8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): January 26, 2009

Adobe Systems Incorporated

(Exact name of Registrant as specified in its charter)

Delaware	0-15175	77-0019522
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

345 Park Avenue
San Jose, California 95110-2704
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 536-6000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 5 — Corporate Governance and Management

Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e)           2009 Performance Share Program

On January 26, 2009, the Executive Compensation Committee of the Board of Directors (the “Committee”) of Adobe Systems Incorporated (the “Company”) approved the Award Calculation Methodology for the 2009 Performance Share Program (the “Program”) under the terms of the Company’s 2003 Equity Incentive Plan. The Committee established the Program to help focus key employees on achieving specific performance goals, reinforce a team orientation, provide significant award potential for achieving outstanding performance, and enhance the ability of the Company to attract and retain highly talented and competent individuals. All members of the Company’s executive management team and other key members of senior management have been selected by the Committee to participate in the Program for fiscal year 2009. The Committee granted awards for the executive officers under the Program on January 26, 2009 in the form of a Maximum Award (as defined below) of performance shares approved pursuant to the terms of the Company’s 2003 Equity Incentive Plan.

The Program requires that the Company achieve established performance goals as an initial threshold in order to earn any performance shares under the Program; if the initial threshold is met, the Program then provides for the calculation of the performance shares actually earned.

For fiscal year 2009, the initial threshold and performance goals are set, including metrics that determine the actual number of performance shares earned, in the 2009 Award Calculation Methodology. The Award Calculation Methodology requires that the Company achieve at least 90% of the GAAP revenue target approved by the Board under the annual operating plan as a minimum performance threshold before participants may earn any performance shares under the Program.  If the initial threshold is not achieved, all participants forfeit their entire award. If this initial threshold is achieved, the actual number of performance shares earned by each participant is set at 115% of his or her target incentive amount (the “Maximum Award”), subject to reduction based on the level of achievement of the following two metrics — non-GAAP operating profit (adjusted to include the profit associated with shippable backlog at the end of the fiscal year) and revenue (adjusted to include shippable backlog at the end of the fiscal year).  The actual number of performance shares earned will correlate to the Company’s 2009 fiscal year-end achievement for each metric. 100% achievement of both metrics will result in 105% achievement of the target incentive amount. The Maximum Award will be reduced to zero if the Company does not achieve at least 75% of its operating profit target and 90% of its revenue target for fiscal year 2009. If these minimum levels are achieved, it will result in 21% achievement of the target incentive amount.

Performance shares will be earned (if at all) upon certification by the Committee of actual performance achievement following the Company’s 2009 fiscal year-end, subject to specified change of control exceptions. In addition, as a condition to earning any part of the Maximum Award, a participant must be employed by the Company through the first anniversary of the grant date to be eligible.

Earned performance shares will vest 25% on the certification date of the achievement of the applicable metrics by the Committee, or the first anniversary of the grant date, whichever is later.  Thereafter, the earned performance shares are subject to time-based vesting and will vest as to 25% of the total number of earned performance shares each year on the second, third and fourth anniversaries of the grant date, contingent upon the participant’s continued service to the Company.

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The target awards and Maximum Awards for the performance shares granted to the Company’s principal executive officer, principal financial officer and other named executive officers* on January 26, 2009 are as follows:

Officer	Title	Target Award	Maximum Award
Shantanu Narayen	President and Chief Executive Officer	47,550	54,683
Mark Garrett	Executive Vice President and Chief Financial Officer	21,100	24,265
Karen Cottle	Senior Vice President, General Counsel and Secretary	16,500	18,975
Matthew Thompson	Senior Vice President, Worldwide Field Operations	16,500	18,975

* For purposes of this filing, the term “named executive officer” refers to executive officers for whom disclosure was required in our most recent filing with the Securities Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934 that required disclosure pursuant to Item 402(c) of Regulation S-K.

A participant may receive less than his or her target award, and in no event may an actual payout exceed the Maximum Award.

