What is the primary purpose of the new compensation plans announced by Adobe?

The primary purpose of the 2007 Performance Share Program and the 2007 Executive Officer Annual Incentive Plan is to align the compensation of Adobe's management and key executives with the company's financial performance and to promote the retention of essential talent.

What are the minimum performance requirements for executives to receive any payout under these programs?

For both the Performance Share Program and the Annual Incentive Plan, a minimum threshold of achieving at least 90% of the company's approved revenue target for fiscal year 2007 must be met before any payouts are earned by participants.

How are the Performance Shares determined and how do they vest?

Performance Shares earned are based on achieving specific targets for operating margin and revenue growth, with a minimum of 95% required for earning any shares above the threshold. Payouts can range from less than the target up to 200% of the target. These earned shares vest over four years, with 25% vesting annually after the certification date, contingent on continued employment.

What factors influence the bonus amount under the 2007 Executive Officer Annual Incentive Plan?

The bonus amount is determined by a combination of factors: the company's achievement of revenue growth and non-GAAP operating margin targets (corporate achievement), and the individual's performance against their operating plan and strategic objectives (individual results). Corporate achievement between 95% and 107%+ of target impacts a 'Funding Level', which is then multiplied by the participant's target bonus and individual results percentage. Bonuses are capped at 300% of the target bonus or $5 million.

ADBE 8-K: Leadership Changes

Summary

Adobe Systems Incorporated (ADBE) filed an 8-K on January 29, 2007, to report the adoption of two new executive compensation plans for fiscal year 2007: the 2007 Performance Share Program and the 2007 Executive Officer Annual Incentive Plan. These programs are designed to align executive compensation with the company's financial performance and to retain key talent. Both plans establish a minimum revenue target of 90% of the Board of Directors' approved target for fiscal year 2007 as a prerequisite for any payout. The Performance Share Program's ultimate payout is contingent upon achieving specific targets for operating margin and revenue growth, with awards vesting over four years. The Annual Incentive Plan bases bonuses on a combination of corporate revenue growth, non-GAAP operating margin, and individual performance, with payouts capped at 300% of the target bonus or $5 million.

Key Highlights

1Adobe established a 2007 Performance Share Program to incentivize and retain key executives.
2The Performance Share Program links payouts to achieving at least 90% of the fiscal year 2007 revenue target.
3Earning Performance Shares requires meeting at least 95% of established operating margin and revenue growth targets, with payouts varying between 95% and 200% of target.
4Performance Shares will vest over a four-year period, with 25% vesting annually after the initial certification date.
5The company also adopted a 2007 Executive Officer Annual Incentive Plan, tied to corporate and individual performance metrics.
6The Annual Incentive Plan requires a minimum 90% revenue target achievement to be eligible for bonuses, which are further determined by corporate achievement (95%-107%+ of target) and individual results, with a maximum payout of 300% of target bonus.
7Specific target and maximum Performance Share grants are detailed for top executives, including the CEO and CFO.

ADOBE INC. 8-K Report, Executive Changes (Jan 30, 2007)

Summary

Key Highlights

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