DEF 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
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Definitive Proxy Statement
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Soliciting Material under §240.14a-12

Adobe Systems Incorporated
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Adobe Systems Incorporated
345 Park Avenue
San Jose, California 95110
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 13, 2016
Dear Stockholders:
You are cordially invited to attend our 2016 Annual Meeting of Stockholders to be held on Wednesday, April 13, 2016 at 9:00 a.m. local time at our Almaden Tower building located at 151 Almaden Boulevard, San Jose, California 95110. We are holding the meeting to:
1.
Elect ten members of our Board of Directors named herein to serve for a one-year term;
2.
Approve the 2003 Equity Incentive Plan as amended to increase the available share reserve by 10 million shares and provide a maximum annual limit on non-employee director compensation;
3.
Approve the 2016 Executive Cash Performance Bonus Plan;
4.
Ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year ending on December 2, 2016;
5.
Approve, on an advisory basis, the compensation of our named executive officers; and
6.    Transact any other business that may properly come before the meeting.
If you owned our common stock at the close of business on February 17, 2016, you may attend and vote at the meeting. A list of stockholders eligible to vote at the meeting will be available for review during our regular business hours at our headquarters in San Jose, California for the ten days prior to the meeting for any purpose related to the meeting.
We are pleased to continue to take advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders over the Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our 2015 Annual Report. We believe that this process allows us to provide our stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our 2015 Annual Report and a form of proxy card. All stockholders who have previously requested a paper copy of our proxy materials will continue to receive a paper copy of the proxy materials by mail.


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Your vote is important. Whether or not you plan to attend the meeting, we hope that you will vote as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet. If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card by signing, dating and mailing your proxy card or voting instruction card in the envelope provided.
 
Sincerely,
 
 
Michael Dillon
Executive Vice President, General Counsel &
Corporate Secretary
March 4, 2016
San Jose, California



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ADOBE SYSTEMS INCORPORATED
Proxy Statement
for the
Annual Meeting of Stockholders
To Be Held April 13, 2016
TABLE OF CONTENTS
 
Page
Information Concerning Solicitation and Voting
Questions and Answers
Board of Directors and Corporate Governance
Security Ownership of Certain Beneficial Owners and Management
Section 16(a) Beneficial Ownership Reporting Compliance
Equity Compensation Plan Information
Compensation Discussion and Analysis
Report of the Executive Compensation Committee
Executive Compensation
Summary Compensation Table
Grants of Plan-Based Awards in Fiscal Year 2015
Outstanding Equity Awards at 2015 Fiscal Year End
Option Exercises and Stock Vested in Fiscal Year 2015
Nonqualified Deferred Compensation
Change of Control
Director Compensation
Compensation Committee Interlocks and Insider Participation
Transactions with Related Persons
Proposal 1—Election of Directors
Proposal 2—Approval of the Adobe Systems Incorporated 2003 Equity Incentive Plan, as Amended
Proposal 3—Approval of the 2016 Executive Cash Performance Bonus Plan
Proposal 4—Ratification of Appointment of Independent Registered Public Accounting Firm
Principal Accounting Fees and Services
Audit Committee Pre-Approval of Services Performed by Our Independent Registered Public Accounting Firm
Report of the Audit Committee
Proposal 5—Advisory Vote on Executive Compensation
Householding of Proxy Materials
Annual Report
Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on April 13, 2016
Stockholder Proposals to be Presented at Next Annual Meeting



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____________________
ADOBE SYSTEMS INCORPORATED
____________________
PROXY STATEMENT
____________________
INFORMATION CONCERNING SOLICITATION AND VOTING
Our Board of Directors (the “Board”) is soliciting proxies for our 2016 Annual Meeting of Stockholders (the “2016 Annual Meeting”) to be held on Wednesday, April 13, 2016, at 9:00 a.m. local time at our Almaden Tower building located at 151 Almaden Boulevard, San Jose, California 95110. Our principal executive offices are located at 345 Park Avenue, San Jose, California 95110, and our telephone number is (408) 536-6000.
The proxy materials, including this proxy statement, proxy card and our 2015 Annual Report, are being distributed and made available on or about March 4, 2016. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the 2016 Annual Meeting. Please read it carefully.
In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected to provide our stockholders access to our proxy materials over the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed on or about March 4, 2016 to most of our stockholders who owned our common stock at the close of business on the record date, February 17, 2016. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them by following the instructions in the Notice.
The Notice will also provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.
Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.
We will bear the expense of soliciting proxies. In addition to these proxy materials, our directors and employees (who will receive no compensation in addition to their regular salaries) may solicit proxies in person, by telephone or email. We have also retained Innisfree M&A Incorporated to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Innisfree a fee of $15,000 for its services and will reimburse Innisfree for reasonable out-of-pocket expenses. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.
QUESTIONS AND ANSWERS
Q:
Who may vote at the 2016 Annual Meeting?
 
 
A:
Our Board set February 17, 2016 as the record date for the meeting. If you owned our common stock at the close of business on February 17, 2016, you may attend and vote at the meeting. Each stockholder is entitled to one vote for each share of common stock held on all matters to be voted on. As of February 17, 2016, there were 501,214,270 shares of our common stock outstanding and entitled to vote at the meeting.

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Q:
What is the quorum requirement for the 2016 Annual Meeting?
 
 
A:
A majority of our outstanding shares entitled to vote as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum.
 
 
 
Your shares will be counted as present at the meeting if you are entitled to vote and you:
 
 
 
 
are present in person at the meeting; or
 
have properly submitted a proxy card or voting instruction card, or voted by telephone or over the Internet.
 
 
 
 
Both abstentions and broker non-votes (as described below) are counted for the purpose of determining the presence of a quorum.
 
 
 
Each proposal identifies the votes needed to approve or ratify the proposed action.
 
 
Q:
What proposals will be voted on at the 2016 Annual Meeting?
 
 
A:
There are five proposals scheduled to be voted on at the meeting:
 
 
 
 
Election of ten members of our Board named herein to serve for a one-year term;
 
 
 
 
Approval of the 2003 Equity Incentive Plan as amended to increase the available share reserve by 10 million shares and provide a maximum annual limit on non-employee director compensation;
 
 
 
 
Approval of the 2016 Executive Cash Performance Bonus Plan;
 
 
 
 
Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 2, 2016; and
 
 
 
 
Approval, on an advisory basis, of the compensation of our named executive officers.
 
 
 
 
We will also consider any other business that properly comes before the meeting. If any other matters are properly brought before the meeting, the persons named in the enclosed proxy card or voter instruction card will vote the shares they represent using their best judgment.
 
 
Q:
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
 
 
A:
We are pleased to continue to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. Accordingly, we have sent to most of our stockholders of record and beneficial owners a notice regarding Internet availability of proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically on an ongoing basis. A stockholder’s election to receive proxy materials by mail or electronically by email will remain in effect until the stockholder terminates such election.
 
 
Q:
Why did I receive a full set of proxy materials in the mail instead of a notice regarding the Internet availability of proxy materials?
 
 
A:
We are providing stockholders who have previously requested to receive paper copies of the proxy materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card, to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. Alternatively, you can go to https://www.icsdelivery.com/adobe and enroll for online delivery of annual meeting and proxy voting materials.

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Q:
How can I get electronic access to the proxy materials?
 
 
A:
You can view the proxy materials on the Internet at www.proxyvote.com. Please have your 12 digit control number available. Your 12 digit control number can be found on your Notice. If you received a paper copy of your proxy materials, your 12 digit control number can be found on your proxy card or voting instruction card.
 
 
 
Our proxy materials are also available on our Investor Relations website at www.adobe.com/adbe.
 
 
Q:
Can I vote my shares by filling out and returning the Notice?
 
 
A:
No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, by requesting and returning a paper proxy card or voting instruction card, or by submitting a ballot in person at the meeting.
 
 
Q:
How may I vote my shares in person at the meeting?
 
 
A:
If your shares are registered directly in your name with our transfer agent, Computershare Investor Services LLC, you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are also invited to attend the meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from your broker, nominee, or trustee that holds your shares, giving you the right to vote the shares at the meeting. The meeting will be held at our Almaden Tower building located at 151 Almaden Boulevard, San Jose, California 95110. If you need directions to the meeting, please visit http://www.adobe.com/aboutadobe/pdfs/sjmap.pdf.
 
 
Q:
How can I vote my shares without attending the meeting?
 
 
A:
Whether you hold shares directly as a registered stockholder of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker, trustee or nominee. In most cases, you will be able to do this by telephone, by using the Internet or by mail if you received a printed set of the proxy materials.
 
 
 
By Telephone or Internet. If you have telephone or Internet access, you may submit your proxy by following the instructions provided in the Notice, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card.
 
 
 
By Mail.  If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your stockbroker, trustee or nominee, and mailing it in the enclosed envelope. If you provide specific voting instructions, your shares will be voted as you have instructed.

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Q:
What happens if I do not give specific voting instructions?
 
 
A:
Registered Stockholder of Record. If you are a registered stockholder of record and you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or you sign, date and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and as the proxy holders may determine in their best judgment with respect to any other matters properly presented for a vote at the meeting.
 
 
 
Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, the organization that holds your shares may generally vote at its discretion on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization will inform the inspector of elections that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting, assuming that a quorum is obtained.
 
 
Q:
Which ballot measures are considered “routine” or “non-routine”?
 
 
A:
The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 2, 2016 (Proposal 4), is considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 4. The election of directors (Proposal 1), the approval of the 2003 Equity Incentive Plan as amended to increase the available share reserve by 10 million shares and provide a maximum annual limit on non-employee director compensation (Proposal 2), the approval of the 2016 Executive Master Bonus Plan (Proposal 3) and the advisory vote on executive compensation (Proposal 5) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and, therefore, there may be broker non-votes on Proposals 1, 2, 3 and 5.
 
 
Q:
How can I revoke my proxy and change my vote?
 
 
A:
You may revoke your proxy and change your vote at any time before the final vote at the meeting. If you are a stockholder of record, you may do this by signing and submitting a new proxy card with a later date; by voting by telephone or by using the Internet, either of which must be completed by 11:59 p.m. Eastern Time on April 12, 2016 (your latest telephone or Internet proxy is counted); or by attending the meeting and voting in person by ballot. Attending the meeting alone will not revoke your proxy unless you specifically request your proxy to be revoked. If you hold shares through a bank or brokerage firm, you must contact that bank or firm directly to revoke any prior voting instructions.
 
 
Q:
Where can I find the voting results of the meeting?
 
 
A:
The preliminary voting results will be announced at the meeting. The final voting results will be reported in a Current Report on Form 8-K, which will be filed with the SEC within four business days after the meeting. If our final voting results are not available within four business days after the meeting, we will file a Current Report on Form 8-K reporting the preliminary voting results and subsequently file the final voting results in an amendment to the Current Report on Form 8-K within four business days after the final voting results are known to us.


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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our Board of Directors
Adobe’s stockholders elect the company’s Board members annually, and all thirteen of our current directors were elected by our stockholders to serve for a term expiring at the 2016 Annual Meeting. Michael Cannon and Robert Sedgewick are not seeking re-election to the Adobe Board effective as of the 2016 Annual Meeting. We thank Messrs. Cannon and Sedgewick for their contributions and many years of service to Adobe during periods of significant company transformation and growth. Additionally, Kelly Barlow, who has represented ValueAct Capital on our Board since 2012, will not be standing for re-election. We thank Mr. Barlow for his service on our Board. In connection with these departures, the Board has reduced its size to ten members effective upon the commencement of the 2016 Annual Meeting.
The following tables set forth the biographical information listed below for each of the ten Board nominees, such as relevant experience, qualifications, attributes and skills, and including other directorships held in public companies.
Nominees for Election for a One-Year Term Expiring in 2017
Name
 
Principal Occupation During Last Five Years and
Relevant Experience, Qualifications, Attributes or Skills
 
Age
 
Director Since
 
 
 
 
 
 
 
Amy L. Banse
 
Ms. Banse serves as Managing Director and Head of Funds, Comcast Ventures and Senior Vice President, Comcast Corporation. Prior to this role, she was President of Comcast Interactive Media (CIM), a division of Comcast responsible for developing Comcast’s online strategy and operating Comcast’s digital properties, including Fandango, Xfinity.com and Xfinitytv.com. Ms. Banse joined Comcast in 1991 and spent the early part of her career at Comcast overseeing the development of Comcast’s cable network portfolio. She received a B.A. from Harvard and a J.D. from Temple University School of Law.
 
56

 
2012
 
 
 
 
 
 
 
 
 
As the Managing Director and Head of Funds for Comcast Ventures and Senior Vice President, Comcast Corporation, as well as her prior executive positions, including President of CIM, Ms. Banse has extensive executive leadership experience, as well as extensive knowledge of operational, financial and strategic issues. She also brings to the Board a deep expertise in global media and technology organizations in online business.
 
 
 
 
Edward W. Barnholt
 
Mr. Barnholt served as President and Chief Executive Officer of Agilent Technologies, Inc., a measurement company, from March 1999 to March 2005 and as its Chairman of the Board from November 2002 until his retirement in March 2005. From 1990 to 1999, Mr. Barnholt served in several executive positions at Hewlett-Packard Company, a computer and electronics company, including serving as Executive Vice President and General Manager of its Measurements Organization. Mr. Barnholt currently serves on the board of directors of eBay Inc., a global online marketplace, and as Chairman of the Board of KLA-Tencor Corporation, a provider of process control and yield management solutions. Mr. Barnholt holds a B.S. and a M.S. in Electrical Engineering from Stanford University.
 
72
 
2005
 
 
 
 
 
 
 
 
 
As the former President, Chief Executive Officer and Chairman of the Board of Agilent, as well as a former senior executive with Hewlett-Packard, Mr. Barnholt possesses significant leadership and operational experience, including on matters particularly relevant to companies with complex technology and international issues. As a board member of two other public companies, Mr. Barnholt also has strong corporate governance expertise and a global business perspective.
 
 
 
 
 
 
 
 
 
 
 

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Name
 
Principal Occupation During Last Five Years and
Relevant Experience, Qualifications, Attributes or Skills
 
Age
 
Director Since
 
 
 
 
 
 
 
Robert K. Burgess
 
Mr. Burgess has been an independent consultant since December 2005. He served as Chief Executive Officer of Macromedia, Inc., a provider of Internet and multimedia software, from November 1996 to January 2005. He also served on the board of directors of Macromedia from November 1996 until December 2005, as Chairman of the Board of Macromedia from July 1998 until December 2005 and as Executive Chairman of Macromedia from January 2005 until December 2005, when Macromedia was acquired by Adobe. Prior to joining Macromedia, Mr. Burgess held key executive positions at Silicon Graphics, Inc., a graphics and computing company, and from 1991 to 1995 served as Chief Executive Officer and a member of the board of directors of Alias Research, Inc., a publicly traded 3D software company, prior to its acquisition by Silicon Graphics. Mr. Burgess currently serves on the board of NVIDIA Corporation, a provider of programmable graphics processing technologies. He previously served on the board of IMRIS Inc. from September 2010 to November 2013. Mr. Burgess holds a B.Com. from McMaster University in Canada.
 
58
 
2005
 
 
 
 
 
 
 
 
 
As the former Executive Chairman, Chief Executive Officer and Chairman of the Board of Macromedia, as well as several other executive positions, Mr. Burgess has extensive executive leadership experience, as well as extensive knowledge of operational, financial and strategic issues. He also possesses significant experience with business issues in technology organizations as a result of his former executive roles. With more than 20 years’ experience as a board member of publicly traded companies, Mr. Burgess also has a broad understanding of the role and responsibilities of the Board and valuable insight on a number of significant issues in the technology industry.
 
 
 
 
Frank A. Calderoni
 
Mr. Calderoni currently serves as Executive Vice President, Operations and Chief Financial Officer at Red Hat, Inc. Until June 2015, he was an Executive Advisor at Cisco Systems Inc., a designer, manufacturer and seller of Internet Protocol (IP)-based networking and other products related to the communications and information technology industry. From 2008 to January 2015, Mr. Calderoni served as Executive Vice President and Chief Financial Officer at Cisco, managing the company’s financial strategy and operations. He joined Cisco in 2004 from QLogic Corporation, a storage networking company where he was Senior Vice President and Chief Financial Officer. Prior to that, he was Senior Vice President, Finance and Administration and Chief Financial Officer for SanDisk Corporation, a flash data storage company. Before joining SanDisk, Mr. Calderoni spent 21 years at IBM, a global services, software and systems company, where he became Vice President and held controller responsibilities for several divisions within the company. Mr. Calderoni currently serves on the board of Nimble Storage, Inc., a flash storage solutions company. Mr. Calderoni holds a B.S. in Accounting and Finance from Fordham University and an M.B.A. in Finance from Pace University.
 
