — 480,000 
David WadhwaniDavid Wadhwani475,000 — 475,000
(1)
Fiscal year 2010 salary increases became effective February 1, 2010. Actual base salaries earned during the fiscal year are shown below in the "Fiscal Year 2010 Executive Bonus Plan Target Cash Incentives" table.

_________________________
(1)
Actual base salaries earned during the fiscal year are shown below in the “Fiscal Year 2012 Executive Bonus Plan Target Cash Incentives” table.
Cash Incentives

Annual Cash Incentive Plan

    Objectives

        Under our Executive Cash Performance Bonus Plan (the "Master Bonus Plan"), which expired at

At the endoutset of fiscal year 2010 in accordance with2012, the provisions of Section 162(m) of the Code, amounts are paid contingent upon the achievement of pre-established performance goals, which are generally set annually. The objectives of the Master Bonus Plan are to:

    •
    drive revenue growth and operating profit achievement;

    •
    drive execution of operating plan and strategic financial objectives; and

    •
    reward NEOs when Adobe meets these objectives.

        In early 2010, the Executive Compensation Committee approved the Fiscal Year 20102012 Executive Annual Incentive Plan (the "Executive“Executive Bonus Plan"Plan”) pursuant to, which operates under the terms of thea stockholder-approved Master Bonus Plan,


Table to provide cash compensation opportunities to our NEOs based on the company’s achievement of Contents


with pre-established performance goals andgoals. The Committee set threshold, target and maximum performance levels for these goals that were based on our Board-approved operating plan for fiscal year 2010.

    2012

Target Annual Incentive Opportunity

The Executive Compensation Committee also set the target annual cash incentive opportunity for fiscal year 20102012 (expressed as a percentage of base salary earned during the year) for each NEO based onin early fiscal year 2012. In setting the target levels, the Committee considered the positioning of the fiscal year 2012 target total cash opportunity against the peer group data provided by Compensia and internal pay equity. With regard to peer pay positioning, the target cash incentive opportunity percentages ofCommittee targeted our other executive officers in light of their responsibilities and achievements. TheCEO’s compensation within the 50th to 75th percentile. With regard to internal pay equity, the Committee believes that the target annual cash incentive opportunity makesshould make up a larger portion of an NEO'sNEO’s target TDC and total target cash compensation as the executive'sexecutive’s level of responsibility increases. The target cash incentive percentages in fiscal year 2010 for Messrs. Lynch and Tarkoff increased from fiscal year 2009, which had the effect of setting their target cash incentive opportunities higher in the target ranges. The Executive Compensation Committee decided to make these increases based on market data, as well as consideration of their performance and internal equity based on the increasing complexity of their roles. The Executive Compensation Committee believed that the other NEOs' target cash incentive opportunities were already appropriately placed within the 50th to 75th percentile and therefore were not changed.

Performance Measures

The Executive Compensation Committee determined that, for purposes of earning any award in fiscal year 2012 under the Executive Bonus Plan for fiscal year 2010,2012, we must achieve:

    •
    have achieved:
a threshold revenue“GAAP Revenue” target funding level (described in the table below), based on revenue determined in accordance with GAAP, forbefore our NEOs to receivecould earn any annual cash incentive award; and

•
separate threshold "Adjusted Revenue"“Adjusted Revenue” and "Adjusted“Adjusted Operating Profit" targetProfit” levels (also described in the table below) towhich determine the "Corporate“Corporate Result Percentage," which helps determine the amount of the awards to be paid to our NEOs.

        AssumingPercentage.”

If we achieved the GAAP Revenue threshold, revenue target funding level for GAAP revenue, theeach participant would be eligible to earn a maximum amountbenefit of 200% of such participant’s bonus target; the annual cash incentive awards would be funded; then aExecutive Bonus Plan’s pre-approved matrix (an excerpt from which is included below) reflecting our percentage achievement of the Adjusted Revenue and Adjusted Operating Profit target levels would then be used to determine the Corporate Result Percentage (ranging from 0% for achievement of results at or below the minimum matrix funding levels to 200% for achievement of results well above the matrix target levels)levels, as shown in the excerpt below). If any of the minimum threshold levelslevel for GAAP revenue,Revenue was not achieved, or the minimum funding levels of Adjusted Revenue or Adjusted Operating RevenueProfit were not achieved, however, our NEOs would earn no annual cash incentive awards.

awards under the Executive Bonus Plan.


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Fiscal Year 2010 Executive Bonus Plan Measures

Fiscal Year 2012 Executive Bonus Plan Measures
Measure
Target
($)		Measure Definition and Required Minimum Threshold AchievementMinimumMeasure Definition
Threshold
Level
($)
Target
($)
Actual
Company
Achievement against Target
(%)
GAAP Revenue
(threshold funding measure)measure, as percentage of target)
3.5 billion90% of Board-approved operating plan GAAP revenue target, excluding the effects of any material acquisitions not incorporated into the operating plan 3.24.04 billion 109—%ü

90%
Adjusted Revenue
(matrix funding measure)measure, as percentage of target)


3.5 billion

90% of GAAP Revenue (as defined above) target adjusted for shippable backlog
 
3.24.04 billion
 
1094.49 billion
%		98%

90%
Adjusted Operating Profit
(matrix funding measure)measure, as percentage of target)

 
1.3 billion

75% of our Board-approved operating plan non-GAAP operating profit target plus the operating profit associated with shippable backlog, and excluding the effects of any material acquisitions not incorporated into the operating plan and the expenses associated with profit sharing, quarterly incentive andany annual incentive plansplan payments (including the Executive Bonus Plan). Adobe'sAdobe’s non-GAAP operating profit excludes stock-based and deferred compensation expense, restructuring charges, and amortization of purchased intangibles.intangibles, technology license arrangements and incomplete technology.
 
1.01.68 billion
 
1241.75 billion
%		96%
75%

To illustrate how the Adjusted Revenue and Adjusted Operating Profit interrelate in determining the Corporate Result Percentage, an excerpt of the Corporate Result Percentage matrix is depicted below.

GRAPHIC

Executive Bonus Plan Matrix Excerpt *

  Corporate Result Percentage
Adjusted Operating Profit125%166%175%183%198%200%
110%116%125%133%148%164%
100%83%91%100%116%132%
90%49%58%68%84%100%
80%16%26%36%52%68%
75%0%10%20%36%52%
  90%95%100%105%110%
  Adjusted Revenue
*The complete matrix was included in Exhibit 10.4 to our Current Report on Form 8-K,
filed with the SEC on January 26, 2012, which is incorporated herein by reference.

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After determining the Corporate Result Percentage, the amount actually earned by each NEO was determined by multiplying each NEO'sNEO’s target cash incentive opportunity by the Corporate Result Percentage and his Individual Result Percentage, as follows:


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Target Cash
Incentive
($)
X
Corporate Result
(%)
X
Individual Result
(%)
=
Actual
=Cash
Actual Cash Incentive Payment
($)

Base salary earned during the year multiplied by applicable target cash incentive percentage



Determined based on the Corporate Result Percentage matrix illustrated above (capped at 100%, in this formula)above. The Corporate Result could not exceed 200%.



Based on (i) each NEO'sNEO’s achievement of individual goals (approved by the Executive Compensation Committee for the Chief Executive Officer and by the Chief Executive Officer for all other NEOs) tied to the internal operating plan and strategic objectives;objectives, and (ii) the individual'sindividual’s contributions toward the achievement of the Corporate Result in excess of 100%;. The Individual Result could not exceed 100% unless Corporate Result Percentage exceeded 100%, in which case could not exceed 200%allowing for downward discretion if warranted.



 

At the time the corporate and individual goals were set for fiscal year 2010,2012, the Executive Compensation Committee believed that the Executive Bonus Plan goals were achievable, but only with significant effort. Foreffort as the operating profit goal was set approximately equal to the strong result achieved in fiscal year 2010, we reported record2011, and the revenue with strong financial results, including exceeding $1 billiongoals reflected a significant strategic transformation in quarterly revenue for the first time in company history in the fourth quarter ofAdobe’s business from fiscal year 2010. During2011, as the company reduced its investment and targeted license revenue in certain enterprise solution product lines in order to align the business around the strategic digital marketing and digital media opportunities.
In fiscal year 20102012 our NEOs successfully drove faster adoption of Creative Cloud subscriptions than originally projected at the beginning of the year when the Committee established the targets for determination of the Corporate Results Percentage. When an Adobe customer migrates from a legacy Creative Suite perpetual licensing product to a Creative Cloud subscription, revenue is recognized over time as comparedopposed to fiscalat the time of purchase. The overachievement in subscriptions during the year 2009, our totaleffectively transitioned more perpetual revenue than expected to Creative Cloud subscriptions, resulting in a lower amount of Adjusted Revenue increased by $863.8 million, or 29%, and our Adjusted Operating Profit grewunder the Executive Bonus Plan. If the perpetual license option had been selected instead of subscription for the number of

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subscriptions by $458.5 million, or 41%which the Company exceeded expectations, the Committee estimated that Adjusted Revenue and Adjusted Operating Profit would have resulted in a Corporate Result Percentage at 100% (see explanation below).

        Due

As shown in the “Fiscal Year 2012 Executive Bonus Plan Measures” table above, we exceeded our GAAP Revenue threshold level, although our corporate results were below our target financial metrics due to the significant effort of our management team, this resulted infactors discussed directly above. We achieved Adjusted Revenue achievement of approximately $3.9$4.403 billion (109%(98% of target) and Adjusted Operating Profit of $1.6$1.683 billion (124%(96% of target). These results yielded a corporate funding level of 200% of the target pool for the Executive Bonus Plan (with a Corporate Result Percentage of 100% for purposes83%.
The Committee monitored each NEO’s progress toward their individual goals on a periodic basis during the year and measured total achievement at year end to qualitatively determine whether or not to exercise its negative discretion to reduce the Individual Result percentage of the formula above, due to the cap).

any of our NEOs. The Executive Compensation Committee determined that our NEOsNEOs’ successfully driving the accelerated transformation of our business model to emphasize recurring revenue (including Creative Cloud) contributed significantly, individually and as a team, to our success and our achievement of 200% of the Corporate Result Percentage in fiscal year 2010. The Executive Compensation Committee therefore gave the most weight in determining the


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Individual Results percentages to this team achievement, but also particularly considered our exceptionalCompany’s strong financial results, the completionoverachievement of our debt financing to enable long-term growth, our NEOs'Creative Cloud subscriptions and momentum in digital marketing. In assessing each NEO’s Individual Result, the Committee considered each NEO’s performance against that NEO’s individual goals, particularly the NEO’s achievement of significant objectives inworking toward our long-term, transformative strategic plan, including the successful launch of Creative Cloud and our acquisition35% year-over-year growth of Day Software Holding AG.Adobe Marketing Cloud revenues. Therefore, the Executive Compensation Committee approveddetermined not to exercise its negative discretion and assessed the Individual ResultsResult of all our NEOs at 100%, as shown in the "Fiscal“Fiscal Year 20102012 Executive Bonus Plan Target Cash Incentives"Incentives” table below, reflecting the NEOs contributions in achieving these superior results.

below.

The target annual cash incentive opportunity amounts and actual cash incentive earned under the Executive Bonus Plan for fiscal year 20102012 for each NEO were as follows:


Fiscal Year 2010 Executive Bonus Plan Target Cash Incentives

Fiscal Year 2012 Executive Bonus Plan Target Cash IncentivesFiscal Year 2012 Executive Bonus Plan Target Cash Incentives
Name
 Salary(1)
($)		 Target
Cash
Incentive
Percentage(2)
(%)		 Target
Cash
Incentive(3)
($)		 Corporate
Result(4)
(%)		 Actual
Individual
Results
(%)		 Actual Cash Incentive Earned ($)  
Salary(1) 
($)
 Target
Cash
Incentive
Percentage
(%)		 
Target
Cash
Incentive(2) 
($)
 Corporate
Result
(%)		 Actual
Individual
Result
(%)		 
Actual Cash Incentive Earned
($)
      

Shantanu Narayen

 909,583 125 1,136,978 100 190 2,160,259 Shantanu Narayen893,182
 150 1,339,773
 83 100 1,112,011

Mark Garrett

 551,641 100 551,641 100 190 1,048,117 Mark Garrett570,644
 100 570,644
 83 100 473,635

Kevin Lynch

 443,529 75 329,058 100 190 625,209 Kevin Lynch496,212
 75 372,159
 83 100 308,892

Robert Tarkoff

 461,109 75 342,208 100 190 650,195 

Matthew Thompson

 499,252 100 499,252 100 190 948,578 Matthew Thompson521,023
 100 521,023
 83 100 432,449

Joshua James(5)

 321,846 75 241,385 100 N/A — 
David WadhwaniDavid Wadhwani471,402
 75 353,551
 83 100 293,447
_________________________
(1)
Actual base salary earned during fiscal year 2012 shown.
(2)
Target cash incentive amount is calculated based on base salary amounts earned during the fiscal year.
(1)
Actual base salary earned during fiscal year 2010 shown.

(2)
Target cash incentive percentages for Messrs. Lynch and Tarkoff were increased from fiscal year 2009 levels of 70% each, effective February 1, 2010.

(3)
Target cash incentive amount is calculated based on base salary amounts earned during the fiscal year.

(4)
Under the terms of the Executive Bonus Plan, the Corporate Result Percentage was capped at 100% for calculation purposes, but overall achievement was 200%.

(5)
Mr. James's information reflects his resignation from Adobe in July 2010.

        We also have an annual bonus pool of $60,000 approved by the Executive Compensation Committee that may be awarded by our Chief Executive Officer to executive officers, including our NEOs, other than himself, as special recognition bonuses. No special recognition bonuses were awarded in fiscal year 2010 from this bonus pool.

        In addition, the Executive Compensation

The Committee retains authority to pay additional discretionary bonuses outside the Executive Bonus Plan if warranted. InFor fiscal year 2010,2012, the Executive Compensation Committee did not authorize any suchelected to award a one-time discretionary bonus payments outsideto each of our NEOs in an amount equal to 17% of each NEO’s Target Cash Incentive under the 2012 Executive Bonus Plan as shown in the table set forth below. When combined with the actual cash incentive earned by each of the NEOs under the Executive Bonus Plan, the NEOs received a total cash payment equal to 100% of the target cash incentive shown in the table above under the Executive Bonus Plan.
As discussed above, the Committee determined that payment of total cash awards at 100% of the target cash incentive amount was merited as our NEOs successfully drove faster adoption of Creative Cloud subscriptions than originally projected at the beginning of the year when the Committee established the targets for determination of the Corporate Results Percentage. The overachievement in Creative Cloud subscriptions during the year effectively transitioned more perpetual revenue than expected to recurring revenue recognized ratably over the term of the license, resulting in both Adjusted Revenue and Adjusted Operating Profit that were lower than the levels targeted for 100%

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payout under the Executive Bonus Plan. Accordingly, the Committee determined that the discretionary cash bonuses to bring total cash payments to approximately 100% of the target amount under the Executive Bonus Plan was appropriate to reward our NEOs.

NEOs for driving the accelerated transformation of our business toward Creative Cloud.

Other Cash Bonus Amounts Awarded:
Cash Bonus
Amount
($)
Shantanu Narayen$227,761
Mark Garrett$97,009
Kevin Lynch$63,267
Matthew Thompson$88,574
David Wadhwani$60,104

Equity Incentives

Goals of Equity Compensation

We use equity compensation to motivate and reward strong corporate performance and to retain valued NEOs.executive officers. We also use equity incentive awards as a means to attract and recruit qualified executives. We believe that equity awards serve to align the interests of our NEOs with those of our stockholders by rewarding them for stock price growth and the achievement of key operational goals.


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By having a significant majoritypercentage of our NEOs'NEOs’ target TDC payable in the form of equity and, thus, subject to higher risk and longer vesting than cash compensation, our NEOs are motivated to align themselves with our stockholders by takingtake actions that will benefit Adobe and its stockholders in the long term.


Types of Equity Compensation Mix

        The Executive Compensation

Each year, the Committee, with input from management, and our Chief Executive Officer, determinedlegal counsel and Compensia, determines the mix of annual equity incentive awards to achieveawards. For fiscal year 2012, the desired levelCommittee—based in part on feedback from our stockholder base—eliminated the granting of time-based stock options, which in fiscal year 2011 accounted for approximately 33% of equity compensation and the desired performance and retention objectives. Forof our NEOs. Accordingly, for fiscal year 2010,2012, the Executive Compensation Committee made minor changes to themix of equity mix for target annualincentive awards to be granted to our executive officers, including our NEOs with the mix made upconsisted of approximately 33% stock options, 33%50% performance shares and 34%50% time-based RSUs forRSUs. The Committee determined that this mix of equity compensation would appropriately balance and meet our NEOs (compared to approximately 50%, 25% and 25%, respectively, for fiscal year 2009), based on the Target Value of the awards. The new equity mix better reflects our peer group's practices, while retaining a strong emphasis on performance (based on stock price appreciation, for stock options, and the achievement of pre-established performancecompensation objectives, for performance shares). Additional factors are indicatedas described in the table below.

The Committee calculated the target values for equity to achieve this desired mix, based on a price of $28.05 per share, the 30-day average of our stock price prior to January 15, 2012, the period just prior to the development of the equity compensation award recommendations. Based on this price per share, the total desired number of targeted shares was determined, was then rounded up to the nearest 5,000 shares and split equally between performance shares and time-based RSUs.

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Fiscal Year 2010 Types of Annual Equity Incentive Awards

Fiscal Year 2012 Mix of Annual Equity Incentive Awards
Type of
Equity/AnnualFiscal Year 2012
Award Value
Allocation
Percentage(1)		DescriptionObjectives/Dilutive EffectVesting(2)
Stock Options
(33%)		 Options to purchase Adobe common stock with an exercise price equal to the closing market price of our common stock as reported on NASDAQ on the grant date; value to the NEOs depends on stock price appreciation above the exercise priceDescription Provide strong reward for growth in our stock price, as the entire value of stock options depends on future stock price appreciation; provide a strong incentive for our NEOs to remain employed with us, as they require continuous employment while vesting; and have the highest relative dilutive effectObjectives/Dilutive Effect Vest in equal monthly installments over a period of four years after the grant date, except for new-hire grants, which vest 25% on the first anniversary of the grant date and then in equal monthly installments thereafter for the following three years
Vesting(1)

Performance Shares
(33%(50%)
 
Stock-settled RSUsawards subject to performance- and time-based vesting conditions; one-year performance period determines the total number of shares eligible to be earned, with significant benefits for overachievement and significant consequences for underachievement, including the potential for no award being earned; no purchase cost to executive, so awards always have value if earned
 
Focus NEOs on annuala three-year performance goals supporting our three-year strategic plangoal tied to long-term stockholder returns while also providing a strong long-term performance and retention incentive, as they requirerequiring continuous employment to vest; provide moderate reward for growth insignificant incentive to grow our stock price; and use fewer shares than stock options, so less dilutionprice
 
Vest 331/1/3% upon the later of certification of performance results or the first anniversary of the grant date; the remainder vest in equal annual installments over two additional years (reflecting the three-year strategic plan that the goals support)

RSUs (34%)
 
RSUs
(50%)
Stock-settled awards subject to time-based vesting conditions; no purchase cost to executive, so awards always have value
 
Provide a strong incentive for our NEOs to remain employed with us, as they require continuous employment while vesting; provide moderate reward for growth in our stock price; and use fewer shares than stock options, so less dilution
 
Vest in equal annual installments over a period of four years
_________________________
(1)
Our equity awards are also subject to certain acceleration provisions as described below under “Severance and Change of Control Compensation” below and “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2012—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2012 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards.”
(1)
In addition to the annual award allocations shown above, certain NEOs also received Retention RSU Awards in fiscal year 2010, as described below under "2010 Retention RSU Awards" and shown in the "Equity Awards during Fiscal Year 2010" table below.

(2)
Our equity awards are also subject to certain acceleration provisions as described below under "Severance and Change of Control Compensation" and "Executive Compensation Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2010 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards."

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For fiscal year 2010,2012, the Executive Compensation Committee, with input from Compensia, management and our Chief Executive Officer, determinedtook a number of factors into account in determining the leveltarget value of the equity compensation opportunity for each of our NEOs based upon data fromNEOs. Among these factors were the desired peer group (as adjusted by Compensia, as described above),positioning, internal pay equity, individual performance of executives, employee retention and to a lesser degree, the other factors for determining compensation discussed under "Executive Summary—Total Rewards Program“Elements of Compensation” above. With regard to peer pay positioning, the Committee reviews the value of equity awards in the aggregate, because of the different mix of equity awards granted by our peers, and the aggregated manner in which this data is presented in the peer group surveys. The Committee set Mr. Narayen’s target equity opportunity for fiscal year 2012 at approximately the level of total equity compensation for fiscal year 2011 as disclosed in our NEOs—Competitive Positioning" above.Summary Compensation Table. For fiscal year 2012, the Committee: increased equity award targets for Messrs. Garrett and Thompson on account of their consistent high performance and in order to align their equity compensation with competitive market practices, based on blended peer company data provided by Compensia using proxy filings and Radford salary surveys; and increased the equity award target for Mr. Wadhwani on account of his increased scope of responsibilities in managing our Digital Media business unit, including his management of the transition toward a subscription model in connection with the launch of Creative Cloud in 2012. The equity award target for Mr. Lynch decreased from fiscal year 2011 due to the retention award granted to him in fiscal year 2011 on account of his significant contributions to the definition, development and execution of our Creative Cloud strategy. As with cash incentives, the Executive Compensation Committee believes that the target equity incentive compensation opportunity should make up a greater portion of an NEO'sNEO’s potential TDC as the individual'sindividual’s level of responsibility increases. Annual equity awards are viewed in the aggregate (by value) when evaluating our positioning with respect to our peer group, because we and these peer companies award different types and mixes

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Table of equity and because the market data we review evaluates the equity awards on an aggregate value basis only, not based on each type of equity award.

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The following table sets forth the total target value determined by the Committee, and the resulting number of options, performance shares (target, maximum and earned) and RSUs (including Retention RSU Awards) granted to each of our NEOs as well asat the Target Valueoutset of fiscal year 2012.
Equity Awards Granted by the Committee at the outset of Fiscal Year 2012
   Performance Share Program    
Name   Target
Award
(#)		 
Maximum
Award(1) 
(#)
 
Actual
Achievement(1) 
(#)
 RSUs
Award(s)
(#)		 Total Target Value of
Equity Award
($)
             
Shantanu Narayen 157,500
 200,000
 182,700
 157,500
 8,700,000
Mark Garrett 62,500
 93,750
 72,500
 62,500
 
3,500,000(2)
Kevin Lynch 62,500
 93,750
 72,500
 62,500
 3,500,000
Matthew Thompson 62,500
 93,750
 72,500
 62,500
 3,500,000
David Wadhwani 55,000
 82,500
 63,800
 55,000
 3,000,000
_________________________
(1)
The maximum number was granted (generally 150% of the target award), but that maximum number was reduced to 116%, which was the overall achievement of the other performance goals (the GAAP Revenue funding threshold measure was achieved) that was certified by the Committee.
(2)
This number represents the target value of Mark Garrett’s RSU awards set by the Committee in January 2012.
In August 2012 Mr. Garrett was additionally granted a one-time retention award of 225,000 RSUs, which had a $7.0 million target value at the total annual equitytime of grant by the Committee. As we have previously disclosed, the Committee evaluates the levels of compensation for our NEOs and Retention RSU Awards awarded to eachdetermines, based on the competitive landscape in which we operate and the specific talents and abilities of our NEOs, the levels of equity that are necessary in fiscal year 2010:


Equity Awards during Fiscal Year 2010

order to retain them as they are directly responsible for Adobe’s strategic business transformation and because their skills are in high demand in the market.  Mr. Garrett is central to the execution of our strategy given his key role as our Executive Vice President and Chief Financial Officer.  In response to Mr. Garrett receiving a competitive offer for his services, the Committee granted him a one-time retention RSU award on August 16, 2012 in order to ensure his retention and motivation throughout the implementation of this strategy.  The details of this grant are included in “Executive Compensation—Summary Compensation Table.”
 
  
 Performance Share Program  
  
  
  
 
 
  
 Annual
RSUs
Award
(#)		 Total Target
Value of Annual
Equity Award
($)		  
 Target Value
of Retention
RSU Award
($)		 
Name
 Stock
Options
(#)		 Target
Award
(#)		 Maximum
Award(1)
(#)		 Actual
Achievement(1)
(#)		 Retention
RSU Award(2) (#)		 

Shantanu Narayen

  290,000  95,000  142,500  128,250  95,000  10,000,000  —  — 

Mark Garrett

  49,000  16,000  24,000  21,600  17,000  1,700,000  50,000  1,778,500 

Kevin Lynch

  49,000  16,000  24,000  21,600  17,000  1,700,000  50,000  1,778,500 

Robert Tarkoff

  40,000  13,000  19,500  17,550  14,000  1,400,000  50,000  1,778,500 

Matthew Thompson

  43,000  14,000  21,000  18,900  15,000  1,500,000  50,000  1,778,500 

Joshua James

  40,000  13,000  19,500  —  14,000  1,400,000  —  — 
2012 Performance Share Program
(1)
The maximum number was granted (150% of the target award), but that maximum number was reduced to 135%, the overall achievement of the other performance goals (the GAAP Revenue funding threshold measure was achieved). As the 2010Committee established a Performance Share Program required continuous employment through the initial vest date to earn any award, Mr. James did not earn any performance shares.

(2)
See description below under "2010 Retention RSU Awards."

        The performance share awards granted infor fiscal year 2010 are2012 (the “2012 Program”), which was subject to the terms of our 2010 Performance Share Program, and any shares earned under the awards are issued pursuant to the terms of our Adobe Systems Incorporated 2003 Equity Incentive Plan (the "2003 Plan"“2003 Plan”). Our Performance Share Program combined company-wide financial metrics and qualitative goals established by the Committee at the beginning of the performance period (see “Performance Goals” below). This program provided incentives to our NEOs to continue to build long-term stockholder value while also motivating them to achieve various strategic and operational priorities. Moreover, any performance shares earned by our NEOs under the 2012 Program vest annually over three years and will only be awarded if an NEO remains providing service to Adobe (or an affiliate) at an applicable vesting date, providing long-term retention value to the company.

In order for our 2012 Program to have awarded any shares, Adobe must have achieved a minimum threshold percentage of 80% of the GAAP Revenue target for fiscal year 2012 set forth in the company’s 2012 operating plan. This measure of GAAP Revenue used the same definition as described above in the table “Fiscal Year 2012 Executive Bonus Plan Measures.” The Committee believed this was a key minimum hurdle to ensure that threshold financial results were achieved before any shares could be earned under the Performance Share Program. If the threshold revenue goal was not achieved, no performance shares would have been earned under the program.
The six sets of performance goals were established and measured by the Committee. The performance goals had weightings ranging from 10% to 25%, as described in further detail below, and the achievement percentage for each performance goal was capped at 150%. The sizeactual award earned was based on the aggregate performance goal achievement percentage resulting from aggregating the achievement levels for each of the fiscal year 2010six performance goals. If the company met the minimum threshold goal, then the Committee would determine the aggregate performance goal

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achievement percentage and calculate the actual awards under our Performance Share Program based on the following formula:
Number of Performance
Shares in Target Award
X
Performance Goal
Achievement %
=
Actual
Performance
Shares

Any partial share was rounded up to the next whole share, but in no event would such rounding result in an actual award greater than the maximum award of 150% of the target.
Performance Goals
Because the company’s GAAP Revenue threshold is not the only measure of performance that the Committee felt should determine compensation under the 2012 Program, the Committee determined that, if the minimum threshold was met, performance share awards would be determined based on the results achieved during the one-yearachievement of key strategic and operational priorities that would drive Adobe’s long-term success and business transition. These performance period, as certified by the Executive Compensation Committee. Each NEO was granted an awardgoals for the maximum2012 Program resulted in key operational and strategic incentives that complemented the financial objectives selected under our cash program. Under the 2012 Program, if the GAAP Revenue threshold funding measure of $3.592 billion was met, the actual number of shares that he could earnto be earned under the 2012 Program would then be calculated based on the maximumCommittee’s assessment of the company’s achievement of the pre-establishedsix categories of performance goals withset forth in the actual awardtable below, according to each category’s individual weight.
In order to focus our NEOs on building stockholder value, the Committee added to our 2012 Program a new requirement that 20% of performance share awards would be earned subjectbased upon a relative TSR measure. Under this new requirement, the Committee assessed the TSR of our common stock as compared against the TSR of the NASDAQ 100 Index during the course of our 2012 fiscal year to determine 20% of the total performance share opportunity.

