Exhibit 10.2
ADOBE
SYSTEMS INCORPORATED
EXECUTIVE SEVERANCE
PLAN
IN THE EVENT OF A CHANGE OF
CONTROL
Adobe Systems
Incorporated, a Delaware corporation (the “Company”)
has adopted this Executive Severance Plan (the “Plan”),
effective as of December 12, 2006, for the benefit of certain
key employees of the Participating Company Group. The Plan
was amended effective January 24, 2008 for compliance with
Code Section 409A, and amended effective February 11,
2008 to update the treatment of performance awards.
The Company
considers it essential to the best interests of its stockholders to
take reasonable steps to retain its key management personnel.
Further, the Board of Directors of the Company (the
“Board”) recognizes that the uncertainty and questions
which might arise among management in the context of a Change of
Control of the Company could result in the departure or distraction
of management personnel to the detriment of the Company and its
stockholders.
The Board has
determined, therefore, that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
its members of management of the Company to their assigned duties
without distraction in the face of potentially disturbing
circumstances arising from any possible Change of Control of the
Company.
The Company hereby
adopts this Executive Severance Plan In the Event of a Change of
Control for the benefit of its employees who are eligible as
provided in the Plan.
Section 1.
Definitions .
1.1
“ Accounting Firm ” shall mean KPMG LLP or, if
such firm is unable or unwilling to perform the calculations
required under this Plan, such other national accounting firm as
shall be designated by agreement between the Participant to whom
Section 4.1 applies and the Company.
1.2
“ Actual Award ” shall have the meaning in the
applicable Performance Share Program, as amended by
Section 3.4 below.
1.3
“ Base Salary ” means the Participant’s
annual base salary as in effect during the last regularly scheduled
payroll period immediately preceding such Participant’s Date
of Termination. Base Salary does not include any bonuses,
commissions, fringe benefits, overtime, car allowances, other
irregular payments or any other compensation except base
salary.
1.4
“ Cause ” shall mean (a) with respect to
Group I Participants (i) felony conviction; or
(ii) willful disclosure of material trade secrets or other
material confidential information related to the business of a
Participating Company; or (iii) willful and continued failure
substantially to perform the same duties as in effect prior to the
Change of Control for the Participating Company (other than any
such failure resulting from physical or mental incapacity or any
actual or anticipated failure resulting from a resignation for Good
Reason) after a written
demand for substantial
performance is delivered by the Chief Executive Officer or the
President of the Company, which demand identifies the specific
actions which the Chief Executive Officer or the President of the
Company believes constitute willful and continued failure
substantially to perform duties, and which performance is not
substantially corrected within ten (10) days of receipt of
such demand. For purposes of the previous sentence, no act or
failure to act shall be deemed “willful” unless done,
or omitted to be done, with willful malfeasance or gross negligence
and without reasonable belief that action or omission was not
materially adverse to the best interest of the Participating
Company Group; and (b) with respect to Group II Participants
(i) theft, dishonesty or falsification of any employment or
Participating Company Group records, (ii) improper disclosure
of a Participating Company’s confidential or proprietary
information, (iii) any intentional act by such Participant
which has a material detrimental effect on the Participating
Company Group’s reputation or business, (iv) failure to
perform any reasonably assigned duties, which failure is not cured
with in thirty (30) days following written notice of such failure
from the Participating Company, (v) gross misconduct or
(vi) felony conviction.
1.5
“ Certification Date ” shall have the meaning
set forth in the applicable Performance Share Program.
1.6
“ Change of Control ” shall mean a Change of
Control of the Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, whether or not
the Company is then subject to such reporting requirement;
provided, however, that anything in this Plan to the contrary
notwithstanding, a Change of Control shall be deemed to have
occurred if:
(a)
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;
(b)
during any period of two (2) consecutive years (not including
any period prior to the Effective Date), 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;
(c)
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
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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);
(d)
all or substantially all of the assets of the Company are sold,
liquidated or distributed; or
(e)
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.
1.7
“ Change of Control Date ” shall mean the date
on which the Change of Control occurs. Notwithstanding the
first sentence of this definition, if a Participant’s
employment with the Participating Company Group terminates prior to
the Change of Control Date and it is reasonably demonstrated that
such termination (a) was at the request of the third party who
has taken steps reasonably calculated to effect the Change of
Control or (b) otherwise arose in connection with or in
anticipation of the Change of Control, then “Change of
Control Date” shall mean the date immediately prior to the
date of such Participant’s termination of
employment.
1.8
“ Code ” shall mean the Internal Revenue Code of
1986, as amended, and any successor provisions thereto.