The description of the Program contained herein is a summary of the material terms of the Program, does not purport to be complete and is qualified in its entirety by reference to the Program used in connection with the 2003 Equity Incentive Plan.  A copy of each of the Program and the Form of Award Grant Notice and Performance Share Award Agreement for use in connection with grants under this Program is incorporated by reference as Exhibit 10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K and incorporated herein by reference. The 2009 Award Calculation Methodology is attached hereto as Exhibit 10.3.

2009 Executive Officer Annual Incentive Plan

On January 26, 2009, the Committee approved the terms of the 2009 Executive Officer Annual Incentive Plan (the “Bonus Plan”), adopted pursuant to the Executive Cash Performance Bonus Plan, which is applicable to executive officers of the Company. Pursuant to the Bonus Plan, each participant is eligible to receive an incentive bonus calculated as a percentage of the executive’s base salary.

The Bonus Plan requires that the Company achieve at least 90% of the GAAP revenue target approved by the Board under the annual operating plan as a minimum performance threshold before participants may earn any incentive bonus under the Bonus Plan. If the initial threshold is not achieved, no payments are made under the Bonus Plan. If this initial threshold is achieved, each participant is eligible to earn a maximum bonus (the “Maximum Bonus”) equal to 110% of such participant’s annual bonus target, up to a maximum of $5 million, subject to reduction as described below. The target bonus is calculated by multiplying the participant’s base salary earned during the fiscal year by a Committee-approved target bonus percentage. The actual bonus earned by each participant is calculated as described below.

For fiscal year 2009, the target bonus and Maximum Bonus, expressed as a percentage of annual base salary for the Company’s principal executive officer, principal financial officer and other named executive officers, are as follows:

Officer	Title	Target Bonus		Maximum Bonus
Shantanu Narayen	President and Chief Executive Officer	125	%	137.5	%
Mark Garrett	Executive Vice President and Chief Financial Officer	100	%	110	%
Karen Cottle	Senior Vice President, General Counsel and Secretary	60	%	66	%
Matthew Thompson	Senior Vice President, Worldwide Field Operations	100	%	110	%

3

The Maximum Bonus for each participant is subject to reduction based on the Company’s achievement, as determined under a matrix, of established revenue (adjusted to reflect the shippable backlog at the end of the fiscal year) and 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) targets. These two metrics, expressed as a percentage, form the “Corporate Result.”  The Maximum Bonus is reduced to zero if the Company does not achieve at least 75% of the operating profit target and at least 90% of the revenue target. If these minimum levels are achieved, the Corporate Result percentage is 23%. The maximum Corporate Result percentage is 110%.

The Maximum Bonus is also subject to reduction based on each individual’s achievement of specified corporate and individual strategic objectives.  The results of these individual metrics, expressed as a percentage, form the “Individual Achievement.”  The Individual Achievement percentage may not exceed 100%.

The Corporate Result and Individual Achievement are used in the calculation of the actual bonus payable under the Bonus Plan if the Corporate Result determined pursuant to the matrix is less than or equal to 100%, as follows:

Participant Target Bonus    x    Corporate Result    x    Individual Achievement

If the Corporate Result exceeds 100%, the Committee, in consultation with our Chief Executive Officer, determines an alternate percentage, referred to as the “Unit Multiplier,” which replaces the Corporate Result in calculating the actual bonus payable under the Bonus Plan. The maximum Unit Multiplier is 110% and the minimum Unit Multiplier is 100%. The Committee, in consultation with the Chief Executive Officer, will determine the Unit Multiplier for each business and functional unit of the Company based on that unit’s contributions to the Company’s results during fiscal year 2009 and the aggregate target incentive bonuses payable under the Bonus Plan for that year. The resulting percentage is the Unit Multiplier specific to that particular business or functional unit of the Company. In no event can the aggregate bonuses under the Bonus Plan be greater than the Corporate Result multiplied by the sum of the dollar value of all participants’ target incentive bonuses. The actual bonus payable under the Bonus Plan is then calculated, as follows:

Participant Target Bonus    x     Unit Multiplier      x     Individual Achievement

The description of the Bonus Plan contained herein is a summary of the material terms of the Bonus Plan, does not purport to be complete, and is qualified in its entirety by reference to the Bonus Plan summary. A copy of the Bonus Plan summary is attached to this Current Report on Form 8-K as Exhibit 10.4.