58
 
2012
 
 
 
 
 
 
 
 
 
As a result of his positions at Cisco, as well as his past service as chief financial officer of publicly traded global technology companies, Mr. Calderoni brings to the Board abundant financial expertise that includes extensive knowledge of the complex financial and operational issues facing large global companies, and a deep understanding of accounting principles and financial reporting rules and regulations. He provides the Board and Audit Committee with significant insight into the preparation of financial statements and knowledge of audit procedures. Through his senior executive positions, Mr. Calderoni has demonstrated his global leadership and business acumen.
 
 
 
 


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Name
 
Principal Occupation During Last Five Years and
Relevant Experience, Qualifications, Attributes or Skills
 
Age
 
Director Since
 
 
 
 
 
 
 
James E. Daley
 
Mr. Daley has been an independent consultant since his retirement in July 2003 from Electronic Data Systems Corporation (EDS), an information technology service company. Mr. Daley served as Executive Vice President and Chief Financial Officer of EDS from March 1999 to February 2003, and as its Executive Vice President of Client Solutions, Global Sales and Marketing from February 2003 to July 2003. From 1963 until his retirement in 1998, Mr. Daley was with Price Waterhouse, L.L.P., an accounting firm, where he served as Co-Chairman-Operations and Vice-Chairman-International from 1988 to 1998. Mr. Daley currently serves on the board of directors of The Guardian Life Insurance Company of America. Mr. Daley holds a B.B.A. from Ohio University.
 
74

 
2001
 
 
 
 
 
 
 
 
 
With more than 35 years of service with the international accounting firm Price Waterhouse, L.L.P., as well as his past service as the Chief Financial Officer of a publicly traded global technology company, Mr. Daley brings to the Board extensive expertise related to the business and financial issues facing large global technology corporations, as well as a comprehensive understanding of international business and corporate governance matters.
 
 
 
 
 
 
 
 
 
 
 
Laura B. Desmond
 
Ms. Desmond is the Global Chief Executive Officer of Starcom MediaVest Group (SMG), a global marketing and media services company which is part of the Publicis Groupe. She is also the Chief Revenue Officer of the Publicis Groupe P12, an executive committee, and a member of the Directoire+, a management board, which are both comprised of the company’s top global leaders. Prior to her appointment as Global Chief Executive Officer in 2008, Ms. Desmond was Chief Executive Officer of SMG–The Americas from 2007 to 2008 where she managed a network spanning the United States, Canada and Latin America. She was Chief Executive Officer of MediaVest, based in New York, from 2003 to 2007, and from 2000 to 2002 she was Chief Executive Officer of SMG’s Latin America group. Ms. Desmond previously served as a director of Tremor Video, Inc. from January 2012 to September 2013. She holds a B.B.A. in Marketing from the University of Iowa.
 
50
 
2012
 
 
 
 
 
 
 
 
 
With her experience as Global Chief Executive Officer of SMG, as well as her prior senior executive positions at SMG, Ms. Desmond brings to the Board a deep expertise in global media and marketing technology organizations, leadership capabilities and business acumen. In addition, her past service on other boards gives her valuable knowledge and perspective.
 
 
 
 
 
 
 
 
 
 
 
Charles M. Geschke
 
Dr. Geschke was a founder of Adobe and has served as our Chairman of the Board since September 1997, sharing that office with John E. Warnock. He was our Chief Operating Officer from December 1986 until July 1994 and our President from April 1989 until his retirement in April 2000. Dr. Geschke holds a Ph.D. in Computer Science from Carnegie Mellon University.
 
76
 
1983
 
 
 
 
 
 
 
 
 
As a co-founder of Adobe and its former President and Chief Operating Officer, Dr. Geschke has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provide the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Co-Chairman of the Board, Dr. Geschke has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.
 
 
 
 

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Name
 
Principal Occupation During Last Five Years and
Relevant Experience, Qualifications, Attributes or Skills
 
Age
 
Director Since
 
 
 
 
 
 
 
Shantanu Narayen
 
Mr. Narayen currently serves as our President and Chief Executive Officer. He joined Adobe in January 1998 as Vice President and General Manager of our engineering technology group. In January 1999, he was promoted to Senior Vice President, Worldwide Products, and in March 2001 he was promoted to Executive Vice President, Worldwide Product Marketing and Development. In January 2005, Mr. Narayen was promoted to President and Chief Operating Officer, and effective December 2007, he was appointed our Chief Executive Officer and joined our Board of Directors. Mr. Narayen serves on the board of directors of Pfizer Inc., a multinational pharmaceutical corporation. He previously served as a director of Dell Inc. from September 2009 to October 2013. Mr. Narayen holds a B.S. in Electronics Engineering from Osmania University in India, a M.S. in Computer Science from Bowling Green State University and an M.B.A. from the Haas School of Business, University of California, Berkeley.
 
52
 
2007
 
 
 
 
 
 
 
 
 
As our President and Chief Executive Officer and as an Adobe employee for more than 18 years, Mr. Narayen brings to the Board extensive leadership and industry experience, including a deep knowledge and understanding of our business, operations and employees, the opportunities and risks faced by Adobe, and management’s current and future strategy and plans. In addition, his service on other boards gives him a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.
 
 
 
 
 
 
 
 
 
 
 
Daniel L. Rosensweig
 
Mr. Rosensweig is currently President, Chief Executive Officer and Chairman of the board of directors of Chegg.com, an online textbook rental company. Prior to joining Chegg.com in February 2010, Mr. Rosensweig served as President and Chief Executive Officer of RedOctane, a business unit of Activision Publishing, Inc., a developer, publisher and distributor of interactive entertainment and leisure products. Prior to joining RedOctane in March 2009, Mr. Rosensweig was an Operating Principal at the Quadrangle Group, a private investment firm. Prior to joining the Quadrangle Group in August 2007, Mr. Rosensweig served as Chief Operating Officer of Yahoo! Inc., an Internet content and service provider, which he joined in April 2002. Prior to joining Yahoo!, Mr. Rosensweig was President of CNET Networks, Inc., an interactive media company, which he joined in October 2000. Mr. Rosensweig served for 18 years with Ziff-Davis, an integrated media and marketing services company, including roles as President and Chief Executive Officer of its subsidiary ZDNet, from 1997 until 2000 when ZDNet was acquired by CNET. Mr. Rosensweig holds a B.A. in Political Science from Hobart College.
 
54

 
2009
 
 
 
 
 
 
 
 
 
As a result of his current executive position at Chegg.com, as well as his former positions as a senior executive at global media and technology organizations, Mr. Rosensweig provides the Board with extensive and relevant executive leadership, worldwide operations and technology industry experience.

 
 
 
 

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Name
 
Principal Occupation During Last Five Years and
Relevant Experience, Qualifications, Attributes or Skills
 
Age
 
Director Since
 
 
 
 
 
 
 
John E. Warnock
 
Dr. Warnock was a founder of Adobe and has been our Chairman of the Board since April 1989. Since September 1997, he has shared the position of Chairman with Charles M. Geschke. Dr. Warnock served as our Chief Executive Officer from 1982 until December 2000. From December 2000 until his retirement in March 2001, Dr. Warnock served as our Chief Technical Officer. Dr. Warnock currently serves as Chairman of the Board of Salon Media Group, Inc. Dr. Warnock holds a Ph.D. in Electrical Engineering from the University of Utah.
 
75

 
1983
 
 
 
 
 
 
 
 
 
As a co-founder of Adobe and its former Chief Executive Officer and Chief Technical Officer, Dr. Warnock has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provide the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Co-Chairman of the Board of Directors of Adobe and Chairman of the Board of Salon, Dr. Warnock has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.
 
 
 
 


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Independence of Directors
As required by the NASDAQ Global Select Market’s (“NASDAQ”) listing standards, a majority of the members of our Board must qualify as “independent,” as affirmatively determined by our Board. Our Board consults with our legal counsel to ensure that its determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in the applicable NASDAQ listing standards.
After review of all relevant transactions and relationships between each director, any of their family members, Adobe, our executive officers and our independent registered public accounting firm, the Board has affirmatively determined that a majority of our Board is comprised of independent directors. Our current independent directors are: Ms. Banse, Mr. Barlow, Mr. Barnholt, Mr. Burgess, Mr. Calderoni, Mr. Cannon, Mr. Daley, Ms. Desmond, Dr. Geschke, Mr. Rosensweig, Dr. Sedgewick and Dr. Warnock.
Committees of the Board
The Audit Committees role includes assisting the Board in fulfilling its responsibilities related to the oversight of our financial, accounting and reporting processes; our system of internal accounting and financial controls; our enterprise risk management program; and our compliance with related legal, regulatory and ethical requirements. The Audit Committee is responsible for the appointment, compensation, engagement, retention, termination and services of our independent registered public accounting firm, including conducting a review of its independence; reviewing and approving the planned scope of our annual audit; overseeing our independent registered public accounting firm’s audit work; reviewing and pre-approving any audit and non-audit services that may be performed by our independent registered public accounting firm; reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls; reviewing our critical accounting policies and the application of accounting principles; monitoring the rotation of partners of our independent registered public accounting firm on our audit engagement team as required by regulation; reviewing the company’s policies and practices with respect to swaps transactions; overseeing Adobe’s Worldwide Investment Policy; and overseeing the performance of our internal audit function. The Audit Committee establishes procedures, as required under applicable regulation, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee also oversees the company’s initiatives related to cyber-security, including prevention and response to any cyber-attacks. The Audit Committee’s role also includes meeting to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm. The Audit Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. See “Report of the Audit Committee” contained in this proxy statement.
Each member of the Audit Committee meets the independence criteria prescribed by applicable regulations and the rules of the SEC for audit committee membership and is an “independent director” within the meaning of applicable NASDAQ listing standards. Each Audit Committee member meets NASDAQ’s financial sophistication requirements, and the Board has further determined that each Audit Committee member is an “audit committee financial expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC. The Audit Committee acts pursuant to a written charter, which complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and NASDAQ, a copy of which can be found on our website at http://www.adobe.com/investor-relations/governance.html.
The Nominating and Governance Committee’s primary purpose is to evaluate candidates for membership on our Board and make recommendations to our Board regarding candidates for director; make recommendations with respect to the composition of our Board and its committees; review and make recommendations regarding the functioning of our Board as an entity; recommend corporate governance principles applicable to Adobe; manage periodic review, discussion and evaluation of the performance of our Board, its committees and its members; assess the independence of our directors; review and approve or disapprove any related-person transaction as defined under Item 404 of Regulation S-K, after examining each such transaction for potential conflicts of interest and other improprieties; review the board memberships of other entities held by members of the Board and approve such memberships for our executive officers. If requested by the Board, the Nominating and Governance Committee also may assist our Board in reviewing and assessing management development and succession planning for our executive officers. The Nominating and Governance Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The members of our Nominating and Governance Committee are all independent directors within the meaning of applicable NASDAQ listing standards. The Nominating and Governance Committee

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operates pursuant to a written charter, a copy of which can be found on our website at http://www.adobe.com/investor-relations/governance.html.
In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the Board’s mix of skills, experience, character, commitment and diversity—diversity being broadly construed to mean a variety of opinions, perspectives and backgrounds, such as gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements and needs of our Board and Adobe at that point in time. In reviewing potential candidates, the Nominating and Governance Committee will also consider all relationships between any proposed nominee and any of Adobe’s stockholders, competitors, customers, suppliers or other persons with a relationship to Adobe. The Nominating and Governance Committee believes that each candidate should be an individual who has demonstrated integrity and ethics in such candidate’s personal and professional life, has an understanding of elements relevant to the success of a publicly traded company and has established a record of professional accomplishment in such candidate’s chosen field. Each candidate should be prepared to participate fully in Board activities, including attendance at, and active participation in, meetings of the Board, and not have other personal or professional commitments that would, in the Nominating and Governance Committee’s judgment, interfere with or limit such candidate’s ability to do so. Each candidate should also be prepared to represent the best interests of all of our stockholders and not just one particular constituency. Additionally, in determining whether to recommend a director for re-election, the Nominating and Governance Committee also considers such director’s past attendance at Board and committee meetings and participation in and contributions to the activities of our Board. The Nominating and Governance Committee has no stated specific minimum qualifications that must be met by a candidate for a position on our Board. The Nominating and Governance Committee does, however, believe it appropriate for at least one member of our Audit Committee to meet the criteria for an “audit committee financial expert” as defined by SEC rules, that each member of our Executive Compensation Committee be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and that a majority of the members of our Board meet the definition of “independent director” within the meaning of applicable NASDAQ listing standards.
The Nominating and Governance Committee’s methods for identifying candidates for election to our Board include the solicitation of ideas for possible candidates from a number of sources, including from members of our Board, our executive officers, individuals who our executive officers or Board members believe would be aware of candidates who would add value to our Board and through other research. The Nominating and Governance Committee, from time to time, retains for a fee one or more third-party search firms to identify suitable candidates.
Any of our stockholders may nominate one or more persons for election as a director at our annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our Bylaws, including that the notice must include information required pursuant to Section 14 of the Exchange Act. In order for the director nomination to be timely for our 2017 Annual Meeting of Stockholders, a stockholder’s notice to our Corporate Secretary must be delivered to our principal executive offices no later than December 19, 2016 nor earlier than November 19, 2016. Our Bylaws specify additional requirements if stockholders wish to nominate directors at special meetings of stockholders.
The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on the same criteria.
The Executive Compensation Committee sets and administers the policies that govern, and reviews and approves, all compensation of our executive officers, including cash and non-cash compensation and equity compensation programs. The Executive Compensation Committee is also responsible for making recommendations to the Board concerning Board and committee compensation. The Executive Compensation Committee may also review and approve equity-based compensation grants to our non-executive officer employees and consultants; however, restricted stock unit grants to our non-executive officer employees are generally approved by a Management Committee for Employee Equity Awards appointed by the Board and currently consisting of our Chief Executive Officer and Executive Vice President, Customer & Employee Experience, within parameters established by the Executive Compensation Committee. In addition, the Executive Compensation Committee reviews our stock ownership guidelines for senior management, which are described below in “Compensation Discussion and Analysis—Equity-Related Policies—Stock Ownership Guidelines.” The Executive Compensation Committee is also responsible for oversight of our overall compensation plans and benefit programs, as well as the approval of all employment, severance and change of control agreements and plans applicable to our executive officers. In connection with this oversight, the Executive Compensation Committee reviews and approves annual performance objectives and goals relevant to executive officers. The Executive Compensation Committee oversees all matters related to stockholder approval of executive compensation, including the advisory vote on executive

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compensation, and evaluates the risk-taking incentives and risk management of our compensation policies and practices. The Executive Compensation Committee also has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The Executive Compensation Committee assesses the independence and any potential conflicts of interest of compensation advisors in accordance with applicable law and NASDAQ listing standards. The members of the Executive Compensation Committee are all independent directors within the meaning of applicable NASDAQ listing standards, and all of the members are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and “outside directors” for purposes of Section 162(m) of the Code. The Executive Compensation Committee acts pursuant to a written charter, a copy of which can be found on our website at http://www.adobe.com/investor-relations/governance.html.
Risk Analysis of Performance-Based Compensation Plans
Our Executive Compensation Committee believes that our employee compensation programs do not encourage excessive and unnecessary risk-taking that would be reasonably likely to have a material adverse effect on Adobe. The Executive Compensation Committee oversaw the performance of a risk assessment of our compensation programs as generally applicable to our employees to ascertain any potential material risks that may be created by our compensation programs. The Executive Compensation Committee considered the findings of the assessment conducted internally and concluded that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy and do not encourage employees to take unnecessary or excessive risks, and that the level of risk that they might encourage is not reasonably likely to materially harm our business or financial condition, after considering mitigating controls. Additionally, the Audit Committee considered the risk assessment and the findings of the Executive Compensation Committee.
Although the majority of target total direct compensation provided to our executive officers is incentive based, the Executive Compensation Committee believes that our executive compensation programs have been designed with appropriate controls and other mitigating measures to prevent excessive and unnecessary risk taking. Incentive-based employee compensation programs typically make up a smaller percentage of our other employees’ overall compensation and therefore provide less motivation for risk taking. The design of these broad-based compensation programs is intended to encourage our employees to remain focused on both short- and long-term operational and financial goals of the company in several key respects:
While our Executive Bonus Plans for fiscal years 2015 and 2016 focus on the achievement of bookings and recurring revenue targets and strategic company objectives, they also include an individual performance component with objectives for many of our executives relating to operating metrics; together with our long-term equity incentive programs that motivate our executives to build stockholder value, our fiscal year 2015 and 2016 compensation programs (which are described further below in the “Compensation Discussion and Analysis” section of this proxy statement) continue to provide balanced objectives while driving our short- and long-term business strategies.
Our Performance Share Program is based on Adobe’s total stockholder return (“TSR”) over a three-year period relative to the companies in the NASDAQ 100 Index, so unlike stock options, the program will not reward short-term spikes in the price of our stock, but instead requires sustained, measurable performance over a three-year period. In the event Adobe’s TSR places in the bottom 25% relative to the companies in the NASDAQ 100 Index, no shares will be awarded, meaning our executives will be rewarded only when Adobe’s stock is performing relative to the market.
Our system of internal controls over financial reporting, standards of business conduct and compliance programs, among other things, reduces the likelihood of manipulation of our financial performance to enhance payments under our bonus and sales compensation plans.
Our performance-based plans include a 200% cap of the target awards. We believe this cap limits the incentive for excessive risk-taking by our employees.
For our non-executive employees, equity incentive awards are solely in the form of restricted stock units (“RSUs”) that vest over three or four years. Annual equity incentive awards for our executive officers and certain senior employees for fiscal years 2015 and 2016 include RSUs that vest one-third each year over three years and performance shares that vest 100% after a three-year cliff, encouraging executive officers and such other employees to focus on sustained stock price appreciation over the long term. Stock options are not granted to members of our Board, our executive officers or any other employees generally, which our