1.9
“ Committee ” means the Executive Severance Plan
Administrative Committee responsible for administering the Plan as
provided in Section 5.
1.10
“ Common Stock ” shall mean the common stock of
the Company.
1.11
“ Company ” means Adobe Systems Incorporated, a
Delaware Corporation, and, except in determining under
Section 1.4 hereof whether or not any Change of Control has
occurred, shall include any successor to its business and/or
assets.
1.12
“ Date of Termination ” means the date of a
Participant’s termination of employment with the
Participating Company Group as determined in accordance with
Section 3.7.
1.13
“ Disability ” shall mean a Participant’s
(a) incapacity due to physical or mental illness which causes
such Participant’s absence from the full-time performance of
his or her duties with the Participating Company Group for six
(6) consecutive months and (b) such Participant’s
failure to return to full-time performance of his or her duties for
the Participating Company Group within thirty (30) days after
written Notice of Termination due to Disability is given to a
Participant. Any question as to the existence of Disability
upon which a Participant and the Participating Company Group cannot
agree shall be determined by a qualified independent physician
selected by the Participant (or, if such Participant is not able to
select a physician, such selection shall be made by any adult
member of the Participant’s immediate
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family), and approved
by the Participating Company Group. The determination of such
physician made in writing to the Participating Company Group shall
be final and conclusive for all purposes of this Plan.
1.14
“ Effective Date ” means December 12,
2006.
1.15
“ Equity Awards ” shall mean options, stock
appreciation rights, stock purchase rights, restricted stock, stock
bonuses and other awards which consist of, or relate to, equity
securities of the Company, other than Performance Awards, in each
case which have been granted to a Participant under the Equity
Plans. For purposes of this Plan, Equity Awards shall also
include any shares of common stock or other securities issued
pursuant to the terms of an Equity Award.
1.16
“ Equity Plans ” shall mean the Adobe Systems
Incorporated 1994 Stock Option Plan, the Adobe Systems Incorporated
1994 Amended Performance and Restricted Stock Plan, the Adobe
Systems Incorporated 1999 Nonstatutory Stock Option Plan, the Adobe
Systems Incorporated 2003 Equity Incentive Plan, the Adobe Systems
Incorporated 2005 Special Purpose Equity Incentive Plan, and any
other equity-based incentive plan or arrangement adopted or assumed
by the Company, and any future equity-based incentive plan or
arrangement adopted or assumed by the Company, but shall not
include the Adobe Systems Incorporated 1997 Employee Stock Purchase
Plan or any other plan intended to be qualified under
Section 423 of the Code.
1.17
“ ERISA ” means the Employee Retirement Income
Security Act of 1974, as amended.
1.18
“ Exchange Act ” shall mean the Securities
Exchange Act of 1934, as amended, and any successor provisions
thereto.
1.19
“ Good Reason ” shall mean a Participant’s
resignation of employment during the Term as a result of any of the
following:
(a)
A meaningful and detrimental alteration in such Participant’s
position, titles, or the nature or status of responsibilities
(including reporting responsibilities) from those in effect
immediately prior to the Change of Control Date;
(b)
A reduction by the Participating Company Group in such
Participant’s Base Salary as in effect immediately prior to
the Change of Control Date or as the same may be increased from
time to time thereafter; a failure by the Participating Company
Group to increase such Participant’s salary at a rate
commensurate with that of other similarly situated key executives
of the Participating Company Group; or a reduction in the target
incentive opportunity percentage used to determine such
Participant’s Target Bonus below the percentage in effect
immediately prior to the Change of Control Date;
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(c)
The relocation of the office of the Participating Company where
such Participant is primarily employed immediately prior to the
Change of Control Date (the “ COC Location ”) to a location
which is more than fifty (50) miles away from the COC Location or
the Participating Company’s requiring such Participant to be
based more than fifty (50) miles away from the COC Location (except
for required travel on the Participating Company’s business
to an extent substantially consistent with the Participant’s
customary business travel obligations in the ordinary course of
business prior to the Change of Control Date);
(d)
The failure by the Participating Company Group to continue in
effect any compensation plan in which such Participant participated
prior to the Change of Control Date or made available to such
Participant after the Change of Control Date, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan in connection with the
Change of Control, or the failure by the Participating Company
Group to continue such Participant’s participation therein on
at least as favorable a basis, both in terms of the amount of
benefits provided and the level of participation relative to other
participants, as existed on the Change of Control Date;
(e)
The failure by the Participating Company Group to continue to
provide such Participant with benefits at least as favorable in the
aggregate to those enjoyed by such Participant under the
Participating Company Group’s retirement, savings, life
insurance, medical, health and accident, disability, and fringe
benefit plans and programs in which such Participant was
participating in immediately prior to the Change of Control Date;
or the failure by the Participating Company Group to provide such
Participant with the number of paid vacation days to which he or
she was entitled on the basis of years of service with the
Participating Company Group in accordance with the Participating
Company Group’s normal vacation policy in effect immediately
prior to the Change of Control;
(f)
The failure by the Participating Company Group to pay or provide to
such Participant with any material item of compensation or benefits
promptly when due;
(g)
The failure of the Participating Company Group to obtain an
agreement from any successor to assume and agree to perform the
obligations of this Plan, as contemplated in Section 9.1
hereof or, if the business for which such Participant’s
services are principally performed is sold at any time after a
Change of Control, the failure of the Participating Company Group
to obtain such an agreement from the purchaser of such
business;
(h)
A material breach by the Participating Company Group of the
provisions of this Plan;
provided
, however , that an event described above in clause (a),
(b), (d), (e), (f) or (h) shall not constitute Good
Reason unless it is communicated by such Participant to the Company
in writing and is not corrected by the Company in a manner which is
reasonably satisfactory to such Participant (including full
retroactive correction with respect to any monetary matter) within
10 days of the Company’s receipt of such written
notice.