4

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit		Incorporated by Reference			Filed
Number	Exhibit Description	Form	Date	Number	Herewith
10.1	Form of Performance Share Program pursuant to the 2003 Equity Incentive Plan	8-K	1/30/08	10.1
10.2	Form of Award Grant Notice and Performance Share Award Agreement used in connection with grants under the 2009 Performance Share Program pursuant to the 2003 Equity Incentive Plan	8-K	1/30/08	10.2
10.3	Award Calculation Methodology to the 2009 Performance Share Program pursuant to the 2003 Equity Incentive Plan				X
10.4	2009 Executive Officer Annual Incentive Plan				X

5

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ADOBE SYSTEMS INCORPORATED
Date: January 29, 2009	By:	/s/ KAREN O. COTTLE
		Karen O. Cottle
		Senior Vice President, General Counsel and Secretary

6

EXHIBIT LIST

Exhibit		Incorporated by Reference			Filed
Number	Exhibit Description	Form	Date	Number	Herewith
10.1	Form of Performance Share Program pursuant to the 2003 Equity Incentive Plan	8-K	1/30/08	10.1
10.2	Form of Award Grant Notice and Performance Share Award Agreement used in connection with grants under the 2009 Performance Share Program pursuant to the 2003 Equity Incentive Plan	8-K	1/30/08	10.2
10.3	Award Calculation Methodology to the 2009 Performance Share Program pursuant to the 2003 Equity Incentive Plan				X
10.4	2009 Executive Officer Annual Incentive Plan				X

7

EX-10.3

Exhibit 10.3

2009 PERFORMANCE SHARE PROGRAM

AWARD CALCULATION METHODOLOGY

Parameter	Description
Award Metrics	“Initial Meta-Funding Gate” requires achievement of GAAP revenues of 90% of Annual Operating Plan (AOP) Threshold performance ·      If Initial Meta-Funding Gate is not met, no Actual Awards will be earned for 2009 ·      If Initial Meta-Fund Gate is met, Maximum Awards may be earned, subject to reduction based on the achievement of the following “Other Performance Goals”: ·      Revenue (adjusted to include shippable backlog at the end of the fiscal year) – Maximum Award reduced to zero if performance does not equal or exceed 90% of AOP (AOP revenue goal will be set in consideration of beginning of year shippable backlog); and ·      Non-GAAP Operating Profit (adjusted to include the profit associated with shippable backlog at the end of the fiscal year) – Maximum Award reduced to zero if performance does not equal or exceed 75% of AOP. Actual Awards determined using the matrix provided in Section 2, below.
Award Determination	·If Initial Meta-Funding Gate is not met, no Performance Shares are credited/earned ·If Initial Meta Funding Gate is met, the number of Performance Shares credited as an Actual Award is calculated using the matrix below Step 1: Determine the “Performance Share Percentage” based on achievement of the Other Performance Goals by using the matrix below:

	125%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	124%	96%	101%	105%	109%	113%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	123%	95%	99%	103%	108%	112%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	122%	93%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	121%	92%	96%	101%	105%	109%	114%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	120%	90%	95%	99%	103%	108%	112%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	119%	89%	93%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	118%	88%	92%	96%	101%	105%	109%	114%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	117%	86%	91%	95%	99%	103%	108%	112%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	116%	85%	89%	93%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	115%	83%	88%	92%	96%	101%	105%	109%	114%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	114%	82%	86%	91%	95%	99%	103%	108%	112%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	113%	80%	85%	89%	93%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	112%	79%	83%	88%	92%	96%	101%	105%	109%	114%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	111%	78%	82%	86%	91%	95%	99%	103%	108%	112%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	110%	76%	80%	85%	89%	93%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	109%	75%	79%	83%	88%	92%	96%	101%	105%	109%	114%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	108%	73%	78%	82%	86%	91%	95%	99%	104%	108%	112%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	107%	72%	76%	80%	85%	89%	93%	98%	102%	106%	111%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	106%	70%	75%	79%	83%	88%	92%	96%	101%	105%	109%	114%	115%	115%	115%	115%	115%	115%	115%	115%	115%	115%
	105%	69%	73%	78%	82%	86%	91%	95%	99%	104%	108%	112%	114%	115%	115%	115%	115%	114%	114%	114%	113%	113%
	104%	68%	72%	76%	81%	85%	89%	93%	98%	102%	106%	111%	112%	114%	113%	113%	112%	112%	112%	111%	111%	110%
	103%	66%	70%	75%	79%	83%	88%	92%	96%	101%	105%	109%	111%	111%	111%	111%	110%	110%	109%	109%	108%	108%
	102%	65%	69%	73%	78%	82%	86%	91%	95%	99%	104%	108%	109%	109%	109%	108%	108%	107%	107%	106%	106%	106%
	101%	63%	68%	72%	76%	81%	85%	89%	93%	98%	102%	106%	107%	107%	106%	106%	105%	105%	105%	104%	104%	103%
Operating	100%	62%	66%	70%	75%	79%	83%	88%	92%	96%	101%	105%	105%	104%	104%	103%	103%	103%	102%	102%	101%	101%
Profit	99%	60%	65%	69%	73%	78%	82%	86%	91%	95%	99%	103%	102%	102%	101%	101%	101%	100%	100%	99%	99%	99%
	98%	59%	63%	68%	72%	76%	81%	85%	89%	93%	98%	100%	100%	99%	99%	99%	98%	98%	97%	97%	97%	96%
	97%	58%	62%	66%	70%	75%	79%	83%	88%	92%	95%	98%	97%	97%	97%	96%	96%	95%	95%	95%	94%	94%
	96%	56%	60%	65%	69%	73%	78%	82%	86%	91%	93%	95%	95%	95%	94%	94%	93%	93%	93%	92%	92%	91%
	95%	55%	59%	63%	68%	72%	76%	81%	85%	88%	91%	93%	93%	92%	92%	91%	91%	91%	90%	90%	89%	89%
	94%	53%	58%	62%	66%	70%	75%	79%	83%	86%	88%	91%	90%	90%	89%	89%	89%	88%	88%	87%	87%	87%
	93%	52%	56%	60%	65%	69%	73%	78%	81%	83%	86%	88%	88%	87%	87%	87%	86%	86%	85%	85%	85%	84%
	92%	50%	55%	59%	63%	68%	72%	76%	79%	81%	83%	86%	86%	85%	85%	84%	84%	83%	83%	83%	82%	82%
	91%	49%	53%	58%	62%	66%	71%	74%	76%	79%	81%	84%	83%	83%	82%	82%	82%	81%	81%	80%	80%	79%
	90%	47%	52%	56%	60%	65%	69%	71%	74%	76%	79%	81%	81%	80%	80%	80%	79%	79%	78%	78%	77%	77%
	89%	46%	50%	55%	59%	63%	67%	69%	71%	74%	76%	79%	78%	78%	78%	77%	77%	76%	76%	76%	75%	75%
	88%	45%	49%	53%	58%	62%	64%	67%	69%	72%	74%	76%	76%	76%	75%	75%	74%	74%	74%	73%	73%	72%
	87%	43%	48%	52%	56%	59%	62%	64%	67%	69%	72%	74%	74%	73%	73%	72%	72%	72%	71%	71%	70%	70%
	86%	42%	46%	50%	55%	57%	59%	62%	64%	67%	69%	72%	71%	71%	70%	70%	70%	69%	69%	68%	68%	68%
	85%	40%	45%	49%	52%	55%	57%	59%	62%	64%	67%	69%	69%	68%	68%	68%	67%	67%	66%	66%	66%	65%
	84%	39%	43%	47%	50%	52%	55%	57%	60%	62%	64%	67%	66%	66%	66%	65%	65%	64%	64%	64%	63%	63%
	83%	37%	42%	45%	47%	50%	52%	55%	57%	60%	62%	64%	64%	64%	63%	63%	62%	62%	62%	61%	61%	60%
	82%	36%	40%	43%	45%	47%	50%	52%	55%	57%	60%	62%	62%	61%	61%	60%	60%	60%	59%	59%	58%	58%
	81%	35%	38%	40%	43%	45%	48%	50%	52%	55%	57%	60%	59%	59%	58%	58%	58%	57%	57%	56%	56%	56%
	80%	33%	35%	38%	40%	43%	45%	48%	50%	52%	55%	57%	57%	57%	56%	56%	55%	55%	54%	54%	54%	53%
	79%	31%	33%	35%	38%	40%	43%	45%	48%	50%	53%	55%	55%	54%	54%	53%	53%	52%	52%	52%	51%	51%
	78%	28%	31%	33%	35%	38%	40%	43%	45%	48%	50%	53%	52%	52%	51%	51%	51%	50%	50%	49%	49%	48%
	77%	26%	28%	31%	33%	36%	38%	40%	43%	45%	48%	50%	50%	49%	49%	49%	48%	48%	47%	47%	47%	46%
	76%	23%	26%	28%	31%	33%	36%	38%	40%	43%	45%	48%	47%	47%	47%	46%	46%	45%	45%	45%	44%	44%
	75%	21%	23%	26%	28%	31%	33%	36%	38%	41%	43%	45%	45%	45%	44%	44%	43%	43%	43%	42%	42%	41%
		90%	91%	92%	93%	94%	95%	96%	97%	98%	99%	100%	101%	102%	103%	104%	105%	106%	107%	108%	109%	110%