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The table below describes the six performance goal categories, key accomplishments under each, their respective weights and the Committee’s assessment of their achievement following our 2012 fiscal year:
Other Performance Goals

Category Objective Key Accomplishments Objective Weight % Achievement %
         
Stockholders Build shareholder value through overall company performance 
Total return to our stockholders of 19.9% during fiscal year 2012, relative to the NASDAQ 100 Index stockholder return of 15.3%

 20% 109%
         
Innovation Ensure leadership through innovation in Digital Media & Digital Marketing 
Launching the groundbreaking Creative Cloud and Creative Suite 6 release, as well as Adobe Marketing Cloud, combining 30 point products into five simple solutions. Additional launches and product innovations include Adobe Social, Adobe AdLens and Project Primetime

 25% 110%
         
Growth Drive strategic growth in Digital Media & Digital Marketing 
Achieving approximately 326,000 Creative Cloud paid memberships, 157% of targeted rates in Board-approved operating plan. Delivering 35% year-over-year revenue growth in digital marketing. Outstanding growth in our Digital Publishing Suite and Adobe CQ businesses, ahead of forecasted growth rates

 25% 135%
         

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Other Performance Goals

Brand Transform perception of Adobe brand 
Major campaigns developed and executed to reposition Adobe, with an emphasis on digital marketing. Positive response from social and public relations campaigns. Significant improvement of brand metrics

 10% 130%
         
Customers Drive continuous improvement in customer satisfaction 
96% average attainment across four key metrics for individual customer satisfaction, Adobe.com customer satisfaction, digital marketing retention and support customer satisfaction. 100% internal participation in customer immersion program

 10% 99%
         
Employees Cultivate employee and organizational success 
Completed 100% of objectives related to internal hiring, key talent retention, performance management and workforce planning

 10% 99%
Overall
Achievement:
       116%
2012 Results
In fiscal year 2012, Adobe achieved $4.403 billion in GAAP Revenue, satisfying the minimum threshold under the 2012 Program, so the performance share awards were fully funded. The Committee assessed that the company achieved the strategic goals at the levels of achievement set forth in the table above in the course of a reduction fromstrong year in which our business successfully navigated a strategic transformation. The Committee assessed an Overall Achievement of the maximum awardperformance goals of 116%, based on actualthe individual achievement percentages indicated above, and therefore awarded performance achievement.shares under our 2012 Program to each NEO equal to 116% of such NEO’s target number of shares. The threshold, target, and maximum awards for our NEOs are set forth in the "Executive“Executive Compensation—Grants of Plan-Based Awards forin Fiscal Year 2010"2012” table.


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        The 2010 Performance Share Program required that Adobe achieve a GAAP Revenue threshold measure of $2.82 billion for NEOs to be eligible to earn any shares under the program. Once that threshold was met, the actual number of shares to be earned under the 2010 Performance Share Program would then be calculated based on the achievement of the other performance goals, each of which was weighted as 20% of each target award:


Other Performance Goals

CategoryGoalKey Accomplishments
Creative SuiteDrive creative business revenue growth through new functionality and increased penetration

•       Exceeded Creative Suite revenue plan

•       Exceeded target for upgrades

FlashDeliver Flash on multiple devices and screens

•       Flash 10.1 shipping on multiple devices through multiple partners

•       Advanced Flash Platform strategy

OmnitureImplement the operating plan for the Omniture Online Marketing Suite product line

•       Achieved record bookings with contract values exceeding plan

•       Completed 3-year strategic plan

Digital Enterprise Solutions Business UnitImplement the operating plan for the Enterprise product line

•       Key strategic acquisition of Day Software identified and completed

•       Significant growth in enterprise revenue

•       Acrobat X released on time with strong Q4 performance

Adobe.comImplement the operating plan for Adobe.com

•       Exceeded revenue target

•       Improved store conversion rate above plan

•       Developed strategy to accelerate Adobe.com growth

        For fiscal year 2010, the GAAP Revenue threshold measure was met. We achieved the above strategic goals in the course of an exceptional year, with record-breaking revenue and outstanding performance on each of the goals, resulting in an overall determination by the Executive Compensation Committee that 135% of each NEO's target award was earned.


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For more information on performance shares granted during fiscal year 2010,2012, see the "Executive“Executive Compensation—Grants of Plan-Based Awards forin Fiscal Year 2010"2012” table and accompanying narrative.

2012 RSU Program

Recognizing that a substantial portion of our NEOs’ compensation is performance based, and therefore inherently at risk, the Committee granted time-based restricted stock units (RSUs) to our NEOs in order to promote retention and continuity in our business. These time-based RSUs are stock-settled awards subject to vesting at a rate of 25% per year on each of the first four anniversaries of the grant date, subject to the NEO’s continued service to Adobe.

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Accordingly, our RSU program provides our NEOs with strong incentives to remain employed by Adobe, while providing additional rewards for growth in our stock price with less dilution to the company than time-based stock options, which were not granted by Adobe to any executive officer in fiscal year 2012.
Realizable Pay
Realizable pay reflects the real value of equity awards and increases or decreases with fluctuations in market value.  When determining the annual equity grants to our executives in January of each year, the Committee believes it is important to take into account not only the grant date values included in our Summary Compensation Table, but also to consider the effect of the value of our stock on those awards at the end of our fiscal year.
           Given that approximately 80 percent of our CEO’s and other NEOs’ target pay is equity based, we consider it especially important to focus on realizable pay when evaluating pay for performance.  Stock options awarded in previous years that are “out of the money” may expire without any realized value or dilutive effect to the company.  In addition, other stock-based awards may have realizable value that is less than was targeted at the time of grant.  Accordingly, a significant portion of our NEOs’ TDC is closely linked to the performance of Adobe’s stock over time.
The following chart demonstrates the relationship between the target and realizable values of our CEO’s total direct compensation and Adobe's indexed TSR for fiscal years 2010, Retention RSU Awards2011 and 2012:
CEO Target and Realizable TDC vs. Indexed TSR
Target TDC:

        During  Target TDC is calculated using our CEO’s target base salary as disclosed in the “Fiscal Years 2011 and 2012 Base Salaries” table (or, in the case of fiscal year 2010, in our definitive proxy statement dated March 1, 2012), the non-equity incentive target value multiplies the target base salary by the Target Cash Incentive % in the “Fiscal Year 2012 Executive Bonus Plan Target Cash Incentives” table, and equity award target values as disclosed in the “Summary Compensation Table” using grant date value.  No target value for All Other Compensation is included.

Realizable TDC:  Realizable TDC is calculated using our CEO’s actual earned base salary, bonus, non-equity incentive plan compensation, and all other compensation as disclosed in the “Summary Compensation Table,” and equity award values of all restricted stock units and performance shares granted in each year multiplied by the stock price on the last day of fiscal year 2012 of $34.61, and in the case of stock options the paper value of all vested and unvested awards granted in each year calculated by subtracting the exercise price from the stock price on the last day of fiscal year 2012 of $34.61.
Indexed TSR:  Indexed TSR is calculated by taking the stock price on the last day of fiscal years 2010, 2011, and 2012 of $29.14, $27.11, and $34.61 respectively, and dividing each by the stock price on the last day of fiscal year 2009 management and the Executive Compensation Committee shared concern over key talent being aggressively targeted and recruited by other companies as the economy improved and the risk of attrition that could result. As a result, management conducted a key talent review during fiscal year 2009 and identified a select group$35.38.

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Table of individuals, including some of our NEOs, who were deemed critical to our strategic priorities and growth, had demonstrated a consistent track record of high performance and/or possessed significant technical and institutional knowledge. Management also conducted a comprehensive market review and concluded that, for this select employee group, the current unvested value of outstanding equity compensation was not sufficient to provide appropriate inducements for these key employees to remain with Adobe.

        As a result, we established guidelines for desired values of unvested equity, as multiples of base salary, for the select group of employees, based on the level of their current position, competitive factors and internal equity, using the 30-day average closing market price of our common stock at the time the analysis was completed. The objectives of these desired unvested equity values were to align the interests of these employees with those of our stockholders, minimize the risk of attrition and support employee engagement and commitment to Adobe over the long term. As this review was being conducted, we announced and then completed the acquisition of Omniture, and therefore commenced a process to ensure the successful initial integration of this key strategic acquisition. Given the significance of the acquisition to our long-term strategic priorities, it was essential that we retain critical key talent from both companies.

        To achieve the desired values of unvested equity for the Adobe key talent, the Executive Compensation Committee approved Retention RSU Awards in late fiscal year 2009 to a select group of non-executive officers, and approved Retention RSU Awards early in fiscal year 2010 to a select group of executive officers, including several of our NEOs, and other senior executives, at the same time it considered annual equity awards for our executive officers. For these key NEOs, the Retention RSU Awards achieved the desired values of unvested equity, based on the average stock price used in the analysis described above. These awards were in addition to the normal 2010 annual awards and were intended to provide significant value to the employees, but only if they remain with Adobe through this critical period of change and integration. The Executive Compensation Committee chose not to grant Mr. Narayen a Retention RSU Award for fiscal year 2010, instead using the size of his fiscal year 2010 annual equity awards to provide the desired retention. Both the fiscal year 2010 annual equity awards and Retention RSU Awards made to our NEOs are included in the amounts shown in the "Equity Awards during Fiscal Year 2010" table above.

        To ensure that these awards emphasize retention, the NEOs' Retention RSU Awards vest with respect to 50% of the shares two years after the grant date, and the remainder of the shares vest in equal annual installments over the following two years.

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Retirement and Deferred Compensation Plan Benefits

We do not provide our employees, including our NEOs, with a defined benefit pension plan, any supplemental executive retirement plans or retiree health benefits, except as required by local law or custom for employees outside the United States. Our NEOs may participate on the same basis as other U.S. employees in our Section 401(k) Retirement Savings Plan (the "401(k) Plan"“401(k) Plan”). The 401(k) Plan provides for a matching contribution by Adobe of 50% of the first 6% of the employee'semployee’s eligible compensation up to a maximum matching cash contribution of $7,350$7,500 for both the 2009 and 20102012 plan years.year. We also provide a "true-up"“true-up” for participants who did not receive their maximum matching


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contribution during a 401(k) Plan year as a result of meeting their contribution limits early in the year. Adobe makes a matching contribution to help attract and retain employees and to provide an additional incentive for our employees to save for their retirement in a tax-advantaged manner.

We also maintain an unfunded, nonqualified deferred compensation plan (the "Deferred“Deferred Compensation Plan"Plan”) for senior managementour executives and our Board. The Deferred Compensation Plan allows participants,executives at the director level and above, including our NEOs, the ability to defer receipt of income to a later date, which may be an attractive tax planning opportunity. We offer this Deferred Compensation Plan to remain attractive to current and potential NEOs in a highly competitive market for executive talent. We generally do not contribute to the Deferred Compensation Plan on behalf of the participants; therefore, our cost to maintain the Deferred Compensation Plan is limited to administration expenses, which are minimal. No NEOs participated in or had an accrued balance under the Deferred Compensation Plan in fiscal year 2010.

2012.

Perquisites and Additional Benefits and Programs

We provide limited perquisites to our executives, including our NEOs. In considering potential perquisites, the Executive Compensation Committee considers the cost to Adobe as compared to the perceived value to our employees. We offer our executives at the director level and above, including our NEOs, an annual physical exam paid for by us, which has an approximate cost of $1,900 per individual, per year.us. We believe that the good health of our executives is important to our business.

In addition, we maintain a limited membership in a Marquis Jet Card Program. Our policy related to this program, adopted to allow for efficient travel by the participating executive officers, allows our Chief Executive Officer the use of a private jet for business travel.travel only. Other executive officers and employees may accompany our Chief Executive Officer only if required for business purposes, only. In addition,and none of our executives or employees are permitted to use our private jet program for personal or other non-business-related travel. Our policy allows family members to accompany a participating executive during business travel, if related costs for the family members are paid for by the executive officer. This policy was adopted to allow for efficient travel by the participating executive officers, which we believe is consistent with market practices. No family members accompanied our executive officers on the aircraft during fiscal year 2010.

2012.

We also provide the following benefits to our NEOs, on the same terms and conditions as provided to all other eligible employees:

health, dental and vision insurance;

•
life insurance;

•
an Employee Stock Purchase Plan;

•
medical and dependent care flexible spending account;

•
short- and long-term disability, accidental death and dismemberment; and

•
patent award program (cash awards made to any employee, including an NEO, who is an inventor of, or a direct manager of an inventor of, an Adobe patent that is filed with the U.S. Patent and Trademark Office, with a further award if the patent is issued).

We believe these benefits are consistent with benefits provided by companies with which we compete for executive-level talent.


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Granting Guidelines for Equity Compensation

Adobe maintains written equity grant guidelines setting forth our grant practices and procedures for all equity awards, as described below under "Executive“Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2010—2012—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards forin Fiscal Year 2010 Table."

2012 Table—Granting Guidelines for Equity Compensation.”

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Ownership Guidelines and Policies

Stock Ownership Guidelines

As part of our overall corporate governance and compensation practices, in 2003, our Board adopted stock ownership guidelines for our executive officers and directors, which the Executive Compensation Committee reviews annually. These guidelines are designed to align our executive officers'officers’ interests with our stockholders'stockholders’ long-term interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking. The Executive Compensation Committee reviews quarterly reports of the stock activity of our executive officers and directors. As of December 3, 2010,November 30, 2012, each of our NEOs was in compliance with the applicable guidelines. The guidelines currently state that the executives in the following positions should hold 25% of the net shares acquired from Adobe for two years unless, following the sale of such shares, the total number of Adobe shares held by that executive equals or exceeds the following amounts:

PositionShares
(#)

Chief Executive Officer

  
Chief Executive Officer150,000

President, Executive Vice President or Chief Financial Officer

50,000

Senior Vice President

25,000

For purposes of these guidelines, an "acquired share"“acquired share” includes shares of vested restricted stock, RSUs, performance shares, performance units and shares issued upon the exercise of vested options. "Net“Net shares acquired"acquired” means acquired shares remaining after deducting acquired shares sold to cover the exercise price and withheld taxes, and excluding shares acquired through our Employee Stock Purchase Plan. Shares that count toward the minimum share ownership include shares owned outright or beneficially owned, shares acquired through the Employee Stock Purchase Plan, vested restricted stock, vested RSUs, performance shares and performance units in our Deferred Compensation Plan, and shares issued uponfrom the exercise of vested options, as well as vested performance shares or performance units deferred into our Deferred Compensation Plan.

options.

Our Board may evaluate whether exceptions should be made in the case of any covered person who, due to his or her unique financial circumstances, would incur a hardship by complying with these guidelines. No such exceptions were granted or were in place in fiscal year 2010.

2012 and all directors and officers were in compliance with the guidelines during fiscal year 2012.

Hedging Policy

Our policies do not permitexplicitly prohibit any employees, including our NEOs, to "hedge"from “hedging” their ownership by engaging in short sales or trading in any derivatives involving Adobe securities.

Employment Agreements

Each of our currently-employed NEOs is (and Mr. James was) employed "at“at will."” Except in limited circumstances, such as when an employment agreement that provides for severance is assumed or renegotiated as part of a corporate transaction, we only enter into agreements providing for severance benefits with our U.S. employeesexecutive officers in relation to a change of control of Adobe or an executive transition plan. Mr. James had such an agreement, which was negotiated to replace and amend his employment and change of control agreements with Omniture at the time we agreed to acquire Omniture to induce him to accept employment with us. This agreement would have expired in most respects at the one-year anniversary of his employment with Adobe. See "Executive Compensation—Change of Control and Termination—Omniture Employment Agreement."

Severance and Change of Control Compensation

Each of our NEOs (except Mr. James) is, or could be, an eligible participant in our Executive Severance Plan for Prior Participants in the Event of a Change of Control (the "Executive Severance Plan"“Prior Participant Change of Control Plan”), which provides


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for severance payments and fully accelerated vesting of outstanding equity awards to our NEOs and other executivesmembers of


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senior management upon an involuntary termination of employment upon or following a qualifying change of control. Our Executive CompensationThe Prior Participant Change of Control Plan replaces the former executive change of control severance plan (the “Former Plan”), which expired in December 2011, for all employees who were eligible under the Former Plan upon its expiration, on substantially the same terms as the Former Plan. We also adopted a change of control severance plan for members of senior management who were not eligible under the Former Plan upon its expiration, but all of our NEOs were eligible and therefore would be covered by the Prior Participant Change of Control Plan. The Committee believes that change of control vesting and severance benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that an executive officer departs Adobe before an acquisition is consummated. We believe that a pre-existing plan will allow our executive officersexecutives to focus on continuing normal business operations and on the success of a potential business combination, rather than on seeking alternative employment. We further believe that the Executive Severance Plan ensurestwo plans ensure stability and will enable our executive officersexecutives to maintain a balanced perspective in making overall business decisions during a potentially uncertain period. Severance payments and benefits under the Executive Severance Planboth plans are provided only upon a qualifying termination of employment upon or following a change of control so that an acquirer that wishes to retain our management team during a transition period or over the long term will have an opportunity to do so.

We have also entered into a Retention Agreement with Mr. Narayen (unchanged since December 2010), which provides similar benefits but does not require termination of his employment in order for him to receive the equity acceleration, as described below under "Executive“Executive Compensation—Change of Control—Chief Executive Officer Retention Agreement." In addition, Mr. James's employment agreement with Adobe specified that his Omniture”
The two change of control agreement, which was entered into effective as of June 7, 2006, would remain in effect for one year after the closing date (which was October 23, 2009), and then would expire, except as to the treatment of his Additional RSUs (as defined below in "Executive Compensation—Change of Control and Termination—Omniture Employment Agreement, Change of Control and Resignation Agreement"). The terms of the Omniture change of control agreement provided that Mr. James would receive cash payments, health benefits and accelerated vesting of certain outstanding equity awards originally issued by Omniture under certain circumstances upon termination of employment prior to, upon or following a change of control. We agreed to continue the terms of his Omniture arrangements for one year to facilitate the closing of this strategically important acquisition and to help ensure that we had the benefit of Mr. James's services during the critical post-closing transition period.

        The Executive Severance Planplans and the individual Retention Agreement with Mr. Narayen do not provide for reimbursements or "gross-ups"“gross-ups” of excise tax amounts under Section 4999 of the Code. Rather, under bothall of these arrangements, benefits would be reduced if doing so would result in a better after-tax economic position for the affected executive. We believe this is an appropriate allocation of the tax cost of these arrangements as between Adobe and the executive and is consistent with market practice. The Omniture change of control agreement with Mr. James provided for a gross up for any payments that would qualify as parachute payments under the Code, as described below under "Executive Compensation—Change of Control and Termination—Omniture Employment Agreement, Change of Control and Resignation Agreement." We agreed to maintain this provision for a limited time after the closing of the acquisition for the reasons described above.

Our change of control arrangements are designed to be competitive with the pay practices of theour peer group. Our Executive CompensationThe Committee periodically reviews the terms and conditions of our change of control arrangements and will make adjustments when and to the extent it deems appropriate. The Executive SeveranceCommittee approved the Prior Participant Change of Control Plan will automatically terminateeffective as of December 13, 2011 upon the automatic expiration of the Former Plan on December 12, 2011, unless extended by us or unless a change2011. The Prior Participant Change of control has occurred before then.

Control Plan will expire on December 13, 2014.

Additional details regarding our Executive SeverancePrior Participant Change of Control Plan, the Former Plan, and the individual Retention Agreement with Mr. Narayen, including estimates of amounts payable in specified circumstances andas of the actual amounts received by Mr. James in connection with his resignation,last day of fiscal year 2012, are disclosed in "Executivethe “Executive Compensation—Change of Control and Termination—Control—Potential Payments upon Termination and/or a Change of Control"Control” table contained in this proxy statement.


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AccountingTax Considerations and Tax Considerations

Compensation Recovery Policies

Tax Deductibility

Section 162(m) of the Code generally disallows a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation'scorporation’s Chief Executive Officer and the three other most highly compensated executive officers as of the end of any fiscal year, other than the Chief Financial Officer. However, certain types of performance-based compensation are excluded from the $1 million deduction limit if specific requirements are met. The Executive Compensation Committee considers the impact of Section 162(m) when designing our executive compensation program and structured our Executive Bonus Plan, stock plans and performance share programs so that a number of awards maywould be granted under these plans and programs in a manner that complies with the requirements imposed by Section 162(m). Tax deductibility is not the primary factor used by the Executive Compensation Committee in setting compensation, however, and corporate objectives may not necessarily align with the requirements for full deductibility under Section 162(m). Accordingly,For instance, in paying the discretionary bonuses described under “Other Cash Incentives,” Adobe will not treat any portion of those bonuses, or the incentive payments under the Executive CompensationBonus Plan, as “performance-based compensation” for purposes of determining whether the Section 162(m) deductibility limits have been exceeded. We estimate that we will incur an additional tax cost of approximately $1,100,000 as a result. In addition, the Committee has granted and may continue to grant awards, such as time-based RSU awards and the one-time cash awards granted this year as described above, under which payments may not be deductible under Section 162(m) when it determines that such non-deductible arrangements are otherwise in the best interests of Adobe and its stockholders.

        Under Section 162(m), to qualify as performance-based compensation, the amount of compensation must depend on the NEO's performance against pre-determined performance goals established by a committee that consists solely of at least two "outside directors" who have never been employed by Adobe or its subsidiaries. During fiscal year 2010, all three members of the Executive Compensation Committee (Ms. Mills and Messrs. Barnholt and Rosensweig) qualified as independent directors under SEC and the applicable NASDAQ listing standards and qualified as outside directors under Section 162(m).

        We believe that the stock options and performance shares granted to our NEOs in fiscal year 2010 qualify under Section 162(m) as performance-based compensation and that compensation related to these awards will be fully deductible. Our RSU awards vest on a time-based vesting schedule and therefore are not considered "performance-based compensation" under Section 162(m). Accordingly, amounts of compensation related to RSUs held by our executive officers may not be fully deductible (depending upon the value of our stock, and the amount of other non-performance-based compensation an executive officer has during the year in which any portion of an RSU vests).


Accounting for Stock-Based Compensation68

        We account for stock-based compensation in accordance with applicable accounting standards. Under the fair value recognition provisions of these standards, stock-based compensation cost is measured at the grant date based on the fair value of the award. With the exception of performance shares, stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the entire award, which is generally the vesting period. For performance shares, stock-based compensation expense is recognized on a straight-line basis over the requisite service period for each vesting portion of the award.


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Compensation Recovery Policies
As a public company subject to Section 304 of the Sarbanes-Oxley Act of 2002, if we are required to restate our financial results as the result of misconduct or due to our material noncompliance with any financial reporting requirements under the federal securities laws, our chief executive officer and chief financial officer may be legally required to reimburse us for any bonus or incentive-based or equity-based compensation they receive. In addition, we will comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and anticipate that we will adopt a compensation recovery policy once final regulations on the subject have been adopted. Our fiscal year 2013 compensation plans explicitly provide for any such required recovery.

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REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE*

The Executive Compensation Committee has reviewed and discussed with management the "Compensation“Compensation Discussion and Analysis"Analysis” contained in this proxy statement. Based on this review and discussion, the Executive Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended December 3, 2010,November 30, 2012 and in this proxy statement.

Respectfully submitted,

EXECUTIVE COMPENSATION COMMITTEE
Carol Mills,
Daniel Rosensweig, Chair
Amy Banse
Kelly Barlow
Edward W. Barnholt
Daniel Rosensweig

*
The material in this report is not "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Robert Sedgewick

_________________________
*The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, except our Annual Report on Form 10-K for the fiscal year ended November 30, 2012, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information regarding the compensation for services performed during fiscal years 2010, 20092012, 2011 and 20082010 awarded to, paid to or earned by the NEOs, which include (i) our Chief Executive Officer, (ii) our Chief Financial Officer and (iii) our three other most highly compensated executive officers, as determined by reference to total compensation for fiscal year 2010,2012, who were serving as executive officers at the end of fiscal year 2010 and (iv) one former executive officer.

2012.

Name and Principal Position
Name and Principal Position
 Year Salary
($)		 Bonus
($)		 Stock
Awards(1)
($)		 Option
Awards(2)
($)		 Non-Equity
Incentive Plan
Compensation(3)
($)		 All Other
Compensation(4)
($)		 Total
($)		  Year Salary
($)		 Bonus
($)		 
Stock
Awards(1) 
($)
 
Option
Awards(2) 
($)
 
Non-Equity
Incentive Plan
Compensation(3) 
($)
 
All Other
Compensation(4) 
($)
 Total
($)
          

Shantanu Narayen

Shantanu Narayen

 2010 909,583 — 6,490,400 2,660,286 2,160,259 7,686 12,228,214  2012 893,182 
227,761(5)
 9,749,250
 —
 1,112,011
 30,747
 12,012,951

President and Chief

 2009 875,000 — 1,895,343 2,254,127 — 7,740 5,032,210 

Executive Officer

 2008 875,000 — 5,196,000 9,653,561 1,257,812 19,850 17,002,223 
President and Chief Executive Officer 2011 896,434 — 6,295,550
 2,403,773
 1,198,980
 30,373
 10,825,110
2010 909,583 — 6,490,400
 2,660,286
 2,160,259
 7,686
 12,228,214

Mark Garrett

Mark Garrett

 
2010		 
551,641		 
—		 
2,835,280		 
449,497		 
1,048,117		 
7,938		 
4,892,473		  2012 570,644 
97,009(5)
 
11,440,000(6)

 —
 473,635
 7,782
 12,589,070

Executive Vice President

 2009 510,000 — 841,046 1,000,254 — 8,040 2,359,340 

and Chief Financial Officer

 2008 504,167 — 1,350,960 1,183,956 492,823 7,590 3,539,496 
Executive Vice President and Chief Financial Officer 2011 568,844 — 2,007,770
 777,691
 608,663
 9,180
 3,972,148
2010 551,641 — 2,835,280
 449,497
 1,048,117
 7,938
 4,892,473

Kevin Lynch

Kevin Lynch

 
2010		 
443,529		 
—		 
2,835,280		 
449,497		 
625,209		 
9,354		 
4,362,869		  2012 496,212 
63,267(5)
 3,868,750
 —
 308,892
 11,247
 4,748,368

Senior Vice President,

 2009 421,000 — 841,046 1,000,254 — 10,290 2,272,590 

Chief Technology Officer

 2008 414,583 — 1,350,960 1,183,956 286,063 11,460 3,247,022 

Robert Tarkoff(5)

 
2010		 
461,109		 
—		 
2,630,320		 
366,936		 
650,195		 
8,754		 
4,117,314		 

Senior Vice President,

                 

Digital Enterprise Solutions

                 

Business Unit

                 
Executive Vice President, Chief Technology Officer 2011 488,711 
25,000(7)
 3,232,850
 1,246,073
 392,191
 42,020
 5,426,845
2010 443,529 — 2,835,280
 449,497
 625,209
 9,354
 4,362,869

Matthew Thompson

Matthew Thompson

 
2010		 
499,252		 
—		 
2,698,640		 
394,456		 
948,578		 
7,938		 
4,548,864		  2012 521,023 
88,574(5)
 3,868,750
 —
 432,449
 29,427
 4,940,223

Senior Vice President,

 2009 450,500 — 657,690 782,189 — 8,040 1,898,419 

Worldwide Field Operations

 2008 446,250 — 1,039,200 927,432 436,209 26,208 2,875,299 

Joshua James(6)

 
2010		 
321,846		 
—		 
922,320		 
366,936		 
—
(7)		 
3,928,492		 
5,539,594		 

Former, Senior Vice President,

 

Omniture Business Unit

 
Executive Vice President, Worldwide Field Operations 2011 519,042 — 1,803,590
 680,480
 555,375
 27,992
 3,586,479
2010 499,252 — 2,698,640
 394,456
 948,578
 7,938
 4,548,864
David Wadhwani(8)
 2012 471,402 
60,104(5)
 3,404,500
 —
 293,447
 8,967
 4,238,420
Senior Vice President, Digital Media Business Unit 2011 457,605 — 1,803,590
 680,480
 364,116
 8,312
 3,314,103
(1)
These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value of performance shares, assuming the probable outcome of related performance conditions at target levels, and RSUs. Pursuant to SEC rules, the amounts shown
___________________
(1)
These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value of performance shares, assuming the probable outcome of related performance conditions at target levels, and RSUs. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures. For reference, the grant date fair value for the performance share awards, assuming the highest level of achievement had been met, is as follows:
Name 2012
($)		 2011
($)		 2010
($)
       
Shantanu Narayen6,190,000 4,645,095
 4,867,800
Mark Garrett2,901,563 1,480,305
 819,840
Kevin Lynch2,901,563 2,399,115
 819,840
Matthew Thompson2,901,563 1,327,170
 717,360
David Wadhwani2,553,375 1,327,170
 *
*Not applicable. See footnote 8 below.