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Executive Compensation Committee believes further mitigates the potential value of unnecessary or excessive risk-taking.
Our officers at the senior vice president level and above are all subject to, and in compliance with, our stock ownership guidelines, described under “Compensation Discussion and Analysis—Equity-Related Policies—Stock Ownership Guidelines,” which encourage a level of stock ownership that we believe appropriately aligns our executives’ long-term interests with those of our stockholders.
Our Insider Trading Policy prohibits all employees and officers from pledging shares, engaging in short sales or hedging transactions involving Adobe’s securities.
We have a clawback policy for certain performance-based incentive compensation of our executive officers.
Fiscal Year 2015 Meetings of the Board and Committees
During fiscal year 2015, our Board held six meetings, and its three standing committees—Audit Committee, Executive Compensation Committee, and Nominating and Governance Committee—collectively held 21 meetings. Other than Ms. Desmond, each director attended at least 75% of the meetings (held during the period that such director served) of the Board and the committees on which such director served in fiscal year 2015. Members of our Board are encouraged to attend our annual meetings of stockholders. Eleven of our thirteen Board members attended our 2015 Annual Meeting of Stockholders.
The following table sets forth the three standing committees of our Board, the members of each committee, and the number of meetings held by our Board and the committees during fiscal year 2015:
Name
 
 
Board
 
Audit
 
Executive
Compensation
 
Nominating and
Governance
 
 
 
 
 
 
 
 
 
 
Ms. Banse
 
X
 
 
 
X
 
 
Mr. Barlow (1)
 
X
 
 
 
X
 
 
Mr. Barnholt
 
X
 
 
 
X
 
Chair
Mr. Burgess
 
X
 
X
 
 
 
 
Mr. Calderoni (2)
 
X
 
Chair
 
 
 
 
Mr. Cannon (1)
 
X
 
X
 
 
 
 
Mr. Daley (2)
 
X
 
X
 
 
 
X
Ms. Desmond
 
X
 
 
 
 
 
X
Dr. Geschke
 
Chair
 
 
 
 
 
 
Mr. Narayen
 
X
 
 
 
 
 
 
Mr. Rosensweig
 
X
 
 
 
Chair
 
X
Dr. Sedgewick (1)
 
X
 
 
 
X
 
 
Dr. Warnock
 
Chair
 
 
 
 
 
 
Number of meetings held in fiscal year 2015
 
6
 
10
 
7
 
4
(1) 
Following the 2016 Annual Meeting, Messrs. Barlow, Cannon and Sedgewick will no longer serve on their respective committees, as each has elected not to stand for re-election. No other changes to the committees’ membership are anticipated by the Board at this time.
(2) 
Prior to April 9, 2015, Mr. Daley served as Chair of our Audit Committee. Effective April 9, 2015, Mr. Calderoni was appointed as Chair of our Audit Committee. The members of the respective committees satisfy the applicable qualification requirements of the SEC, NASDAQ and the Code.


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Communications with the Board
Any stockholder who desires to contact our Board, or specific members of our Board, may do so electronically by sending an email to the following address: directors@adobe.com. Alternatively, a stockholder may contact our Board, or specific members of our Board, by writing to: Stockholder Communications, Adobe Systems Incorporated, 345 Park Avenue, San Jose, California 95110 USA. All such communications will be initially received and processed by the office of our Corporate Secretary. Accounting, audit, internal accounting controls and other financial matters will be referred to the Chair of the Audit Committee. Other matters will be referred to the Board, the non-employee directors or individual directors as appropriate.
Board Leadership Structure
We currently separate the roles of Chief Executive Officer and Chairmen of our Board. Our Board is chaired by Dr. Geschke and Dr. Warnock, Adobe’s founders and former President and Chief Executive Officer, respectively. The duties of the Chairmen of our Board include:
presiding over all meetings of the Board;
preparing the agenda for Board meetings in consultation with the Chief Executive Officer, other members of our executive management and other members of our Board;
calling and presiding over meetings of the independent directors;
managing the Board’s evaluation of the Chief Executive Officer; and
presiding over all meetings of stockholders.
Accordingly, the Chairmen have substantial ability to shape the work of our Board. We believe that separation of the positions of Chairmen and Chief Executive Officer reinforces the independence of our Board in its oversight of our business and affairs. In addition, such separation helps create an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of our Board to monitor whether management’s actions are in the best interests of Adobe and its stockholders.
Our Board also believes that there may be advantages to having independent chairmen for matters such as communications and relations between our Board, the Chief Executive Officer and other senior management, and in assisting our Board in reaching consensus on particular strategies and policies. Dr. Geschke’s and Dr. Warnock’s past service as executive officers helps ensure our Board and management act with a common purpose, making them best positioned to act as a bridge between management and the Board. Having Chairmen separate from the Chief Executive Officer also allows the Chairmen to focus on assisting the Chief Executive Officer and senior management in seeking and adopting successful business strategies and risk management policies and in making successful choices in management succession. The Board also believes that it is advantageous to have Chairmen with extensive history and knowledge of Adobe, our corporate culture and the industries in which we compete, as is the case with Dr. Geschke and Dr. Warnock.
The Board’s Role in Risk Oversight
Risk assessment and oversight are an integral part of our governance and management processes. Our Board takes an active role in reviewing Adobe’s corporate strategy and priorities on an on-going basis, and also encourages management to promote a culture that actively manages risks as a part of Adobe’s corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing Adobe. Throughout the year, senior management reviews these risks with the Board at regular Board and committee meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks. The Board regularly provides management with input on these risks and mitigation steps.
Our Board does not have a standing risk management committee, but rather administers this oversight function directly through our Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to oversee our major financial risk exposures,

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cyber-security exposures and the steps our management has taken to monitor and control these exposures, as well as oversight of our enterprise risk management program. The Audit Committee also monitors compliance with legal and regulatory requirements and oversees the performance of our internal audit function. Our Nominating and Governance Committee monitors the effectiveness of our Corporate Governance Guidelines and approves or disapproves any related-persons transactions. Our Executive Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking, which determination is reviewed by our Audit Committee.
Corporate Governance Guidelines
We believe in sound corporate governance practices and have adopted formal Corporate Governance Guidelines to enhance our effectiveness. Our Board adopted these Corporate Governance Guidelines in order to ensure that it has the necessary practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines set forth the practices our Board follows with respect to Board and committee composition and selection, Board meetings, Chief Executive Officer performance evaluation and management development and succession planning for senior management, including the Chief Executive Officer position. A copy of our Corporate Governance Guidelines is available on our website at http://www.adobe.com/investor-relations/governance.html.
Code of Ethics
We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer and certain other finance department executives, which is a “code of ethics” as defined by applicable SEC rules. The Code of Ethics is publicly available on our website at http://www.adobe.com/investor-relations/governance.html. If we make any amendments to the Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this Code of Ethics to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer or certain other finance department executives, we will disclose the nature of the amendment or waiver, its effective date, and to whom it applies, on our website at http://www.adobe.com/company/integrity.html or in a Current Report on Form 8-K filed with the SEC. There were no waivers of the Code of Ethics during fiscal year 2015.
Code of Business Conduct
We have also adopted a Code of Business Conduct applicable to all officers, directors and employees of Adobe as required by applicable NASDAQ listing standards. This Code of Business Conduct is publicly available on our website at http://www.adobe.com/company/integrity.html. There were no waivers of the Code of Business Conduct for any of our directors or executive officers during fiscal year 2015.
Board Evaluation
Every other year we engage an outside advisor to interview confidentially each of the members of our Board and to conduct a comprehensive Board self-evaluation to assess the effectiveness of our Board and committees. The Board then meets with the outside advisor to review and discuss the evaluation results and any actions to be taken as a result of the discussion. The evaluation aims to (1) find opportunities where our Board and committees can improve their performance and effectiveness, (2) assess any need to evolve the composition and expertise of our Board, and (3) assure that our Board and committees are operating in accordance with our Corporate Governance Guidelines and committee charters.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock as of February 17, 2016 by each entity or person who is known to beneficially own 5% or more of our common stock, each of our directors, each named executive officer (“NEO”) identified in “Executive Compensation—Summary Compensation Table” contained in this proxy statement and all of our directors and current executive officers as a group.
Name of Beneficial Owner(1)
 
 
Amount and Nature of
Beneficial Ownership
(2)(3)
 
 
Percent of Class(4)
 
 
 
 
 
 
 
PRIMECAP Management Company
33,244,110

(5) 
 
6.63%
225 South Lake Avenue, No. 400
Pasadena, CA 91101
 
 
 
 
FMR LLC
32,199,913

(6) 
 
6.42%
245 Summer Street
Boston, MA 02210
 
 
 
 
Entities associated with BlackRock, Inc.
28,877,347

(7) 
 
5.76%
55 East 52nd Street
New York, NY 10022
 
 
 
 
The Vanguard Group
28,697,991

(8) 
 
5.73%
100 Vanguard Blvd.
Malvern, PA 19355
 
 
 
 
Shantanu Narayen
366,236

(9) 
 
*
Mark Garrett
50,107

(10) 
 
*
Abhay Parasnis

 
 
*
Bradley Rencher
102,896

(11) 
 
*
Matthew Thompson
51,718

 
 
*
Amy L. Banse
27,791

(12) 
 
*
Kelly J. Barlow
3,426

(13) 
 
*
Edward W. Barnholt
63,124

(14) 
 
*
Robert K. Burgess
88,124

(15) 
 
*
Frank A. Calderoni
21,051

(16) 
 
*
Michael R. Cannon
88,124

(17) 
 
*
James E. Daley
57,202

(18) 
 
*
Laura B. Desmond
21,051

(19) 
 
*
Charles M. Geschke
409,271

(20) 
 
*
Daniel L. Rosensweig
51,568

(21) 
 
*
Robert Sedgewick
125,623

(22) 
 
*
John E. Warnock
622,997

(23) 
 
*
All directors and current executive officers as a group (22 persons)
2,175,211

(24) 
 
0.43%
_________________________
*
Less than 1%.
(1) 
The address of each person named in the table, unless otherwise indicated, is c/o Adobe Systems Incorporated, 345 Park Avenue, San Jose, California 95110.
(2) 
This table is based upon information supplied by executive officers, directors and principal stockholders, as well as beneficial ownership reports filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. None of the shares beneficially owned by our executive officers and directors are pledged as security.

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(3) 
Holdings reported include any equity awards deferred under our deferred compensation plan.
(4) 
Applicable percentages are based on 501,214,270 shares outstanding on February 17, 2016, adjusted as required by rules promulgated by the SEC.
(5) 
Based solely on a Schedule 13G/A filed with the SEC on February 12, 2016, reporting beneficial ownership as of December 31, 2015, with sole dispositive power as to all shares and sole voting power with respect to 5,236,729 shares.
(6) 
Based solely on a Schedule 13G/A filed with the SEC on February 12, 2016, reporting beneficial ownership as of December 31, 2015, with sole dispositive power as to all shares and sole voting power with respect to 3,644,225 shares.
(7) 
Based solely on a Schedule 13G/A filed with the SEC on January 25, 2016, reporting beneficial ownership as of December 31, 2015. Such entities have sole dispositive power as to all shares and sole voting power with respect to 24,546,800 shares.
(8) 
Based solely on a Schedule 13G/A filed with the SEC on February 10, 2016, reporting beneficial ownership as of December 31, 2015, with sole dispositive power as to 27,710,710 shares, sole voting power with respect to 931,788 shares, shared dispositive power as to 987,281 shares and shared voting power with respect to 50,200 shares.
(9) 
Consists of 298,972 shares held by the Narayen Family Trust, of which Mr. Narayen is a trustee, and 67,264 shares issuable upon exercise of outstanding options held by Mr. Narayen exercisable within 60 days of the date of this table.
(10) 
Consists of 50,000 shares held by the Garrett Living Trust, of which Mr. Garrett is a trustee, and 107 shares held by the Garrett Family Investment Partnership LP.
(11) 
Includes 18,410 shares issuable upon exercise of outstanding options held by Mr. Rencher exercisable within 60 days of the date of this table.
(12) 
Includes 3,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Ms. Banse.
(13) 
Includes 3,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units. After vesting, the shares will be transferred to ValueAct Capital. As a partner of ValueAct Capital, Mr. Barlow may be deemed to be the beneficial owner of additional shares held by the ValueAct entities, totaling 11,777,725 shares. Mr. Barlow disclaims beneficial ownership except to the extent of his pecuniary interest in each applicable ValueAct entity.
(14) 
Consists of 5,000 shares held by a family trust, of which Mr. Barnholt is a trustee; 29,698 shares held by Mr. Barnholt; and 28,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Barnholt.
(15) 
Consists of 33,078 shares held by the Burgess Family Trust, of which Mr. Burgess is a trustee; 1,620 shares, for which Mr. Burgess has shared voting and dispositive power, held in trust for the benefit of his children; and 53,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Burgess.
(16) 
Includes 3,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Calderoni.
(17) 
Consists of 5,000 shares held by the Michael Cannon 2004 Trust, of which Mr. Cannon is a trustee; 29,698 shares held by Mr. Cannon; and 53,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Cannon.

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(18) 
Includes 32,542 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Daley.
(19) 
Includes 3,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Ms. Desmond.
(20) 
Consists of 296,547 shares held by the Geschke Family Trust, of which Dr. Geschke is a trustee, and 112,724 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Dr. Geschke.
(21) 
Consists of 48,142 shares held by The Rosensweig 2012 Irrevocable Children’s Trust, of which Mr. Rosensweig is a trustee and 3,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Rosensweig.
(22) 
Includes 49,702 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Dr. Sedgewick.
(23) 
Consists of 596,703 shares held by the Warnock Family Trust, of which Dr. Warnock is a trustee; 22,868 shares held by Dr. Warnock; and 3,426 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Dr. Warnock.
(24) 
Includes 461,378 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by our directors and current executive officers. See also footnotes 9 through 22.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and directors, as well as any person or entity who owns more than 10% of a registered class of our common stock or other equity securities, to file with the SEC certain reports of ownership and changes in ownership of our securities. Executive officers, directors and stockholders who hold more than 10% of our outstanding common stock are required by the SEC to furnish us with copies of all required forms filed under Section 16(a). We typically prepare Section 16(a) forms on behalf of our executive officers and directors based on the information provided by them.
Based solely on review of this information and written representations by our executive officers and directors that no other reports were required, we believe that, during fiscal year 2015, no reporting person failed to file the forms required by Section 16(a) of the Exchange Act on a timely basis.

