<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Adobe Systems Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Merrill Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
ADOBE SYSTEMS INCORPORATED
1585 Charleston Road
P.O. Box 7900
Mountain View, California 94039-7900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 5, 1995
To the Shareholders:
Please take notice that the Annual Meeting of the Shareholders of Adobe
Systems Incorporated, a California corporation, will be held on April 5, 1995,
at 1:30 p.m., local time, at the Stanford Park Hotel, 100 El Camino Real, Menlo
Park, California 94025 for the following purposes:
1. To elect four (4) Class II directors of the Company to serve for a
two-year term.
2. To approve an amendment to the Company's Restricted Stock Option
Plan (for outside directors and consultants only), (i) increasing by
250,000 the number of shares reserved for issuance under the Plan,
(ii) increasing to 10,000 from 7,500 the number of shares subject to
options automatically granted each year to non-employee directors and
available to be granted to a consultant, and (iii) increasing to
15,000 from 7,500 the number of shares subject to options
automatically granted to a new non-employee director upon joining the
Board.
3. To ratify the appointment of KPMG Peat Marwick as the independent
public accountants of the Company for the next fiscal year.
4. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on February 16, 1995 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof.
By Order of the Board of Directors
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
Mountain View, California
February 28, 1995
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN
THE POST-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO
EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE>
ADOBE SYSTEMS INCORPORATED
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 5, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION CONCERNING SOLICITATION AND VOTING........................... 1
PROPOSAL ONE -- ELECTION OF DIRECTORS.................................... 2
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............. 5
EXECUTIVE COMPENSATION AND OTHER INFORMATION............................. 6
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE........................... 9
DIRECTOR COMPENSATION.................................................... 12
PERFORMANCE GRAPH........................................................ 13
PROPOSAL TWO -- APPROVAL OF AN INCREASE IN THE (i) SHARE RESERVE; (ii)
AUTOMATIC ANNUAL GRANTS TO NON-EMPLOYEE DIRECTORS (AND AVAILABLE GRANTS
TO CONSULTANTS); AND (iii) INITIAL GRANT TO A NEW NON-EMPLOYEE DIRECTOR
UNDER THE RESTRICTED STOCK OPTION PLAN................................. 14
PROPOSAL THREE -- RATIFICATION OF APPOINTMENT OF AUDITORS................ 16
OTHER BUSINESS........................................................... 17
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING............. 17
</TABLE>
<PAGE>
PROXY STATEMENT
-------------
ANNUAL MEETING OF SHAREHOLDERS
OF
ADOBE SYSTEMS INCORPORATED
--------------
The accompanying proxy is solicited by the Management of Adobe Systems
Incorporated (the "Company") for use at its Annual Meeting of Shareholders to be
held on April 5, 1995, at the Stanford Park Hotel, 100 El Camino Real, Menlo
Park, California 94025 at 1:30 p.m., local time, or at any adjournment thereof.
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The principal executive offices of the Company are at 1585 Charleston Road,
P.O. Box 7900, Mountain View, California 94039-7900. The Company's telephone
number at that location is (415) 961-4400. The date of this Proxy Statement is
February 28, 1995, the approximate date on which these proxy solicitation
materials and the Annual Report to Shareholders for the fiscal year ended
November 25, 1994, including financial statements, were first sent or given to
shareholders entitled to vote at the meeting.
This solicitation of proxies is made on behalf of the Management of the
Company and the associated cost will be borne by the Company. The Company has
engaged Kissel-Blake, Inc. ("Kissel-Blake") to assist in the solicitation of
proxies for the meeting. The Company will pay $10,000 in fees for Kissel-Blake's
services and will reimburse Kissel-Blake for reasonable out-of-pocket expenses.
In addition to solicitation by mail and by Kissel-Blake, Management may use
the services of its directors, officers and others to solicit proxies,
personally or by telephone. Arrangements may also be made with brokerage houses
and other custodians, nominees and fiduciaries to forward solicitation material
to the beneficial owners of the stock held of record by such persons, and the
Company may reimburse them for reasonable out-of-pocket and clerical expenses
incurred by them in so doing.
RECORD DATE, VOTING AND REVOCABILITY OF PROXIES
The Company had outstanding on February 16, 1995, (the "Record Date")
62,109,898 shares of Common Stock, without par value, all of which are entitled
to vote on all matters to be acted upon at the meeting. The Company's By-Laws
provide that a majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum for transaction of business. Each
shareholder is entitled to one vote for each share held on the Record Date. If
no instructions are given on the executed Proxy, the Proxy will be voted for all
nominees and in favor of all proposals described.
An affirmative vote of a majority of shares present and voting at the
meeting is required for approval of all items being submitted to the
shareholders for their consideration, other than the election of directors,
which is determined by a plurality of the votes cast if a quorum is present and
voting. An automated system administered by the Company's transfer agent
tabulates the votes. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting for purposes of
determining the presence of a quorum. Each is tabulated separately. Abstentions
will be included in tabulations of the votes cast for purposes of determining
whether a proposal has been approved. Broker non-votes will not be counted for
purposes of determining the number of votes cast for a proposal.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by filing with the Secretary of the Company
a written notice revoking it, by presenting at the meeting a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
1
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board has nominated Messrs. Warnock, Sedgewick, Spencer and Carter to
serve as Class II directors of the Company. Management knows of no reason why
any of these nominees would be unable or unwilling to serve, but if any nominee
should be unable or unwilling to serve, the Proxies will be voted for the
election of such other persons for the office of director as Management may
recommend in the place of such nominee.