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    disregard the impact of estimated forfeitures. The grant date fair value for the performance share awards, assuming the highest level of achievement had been met, is as follows:



Name
 2010
($)		 2009
($)		 2008
($)		 

Shantanu Narayen

  4,867,800  1,089,822  5,958,080 

Mark Garrett

  819,840  483,601  2,701,920 

Kevin Lynch

  819,840  483,601  2,701,920 

Robert Tarkoff

  666,120  *  * 

Matthew Thompson

  717,360  378,172  2,078,400 

Joshua James

  666,120  *  * 
*
Not applicable.

    For additional information on the valuation assumptions, see Part II, Item 8 "Financial Statements and Supplementary Data" of our 2010 Annual Report on Form 10-K and in the Notes to Consolidated Financial Statements at Note 13, "Stock-based Compensation."

    As Mr. James did not complete the service period required by the terms of the performance share program, such shares were forfeited when he left Adobe in July 2010. Mr. James's RSUs were also forfeited (14,000 shares granted in fiscal year 2010 with grant date fair value of $478,240). No stock awards reflected in this table were forfeited by any of our other NEOs.

(2)
These For additional information on the valuation assumptions, see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2012 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation.”
(2)
No option awards were granted in fiscal year 2012 pursuant to the Committee’s actions to eliminate the use of stock options for all employees.
Prior year amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value of stock options, in accordance with applicable accounting guidance related to stock-based compensation. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures related to service-based vesting conditions. All of the stock option awards to Mr. James reflected in this table were forfeited during fiscal year 2010 due to his departure in July 2010. No stock options reflected in this table were forfeited by any of our other NEOs. For additional information on the valuation assumptions, see Part II, Item 8 "Financial“Financial Statements and Supplementary Data"Data” of our 20102011 Annual Report on Form 10-K and in the Notes to Consolidated Financial Statements at Note 13, "Stock-based12, “Stock-based Compensation."”
(3)
These amounts consist solely of amounts earned under the Executive Bonus Plan, and equivalent predecessor plans, each of which is a cash bonus plan adopted under our Master Bonus Plan and its predecessor. Amounts earned under the Executive Bonus Plan are payable in the subsequent fiscal year.
(4)
These amounts for fiscal year 2012 include matching contributions under Adobe’s 401(k) Plan (including an additional matching contribution made by Adobe early in the applicable fiscal year to eligible participants who did not previously receive the maximum matching contribution during the prior 401(k) Plan year), and life insurance premiums for all NEOs. In addition, for Mr. Narayen, Mr. Lynch, and Mr. Wadhwani, the amounts include the cost of an executive physical; for Mr. Narayen and Mr. Thompson, they include the taxable value of the Platinum Club trip for the NEO and his spouse ($20,918 for Mr. Narayen and $21,762 for Mr. Thompson).
(5)
One-time bonus awarded by the Committee in an amount equal to 17% of each NEO’s Target Cash Incentive under the 2012 Executive Bonus Plan as described above in “Compensation Discussion and Analysis—Cash Incentives—Other Cash Incentives.”
(6)
Includes a one-time retention award of 225,000 RSUs, which had a $7.0 million target value at the time of grant by the Committee. As discussed above in “Compensation Discussion and Analysis—Equity Incentives,” this one-time retention award was granted by the Committee on August 16, 2012 in response to Mr. Garrett receiving a competitive offer for his services.
(7)
Special recognition bonus awarded by our Chief Executive Officer in recognition of Mr. Lynch’s extended assignment in Hamburg, Germany.
(8)
Mr. Wadhwani was not a named executive officer in fiscal year 2010.

72
(3)
These amounts consist solely of amounts earned under the Executive Bonus Plan, and equivalent predecessor plans, each of which is a cash bonus plan adopted under our Master Bonus Plan. Amounts earned under the Executive Bonus Plan are payable in the subsequent fiscal year.

(4)
These amounts for fiscal year 2010 consist of matching contributions under Adobe's 401(k) Plan (including an additional matching contribution made by Adobe early in the applicable fiscal year to eligible participants who did not previously receive the maximum matching contribution during the prior 401(k) Plan year), life insurance premiums, patent awards, transition bonuses, COBRA premiums, tax gross-ups and severance payments as follows:

Name
 401(k)
Company
Match
($)		 Life
Insurance
Premiums
($)		 Patent
Award
($)		 Transition
Bonus
($)		 COBRA
Premiums
($)		 Tax Gross-
Up for
2010
($)		 Severance
Payment
($)		 Total
($)		 

Shantanu Narayen

  7,350  336  —  —  —  —  —  7,686 

Mark Garrett

  7,350  588  —  —  —  —  —  7,938 

Kevin Lynch

  7,350  204  1,800  —  —  —  —  9,354 

Robert Tarkoff

  7,350  204  1,200  —  —  —  —  8,754 

Matthew Thompson

  7,350  588  —  —  —  —  —  7,938 

Joshua James

  7,350  76  —  750,000  9,717  1,481,349  1,680,000  3,928,492 
(5)
Mr. Tarkoff was not a named executive officer in any prior fiscal year.

(6)
Mr. James was not a named executive officer in any prior fiscal year. Mr. James resigned from his employment with us effective July 30, 2010, and received certain severance payments under the terms of a Confidential Resignation Agreement and General Release of Claims. See "Change of Control and Termination—Omniture Employment Agreement, Change of Control and Resignation Agreement" in this proxy statement for additional information regarding Mr. James's agreements with us.

(7)
As a result of Mr. James's resignation of employment prior to the 2010 fiscal year end, Mr. James was not eligible to receive any payments under our Executive Bonus Plan.

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Grants of Plan-Based Awards in Fiscal Year 2010

2012

The following table shows all plan-based awards granted to the NEOs during fiscal year 2010.2012. The equity awards granted in fiscal year 20102012 identified in the table below are also reported in "Outstanding“Outstanding Equity Awards at 20102012 Fiscal Year End."” For additional information regarding incentive plan awards, please refer to the cash incentives and equity incentives sections of our "Compensation“Compensation Discussion and Analysis."

”

 
  
  
  
  
  
  
  
 All
Other
Stock
Awards:
Number
of Shares
of
Stock or
Units(3)
(#)		  
  
  
 
 
  
  
  
  
  
  
  
 All Other
Option
Awards:
Number of
Securities
Underlying
Options(4)
(#)		  
  
 
 
  
 Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)		 Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)		 Exercise
or Base
Price of
Option
Awards
($/Share)		  
 
 
  
 Grant Date
Fair Value of
Stock and
Option Awards(5)
($)		 
Name
 Grant
Date		 Threshold
($)		 Target
($)		 Maximum
($)		 Threshold
(#)		 Target
(#)		��Maximum
(#)		 

Shantanu Narayen

  —  —  1,136,978  2,273,957  —  —  —  —  —  —  — 

  1/25/10  —  —  —  —  95,000  142,500  —  —  —  3,245,200 

  1/25/10  —  —  —  —  —  —  95,000  —  —  3,245,200(6)

  1/25/10  —  —  —  —  —  —  —  290,000  34.16  2,660,286 

Mark Garrett

  
—		  
—		  
551,641		  
1,103,282		  
—		  
—		  
—		  
—		  
—		  
—		  
—		 

  1/25/10  —  —  —  —  16,000  24,000  —  —  —  546,560(6)

  1/25/10  —  —  —  —  —  —  17,000  —  —  580,720 

  1/25/10  —  —  —  —  —  —  50,000  —  —  1,708,000 

  1/25/10  —  —  —  —  —  —  —  49,000  34.16  449,497 

Kevin Lynch

  
—		  
—		  
329,058		  
658,115		  
—		  
—		  
—		  
—		  
—		  
—		  
—		 

  1/25/10  —  —  —  —  16,000  24,000  —  —  —  546,560(6)

  1/25/10  —  —  —  —  —  —  17,000  —  —  580,720 

  1/25/10  —  —  —  —  —  —  50,000  —  —  1,708,000 

  1/25/10  —  —  —  —  —  —  —  49,000  34.16  449,497 

Robert Tarkoff

  
—		  
—		  
342,208		  
684,416		  
—		  
—		  
—		  
—		  
—		  
—		  
—		 

  1/25/10  —  —  —  —  13,000  19,500  —  —  —  444,080(6)

  1/25/10  —  —  —  —  —  —  14,000  —  —  478,240 

  1/25/10  —  —  —  —  —  —  50,000  —  —  1,708,000 

  1/25/10  —  —  —  —  —  —  —  40,000  34.16  366,936 

Matthew Thompson

  
—		  
—		  
499,252		  
998,504		  
—		  
—		  
—		  
—		  
—		  
—		  
—		 

  1/25/10  —  —  —  —  14,000  21,000  —  —  —  478,240(6)

  1/25/10  —  —  —  —  —  —  15,000  —  —  512,400 

  1/25/10  —  —  —  —  —  —  50,000  —  —  1,708,000 

  1/25/10  —  —  —  —  —  —  —  43,000  34.16  394,456 

Joshua James

  
—		  
—		  
365,538		  
731,075		  
—		  
—		  
—		  
—		  
—		  
—		  
—		 

  1/25/10  —  —  —  —  13,000  19,500  —  —  —  444,080(6)

  1/25/10  —  —  —  —  —  —  14,000  —  —  478,240 

  1/25/10  —  —  —  —  —  —  —  40,000  34.16  366,936 
   
Estimated Future Payouts 
Under Non-Equity Incentive 
Plan Awards(1)
 
Estimated Future Payouts 
Under Equity Incentive Plan 
Awards(2)
 
All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
 All Other Option Awards: Number of Securities Underlying Exercise or Base Price of Option Grant Date
Fair Value of
Stock and
Option

Name
Grant
Date		 Threshold
($)		 Target
($)		 Maximum
($)		 Threshold
(#)		 Target
(#)		 Maximum
(#)		 
Units(3) 
(#)
 
Options
(#)
 Awards ($/Share) 
Awards(4) 
($)
                      
Shantanu
  Narayen
— — 1,339,773
 2,679,545
 — —
 —
 —
 — — —
 1/24/2012 — —
 —
 — 157,500
 200,000
 —
 — — 
4,874,625(5)

 1/24/2012 — —
 —
 — —
 —
 157,500
 — — 4,874,625
Mark Garrett— — 570,644
 1,141,288
 — —
 —
 —
 — — —
 1/24/2012 — —
 —
 — 62,500
 93,750
 —
 — — 
1,934,375(5)

 1/24/2012 — —
 —
 — —
 —
 62,500
 — — 1,934,375
 8/16/2012 — —
 —
 — —
 —
 225,000
 — — 7,571,250
Kevin Lynch— — 372,159
 744,318
 — —
 —
 —
 — — —
 1/24/2012 — —
 —
 — 62,500
 93,750
 —
 — — 
1,934,375(5)

 1/24/2012 — —
 —
 — —
 —
 62,500
 — — 1,934,375
Matthew
  Thompson
— — 521,023
 1,042,045
 — —
 —
 —
 — — —
 1/24/2012 — —
 —
 — 62,500
 93,750
 —
 — — 
1,934,375(5)

 1/24/2012 — —
 —
 — —
 —
 62,500
 — — 1,934,375
David
 Wadhwani
— — 353,551
 707,102
 — —
 —
 —
 — — —
 1/24/2012 — —
 —
 — 55,000
 82,500
 —
 — — 
1,702,250(5)

 1/24/2012 — —
 —
 — —
 —
 55,000
 — — 1,702,250
_________________________
(1)
These columns represent awards granted under our Executive Bonus Plan for performance in fiscal year 2012. These columns show the awards that were possible at the threshold, target and maximum levels of performance. Minimum performance under the Executive Bonus Plan could have resulted in a threshold amount equal to $0. Actual cash incentive awards earned in fiscal year 2012 by the NEOs under the Executive Bonus Plan are shown in the column titled “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table.”
(2)
These columns represent awards granted under our 2012 Performance Share Program, which was adopted under our 2003 Plan, for performance in fiscal year 2012. These columns show the awards that were possible at the threshold, target and maximum levels of performance. The Committee had full discretion not to award shares under the 2012 Performance Share Program regardless of the performance level achieved, and, as a result, the threshold amount could have equaled zero shares. Actual awards earned in fiscal year 2012 by the NEOs under this program are shown in the table “Equity Awards Granted by the Committee at the outset of Fiscal Year 2012” in the “Compensation Discussion and Analysis.”
(3)
This column represents awards of RSUs granted under our 2003 Plan.
(4)
These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value of each equity award. For additional information on the valuation assumptions, see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2012

73
(1)
These columns represent awards granted under our Executive Bonus Plan for performance in fiscal year 2010. These columns show the awards that were possible at the threshold, target and maximum levels of performance. Minimum performance under the Executive Bonus Plan could have resulted in a threshold amount equal to $0. Actual cash incentive awards earned in fiscal year 2010 by the NEOs under the Executive Bonus Plan are shown in the column titled "Non-Equity Incentive Plan Compensation" in the "Summary Compensation Table."

(2)
These columns represent awards granted under our 2010 Performance Share Program, which was adopted under our 2003 Plan, for performance in fiscal year 2010. These columns show the awards that were possible at the threshold, target and maximum levels of performance. The Executive Compensation Committee had full discretion not to award shares under the 2010 Performance Share Program regardless of the performance level achieved, and, as a result, the threshold amount could have equaled zero shares. Actual awards earned in fiscal year 2010 by the NEOs under this program are shown in the table "Equity Awards during Fiscal Year 2010" in the "Compensation Discussion and Analysis."

(3)
This column represents awards of RSUs granted under our 2003 Plan.

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(4)
This column represents awards of stock options granted under our 2003 Plan.

(5)
These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value of each equity award. For additional information on the valuation assumptions, see Part II, Item 8 "Financial Statements and Supplementary Data" of our 2010
Annual Report on Form 10-K and in the Notes to Consolidated Financial Statements at Note 13, "Stock-based12, “Stock-based Compensation."

(6)
The grant date fair value included in this column for awards granted under our 2010 Performance Share Program is based on the target award amount listed in this table, as this amount was estimated to be the probable outcome of the performance conditions associated with these grants determined as of the grant date, excluding the effect of estimated forfeitures. See footnote 1 to the "Summary Compensation Table" for more information regarding the grant date fair value for these awards at the maximum payout levels.
”

(5)
The grant date fair value included in this column for awards granted under our 2012 Performance Share Program is based on the target award amount listed in this table, as this amount was estimated to be the probable outcome of the performance conditions associated with these grants determined as of the grant date, excluding the effect of estimated forfeitures. See footnote 1 to the “Summary Compensation Table” for more information regarding the grant date fair value for these awards at the maximum payout levels.

Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 20102012 Table

The material terms of the NEOs'NEOs’ annual compensation, including base salaries, the Executive Bonus Plan (which is a cash plan adopted under our Master Bonus Plan), the performance share program, and the explanations of the amounts of salary, cash incentives and equity values in proportion to total compensation are described under "Compensation“Compensation Discussion and Analysis"Analysis” in this proxy statement. Our equity award granting practices are described below and our severance benefits are described under "Change“Change of Control and Termination" in this proxy statement. Specifically, Mr. James's employment agreement with Adobe, negotiated to replace and amend his Omniture employment and change of control agreements as part of our acquisition of Omniture, is described under "Change of Control and Termination—Omniture Employment Agreement, Change of Control and Resignation Agreement"Control” in this proxy statement. None of our other NEOs have entered into a written employment agreement with Adobe.

As discussed in greater detail in "Compensation“Compensation Discussion and Analysis,"” the fiscal year 20102012 non-equity incentive awards were granted pursuant to the Executive Bonus Plan, with amounts earned based on the achievement of certain financial targets as well as individual performance goals.goals applicable to each respective NEO. Cash incentives were fully vested when earned.

As discussed in greater detail in "Compensation“Compensation Discussion and Analysis,"” the fiscal year 20102012 performance share awards were granted in the form of stock-settled RSUs subject to the terms of our 20102012 Performance Share Program. Awards earned under the 20102012 Performance Share Program were determined based on the results achieved during the one-year performance period, as certified by the Executive Compensation Committee. Each NEO was granted an award for the maximum number of shares that he could earn based on the maximum achievement of the pre-established other performance goals, with the actual award earned subject to a reduction from the maximum award based on actual achievement of the other performance goals. The first1/ 1/3 of the shares earned vested on the first anniversary of the grant date, and the remaining2/ 2/3 of the shares earned is subject to equal annual time-based vesting over the two years after the first anniversary of the grant date.

        As discussed in greater detail in "Compensation Discussion and Analysis,"date, contingent upon the NEOs' Retention RSU Awards (each an award of 50,000NEO’s continued service to Adobe.

The RSUs for Messrs. Garrett, Lynch, Tarkoff and Thompson)granted pursuant to our 2003 Plan vest 50%over four years with 25% vesting on the secondeach anniversary of the grant date and then 25% on each of the third and fourth anniversaries of the grant date; the other RSUs vest in equal annual installments over a period of four years.

date. There is no purchase price associated with performance share or RSU awards.

        The stock options vest in equal monthly installments over four years from the date of grant, subject to continued employment, and the exercise price was the closing market price of our common stock on the grant date.

We did not pay dividends on our common stock during fiscal year 2010.

2012.

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Adobe has adopted written guidelines setting forth our grant practices and procedures for all equity awards. Pursuant to these guidelines:

the effective grant date for our annual equity awards granted to our employees, including the NEOs, is January 24th of each year, or the first trading day thereafter, unless another date is approved and documented by the Executive Compensation Committee;

•
the effective grant date for executive officer new hire stock option awards is the next 15th day of a month following the executive officer's hire date, or the first trading day thereafter;

•
the effective grant date for executive officer new hire RSU and performance share awards is the executive officer'sofficer’s hire date, unless the performance share program for the applicable fiscal year has not yet been adopted (in which case the performance share award and any accompanying RSU award will be granted when the program is adopted); and

•
the effective grant date for non-executive officer new hire stock option, performance share and RSU awards is the 15th15th day of the month following the month of the employee'semployee’s hire date, or, if that is not a trading day, the first trading day thereafter, unless the performance share program for the applicable fiscal year has not yet been adopted (in which case the performance share award and any accompanying RSU award will be granted when the program is adopted).

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Because the grant dates are pre-established, the timing of the release of material nonpublic information does not affect the grant dates for equity awards, and Adobe does not time the release of material nonpublic information based on equity award grant dates.

        Our Executive Compensation

The Committee approves all grants made to our executive officers at an in-person or telephonic meeting on or before the grant date. The Executive Compensation Committee also has the authority to approve non-executive officer stock option, performance share and RSU awards on or before the grant date. Our Board has also delegated to a Management Committee for Employee Equity Awards the authority to approve stock option, performance share and RSU awards to non-executive officer employees in accordance with the granting guidelines described above. Pursuant to its charter, the Executive Compensation Committee has the authority to establish the terms and conditions of our equity awards; therefore, the Executive Compensation Committee may make exceptions to Adobe'sAdobe’s granting guidelines.

All stock option awards are granted with an exercise price equal to or greater than (in some instances for awards outside the United States) the fair market value of the underlying stock on the effective grant date or, in accordance with the terms of our approved equity plans, the fair market value of the underlying stock on the datelast trading day prior to the effective grant date, if an award is granted on a non-trading day.

Effect of Retirement, Death and Disability on Equity Compensation Awards

The terms and conditions of our stock option and RSU awards provide that if a recipient'srecipient’s employment is terminated due to death or disability, the recipient will be given credit for an additional 12 months of service, resulting in vesting for the applicable award accelerating by 12 months. In addition, our U.S. and certain other stock option agreements provide that if a recipient'srecipient’s employment terminates on or after age 65, the individual will be given credit for an additional 12 months of service, resulting in vesting for the applicable award accelerating by 12 months. The terms and conditions of our performance share awards provide that if a recipient'srecipient’s employment is terminated due to death or disability before certification of the performance goals, the recipient will receive a pro-rated target award based on the number of months of service provided during the performance period.period, for which the vesting will be accelerated by an amount equal to the percentage amount scheduled to vest on the next annual vesting date for each award. If a recipient'srecipient’s employment is terminated due to death or disability after certification of the performance goals, the recipient will receive accelerated vesting of the actual award equal to the percentage amount scheduled to vest on the next annual vesting date for each award.


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Outstanding Equity Awards at 20102012 Fiscal Year End

The following table sets forth information regarding outstanding equity awards as of December 3, 2010November 30, 2012, for each NEO. All vesting is contingent upon continued employment with Adobe. Market values and payout values in this table are calculated based on the closing market price of our common stock as reported on NASDAQ on December 3, 2010,November 30, 2012, which was $29.14$34.61 per share.


 Option Awards(1) Stock Awards 
Option Awards(1)
 Stock Awards
Name
 Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable		 Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable		 Option
Exercise
Price
($)		 Option
Expiration
Date		 Number of
Shares
or Units
of Stock
That Have
Not Vested
(#)		 Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)		 Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(2)
(#)		 Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)		  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable		 Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable		 Option
Exercise
Price
($)		 Option
Expiration
Date		 Number of
Shares
or Units
of Stock
That Have
Not Vested
(#)		 Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)		 
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(2) 
(#)
 Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
        

Shantanu Narayen

 377,742 — 29.12 1/14/2012 — — — — Shantanu Narayen200,000
 — 39.39 2/2/2013 — —
 —
 —
225,000
 — 39.69 1/24/2014 — —
 —
 —

 200,000 — 32.42 5/24/2012 — — — —  603,000
 — 34.64 1/24/2015 — —
 —
 —

 200,000 — 39.39 2/2/2013 — — — —  268,000
 — 34.64 1/24/2015 — —
 —
 —

 215,624 9,376(3) 39.69 1/24/2014 — — — —  —
 — — — 
32,000(3)

 1,107,520
 —
 —

 189,833 78,167(4) 34.64 1/24/2015 — — — —  273,411
 
11,889(4)
 19.93 1/26/2016 — —
 —
 —

 — — — — 12,500(5) 364,250 — —  —
 — — — 
11,887(5)

 411,409
 —
 —

 — 603,000(6) 34.64 1/24/2015 — — — —  205,416
 
84,584(6)
 34.16 1/25/2017 — —
 —
 —

 — — — — 53,320(7) 1,553,745 — —  —
 — — — 
47,500(7)
 1,643,975
 —
 —

 — — — — 64,000(8) 1,864,960 — —  —
 — — — 
42,750(8)
 1,479,578
 —
 —

 130,761 154,539(9) 19.93 1/26/2016 — — — —  124,666
 
147,334(9)
 34.03 1/24/2018 — —
 —
 —

 — — — — 35,662(10) 1,039,191 — —  —
 — — — 
70,500(10)
 2,440,005
 —
 —

 60,416 229,584(11) 34.16 1/25/2017 — — — —  —
 — — — 
78,866(11)
 2,729,552
 —
 —

 — — — — — — 95,000 2,768,300  —
 — — — 
157,500(12)
 5,451,075
 —
 —

 — — — — 95,000(12) 2,768,300 — —  —
 — — — — —
 200,000
 6,922,000

Mark Garrett

 
257,811		 
17,189
(13)		 
39.25		 
2/15/2014		 
—		 
—		 
—		 
—		 Mark Garrett275,000
 — 39.25 2/15/2014 — —
 —
 —

 — — — — 3,750(14) 109,275 — —  120,000
 — 34.64 1/24/2015 — —
 —
 —

 85,000 35,000(4) 34.64 1/24/2015 — — — —  121,324
 
5,276(4)
 19.93 1/26/2016 — —
 —
 —

 — — — — 24,180(7) 704,605 — —  —
 — — — 
5,275(5)

 182,568
 —
 —

 58,023 68,577(9) 19.93 1/26/2016 — — — —  34,708
 
14,292(6)

 34.16 1/25/2017 — —
 —
 —

 — — — — 15,825(10) 461,141 — —  —
 — — — 
25,000(13)

 865,250
 —
 —

 10,208 38,792(11) 34.16 1/25/2017 — — — —  —
 — — — 
8,500(7)

 294,185
 —
 —

 — — — — 50,000(15) 1,457,000 — —  —
 — — — 
7,200(8)

 249,192
 —
 —

 — — — — — — 16,000 466,240  40,332
 
47,668(9)
 
34.03

 1/24/2018 — —
 —
 —

 — — — — 17,000(12) 495,380 — —  —
 — — — 
22,500(10)

 778,725
 —
 —

Kevin Lynch

 
13,910		 
—		 
24.66		 
2/24/2015		 
—		 
—		 
—		 
—		 

 26,863 — 26.53 9/14/2015 — — — —  —
 — — — 
25,113(11)

 869,853
 —
 —

 120,750 — 32.10 11/30/2015 — — — —  —
 — — — 
62,500(12)

 2,163,125
 —
 —

 90,000 — 38.52 1/3/2013 — — — —  —
 — — — — —
 93,750
 3,244,688

 143,749 6,251(3) 39.69 1/24/2014 — — — —  —
 — — — 
225,000(14)

