Exhibit 10.4
ADOBE SYSTEMS
INCORPORATED
EXECUTIVE ANNUAL INCENTIVE
PLAN
FISCAL YEAR 2009
OBJECTIVES :
To drive growth and accountability, drive
execution of long-term strategy and operating plan, motivate and
inspire employees to contribute at peak performance.
PURPOSE:
As part of the total compensation program, Adobe
has designed an Annual Incentive Plan for its 2009 fiscal year for
certain executive officers. This Executive Annual Incentive Plan
(“AIP”) operates under, and is part of, the Adobe
Systems Incorporated Executive Cash Performance Bonus Plan, which
has been approved by Adobe’s Board of Directors and
stockholders.
ELIGIBILITY:
Executive officers of the Company who are
employed (full time or part time) during the full eligibility
period (fiscal year) and who are regular employees of Adobe at the
end of the eligibility period, are eligible to participate in the
AIP. If an executive officer is hired after the beginning of the
AIP eligibility period and the Committee determines that such
executive should be eligible to earn compensation under the AIP,
the executive officer’s actual bonus will be pro-rated based
on the actual earned salary during the AIP eligibility period. If
the executive officer’s salary and/or AIP annual bonus target
percent changes during the AIP eligibility period, the
officer’s actual bonus will be pro-rated based on those
adjusted figures as follows: the actual bonus will be based
on the number of days in the AIP period with the former AIP annual
bonus target percent/earned salary and the number of days in the
AIP eligibility period with the new AIP annual bonus target
percent/earned salary. Except as provided in an applicable
severance plan in the event of a change of control or an individual
retention agreement with an executive, if the executive’s
employment terminates before the end of the AIP eligibility period,
the executive will not be eligible for a bonus payment, or any
portion of a bonus payment. If an executive is on a leave of
absence for the entire AIP eligibility period, the executive is not
eligible for an AIP bonus. If the executive officer is on a leave
of absence for a portion of the AIP eligibility period, the officer
will be eligible for a bonus under the AIP based on actual salary
earned during the fiscal year (exclusive of any salary replacement
benefits paid during the leave via insurance).
EMPLOYEES COVERED BY INTERNAL REVENUE CODE
SECTION 162(M):
Notwithstanding the foregoing eligibility
provisions, to the extent it determines to be necessary or
desirable to achieve full deductibility of bonus compensation
awarded under the AIP, the Committee, in its sole discretion,
(i) may exclude from participation under the AIP those
individuals who are or who may likely be “covered
employees” under Section 162(m) of the Internal
Revenue Code of 1986, as amended
(“Section 162(m)”) whose employment in an eligible
position commenced after the Committee established the Threshold
Goal (described below), which generally will be a date not later
than the 90 th
day of the AIP eligibility
period and (ii) may take other actions as necessary to ensure
deductibility of the compensation paid under the AIP.
HOW THE AIP WORKS
INCENTIVE BONUS TARGET:
An annual bonus target percent is designated for
each eligible participant. Each participant’s actual bonus is
calculated, in part (as further described below), as the product of
the annual bonus target percent and the actual base salary earned
by the participant in the fiscal year. For example, a Senior Vice
President whose annual bonus target percent is 60% and whose actual
earned annual base salary is $400,000 would have his actual bonus
calculated by reference to $240,000 ($400,000 x 60%).
If the Threshold Goal (described below) has been
attained, Adobe calculates how well the Company (Adobe Systems
Incorporated, together with its group of subsidiary companies) has
performed against its budgeted operating profit and revenue for the
year. The Company must achieve at least 75% of its budgeted
non-GAAP operating profit (adjusted to include the operating profit
associated with shippable backlog at the end of the fiscal
year and to exclude profit sharing, quarterly incentive plan
payments and annual incentive plan payments) and 90% of its
budgeted revenue (adjusted to reflect shippable backlog at the end
of the fiscal year), each based on the annual consolidated budget
approved by Adobe’s Board of Directors at the beginning of
the fiscal year, in order for eligible executives to earn any bonus
under the AIP. If the Company attains less than either of those
targets, eligible executives will receive no bonus under the
AIP.
AIP THUS HAS FOUR COMPONENTS:
Threshold Goal, Corporate Result, Unit
Multiplier and Individual Achievement
THRESHOLD GOAL:
The Committee established an objective,
non-discretionary Company performance goal for the AIP eligibility
period based on one of the criteria approved by the Company’s
stockholders in 2006 (the “Threshold Goal”). If the
Company achieves the Threshold Goal, each executive who
participates in the AIP is then eligible to earn a maximum bonus
under the AIP equal to 110% of such executive’s annual bonus
target, up to a maximum of $5 million (“Maximum
Award”). Under the AIP for 2009, the Threshold Goal is a
minimum of 90% achievement against the Company’s budgeted
annual operating plan GAAP revenue. No bonuses will be earned or
payable under the AIP unless this Threshold Goal is achieved. If
this Threshold Goal is achieved, each executive’s bonus under
the AIP is then determined based on a formula that multiplies the
executive’s annual bonus target percent and earned salary
(1) by either the Corporate Result or the Unit Multiplier (the
applicable percentage, which in no event may exceed 110%
corresponding to the Maximum Award percentage, is described below)
and (2) by that executive’s Individual Achievement
(which in no event may exceed 100%). Thus, the actual bonus payable
to an executive under the AIP may never exceed the Maximum Award,
and the effect of the Corporate Result or the Unit Multiplier and
the executive’s Individual Achievement potentially is to
reduce the bonus earned as a result of the Company’s
achievement of the Threshold Goal from the Maximum Award to the
actual bonus payable.
CORPORATE RESULT :
In addition to establishing the Threshold Goal,
the Committee established two