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1.19
“ Group I Participant ” shall mean each senior
management employee of a Participating Company who (i) is on
the U.S. payroll, (ii) is not a party to any other retention
and/or severance agreement with the Participating Company Group
that is not otherwise waived in accordance with Section 3.10,
and (iii) on the Change of Control Date, is classified as a
Vice President (or any more senior role) of a Participating
Company.
1.20
“ Group II Participant ” shall mean each senior
management-level employee of a Participating Company who
(i) is on the U.S. payroll, (ii) is not a party to any
other retention and/or severance agreement with the Participating
Company Group that is not otherwise waived in accordance with
Section 3.10, and (iii) who on the Change of Control
Date, is classified as a Director, Senior Director, or such other
position, which is determined by the Company prior to the Change of
Control as equivalent thereto.
1.21
“ Involuntary Termination ” shall mean
(i) a Participant’s involuntary termination of
employment with the Participating Company Group during the Term
other than for death, Disability or Cause or (ii) a
Participant’s resignation of employment with the
Participating Company Group during the Term for Good
Reason.
1.22
“ Notice of Termination ” means the notice
specified in Section 3.7.
1.23
“ Participating Company Group ” means the
Company and any present or future United States parent and/or
United States direct or indirect subsidiary corporations of the
Company that have been designated by the Board as a
“Participating Company” for purposes of this Plan (all
of which along with the Company being individually referred to as a
“Participating Company” and collectively referred to as
the “Participating Company Group”). For purposes
of this Plan, a parent or subsidiary corporation shall be defined
in Sections 424(e) and 424(f) of the Code and shall
include entities related to the Company by similar ownership levels
that are not corporations.
1.24
“ Participant ” shall mean each Group I
Participant and each Group II Participant.
1.25
“ Performance Awards ” shall have the meaning
set forth in the applicable Equity Plan, and shall include awards
of performance-based restricted stock, performance-based restricted
stock units and performance-based cash awards.
1.26
“ Performance Period ” shall have the meaning
set forth in the applicable Performance Share Program and
underlying Equity Plan.
1.27
“ Performance Share Program ” shall mean the
specific terms of Performance Awards adopted from time to time by
the Company with respect to a specified Performance
Period.
1.28
“ Plan ” means this Adobe Systems Incorporated
Executive Severance Plan In the Event of a Change of
Control.
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1.29
“ Plan Year ” means the calendar year and the
last day of such year is December 31.
1.30
“ Reference Bonus ” shall mean the greater of
(a) the Target Bonus applicable to a Participant for the year
in which such Participant’s Involuntary Termination occurs or
(b) the highest Target Bonus applicable to such
Participant in any of the three years ending prior to the Change of
Control Date.
1.31
“ Reference Salary ” shall mean the greater of
(a) the annual rate of a Participant’s Base Salary from
the Participating Company Group in effect immediately prior to the
date of such Participant’s Involuntary Termination or
(b) the annual rate of a Participant’s Base Salary from
the Participating Company Group in effect at any point during the
three-year period ending on the Change of Control Date.
1.32
“ Regulations ” shall mean the proposed,
temporary and final regulations under Section 280G of the Code
or any successor provision thereto.
1.33
“ Severance Benefits ” means those benefits
provided to a Participant under this Plan on account of a Change of
Control, as determined in accordance with Section 3.2, 3.3,
3.4 and 3.5 after the execution of a release of claims as required
by Section 10.
1.34
“ Severa
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