 7,787,250
 —
 —

 85,000 35,000(4) 34.64 1/24/2015 — — — — 

 — — — — 8,333(5) 242,824 — — 

 — — — — 24,180(7) 704,605 — — 

 58,023 68,577(9) 19.93 1/26/2016 — — — — 

 — — — — 15,825(10) 461,141 — — 

 10,208 38,792(11) 34.16 1/25/2017 — — — — 

 — — — — 50,000(15) 1,457,000 — — 

 — — — — — — 16,000 466,240 

 — — — — 17,000(12) 495,380 — — 

76

Table of Contents




 Option Awards(1) Stock Awards 
Option Awards(1)
 Stock Awards
Name
 Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable		 Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable		 Option
Exercise
Price
($)		 Option
Expiration
Date		 Number of
Shares
or Units
of Stock
That Have
Not Vested
(#)		 Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)		 Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(2)
(#)		 Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)		  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable		 Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable		 Option
Exercise
Price
($)		 Option
Expiration
Date		 Number of
Shares
or Units
of Stock
That Have
Not Vested
(#)		 Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)		 
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(2) 
(#)
 Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)

Robert Tarkoff

 218,750 31,250(16) 41.37 5/15/2014 — — — — 
Kevin LynchKevin Lynch13,910
 — 24.66 2/24/2015 — —
 —
 —
26,863
 — 26.53 9/14/2015 — —
 —
 —
120,750
 — 32.10 11/30/2015 — —
 —
 —
90,000
 — 38.52 1/3/2013 — —
 —
 —
150,000
 — 39.69 1/24/2014 — —
 —
 —
120,000
 — 34.64 1/24/2015 — —
 —
 —
26,434
 
5,276(4)
 19.93 1/26/2016 — —
 —
 —
—
 — — — 
5,275(5)

 182,568
 —
 —

 — — — — 3,750(17) 109,275 — —  34,708
 
14,292(6)

 34.16 1/25/2017 — —
 —
 —

 66,582 27,418(4) 34.64 1/24/2015 — — — —  —
 — — — 
25,000(13)

 865,250
 —
 —

 — — — — 18,600(7) 542,004 — —  —
 — — — 
8,500(7)

 294,185
 —
 —

 15,373 53,627(9) 19.93 1/26/2016 — — — —  —
 — — — 
7,200(8)

 249,192
 —
 —

 — — — — 12,375(10) 360,608 — —  64,624
 
76,376(9)
 
34.03

 
1/24/2018

 — —
 —
 —

 8,332 31,668(11) 34.16 1/25/2017 — — — —  —
 — — — 
36,000(10)

 1,245,960
 —
 —

 — — — — 50,000(15) 1,457,000 — —  —
 — — — 
40,733(11)

 1,409,769
 —
 —

 — — — — — — 13,000 378,820  —
 — — — 
62,500(12)

 2,163,125
 —
 —

 — — — — 14,000(12) 407,960 — —  —
 — — — — —
 93,750
 3,244,688

Matthew Thompson

 
239,582		 
10,418
(18)		 
40.05		 
1/16/2014		 
—		 
—		 
—		 
—		 Matthew Thompson250,000
 — 40.05 1/16/2014 — —
 —
 —

 66,581 27,419(4) 34.64 1/24/2015 — — — —  94,000
 — 34.64 1/24/2015 — —
 —
 —

 — — — — 3,750(5) 109,275 — —  —
 — — — 
4,125(5)

 142,766
 —
 —

 — — — — 18,600(7) 542,004 — —  94,873
 
4,127(4)

 19.93 1/26/2016 — —
 —
 —

 45,374 53,626(9) 19.93 1/26/2016 — — — —  30,458
 
12,542(6)

 34.16 1/25/2017 — —
 —
 —

 — — — — 12,375(10) 360,608 — —  —
 — — — 
25,000(13)

 865,250
 —
 —

 8,958 34,042(11) 34.16 1/25/2017 — — — —  —
 — — — 
7,500(7)

 259,575
 —
 —

 — — — — 50,000(15) 1,457,000 — —  —
 — — — 
6,300(8)

 218,043
 —
 —

 — — — — — — 14,000 407,960  35,290
 
41,710(9)
 
34.03

 
1/24/2018

 — —
 —
 —

 — — — — 15,000(12) 437,100 — —  —
 — — — 
20,250(10)

 700,853
 —
 —

Joshua James(19)

 
121,668		 
—		 
12.33		 
3/28/2016		 
—		 
—		 
—		 
—		 

 103,157 — 21.02 6/15/2016 — — — —  —
 — — — 
22,533(11)

 779,867
 —
 —

 280,986 — 21.02 6/15/2016 — — — —  —
 — — — 
62,500(12)

 2,163,125
 —
 —

 70,471 — 18.38 2/26/2019 — — — —  —
 — — — — —
 93,750
 3,244,688

(1)77
All stock option awards were granted pursuant to our 2003 Plan, except certain stock option grants to Messrs. Lynch and James. Mr. Lynch's grants for 13,910, 26,863 and 120,750 shares were made pursuant to the Macromedia, Inc. 2002 Equity Incentive Plan. Mr. James's grants were made pursuant to the Omniture, Inc. 2006 and Omniture, Inc. 1999 Equity Incentive Plans. Mr. James's other stock option awards were canceled after he resigned from Adobe in July 2010.

(2)
These amounts represent the target number of shares that could have been earned under our 2010 Performance Share Program. The performance period ended at the end of fiscal year 2010, and certification was completed on January 24, 2011. The first1/3 of the performance shares earned vested on January 25, 2011, the first anniversary of the grant date, and the remaining2/3 of the shares earned is subject to annual time-based vesting over the two years after the grant date. Shares fully vest on January 25, 2013. See the table "Equity Awards during Fiscal Year 2010" in the "Compensation Discussion and Analysis" for actual achievement amounts. The following table represents the maximum amounts that could have been earned under the 2010 Performance Share Program:

Name
 Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)		 Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)		 

Shantanu Narayen

  142,500  4,152,450 

Mark Garrett

  24,000  699,360 

Kevin Lynch

  24,000  699,360 

Robert Tarkoff

  19,500  568,230 

Matthew Thompson

  21,000  611,940 

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(3)
Four-year vesting in equal monthly installments. Shares fully vested on January 24, 2011.

(4)
Four-year vesting in equal monthly installments. Shares fully vest on January 24, 2012.

(5)
These amounts represent awards actually earned under our 2007 Performance Share Program. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vested on January 24, 2011.

(6)
Four-year vesting with1/3 vesting on the third anniversary of the grant date and2/3 vesting on the fourth anniversary of the grant date. Shares fully vest on January 24, 2012.

(7)
These amounts represent awards actually earned under our 2008 Performance Share Program. Four-year vesting with 25% vesting in fiscal year 2009 upon certification, and then 25% vesting per year on each anniversary of the grant date. Shares fully vest on January 24, 2012.

(8)
RSUs granted pursuant to our 2003 Plan. Five-year vesting with 50% vesting on the fourth anniversary of the grant date and 50% vesting on the fifth anniversary of the grant date. Shares fully vest on January 24, 2013.

(9)
Four-year vesting in equal monthly installments. Shares fully vest on January 26, 2013.

(10)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on January 26, 2013.

(11)
Four-year vesting in equal monthly installments. Shares fully vest on January 25, 2014.

(12)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on January 25, 2014.

(13)
Four-year vesting with 25% vesting on the first anniversary of the grant date and equal monthly vesting thereafter. Shares fully vested on February 15, 2011.

(14)
These amounts represent awards actually earned under our 2007 Performance Share Program. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vested on February 7, 2011.

(15)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 50% vesting on the second anniversary of the grant date and 25% vesting on the third and fourth anniversaries of the grant date. Shares fully vest on January 25, 2014.

(16)
Four-year vesting with 25% vesting on the first anniversary of the grant date and equal monthly vesting thereafter. Shares fully vest on May 15, 2011.

(17)
These amounts represent awards actually earned under our 2007 Performance Share Program. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on May 15, 2011.

(18)
Four-year vesting with 25% vesting on the first anniversary of the grant date and equal monthly vesting thereafter. Shares fully vested on January 16, 2011.

(19)
As a result of Mr. James's resignation of employment as of July 30, 2010, certain of his options were accelerated per the terms of his Confidential Resignation Agreement and General Release of Claims. See "Change of Control and Termination—Omniture Employment Agreement, Change of Control and Resignation Agreement" below for more information regarding Mr. James's resignation agreement.


 
Option Awards(1)
 Stock Awards
Name Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable		 Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable		 Option
Exercise
Price
($)		 Option
Expiration
Date		 Number of
Shares
or Units
of Stock
That Have
Not Vested
(#)		 Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)		 
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(2) 
(#)
 Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
David Wadhwani20,699
 — 
25.41

 
2/11/2015

 — —
 —
 —
 35,000
 — 
30.79

 
6/22/2013

 — —
 —
 —
 25,000
 — 
39.69

 
1/24/2014

 — —
 —
 —
 30,000
 — 
34.64

 
1/24/2015

 — —
 —
 —
 9,000
 — 
35.75

 
4/15/2015

 — —
 —
 —
 16,041
 
1,959(4)

 
19.93

 
1/26/2016

 — —
 —
 —
 —
 — — — 
1,958(5)

 67,766
 —
 —
 —
 — — — 
15,000(15)

 519,150
 —
 —
 20,293
 
8,357(6)

 
34.16

 
1/25/2017

     —
 —
 —
 — — — 
6,974(7)

 241,370
 —
 —
 —
 — — — 
10,000(16)
 346,100
 —
 —
 35,290
 
41,710(9)
 
34.03

 
1/24/2018

 — —
 —
 —
 —
 — — — 
20,250(10)

 700,853
 —
 —
 —
 — — — 
22,533(11)

 779,867
 —
 —
 —
 — — — 
55,000(12)

 1,903,550
 —
 —
 —
 — — — — —
 82,500
 2,855,325
_________________________
(1)
All stock option awards were granted pursuant to our 2003 Plan, except certain stock option grants to Mr. Lynch and Mr. Wadhwani. Mr. Lynch’s grants for 13,910, 26,863 and 120,750 shares and Mr. Wadhwani’s grant for 20,699 were made pursuant to the Macromedia, Inc. 2002 Equity Incentive Plan.
(2)
These amounts represent the maximum number of shares that could have been earned under our 2012 Performance Share Program. The performance period ended at the end of fiscal year 2012, and certification was completed on January 24, 2013. The first 1/3 of the performance shares earned vested on January 24, 2013, the first anniversary of the grant date, and the remaining 2/3 of the shares earned is subject to annual time-based vesting over the two years after the first anniversary of the grant date. Shares fully vest on January 24, 2015. See the table “Equity Awards Granted by the Committee at the outset of Fiscal Year 2012” in the “Compensation Discussion and Analysis” for actual achievement amounts.
(3)
RSUs granted pursuant to our 2003 Plan. Five-year vesting with 50% vesting on the fourth anniversary of the grant date and 50% vesting on the fifth anniversary of the grant date. Shares fully vest on January 24, 2013.
(4)
Four-year vesting in equal monthly installments. Options fully vest on January 26, 2013.
(5)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on January 26, 2013.
(6)
Four-year vesting in equal monthly installments. Options fully vest on January 25, 2014.
(7)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on January 25, 2014.
(8)
These amounts represent awards actually earned under our 2010 Performance Share Program. Three-year vesting with 1/3 vesting on the each anniversary of the grant date. Shares fully vest on January 25, 2013.
(9)
Four-year vesting in equal monthly installments. Options fully vest on January 24, 2015.

78

Table of Contents


(10)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on January 24, 2015.
(11)
These amounts represent awards actually earned under our 2011 Performance Share Program. Three-year vesting with 1/3 vesting on the each anniversary of the grant date. Shares fully vest on January 24, 2015.
(12)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on January 24, 2016.
(13)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 50% vesting on the second anniversary of the grant date and 25% vesting on the third and fourth anniversaries of the grant date. Shares fully vest on January 25, 2014.
(14)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on August 26, 2016.
(15)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 50% vesting on the second anniversary of the vesting commencement date and thereafter as to 25% on each of the third and fourth anniversaries of the vesting commencement date. Shares fully vest on December 15, 2013.
(16)
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 25% vesting on each anniversary of the grant date. Shares fully vest on June 22, 2014.

79


Table of Contents


Option Exercises and Stock Vested in Fiscal Year 2010

2012

The following table sets forth information regarding each exercise of stock options and the vesting during fiscal year 20102012 of time-based stock-settled RSUs, and performance-based stock-settled RSUs granted under our 20072008, 2010, and 20082011 Performance Share Programs for each of the NEOs, on an aggregate basis. The value realized on the exercise of option awards is calculated as follows (i) if the exercise involves a sale of some or all of the exercised shares, the difference between the actual price at which the exercised shares were sold and the exercise price of the options;options, or (ii) in all other cases, the difference between the closing market price of our common stock as reported on NASDAQ on the date of exercise and the exercise price of the options. The value realized on vesting of stock awards representsis based on the closing market price of our common stock as reported on NASDAQ on the vesting date of the stock-settled RSUs.


 Option Awards Stock Awards  Option Awards Stock Awards
Name
 Number of
Shares Acquired
on Exercise
(#)		 Value Realized
on Exercise
($)		 Number of
Shares Acquired
on Vesting
(#)		 Value Realized
on Vesting
($)		  Number of
Shares Acquired
on Exercise
(#)		 Value Realized
on Exercise
($)		 Number of
Shares Acquired
on Vesting
(#)		 Value Realized
on Vesting
($)
        

Shantanu Narayen

 — — 51,048 1,749,800 Shantanu Narayen200,000
 292,000
 199,981
 6,218,081

Mark Garrett

 — — 21,115 717,575 Mark Garrett—
 —
 73,882
 2,302,077

Kevin Lynch

 — — 25,698 881,176 Kevin Lynch49,746
 525,815
 86,182
 2,682,762

Robert Tarkoff

 30,000 371,788 17,175 586,187 

Matthew Thompson

 — — 17,175 588,662 Matthew Thompson—
 —
 66,492
 2,072,546

Joshua James

 — — 12,249 357,303 
David WadhwaniDavid Wadhwani20,000
 271,105
 47,493
 1,409,518



Nonqualified Deferred Compensation

Under the terms of our Deferred Compensation Plan, eligible employees, including each of the NEOs, and directors may elect to defer the receipt of a portion of cash and equity compensation they would otherwise have received when earned. Amounts deferred under the Deferred Compensation Plan are deemed invested in the investment funds selected by the participant from the same fundwith similar options as available under the Adobe 401(k) Plan, except that the individually directed brokerage account feature and the Retirement Savings Trust are not available under the Deferred Compensation Plan. Participants can make changes in the allocations of their deferred compensation among these funds in generally the same manner and on generally the same terms as our 401(k) Plan. Deferrals are adjusted for earnings and losses in the deemed investments. We do not contribute to the Deferred Compensation Plan on behalf of our employees, or match the deferrals made by participants, with the exception of situations in which an election to defer under the Deferred Compensation Plan would prevent a participant from receiving the full 401(k) company match as described in the "Compensation“Compensation Discussion and Analysis—Retirement and Deferred Compensation Plan Benefits"Benefits” section of this proxy statement. In those situations, we make a contribution to the Deferred Compensation Plan equal to the foregone 401(k) company match. No such contribution was made in fiscal year 2010.2012. As a result, amounts payable under the Deferred Compensation Plan generally are entirely determined by participant contributions and fund elections.

Employee participants in the Deferred Compensation Plan may elect to contribute 1% to 75% of their base salary and 1% to 100% of other specified compensation, including commissions and bonuses. Participants may also contribute 100% per vesting tranche of their RSU and performance share awards. Participants elect the payment of benefits to begin on a specified date at least three years in the future in the form of a lump sum or annual installments of 5, 10 or 15 years. Upon termination of a participant'sparticipant’s employment with Adobe, the participant will receive a distribution in the form of a lump sum payment. Each participant shall elect whether to keep his or her account balance in the Deferred Compensation Plan or to receive a lump sum distribution upon a change of control. In addition, if a


Table of Contents


participant experiences an unforeseeable emergency during the deferral period, the participant may petition to receive a partial or full payout from the Deferred Compensation Plan. All distributions are made in cash, except that deferred RSUs and performance shares are settled in Adobe stock.

No NEOs participated in, or had an accrued balance under, the Deferred Compensation Plan in fiscal year 2010.

2012.



80
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Change of Control and Termination

Each of the NEOs (except Mr. James, who is no longer an employee) is eligible to receive severance benefits in the event of certain terminations of employment upon or after a change of control of Adobe, pursuant to the terms of our Executive SeverancePrior Participant Change of Control Plan applicable to each of our current NEOs or, in the case of our Chief Executive Officer, upon or after a change of control of Adobe, in some cases whether or not his employment is terminated, pursuant to his individual Retention Agreement. Mr. Narayen would need to waive all benefits under his Retention Agreement to receive any benefits under the Prior Participant Change of Control Plan.
On December 12, 2011, the Former Plan expired by its terms; our Executive SeveranceCompensation Committee approved the Prior Participant Change of Control Plan effective as of December 13, 2011, and our NEOs became eligible participants under this new plan at that time. The material terms of, and payments due under, the Prior Participant Change of Control Plan are similar to the Former Plan.

Participants of the Former Plan are eligible to participate in the Prior Participant Change of Control Plan. The Prior Participant Change of Control Plan will expire on December 13, 2014, unless extended by Adobe or unless a change of control occurs prior thereto, in which case the Prior Participant Change of Control Plan will terminate following the later of the date which is at least two years after the occurrence of a change of control or the payment of all severance benefits due under the Prior Participant Change of Control Plan. The Committee also approved an additional change of control severance plan that would apply to certain employees who were not eligible under the Former Plan upon its expiration, and therefore are not eligible under the Prior Participant Change of Control Plan.

Pursuant to the terms of our Executive Severancethe Prior Participant Change of Control Plan and Mr. Narayen'sNarayen’s Retention Agreement, a "change“change of control"control” of Adobe is generally defined as one of the following:

    •
a person or entity becomes the beneficial owner of Adobe securities representing 30% or more of the combined voting power of our then outstanding securities entitled to vote in the election of directors;

•
during any period of two consecutive years, a majority of our directors who were nominated by a vote of at least3/ 3/4 of the directors in office at the beginning of the period cease to be directors;

•
as a result of a reorganization, merger, consolidation or other corporate transaction involving Adobe, our stockholders immediately prior to the transaction do not retain ownership of more than 50% of the combined voting power of Adobe or resulting entity;

•
all or substantially all of our assets are sold, liquidated or distributed; or

•
a "change“change of control"control” or a "change“change in the effective control"control” of Adobe within the meaning of Section 280G of the Code occurs.

Executive Severance Plan

Plans

Pursuant to the Executive SeverancePrior Participant Change of Control Plan, if there is a qualifying change of control of Adobe, and within two years following the change of control, Messrs.Mr. Garrett, Mr. Lynch, TarkoffMr. Thompson or ThompsonMr. Wadhwani experiences a separation from service as a result of Adobe (or any successor) terminating the executive officer'sofficer’s employment without cause, or as a result of his disability, or if he resigns for good reason, the executive officer would be eligible to receive:

    •
24 months of salary and target bonus plus one month of salary and bonus per year of service up to an additional 12 months;

•
pro-rata target bonus for the fiscal year of termination;
COBRA premiums for the eligible executive and covered dependents until the earlier of (i) the last month in which the executive and his covered dependents are eligible for and enrolled in COBRA coverage and (ii) 24 months plus the number of years of service with Adobe (up to a maximum of 12); and

•
accelerated vesting of all outstanding equity awards (to(including, to the extent credited, for performance shares).

In the event that any amount under the Executive SeverancePrior Participant Change of Control Plan would constitute an excess parachute payment within the meaning of Section 280G of the Code, the amounts payable will not exceed the amount

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which produces the greatest after-tax benefit to the affected individual. All of the benefits under the Retention AgreementPrior Participant Change of Control Plan are conditioned upon the executive officer signing a release of

claims.

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claims. The Executive Severance Plan expires on December 12, 2011, unless extended by Adobe or unless a change of control occurs prior thereto, in which case the Executive Severance Plan will terminate following the later of the date which is at least two years after the occurrence of a change of control or the payment of all severance benefits due under the Executive Severance Plan.

Chief Executive Officer Retention Agreement

Effective January 12, 1998, Adobe entered into a Retention Agreement with Mr. Narayen, which was amended twice, the first time effective February 11, 2008, based on his promotion to Chief Executive Officer, and the second on December 17, 2010, in order to clarify the manner of compliance with, or exemption from, Section 409A of the Code, in light of updates to, and interpretations of, applicable tax regulations.

Pursuant to his Retention Agreement, if there is a qualifying change of control of Adobe, and within two years following the change of control Mr. Narayen experiences a separation from service as a result of Adobe (or any successor) terminating his employment without cause, or as a result of his disability, or if he resigns for good reason, Mr. Narayen would be eligible to receive:

    •
36 months of salary and target bonus;
pro-rata target bonus for the fiscal year of termination; and

•
COBRA premiums for him and covered dependents until the earlier of (i) the last month in which the executivehe and his covered dependents are eligible for and enrolled in COBRA coverage and (ii) 36 months.

Upon a change of control, regardless of whether his employment is terminated, or his death or disability, Mr. Narayen would be eligible to receive:

    •
    receive accelerated vesting of all outstanding equity awards (to(including, to the extent credited, for performance shares).

and all stock options will become fully exercisable.

In the event that any amount under Mr. Narayen'sNarayen’s Retention Agreement would constitute an "excess“excess parachute payment"payment” within the meaning of Section 280G of the Code, the amounts payable will not exceed the amount which produces the greatest after-tax benefit to Mr. Narayen. All benefits provided under the Retention Agreement are conditioned upon his signing a release of claims. The Retention Agreement has no expiration date.

2003 Plan
See “Proposal 2—Summary of the 2003 Plan—Change of Control” for a description of the treatment of awards under the 2003 Plan in the event of a change of control.
Performance Share Programs

Pursuant to our Performance Share Programs, in the event of a change of control prior to the certification date, there will be an automatic crediting to theeach NEO of a pro-rated (based on time elapsed during the performance period) target award immediately prior to the date of the change of control, but the applicable time-based service vesting requirements will continue to apply. The Executive SeverancePrior Participant Change of Control Plan and Mr. Narayen'sNarayen’s Retention Agreement may provide for acceleration of some or all of the awards held by the NEOs, as described above.

Omniture Employment Agreement, Change of Control and Resignation Agreement

        In connection with our acquisition of Omniture, we entered into an at-will employment agreement with Mr. James, Omniture's former Chief Executive Officer, on September 15, 2009. The agreement was negotiated as a replacement and amendment of Mr. James's existing employment and change of control agreements with Omniture. We agreed to employ Mr. James as a Senior Vice President with an annual base salary of $480,000 and an annual target cash incentive of 75% of his base salary, subject to the terms of our Executive Bonus Plan. Mr. James also received a grant of 500,000 stock options, 200,000 shares of which would vest and become exercisable on the second anniversary of the grant date, and the remainder of which would vest monthly thereafter and be fully vested on the fourth anniversary of the grant date; a grant of 50,000 RSUs, which would vest 25% annually over four years


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following the grant date; and a retention grant of 75,000 RSUs (the "Additional RSUs"), which would vest 50% annually over two years following the grant date. All equity vesting was subject to Mr. James's continued employment with us. These new equity grants were not subject to accelerated vesting under his Omniture change of control agreement, except that, in the event that he would have been entitled to accelerated vesting of his other equity granted by Omniture under his Omniture change of control agreement (even if the agreement had terminated), his Additional RSUs would immediately vest on a pro rata basis, based on the number of completed months of employment by Mr. James with Adobe.

        In addition, under the employment agreement, 25% of certain outstanding Omniture stock options and restricted stock units held by Mr. James that would have vested as of the closing date of the Omniture acquisition under his pre-existing Omniture agreements would remain unvested and would instead vest and become exercisable one year after the closing date, subject to Mr. James's continued employment with Adobe. If Mr. James's employment with us ended before the one year period was complete, for any reason other than termination for cause by Adobe or termination for other than good reason by Mr. James (each as defined in the agreement), those shares would immediately vest upon his termination. In addition, Mr. James's existing change of control agreement with Omniture would remain in effect for one year after the closing date, through October 23, 2010, governing the treatment of equity issued by Omniture and assumed by Adobe, as well as his eligibility to receive severance under certain circumstances upon his termination from Adobe during this period. Under the terms of the Omniture change of control agreement, Mr. James would have been entitled to certain severance benefits in the event he resigned for good reason, was terminated from employment other than for cause, or died or became disabled (each as defined in the Omniture change of control agreement) in connection with a qualifying change of control.

        Effective as of July 30, 2010, Mr. James resigned from his position with us as Senior Vice President, Omniture Business Unit. In connection with his resignation, we entered into a Confidential Resignation Agreement and General Release of Claims with Mr. James, pursuant to which he received the following in lieu of the severance benefits provided by the Omniture change of control agreement and the Adobe employment agreement (collectively, the "Severance Benefits"):

    •
    a lump sum severance payment of $1,680,000, subject to applicable withholding;

    •
    COBRA premiums for him and covered dependents through January 31, 2012, or such earlier date that he becomes eligible to obtain other group health insurance;

    •
    a lump sum transition bonus of $750,000, subject to applicable withholding;

    •
    all outstanding, unvested stock options and RSUs issued by Omniture and assumed by Adobe vested in full and became exercisable, and the expiration date of such stock options (as well as all of his other vested options issued by Omniture and assumed by Adobe, according to the provisions of his Omniture change of control agreement) became the 5th anniversary of his resignation date (July 30, 2015);

    •
    a payment to cover excise taxes pursuant to Section 280G of the Code and the "gross up" of such taxes related to the Severance Benefits in accordance with the provisions set forth in the Omniture change of control agreement, which amount was ultimately determined to be $1,481,349; and

    •
    coverage under Adobe's directors' and officers' liability insurance policy for former executives until July 30, 2016.

        All equity issued to Mr. James upon his initial employment with Adobe and his annual equity awards made by Adobe in January 2010 were canceled. Mr. James's receipt of the Severance Benefits was subject to his execution of a general release of claims in favor of Adobe and to his continued compliance with his non-competition, no-hire, non-solicitation and other continuing agreements with Adobe. Mr. James's non-competition, no-hire and non-solicitation covenants obligate him for 24 months after his termination.


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Potential Payments upon Termination and/or a Change of Control

The following table sets forth the estimated potential payments and benefits payable to each NEO under the Prior Participant Change of Control Plan (which was in effect on November 30, 2012) in the event of a termination of employment and/or a change of control of Adobe ("COC"(“COC”), as if such termination or COC event had occurred on December 3, 2010,November 30, 2012, the last day of fiscal year 2010, except that with respect to Mr. James, the actual payments and the benefits resulting from his July 30, 2010 resignation, valued as of that date, are included.2012. The value of the stock awards is based on the closing market price of our common stock as reported on NASDAQ on December 3, 2010,November 30, 2012, which was $29.14$34.61 per share, except for Mr. James's awards, which are based on $28.72 per share, which was the closing market price of our common stock as reported on NASDAQ on July 30, 2010, the date of Mr. James's resignation.share. Each NEO must sign a release of claims to receive any of the benefits below except those for Death/Disability, COC Only (continued employment), or COC Only/Equity Not Assumed or Substituted.