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EQUITY COMPENSATION PLAN INFORMATION
The following table shows information related to our common stock which may be issued under our existing equity compensation plans as of November 27, 2015, including our 1997 Employee Stock Purchase Plan, 2003 Equity Incentive Plan, and 1994 Performance and Restricted Stock Plan, plus certain non-stockholder-approved equity compensation plans and awards assumed by us (and which were not subsequently voted on by Adobe’s stockholders) in connection with our acquisitions of Macromedia, Inc. in December 2005, Omniture, Inc. in October 2009, Demdex, Inc. in January 2011, EchoSign, Inc. in July 2011, Typekit, Inc. in September 2011, Auditude, Inc. in October 2011, Efficient Frontier, Inc. in January 2012, Behance, Inc. in December 2012, Neolane in July 2013, Aviary in September 2014 and Fotolia in January 2015:
Plan Category
 
Number of
securities to be
issued upon exercise
of outstanding
options, warrants and rights
(1)
 
Weighted-average
exercise price of
outstanding
options, warrants and rights
(1)(2)
 
Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in first
column)
 
 
 
 
 
 
 
Equity compensation plans approved by
    Adobe’s stockholders
14,033,878(3)

 
$34.54
 
59,268,684(4)

Equity compensation plans not approved by
    Adobe’s stockholders(5)
1,272,586

 
$13.89
 

Total
15,306,464

 
$28.28
 
59,268,684

_________________________
(1) 
Rights include performance shares and restricted stock units.
(2) 
Weighted-average exercise prices are calculated without regard to performance shares and RSUs, which do not have any exercise price.
(3) 
Includes 1,386,850 shares of common stock issuable pursuant to the terms of our 2013 Performance Share Program at maximum levels (200%) as of November 27, 2015. However, 504,150 shares were forfeited due to participants’ departure from Adobe prior to the certification date. Furthermore, after the 2015 fiscal year end, it was determined that 198% of the target awards (1,372,962 shares) were earned under the terms of this program, and the balance were forfeited as of January 24, 2016. Includes 1,241,000 shares of common stock issuable pursuant to the terms of our 2014 Performance Share Program at maximum levels (200%) as of November 27, 2015. This number does not include 176,100 shares at maximum levels (200%) under our 2014 Performance Share Program that were forfeited due to participants’ departure from Adobe prior to the certification date. Includes 1,253,016 shares of common stock issuable pursuant to the terms of our 2015 Performance Share Program at maximum levels (200%) as of November 27, 2015. This number does not include 89,100 shares at maximum levels (200%) under our 2015 Performance Shares Program that were forfeited due to participants’ departure from Adobe prior to the certification date.
(4) 
Includes 10,808,083 shares that are reserved for issuance under the 1997 Employee Stock Purchase Plan as of November 27, 2015 and 48,460,601 shares that are reserved for issuance under the 2003 Equity Incentive Plan.
(5) 
We assumed the outstanding stock awards, and in certain situations described below shares remaining available for future issuance, under various equity incentive plans maintained by companies we acquired, as follows:

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Company
Date of Acquisition
Macromedia, Inc.
December 3, 2005
Omniture, Inc.
October 23, 2009
Demdex, Inc.
January 18, 2011
EchoSign, Inc.
July 15, 2011
Typekit, Inc.
September 28, 2011
Auditude, Inc.
October 18, 2011
Efficient Frontier, Inc.
January 13, 2012
Behance, Inc.
December 20, 2012
Neolane
July 22, 2013
Aviary, Inc.
September 22, 2014
Fotolia
January 27, 2015
As part of the assumption of the Macromedia plans, effective December 3, 2005, our Board adopted the Adobe Systems Incorporated 2005 Equity Incentive Assumption Plan (the “Assumption Plan”). The Assumption Plan permits the grant of non-statutory stock options, stock appreciation rights, stock purchase rights, stock bonuses, restricted stock, restricted stock units, performance shares and performance units using shares reserved under certain of the assumed Macromedia plans (as described below). In connection with our assumption of the Omniture plans, on November 16, 2009, the Assumption Plan was amended by the Executive Compensation Committee to include shares reserved under certain of the assumed Omniture plans (as described below). The Assumption Plan has not been approved by our stockholders. The terms and conditions of stock awards under the Assumption Plan are substantially similar to those under our 2003 Equity Incentive Plan. In accordance with applicable NASDAQ listing requirements, we previously granted new stock awards under the Assumption Plan to our employees who were not employed by or providing services to us or any of our affiliates prior to December 3, 2005 (other than employees of Macromedia before December 3, 2005, and Omniture before October 23, 2009, and their respective affiliates and subsidiaries).
Our Executive Compensation Committee elected to retire all remaining outstanding share reserves under the Assumption Plan in 2015 and no additional shares will be granted out of the Assumption Plan reserves. However, the plan remains in place to govern the awards issued and outstanding thereunder and to facilitate the assumption of, and grants from, equity plan share reserves as deemed appropriate in connection with potential future acquisitions.
In addition to the Assumption Plan, as of the fiscal year ended November 27, 2015, we maintained equity compensation plans covering stock awards that were assumed by us as follows: four plans in connection with the Macromedia acquisition; seven plans in connection with the Omniture acquisition; two plans in connection with the Day Software acquisition; one plan in connection with the Demdex acquisition; one plan in connection with the EchoSign acquisition; one plan in connection with the Typekit acquisition; two plans in connection with the Auditude acquisition; one plan and one non-plan stock option agreement in connection with the Efficient Frontier acquisition; one plan in connection with the Behance acquisition; two plans in connection with the Neolane acquisition; one plan in connection with the Aviary acquisition; and one plan in connection with the Fotolia acquisition, in each case under which stock awards had been granted by these predecessor entities that remained outstanding at the time of the respective acquisition. We did not assume the reserves of the plans from which these awards were issued. The “Equity compensation plans not approved by Adobe’s stockholders” row in the “Equity Compensation Plan Information” table above shows aggregated share reserve information for these awards in addition to the Assumption Plan. No future awards may be granted under any of our acquired plans.
Please see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2015 Annual Report on Form 10-K and the notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation” for further information regarding our equity compensation plans and awards.

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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides information regarding our executive compensation programs during fiscal year 2015 for the following executive officers of Adobe:
Shantanu Narayen, President and Chief Executive Officer
Mark Garrett, Executive Vice President and Chief Financial Officer
Matthew Thompson, Executive Vice President, Worldwide Field Operations
Bradley Rencher, Executive Vice President and General Manager, Digital Marketing
Abhay Parasnis, Executive Vice President and Chief Technology Officer

These executive officers are referred to in this Compensation Discussion and Analysis and in the accompanying compensation tables as our named executive officers, or “NEOs.”
This Compensation Discussion and Analysis describes the material elements of our executive compensation programs for our executive officers during fiscal year 2015. It also provides an overview of our executive compensation philosophy, including our principal compensation programs. Finally, it analyzes how and why the Executive Compensation Committee of our Board (the “Committee”) arrived at its material compensation decisions for our executive officers, including our NEOs, in fiscal year 2015.
Fiscal Year 2015 Business Highlights
Over the past several years, Adobe has radically transformed our business model, shifting from a focus on pre-packaged software to a services-based business built around subscription offerings and recurring revenue. In fiscal year 2015, this new business model continued to produce strong results, with over two-thirds of our revenue coming from recurring sources. With the continued growth of Creative Cloud, Adobe’s leadership team has achieved a monumental shift in our core Digital Media business, driving growth and increasing the predictability of our financial results. At the same time, our NEOs have continued to drive growth in our Digital Marketing business that has achieved leadership in its category. While executing on this strategy, our NEOs have continued to produce strong financial results. For the fiscal year ended November 27, 2015:
Adobe achieved a record $4.8 billion in annual revenue, representing year-over-year growth of 16%;
Our Digital Media Annualized Recurring Revenue (“ARR”) grew to $3 billion, growing $1.12 billion during the fiscal year;
Adobe Marketing Cloud achieved a record $1.36 billion in annual revenue and met our goal of approximately 30% annual bookings growth;
Adobe added more than 2.7 million paid Creative Cloud subscriptions, exiting the year with over 6.17 million subscriptions;
Adobe repurchased 8.1 million shares during the year, returning approximately $627 million of cash to stockholders; and
During the fiscal year, the price of Adobe’s common stock increased approximately 25%, delivering significant returns to our stockholders.
Our executive officers also delivered on key strategic performance objectives established by the Committee for fiscal year 2015 and other corporate initiatives. In addition to producing strong financial results in fiscal year 2015, achievements included:
Continued broad leadership recognition in digital marketing, including Adobe Marketing Cloud being named the sole leader in the Digital Experience Platforms Wave report by Forrester Research and as a leader in Gartner Magic Quadrant for Digital Marketing Hubs;
Recognition as one of the “Best Places to Work” around the globe by a number of publications, including Glassdoor’s top 20 list;

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Being named to the “Global 100 Most Sustainable Corporations in the World Index,” one of only two software companies included this year;
For the first time, being included on CR Magazine’s 100 Best Corporate Citizens List in recognition of our transparency in reporting and responsible business practices;
Climbing to #68 on Interbrand’s 2015 list of Best 100 Global Brands;
2015 IEEE Spectrum patent rankings ranked Adobe #6 among software companies worldwide for patent portfolio size, strength, and quality; and
Continued emphasis on key corporate social responsibility objectives as Adobe continues to impact our community, donating millions of dollars to charitable causes (directly and through the Adobe Foundation), and serving in the community through our employees, who contributed thousands of hours volunteering through pro bono initiatives and Adobe-sponsored programs.
Fiscal Year 2015 Compensation Highlights
Our executive compensation programs are designed to directly tie the outcomes of our incentive compensation awards for our executive officers to the achievement of our key strategic performance objectives and returns to our stockholders, and drive the creation of sustainable long-term stockholder value. Our fiscal year 2015 compensation programs reflected this philosophy, and compensation earned reflected our business achievements discussed above.
Our financial and operational results were substantially in line with the high expectations our Executive Compensation Committee set for our NEOs at the outset of the fiscal year, including record ARR in our Digital Media business and net bookings in our Digital Marketing business, as well as achievement of key customer advocacy objectives. Accordingly, the Committee determined that the annual cash incentive awards for our NEOs were achieved at 95% of their target award opportunity (for more discussion of cash awards, see the section captioned “Cash Incentives” below).
The three-year performance period under Adobe’s 2013 Performance Share Program closed at the end of our 2015 fiscal year. Under this program shares were earned based on relative total stockholder return (“TSR”) over a three-year performance period, during which Adobe achieved a remarkable total return of 158.6%. With this performance our percentile rank among the companies included in the NASDAQ 100 Index as of December 1, 2012 was approximately 89%, which under the plan resulted in each of the participants being awarded performance shares equal to 198% of the executive’s target number of shares.
Approximately 87% of our CEO’s target compensation in fiscal year 2015 was comprised of equity awards. A substantial percentage (50%) of those awards are based on relative TSR (compared against companies included in the NASDAQ 100 Index) over a three-year performance period issued under our Performance Share Program, with the balance of equity value issued as time-based RSUs that vest annually over three years. This means that, unless we achieve the TSR performance objective of the Performance Share Program each year and over the long-term, our executive officers will not realize the full potential value of their long-term incentive compensation. Further, because Adobe common stock underlies our equity-based compensation awards, the immediate value of these awards is wholly subject to fluctuations in our stock price, strongly aligning the interests of our executive officers with those of our stockholders.
Our pay-for-performance philosophy is reflected in the chart below, which depicts the composition of our CEO and other NEOs’ targeted 2015 compensation:

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Mr. Narayen’s and Other NEOs’ Target Pay Mix(1)(2) 
_______________________________________________________________________________________________________ 
(1) 
The mechanism for calculating the target equity award values is described in detail below under “Equity Incentives—Equity Compensation Mix.” The amounts shown for our other NEOs represents their average target pay mix. For the actual grant date fair values of our equity awards, computed in accordance with stock-based compensation accounting principles, please see “Executive Compensation—Summary Compensation Table” below.
(2) 
Mr. Parasnis’ compensation is excluded from this data, as he joined Adobe in the latter half of the fiscal year and did not receive performance-based equity compensation during the year.
Response to 2015 Say-on-Pay Vote; Compensation Approach in Fiscal 2016
Adobe values the input of our stockholders on our compensation programs. We hold an advisory vote on executive compensation on an annual basis. We also regularly communicate with our stockholders to better understand their opinions on governance issues, including compensation. The Executive Compensation Committee carefully considers stockholder feedback and the outcome of each vote when reviewing our executive compensation programs each year. At our 2015 annual stockholders meeting, over 90% of the votes cast approved, on an advisory basis, our NEO compensation and disclosures for fiscal year 2014. This high percentage of votes in favor of our compensation approach validated the updates to our compensation programs in response to stockholder feedback received in previous years. In particular, we believe the strong approval was largely driven by the following attributes of our fiscal year 2014 executive compensation programs: (1) the three-year performance period under our Performance Share Program; (2) basing our Performance Share Program on a single objective metric—relative TSR—closely aligning the compensation opportunity of our NEOs to long-term stockholder interests; (3) putting in place a clawback policy applicable in the event of a material restatement of our financial statements (as described further below), and (4) basing our short-term cash incentive program on financial metrics that align with our growth strategy.
In addition to taking stockholder feedback into account, the Committee has evaluated a number of other factors discussed below in making decisions about our executive compensation approach. Following this evaluation, the Committee determined not to make significant changes to our equity compensation program for fiscal year 2016, continuing the general approach from recent fiscal years. This program was designed to align with our three-year

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operating plan and the multi-year growth strategy of our Digital Media and Digital Marketing businesses as our executives guide Adobe through a planned period of significant growth.
As in previous years, the Committee continued to emphasize annualized recurring revenue and bookings in our 2016 executive cash bonus plan to drive growth in our strategic businesses. The Committee added additional strategic objectives to the corporate performance payout under the 2016 bonus plan in order to motivate our executives to achieve certain company priorities, such as driving customer value and more closely integrating Adobe’s cloud offerings. Lastly, the Committee decided to place greater weight on individual performance in the bonus plan, increasing the individual performance component to fifty percent of each participant’s bonus opportunity.
Additional information regarding our fiscal year 2016 executive compensation programs is available in our Current Report on Form 8-K filed with the SEC on January 29, 2016.
Compensation Philosophy and Objectives
Adobe’s vision is to change the world through digital experiences. To support our product and technical innovation with strong execution, we strive to create a dynamic work environment that attracts and retains great people who drive successful business outcomes, growth, innovation and customer focus for Adobe.
We believe that the skills, experience and dedication of our executive officers are critical factors that contribute directly to our operating results, thereby enhancing stockholder value. In order to continue to develop and bring to market the products that drive our financial performance, we must attract, motivate, and retain the top talent within our industry. As such, our compensation programs are designed: (1) to provide competitive compensation opportunities that attract, as needed, individuals with the skills necessary for us to achieve our business objectives and retain those top performing individuals; (2) to relate directly to our corporate performance and meaningfully drive our business objectives; (3) to reward and motivate strong individual performance, but with a substantial majority of compensation tied to corporate objectives; (4) to avoid undue compensation-related risk; and (5) to create direct alignment with our stockholders by providing equity ownership in the company. Further, the following aspects of our compensation program underscore our continued commitment to corporate governance and compensation best practices:
Our executives’ total compensation is designed to pay for performance and is comprised of elements addressing both short-term and long-term financial performance.
Our Insider Trading Policy, which applies to all employees, officers and directors of the company, prohibits transactions involving pledging, hedging or short sales of Adobe equity.
Our officers at the senior vice president level and above are subject to stock ownership guidelines.
We do not provide golden parachute excise tax gross-up payments.
We do not provide defined benefit pension plans, supplemental executive retirement plans or retiree health benefits.
We have a clawback policy for certain performance-based incentive compensation of our executive officers.
We believe our executive compensation program has been effective at driving the achievement of our target financial and strategic results, appropriately aligning executive pay and corporate performance and enabling us to attract and retain top executives within our industry.