Revenue

Step 2: Determine the number of Performance Shares credited as an Actual Award by determining the Performance Share Percentage (Step 1) and multiplying that percentage by the number of Performance Shares subject to Target Award (partial share amounts will be rounded up to the next whole share) ·      The maximum number of Performance Shares that may be credited as an Actual Award is 115% of the Target Award (the “Maximum Award”) ·      If achievement is below either Other Performance Goal threshold, shares credited are 0% of the Target Award. ·      If achievement is at the threshold level of performance for both Other Performance Goals, shares credited are 21% of the Target Award (“Minimum Award”) ·      Achievement percents are rounded to the nearest whole percent ·      Actual number of Performance Shares credited as Actual Award is calculated based on achievement, rounded up to the next whole share See below for examples of the Actual Award determination process

Actual Award Determination Examples

Assume: ·        Maximum Award of 2,875 Performance Shares ·        Target Award of 2,500 Performance Shares

Example 1
2009 Adjusted Revenue Achievement: 102% of AOP	2009 Adjusted Non-GAAP Operating Profit Achievement: 103% of AOP
Performance Share Percentage According to Matrix: 111% Performance Shares Credited as Actual Award: 2,500 Target X 111% = 2,775 Performance Shares

Example 2
2009 Adjusted Revenue Achievement: 99% of AOP	2009 Adjusted Non-GAAP Operating Profit: 96% of AOP
Performance Share Percentage According to Matrix: 93% Performance Shares Credited as Actual Award: 2,500 Target X 93% = 2,325 Performance Shares

EX-10.4

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 90th 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 additional corporate goals, which together form the “Corporate Result.” The Corporate Result is a percentage that is calculated under a matrix. The Corporate Result measures Adobe’s achievement against its budgeted revenue target (adjusted to reflect shippable backlog), and Adobe’s achievement in containing costs, as determined by reference to its achievement against its budgeted non-GAAP operating profit target (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).