THE BOARD RECOMMENDS VOTING "FOR" THE FOUR NOMINEES LISTED BELOW.
INFORMATION REGARDING NOMINEES
The number of directors authorized by the Company's By-Laws is a range from
four to eight, with the exact number to be fixed by the Board. The exact number
is currently fixed at eight. The Company's By-Laws provide that the directors
shall be divided into two classes, as nearly equal in number as possible, with
the classes of directors serving for staggered, two-year terms. The four Class
II directors to be elected at the 1995 Annual Meeting are to be elected to hold
office until the 1997 Annual Meeting and until their successors have been
elected and qualified.
The following table sets forth the name and age of each nominee, and each
director of the Company whose term of office continues after the Annual Meeting,
the principal occupation of each during the past five years, and the period
during which each has served as a director of the Company:
INCUMBENT CLASS I DIRECTORS FOR A TERM EXPIRING IN 1996:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE YEAR
- ------------------------------ ------------------------------------------------------------------- ----------- ---------
<S> <C> <C> <C>
Charles M. Geschke Dr. Geschke was a founder of the Company and has been its President 55 1982
since April 1989. He has been a director since 1982, and was Chief
Operating Officer from December 1986 until July 1994. From October
1972 until founding the Company, Dr. Geschke was the Manager of the
Imaging Sciences Laboratory at Xerox Corporation's Palo Alto
Research Center. Dr. Geschke received a Ph.D. in computer science
from Carnegie Mellon University.
William R. Hambrecht Mr. Hambrecht has been a director of the Company since December 59 1982
1982. Since April 1992, he has been Chairman of the Board of
Hambrecht & Quist Group and Hambrecht & Quist Incorporated, a
subsidiary of Hambrecht & Quist Group. From April 1992 until
October 1994, he also served as Co-Chief Executive Officer of both
entities. From April 1986 to April 1992, Mr. Hambrecht served as
President of both entities, as well as a Director of Hambrecht &
Quist Group and Co-Chief Executive Officer of Hambrecht & Quist
Incorporated.
Delbert W. Yocam Mr. Yocam has been a director of the Company since February 1991. 51 1991
He is an independent consultant. From September 1992 until November
1994, he served as President, Chief Operating Officer and a
director of Tektronix, Inc. Prior to joining Tektronix, Inc., Mr.
Yocam was an independent consultant. He was employed by Apple
Computer, Inc. from 1979 to 1989, serving as Executive Vice
President and Chief Operating Officer from 1986 to 1988,
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE YEAR
- ------------------------------ ------------------------------------------------------------------- ----------- ---------
<S> <C> <C> <C>
and as President of Apple Pacific, a division of Apple Computer,
Inc., from 1988 to 1989. Mr. Yocam is a director of AST Research,
Inc. and Oracle Corporation.
Paul Brainerd Mr. Brainerd became a director of the Company on August 31, 1994, 47 1994
the closing date of the Company's acquisition of Aldus Corporation.
From January 1984 until August 1994, he was President and a
director of Aldus Corporation. From August 1993 until August 1994,
he was Chairman of the Board of Aldus. Mr. Brainerd is a director
of The Brainerd Foundation, a non-profit environmental foundation.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS FOR A TERM EXPIRING IN 1997:
John E. Warnock Dr. Warnock was a founder of the Company and has been its Chairman 54 1982
of the Board since April 1989. He has been a director and Chief
Executive Officer since 1982. From April 1978 until founding the
Company, Dr. Warnock was Principal Scientist of the Imaging
Sciences Laboratory at Xerox Corporation's Palo Alto Research
Center. Dr. Warnock received a Ph.D. in electrical engineering from
the University of Utah. Dr. Warnock is a director of Evans &
Sutherland Computer Corporation.
Robert Sedgewick Prof. Sedgewick has been a director of the Company since January 48 1990
1990. He is the William O. Baker Professor of Computer Science at
Princeton University, where he served as Chairman of the Department
of Computer Science from 1985 to 1994. He is the author of a widely
used series of textbooks on algorithms. Prof. Sedgewick holds a
Ph.D. in computer science from Stanford University.
William J. Spencer Dr. Spencer has been a director of the Company since October 1992. 64 1992
Since October 1990, he has been President and Chief Executive
Officer of SEMATECH. From May 1986 until October 1990, he was Group
Vice President and Senior Technical Officer of Xerox Corporation.
Dr. Spencer is a director of Executone Information Systems.
Gene P. Carter Mr. Carter became a director of the Company on August 31, 1994. Mr. 60 1994
Carter has been a private investor since 1984, and since 1989 has
been Chairman of Portable Energy Products, Inc., a privately held
manufacturer of rechargeable energy cells for the portable
instrumentation market. He is a director of Chips & Technologies,
Inc.