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Peer Group and Competitive Positioning
The Committee regularly reviews relevant market and industry practices on executive compensation. We do so to balance our need to compete for talent with the need to maintain a reasonable and responsible cost structure while aligning our executive officers’ interests with those of our stockholders.
Each year, to assist the Committee in its deliberations on executive compensation, the Committee reviews and updates our list of peer companies as points of comparison, as necessary, to ensure that the comparisons are meaningful. Our independent compensation consultant, using the Committee’s criteria (described in the table below), provides recommendations on the composition of our compensation peer group.” Based on the factors described in the table below and the input of Compensia and management, the Committee made no changes to our peer group for 2015.
Peer Group for Fiscal Year 2015

General Description
 
Criteria Considered
 
Peer Group List
 
 
 
 
 
High-technology companies at which our NEOs’ positions would be analogous in scope and complexity, which operate in similar or related businesses to Adobe, and with which Adobe competes for talent
 
Companies with revenues within 0.5x to 2.0x of Adobe’s and market capitalization within 0.3x to 3.0x of Adobe’s, and at least three of the following criteria: (1) global multi-faceted software/Internet company; (2) profit margin within 0.5x to 2.0x of Adobe’s; (3) number of employees within 0.5x to 2.0x of Adobe’s; (4) company names Adobe as peer; and (5) stockholder advisory firm names company as Adobe’s peer
 
Activision Blizzard, Inc.
Autodesk, Inc.
Broadcom Corporation CA, Inc. Citrix Systems, Inc.
Intuit, Inc. Juniper Networks, Inc.
NetApp, Inc. NVIDIA Corporation
salesforce.com, inc.
Symantec Corporation
VMware, Inc.
Yahoo! Inc.
Our independent compensation consultant then prepares a compensation analysis compiled from both executive compensation surveys and data gathered from publicly available information for our peer group companies. The Committee uses this data to compare the current compensation of our NEOs to the peer group and to determine the relative market value for each NEO position. In addition, because Adobe’s market cap is within the top quartile of its peer companies, the Committee and management also specifically consider position of market cap relative to peers when reviewing equity and target total direct compensation levels.
Pay Mix
Our executive compensation programs include base salary, an annual cash incentive opportunity, equity incentive awards and employee benefits. The percentage of performance-based compensation, or “at risk” pay, for Adobe’s management and other employees generally increases with job responsibility, reflecting our view of internal pay equity and the ability of a given employee to contribute to our results. We also generally align our compensation strategy with the practices of our peer group when possible and to the extent consistent with our business model. Our executive compensation programs focus on linking pay to performance and reinforcing the alignment of our executives’ interests with those of our stockholders. If results do not meet our expectations, our NEOs will receive compensation that is below our target levels and may be below market in comparison to our peer group. Similarly, when superior results are achieved, our NEOs may receive compensation that is above our target levels and above market. For more information, see the section captioned “Realizable Pay” below.

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Compensation Objectives
 
 
 
 
 
 
Objectives
Compensation
Element
 
 
Description
 
Attract/Retain Key Performers
 
Reward
Short-Term
Performance
 
Reward
Long-Term
Performance
 
 
 
 
 
 
 
 
 
Base Salary    
 
Base salary provides market competitive compensation in recognition of role and responsibilities.
 
ü
 
 
 
 
Cash Incentives    
 
Cash incentives are earned in full or in part only if (1) we achieve certain pre-established one-year company performance targets, (2) the recipient achieves individual performance levels or objectives, and (3) the recipient remains employed with Adobe for the performance period.
 
ü
 
ü
 
 
Equity Incentives    
 
Equity incentives are awarded upon hire and then typically annually thereafter. Awards are both performance-based and time-based, each vesting over multiple years, aligning employee interests with stockholder interests.
 
ü
 
ü
 
ü
Employee Benefits
and Perquisites    
 
Benefits programs for all Adobe eligible employees provide protection for health, welfare and retirement.
 
ü
 
 
 
 
In setting the mix among the different elements of executive compensation, we do not target specific allocations, but generally emphasize performance-based compensation, both cash and equity, in our executive officers’ compensation. Total target cash compensation opportunity (base salary and cash incentives) represents less of our executive officers’ total target compensation than the total target equity compensation opportunity, to increase alignment with our stockholders’ interests and motivate performance that creates sustainable long-term stockholder value.
These allocations reflect our belief that a significant portion of our NEOs’ compensation should be performance based and therefore “at risk” based on company and individual performance, as well as NEO service requirements. Since our cash incentive opportunities and equity incentive awards have both upside opportunities and downside risks and our actual performance can deviate from the target goals, the amount of compensation actually earned will differ from the target allocations.
The fiscal year 2015 target total direct compensation (“TDC”) for our NEOs was set by the Committee based on a number of factors, including: competitive pay practices reflected in the peer group data; each executive’s contribution to Adobe; company and individual performance; anticipated future contributions; internal pay equity; and historical pay levels. The Committee also reviewed the positioning of the total target cash and equity elements of compensation against levels at our peer companies, but these individual elements of NEO compensation may vary based on the importance of the other factors noted above in any given year with respect to any given NEO. Because our fiscal year begins earlier than most of our peer companies, our target TDC attempts to foresee what the competitive compensation positioning for each role will be for the coming fiscal year.
Base Salary
For fiscal year 2015, the Committee reviewed the base salaries of our NEOs, comparing these salaries to the base salary levels at the companies in our peer group, as well as considering the roles and responsibilities, performance and potential performance of the NEOs and their mix of other compensation elements (cash and equity incentives). Following its review, the Committee determined that our NEO salaries were competitive and did not make any changes to the salaries of our NEOs, which are shown in the table below.

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Fiscal Year 2015 Base Salaries
Name
 
2015
Salary
(1)
($)
 
 
 
Shantanu Narayen
1,000,000

Mark Garrett
650,000

Matthew Thompson
625,000

Bradley Rencher
530,000

Abhay Parasnis
500,000

_________________________
(1) 
Actual base salaries earned during the fiscal year are shown below in the “Fiscal Year 2015 Executive Bonus Plan Target Cash Incentives” table.
Cash Incentives
Annual Cash Incentive Plan
At the outset of 2015, the Committee approved the Fiscal Year 2015 Executive Annual Incentive Plan (the “Executive Bonus Plan”), which operates under the terms of a stockholder-approved 2011 Executive Cash Performance Bonus Plan, to provide cash compensation opportunities to our NEOs based on the company’s achievement of pre-established performance goals. The Committee set threshold, target and maximum performance levels for these goals that were based on our Board-approved operating plan for fiscal year 2015 (the “Operating Plan”).
Plan Design and Target Annual Incentive Opportunity
The Committee set the target annual cash incentive opportunity for fiscal year 2015 (expressed as a percentage of base salary earned during the year) for each NEO early in the fiscal year. In setting the target levels, the Committee considered each NEO’s fiscal year 2015 target total cash opportunity against the peer group data provided by our independent compensation consultant, internal pay equity and the roles and responsibilities of the NEOs. The Committee set the fiscal year 2015 cash incentive targets for each of the NEOs at the same percentage as their target opportunities in fiscal year 2014 (other than Mr. Parasnis, who was not with the company during 2014). The Committee believes that the target annual cash incentive opportunity should make up a larger portion of an NEO’s total target cash compensation as the executive’s level of responsibility increases.
As with our fiscal year 2014 program, the Executive Bonus Plan was designed to align our NEOs’ cash bonus incentives with the company’s strategic priorities of driving financial performance based on ARR growth in Digital Media and net bookings growth (“Bookings”) in Digital Marketing. Focusing our business on subscriptions and cloud-based services, such as Creative Cloud and Adobe Marketing Cloud, encourages our executives to continue to grow our recurring revenue streams. As discussed in our recent Annual Reports, the Committee and the company’s management feel that these metrics are the best indicators of the forward-looking health of Adobe’s business following our transition away from perpetual revenue (generally recognized at the time of sale), which has been largely replaced by subscription revenue that is generally recognized over time.
Portions of the cash opportunity for each NEO were also tied to a customer advocacy objective and an individual goal component tailored to each executive.
The Committee determined that, for purposes of earning any award under the Executive Bonus Plan for fiscal year 2015, we must have achieved a threshold goal of 85% of the GAAP Revenue set forth in the Operating Plan. If the threshold goal was not achieved, none of the participants in the Executive Bonus Plan would have been eligible to earn any annual cash incentive award. If we achieved the GAAP Revenue threshold, each participant would be eligible to earn a maximum award of 200% of such participant’s bonus target.
Actual awards earned by each participant (which are a reduction from the maximum award funded once the GAAP Revenue threshold is met) are based on a formula with the company’s achievement of its performance goals (Financial Result and Customer Advocacy, collectively referred to as the Corporate Result) weighted at 75% of the

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participant’s target award, and achievement of the participant’s individual goals weighted at 25% of the participant’s target award, as follows:
Financial Performance
(4/5 of Corporate Result)
+
Customer Advocacy
(1/5 of Corporate Result)
+
Individual Goals Result
(25%)
Corporate Result (75%)
 
Corporate Result
The “Corporate Result” (expressed as a percentage) is the weighted average of two elements: (1) Financial Performance and (2) Customary Advocacy.
The company’s financial performance for the Performance Period (“Financial Performance”) is determined by a metric comprised of both (1) net new annualized recurring revenue in Digital Media and (2) Bookings for the Adobe Marketing Cloud, in both cases as set forth in the Operating Plan.
As described in our Annual Report on Form 10-K for the fiscal year ended November 27, 2015, we define annualized recurring revenue, or ARR, in our Digital Media business as the sum of: (1) the number of current subscriptions, multiplied by the average subscription price paid per user per month, multiplied by twelve months, taken to indicate the annual value of our Digital Media subscriptions and services; plus (2) twelve months of contract value of Enterprise Term License Agreements where the revenue is ratably recognized over the life of the contract; plus (3) twelve months of Adobe Digital Publishing Suite contract value where the revenue is ratably recognized.
The Bookings target for Adobe Marketing Cloud is also based on the target set forth in the Operating Plan. Our Bookings measure is a proprietary formula that we use to monitor the value of our business in the Adobe Marketing Cloud.
Financial Performance measures net new ARR in our Digital Media business and Bookings for Adobe Marketing Cloud on a combined basis, with the actual percentage of Financial Performance achievement determining the Financial Performance payout percentage (with a maximum achievement of 200%). The potential results based on ARR and Bookings achievement are included in Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on January 28, 2015. Below is a sample of these potential results:
Financial Performance as % of Operating Plan Targets (rounded)(1)
 
Financial Performance Result (%)
85% and below
 
0%
90%
 
75%
95%
 
95%
100%
 
100%
105%
 
150%
110% and above
 
200%
_________________________
(1) 
The financial performance (as a percentage of operating plan target) will be rounded to the nearest whole number. 

The Customer Advocacy Result is based on quantitative and qualitative analysis of the company’s improvement of the customer experience by achievement of customer advocacy objectives. If the Financial Performance payout percentage is at or below 100%, then the maximum percentage of the Customer Advocacy Result permitted will be 100%. If the Financial Performance payout percentage is above 100%, then the maximum percentage of the Customer Advocacy Result permitted will be equal to the Financial Performance payout percentage (with a maximum achievement of 200%).

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The Corporate Result is also subject to adjustment by the Committee by up to 20 percentage points up or down based on the Committee’s assessment of the company’s qualitative performance during the fiscal year (with a maximum achievement of 200%).
Individual Goals
As noted above, each NEO’s individual achievement constitutes 25% of his target award opportunity under the Executive Bonus Plan. An executive’s individual goals result may range from 0% to 200%. These individual goals were selected by the Committee in consultation with our CEO (other than with respect to his own goals) at the outset of fiscal year 2015, and the Committee reviewed the achievement of such individual goals for each NEO to determine the NEO’s individual goals achievement. For our CEO, these individual goals for fiscal year 2015 focused on driving corporate growth, alliances and product innovation. For our other NEOs, the individual goals for fiscal year 2015 were specifically tailored to the functions led by each NEO and aligned to the achievement of our overall Operating Plan, including goals shown in the table below:
Executive Officer
 
Individual Goal (1)
 
 
 
Mark Garrett
 
Improve financial planning processes and drive cost savings
Matthew Thompson
 
Grow recurring revenue across business units and develop high-performing sales organization
Bradley Rencher
 
Drive product innovation and deliver improved customer experience
________________________
(1) 
The Committee did not set an individual goal for Mr. Parasnis, who joined in the latter half of our 2015 fiscal year. In determining his payout under the Executive Bonus Plan, the Committee assessed his overall performance during the fiscal year.
Calculation of Actual Awards
Once each component described above is certified by the Committee, the actual bonus award earned by each participant was determined using the following formula:
Actual Award
($)
=
[(Corporate Result % * 75%)
+
(Individual Goals Result * 25%)]
X
Target Award ($)
Fiscal Year 2015 Results and Payouts
At the time the corporate and individual goals were set for fiscal year 2015, the Committee believed that the Executive Bonus Plan goals were aggressive, achievable only with significant effort.
In fiscal year 2015 we achieved $4.796 billion of revenue, exceeding our GAAP Revenue threshold level. Our business generated ARR growth in Digital Media approximately in line with our internal goals at 97.5% of the Operating Plan target, and Bookings growth in Digital Marketing of 93.4% of the Operating Plan target, both on a constant-currency basis. The combined performance of 95% amounts to a Financial Performance Result of 100% according to the matrix included as Exhibit A to the Executive Bonus Plan, as set forth in our 8-K filed with the SEC on January 28, 2015. The Committee set the Customer Advocacy result at 75%, emphasizing the need for Adobe to continue to focus on providing a world-class experience to our customers. Together with the Financial Performance this resulted in a Corporate Result of 95%, which the Committee viewed as outstanding achievement in light of the relative difficulty of the targets under the Executive Bonus Plan. The Committee did not make a discretionary adjustment to the Corporate Result.
The Committee monitored each NEO’s performance on a periodic basis during the year and measured total achievement at year end. The Committee determined that our NEOs successfully drove the accelerated transformation of our business model to emphasize recurring revenue through ARR in our Digital Media business and Bookings in our Digital Marketing business, which generated growth and value for the company’s stockholders. In assessing each NEO’s individual goals achievement at 95%, the Committee focused on the Corporate Result and coordinated

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teamwork among the executives, as well as each executive’s high level of contribution and key role in driving growth and company priorities in each of their respective areas.
Based on a Corporate Result of 95% (accounting for 75% of each NEO’s bonus opportunity) and an individual goals achievement percentage of 95% for each NEO (accounting for the remaining 25% of the bonus opportunity), the actual payout percentage for each NEO under our 2015 Executive Bonus Plan was 95%. This resulted in the Committee awarding the cash bonuses shown in the following table:
Fiscal Year 2015 Executive Bonus Plan Cash Incentives
Name
 
Salary(1) 
($)
 
Target
Cash
Incentive
Percentage
(%)
 
Target
Cash
Incentive
(2) 
($)
 
Actual
Payout Percentage
(%)
 
Actual Cash Incentive Earned
($)
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
995,404

 
150
 
1,493,106

 
95
 
1,418,450

Mark Garrett
647,013

 
100
 
647,013

 
95
 
614,662

Matthew Thompson
622,127

 
100
 
622,127

 
95
 
591,021

Bradley Rencher
527,564

 
95
 
501,186

 
95
 
476,126

Abhay Parasnis
183,583

 
95
 
174,404

 
95
 
165,683

________________________
(1) 
Actual base salary earned during fiscal year 2015.
(2) 
Target cash incentive amount is calculated based on base salary amounts earned during the fiscal year at 100% payout.
Other Cash Incentives
The Committee retains authority to pay additional discretionary bonuses outside the Executive Bonus Plan but declined to grant any such awards in fiscal year 2015.
Equity Incentives
Goals of Equity Compensation
We use equity compensation to motivate and reward strong corporate performance and to retain valued executive officers. We also use equity incentive awards as a means to attract and recruit qualified executives. We believe that equity awards serve to align the interests of our NEOs with those of our stockholders by rewarding them for stock price growth. By having a significant percentage of our NEOs’ target TDC payable in the form of multi-year equity and, thus, subject to higher risk and longer vesting than cash compensation, our NEOs are motivated to take actions that will benefit Adobe and its stockholders in the long term.

Equity Compensation Mix
For fiscal year 2015, the mix of equity incentive awards to our NEOs consisted of 50% performance share awards and 50% time-based RSUs. The Committee determined that this mix of equity compensation would appropriately balance and meet our compensation objectives, as described in the table below. The Committee calculated the target values for equity to achieve this desired mix, based on a price of $72.71 per share, the trailing 30-day average of the closing price per share of our common stock as of January 15, 2015, the period just prior to the development of the equity compensation award recommendations. Based on this price per share, the total desired number of targeted shares was determined and then rounded up to the nearest 100 shares, then split equally between performance share awards and time-based RSUs.