The Corporate Result percentage is zero, and each Executive’s Maximum Award is reduced to zero, unless the Company achieves at least 75% of its budgeted adjusted non-GAAP operating profit and 90% of its budgeted adjusted revenue. If these minimum levels are achieved, the Corporate Result is 23%. The maximum Corporate Result percentage is 110%, corresponding to the Maximum Award percentage. The matrix used to calculate the actual Corporate Result is attached as Exhibit A. The Corporate Result is used instead of the Unit Multiplier in the calculation of  the actual bonus payable under the AIP if the Corporate Result determined under the matrix is less than or equal to 100%.

2

UNIT MULTIPLIER:

If the Corporate Result exceeds 100%, the Committee in consultation with the CEO determines an additional percentage (the “Unit Multiplier”) that expresses each business unit’s and functional unit’s contribution toward the Company’s success during the AIP eligibility period. The Unit Multiplier replaces the Corporate Result in calculating the actual bonus payable under the AIP. The maximum Unit Multiplier is 110%, corresponding to the Maximum Award percentage, and the minimum Unit Multiplier is 100%. The Unit Multiplier is determined as follows:

1.The Committee in consultation with the CEO determines the product of (1) the Corporate Result and (2) the sum of the dollar value of all AIP participants’ target incentive bonuses (the “Aggregate Corporate Result” — expressed as a dollar amount).

2.The Committee in consultation with the CEO allocates the Aggregate Corporate Result among each of Adobe’s business and functional units based on the relative contribution by each such business and functional unit to the Company’s success in the AIP eligibility period (such allocated amount, the “Unit Allocation”).

3.For each unit, the Committee in consultation with the CEO then divides the Unit Allocation by the sum of the dollar value of the aggregate participant target bonuses within the particular unit. The resulting percentage is the Unit Multiplier for that unit.

INDIVIDUAL ACHIEVEMENT:

The Committee in consultation with the CEO determines each participant’s individual achievement multiplier (expressed as a percentage not to exceed 100%, the “Individual Achievement”) based on that executive’s achievement of certain goals selected for such executive at the beginning of the AIP eligibility period from 3-5 categories of goals. The categories are as follows:  Revenue (BUs); Product Roadmap (BUs only); Strategic Objectives; People Management; Expense Management. The weighting of goals will be largely discretionary within fixed guidelines. For business units, the Revenue, Product Roadmap, and Strategic Objectives must, in the aggregate, total 85%; People Management 10%; and Expense Management 5%. For functional units and those business units with no Revenue or Product Roadmap component, 85% of Individual Achievement will be tied to one or more Strategic Objectives tied to the operating plan.

ADMINISTRATION:

AIP bonuses are paid on an annual basis approximately 45-60 days after fiscal year-end. A 5% reduction will be applied to the AIP bonus otherwise earned by any executive who fails to meet the annual performance appraisal submission deadline. A separate 5% reduction will be applied to the AIP bonus that would otherwise be earned by any executive who fails to timely complete mandatory training during the fiscal year. Participation in the AIP is at the discretion of the Committee, in consultation with Company management. The Company reserves the right to interpret and to make changes to or withdraw the AIP at any time, subject to applicable legal requirements. All terms and conditions of the AIP are subject to compliance with applicable law.

3

Threshold Goal

IF ACTUAL GAAP REVENUE EQUALS OR EXCEEDS 90%, EACH PARTICIPANT IS ELIGIBLE FOR A MAXIMUM AWARD OF 110% OF ANNUAL BONUS TARGET.