82
Triggering Event(1) Target
Bonus(2)
($)		 Lump
Sum
Severance
($)		 Accelerated
Stock
Options(3)
($)		 Accelerated
Performance
Awards(4)
($)		 Accelerated
Restricted
Stock
Units
($)		 Cont.
Health
Insurance
Coverage
(present
value)(5)
($)		 Total(6)
($)		 

Shantanu Narayen

                      
 

Death/Disability(7)

  —  —  656,903  2,063,889  1,038,477  —  3,759,269 
 

Voluntary Termination/Involuntary Termination with Cause

  —  —  —  —  —  —  — 
 

Involuntary Termination Without Cause/Resignation for Good Reason

  —  —  —  —  —  —  — 
 

Involuntary Termination/Resignation for Good Reason upon COC(8)

  1,125,000  6,075,000  1,423,286  4,686,295  5,672,451  37,381  19,019,413 
 

COC Only (continued employment)(9)

  —  —  1,423,286  4,686,295  5,672,451  —  11,782,032 
 

COC Only/Equity Not Assumed or Substituted(10)

  —  —  1,423,286  4,686,295  5,672,451  —  11,782,032 

Mark Garrett

                      
 

Death/Disability(7)

  —  —  291,497  616,991  277,559  —  1,186,047 
 

Voluntary Termination/Involuntary Termination with Cause

  —  —  —  —  —  —  — 
 

Involuntary Termination Without Cause/Resignation for Good Reason

  —  —  —  —  —  —  — 
 

Involuntary Termination/Resignation for Good Reason upon COC(8)

  550,000  2,475,000  631,576  1,280,120  2,413,521  37,381  7,387,598 
 

COC Only (continued employment)(9)

  —  —  —  —  —  —  — 
 

COC Only/Equity Not Assumed or Substituted(10)

  —  —  631,576  1,280,120  2,413,521  —  4,325,217 

Kevin Lynch

                      
 

Death/Disability(7)

  —  —  291,497  750,540  277,559  —  1,319,596 
 

Voluntary Termination/Involuntary Termination with Cause

  —  —  —  —  —  —  — 
 

Involuntary Termination Without Cause/Resignation for Good Reason

  —  —  —  —  —  —  — 
 

Involuntary Termination/Resignation for Good Reason upon COC(8)

  330,000  2,310,000  631,576  1,413,669  2,413,521  30,034  7,128,800 
 

COC Only (continued employment)(9)

  —  —  —  —  —  —  — 
 

COC Only/Equity Not Assumed or Substituted(10)

  —  —  631,576  1,413,669  2,413,521  —  4,458,766 

Robert Tarkoff

                      
 

Death/Disability(7)

  —  —  227,948  506,550  222,193  —  956,691 
 

Voluntary Termination/Involuntary Termination with Cause

  —  —  —  —  —  —  — 
 

Involuntary Termination Without Cause/Resignation for Good Reason

  —  —  —  —  —  —  — 
 

Involuntary Termination/Resignation for Good Reason upon COC(8)

  345,000  1,811,250  493,886  1,030,099  2,225,568  37,381  5,943,184 
 

COC Only (continued employment)(9)

  —  —  —  —  —  —  — 
 

COC Only/Equity Not Assumed or Substituted(10)

  —  —  493,886  1,030,099  2,225,568  —  3,749,553 

Matthew Thompson

                      
 

Death/Disability(7)

  —  —  227,948  516,264  229,478  —  973,690 
 

Voluntary Termination/Involuntary Termination with Cause

  —  —  —  —  —  —  — 
 

Involuntary Termination Without Cause/Resignation for Good Reason

  —  —  —  —  —  —  — 
 

Involuntary Termination/Resignation for Good Reason upon COC(8)

  500,000  2,250,000  493,886  1,059,239  2,254,708  36,990  6,594,823 
 

COC Only (continued employment)(9)

  —  —  —  —  —  —  — 
 

COC Only/Equity Not Assumed or Substituted(10)

  —  —  493,886  1,059,239  2,254,708  —  3,807,833 

Joshua James(11)

                      
 

Voluntary Termination/Involuntary Termination with Cause

  —  3,911,349(12) 5,680,710  —  351,791  16,803  9,960,653 
(1)
Adobe's standard form of U.S. stock option agreement under our 2003 Plan provides for the acceleration of 12 months of vesting in the event the individual is age 65 or older upon termination of employment; however, the table does not reflect this retirement vesting because none of the NEOs is at least age 65.

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(2)
This amount represents the fiscal year 2010 target annual cash incentive opportunity under the Executive Bonus Plan calculated according to its terms, based on the then-current base salary of the NEO (not the actual amount of salary earned during the fiscal year). This amount is pro-rated for the elapsed time in the current incentive period, assuming that all performance targets are met; therefore, the amount reported is 100% of the target annual cash incentive opportunity. See the column titled "Non-Equity Incentive Plan Compensation" in the "Summary Compensation Table" for actual fiscal year 2010 bonuses earned by the NEOs.

(3)
This amount is calculated by aggregating the sums determined by multiplying, for each award, (i) the number of accelerated stock options, times (ii) the difference between (a) the closing price per share ($29.14) of our common stock on December 3, 2010, except for Mr. James's awards, which use the closing price per share ($28.72) on July 30, 2011, the date of Mr. James's resignation, and (b) the option exercise price per share.

(4)
This amount includes pro-rated shares under the 2010 Performance Share Program based on the elapsed time in the performance period; because the performance period ended on December 3, 2010, but was not yet certified, the amount reported is based on 100% of the target award amount.

(5)
Amounts reported represent the present value of 18 months of COBRA payments with an estimated 5% premium increase every 12 months. The present value is calculated by using 120% of the short-term applicable federal rate of 0.38%, except for Mr. James whose short-term applicable federal rate of 0.73% was based upon his departure date.

(6)
In accordance with the terms of the Executive Severance Plan and Mr. Narayen's Retention Agreement, all of the benefits in this table are subject to a reduction in the event the amounts payable would constitute an excess parachute payment within the meaning of Section 280G of the Code, to the extent the amounts payable do not exceed the amount which produces the greatest after-tax benefit to the NEOs. No reduction applied for any of the NEOs in the table above.

(7)
For an explanation of benefits to be received by our NEOs as a result of death or disability, see "Compensation Discussion and Analysis—Effect of Retirement, Death and Disability on Equity Compensation Awards" above.

(8)
For an explanation of benefits received by our NEOs as a result of an involuntary termination or resignation for good reason upon a COC, see "Change of Control and Termination" above.

(9)
Assumes that all equity awards were assumed or substituted by the hypothetical acquiring company. No benefits are payable to the NEOs pursuant to the terms of the Executive Severance Plan and there is no accelerated vesting pursuant to the terms of the applicable equity award agreements if the NEOs' employment continues after a COC; however, Mr. Narayen's Retention Agreement provides that all outstanding equity awards (to the extent credited, for performance shares) accelerate and are immediately exercisable and vested in full upon a COC, regardless of whether his employment is terminated.

(10)
Assumes that equity awards were not assumed or substituted by the hypothetical acquiring company. Pursuant to the terms of the applicable equity plans generally, any unexercised and/or unvested portions of any outstanding equity awards that are not assumed or substituted by the acquiring company are immediately exercisable and vested in full as of the date immediately prior to the effective date of the COC.

(11)
Mr. James joined Adobe in connection with our acquisition of Omniture in October 2009 and resigned from his employment with us effective July 30, 2010. In accordance with SEC rules, we are only providing information with respect to payments actually received by Mr. James as a result of his departure from Adobe.

(12)
Total bonus paid to Mr. James comprises the following: $1,680,000 lump sum severance payment, $750,000 lump sum transition bonus, $1,481,349 lump sum payment to cover excise taxes pursuant to Section 280G of the Code and the "gross up" of such taxes related to the Severance Benefits in accordance with the provision set forth in the Omniture change of control agreement.


Triggering Event (1)
 
Target 
Bonus (2) 
($)
 
Lump
Sum
Severance (3)($)
 
Accelerated 
Stock 
Options (4) 
($)
 
Accelerated 
Performance 
Awards (5) 
($)
 Accelerated
Restricted
Stock
Units
($)		 
Cont. 
Health 
Insurance 
Coverage 
(present 
value) (6) 
($)
 
Total (7) 
($)
               
Shantanu Narayen              
Death/Disability(8)    
 —
 —
 246,596
 6,478,404
 4,517,020
 —
 11,242,020
Voluntary Termination/Involuntary Termination with Cause —
 —
 —
 —
 —
 —
 —
Involuntary Termination Without Cause/Resignation for Good Reason —
 —
 —
 —
 —
 —
 —
Involuntary Termination/Resignation for Good Reason upon COC(9)    
 1,350,000
 6,750,000
 298,047
 15,111,280
 11,053,984
 42,166
 34,605,477
COC Only (continued employment)(10)    
 —
 —
 298,047
 15,111,280
 11,053,984
 —
 26,463,311
COC Only/Equity Not Assumed or Substituted(11)    
 —
 —
 298,047
 15,111,280
 11,053,984
 —
 26,463,311
Mark Garrett              
Death/Disability(8)    
 —
 —
 95,724
 2,126,231
 3,509,454
 —
 5,731,409
Voluntary Termination/Involuntary Termination with Cause —
 —
 —
 —
 —
 —
 —
Involuntary Termination Without Cause/Resignation for Good Reason —
 —
 —
 —
 —
 —
 —
Involuntary Termination/Resignation for Good Reason upon COC(9)    
 575,000
 
764,002(13)

 111,531
 5,445,295
 12,071,103
 42,166
 19,009,097
COC Only (continued employment)(10)    
 —
 —
 —
 —
 —
 —
 —
COC Only/Equity Not Assumed or Substituted(11)    
 —
 —
 111,531
 5,445,295
 12,071,103
 —
 17,627,929
Kevin Lynch              
Death/Disability(8)    
 —
 —
 103,409
 2,396,189
 1,718,387
 —
 4,217,985
Voluntary Termination/Involuntary Termination with Cause —
 —
 —
 —
 —
 —
 —
Involuntary Termination Without Cause/Resignation for Good Reason —
 —
 —
 —
 —
 —
 —
Involuntary Termination/Resignation for Good Reason upon COC(9)    
 375,000
 
2,625,000(12)

 128,181
 5,985,211
 4,751,088
 32,593
 13,897,073
COC Only (continued employment)(10)    
 —
 —
 —
 —
 —
 —
 —
COC Only/Equity Not Assumed or Substituted(11)    
 —
 —
 128,181
 5,985,211
 4,751,088
 —
 10,864,480
Matthew Thompson              
Death/Disability(8)    
 —
 —
 76,587
 2,050,066
 1,479,578
 —
 3,606,231
Voluntary Termination/Involuntary Termination with Cause —
 —
 —
 —
 —
 —
 —
Involuntary Termination Without Cause/Resignation for Good Reason —
 —
 —
 —
 —
 —
 —
Involuntary Termination/Resignation for Good Reason upon COC(9)    
 525,000
 2,537,500
 90,420
 5,324,160
 4,131,569
 41,660
 12,650,309
COC Only (continued employment)(10)    
 —
 —
 —
 —
 —
 —
 —
COC Only/Equity Not Assumed or Substituted(11)    
 —
 —
 90,420
 5,324,160
 4,131,569
 —
 9,546,149
               
               

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Triggering Event (1)
 
Target 
Bonus (2) 
($)
 
Lump
Sum
Severance (3)($)
 
Accelerated 
Stock 
Options (4) 
($)
 
Accelerated 
Performance 
Awards (5) 
($)
 Accelerated
Restricted
Stock
Units
($)		 
Cont. 
Health 
Insurance 
Coverage 
(present 
value) (6) 
($)
 
Total (7) 
($)
David Wadhwani              
Death/Disability(8)    
 —
 —
 43,440
 1,658,996
 1,330,581
 —
 3,033,017
Voluntary Termination/Involuntary Termination with Cause —
 —
 —
 —
 —
 —
 —
Involuntary Termination Without Cause/Resignation for Good Reason —
 —
 —
 —
 —
 —
 —
Involuntary Termination/Resignation for Good Reason upon COC(9)    
 356,250
 
1,537,032(12)(14)

 56,711
 4,586,967
 3,778,789
 42,166
 10,357,915
COC Only (continued employment)(10)    
 —
 —
 —
 —
 —
 —
 —
COC Only/Equity Not Assumed or Substituted(11)    
 —
 —
 56,711
 4,586,967
 3,778,789
 —
 8,422,467
_________________________
(1)
While Adobe’s standard form of stock option agreement under the 2003 Plan provides for the acceleration of 12 months of vesting in the event the person is age 65 or older upon terminating employment with Adobe, the table does not reflect this retirement vesting because none of the NEOs is at least age 65.
(2)
This amount represents the fiscal year 2012 target annual cash incentive opportunity under the Executive Bonus Plan calculated according to the terms of the Prior Participant Change of Control Plan, which means it is based on the then-current base salary of the NEO (not the actual amount of salary earned during the fiscal year). The cash incentive opportunity amount is pro-rated for the elapsed time in the current incentive period, assuming that all performance targets have been met; therefore, the amount reported is 100% of the target annual cash incentive opportunity. Actual fiscal year 2012 bonuses earned by each NEO’s are reported in the column titled “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table.”
(3)
Based on the base salary and target bonus on November 30, 2012.
(4)
This amount is calculated by aggregating the sums determined by multiplying, for each award, (i) the number of accelerated stock options times (ii) the difference between the closing price per share ($34.61) of our common stock on November 30, 2012, and the option exercise price per share.
(5)
This amount includes pro-rated shares under the 2012 Performance Share Program based on the elapsed time in the performance period; because the performance period ended on November 30, 2012, but was not yet certified, the amount reported is based on 100% of target award amount.
(6)
Amounts reported represent the present value of 18 months of COBRA payments with an estimated 5% premium increase every 12 months. The present value is calculated by using 120% of the short term applicable federal rate of 0.26%.
(7)
In accordance with the terms of the Prior Participant Change of Control Plan and Mr. Narayen’s Retention Agreement, all of the benefits in this table are subject to a reduction in the event the amounts payable would constitute an excess parachute payment within the meaning of Section 280G of the Code, to the extent the amounts payable do not exceed the amount which produces the greatest after-tax benefit to the NEOs. Only Mr. Garrett’s and Mr Wadhwani’s benefits were so reduced. See footnote 13 below.
(8)
For an explanation of benefits to be received by our NEOs as a result of death or disability, see “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2012—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2012 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards” above.
(9)
For an explanation of benefits received by our NEOs as a result of an involuntary termination or resignation for good reason upon a COC, see “Change of Control” above.

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(10)
Assumes that all equity awards were assumed or substituted by the hypothetical acquiring company. No benefits are payable to the NEOs pursuant to the terms of the Prior Participant Change of Control Plan and there is no accelerated vesting pursuant to the terms of the applicable equity award agreements if the NEOs’ employment continues after a COC; however, Mr. Narayen’s Retention Agreement provides that all outstanding equity awards (to the extent credited, for performance shares) accelerate and are immediately exercisable and vested in full upon a COC, regardless of whether his employment is terminated.
(11)
Assumes that equity awards were not assumed or substituted by the hypothetical acquiring company. Pursuant to the terms of the applicable equity plans generally, any unexercised and/or unvested portions of any outstanding equity awards that are not assumed or substituted by the acquiring company are immediately exercisable and vested in full as of the date immediately prior to the effective date of the COC.
(12)
Mr. Lynch and Mr. Wadhwani both receive credit under the Prior Participant Change of Control Plan for their service time at Macromedia, Inc., which was acquired by Adobe in 2005. Mr. Lynch’s service began in July 1996, and Mr. Wadhwani’s service began in April 2002.
(13)
Mr. Garrett’s severance amount exceeded the 280G threshold and therefore triggered a reduction pursuant to the Prior Participant Change of Control Plan. His lump sum severance amount would have been $2,779,167 without this provision.
(14)
Mr. Wadhwani’s severance amount exceeded the 280G threshold and therefore triggered a reduction pursuant to the Prior Participant Change of Control Plan. His lump sum severance amount would have been $2,355,208 without this provision.



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DIRECTOR COMPENSATION

The following table sets forth certain information with respect to compensation awarded to, paid to or earned by each of Adobe'sAdobe’s non-employee directors during fiscal year 2010.

2012. Mr. Barlow was appointed to our Board on December 4, 2012, which was after the close of our 2012 fiscal year. Accordingly, Mr. Barlow’s compensation as a director is not addressed in this section.

Name
 Fees
Earned
or Paid in Cash(1)(2)(3)
($)		 Stock
Awards(4)(5)(6)
($)		 Option
Awards(5)(7)(8)
($)		 Total
($)		  
Fees
Earned
or Paid in Cash(1)(2)(3) 
($)
 
Stock
Awards(4)(5)(6) 
($)
 
Option
Awards(4)(7)(8) 
($)
 Total
($)
        

Charles M. Geschke

 100,000 201,094 — 301,094 Charles M. Geschke110,000
 —
 184,998
 294,998

John E. Warnock

 100,000 201,094 — 301,094 John E. Warnock110,000
 —
 184,998
 294,998
Amy BanseAmy Banse39,560
 
439,585(9)

 —
 479,145

Edward W. Barnholt

 80,000 201,094 — 281,094 Edward W. Barnholt90,000
 235,113
 —
 325,113

Robert K. Burgess

 50,000 201,094 — 251,094 Robert K. Burgess80,000
 235,113
 —
 315,113
Frank CalderoniFrank Calderoni41,703
 
439,585(9)

 —
 481,288

Michael R. Cannon

 70,000 201,094 — 271,094 Michael R. Cannon80,000
 235,113
 —
 315,113

James E. Daley

 97,500 — 186,705 284,205 James E. Daley107,500
 235,113
 —
 342,613

Carol Mills

 87,500 201,094 — 288,594 
Laura DesmondLaura Desmond36,346
 
439,585(9)

 —
 475,931

Daniel Rosensweig

 65,000 201,094 — 266,094 Daniel Rosensweig97,500
 235,113
 —
 332,613

Robert Sedgewick

 70,000 201,094 — 271,094 Robert Sedgewick75,000
 235,113
 —
 310,113
(1)
Director fees were paid at the end of the quarter for which services were provided.

(2)
The following table provides a breakdown of the annual retainers and committee fees earned or paid in cash:
_________________________
(1)
Director fees were paid at the end of the quarter for which services were provided.
(2)
The following table provides a breakdown of the annual retainers and committee fees earned or paid in cash:

Name
 Annual Board
Retainers
($)		 Audit
Committee
Fees
($)		 Executive
Compensation
Committee Fees
($)		 Nominating
and
Governance
Committee
Fees
($)		 Total
($)		 

Dr. Geschke

  100,000* —  —  —  100,000 

Dr. Warnock

  100,000* —  —  —  100,000 

Mr. Barnholt

  50,000  —  15,000  15,000  80,000 

Mr. Burgess

  50,000  —  —  —  50,000 

Mr. Cannon

  50,000  20,000  —  —  70,000 

Mr. Daley

  50,000  40,000  —  7,500  97,500 

Ms. Mills

  50,000  —  30,000  7,500  87,500 

Mr. Rosensweig

  50,000  —  15,000  —  65,000 

Dr. Sedgewick

  50,000  20,000  —  —  70,000 
      *
      Includes $50,000 annual Board member fee and $50,000 annual Board Chair fee.

(3)
Messrs. Cannon and Daley each deferred all cash fees pursuant to Adobe's Deferred Compensation Plan. For more information on this plan, see "Deferred Compensation Plan" below.

(4)
These amounts do not reflect the actual economic value realized by the director for these awards. In accordance with SEC rules, this column reflects awards of 5,946 RSUs for each director as noted in the table in fiscal year 2010 with a grant date fair value of $33.82 per share, disregarding estimates of forfeitures related to service-based vesting conditions. For the assumptions and methodology used to calculate these amounts, please see Part II, Item 8 "Financial Statements and Supplementary Data" of our 2010 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 13, "Stock-based Compensation."

(5)
On April 10, 2010, each non-employee director received a grant of stock options, RSUs or a 50% combination of each (as elected by each director in his or her discretion prior to the end of the
Name Annual Board
Retainers
($)		 Audit
Committee
Fees
($)		 Executive
Compensation
Committee Fees
($)		 Nominating
and
Governance
Committee
Fees
($)		 Total
($)
           
Dr. Geschke
110,000*

 —
 —
 —
 110,000
Dr. Warnock
110,000*

 —
 —
 —
 110,000
Ms. Banse**
33,132
 —
 6,428
 —
 39,560
Mr. Barnholt60,000
 —
 15,000
 15,000
 90,000
Mr. Burgess60,000
 20,000 —
 —
 80,000
Mr. Calderoni**
33,132
 8,571
 —
 —
 41,703
Mr. Cannon60,000
 20,000
 —
 —
 80,000
Mr. Daley60,000
 40,000
 —
 7,500
 107,500
Ms. Desmond**
33,132
 —
 —
 3,214
 36,346
Mr. Rosensweig60,000
 —
 30,000
 7,500
 97,500
Dr. Sedgewick60,000
 —
 15,000
 —
 75,000

*
Includes $60,000 annual Board member fee and $50,000 annual Board Chair fee.
** Retainers and fees for Ms. Banse, Mr. Calderoni and Ms. Desmond were pro-rated based on joining the Board on May 14, 2012. Committee fees for Ms. Banse, Mr. Calderoni and Ms. Desmond were pro-rated based on appointments to their respective committees on June 28, 2012.
(3)
Mr. Calderoni, Mr. Daley and Ms. Desmond each deferred all cash fees pursuant to Adobe’s Deferred Compensation Plan. For more information on this plan, see “Deferred Compensation Plan” below.

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    previous fiscal year), per the terms of the Board's Non-Employee Director Compensation Policy, as described below.

(6)
At 2010 fiscal year end, each non-employee director held the following aggregate number of unvested RSUs:



(4)
On April 13, 2012, each non-employee director then sitting on Adobe’s Board received a grant of stock options, RSUs or a 50% combination of each (as elected by each director in his or her discretion prior to the end of the previous fiscal year), per the terms of the Board’s Non-Employee Director Compensation Policy, as described below. Mr. Daley deferred his 2012 RSU grant pursuant to Adobe's Deferred Compensation Plan. For more information on this plan, see “Deferred Compensation Plan” below.
(5)
These amounts do not reflect the actual economic value realized by the director for these awards. In accordance with SEC rules, this column reflects the grant date fair value of 7,086 RSUs for each director (other than Ms. Banse, Mr. Calderoni and Ms. Desmond) electing to receive RSUs, disregarding estimates of forfeitures related to service-based vesting conditions. For the assumptions and methodology used to calculate these amounts, please see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2012 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation.”
(6)
At 2012 fiscal year end, each non-employee director held the following aggregate number of unvested RSUs:
NameAggregate Shares Subject
to Unvested RSUs
(#)

Dr. Geschke

  5,946

Dr. Warnock

5,946

Mr. Barnholt

5,946

Mr. Burgess

5,946

Mr. Cannon

5,946

Mr. Daley

Geschke—

Ms. Mills

Dr. Warnock		—5,946

Mr. Rosensweig

Ms. Banse		13,63916,098

Mr. Barnholt

7,086
Mr. Burgess7,086
Mr. Calderoni13,639
Mr. Cannon7,086
Mr. Daley7,086
Ms. Desmond13,639
Mr. Rosensweig7,086
Dr. Sedgewick

7,0865,946
(7)
These amounts do not reflect the actual economic value realized by the director for these awards. In accordance with SEC rules, this column reflects the grant date fair value of 21,258 stock options with an exercise price of $33.18 in fiscal year 2012 for each director electing to receive stock options, in accordance with applicable accounting guidance related to stock-based compensation, disregarding estimates of forfeitures related to service-based vesting conditions. For the methodology of how this amount is calculated, please see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2012 and 2011 Annual Reports on Form 10-K and the Notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation.”

(7)87
These amounts do not reflect the actual economic value realized by the director for these awards. In accordance with SEC rules, this column reflects an award
Table of 17,840 stock options in fiscal year 2010 with a grant date fair value of $10.47 per share, pursuant to the 2003 Plan, in accordance with applicable accounting guidance related to stock-based compensation, disregarding estimates of forfeitures related to service-based vesting conditions. For the methodology of how this amount is calculated, please see Part II, Item 8 "Financial Statements and Supplementary Data" of our 2010 and 2009 Annual Reports on Form 10-K and the Notes to Consolidated Financial Statements at Note 13, "Stock-based Compensation."

(8)
At 2010 fiscal year end, each non-employee director held stock options, including vested and unvested options, to purchase the following aggregate number of shares of our common stock:
Contents



(8)
At 2012 fiscal year end, each non-employee director held stock options, including vested and unvested options, to purchase the following aggregate number of shares of our common stock:
NameAggregate Shares Subject
to Outstanding Options
(#)

Dr. Geschke

  
156,887Dr. Geschke199,421

Dr. Warnock

233,476270,942

Ms. Banse

—
Mr. Barnholt

131,887

Mr. Burgess

131,887

Mr. Calderoni

—
Mr. Cannon

110,000

Mr. Daley

276,003254,727

Ms. Mills

90,942

Mr. Rosensweig

Desmond—

Mr. Rosensweig

—
Dr. Sedgewick

212,218190,942

(9)
Ms. Banse, Mr. Calderoni and Ms. Desmond joined the Board on May 14, 2012; each received an initial grant of RSUs in an amount valued (based on the estimated value on the grant date) at $450,000 according to our 2012 Non-Employee Director Compensation Policy, described below under “Equity Awards.”

Compensation Philosophy

The general policyphilosophy of our Board is that compensation for non-employee directors should be a mix of cash and equity-based compensation to reward directors for a year of service in fulfilling their oversight responsibilities. Adobe does not compensate its management director (our Chief Executive Officer) for Board service in addition to his regular employee compensation. Each year, the Executive Compensation Committee evaluates the appropriate level and form of compensation for non-employee directors and recommends changes, if any, to the Board. The Executive Compensation Committee considers advice from Compensia, when appropriate. Our Board reviews the Executive Compensation Committee'sCommittee’s recommendations and then determines the amount of director compensation.


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Fees Earned or Paid in Cash

In fiscal year 2010,2012, each non-employee director received an annual retainer of $50,000 (in$60,000 (and in addition, each Chairman of the Board received a Board Chair fee of $50,000) plus committee fees for each committee on which he or she served, as follows:

Committee Chair
($)		 Members
($)
     
Audit40,000 20,000
Executive Compensation30,000 15,000
Nominating and Governance15,000 7,500

Our Board retained the same levels of cash compensation for fiscal year 2011, except that the annual Board retainer was increased to $60,000.

2013.

Equity Awards

Our Board approved a 20102012 Non-Employee Director Compensation Policy, effective November 28, 2009,December 4, 2011, which includesincluded equity award grants to non-employee directors as follows:

an initial grant of RSUs in an amount valued (based on the estimated value on the grant date) at $450,000 that is converted into a number of RSUs based on the average closing market price over the 30 calendar days ending the day prior to the grant date. The award vests 50% each year on the anniversary of the grant date over a two-year period. Directors receiving an initial grant will not be eligible to receive an

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annual grant until the second annual meeting of stockholders after joining the Board; directors who first join our Board upon being elected at an annual meeting of stockholders will receive the initial award and will also receive an annual award at the next annual meeting; and

•
an annual grant of stock options, RSUs or a 50% combination of each (to be elected by each director in his or her discretion in the previous fiscal year), which vests 100% on the day immediately preceding our next annual meeting of stockholders. The annual award is valued at $210,000$240,000 (based on the estimated value on the date of grant), and is converted into a number of RSUs based on the average closing market price over the 30 calendar days ending the day prior to the grant date. If the director elects to receive the annual award partially or entirely in the form of stock options, the RSU award amount (either 50% or 100%, depending on the mix the director previously elected) is multiplied by three to determine the number of stock options.

Our Board retained the same equity compensation for fiscal year 2011, except that the value of the annual award was increased to $240,000.

