What is the purpose of the Deferred Compensation Plan?

The Deferred Compensation Plan is designed to provide eligible directors and highly-compensated employees with an opportunity to defer a portion of their current compensation for future payment, offering a tax-advantaged savings vehicle.

What constitutes a 'change of control' under the new Executive Severance Plan?

A 'change of control' is broadly defined and includes events such as a person acquiring 30% or more of Adobe's voting securities, a shift in board majority, a merger or consolidation where Adobe stockholders don't retain over 50% ownership, a sale of substantially all of Adobe's assets, or a 'change of control' as defined by Section 280G of the Internal Revenue Code.

What benefits would an executive receive if terminated involuntarily after a change of control?

In the event of an involuntary termination within two years of a change of control, executives would receive earned salary and PTO, a pro-rata bonus, a cash severance payment based on salary, bonus, position, and years of service, 100% acceleration of most equity awards, and COBRA premium payments.

Are there any limitations on the severance payments in the Change of Control plan?

Yes, the plan includes a "cutback" provision. If the total payments to an executive would constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code, the amounts payable will be reduced to the extent necessary to provide the executive with the greatest after-tax benefit, thereby avoiding excise taxes.

ADBE 8-K: Material Agreements

Summary

This Form 8-K filing from Adobe Systems Incorporated (ADBE) on September 25, 2006, primarily announces the approval of two significant executive compensation and benefits plans. First, the company's Board of Directors approved the Adobe Systems Incorporated Deferred Compensation Plan, effective December 2, 2006. This plan allows eligible directors and highly-compensated employees to defer a portion of their salary, bonuses, commissions, and other compensation, with distributions available in lump sums or installments at least three years in the future. Second, the Board approved the renewal of the Adobe Systems Incorporated Executive Severance Plan in the Event of a Change of Control, effective December 12, 2006. This plan outlines severance benefits for executives in the event of an "involuntary termination" (termination without cause or resignation for good reason) within two years following a change of control. Benefits include continued salary, pro-rata bonuses, a severance multiple based on position and years of service, accelerated vesting of equity awards (with some exceptions), and COBRA premium payments.

Key Highlights

1Adobe's Board of Directors approved a new Deferred Compensation Plan, effective December 2, 2006, allowing eligible employees and directors to defer compensation.
2Participants in the Deferred Compensation Plan can defer up to 75% of base salary and 100% of other compensation, with payout options after a minimum of three years.
3The company renewed its Executive Severance Plan in the Event of a Change of Control, effective December 12, 2006.
4The renewed Executive Severance Plan provides benefits to executives terminated involuntarily within two years of a change of control.
5Severance benefits under the Change of Control plan include salary, bonus continuation, a service-based severance multiple, accelerated equity vesting, and COBRA continuation.
6The plan includes provisions to limit parachute payments to avoid excise taxes under Section 280G of the Internal Revenue Code.
7The Executive Severance Plan has a defined term of five years unless extended or a change of control occurs.

ADOBE INC. 8-K Report, Material Agreement (Sep 26, 2006)

Summary

Key Highlights

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