If Corporate Result is less than or equal to 100%

EARNED SALARY X ANNUAL BONUS TARGET PERCENT  X CORPORATE RESULT X INDIVIDUAL ACHIEVEMENT = BONUS

If Corporate Result exceeds 100%

EARNED SALARY X ANNUAL BONUS TARGET PERCENT  X UNIT MULTIPLIER X INDIVIDUAL ACHIEVEMENT = BONUS

Example (SVP)	Corporate Results Exceeds 100%	Corporate Result Less than or Equal to 100%
Earned Salary	$400,000	$400,000
Annual Bonus Target	$400,000 x 60% = $240,000	$400,000 x 60% = $240,000
Threshold Goal (% of AOP GAAP Revenue)	100% of AOP Revenue	95% of AOP Revenue
Corporate Result (per matrix)	100% Adjusted Revenue, 101% Adjusted Non-GAAP Operating Profit = 102%*	95% Adjusted Revenue, 96% Adjusted Non-GAAP Operating Profit = 75%
Unit Multiplier	105%	n/a
Individual Achievement	100%	90%
Bonus Calculation Example	$240,000 x 105% (Unit Mult.) x 100% (Ind.) = $252,000	$240,000 x 75% (Corporate Result) x 90% (Ind.) = $162,000

*Does not apply because Unit Multiplier is in effect in this example.