        All outstanding stock options granted to non-employee directors before November 28, 2008 vest and are exercisable at a rate of 25% on the day immediately preceding our annual stockholder meeting over a four-year period.

2013.

Non-employee directors may only exercise the stock options once they vest. Stock options are generally exercisable until not later than three months after termination of director status (except in the case of termination due to death or disability), but that period is extended for non-employee directors with at least four years of Board service to Adobe, to one year following termination of director status or the expiration date of the stock option, if earlier. If a non-employee director'sdirector’s service terminates due to death or disability, the director will be given credit for an additional 12 months of service for the vesting of both stock options and RSUs.

RSUs, and stock options will remain exercisable for one year following the termination or until the expiration of the stock option, if earlier.

In the event of a change of control, any unvested portion of a non-employee director option shall become fully vested and exercisable 30 daysas of immediately prior to the transaction resulting in a change of control, subject to the consummation of the change of control. If the stock option is not assumed or substituted by the acquiring company, it will terminate to the extent


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it is not exercised on or before the date of such a transaction. Any unvested portion of RSUs will become vested in full immediately prior to the effective date of a change of control.

        In light of the pending retirement of Ms. Mills, who announced on January 14, 2011 that she would not be standing for re-election to the Board at the 2011 Annual Meeting of Stockholders, our Board has elected to accelerate all of her outstanding unvested stock options as of her last day of service (6,250 shares from the stock option granted in 2008) in recognition of her service to Adobe.

Deferred Compensation Plan

Our Deferred Compensation Plan allows non-employee directors to defer from 5% up to 100% of their cash compensation, which amounts are deemed invested in the investment funds selected by the director from the same fund options as generally available in Adobe'sAdobe’s 401(k) Plan (other than the individual direct brokerage account and Retirement Savings Trust). Participants may also contribute 100% per vesting tranche of their RSU awards. Deferred Compensation Plan participants must elect irrevocably to receive the deferred funds on a specified date at least three years in the future in the form of a lump sum or annual installments over 5, 10 or 15 years.  Messrs. CannonMr. Calderoni, Mr. Daley and DaleyMs. Desmond participated in the Deferred Compensation Plan with respect to 100% of their respective retainers and committee fees for their services in fiscal year 2010.2012. Mr. Daley also elected to defer 100% of his RSU award granted in 2012. See "Executive“Executive Compensation—Nonqualified Deferred Compensation"Compensation” in this proxy statement for more information regarding our Deferred Compensation Plan.

Expenses

We reimburse our directors for their travel and related expenses in connection with attending Board and committee meetings, as well as costs and expenses incurred in attending director education programs and other Adobe-related seminars and conferences.

Other Benefits

Non-employee directors are offered an opportunity to purchase certain Adobe health, dental, and vision insurance while serving as a Board member. Participating directors pay 100% of their own insurance premiums.

Stock Ownership Guidelines

We have adopted stock ownership guidelines for members of our Board. Under these guidelines, each non-employee director should hold 25% of the net shares acquired from Adobe until the total number of shares held by such non-employee director equals or exceeds 6,000 shares (increased from 5,000 shares effective October 8, 2010).shares. Once achieved, this 6,000 share guideline should be

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maintained going forward. An "acquired share"“acquired share” includes shares of vested restricted stock, RSUs, performance shares, performance units and shares issued upon the exercise of vested options. "Net“Net shares acquired"acquired” means acquired shares remaining after deducting acquired shares sold to cover the exercise price and withheld for taxes. Shares that count toward the minimum share ownership include shares owned outright or beneficially owned, shares acquired through the ESPP,Employee Stock Purchase Plan, vested restricted stock, vested RSUs, and shares issued upon the exercise of vested options, as well as vested performance shares or performance units deferred into our Deferred Compensation Plan. As of December 3, 2010,November 30, 2012, each of our non-employee directors waswere in compliance with these guidelines.


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COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION

The members of our Executive Compensation Committee for fiscal year 20102012 prior to June 28, 2012, were Mr. Barnholt, Mr. Rosensweig and Dr. Sedgewick. Effective June 28, 2012 and for the remainder of fiscal year 2012, the members of our Executive Compensation Committee were Ms. MillsBanse, Mr. Barnholt, Mr. Rosensweig and Messrs.Dr. Sedgewick. Effective December 4, 2012, the members of our Executive Compensation Committee were Ms. Banse, Mr. Barlow, Mr. Barnholt, Mr. Rosensweig and Rosensweig.Dr. Sedgewick. There are no members of our Executive Compensation Committee who were officers or employees of Adobe or any of our subsidiaries during fiscal year 2010.2012. No members were formerly officers of Adobe or had any relationship otherwise requiring disclosure hereunder. During fiscal year 2010,2012, no interlocking relationships existed between any of our executive officers or members of our Board or Executive Compensation Committee, on the one hand, and the executive officers or members of the board of directors or compensation committee of any other entity, on the other hand.


TRANSACTIONS WITH RELATED PERSONS

Review, Approval or Ratification of Transactions with Related Persons

        Adobe's

Adobe’s Code of Business Conduct requires that all employees and directors avoid conflicts of interests that interfere with the performance of their duties or are not in the best interests of Adobe.

In addition, pursuant to its written charter, the Nominating and Governance Committee considers and approves or disapproves any related person transaction as defined under Item 404 of Regulation S-K promulgated by the SEC, after examining each such transaction for potential conflicts of interest and other improprieties. The Nominating and Governance Committee has not adopted any specific written procedures for conducting such reviews and considers each transaction in light of the specific facts and circumstances presented.

Transactions with Related Persons

Since the beginning of fiscal year 2010,2012, there have not been any transactions, nor are there any currently proposed transactions, in which Adobe was or is to be a participant, the amount involved exceeded $120,000, and any related person had or will have a material direct or indirect interest.


HOUSEHOLDING OF PROXY MATERIALS

We have adopted a procedure approved by the SEC known as "householding."“householding.” This procedure allows multiple stockholders residing at the same address the convenience of receiving a single copy of our Notice, 20102012 Annual Report and proxy materials, as applicable, unless we have received contrary instructions from one or more of the stockholders. This allows us to save money by reducing the number of documents we must print and mail, and helps reduce the environmental impact as well.

Householding is available to both registered stockholders and beneficial owners of shares held in street name.

Registered Stockholders

If you are a registered stockholder and have consented to our mailing of proxy materials and other stockholder information to only one account in your household, as identified by you, we will deliver or mail a single copy of our Notice, 20102012 Annual Report and proxy materials, as applicable, for all registered stockholders residing at the same address. Your consent will be perpetual unless you revoke it, which you may do at any time by contacting Broadridge Financial Solutions, Inc., either by calling 1-800-542-1061 (toll free), or by writing to Broadridge, Householding Department, 51 Mercedes Way , Edgewood, NY 11717. If you revoke your consent, we will begin sending you individual copies of future mailings of these documents within 30 days after we receive your revocation notice. If you received a householded mailing this year, and you would like to receive additional copies of our Notice, 2010


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2012 Annual Report and proxy materials, as applicable, mailed to you, please submit your request to Broadridge who will promptly deliver the requested copies.

Registered stockholders who have not consented to householding will continue to receive copies of our Notice, Annual Reports and proxy materials, as applicable, for each registered stockholder residing at the same

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address. As a registered stockholder, you may elect to participate in householding and receive only a single copy of annual reports or proxy statements for all registered stockholders residing at the same address by contacting Broadridge as outlined above.

Street Name Holders

Stockholders who hold their shares through a brokerage may elect to participate in householding or revoke their consent to participate in householding by contacting their respective brokers.


ANNUAL REPORT

Accompanying this proxy statement is our Annual Report on Form 10-K for the fiscal year ended December 3, 2010.November 30, 2012. The 20102012 Annual Report contains audited financial statements covering our fiscal years ended November 30, 2012, December 2, 2011 and December 3, 2010, November 27, 2009 and November 28, 2008.2010. Copies of our Annual Report on Form  10-K for the fiscal year ended December 3, 2010,November 30, 2012, as filed with the SEC, are available free of charge on our website atwww.adobe.com/aboutadobe/invrelations or you can request a copy free of charge by calling 408-536-4700 or sending an email toadobe@kpcorp.com. Please include your contact information with the request.


IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING TO BE HELD ON APRIL 21, 2011

11, 2013

This proxy statement and our 20102012 Annual Report on Form 10-K for the fiscal year ended December 3, 2010,November 30, 2012, as filed with the SEC, are available athttp://materials.proxyvote.com/00724F.


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STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING

Stockholder proposals may be included in our proxy statement for an annual meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. For a stockholder proposal to be considered for inclusion in our proxy statement for the annual meeting to be held in 2012,2014, we must receive the proposal at our principal executive offices, addressed to the Corporate Secretary, no later than November 11, 2011.1, 2013. In addition, a stockholder proposal that is not intended for inclusion in our proxy statement under Rule 14a-8 may be brought before the 20122014 annual meeting so long as we receive information and notice of the proposal in compliance with the requirements set forth in our Bylaws, addressed to the Corporate Secretary at our principal executive offices, not later than December 16, 2013 nor earlier than November 11, 201116, 2013 for nominations for election to the Board of Directors and for all other business, not later than November 1, 2013 nor earlier than October 12, 2011.

2, 2013.

 GRAPHIC
 Karen Cottle
Michael Dillon
Senior Vice President, General Counsel &
Corporate Secretary

March 10, 2011
1, 2013
San Jose, California




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ANNEX A

Appendix A


CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF
_____________

ADOBE SYSTEMS INCORPORATED
2003 EQUITY INCENTIVE PLAN

(a Delaware corporation)

ADOBE SYSTEMS INCORPORATED, a corporation organized

Amended and existing under the lawsRestated as of the State of Delaware, hereby certifies as follows:

        FIRST:    The name of this corporation is Adobe Systems Incorporated.

        SECOND:    The original Certificate of Incorporation of the corporation was filed with the Secretary of State of Delaware on May 9, 1997, and the original name of the corporation was Adobe Systems (Delaware) Incorporated.

        THIRD:    The Board of Directors of the corporation, acting in accordance with Section 242 of the General Corporation Law of the State of Delaware, adopted resolutions to amend Section 2 of Paragraph A of Article V of the Restated Certificate of Incorporation of the corporation to read in its entirety as follows:

        FOURTH:    Thereafter pursuant to a resolution of the Board of Directors this Certificate of Amendment was submitted to the stockholders of the corporation for their approval, and was duly adopted in accordance with the provisions of the corporation's Restated Certificate of Incorporation and Section 242 of the General Corporation Law of the State of Delaware.

        FIFTH:    All other provisions of the Restated Certificate of Incorporation shall remain in full force and effect.

[____________]
_____________




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IN WITNESS WHEREOF, ADOBE SYSTEMS INCORPORATED has caused this Certificate of Amendment to be signed by its President and Chief Executive Officer and attested to by its Secretary in San Jose, California this        day of                        , 2011.



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1.Establishment, Purpose and Term of PlanA-1
1.1EstablishmentA-1
1.2PurposeA-1
1.3Term of PlanA-1
2.Definitions and ConstructionA-1
2.1DefinitionsA-1
2.2

Construction

A-5
3.AdministrationA-5
3.1Administration by the CommitteeA-5
3.2

Authority of Officers

A-5
3.3
Administration with Respect to Insiders

A-6
3.4

Committee Complying with Section 162 (m)

A-6
3.5

Powers of the Committee

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3.6

Repricing

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3.7IndemnificationA-7
4.

 Shares Subject to Plan

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4.1

Maximum Number of Shares Issuable

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4.2

Adjustments for Changes in Capital Structure

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5.

Eligibility and Award Limitations

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5.1

Persons Eligible for Awards

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5.2

Participation

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5.3

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5.4

Award Limits

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6.

 Terms and Conditions of Options

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6.1

Exercise Price

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6.2

Exercisability and Term of Options

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6.3

Payment of Exercise Price

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6.4

Effect of Termination of Service

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6.5

Transferability of Options

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7.

Terms and Conditions of Stock Appreciation Rights

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7.1

Types of SARs Authorized

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7.2

Exercise Price

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7.3

Exercisability and Term of SARs

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7.4

Exercise of SARs

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7.5

Deemed Exercise of SARs

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7.6

Effect of Termination of Service

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7.7

Nontransferability of SARs

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8.

Terms and Conditions of Stock Awards

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8.1

Types of Stock Awards Authorized

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8.2

Purchase Price

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8.3
Purchase Period

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8.4

Payment of Purchase Price

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8.5

Vesting; Restrictions on Transfer; Deferral

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8.6

Voting Rights; Dividends and Distributions

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8.7

Effect of Termination of Service

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8.8

Nontransferability of Stock Award Rights

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9.

Terms and Conditions of Performance Awards

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9.1

Types of Performance Awards Authorized

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9.2

Initial Value of Performance Shares and Performance Units

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9.3

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9.4

Measurement of Performance Goals

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9.5

Settlement of Performance Awards

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9.6

Dividend Equivalents

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9.7

Effect of Termination of Service

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9.8

Nontransferability of Performance Awards

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10.
Performance-Based Compensation under Code Section 162(m)

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10.1

General

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10.2

Performance Goals

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10.3

Performance Goals Based on Performance Measures

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11.

Standard Forms of Award Agreement

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11.1

Award Agreements

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11.2
Authority to Vary Terms

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11.3
Clawback/Recovery

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12.

Change of Control

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12.1

Awards Granted Prior to January 24, 2008

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12.2

Awards Granted On or After January 24, 2008

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13.

Compliance with Securities Law

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14.

Tax Withholding

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14.1

Tax Withholding in General

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14.2

Withholding in Shares

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15.

Termination or Amendment of Plan

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16.

Miscellaneous Provisions

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16.1

Repurchase Rights

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16.2

Provision of Information

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16.3

Rights as Employee, Consultant or Director

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16.4

Rights as a Stockholder

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16.5

Fractional Shares

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16.6

Beneficiary Designation

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16.7

Unfunded Obligation

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16.8

Section 409A

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Shantanu Narayen
President and Chief Executive Officer

ATTEST:



Karen O. Cottle
Senior Vice President, General Counsel and Secretary

 



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ADOBE SYSTEMS INCORPORATED
2003 EQUITY INCENTIVE PLAN

1.

1997 EMPLOYEE STOCK PURCHASEESTABLISHMENT, PURPOSE AND TERM OF PLAN

(as amended through February 16, 2011)

1. Purpose and Term of Plan.

1.1    Purpose. Establishment. Adobe Systems Incorporated, a Delaware corporation, hereby establishes the Adobe Systems Incorporated 2003 Equity Incentive Plan (as amended and restated, the “Plan”) effective as of April 9, 2003, the date of its approval by the stockholders of the Company (the “Effective Date”).
1.2    Purpose.The purpose of the Adobe Systems Incorporated 1997 Employee Stock Purchase Plan (the “Plan”) is to provide Eligible Employeesadvance the interests of the Participating Company Group withand its stockholders by providing an opportunityincentive to acquire a proprietary interestattract, 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 Company through the purchaseform of Stock. The Company intends that the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments or replacements of such section),Options, Stock Appreciation Rights, Stock Purchase Rights, Stock Bonuses, Restricted Stock Units, Performance Shares and the Plan shall be so construed.Performance Units.

1.2 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.

2. Definitionsissued and Construction.

2.1 Definitions. Any term not expressly defined inall restrictions on such shares under the terms of the Plan but defined for purposes of Section 423and the agreements evidencing Awards granted under the Plan have lapsed. However, all Incentive Stock Options shall be granted, if at all, within ten (10) years from the earlier of the Code shall havedate the same definition herein. Plan is adopted, as amended, by the Board or the date the Plan is duly approved, as amended, by the stockholders of the Company.

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.
(b)“Award” means any Option, SAR, Stock Purchase Right, Stock Bonus, Restricted Stock Unit, 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 “Restricted Stock Unit Agreement,” “ a “Performance Share Agreement” or a “Performance Unit Agreement.”

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

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

(c) (f)“Committee” means athe 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. Unless the powersIf no committee of the Committee haveBoard has been specifically limited,appointed to administer the CommitteePlan, the Board shall haveexercise all of the powers of the BoardCommittee granted herein, including, without limitation,and, in any event, the power to amendBoard may in its discretion exercise any or terminate the Plan at any time, subject to the termsall of the Plan and any applicable limitations imposed by law.such powers.

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

(e) (h)“CompensationConsultant” means with respecta person engaged to any Offering Period, base wagesprovide consulting or salary, overtime, bonuses, commissions, shift differentials, payments for paid time off, payments in lieu of notice, and compensation deferred under any programadvisory services (other than as an Employee or plan, including, without limitation, pursuant to Section 401(k) or Section 125a member of the Code. Compensation shall be limited to amounts actually payable in cash or deferred during the Offering Period.

Compensation shall not include moving allowances, payments pursuantBoard) to a severance agreement, termination pay, relocation payments, sign-on bonuses, any amounts directlyParticipating Company, provided that the identity of such person, the nature of such services or


indirectly paid 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 (i) registration on a Form S‑8 Registration Statement under the Securities Act, or (ii) Rule 701 of the Securities Act, or (iii) other means of compliance with the securities laws of all relevant jurisdictions.

(i)“Director” means a member of the Board or the board of directors of any other stock purchaseParticipating Company.
(j)“Disability” means the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code.
(k)“Dividend Equivalent” means a credit, made at the discretion of the Committee or stock option plan, oras 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.
(l)“Employee” means any other compensation not included above.

(f) “Eligible Employee” means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan.

(g) “Employee” means a 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 and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 423422 of the Code. A ParticipantCode; provided, however, that neither service as a member of the Board nor payment of a director’s fee shall be deemedsufficient to have ceased to be an Employee either upon an actual termination ofconstitute employment or upon the corporation employing the Participant ceasing to be a Participating Company. Forfor purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while such individual is on a bona fide leavePlan.

(m)“Exchange Act” means the Securities Exchange Act of absence approved by the Company of ninety (90) days or less. In the event an individual’s leave of absence exceeds ninety (90) days, the individual shall be deemed to have ceased to be an Employee on the ninety-first (91st) day of such leave unless the individual’s right to reemployment with the Participating Company Group is guaranteed either by statute or by contract. The Company shall determine in go od faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment,1934, as the case may be. All such determinations by the Company shall be, for purposes of an individual’s participation in or other rights under the Plan as of the time of the Company’s determination, final, binding and conclusive, notwithstanding that the Company or any governmental agency subsequently makes a contrary determination.amended.

(h) (n)“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 theresuch determination is then a public market forexpressly 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 sale price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the

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Stock is so quoted instead) as quoted on the Nasdaq Global Select Market, theThe Nasdaq Small-CapSmallCap 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 Journalor 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 Board,Committee, in its sole discretion.
(ii)If, there is then no public market foron such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value on any relevant dateof a share of Stock shall be as determined by the BoardCommittee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse.

(i) (o)“OfferingIncentive Stock Option” means an offeringOption intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as providedan Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option.
(p)“Insider” means an Officer, a member of the Board or any other person whose transactions in Stock are subject to Section 6.16 of the Exchange Act.

(j) (q)“Offering DateNonstatutory 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.
(r)“Officer” means any person designated by the Board as an officer of the Company.
(s)“Option” means the right to purchase Stock at a stated price for any Offering Period,a specified period of time granted to a participant pursuant to Section 6 of the first day of such Offering Period.

(k) “Offering Period” meansPlan. An Option may be either an Incentive Stock Option or a period established in accordance with Section 6.1.Nonstatutory Stock Option.

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

2(u)


(m) “Participant” means an Eligible Employeeany eligible person who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan.been granted one or more Awards.

(n) (v)“Participating Company” means the Company or any Parent Corporation, or Subsidiary Corporation designated by the Board as a corporation the Employees of which may, if Eligible Employees, participate in the Plan. The Board shall have the sole and absolute discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies.Affiliate.

(o) (w)“Participating Company Group” means, at any point in time, the Company and all other corporations collectively which are then Participating Companies.

(p) (x)“Purchase DatePerformance Award” means an Award of Performance Shares or Performance Units.
(y)“Performance Award Formula” means, for any Purchasean Award, a formula or table established by the Committee, which provides the basis for computing the value of an Award at

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one or more threshold levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(z)“Performance Goal” means a performance goal established by the Committee and may or may not include performance goals relating to a Performance Measure (as defined in Section 10).
(aa)“Performance Period” means a period established by the last dayCommittee at the end of such period.which one or more Performance Goals are to be measured.

(q)(bb)    “Purchase PeriodPerformance 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 based on performance.
(cc)    “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 based upon performance.
(dd)    “Predecessor Plans” mean, collectively, the Adobe Systems Incorporated 1994 Stock Option Plan and the Adobe Systems Incorporated 1999 Equity Incentive Plan.
(ee)    “Restricted Stock Unit” means a bookkeeping entry representing a right granted to a Participant pursuant to Section 8 of the Plan to receive one share of Stock, a cash payment equal to the value of one share of Stock, or a combination thereof, as determined in the sole discretion of the Committee.
(ff)    “Restriction Period” means the period established in accordance with Section 6.2.8.5 of the Plan during which shares subject to a Stock Award are subject to Vesting Conditions.

(r) (gg)    “Purchase PriceRule 16b‑3” means Rule 16b‑3 under the price at whichExchange Act, as amended from time to time, or any successor rule or regulation.
(hh)    “SAR” or “Stock Appreciation Right” means a bookkeeping entry representing, for each share of Stock may be purchased under the Plan, as determined in accordance with Section 9.

(s) “Purchase Right” means an optionsubject to such SAR, a right granted to a Participant pursuant to Section 7 of the Plan to purchase such sharesreceive 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.

(ii)    “Section 162(m)” means Section 162(m) of the Code.
(jj)    “Securities Act” means the Securities Act of 1933, as providedamended.
(kk)    “Service” means a Participant’s employment or service with the Participating Company Group as an Employee, a Consultant or a Director, whichever such capacity the Participant held on the date of grant of an Award. Unless otherwise determined by the Committee, a Participant’s Service shall be deemed to have terminated if the Participant ceases to render service to the Participating Company Group in Section 8,such initial capacity. However, a Participant’s Service shall not be deemed to have terminated merely because of a change in the Participating Company for which the Participant mayrenders such Service in such initial capacity, provided that there is no interruption or may not exercise during the Offering Period in which such option is outstanding. Such option arises from the right of a Participant to withdraw any accumulated payroll deductionstermination of the Participant’s Service. 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 not previously appliedperforms

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Service ceasing to be a Participating Company. Subject to the purchaseforegoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.
(ll)    “Stock under the Plan and to terminate participation in the Plan at any time during an Offering Period.

(t) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2.4.2 of the Plan.

(u) (mm)    “Subscription AgreementStock Award” means an Award of a Stock Bonus, a Stock Purchase Right or a Restricted Stock Unit Award.
(nn)    “Stock Bonus” means Stock granted to a Participant pursuant to Section 8 of the Plan.
(oo)    “Stock Purchase Right” means a written agreement in such form as specified byright to purchase Stock granted to a Participant pursuant to Section 8 of the Company, stating an Employee’s election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee’s Compensation.Plan.

(v) (pp)    “Subscription Date” means the last business day prior to the Offering Date of an Offering Period or such earlier date as the Company shall establish.

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

(qq)    “Ten Percent Owner” means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(rr)    “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.

ADMINISTRATION.

3.1    Administration by the Board. Committee.The Plan shall be administered by the Board, including any duly appointed Committee of the Board.Committee. All questions of interpretation of the Plan of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase RightAward shall be determined by the BoardCommittee, and such determinations shall be final and binding upon all persons having an interest in the Plan or the Purchase Right. Subject to the provisions of the Plan, the Board shall determine all of the relevant terms and conditions of Purchase Rights granted pursuant to the Plan; provided, however, that all Participants granted Purchase Rights pursuant to the Plan shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code to the extent required by applicable law. All expenses incurred in connection with the administration of the Plan shall be paid by the Company.such Award.

3.2    Authority of Officers.Any officer of the CompanyOfficer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election thatwhich is the responsibility of or thatwhich is allocated to the Company herein, provided that the officerOfficer has apparent authority with respect to such matter, right, obligation, determination or election.

3.3 Policies and Procedures Established by To the Company. The Company may, from time to time,extent consistent with the Plan and the requirements ofapplicable law (including but not limited to Delaware General Corporation Law Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its sole discretion, for the proper administration of the Plan, including, without limitation, (a) a minimum payroll deduction amount required for participation in an Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant, or the acceptance by the Company of a direct payment from a Participant,  in order to adjust for the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan.

4. Shares Subject to Plan.

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, and effective upon approval by the stockholders of the Company, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be ninety-three million (93,000,000) and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof. If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of such Purchase Right shall again be available for issuance under the Plan.

4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, or in the event of any merger (including a merger effected for the purpose of changing the Company’s domicile), sale of assets or other reorganization in which the Company is a party, appropriate adjustments shall be made in the number and class of shares subject to the Plan and each Purchase Right and in the Purchase Price. If a majority of the

4


shares which are of the same class as the shares that are subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”157(c)), the Board may, unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject t o the Purchase Right. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.

5. Eligibility.

5.1 Employees Eligible to Participate. Each Employee of a Participating Company is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the following:

(a) Any Employee who is customarily employed by the Participating Company Group for less than twenty (20) hours per week; or

(b) Any Employee who is customarily employed by the Participating Company Group for not more than five (5) months in any calendar year;

provided, however, that Employees of a Participating Company may be Eligible Employees even if their customary employment is less than twenty (20) hours per week and/or five (5) months per calendar year, to the extent required by local law.

5.2 Exclusion of Certain Stockholders. Notwithstanding any provision of the Plan to the contrary, no Employee shall be granted a Purchase Right under the Plan if, immediately after such grant, such Employee would own or hold options to purchase stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code. For purposes of this Section 5.2, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee.

6. Offerings.

6.1 Offering Periods. Except as otherwise set forth below, the Plan shall be implemented by Offerings of approximately twenty-four (24) months duration or such other duration as the Board shall determine. Offering Periods shall commence on or about January 1 and July 1 of each year and end on or about the second December 31 and June 30, respectively, occurring thereafter. Notwithstanding the foregoing, the Board may establish a different duration for one or more future Offering Periods or different commencing or ending dates for such Offering Periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. If the first or last day of an Offering Period is not a day on which the national securities exchanges or Nasdaq Global Select Market are open for trading, the Company shall specify the tra ding day that will be deemed the first or last day, as the case may be, of the Offering Period.

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6.2 Purchase Periods. Each Offering Period shall consist of four (4) consecutive Purchase Periods of approximately six (6) months duration, or such other number or duration as the Board shall determine. A Purchase Period commencing on or about January 1 shall end on or about the next June 30. A Purchase Period commencing on or about July 1 shall end on or about the next December 31. Notwithstanding the foregoing, the Board may establish a different duration for one or more future Purchase Periods or different commencing or ending dates for such Purchase Periods. If the first or last day of a Purchase Period is not a day on which the national securities exchanges or Nasdaq Global Select Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Purchase Period.

7. Participation in the Plan.

7.1 Initial Participation. An Eligible Employee may become a Participant in an Offering Period by delivering a properly completed Subscription Agreement to the office designated by the Company not later than the close of business for such office on the Subscription Date established by the Company for such Offering Period. An Eligible Employee who does not deliver a properly completed Subscription Agreement to the Company’s designated office on or before the Subscription Date for an Offering Period shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless such Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate office of the Company on or before the Subscription Date for such subsequent Offering Period. An Employee who becomes an Eligible Employee on or a fter the Offering Date of an Offering Period shall not be eligible to participate in such Offering Period but may participate in any subsequent Offering Period provided such Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period.