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Fiscal Year 2015 Mix of Annual Equity Incentive Awards
Type of
Equity
(Allocation
Percentage)
 
Description
 
Objectives/Dilutive Effect
 
Vesting(1)
 
 
 
 
 
 
 
Performance Share Awards
(50%)
 
Stock-settled awards subject to performance- and time-based vesting conditions; three-year performance period determines the total number of shares earned, with significant benefits for overachievement and significant consequences for underachievement, including the potential for no award being earned; no purchase cost to executive, so awards always have value if earned
 
Focus NEOs on a three-year performance goal tied to long-term stockholder returns while also providing a strong retention incentive, requiring continuous employment to vest; provide significant incentive to grow our stock price; and use fewer shares than stock options, so less dilution
 
Performance shares vest upon the certification of performance results following a three-year performance period
 
 
 
 
 
 
 
Time-Based RSUs
(50%)
 
Stock-settled awards subject to time-based vesting conditions; no purchase cost to executive, so awards always have value
 
Provide a strong incentive for our NEOs to remain employed with us, as they require continuous employment while vesting; provide moderate reward for growth in our stock price; and use fewer shares than stock options, so less dilution
 
Vest in equal annual installments over a period of three years
_________________________
(1) 
Our NEOs’ equity awards are also subject to certain acceleration provisions as described below under “Severance and Change of Control Compensation” and “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2015—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2015 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards.”    
Target Value and Award Determination
For fiscal year 2015, the Committee, with input from its independent compensation consultant, management and our Chief Executive Officer, took a number of factors into account in determining the target value of the equity compensation opportunity for each of our NEOs. Among these factors were the individual performance of executives, peer group positioning, internal pay equity, employee retention and the other factors for determining compensation discussed under “Compensation Philosophy and Objectives” above. With regard to peer pay positioning, the Committee reviews the value of equity awards in the aggregate because of the different mix of equity awards granted by our peers, and the aggregated manner in which this data is presented in the peer group surveys. The Committee increased Mr. Narayen’s target equity opportunity in fiscal year 2015 to reflect his individual achievements and the company’s success coming out of a significant business transformation. The increase was also made in part to better position his equity in relation to high market cap peer companies and to enhance the retentive value of his total compensation. The Committee increased the target equity opportunities of other NEOs to better align their equity in relation to higher market cap companies in our peer group as well as to better align internal pay equity. The Committee believes that the target equity incentive compensation opportunity should make up a greater portion of an NEO’s potential TDC as the individual’s level of responsibility increases.
The following table sets forth the total target value determined by the Committee, as well as the resulting number of performance shares (target, maximum and earned) and RSUs granted to each of our NEOs at the outset of fiscal year 2015. Note that this table reflects the values targeted by the Committee at the outset of the fiscal year; for

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the actual grant date fair values of these equity awards, computed in accordance with stock-based compensation accounting principles, please see “Executive Compensation—Summary Compensation Table” below.
Equity Awards Granted by the Committee at the Outset of Fiscal Year 2015

 
 
 
 
 
Performance Share Program(1)
 
 
Name
 
 
 
Total Target Value of
Equity Award
($)
(2)
 
Target
Award
(#)
 
Maximum
Award
(#)
 
RSUs
Award(s)
(#)
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
 
$
16,500,000

 
113,500

 
227,000

 
113,500

Mark Garrett
 
$
5,000,000

 
34,400

 
68,800

 
34,400

Matthew Thompson
 
$
5,000,000

 
34,400

 
68,800

 
34,400

Bradley Rencher
 
$
3,750,000

 
25,800

 
51,600

 
25,800

_________________________
(1) 
Achievement of performance shares granted in 2015 will be certified by the Committee following the three-year performance period.
(2) 
Amount of performance shares and RSUs awarded to each NEO based on target value of equity award is described above under “Equity Compensation Mix.”
New Hire Grant
On July 20, 2015, Adobe’s Board granted Mr. Parasnis a one-time new hire award of 83,500 RSUs, which had a target value of approximately $6.85 million at the time of grant. As we have previously disclosed, we evaluate the levels of compensation for our executives and determine, based on the competitive landscape in which we operate and the specific talents and abilities of our executives, the levels of equity that are necessary in order to retain them as their skills are in high demand in the market. Mr. Parasnis is central to the execution of our cloud strategy given his key role as our Chief Technology Officer. The details of this grant are included in “Executive Compensation—Summary Compensation Table.”
2015 Performance Share Program
As with our 2014 Performance Share Program, under our 2015 Performance Share Program shares are earned based on a single objective financial measure—relative TSR over a three-year performance period. All earned performance share awards will vest upon the latter of the Committee’s certification of results and the three-year anniversary of the grant date. Accordingly, the performance shares will align our NEOs’ interests with those of our stockholders over the long term, while also providing key retention incentives, as the shares will only be awarded if an NEO remains providing service to Adobe (or an affiliate) upon the date of the Committee’s certification of results following the end of the three-year performance period. Moreover, the economics of our Performance Share Program will result in strengthened retention incentives for our executives during periods over which the company is delivering favorable returns to our investors.
Under the 2015 Performance Share Program, the participants can earn between 0% and 200% (the payout cap under our program) of the target amount of performance shares. The three-year TSR measure compares the TSR of our common stock against the TSR of the companies included in the NASDAQ 100 Index as of November 28, 2014, using a cumulative 90 calendar day look-back as of the beginning and the end of the three-year period. This TSR metric creates accountability since the payout depends upon our stockholder return being better than other companies in the NASDAQ 100 Index, which companies the Committee and Adobe’s management believe constitute the most relevant market benchmark for Adobe’s performance. Also, the NASDAQ 100 (as opposed to our peer group) is broad enough to accommodate the high amount of consolidation and acquisition in our industry sector without significantly impacting the overall makeup of comparative companies between the start and end of the performance period. The number of performance shares awarded will increase or decrease 2.5% for every percentile that Adobe’s TSR percentile rank is above or below, respectively, the NASDAQ 100 companies’ 50th percentile, and no shares will be awarded if our performance ranks below the 25th percentile for the three-year performance period. Additionally, regardless of our relative position with respect to the NASDAQ 100 companies, the award will be

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capped at 100% of target in the case of Adobe having a negative absolute TSR over the measurement period. The Performance Share Program pays above target for significant market performance. To summarize:
Company Percentile Rank as Compared to Index Companies
Shares of Stock That May Be Earned
(as a Percentage of Target Shares)
Below 25th (1)
0%
25th 
38%
35th 
63%
50th
100% (2)
75th 
163%
90th 
200% (3)
100th 
200%
_________________________
(1)    A threshold percentile rank of 25% is required before any Performance Share Program awards can be earned.
(2) 
The maximum shares that may be earned at the 50th percentile or higher is 100% of target, if Company TSR is not positive.
(3) 
The maximum shares that may be earned is 200% of target, if Company TSR is positive.
Because our 2015 Program is based on a three-year performance period, none of the performance shares can be earned until the certification of the performance period closes at the outset of our 2018 fiscal year.
For more information on performance shares granted during fiscal year 2015, see the “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2015” table and accompanying narrative.
Performance Share Program Results and Payouts
The three-year performance period under Adobe’s 2013 Performance Share Program closed at the end of our 2015 fiscal year. As with our 2015 program described above, shares under the 2013 Performance Share Program were earned based on relative TSR over a three-year performance period. At the end of the performance period, there were 98 firms remaining in the relative peer group identified in the 2013 program. During the three-year performance period Adobe’s total return was 158.6%, calculated based on the methodology set forth in the program. Of the peer firms, 87 had total returns less than Adobe’s, and 10 had total returns greater than Adobe’s, resulting in a percentile rank of approximately 89 percent.
As described in our 2013 Performance Share Program, if the company’s TSR is positive, the company's achievement of a Percentile Rank that exceeds the fiftieth percentile will increase the number of shares of stock that will become eligible to be earned by increments of two and one-half percent (2.5%), rounded up to the nearest whole percent, using the following formula:
100% - ((50 ‑ Percentile Rank) * 2.5%) = Percentage Payout
Under this formula, our percentile rank results in a percentage payout of 198% (after applying the required rounding convention). The Committee retained an independent consultant to calculate the results and certified achievement at 198%. The target, maximum and actual shares awarded for our NEO participants under the 2013 Performance Share Program are set forth in the table below:

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2013 Performance Share Program Results (1) 
Name
 
 
 
Target
Award
(#)
 
Maximum
Award
(#)
 
Actual
Achievement
(%)
 
Shares Awarded
(#)
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
 
157,500

 
315,000

 
198
%
 
311,850

Mark Garrett
 
35,000

 
70,000

 
198
%
 
69,300

Matthew Thompson
 
55,000

 
110,000

 
198
%
 
108,900

Bradley Rencher
 
40,000

 
80,000

 
198
%
 
79,200

_________________________
(1) 
Mr. Parasnis was not a participant in Adobe’s 2013 Performance Share Program.
2015 RSU Program
Recognizing that a substantial portion of our NEOs’ compensation is performance based, and therefore inherently at risk, the Committee granted time-based RSUs to our NEOs in order to promote retention and continuity in our business. In fiscal year 2015, our time-based RSUs were subject to vesting at a rate of 1/3 per year over three years to provide additional retention incentives. Accordingly, our RSU program provides our NEOs with strong incentives to remain employed by Adobe, while providing additional rewards for growth in our stock price with less dilution to the company than time-based stock options, which were not granted by Adobe to any executive officer in fiscal year 2015.
Realizable Pay
Realizable pay reflects the real value of equity awards and increases or decreases with fluctuations in market value.  When determining the annual equity grants to our executives in January of each year, the Committee believes it is important to take into account not only the grant date values included in our Summary Compensation Table, but also to consider the effect of the value of our stock on those awards at the end of our fiscal year.
Given that approximately 87% of our CEO’s and 79% of our other NEOs’ target pay is equity based, the Committee and the company consider it especially important to focus on realizable pay when evaluating pay for performance.  For example, decreases in our stock price could cause stock-based awards to have realizable values that are less than what was targeted at the time of grant, including performance periods under our Performance Share Programs potentially closing with no value earned and no dilutive effect to the company. 
As the table below illustrates, when the company’s stock price increases and generates positive returns for Adobe’s stockholders, the increase impacts an executive’s realizable pay during the present fiscal year and for past fiscal years during which the executive received equity awards that are held or still subject to vesting. Accordingly, a significant portion of our NEOs’ TDC is closely linked to the performance of Adobe’s stock over time, motivating our executives to generate positive returns to Adobe’s stockholders.
The following chart demonstrates the relationship between the target and realizable values of our CEO’s total direct compensation and Adobe's indexed TSR for the past five completed fiscal years:

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Target TDC:  Target TDC is calculated using our CEO’s target base salary as disclosed in the Compensation Discussion and Analysis sections of this and prior proxy statements, the non-equity incentive target value multiplies the target base salary by the target cash incentive percentage, and equity award target grant date fair values.  No target value for All Other Compensation is included.
Realizable TDC:  Realizable TDC is calculated using our CEO’s actual earned base salary, bonus, non-equity incentive plan compensation, and all other compensation as disclosed in the “Summary Compensation Table,” and equity award values of all restricted stock units and performance shares granted (adjusted to reflect current estimated payout of outstanding performance shares) in each year multiplied by the stock price on the last day of fiscal year 2015 of $92.17.
Indexed TSR:  Indexed TSR is calculated by taking the stock price on the last day of fiscal years 2011 to 2015 of $27.11, $34.61, $56.78, $73.68,and $92.17 respectively, and dividing each by the stock price on the last day of fiscal year 2010 of $29.14.
Retirement and Deferred Compensation Plan Benefits
We do not provide our employees, including our NEOs, with a defined benefit pension plan, any supplemental executive retirement plans or retiree health benefits, except as required by local law or custom for employees outside the United States. Our NEOs may participate on the same basis as other U.S. employees in our Section 401(k) Retirement Savings Plan (the “401(k) Plan”) with a company-sponsored match component.
We also maintain an unfunded, nonqualified deferred compensation plan (the “Deferred Compensation Plan”). Our executives and our Board members are eligible to participate at their election. The Deferred Compensation Plan provides the ability to defer receipt of income to a later date, which may be an attractive tax planning opportunity. We generally do not contribute to the Deferred Compensation Plan on behalf of the participants; therefore, our cost to maintain the Deferred Compensation Plan is limited to administration expenses, which are minimal. Other than Mr. Narayen, no other NEOs participated in or had an accrued balance under the Deferred Compensation Plan in fiscal year 2015.


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Perquisites and Additional Benefits and Programs
We provide limited perquisites to our executives, including our NEOs. In considering potential perquisites, the Committee considers the cost to Adobe as compared to the perceived value to our employees as well as other corporate governance and employee relations factors. We offer our executives at the director level and above, including our NEOs, an annual comprehensive physical examination that is fully funded by Adobe, as an added benefit to the Adobe medical insurances provided. Alternatively, our NEOs may choose to enroll in a health concierge service. Adobe recognizes the significant role of its executives and offers this program to encourage a focus on keeping well.
In addition, we maintain limited memberships in private jet programs. Our policy related to these programs, adopted to enable efficient travel, allows our Chief Executive Officer the use of a private jet for business travel only. A limited number of other executive officers and employees may accompany our CEO only if required for business purposes, and none of our executives or employees are permitted to use our private jet program for non-business-related travel. Our policy allows family members to accompany the CEO during business travel only if additional costs for the family members are paid for by the executive officer. The CEO complied with this policy at all times during fiscal year 2015.
We also provide the following benefits to our NEOs, on the same terms and conditions as provided to all other eligible employees: health, dental and vision insurance; life insurance; an Employee Stock Purchase Plan; health savings account; medical and dependent care flexible spending account; and short- and long-term disability, accidental death and dismemberment. We believe these benefits are consistent with benefits provided by companies with which we compete for executive-level talent.
Equity-Related Policies
Stock Ownership Guidelines
In 2003, our Board adopted stock ownership guidelines for all employees at the senior vice president level and above (including our executive officers) and directors, which the Committee reviews periodically. Under these guidelines, our CEO must hold 50% of net shares acquired until the CEO satisfies (and continues to satisfy) the threshold share ownership requirements listed in the table below. The Board amended the guidelines applicable to our Executive and Senior Vice Presidents during our 2016 fiscal year, and under the amended guidelines our executive officers (excluding our CEO) must hold 50% of net shares acquired until they satisfy (and continue to satisfy) half of the threshold share ownership requirements listed in the table below. Once they achieve half of the share ownership requirements listed in the table below, they must hold 25% of net shares acquired until they satisfy (and continue to satisfy) the share ownership requirements listed in the table below. Such threshold ownership levels must be maintained indefinitely, as long as the individual remains an employee at the senior vice president level and above of Adobe. These guidelines are designed to align our officers’ interests with our stockholders’ long-term interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking.
The Committee reviews quarterly reports of the stock activity of our officers and directors. As of November 27, 2015, each of our NEOs was in compliance with the applicable guidelines. Under the guidelines, the executives in the following positions should hold the percentages described above of the net shares acquired from Adobe unless, following the sale of such shares, the total number of Adobe shares held by that executive equals or exceeds the following amounts:
Position
 
Shares
(#)
 
 
 
Chief Executive Officer
150,000

President, Executive Vice President or Chief Financial Officer
50,000

Senior Vice President
25,000

Shares that count toward the minimum share ownership include: shares owned outright or beneficially owned; shares acquired through the Employee Stock Purchase Plan; vested restricted stock; vested RSUs, performance shares and performance units in our Deferred Compensation Plan; and shares issued from the exercise of vested options.

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Our Board may evaluate whether exceptions should be made in the case of any covered person who, due to his or her unique financial circumstances, would incur a hardship by complying with these guidelines. No such exceptions were granted or were in place in fiscal year 2015 and all directors and officers were in compliance with the guidelines during fiscal year 2015.
Anti-Hedging and Anti-Pledging Policy
Our insider trading policy explicitly prohibits any director or employee, including our NEOs, from hedging their equity ownership in Adobe by engaging in short sales or trading in any derivatives involving Adobe securities. Our employees are also prohibited from holding Adobe stock in a margin account or otherwise pledging Adobe stock or using financial instruments such as prepaid forwards, equity swaps, collars and exchange funds.
Performance-Based Compensation Recovery Policy
With the recommendation of our Executive Compensation Committee, the Board adopted a Clawback Policy in February 2015.  The Clawback Policy is applicable in the event of a material restatement of our financial statements that results from the intentional misconduct or fraud of a Section 16 executive officer.   The Clawback Policy enables the Board to require repayment or cancellation of the incremental portion of the performance-based incentive compensation paid or payable to such officer in excess of the amount that would have been paid or payable based on the restated financial results. We will also continue to monitor rule-making actions of the SEC and NASDAQ related to clawback policies and implement such rules when required.
In addition, as a public company subject to Section 304 of the Sarbanes-Oxley Act of 2002, if we are required to restate our financial results as the result of misconduct or due to our material noncompliance with any financial reporting requirements under the federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or incentive-based or equity-based compensation they receive.
Granting Guidelines for Equity Compensation
Adobe has adopted written guidelines setting forth our grant practices and procedures for all equity awards. Pursuant to these guidelines:
the vesting commencement date for our annual equity awards granted to our employees, including the NEOs, is January 24 of each year, or the first trading day thereafter, unless another date is approved and documented by the Committee;
the effective grant date for executive officer new hire RSU and performance share awards is the executive officer’s hire date (subject to compliance with Section 162(m), as deemed advisable by the Committee); and
the effective grant date for non-executive officer new hire stock option, performance share and RSU awards is the 15th day of the month following the month of the employee’s hire date, or, if that is not a trading day, the first trading day thereafter.
Because the grant dates are pre-established, the timing of the release of material non-public information does not affect the grant dates for equity awards, and Adobe does not time the release of material non-public information based on equity award grant dates.
The Committee approves all grants made to our executive officers on or before the grant date. The Committee also has the authority to approve non-executive officer stock option, performance share and RSU awards on or before the grant date. Our Board has also delegated to a Management Committee for Employee Equity Awards (consisting of the Chief Executive Officer and the Executive Vice President, Customer & Employee Experience) the authority to approve RSU awards to non-executive officer employees in accordance with the granting guidelines described above and subject to Committee-approved vesting schedules and share limits. In addition, our Board has delegated to an Acquired Company & Retention Equity Awards Committee (consisting of the CEO in his capacity as a member of the Board) the authority to approve the assumption of outstanding awards in an acquisition, and the granting of stock option, performance share and RSU awards to employees. Pursuant to its charter, the Committee has the authority to establish the terms and conditions of our equity awards; therefore, the Committee may make exceptions to Adobe’s granting guidelines.