4

EXHIBIT A

	125%	99%	103%	107%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	124%	97%	101%	105%	109%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	123%	96%	100%	104%	108%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	122%	94%	98%	102%	106%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	121%	93%	97%	101%	105%	108%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	120%	91%	95%	99%	103%	107%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	119%	90%	94%	98%	102%	105%	109%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	118%	88%	92%	96%	100%	104%	108%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	117%	87%	91%	95%	99%	102%	106%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	116%	85%	89%	93%	97%	101%	105%	109%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	115%	84%	88%	92%	96%	99%	103%	107%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	114%	82%	86%	90%	94%	98%	102%	106%	109%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	113%	81%	85%	89%	93%	96%	100%	104%	108%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	112%	79%	83%	87%	91%	95%	99%	103%	106%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	111%	78%	82%	86%	90%	93%	97%	101%	105%	109%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	110%	76%	80%	84%	88%	92%	96%	100%	103%	107%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	109%	75%	79%	83%	87%	90%	94%	98%	102%	106%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	108%	73%	77%	81%	85%	89%	93%	97%	100%	104%	108%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	107%	72%	76%	80%	84%	87%	91%	95%	99%	103%	107%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%	110%
	106%	70%	74%	78%	82%	86%	90%	94%	97%	101%	105%	109%	110%	110%	110%	110%	110%	110%	110%	110%	110%	109%
	105%	69%	73%	77%	81%	84%	88%	92%	96%	100%	104%	108%	109%	110%	110%	110%	110%	109%	108%	108%	107%	107%
	104%	67%	71%	75%	79%	83%	87%	91%	94%	98%	102%	106%	107%	109%	108%	108%	107%	107%	106%	105%	105%	104%
	103%	66%	70%	74%	78%	81%	85%	89%	93%	97%	101%	105%	106%	106%	106%	105%	105%	104%	103%	103%	102%	102%
	102%	64%	68%	72%	76%	80%	84%	88%	91%	95%	99%	103%	104%	104%	103%	103%	102%	102%	101%	100%	100%	99%
	101%	63%	67%	71%	75%	78%	82%	86%	90%	94%	98%	102%	102%	101%	101%	100%	100%	99%	99%	98%	97%	97%
Operating	100%	61%	65%	69%	73%	77%	81%	85%	88%	92%	96%	100%	99%	99%	98%	98%	97%	97%	96%	96%	95%	94%
Profit	99%	60%	64%	68%	72%	75%	79%	83%	87%	91%	95%	98%	97%	96%	96%	95%	95%	94%	94%	93%	92%	92%
	98%	58%	62%	66%	70%	74%	78%	82%	85%	89%	93%	95%	95%	94%	93%	93%	92%	92%	91%	91%	90%	89%
	97%	57%	61%	65%	69%	72%	76%	80%	84%	88%	91%	93%	92%	91%	91%	90%	90%	89%	89%	88%	88%	87%
	96%	55%	59%	63%	67%	71%	75%	79%	82%	86%	89%	90%	90%	89%	88%	88%	87%	87%	86%	86%	85%	85%
	95%	54%	58%	62%	66%	69%	73%	77%	81%	85%	86%	88%	87%	87%	86%	85%	85%	84%	84%	83%	83%	82%
	94%	52%	56%	60%	64%	68%	72%	76%	79%	82%	84%	85%	85%	84%	84%	83%	82%	82%	81%	81%	80%	80%
	93%	51%	55%	59%	63%	66%	70%	74%	78%	80%	81%	83%	82%	82%	81%	80%	80%	79%	79%	78%	78%	77%
	92%	49%	53%	57%	61%	65%	69%	73%	76%	77%	79%	80%	80%	79%	79%	78%	77%	77%	76%	76%	75%	75%
	91%	48%	52%	56%	60%	63%	67%	71%	73%	75%	76%	78%	77%	77%	76%	76%	75%	74%	74%	73%	73%	72%
	90%	46%	50%	54%	58%	62%	66%	69%	71%	72%	74%	75%	75%	74%	74%	73%	73%	72%	71%	71%	70%	70%
	89%	45%	49%	53%	57%	60%	64%	67%	68%	70%	71%	73%	72%	72%	71%	71%	70%	70%	69%	68%	68%	67%
	88%	43%	47%	51%	55%	59%	63%	64%	66%	67%	69%	70%	70%	69%	69%	68%	68%	67%	66%	66%	65%	65%
	87%	42%	46%	50%	54%	57%	60%	62%	63%	65%	66%	68%	67%	67%	66%	66%	65%	65%	64%	63%	63%	62%
	86%	40%	44%	48%	52%	56%	58%	59%	61%	62%	64%	65%	65%	64%	64%	63%	63%	62%	62%	61%	60%	60%
	85%	39%	43%	47%	51%	54%	55%	57%	58%	60%	61%	63%	62%	62%	61%	61%	60%	60%	59%	59%	58%	57%
	84%	37%	41%	45%	49%	51%	53%	54%	56%	57%	59%	61%	60%	59%	59%	58%	58%	57%	57%	56%	55%	55%
	83%	36%	40%	44%	47%	49%	50%	52%	53%	55%	57%	58%	58%	57%	56%	56%	55%	55%	54%	54%	53%	52%
	82%	34%	38%	42%	45%	46%	48%	49%	51%	52%	54%	56%	55%	54%	54%	53%	53%	52%	52%	51%	51%	50%
	81%	33%	37%	41%	42%	44%	45%	47%	48%	50%	52%	53%	53%	52%	51%	51%	50%	50%	49%	49%	48%	48%
	80%	31%	35%	38%	40%	41%	43%	44%	46%	48%	49%	51%	50%	50%	49%	48%	48%	47%	47%	46%	46%	45%
	79%	30%	34%	36%	37%	39%	40%	42%	44%	45%	47%	48%	48%	47%	47%	46%	45%	45%	44%	44%	43%	43%
	78%	28%	32%	33%	35%	36%	38%	39%	41%	43%	44%	46%	45%	45%	44%	43%	43%	42%	42%	41%	41%	40%
	77%	27%	29%	31%	32%	34%	35%	37%	39%	40%	42%	43%	43%	42%	42%	41%	40%	40%	39%	39%	38%	38%
	76%	25%	27%	28%	30%	31%	33%	35%	36%	38%	39%	41%	40%	40%	39%	39%	38%	37%	37%	36%	36%	35%
	75%	23%	24%	26%	27%	29%	31%	32%	34%	35%	37%	38%	38%	37%	37%	36%	36%	35%	34%	34%	33%	33%
		90%	91%	92%	93%	94%	95%	96%	97%	98%	99%	100%	101%	102%	103%	104%	105%	106%	107%	108%	109%	110%

Revenue

5