7.2 Continued Participation. A Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that such Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan pursuant to Section 12.1 or (b) terminated employment as provided in Section 13. A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section 7.2, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan. However, a Participant may deliver a new Subscription Agreement for a subsequent Offering Period in accordance with the proce dures set forth in Section 7.1 if the Participant desires to change any of the elections contained in the Participant’s then effective Subscription Agreement. Eligible Employees may not participate simultaneously in more than one Offering.

8. Right to Purchase Shares.

8.1 Grant of Purchase Right. Except as set forth below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be granted automatically a Purchase Right consisting of an option to purchase five thousand (5,000) shares of Stock. No Purchase Right shall be granted on an Offering Date to any person who is not, on such Offering Date, an Eligible Employee.

8.2 Pro Rata Adjustment of Purchase Right. Notwithstanding the provisions of Section 8.1, and except as otherwise provided in Section 14.2, if the Board establishes an Offering Period of less than twenty-three and one-half (23½) months or more than twenty-four and one-half

6


(24½) months in duration, the number of whole shares of Stock subjectdiscretion, delegate to a Purchase Right shall be determined by multiplying 208.33 shares by the number of months (rounded to the nearest whole month) in the Offering Period and disregarding any resulting fractional share.

8.3 Calendar Year Purchase Limitation. Notwithstanding any provision of the Plan to the contrary, no Purchase Right shall entitle a Participant to purchase shares of Stock under the Plan at a rate which, when aggregated with such Participant’s rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right has been outstanding at any time. For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period. The limitation described in this Section 8.3 sha ll be applied in conformance with applicable regulations under Section 423(b)(8) of the Code.

9. Purchase Price. The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the Board; provided, however, that the Purchase Price shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date. Unless otherwise provided by the Board prior to the commencement of an Offering Period, the Purchase Price for that Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date.

10. Accumulation of Purchase Price through Payroll Deduction. Shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for only by means of payroll deductions from the Participant’s Compensation accumulated during the Offering Period for which such Purchase Right was granted, subject to the following:

10.1 Amount of Payroll Deductions. Except as otherwise provided herein, the amount to be deducted under the Plan from a Participant’s Compensation on each payday during an Offering Period shall be determined by the Participant’s Subscription Agreement. The Subscription Agreement shall set forth the percentage of the Participant’s Compensation to be deducted on each payday during an Offering Period in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions made effective following the first payday during an Offering) or more than twenty-five percent (25%). Notwithstanding the foregoing, the Board may change the limits on payroll deductions effective as of any future Offering Date.

10.2 Commencement of Payroll Deductions. Payroll deductions shall commence on the first payday following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided herein.

10.3 Election to Change or Stop Payroll Deductions. Subject to any limitations imposed by the Board prior to the commencement of an Offering Period, during an Offering Period, a Participant may elect to increase or decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company’s designated office an amended Subscription

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Agreement authorizing such change on or before the “Change Notice Date.” The “Change Notice Date” shall be a date prior to the beginning of the first pay period for which such election is to be effective as established by the Company from time to time and announced to the Participants. A Participant who elects to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in the current Offering Period unless such Participant withdraws from the Plan as provided in Section 12.1.  Until otherwise provided by the Board, for all Offering Periods that commence on or after January 1, 2008, a Participant may only elect to decrease the rate of, or to stop, deductions from his or her Compensation during any on-going Offering Period, and may only increase his or her rate of deductions as to future Offering Periods; except howeve r, that any increase to a Participant’s election approved by the Company as a result of the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan shall not be subject to these increase limitations.

10.4 Participant Accounts. Individual bookkeeping accounts shall be maintained for each Participant. All payroll deductions from a Participant’s Compensation shall be credited to such Participant’s Plan account and shall be deposited with the general funds of the Company. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose.

10.5 No Interest Paid. Interest shall not be paid on sums deducted from a Participant’s Compensation pursuant to the Plan.

10.6 Administrative Errors.  Notwithstanding the above, in the case of an administrative error by the Company, the Company may choose to accept a direct payment from a Participant in order to adjust for the Company’s delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant’s election under the Plan or as advisable to comply with the requirements of Section 423 of the Code.

11. Purchase of Shares.

11.1 Exercise of Purchase Right. On each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant’s payroll deductions accumulated in the Participant’s Plan account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price. However, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant’s Purchase Right. No shares of Stock shall be purchased on a Purchase Date on behalf of a Partici pant whose participation in the Offering or the Plan has terminated before such Purchase Date.

11.2 Pro Rata Allocation of Shares. In the event that the number of shares of Stock which might be purchased by all Participants in the Plan on a Purchase Date exceeds the number of shares of Stock available in the Plan as provided in Section 4.1, the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be practicable and as the Company shall determine to be equitable. Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded.

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11.3 Delivery of Certificates. As soon as practicable after each Purchase Date, the Company shall arrange the delivery to each Participant, as appropriate, of a certificate representing the shares acquired by the Participant on such Purchase Date; provided that the Company may deliver such shares to a broker that holds such shares in street name for the benefit of the Participant. Shares to be delivered to a Participant under the Plan shall be registered in the name of the Participant, or, if requested by the Participant, in the name of the Participant and his or her spouse, or, if applicable, in the names of the heirs of the Participant.  Notwithstanding the foregoing, to the extent permitted by applicable law and the Company’s governing documents, the Company may refrain from issuing paper certificates and may instead cause the issuance of th e shares to the Participant under this Plan to be recorded electronically on the books of the Company, the applicable transfer agent and/or broker, as applicable.

11.4 Return of Cash Balance. Any cash balance remaining in a Participant’s Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date. However, if the cash to be returned to a Participant pursuant to the preceding sentence is an amount less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain such amount in the Participant’s Plan account to be applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period, as the case may be.

11.5 Tax and Withholding. At the time a Participant’s Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the foreign, federal, state and local tax and withholding obligations of the Participating Company Group, if any, which arise upon exercise of the Purchase Right or upon such disposition of shares, respectively.  For the avoidance of doubt, any tax arising from the exercise of the Purchase Right or upon the disposition of shares, whether initially payable by the Participant or the Participating Company Group (each a “Stock Tax”), shall be paid by the Participant.  Without limitation to the foregoing, any Indian Fringe Benefit Tax due as a result of a Participant exercis ing a Purchase Right shall be deemed a Stock Tax. The Participating Company Group may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary to satisfy any Stock Tax and/or withholding obligations.  If the Participant’s compensation is not sufficient to meet the Stock Tax and/or withholding obligation, the Participating Group Company shall be under no obligation to deliver the Shares until the Participant has made adequate provisions for payment of the Stock Tax and/or withholding obligations.

11.6 Expiration of Purchase Right. Any portion of a Participant’s Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period.

11.7 Reports to Participants. Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant’s Plan account setting forth the total payroll deductions accumulated prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant’s Plan account pursuant to Section 11.4. The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine.

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12. Withdrawal from Offering or Plan.

12.1 Voluntary Withdrawal from the Plan. A Participant may withdraw from the Plan by signing and delivering to the Company’s designated office a written notice of withdrawal on a form provided by the Company for such purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, if a Participant withdraws from the Plan after the Purchase Date of a Purchase Period, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date. A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1. The Company may impose, from time to time, a requirement that the notice of with drawal from the Plan be on file with the Company’s designated office for a reasonable period prior to the effectiveness of the Participant’s withdrawal.

12.2 Automatic Withdrawal From an Offering. If the Fair Market Value of a share of Stock on a Purchase Date other than the final Purchase Date of an Offering is less than the Fair Market Value of a share of Stock on the Offering Date of the Offering, then every Participant automatically shall be (a) withdrawn from such Offering at the close of such Purchase Date and after the acquisition of shares of Stock for the Purchase Period and (b) enrolled in the Offering commencing on the first business day subsequent to such Purchase Date.

12.3 Return of Payroll Deductions. Upon a Participant’s voluntary withdrawal from the Plan pursuant to Sections 12.1 or automatic withdrawal from an Offering pursuant to Section 12.2, the Participant’s accumulated payroll deductions which have not been applied toward the purchase of shares of Stock (except, in the case of an automatic withdrawal pursuant to Section 12.2, for an amount necessary to purchase an additional whole share as provided in Section 11.4) shall be returned as soon as practicable after the withdrawal, without the payment of any interest, to the Participant, and the Participant’s interest in the Plan or the Offering, as applicable, shall terminate. Such accumulated payroll deductions may not be applied to any other Offering under the Plan.

13. Termination of Employment or Eligibility. Upon a Participant’s ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or the failure of a Participant to remain an Eligible Employee, the Participant’s participation in the Plan shall terminate immediately. In such event, the payroll deductions credited to the Participant’s Plan account since the last Purchase Date shall, as soon as practicable, be returned to the Participant or, in the case of the Participant’s death, to the Participant’s legal representative, and all of the Participant’s rights under the Plan shall terminate. Interest shall not be paid on sums returned pursuant to this Section 13. A Participant whose participation has been so terminated may again become eligibl e to participate in the Plan by again satisfying the requirements of Sections 5 and 7.1.

14. Transfer of Control.

14.1 Definitions.

(a) 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 in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a

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party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.

(b) A “Transfer of Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stockcommittee comprised of one or more corporations which, as a result ofOfficers (any such committee, an “Officer Committee”) the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or throughauthority to designate Employees (other than themselves) to receive one or more subsidiary corporations. The Board shall have the rightOptions or rights to determine whether multiple sales or exchangesacquire shares of the voting stock of the Company or multiple Ownership Change Events are related,Stock and its determination shall be final, binding and conclusive.

14.2 Effect of Transfer of Control on Purchase Rights. In the event of a Transfer of Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), shall assume the Company’s rights and obligations under the Plan. If the Acquiring Corporation elects not to assume the Company’s rights and obligations under outstanding Purchase Rights, the Purchase Date of the then current Purchase Period shall be accelerated to a date before the date of the Transfer of Control specified by the Board, butdetermine the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are neither assumed by the Acquiring Corporation in connection with the Transfer of Control nor exercised assuch Options and rights, without further approval of the dateBoard or the Committee. Any such grants will be subject to the terms of the Transfer o f Control shall terminate and ceaseBoard resolutions providing for such delegation of authority.


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3.3    Administration with Respect to be outstanding effective asInsiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the dateCompany is registered pursuant to Section 12 of the Transfer of Control.

15. Nontransferability of Purchase Rights. A Purchase Right may not be transferred in any manner otherwise than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.

16. Restriction on Issuance of Shares. The issuance of shares underExchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b‑3.

3.4    Committee Complying with Section 162(m). If the Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of two or more “outside directors” within the meaning of Section 162(m) to approve the grant of any Award which might reasonably be anticipated to result in the payment of employee remuneration that would otherwise exceed the limit on employee remuneration deductible for income tax purposes pursuant to Section 162(m).
3.5    Powers of the Committee. In addition to any other powers set forth in the Plan and subject to compliance with allthe 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 and to designate Options as Incentive Stock Options or Nonstatutory Stock Options;
(c)to determine the Fair Market Value of shares of Stock or other property;
(d)to determine the terms, conditions and restrictions applicable requirements of foreign, federal or state law with respect to such securities. A Purchase Right mayeach Award (which need not be exercised ifidentical) and any shares acquired pursuant thereto, including, without limitation, (i) the issuanceexercise or purchase price of shares upon such exercise would constitute a violationpurchased pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any applicable foreign, federaltax withholding obligation arising in connection with Award, including by the withholding or state securities lawsdelivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or other law or regulations or the requirementsvesting of any securities exchangeAward or market system uponany shares acquired pursuant thereto, (v) the Performance Award Formula and Performance Goals applicable to any Award and the extent to which the Stock may then be listed. In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act of 1933, as amended, shall atsuch Performance Goals have been attained, (vi) the time of exercisethe expiration of any Award, (vii) the effect of the Purchase RightParticipant’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, Restricted Stock Units, Performance Shares or Performance Units will be settled in effectshares 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 shares issuable upon exerciseperiod 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 Purchase Right,Plan, including,

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without limitation, as the Committee deems necessary or (b)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 opinion of legal counselPlan or any Award Agreement and to make all other determinations and take such other actions with respect to the Company,Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.
3.6    Repricing. Without the affirmative vote of holders of a majority of the shares issuable up on exerciseof Stock cast in person or by proxy at a meeting of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of said Act. The inabilitystockholders 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 saleat which a quorum representing a majority of any shares under the Plan 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 a Purchase Right, the Company may require the

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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.

17. Rights as a Stockholder and Employee. A Participant shall have no rights as a stockholder by virtue of the Participant’s participation in the Plan until the date of the issuance of a certificate for the shares purchased pursuant to the exercise of the Participant’s Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 4.2. Nothing herein creates an employment relationship between the Participant and any member of the Participating Group Company where such relationship does not otherwise exist, nor shall anything herein confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant’s employment at any time.

18. Legends. The Company may at any time place legends or other identifying symbols referencing any applicable foreign, federal or state securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representingoutstanding shares of Stock issued underis present or represented by proxy, the Plan. The ParticipantBoard shall atnot approve a program providing for either (a) the requestcancellation of outstanding Options or SARs and the Company, promptly presentgrant in substitution therefor of new Awards having a lower exercise or purchase price or (b) the amendment of outstanding Options or SARs to reduce the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include butexercise price thereof. This paragraph shall not be limitedconstrued to apply to “issuing or assuming a stock option in a transaction to which section 424(a) applies,” within the following:

“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE).”

19. Notificationmeaning of Sale of Shares. The Company may require the Participant to give the Company prompt notice of any disposition of shares acquired by exercise of a Purchase Right within two years from the date of granting such Purchase Right or one year from the date of exercise of such Purchase Right. The Company may require that until such time as a Participant disposes of shares acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant’s name (or, if elected by the Participant, in the nameSection 424 of the Participant and his or her spouse but not in the name of any nominee) until the lapse of the time periods with respect to such Purchase Right referred to in the preceding sentence. The Company may direct that the certificates evidencing shares acquired by exercise of a Purchase Right refer to such requireme nt to give prompt notice of disposition.Code.

20. Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form3.7    

12Indemnification.


specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

21. 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 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.

22. Amendment or Termination4.SHARES SUBJECT TO PLAN.
4.1    Maximum Number of the Plan. The Board may at any time amend or terminate the Plan, except that (a) such termination shall not affect Purchase Rights previously granted under the Plan, exceptShares Issuable. Subject to adjustment as permitted under the Plan, and (b) no amendment may adversely affect a Purchase Right previously granted under the Plan (except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant toprovided in Section 423 of the Code or to obtain qualification or registration of the shares of Stock under applicable foreign, federal or state securities laws). In addition, an amendment to the Plan must be approved by the stockholders of the Company within twelve (12) months of the adoption of such amendment if such amendment would authorize the sale of more shares than are authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Board as Participating Companies.

23. Continuation of Plan Terms as to Outstanding Purchase Rights. Any other provision of the Plan to the contrary notwithstanding, the terms of the Plan prior to amendment (other than4.2, the maximum aggregate number of shares of Stock issuable thereunder)that may be issued under the Plan shall remain in effect and applybe two hundred forty-seven million one hundred forty-nine thousand six hundred twenty(247,149,620). The number of shares of stock available for issuance under the Plan shall be reduced (a) by one share for each share issued pursuant to all Purchase Rightsoptions or rights granted pursuant to the PlanPredecessor Plans or pursuant to Options or Stock Appreciation Rights, and (b) by one and seventy seven-hundredths (1.77) shares for each share issued pursuant to Awards other than those set forth in the preceding clause (a); provided, however, that (A) for Awards granted prior to amendment.April 5, 2007, the reduction was one share of Stock for each share of Stock issued pursuant to any Awards, (B) for Awards granted on April 5, 2007 through and including April 9, 2008, the reduction was two and one-tenth (2.1) shares for each share issued pursuant to any Awards other than options or rights granted pursuant to the Predecessor Plans or pursuant to Options or Stock Appreciation Rights, and (C) for Awards granted on April 10, 2008 through and including March 31, 2009, the reduction was two and four-tenths (2.4) shares for each share issued pursuant to any Awards other than options or rights

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ADOBE SYSTEMS INCORPORATED
2011 EXECUTIVE CASH PERFORMANCE BONUS PLAN

1.             Purposesgranted pursuant to the Predecessor Plans or pursuant to Options or Stock Appreciation Rights. Such shares shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If an outstanding 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 be added back to the Plan share reserve in an amount corresponding to the reduction in such share reserve previously made in accordance with the rules described above in this Section 4.1 and again be available for issuance under the Plan. This Adobe Systems Incorporated 2011 Executive Cash Performance BonusShares of Stock shall not be deemed to have been issued pursuant to the Plan sets forthwith respect to any portion of an Award (other than a SAR that may be settled in shares of Stock and/or cash) that is settled in cash. Shares withheld in satisfaction of tax withholding obligations pursuant to Section 14.2 shall not again become available for issuance under the planPlan. Upon exercise of a SAR, whether in cash or shares of Stock, the number of shares available for paymentissuance under the Plan shall be reduced by the gross number of cash bonusesshares for which the SAR is exercised. If the exercise price of an Option is paid by “net exercise” (as described in Section 6.3(a)(iv)) or tender to those Participants designated for participation and is intended to increase stockholder value and the success of the Company, by motivating Participants to performor attestation to the bestownership, of their abilities and to achieveshares of Stock owned by the Company’s objectives. The Plan’s goals are toParticipant, the number of shares available for issuance under the Plan shall be achievedreduced by providing such Participants with incentive awards based on the achievementgross number of goals relating toshares for which the performanceOption is exercised.

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 ISO Share Limit (as defined in Section 5.3(a)), the Award limits set forth in Section 5.4 and to any outstanding Awards, and in the exercise or purchase price per share under any outstanding Award. 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, Directors and Consultants. No Award shall be granted prior to the date on which such person commences Service.
5.2    Participation. Except as otherwise provided in Section 3.2, 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.

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5.3    Incentive Stock Option Limitations.
(a)Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying Corporation”). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person, but who is otherwise an Employee or a Director of, or Consultant to, the Company or any of its business units orAffiliates, may be granted only a Nonstatutory Stock Option.
(b)ISO Share Limit. Subject to adjustment as provided in Section 4.2, the maximum number of shares of Stock that may be issued upon the achievementexercise of objectively determinable performance goals. TheIncentive Stock Options granted under the Plan is intendedand the Predecessor Plans will equal the aggregate Share number stated in the first sentence of Section 4.1, plus, to permit the payment of bonuses that may qualify as performance-bas ed compensationextent allowable under Code Section 162(m)422 and the Treasury Regulations promulgated thereunder, any shares of Stock that become available for Performance Periods starting on or afterissuance under the commencementPlan pursuant to Section 4.1 (the “ISO Share Limit”).
(c)Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Company’s 2011 Fiscal Year.

2.             Definitions.

(a)          “Award” means,Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to each Participant,such stock is granted. If the award determined pursuantCode is amended to Section 8(a) belowprovide for a Performance Period. Each Award is determined by a Payout Formula for a Performance Period, subject to the Committee’s authority underdifferent limitation from that set forth in this Section, 8(a) to eliminate or reduce the Award otherwise payable.

(b)          “Base Salary” means,such different limitation shall be deemed incorporated herein effective as to any Performance Period, the Participant’s annualized salary rate on the last day of the Performance Period. Such Base Salary shall be before both (a) deductions for taxes or benefits,date and (b) deferrals of compensation pursuant to Company-sponsored plans.

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

(d)          “Code” means the Internal Revenue Code of 1986, as amended.

(e)           “Committee” means the Executive Compensation Committee of the Board, or another committee or subcommittee of the Board, which shall, with respect to payments hereunder intended to qualifysuch Options as performance-based compensation under Code Section 162(m), consist,required or permitted by such amendment to the extent requiredCode. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by Section 162(m), solely of two or more membersreason of the Board who qualifylimitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise, each portion shall be separately identified.

(d)Leaves of Absence. For purposes of Incentive Stock Options, no leave of absence may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as “outside directors”an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
5.4    Award Limits.
(a)    Section 162(m) Award Limits. The following limits shall apply to the grant of any Award if, at the time of grant, the Company is a “publicly held corporation” within the meaning of Section 162(m).

(f)           (i)“Company” means Adobe Systems Incorporated or any of its subsidiaries (as such term is definedOptions and SARs. Subject to adjustment as provided in Code Section 424(f)).

(g)           “Fiscal Year” means a4.2, no Employee shall be granted within any fiscal year of the Company.

(h)          “Maximum Award” means,Company one or more Options or Freestanding SARs which in the aggregate are for more than four million (4,000,000) shares of Stock. An Option which is canceled (or a Freestanding SAR as to any Participant for any Performance Period,which the maximum award that may be granted exercise price is reduced


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to reflect a reduction in the Participant underFair Market Value of the Plan.  In no event mayStock) in the Maximum Award exceed $5 million multiplied by the number of complete Fiscal Years contained within the Performance Period, or, for any Performance Period of less than one complete Fiscal Year, $5 million.

(i)           “Participant” means an eligible executive or member of senior managementsame fiscal year of the Company selected by the Committee, in its sole discretion, to participate in the Plan for a Performance Period.

(j)           “Payout Determination Date” means the date upon which the Committee determines the amounts payable pursuant to the Target Award and the Payout Formula with respect to any previously completed Performance Period, in accordance with Section 8(a).

(k)          “Payout Formula” means, as to any Performance Period, the formula or payout matrix established by the Committee pursuant to Section 7 in order to determine the Awards (if any)it was granted shall continue to be paidcounted against such limit for such fiscal year.

(ii)Stock Awards. Subject to Participants, which is generally expressedadjustment as a percentage (which mayprovided in Section 4.2, no Employee shall be more than 100%)granted within any fiscal year of the Target Award. The formulaCompany one or matrix may differ from Participant to Participant.

(l)           “Performance-Based Compensation” means compensation that ismore Stock Awards intended to qualify as “performance-based compensation” withinunder Section 162(m) for more than one million five hundred thousand (1,500,000) shares of Stock in the meaningaggregate.

(iii)Performance Awards. Subject to adjustment as provided in Section 4.2, no Employee shall be granted (A) an Award of Performance Shares intended to qualify as “performance based compensation” under Section 162(m), which could result in such Employee receiving more than one million five hundred thousand (1,500,000) shares of Stock in the aggregate during any fiscal year of the Company, or (B) an Award of Performance Units intended to qualify as “performance-based compensation” under Section 162(m), which could result in such Employee receiving more than two million five hundred thousand dollars ($2,500,000) during any fiscal year of the Company.
(b)Clarification of Limits. For purposes of clarification regarding the foregoing limits, (A) Awards granted in previous fiscal years will not count against the Award limits in subsequent fiscal years even if the Awards from previous fiscal years are earned or otherwise settled in fiscal years following the fiscal year in which they are granted, and (B) more than one Award of the same type can be granted in a fiscal year as long as the aggregate number of shares of Stock granted pursuant to all Awards of that type (and that are intended to qualify as “performance-based compensation” under Section 162(m)) do not exceed the fiscal year limit applicable to that Award type.
6.TERMS AND CONDITIONS OF OPTIONS.

(m)         “Performance Goals” means

Options shall be evidenced by Award Agreements specifying the goal(s) (or combined goal(s)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 (a) 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 and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock 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 Sections 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 (inand 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 Incentive Stock Option granted to

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a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder to an Employee, Consultant or Director shall terminate seven (7) years after the effective date of grant of the Option, unless earlier terminated in accordance with its discretion)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 applicablemade (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 Participantbroker 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 Award. Asexercise 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 a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided further, however, that shares of Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or (v) by such other consideration 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 (or such longer or shorter period as necessary to avoid a charge to earnings for financial accounting purposes) and not used for another Option exercise by attestation during any 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.
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

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Committee, in its discretion, and set forth in the Award Agreement evidencing such Option or in another written agreement between the Company and the Participant.
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 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

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and restrictions as shall be determined by the Committee and set forth in the Performance Goals applicableAward 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 targeted levellump sum or levelsin installments. When payment is to be made in shares of achievement using one or moreStock, the number of shares to be issued shall be determined on the basis of the following measures: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    growthDeemed 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 revenue or product revenue;


·growth ina payment to the market priceholder of stock;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    operating margin;Effect of Termination of Service.

·margin, including gross margin;

·operating income;

·operating income An SAR shall be exercisable after taxes;

·operating profit or net operating profit;

·pre-tax profit;

·earnings before interest, taxesa Participant’s termination of Service to such extent and depreciation;

·earnings before interest, taxes, depreciation and amortization;

·income, before or after taxes (including net income);

·total return on shares of stock or total stockholder return;

·earnings, including but not limited to earnings per share and net earnings;

·return on stockholder equity or average stockholder’s equity;

·return on net assets;

·return on assets, investment or capital employed;

·expenses;

·cost reduction goals;

·return on capital;

·economic value added;

·market share;

·operating cash flow;

·cash flow,during such period as indicated by book earnings before interest, taxes, depreciation and amortization;

·cash flow per share;

·improvement in or attainment of working capital levels;

·debt reduction;

·debt levels;

·capital expenditures;

·sales or revenue targets, including product or product family targets;

·billings;

·workforce diversity;

·customer satisfaction;

·implementation or completion of projects or processes;

·improvement in or attainment of working capital levels;

·stockholders’ equity; and


·other measures of performance selecteddetermined by the Committee, in its discretion, and set forth in the Award Agreement evidencing such SAR or in another written agreement between the Company and the Participant.

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, a Stock Purchase Right or a Restricted Stock Unit, and the number of shares of Stock subject to the extent consistentAward, in such form as the Committee shall from time to time establish. No Stock Award or 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 Section 162(m).and be subject to the following terms and conditions:
8.1    

The Performance GoalsTypes of Stock Awards Authorized. Stock Awards may be based on (i) absolute target values, (ii) growth, maintenancein the form of a Stock Bonus, a Stock Purchase Right or limiting losses,a Restricted Stock Unit. Stock Awards may be granted or vest upon such conditions as comparedthe Committee shall determine, including, without limitation, service to a prior period,Participating Company or (iii) values relative toupon the performanceattainment of one or more comparable companiesPerformance Goals. If either the grant of a Stock Award or the lapsing of the Restriction Period is to be contingent upon the performanceattainment of one or more relevant indices. The Performance Goals based on Performance Measures, the Committee shall follow procedures


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set forth in Section 10 if they are intended to qualify as “performance-based compensation” under Section 162(m).
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 an Employee, a Consultant or a Director may become exercisable prior to the date on which such person commences Service.
8.4    Payment of Purchase Price. Stock Bonuses shall be issued in consideration for past services actually rendered to a Participating Company or for its benefit. At the time of grant of Restricted Stock Units, the Committee will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Stock acquired pursuant to Restricted Stock Units. 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 or delivered pursuant to a Restricted Stock Unit shall be made (i) in cash, by check, or cash equivalent, (ii) by such other consideration as may be measuredapproved by the Committee from time to time to the extent permitted by applicable law, or (iii) by any combination thereof, in each case consistent with any requirements under applicable law regarding payment in respect of the “par value” of the Stock. The Committee may at any time or from time to time grant Stock Purchase Rights or Restricted Stock Units 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.
8.5    Vesting; Restrictions on Transfer; Deferral. Shares issued pursuant to any Stock Award (including, without limitation, the percentage of actual achievement relative to pre-established target Performance Goals) 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, a Company-wide basis Performance Award Formula and/or solelyPerformance Goals (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 12, or as provided in Section 8.8. 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. Restricted Stock Units may be subject to such conditions that may delay the delivery of the shares of Stock (or their cash equivalent) subject to Restricted Stock Units after the vesting of such Award.
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

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subject to a Stock Bonus or Restricted Stock Purchase Right, 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. With respect to Restricted Stock Units, the Committee may, in its sole discretion, provide that dividend equivalents shall not be paid or provide either for the current payment of dividend equivalents or for the accumulation and payment of dividend equivalents to the extent that the Restricted Stock Units become nonforfeitable. 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 and, if applicable, deferral elections 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 or in another written agreement between the Company and the Participant, 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, (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 and (iii) the Participant shall forfeit all rights in any portion of a Restricted Stock Unit award that has not vested 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 business units, divisions, affiliates,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 business segments.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:
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. Awards intended to qualify as “performance-based compensation” under Section 162(m) shall also be subject to the provisions of Section 10.