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In the event we award stock options, all stock option awards would be granted with an exercise price equal to or greater than (in some instances for awards outside the United States) the fair market value of the underlying stock on the effective grant date or, in accordance with the terms of our approved equity plans, the fair market value of the underlying stock on the last trading day prior to the effective grant date, if an award is granted on a non-trading day.
Employment Agreements
Each of our NEOs is employed “at will.” Except in limited circumstances, such as when an employment agreement that provides for severance is assumed or renegotiated as part of a corporate transaction, we only enter into agreements providing for severance benefits with our U.S. executive officers in relation to a change of control of Adobe or an executive transition plan.
Severance and Change of Control Compensation
The Committee believes that change of control vesting and severance benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that an executive departs Adobe before an acquisition is consummated. The Committee and the company believe that a pre-existing plan will allow our executives to focus on continuing normal business operations and on the success of a potential business combination, rather than on seeking alternative employment. Further, a pre-existing plan ensures stability and will enable our executives to maintain a balanced perspective in making overall business decisions during a potentially uncertain period. To that end, Adobe provides certain change of control benefits as described below.
Each of our NEOs is an eligible participant in our 2014 Executive Severance Plan in the Event of a Change of Control (the “Change of Control Plan”). The Change of Control Plan provides for severance payments and fully accelerated vesting of outstanding equity awards for our NEOs and other members of senior management upon an involuntary termination of employment upon or following a qualifying change of control. The terms of the Change of Control Plan are described below.
We also maintain a Retention Agreement with Mr. Narayen, which provides similar benefits but does not require termination of his employment in order for him to receive the equity acceleration, as described below under “Executive Compensation—Change of Control.” Mr. Narayen’s original Retention Agreement, dated January 12, 1998, was amended February 11, 2008 based on his promotion to Chief Executive Officer, and was further amended on December 11, 2010 and December 5, 2014 in order to clarify the manner of compliance with, or exemption from, Internal Revenue Code Section 409A.
The Change of Control Plan and the Retention Agreement with Mr. Narayen do not provide for reimbursements or “gross-ups” of excise tax amounts under Section 4999 of the Code. Rather, under both of these arrangements, benefits would be reduced if doing so would result in a better after-tax economic position for the affected executive. The Committee and the company believe this is an appropriate allocation of the tax cost of these arrangements between Adobe and the executive and is consistent with market practice.
Our change of control arrangements are designed to be competitive with the pay practices of our peer group. The Committee periodically reviews the terms and conditions of our change of control arrangements and will make adjustments when and to the extent it deems appropriate. The Change of Control Plan will expire on December 13, 2017.
Additional details regarding our Change of Control Plan and the Retention Agreement with Mr. Narayen, including estimates of amounts payable in specified circumstances as of the last day of fiscal year 2015, are disclosed in the “Executive Compensation—Change of Control—Potential Payments upon Termination and/or a Change of Control” table contained in this proxy statement.

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Role of Our Executive Compensation Committee, External Compensation Consultant and Management
The Executive Compensation Committee oversees and provides strategic direction to management regarding many elements of our executive compensation programs. It reviews and approves the compensation and severance benefits of Adobe’s executive officers, including our NEOs. As part of this review, the Committee regularly solicits input from its independent compensation consultant. In fiscal year 2015, the Committee met regularly in executive session with its independent compensation consultant and without management present. The Chair of the Committee also met separately with the consultant, both with and without management present. The Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The Committee also discusses Mr. Narayen’s performance with the Board and remains solely responsible for making the final decisions on compensation for our executive officers, including our NEOs.
The Executive Compensation Committee regularly reviews the compensation programs for our executive officers, including our NEOs, to ensure they achieve the desired goal of aligning our executive compensation structure with our stockholders’ interests. This includes using our incentive compensation awards to support our strategic and operating plans. As discussed above, we also closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity, so that we may ensure that our compensation programs are within the norm of market practices. This aids in the retention of our NEOs in a competitive market for executive talent.
Since 2008, the Executive Compensation Committee has engaged Compensia, Inc. to review and provide independent advice concerning all of the components of Adobe’s executive compensation program, on account of Compensia’s expertise in the software industry, its knowledge of our peer group, and its geographical proximity, enabling frequent in-person attendance at Committee meetings. Compensia provided the following services on behalf of the Committee during fiscal year 2015: (1) reviewed and provided recommendations on the composition of our peer group, and provided compensation data relating to executives at the selected companies in our peer group; (2) conducted a comprehensive review of the total compensation arrangements for all of our executive officers; (3) provided advice on our executive officers’ compensation; (4) provided advice on stock ownership guidelines for executive officers and directors; (5) assisted with executive equity program design, including analysis of equity mix and target grant levels; (6) assisted with review of our fiscal year 2015 equity program and Executive Annual Incentive Plan; (7) provided updates on NASDAQ listing standards, Say-on-Pay results, and Dodd-Frank regulatory developments; (8) conducted a comprehensive review of compensation paid to the Board and provided recommendations to the Committee and the Board regarding future director pay structure; (9) updated the Committee on emerging trends and best practices in the area of executive and board compensation; and (10) reviewed the Compensation Discussion and Analysis for inclusion in our 2015 proxy statement.
The Committee conducted a formal review of Compensia’s independence and is satisfied with the qualifications, performance and independence of Compensia. Other than providing limited guidance to our Employee Experience department regarding Adobe’s broad-based equity compensation design for all employees (as approved by the Committee), Compensia does not provide any other services to Adobe. Adobe pays for the cost of Compensia’s services.
Our Employee Experience, Finance and Legal departments work with our Chief Executive Officer and Compensia to design and develop new compensation programs applicable to our NEOs and other executive officers, to recommend changes to existing compensation programs, to recommend financial and other performance targets to be achieved under those programs, to prepare analyses of financial data, to prepare peer group compensation comparisons and other Committee briefing materials and, ultimately, to implement the decisions of the Committee. Members of these departments and our Chief Executive Officer also meet with Compensia separately from the Committee to convey information on proposals that management may make to the Committee, as well as to allow Compensia to collect information about Adobe to develop its own proposals.
In addition, our Chief Executive Officer conducted reviews of the performance and compensation of the other NEOs, and based on these reviews, made his recommendations for fiscal year 2015 target compensation levels (including adjustments to base salary and target cash and equity incentive levels) directly to the Committee. No NEO was present or participated in the final determinations or deliberations of the Committee regarding the amount of any component of his own fiscal year 2015 compensation package.

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Tax and Accounting Considerations
In designing our compensation programs, the Committee considers the financial accounting and tax consequences to Adobe as well as the tax consequences to our employees. In determining the aggregate number and mix of equity grants in any fiscal year, the Committee and management consider the size and share-based compensation expense of the outstanding and new equity awards. Section 162(m) of the Code generally disallows a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation’s Chief Executive Officer and the three other most highly compensated executive officers as of the end of any fiscal year, other than the Chief Financial Officer. However, certain types of performance-based compensation are excluded from the $1 million deduction limit if specific requirements are met.
The Committee considers the impact of Section 162(m) when designing our executive compensation programs and structured our Executive Bonus Plan, stock plans and performance share programs so that a number of awards may be granted under these plans and programs in a manner that complies with the requirements imposed by Section 162(m). Tax deductibility is not the primary factor used by the Committee in setting compensation, however, and corporate objectives may not necessarily align with the requirements for full deductibility under Section 162(m). We believe it is important to preserve flexibility in administering compensation programs as corporate objectives may not always be consistent with the requirements for full deductibility. In addition, the Committee from time to time has granted and may continue to grant awards, such as time-based RSU awards and one-time discretionary cash awards under which payments may not be deductible under Section 162(m) when it determines that such non-deductible arrangements are otherwise in the best interests of Adobe and its stockholders.

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REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE* 
The Executive Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” contained in this proxy statement. Based on this review and discussion, the Executive Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended November 27, 2015 and in this proxy statement.
Respectfully submitted,
EXECUTIVE COMPENSATION COMMITTEE
Daniel Rosensweig, Chair
Amy Banse
Kelly Barlow
Edward Barnholt
Robert Sedgewick

_________________________
*
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, except our Annual Report on Form 10-K for the fiscal year ended November 27, 2015, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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EXECUTIVE COMPENSATION
Summary Compensation Table for Fiscal Years 2015, 2014 and 2013
The following table sets forth information regarding the compensation for services performed during fiscal years 2015, 2014 and 2013 awarded to, paid to or earned by the NEOs, which include (1) our Chief Executive Officer, (2) our Chief Financial Officer and (3) our three other most highly compensated executive officers, as determined by reference to total compensation for fiscal year 2015, who were serving as executive officers at the end of fiscal year 2015.
Name and Principal Position
 
Year
 
Salary
($)
 
Stock
Awards
(1) 
($)
 
Non-Equity
Incentive Plan
Compensation
(2) 
($)
 
All Other
Compensation
(3) 
($)
 
Total
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
 
2015
 
995,404

 
15,851,410

 
1,418,450

 
91,922

 
18,357,186

President and Chief Executive Officer
 
2014
 
991,667

 
15,426,445

 
1,433,950

 
38,856

 
17,890,918

 
2013
 
941,667

 
13,148,100

 
1,638,500

 
19,211

 
15,747,478

Mark Garrett
 
2015
 
647,013

 
4,804,304

 
614,662

 
14,514

 
6,080,493

Executive Vice President and Chief Financial Officer
 
2014
 
645,833

 
4,376,210

 
622,583

 
14,055

 
5,658,681

 
2013
 
616,667

 
2,921,800

 
715,334

 
8,967

 
4,262,768

Matthew Thompson
 
2015
 
622,127

 
4,804,304

 
591,021

 
90,257

 
6,107,709

Executive Vice President, Worldwide Field Operations
 
2014
 
620,833

 
4,888,190

 
598,483

 
39,265

 
6,146,771

 
2013
 
587,500

 
4,591,400

 
681,500

 
33,372

 
5,893,772

Bradley Rencher
 
2015
 
527,564

 
3,603,228

 
476,126

 
8,106

 
4,615,024

Executive Vice President and GM, Digital Marketing
 
2014
 
525,000

 
3,346,155

 
480,795

 
7,890

 
4,359,840

 
2013
 
491,667

 
3,339,200

 
484,784

 
9,119

 
4,324,770

Abhay Parasnis (4)
 
2015
 
183,583

 
6,854,515

 
165,683

 
8,022

 
7,211,803

Executive Vice President and Chief Technology Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________________________
(1) 
These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value, computed in accordance with stock-based compensation accounting principles, of performance shares, assuming the probable outcome of related performance conditions at target levels, and RSUs. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures. As shown above in the table entitled “Equity Awards Granted by the Committee at the Outset of Fiscal Year 2015,” performance share awards have a maximum payout of 200% of the target number of shares.
(2) 
These amounts consist solely of amounts earned under our Executive Bonus Plans, each of which is a cash bonus plan adopted under our 2011 Executive Cash Performance Bonus Plan. Amounts earned under the Executive Bonus Plan are payable in the subsequent fiscal year. Mr. Narayen deferred his bonus earned in fiscal year 2015 to the Deferred Compensation Plan.
(3) 
These amounts for fiscal year 2015 include matching contributions under Adobe’s 401(k) Plan (including an additional matching contribution made by Adobe early in the fiscal year to eligible participants who did not previously receive the maximum matching contribution during the prior 401(k) Plan year), and life insurance premiums for all NEOs. The amounts also include the cost of an executive physical for Messrs. Narayen and Rencher and the cost of executive health concierge service in lieu of the executive physical for Mr. Garrett. In addition, for Messrs. Narayen and Thompson, these amounts include the taxable value of the sales club trip for Mr. Narayen and his spouse ($42,057, which was grossed up to $81,743) and for Mr. Thompson and his spouse ($42,057, which was grossed up to $81,743). It is our practice to cover the full costs of the sales club trip for any employee who is entitled to attend.
(4) 
Mr. Parasnis’ start date was July 20, 2015. He was not a named executive officer in fiscal year 2014 or 2013. Mr. Parasnis’ stock awards reflect the grant date fair value of his new hire RSU grant.

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Grants of Plan-Based Awards in Fiscal Year 2015
The following table shows all plan-based awards granted to the NEOs during fiscal year 2015. The equity awards granted in fiscal year 2015 identified in the table below are also reported in “Outstanding Equity Awards at 2015 Fiscal Year End.” For additional information regarding incentive plan awards, please refer to the Cash Incentives and Equity Incentives sections of our “Compensation Discussion and Analysis.”
 
 
 
Estimated Future Payouts 
Under Non-Equity Incentive 
Plan Awards(1)
 
Estimated Future Payouts 
Under Equity Incentive Plan 
Awards(2)
 
All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
 
Grant Date
Fair Value of
Stock and
Option
 

Name
Grant
Date
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
Units(3) 
(#)
 
Awards(4) 
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
 
 
1,500,000

 
3,000,000

 
 

 

 

 

 
 
1/26/2015
 
 

 

 
43,130
 
113,500

 
227,000

 

 
7,595,420

(5) 
 
1/26/2015
 
 

 

 
 

 

 
113,500

 
8,255,990

 
Mark Garrett
 
 
650,000

 
1,300,000

 
 

 

 

 

 
 
1/26/2015
 
 

 

 
13,072
 
34,400

 
68,800

 

 
2,302,048

(5) 
 
1/26/2015
 
 

 

 
 

 

 
34,400

 
2,502,256

 
Matthew Thompson
 
 
625,000

 
1,250,000

 
 

 

 

 

 
 
1/26/2015
 
 

 

 
13,072
 
34,400

 
68,800

 

 
2,302,048

(5) 
 
1/26/2015
 
 

 

 
 

 

 
34,400

 
2,502,256

 
Bradley Rencher
 
 
503,500

 
1,007,000

 
 

 

 

 

 
 
1/26/2015
 
 

 

 
9,804
 
25,800

 
51,600

 

 
1,726,536

(5) 
 
1/26/2015
 
 

 

 
 

 

 
25,800

 
1,876,692

 
Abhay Parasnis
 
 
170,900

 
341,896

 
 

 

 

 

 
 
7/20/2015
 
 

 

 
 

 

 
83,500

 
6,854,515

 
_________________________
(1) 
These columns represent awards granted under our Executive Bonus Plan for performance in fiscal year 2015. These columns show the awards that were possible at the threshold, target and maximum levels of performance. Minimum performance under the Executive Bonus Plan could have resulted in a threshold amount equal to $0. Actual cash incentive awards earned in fiscal year 2015 by the NEOs under the Executive Bonus Plan are shown in the column titled “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table.” Mr. Parasnis’ award at target and maximum levels of performance is prorated from his effective start date of July 20, 2015 through the end of fiscal year 2015.
(2) 
These columns represent awards granted under our 2015 Performance Share Program, which was adopted under our 2003 Equity Incentive Plan, as amended (the “2003 Plan”). These columns show the awards that are possible at the threshold, target and maximum levels of performance. If the company does not achieve the threshold performance metric, zero shares will be earned. Because our 2015 Performance Share Program is based on a three-year performance period, none of the performance shares can be earned until the performance period closes at the outset of our 2018 fiscal year. See “Equity Awards Granted by the Committee at the Outset of Fiscal Year 2015” in the “Compensation Discussion and Analysis” section of this proxy statement for additional discussion.
(3) 
This column represents awards of RSUs granted under our 2003 Plan.
(4) 
These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value, computed in accordance with stock-based compensation accounting principles, of each equity award. For additional information on the valuation assumptions, see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2015 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 12, “Stock-Based Compensation.”
(5) 
The grant date fair value included in this column for awards granted under our 2015 Performance Share Program is based on the probable outcome of the performance conditions associated with these grants determined as of the grant date, excluding the effect of estimated forfeitures.