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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. 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. The Performance Goals shall be established by the Committee on the basis of achievement of Company-wide, divisional, or individual goals, applicable federal or state securities laws, or any other basis determined by the Committee in its discretion, except with respect to Awards intended to qualify as “performance-based compensation” under Section 162(m), in which case the provisions of Section 10 will apply thereto. Performance Goals 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 Goal may be stated as an absolute value or as a value determined relative to a standard selected by the Committee. Performance Goals may differ from Participant to Participant and from Award to Award.

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 determine 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 to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine, except with respect to Awards intended to qualify as “performance-based compensation” under Section 162(m), in which case the provisions of Section 10 will apply thereto. If permitted under a Participant’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 Participant 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.

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(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 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 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 at the election of the Participant or otherwise. 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.
(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 or in another written agreement between the Company and the Participant.
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

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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.PERFORMANCE-BASED COMPENSATION UNDER CODE SECTION 162(M)
10.1    General. If the Committee, which is constituted to comply with Section 3.4, in its discretion, decides to grant an Award intended to qualify as “performance-based compensation” under Section 162(m), the provisions of this Section 10 will control over any contrary provision in the Plan; provided, however, nothing in this Section 10 will prohibit the ability of a Committee in its discretion to grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) to such Participants that are based on Performance Goals or other specific criteria or goals, but that do not satisfy the requirements of this Section 10.
10.2    Performance Goals. The granting and/or vesting of Stock Awards or Awards of Performance Shares or Performance Units may be made subject to the attainment of Performance Goals relating to one or more measures of business or financial performance (each, a “Performance Measure”), which may include one or more of the following, as determined by the Committee:

(i)growth in revenue or product revenue;
(ii)recurring revenue;
(iii)annualized recurring revenue;
(iv)growth in the market price of the Stock;
(v)operating margin;
(vi)margin, including gross margin;
(vii)operating income;
(viii)operating income after taxes;
(ix)operating profit or net operating profit;
(x)pre-tax profit;
(xi)earnings before interest, taxes and depreciation;
(xii)earnings before interest, taxes, depreciation and amortization;
(xiii)income, before or after taxes (including net income);
(xiv)total return on shares of Stock or total stockholder return;

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(xv)earnings, including but not limited to earnings per share and net earnings;
(xvi)return on stockholder equity or average stockholders’ equity;
(xvii)return on net assets;
(xviii)return on assets, investment or capital employed;
(xix)expenses;
(xx)cost reduction goals;
(xxi)return on capital;
(xxii)economic value added;
(xxiii)market share;
(xxiv)operating cash flow;
(xxv)cash flow, as indicated by book earnings before interest, taxes, depreciation and amortization;
(xxvi)cash flow per share;
(xxvii)improvement in or attainment of working capital levels;
(xxviii)debt reduction;
(xxix)debt levels;
(xxx)capital expenditures;
(xxxi)sales or revenue targets, including product or product family targets;
(xxxii)bookings;
(xxxiii)billings;
(xxxiv)workforce diversity;
(xxxv)customer satisfaction;
(xxxvi)implementation or completion of projects or processes;
(xxxvii)improvement in or attainment of working capital levels;
(xxxviii)stockholders’ equity; and

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(xxxix)other measures of performance selected by the Committee to the extent consistent with Section 162(m).
10.3    Performance Goals Based on Performance Measures.
(a)Determination of Performance Goals Based on Performance Measures. Performance Goals based on Performance Measures may differ from Participant to Participant and from Award to Award. In establishing a Performance Goal based on the Target Determination Date, the Committee shall define, in an objective fashion, the manner of calculating the Performance Goal it selects to use for such Performance Period.  The Performance Goals shall be determined in accordance with United States generally accepted accounting principles (“GAAP”), unlessMeasures, the Committee determines that a non-GAAP measure can and will be used in a manner that complies with Section 162(m).   The Committee may provide that the attainment of the Performance Goalperformance shall be measured by appropriately adjusting the evaluation of Performance Goal performanceadjusted as follows:

·(i)to include or exclude restructuring and/or other nonrecurring charges;

·(ii)to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated Performance Goals;

·(iii)to include or exclude the effects of changes to GAAPgenerally accepted accounting principles required by the Financial Accounting Standards Board;

·(iv)to include or exclude the effects of any statutory adjustments to corporate tax rates;

·(v)to include or exclude the effects of any “extraordinary items” as determined under GAAP;generally accepted accounting principles;

·(vi)to include or exclude the effect of payment of the bonuses under this Plan and any othercash bonus plansplan of the Company;

·(vii)to include or exclude the effect of stock based compensation and/or deferred compensation;

·(viii)to include or exclude any other unusual, non-recurring gain or loss or other extraordinary item;

·(ix)to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development;

·(x)to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions;

·to include or exclude the effects of divestitures, acquisitions or joint ventures;

·(xi)to include or exclude the effects on reported financial results of changes in accounting treatment for certain transactions as a result of business model changes;
(xii)to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP;generally accepted accounting principles;

·(xiii)to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture;


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·(xiv)to include or exclude the effect of any change in the outstanding shares of common stock of the CompanyStock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends;

·(xv)to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code);


·(xvi)to reflect any partial or complete corporate liquidation;

·(xvii)to reflect shippable backlog; and

·(xviii)to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.

The

An Award may contain provisions for achievement of Performance Goals that are not based on Performance Measures (“Non-Performance Measure Goals”), but achievement, or non-achievement of any such Performance Goals may only operate to reduce the amount of an actual Award determined based on achievement of Performance Goals that are based on Performance Measures. That is, achievement of Non-Performance Measure Goals shall be viewed as an act of negative discretion by the Committee for purposes of determining an actual Award.
(b)Procedures. To the extent necessary to comply with the performance-based compensation provisions of Section 162(m), with respect to any adjustmentAward granted subject to Performance Goals based on Performance Measures and intended to qualify as “performance-based compensation” under Section 162(m), within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Section 162(m)), the Committee will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals based on Performance Measures applicable to the Performance Period, (iii) establish the Performance Goals based on Performance Measures, and amounts of such Awards, as applicable, which may be earned for such Performance Period, (iv) specify the relationship between Performance Goals based on Performance Measures and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period, and (v) provide for such other terms and conditions as the Committee may determine that would not otherwise cause Awards to cease to qualify as “performance-based compensation” under Section 162(m).
(c)Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance-based compensation under Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m), and the Plan will be deemed amended to the extent necessary to conform to such requirements.
(d)Determination of Amounts Earned. Following the completion of each Performance Period, the Committee will certify in writing whether the applicable Performance Goals based on Performance Measures have been achieved for such Performance Period. A Participant will

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be eligible to receive payment pursuant to an Award intended to qualify as “performance-based compensation” under Section 162(m) for a Performance Period only if the Performance Goals based on Performance Measures for such period are achieved. In determining the amounts earned by a Participant pursuant to an Award intended to qualified as “performance-based compensation” under Section 162(m), the Committee will have the right to (a) reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period, (b) determine what actual Award, if any, will be paid in the event of a termination of employment as the result of a Participant’s death or disability or upon a Change of Control (as defined in Section 12) or in the event of a termination of employment following a Change of Control prior to the end of the Performance Period, and (c) determine what actual Award, if any, will be paid in the event of a termination of employment other than as the result of a Participant’s death or disability prior to a Change of Control and prior to the end of the Performance Period to the extent an actual Award would have otherwise been achieved had the Participant remained employed through the end of the Performance Period.
11.STANDARD FORMS OF AWARD AGREEMENT.
11.1    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.
11.2    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.
11.3    Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Committee may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Committee determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of Cause.
12.CHANGE OF CONTROL.
12.1    Awards Granted Prior to January 24, 2008. The following provisions shall control for Awards granted prior sentenceto January 24, 2008:
(a)Except as otherwise provided in a Participant’s Award Agreement:
(i)An “Ownership Change Event” shall be determineddeemed 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

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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 12.1(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 11.2 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 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 12.1(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.
12.2    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;

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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);
(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

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shall terminate and cease to be outstanding effective as of the time of consummation of the Change of Control.
13.COMPLIANCE WITH SECURITIES LAW.
13.1    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 GAAP,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.
13.2    If the exercise of an Award, or the purchase or delivery of shares of Stock subject to an Award, following the termination of the Participant's Service would be prohibited at any time during the applicable post-termination period solely because the issuance of shares of Stock would violate the registration requirements under the Securities Act, then the Award shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Participant's Service during which the exercise of the Award would not be in violation of such registration requirements, or (ii) the expiration of the term of the Award as set forth in the Award Agreement.
14.TAX WITHHOLDING.
14.1    Tax Withholding in General. Unless prohibited by applicable law, 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.
14.2    Withholding in Shares. Unless prohibited by applicable law, 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.

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15.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 Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule. No termination or amendment of the Plan shall affect any then outstanding Award unless expressly provided by the Committee determines that a non-GAAP adjustment canCommittee. 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.
16.MISCELLANEOUS PROVISIONS.
16.1    Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and will be used in a manner that complies with Section 162(m).

(n)          “Performance Period’ means any Fiscal Year or such other periodrestrictions as determined by the Committee in its sole discretion.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.

(o)16.2    “Plan” means this Adobe Systems Incorporated 2011 Executive Cash Performance Bonus Plan.Provision of Information.

(p)          “Plan Year” means Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s fiscal year.common stockholders.

(q)16.3    “Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 162(m)” means Section 162(m)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, a Consultant or a Director, 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.
16.4    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 Code, or any successor to Section 162(m), as that Section may be interpreted from time to timeissuance of such shares (as evidenced by the Internal Revenue Service, whether by regulation, noticeappropriate entry on the books of the Company or otherwise.

(r)           “Target Award’ meansof a duly authorized transfer agent of the target award payableCompany). 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.

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

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16.6    Beneficiary Benefits. Subject to local laws and procedures, the Company may request appropriate written documentation from a trustee or other legal representative, court, or similar legal body, regarding any benefit under the Plan to awhich the Participant foris entitled in the Performance Period, expressed as a percentageevent of such Participant’s Base Salary (or any other measuredeath before such representative shall be entitled to act on behalf of the Participant’s base salary determined byParticipant and before a beneficiary receives any or all of such benefit.
16.6    Unfunded Obligation. Participants shall have the Committee) or a specific dollar amount, as determined by the Committee in accordance with Section 6.

(s)           “Target Determination Cutoff Date” means the latest possible date that will not jeopardize a Target Award’s qualification as Performance-Based Compensation.

(t)           “Target Determination Date” means the date or dates upon which the Committee sets the Target Award and Payout Formula with respect to any Performance Period, in accordance with Section 7.

(u)“Threshold Award” means the minimum award payable under the Plan to a Participant for the Performance Period, expressed as a percentagestatus of Participant’s Base Salary (or any other measuregeneral unsecured creditors of the Participant’s base salary determined by the Committee) or a specific dollar amount, as determined by the Committee in accordance with Section 6.

3.             Plan Administration.

(a)          The Committee shall be responsible for the general administration and interpretation of the Plan and for carrying out its provisions. SubjectCompany. Any amounts payable to the requirements for qualifying compensation as Performance-Based Compensation, the Committee may delegate specific administrative tasksParticipants pursuant to Company employees or others as appropriate for proper administration of the Plan. Subject to the limitations on Committee discretion imposed under Section 162(m), the Committee shall have such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following powers and duties, but subject to the terms of the Plan:

(i)           discretionary authority to adopt Target Awards and Payout Formulae under this Plan for a given Performance Period on or prior to the Target Determination Cutoff Date;

(ii)          discretionary authority to construe and interpret the terms of the Plan, and to determine eligibility and the amount, manner and time of payment of any Awards hereunder;

(iii)         to prescribe forms and procedures for purposes of Plan participation and distribution of Awards; and

(iv)         to adopt rules, regulations and bylaws and to take such actions as it deems necessary or desirable for the proper administration of the Plan.


(b)          Any rule or decision by the Committee that is not inconsistent with the provisions of the Plan shall be conclusiveunfunded and binding onunsecured obligations for all persons, andpurposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be givenrequired 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 maximum deference permitted by law.

4.             Eligibility.   Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee, the Officer 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 employees eligible to participateParticipants shall have no claim against any Participating Company for any changes in the Plan for a given Performance Period shallvalue of any assets which may be determinedinvested or reinvested by the Committee, and are generally expectedCompany with respect to include executive officersthe Plan.

16.8    Section 409A. It is intended that all of the Company who are subjectbenefits and payments provided under this Plan satisfy, to the greatest extent possible, the exemptions from the application of Code Section 16409A (together, with any state law of similar effect, “Section 409A”) provided under Treasury Regulations Sections 1.409A 1(b)(4), 1.409A 1(b)(5), 1.409A-1(b)(6) and 1.409A 1(b)(9), and this Plan will be construed to the Securities and Exchange Act of 1934 and any other members of senior management of the Company who are specifically designated by the Committee, in its sole discretion, for participation in the Plan. Unless specifically excepted under terms that aregreatest extent possible as consistent with Section 162(m), a Participant must be actively employed onthose provisions. To the last day ofextent not so exempt, this Plan and the Performance Periodpayments and benefits to be eligibleprovided hereunder are intended to, receive a payment hereunder. No person shalland will be automatically entitledconstrued and implemented so as to, participatecomply in all respects with the Plan.

5.             Performance Goal Determination.   On the Target Determination Date, the Committee, in its sole discretion, shall establish the Performance Goals for each Participant for the Performance Period. Such Performance Goals shall be set forth in writing on or prior to the Target Determination Cutoff Date, and the achievementapplicable provisions of such Performance Goals shall be substantially uncertain at such time.

6.             Target Award Determination.   On the Target Determination Date, the Committee, in its sole discretion, shall establish a Target Award and a Maximum Award for each Participant. Each Participant’s Target Award and Maximum Award (and any Threshold Award, as applicable) shall be set forth in writing on or prior to the Target Determination Cutoff Date.

7.             DeterminationSection 409A. For purposes of Payout Formula.   On the Target Determination Date, the Committee, in its sole discretion, shall establish a Payout FormulaSection 409A (including, without limitation, for purposes of determining the Award (if any) payableTreasury Regulation Section 1.409A 2(b)(2)(iii)), any right to each Participant. Each Payout Formula (a) shall be set forth in writing on or prior to the Target Determination Cutoff Date, (b) shall provide for the payment of a Participant’s Award if the Performance Goals for the Performance Period are achieved, and (c) may provide for an Award payment greater than or less than the Participant’s Target Award, depending upon the extent to which the Performance Goals are achieved. Notwithstanding the preceding, in no event shall a Participant’s Award forreceive any Performance Period exc eed the Maximum Award.

8.             Payout Determination; Award Payment.

(a)          Payout Determination and Certification.   On the Payout Determination Date, the Committee shall certify in writing (which may be by approval of the minutes from the meeting in which the certification was made or by a written certification signed by a duly authorized officer of the Company who attended the Committee meeting of the certifications made by the Committee in its meeting) the extent to which the Performance Goals applicable to each Participant for the Performance Period were achieved or exceeded. The Award for each Participant shall be determined by applying the Payout Formula to the level of actual performance that has been certified by the Committee. Notwithstanding any contrary provision of the Plan, the Committee, in its sole discretion, may eliminate or reduce the Award payable to any Participant below that which otherwise would be payableinstallment payments under the Payout Formula.

(b)          Right to Receive Payment.   Each Award under the Plan shall be paid solely from the general assets of the Company. Nothing in this Plan shall be construedtreated as a right to createreceive a trustseries of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.

To the extent that the Committee determines that any Award granted under the Plan is, or may reasonably be, subject to 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). Such terms and conditions shall include, without limitation, the following provision (or comparable provision of similar effect): “To the extent that (i) one or more of the payments or benefits received or to establish or evidence any Participant’s claimbe received by a Participant upon “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h) without regard to alternative definitions thereunder) pursuant to this Plan would constitute deferred compensation subject to the requirements of Section 409A, and (ii) the Participant is a “specified employee” within the meaning of Section 409A at the time of separation from service, then to the extent delayed commencement of any rightportion of such payments or benefits is required in order to payment of an Award other than as an unsecured general creditor with respect to any payment to which he or she mayavoid a prohibited distribution under Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments and benefits shall not be entitled.

(c)           Form of Distributions.   The Company shall distribute all Awardsprovided to the Participant in cash.  All paymentsprior to the earliest of (i) the expiration of the six-month period measured from the date of separation from service, (ii) the date of the Participant’s death or (iii) such earlier date as permitted under this Plan will be subject to applicable tax withholdings.

(d)          TimingSection 409A without the imposition of Distributions.   Subject to Section 8(e) below,adverse taxation on the Company shall distribute amounts payable to Participants as soon as is practicableParticipant. Upon the first business day following the determination and written certification of the Award for a Performance Period, but in no event later than March 15 of the year following the year of performance so that all such payments comply with Treasury Regulation Section 1.409A-1(b)(4).

(e)           Deferral.   The Committee may defer payment of Awards, or any portion thereof, to Participants as the Committee, in its discretion, determines to be necessary or desirable to preserve the deductibilityexpiration of such amounts underapplicable Section 162(m). In addition, the Committee, in its sole discretion, may permit a Participant409A(a)(2)(B)(i) period, all payments and benefits deferred pursuant to defer receipt of the payment of cash that would otherwise be delivered to a Participant under the Plan. Any such deferral elections shall be subject to such rules and procedures as shall be determined by the Committee in its sole discretion.


9.             Term of Plan.   The Plan shall first apply to the 2011 Plan Year; however, no payments shall be made under the Plan to individuals who are “covered employees” (as defined under Section 162(m)) in respect of performance in the 2011 Plan Year if the Plan is not approved at the first annual meeting of the Company’s stockholders held in 2011. The Plan shall continue until the earlier of (a) the date as of which the Committee terminates the Plan and (b) the last day of the Plan Year ending in 2015 (provided that Awards, if any, for such Plan Yearthis paragraph shall be paid in accordance witha


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lump sum to the termsParticipant, and any remaining payments and benefits due shall be paid as otherwise provided herein.” If an Award Agreement is silent as to such provision, the foregoing provision is hereby incorporated by reference directly into such Award Agreement.
In addition, and notwithstanding any provision of the Plan).

10.          Amendment and Termination of the Plan.   The Committee may amend, modify, suspend or terminate the Plan in whole or in part, at any time, including adopting amendments deemed necessary or desirable to correct any defect or to supply omitted data or to reconcile any inconsistency in the Plan or in any Award granted hereunder; provided, however, that no amendment, alteration, suspension or discontinuation shall be made which would (i) increase the amount of compensation payable pursuant to such Award or (ii) cause compensation that is, or may become, payable hereunder to any “covered employee” to fail to qualify as Performance-Based Compensation. To the extent necessary or advisable under applicable law, including Section 162(m), Pla n amendments shall be subject to stockholder approval. At no time before the actual distribution of funds to Participants under the Plan shall any Participant accrue any vested interest or right whatsoever under the Plan except as otherwise stated in this Plan.

11.          Bifurcation of the Plan.   It is the intent of the Company that the Plan, and all payments made hereunder, satisfy and be interpreted in a manner that, in the case of Participants who are persons whose compensation is subject to the limitations on deductibility of compensation provided under Section 162(m), qualify as Performance-Based Compensation under Section 162(m).  Any provision, application or interpretation of the Plan inconsistent with this intent to satisfy the requirements of Section 162(m) shall be disregarded.  However, notwithstanding anything to the contrary, in the 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) or contains any ambiguity as to the application of Section 409A, the Committee may, without the Participant’s consent, adopt such amendments to the Plan and the provisionsapplicable 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 (or clarify the exemption of) the Award from Section 409A, (B) preserve the intended tax treatment of the Plan may at any time be bifurcated bybenefits provided with respect to the Board Award, and/or (C) comply with the Committee in any manner so that certain provisions of the Plan or a ny payment intended (or required in order) to satisfy the applicable requirements of Section 162(m) are only applicable to persons whose compensation is subject409A and related Department of Treasury guidance.

Notwithstanding anything to the limitations on deductibility of compensation provided under Section 162(m).

12.          No Guarantee of Employment.  The Plan is intended to provide a financial incentive to Participants and is not intended to confer any rights to continued employment upon Participants whose employment will remain at-will and subject to termination by eithercontrary contained herein, neither the Company nor any of its Affiliates shall be responsible for, or required to reimburse or otherwise make any Participant atwhole for, any time,tax or penalty imposed on, or losses incurred by, any Participant that arises in connection with the potential or without cause or notice.

actual application of Section 409A to any Award granted hereunder.




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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report, Form 10-K and Stockholder Letter are available at www.proxyvote.com. M30884-P06774 ADOBE SYSTEMS INCORPORATED PROXY FOR ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY The undersigned hereby appoints John E. Warnock and Shantanu Narayen, and each of them, with full power of substitution, to represent the undersigned and to vote all of the shares of stock in Adobe Systems Incorporated (the "Company") which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company, to be held at the Company's headquarters, 321 Park Avenue, East Tower, San Jose, California 95110-2704 on Thursday, April 21, 2011 at 9:00 a.m. local time and at any adjournment or postponement thereof: (1) as hereinafter specified upon the proposals listed on the reverse side and as more particularly described in the Company's Proxy Statement, receipt of which is hereby acknowledged, and (2) in their discretion upon such other matters as may properly come before the meeting. The shares represented hereby shall be voted as specified. If no specification is made, such shares shall be voted FOR the election of the nominees listed on the reverse side for the Board of Directors and FOR Proposals 2, 3, 4, 5 and 6 and for ONE YEAR with respect to Proposal 7. Whether or not you are able to attend the meeting, you are urged to sign and mail the proxy card in the return envelope so that the stock may be represented at the meeting. IF YOU ELECT TO VOTE BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE (CONTINUED AND TO BE SIGNED ON REVERSE SIDE)


THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date ADOBE SYSTEMS INCORPORATED M30883-P06774 345 PARK AVENUE SAN JOSE, CA 95110-2704 2. Approval of the amendment of the 1997 Employee Stock Purchase Plan to increase the share reserve by 17 million shares. 1a. Robert K. Burgess 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 Year 2 Years 3 Years Abstain The Board of Directors recommends a vote FOR all nominees. Vote on Directors For Against Abstain For Against Abstain

YOU CAN VOTE OVER THE INTERNET OR BY TELEPHONE
QUICK * EASY * IMMEDIATE * AVAILABLE
24 HOURS A DAY * 7 DAYS A WEEK

Adobe Systems Incorporated encourages you to take advantage of convenient ways to vote. If voting by proxy, you may vote over the Internet,internet, by telephone or by mail. Your Internetinternet or telephone vote authorizes the named proxies to vote in the same manner as if you marked, signed, and returned your proxy card. To vote over the Internet,internet, by telephone, or by mail, please read the accompanying proxy statement and then follow these easy steps:


VOTE BY INTERNET - www.proxyvote.com
Use the Internetinternet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on April 20, 2011.10, 2013. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on April 20, 2011.10, 2013. Have your proxy card in hand when you call and then follow the instructions.


ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by Adobe Systems Incorporated in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet.internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internetinternet and, when prompted, indicate that you agree to receive or access proxy materials electronically in the future.

VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Adobe Systems Incorporated, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

345 PARK AVENUE
SAN JOSE, CA 95110-2704
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M52493-P33586KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

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ADOBE SYSTEMS INCORPORATED
Vote on DirectorsVote on Proposals
The Board of Directors recommends a vote FOR all nominees.
The Board of Directors recommends a vote FOR Proposals 2, 3 and 4:
1.Election of the four (4) Class IIthirteen (13) Directors proposed in the accompanying Proxy Statement to serve for a two-yearone-year term. 1b. Daniel Rosensweig 1c. Robert Sedgewick 1d. John E. Warnock Vote on Proposals The Board of Directors recommends a vote FOR Proposals 2, 3, 4, 5 and 6: 3. ForAgainstAbstainForAgainstAbstain
1a.Amy L. Banseooo2.
Approval of the adoptionamendment and restatement of the 2011 Executive Cash Performance Bonus Plan. 4. 2003 Equity Incentive Plan to increase the available share reserve by 17.5 million shares, increase the aggregate stock award and performance share limits, approve new performance measures and an adjustment, and make other modifications as described in the accompanying Proxy Statement.
ooo
1b.Kelly J. Barlowooo
1c.Edward W. Barnholtooo
1d.Robert K. Burgessooo
1e.Frank A. Calderoniooo
1f.Michael R. Cannonooo3.Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting  firm for  the  fiscal year ending on December 2, 2011. 5. Approval of the Certificate of Amendment to the Restated Certificate of Incorporation to eliminate our classified Board structure. 6. Advisory vote to approve the resolutionNovember  29,  2013.ooo
1g.James E. Daleyooo
1h.Laura B. Desmondooo
1i.Charles M. Geschkeooo4.Approve, on an advisory basis, the compensation of the named executive officers. The Board of Directors recommends a vote for ONE YEAR on the following proposal: 7. Advisory vote on the frequency of future advisory votes to approve a resolution on the compensation of the named executive officers. ooo
1j.Shantanu Narayenooo
1k.Daniel L. Rosensweigooo
1l.Robert Sedgewickooo
1m.John E. Warnockooo
Sign exactly as your name(s) appear(s) on the stock certificate. If shares of stock stand of record in the names of two or more persons, or in the name of husband and wife, whether as joint tenants or otherwise, both or all of such persons should sign the proxy card. If shares of stock are held of record by a corporation, the proxy card should be executed by the President or Vice President and the Secretary or Assistant Secretary. Executors or administrators or other fiduciaries who execute the proxy card for a deceased stockholder should give their full title. Please date the proxy card. For Against Abstain


Signature [PLEASE SIGN WITHIN BOX]
Date
Signature (Joint Owners)
Date





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Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com.
M52494-P33586
ADOBE SYSTEMS INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints each of John E. Warnock and Shantanu Narayen with full power of substitution, to represent the undersigned and to vote all of the shares of stock in Adobe Systems Incorporated (the “Company”) which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company, to be held at the Company’s headquarters, 321 Park Avenue, East Tower, San Jose, California 95110-2704 on Thursday, April 11, 2013 at 9:00 a.m. local time and at any adjournment or postponement thereof: (1) as hereinafter specified upon the proposals listed on the reverse side and as more particularly described in the Company’s Proxy Statement, receipt of which is hereby acknowledged, and (2) in their discretion upon such other matters as may properly come before the meeting.
The shares represented hereby shall be voted as specified. If no specification is made, such shares shall be voted FOR the election of the nominees listed on the reverse side for the Board of Directors and FOR Proposals 2, 3 and 4. Whether or not you are able to attend the meeting, you are urged to sign and mail the proxy card in the return envelope so that the stock may be represented at the meeting.
IF YOU ELECT TO VOTE BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY
USING THE ENCLOSED ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)