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Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2015 Table
The material terms of the NEOs’ annual compensation, including base salaries, the Executive Bonus Plan, the 2015 Performance Share Program, the time-based RSUs and the explanations of the amounts of salary, cash incentives and equity values in proportion to total compensation are described under “Compensation Discussion and Analysis” in this proxy statement. Our equity award granting practices are described above and our severance benefits are described under “Change of Control” in this proxy statement. None of our NEOs have entered into a written employment agreement with Adobe.
As discussed in greater detail in “Compensation Discussion and Analysis,” the fiscal year 2015 non-equity incentive awards were granted pursuant to the Executive Bonus Plan, with amounts earned based on the achievement of certain financial and customer advocacy targets as well as individual performance goals applicable to each respective NEO. Cash incentives were fully vested when earned.
As discussed in greater detail in “Compensation Discussion and Analysis,” the fiscal year 2015 performance share awards will be settled in stock, subject to the terms of our 2015 Performance Share Program. Actual awards earned under the 2015 Performance Share Program will be determined based on the results achieved during the three-year performance period, as certified by the Committee at the outset of our 2018 fiscal year, contingent upon each NEO’s continued service to Adobe.
The RSUs granted to our NEOs pursuant to our 2003 Plan at the outset of fiscal year 2015 vest over three years with one-third vesting on each anniversary of the grant date subject to continued service through each applicable vesting date. There is no purchase price associated with performance share or RSU awards. We did not pay dividends on our common stock during fiscal year 2015.
Effect of Retirement, Death and Disability on Equity Compensation Awards
The terms and conditions of our stock option and RSU awards provide that if a recipient’s employment is terminated due to death or disability, the recipient will be given credit for an additional 12 months of service, resulting in vesting for the applicable award accelerating by 12 months. In addition, our U.S. and certain other stock option agreements provide that if a recipient’s employment terminates on or after age 65, the individual will be given credit for an additional 12 months of service, resulting in vesting for the applicable award accelerating by 12 months.
The terms and conditions of our performance share awards granted in fiscal years 2013, 2014 and 2015 (which vest upon the later of the certification of the performance goals and the third anniversary of the grant date) provide that if a recipient’s employment is terminated due to death or disability before certification of the performance goals, the recipient will receive a prorated target award based on the number of months of service provided during the performance period.

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Outstanding Equity Awards at 2015 Fiscal Year End
The following table sets forth information regarding outstanding equity awards as of November 27, 2015, for each NEO. All vesting is contingent upon continued employment with Adobe through the applicable vesting date and certain equity awards are subject to performance conditions, each as specified in the footnotes. Market values and payout values in this table are calculated based on the closing market price of our common stock as reported on NASDAQ on November 27, 2015, which was $92.17 per share.
 
Option Awards(1)
 
Stock Awards
Name
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
 
Option
Exercise
Price
($)
 
Option
Expiration
Date
 
Number of
Shares
or Units
of Stock
That Have
Not Vested
(#)
 
Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)
 
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
 
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
134,530

 

 
34.03

 
1/24/2018

 

 

 

 

 

 

 

 

 
39,375(2)

 
3,629,194

 

 

 

 

 

 

 
315,000(3)

 
29,033,550

 
 
 
 
 

 

 

 

 

 

 
253,100(4)

 
23,328,227

 

 

 

 

 
84,366(5)

 
7,776,014

 

 

 

 

 

 

 
113,500(6)

 
10,461,295

 

 

 

 

 

 

 

 

 
227,000(7)

 
20,922,590

Mark Garrett

 

 

 

 
15,625(2)

 
1,440,156

 

 

 

 

 

 

 
70,000(3)

 
6,451,900

 
 
 
 
 

 

 

 

 

 

 
71,800(4)

 
6,617,806

 

 

 

 

 
23,933(5)

 
2,205,905

 

 

 

 

 

 

 
34,400(6)

 
3,170,648

 

 

 

 

 

 

 

 

 
68,800(7)

 
6,341,296

 

 

 

 

 
56,250(8)

 
5,184,563

 

 

Matthew Thompson

 

 

 

 
15,625(2)

 
1,440,156

 

 

 

 

 

 

 
110,000(3)

 
10,138,700

 
 
 
 
 

 

 

 

 

 

 
80,200(4)

 
7,392,034

 

 

 

 

 
26,733(5)

 
2,463,981

 

 

 

 

 

 

 
34,400(6)

 
3,170,648

 

 

 

 

 

 

 

 

 
68,800(7)

 
6,341,296

Bradley Rencher
18,410

 

 
34.03

 
1/24/2018

 

 

 

 

 

 

 

 

 
11,250(2)

 
1,036,913

 

 

 

 

 

 

 
80,000(3)

 
7,373,600

 
 
 
 
 

 

 

 

 

 

 
54,900(4)

 
5,060,133

 

 

 

 

 
18,300(5)

 
1,686,711

 

 

 

 

 

 

 
25,800(6)

 
2,377,986

 

 

 

 

 

 

 

 

 
51,600(7)

 
4,755,972

Abhay Parasnis

 

 

 

 
83,500(9)

 
7,696,195

 

 

_________________________
(1) 
All stock option awards were granted pursuant to our 2003 Plan.
(2) 
RSUs granted pursuant to our 2003 Plan. Four-year with 1/4 vesting on each anniversary of the grant date. Shares fully vest on January 24, 2016.
(3) 
These amounts represent the maximum number of shares that could be earned under our 2013 Performance Share Program. The performance period ended at the end of fiscal year 2015, and certification was completed

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on January 24, 2016. See the discussion in the “Compensation Discussion and Analysis” section of this proxy statement for actual achievement amounts.
(4) 
These amounts represent the maximum number of shares that could be earned under our 2014 Performance Share Program. The performance period will end at the end of fiscal year 2016, and the certification to be completed thereafter. To the extent performance conditions are met, the awards shall fully vest as of the later of January 24, 2017 or the certification date.
(5) 
RSUs granted pursuant to our 2003 Plan. Three-year vesting with 1/3 vesting on each anniversary of the grant date. Shares fully vest on January 24, 2017.
(6) 
RSUs granted pursuant to our 2003 Plan. Three-year vesting with 1/3 vesting on each anniversary of the grant date. Shares fully vest on January 24, 2018.
(7) 
These amounts represent the maximum number of shares that could be earned under our 2015 Performance Share Program. The performance period will end at the end of fiscal year 2017, and the certification to be completed thereafter. The awards shall fully vest as of the later of January 24, 2018 or the certification date.
(8) 
RSUs granted pursuant to our 2003 Plan. Four-year vesting with 1/4 vesting on each anniversary of the grant date. Shares fully vest on August 16, 2016.
(9) 
RSUs granted pursuant to our 2003 Plan. Three-year vesting with 1/2 vesting on the second anniversary of the grant date and remaining 1/2 vesting on the third anniversary of the grant date. Shares fully vest on July 20, 2018.

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Option Exercises and Stock Vested in Fiscal Year 2015
The following table sets forth information regarding each exercise during fiscal year 2015 of stock options and the vesting during fiscal year 2015 of time-based stock-settled RSUs, and performance-based stock-settled awards granted under our 2012 Performance Share Program for each of the NEOs, on an aggregate basis. Our Performance Share Program transitioned to a three-year performance period starting in fiscal year 2013. Because certification occurs in the year following the end of the performance period, none of the awards under our 2013, 2014 or 2015 Performance Share Programs were eligible to be earned or vest in 2015.
The value realized on the exercise of option awards is calculated as follows (1) if the exercise involves a sale of some or all of the exercised shares, the difference between the actual price at which the exercised shares were sold and the exercise price of the options, or (2) in all other cases, the difference between the closing market price of our common stock as reported on NASDAQ on the date of exercise and the exercise price of the options. The value realized on vesting of stock awards is based on the closing market price of our common stock as reported on NASDAQ on the vesting date of the stock-settled awards.
 
Option Awards
 
Stock Awards
Name
 
Number of
Shares Acquired
on Exercise
(#)
 
Value Realized
on Exercise
($)
 
Number of
Shares Acquired
on Vesting
(#)
 
Value Realized
on Vesting
($)
 
 
 
 
 
 
 
 
 
Shantanu Narayen
358,033

 
15,367,384

 
244,709

 
18,123,149

Mark Garrett
9,168

 
330,076

 
133,008

 
10,528,947

Matthew Thompson
12,835

 
492,442

 
87,408

 
6,473,436

Bradley Rencher
53,990

 
2,392,307

 
62,050

 
4,595,423

Abhay Parasnis

 

 

 


Nonqualified Deferred Compensation
We originally adopted a Deferred Compensation Plan in December 2006, which has been amended from time to time and most recently in November 2014. Under the terms of our Deferred Compensation Plan, eligible employees, including each of the NEOs, and directors may elect to defer the receipt of a portion of cash and equity compensation they would otherwise have received when earned. Amounts deferred under the Deferred Compensation Plan are deemed invested in the investment funds selected by the participant with similar options as available under the Adobe 401(k) Plan. We do not contribute to the Deferred Compensation Plan on behalf of its participants, or match the deferrals made by participants, with the exception of situations in which an election to defer under the Deferred Compensation Plan would prevent a participant from receiving the full 401(k) company match. In those situations, we make a contribution to the Deferred Compensation Plan equal to the foregone 401(k) company match. During fiscal year 2015, Adobe contributed this match amount in the amount of approximately $8,947 in the aggregate for all participants as applicable. Accordingly, amounts payable under the Deferred Compensation Plan generally are entirely determined by participant contributions and fund elections.
Employee participants in the Deferred Compensation Plan may elect to contribute 5% to 75% of their base salary and 5% to 100% of other specified compensation, including commissions and bonuses. Participants may also contribute 100% per vesting tranche of their RSU and performance share awards. Generally, participants may elect the payment of benefits with respect to cash and equity deferrals to begin on a specified date or upon termination of employment. Payment of cash deferrals may be made in the form of a lump sum or annual installments, subject to certain requirements. Payments of equity deferrals may only be made in the form of a lump sum. In addition, each participant shall elect whether to keep his or her account balance in the Deferred Compensation Plan or to receive a lump sum distribution upon a change of control. If a participant experiences an unforeseeable emergency during the deferral period, the participant may petition to receive a partial or full payout from the Deferred Compensation Plan. All distributions are made in cash, except that deferred RSUs and performance shares are settled in Adobe stock.
Other than Mr. Narayen, no other NEOs participated in, or had an accrued balance under, the Deferred Compensation Plan in fiscal year 2015. The following table shows Mr. Narayen’s accrued contributions to the Deferred Compensation Plan with respect to fiscal year 2015:

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Nonqualified Deferred Compensation
Name
 
Executive contributions in fiscal 2015
($)
 
Registrant contributions in fiscal 2015
($)
 
Aggregate earnings fiscal 2015
($)
 
Aggregate withdrawals/distributions in fiscal 2015
($)
 
Aggregate balance at November 27, 2015
($)
 
 
 
 
 
 
 
 
 
 
 
Shantanu Narayen
 
$
1,352,009

 
$

 
$

 
$

 
$
1,352,009

_________________________
(1) 
Mr. Narayen deferred his bonus earned from the Fiscal Year 2015 Executive Annual Incentive Plan amounting to $1,418,450. The bonus, net of applicable taxes, was credited to the Deferred Compensation Plan subsequent to fiscal 2015 year-end at approximately the same time bonuses were paid to other executives who had not deferred their bonuses.


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Change of Control
Each of the NEOs is eligible to receive severance benefits in the event of certain terminations of employment upon or after a change of control of Adobe, pursuant to the terms of our Change of Control Plan applicable to each of our current NEOs or, in the case of our Chief Executive Officer, upon or after a change of control of Adobe, in some cases whether or not his employment is terminated, pursuant to his Retention Agreement. Mr. Narayen would need to waive all benefits under his Retention Agreement to receive any benefits under the Change of Control Plan.
The terms of the Change of Control Plan are described below.
Change of Control Terms
Change of Control Plan. Each of our NEOs is an eligible participant in our 2014 Executive Severance Plan in the Event of a Change of Control. The Change of Control Plan will expire on December 13, 2017, unless extended by Adobe. If a change of control occurs prior to its expiration, the Change of Control Plan will terminate following the later of the date which is twelve months after the occurrence of a change of control or the payment of all severance benefits due under the Change of Control Plan.
Pursuant to the Change of Control Plan, if there is a qualifying change of control of Adobe (as defined in the plan), and within three months prior and twelve months following the change of control, Messrs. Garrett, Thompson, Parasnis or Rencher experience a separation from service as a result of Adobe (or any successor) terminating his employment without cause (and not due to death or disability) or if he resigns for good reason, such executive officer would be eligible to receive:
twenty-four months of salary and target bonus;
COBRA premiums for the eligible executive and covered dependents until the earlier of (1) the last month in which the executive and his covered dependents are eligible for and enrolled in COBRA coverage and (2) twenty-four months; and
accelerated vesting of all outstanding equity awards (including, for performance shares, solely to the extent shares are credited to the executive based upon performance achieved as of the change of control).
In the event that any amount under the Change of Control Plan would constitute an excess parachute payment within the meaning of Section 280G of the Code, the amounts payable will not exceed the amount which produces the greatest after-tax benefit to the affected individual. All of the benefits under the Change of Control Plan are conditioned upon the executive officer signing a release of claims.
Chief Executive Officer Retention Agreement. Effective January 12, 1998, Adobe entered into a Retention Agreement with Mr. Narayen, which has been amended three times: the first time effective February 11, 2008, based on his promotion to Chief Executive Officer, and the second and third times on December 17, 2010 and December 5, 2014, respectively, both times in order to clarify the manner of compliance with, or exemption from, Section 409A of the Code, in light of updates to, and interpretations of, applicable tax regulations.
Pursuant to his Retention Agreement, if there is a qualifying change of control of Adobe (as defined in the agreement), and prior to or within two years following the change of control Mr. Narayen experiences a separation from service as a result of Adobe (or any successor) terminating his employment without cause, or as a result of his disability, or if he resigns for good reason, Mr. Narayen would be eligible to receive:    
thirty-six months of salary and target bonus;
pro-rata target bonus for the fiscal year of termination; and
COBRA premiums for him and covered dependents until the earlier of (1) the last month in which he and his covered dependents are eligible for and enrolled in COBRA coverage and (2) thirty-six months.
Upon a change of control, regardless of whether his employment is terminated, Mr. Narayen would be eligible to receive accelerated vesting of all outstanding equity awards (including, for performance shares, solely to the extent shares

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are credited to him based upon performance achieved at the change of control) and all stock options would become fully exercisable.
In the event that any amount under Mr. Narayen’s Retention Agreement would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, the amounts payable will not exceed the amount which produces the greatest after-tax benefit to Mr. Narayen. All benefits provided under the Retention Agreement are conditioned upon his signing a release of claims. The Retention Agreement has no expiration date.
2003 Plan
See “Proposal 2—Summary of the 2003 Plan—Change of Control” for a description of the treatment of awards under the 2003 Plan in the event of a change of control.
Performance Share Programs
Pursuant to our Performance Share Programs in 2013, 2014 and 2015, in the event of a change of control prior to the certification date, the performance period will be shortened and the Committee will determine the level of achievement and the number of shares credited as of immediately prior to the date of the change of control, but the applicable time-based service vesting requirements will continue to apply. The Change of Control Plan, as applicable, and Mr. Narayen’s Retention Agreement provide for acceleration of the applicable time-based service vesting requirements under our Performance Share Programs for the awards held by the NEOs, as described above.
Potential Payments upon Termination and/or a Change of Control
The following table sets forth the estimated potential payments and benefits payable to each NEO under the Change of Control Plan (which was in effect on November 27, 2015), and in the case of Mr. Narayen, his Retention Agreement, in the event of a termination of employment and/or a change of control of Adobe (“COC”), as if such termination or COC event had occurred on November 27, 2015, the last day of fiscal year 2015. The value of the equity awards is based on the closing market price of our common stock as reported on NASDAQ on November 27, 2015, which was $92.17 per share. Each NEO must sign a release of claims to receive any of the benefits below except those for Death/Disability, COC Only (continued employment), or COC Only/Equity Not Assumed or Substituted.
Triggering Event (1)
 
Target 
Bonus (2) 
($)
 
Lump
Sum
Severance
(3)
($)
 
Accelerated 
Performance 
Awards (4) 
($)
 
Accelerated
Restricted
Stock
Units
($)
 
Cont. 
Health 
Insurance 
Coverage 
(present 
value) (5) 
($)
 
Total (6) 
($)