</TABLE>
BOARD MEETINGS AND COMMITTEES
Messrs. Hambrecht, Sedgewick and Yocam served as members of the Executive
Compensation Committee throughout fiscal 1994. The Executive Compensation
Committee held six meetings during fiscal 1994. The responsibilities of the
Executive Compensation Committee are set forth under "Report of the Executive
Compensation Committee."
3
<PAGE>
Messrs. Warnock and Geschke served as members of the Employee Grant
Committee during fiscal 1994. The Employee Grant Committee (which reviews and
approves grants of options and restricted stock to non-officer employees under
the Company's 1994 Stock Option Plan and 1994 Performance and Restricted Stock
Plan, respectively) acted thirty-two times by written consent during fiscal
1994.
Mr. Spencer served as a member of the Audit Committee throughout fiscal
1994. Mr. Hambrecht served on the Audit Committee through August 1994, and then
Mr. Brainerd replaced him. The Audit Committee (which reviews and approves (i)
the scope of the audit performed by the Company's independent public accountants
and (ii) the Company's accounting principles and internal accounting controls)
held one meeting during fiscal 1994.
The Board of Directors established the Investment Committee in February
1994, and the Committee held two meetings during the fiscal year. The Investment
Committee evaluated the advisability of the Company investing in an
outside-managed venture capital fund focused on startup companies in the same
industry as the Company and continues to monitor the performance of the fund.
Directors Sedgewick and Yocam served as members the entire year and Director
Carter joined this Committee in September 1994.
The Company does not have a nominating committee nor any committee
performing such functions.
During fiscal 1994, the Board of Directors held seventeen meetings. All
directors attended at least 75% of the meetings of the Board and all committees
of the Board of which they were members.
4
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of January 13, 1995: (a) by each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock; (b) the Chief Executive Officer of the Company; (c) each of the
four other most highly compensated executive officers of the Company (determined
at fiscal year-end, 1994); (d) by each director of the Company; and (e) by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF COMMON
NAME OWNERSHIP (1)(2) STOCK OUTSTANDING
- ------------------------------------------------------------------------ --------------------- -----------------
<S> <C> <C>
The Prudential Insurance Co. of America ................................ 5,199,423(3) 8.7%
Prudential Plaza
Newark, NJ 07102
John E. Warnock......................................................... 1,223,929(4) 2.0%
Charles M. Geschke...................................................... 957,853(5) 1.6%
Stephen A. MacDonald.................................................... 398,534(6) *
David B. Pratt.......................................................... 172,193(7) *
M. Bruce Nakao.......................................................... 168,299(8) *
William R. Hambrecht.................................................... 83,484(9) *
Robert Sedgewick........................................................ 43,700(10) *
William J. Spencer...................................................... 27,500(11) *
Delbert W. Yocam........................................................ 37,500(12) *
Gene P. Carter.......................................................... 113,504(13) *
Paul Brainerd........................................................... 2,899,100(14) 4.7%
All directors and executive officers as a group (13 persons)............ 6,273,491(15) 10.2%
<FN>
- --------------
* Less than 1%
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table.
(2) As to any shares issuable upon exercise of outstanding options identified in
the footnotes to this table, those shares exercisable on January 13, 1995 or
within 60 days thereafter are included.
(3) Of the shares attributed to The Prudential Insurance Company of America, it
has sole voting power and sole dispositive power for 522,500 shares, shared
dispositive power for 4,676,923 shares, and shared voting power for
3,926,123 shares. This information was provided to the Company pursuant to
Schedule 13G as of December 31, 1994.
(4) Of the shares attributed to Dr. Warnock, 8,400 shares are held in trust for
the benefit of members of Dr. Warnock's family. Includes 303,508 shares
issuable upon exercise of outstanding options.
(5) Of the shares attributed to Dr. Geschke, 694,921 shares are held in trust
for the benefit of members of Dr. Geschke's family. In addition, 52,100
shares are held in the name of the Charles M. Geschke and Nancy A. Geschke
Foundation. Dr. Geschke disclaims beneficial ownership of any shares held by
the foundation. Includes 210,832 shares issuable upon exercise of
outstanding options.
(6) Includes 384,598 shares issuable upon exercise of outstanding options.
(7) Of the shares attributed to Mr. Pratt, 1,503 shares are held in trust for
members of Mr. Pratt's family. Includes 158,915 shares issuable upon
exercise of outstanding options.
(8) Of the shares attributed to Mr. Nakao, 100 shares are held for the benefit
of his minor son. Includes 146,499 shares issuable upon exercise of
outstanding options.
(9) Of the shares attributed to Mr. Hambrecht, 5,984 shares are held in trust
for members of Mr. Hambrecht's family. Includes 77,500 shares issuable upon
exercise of outstanding options.
(10) Includes 42,500 shares issuable upon exercise of outstanding options.
(11) Includes 27,500 shares issuable upon exercise of outstanding options.
(12) Includes 37,500 shares issuable upon exercise of outstanding options.
(13) Of the shares attributed to Mr. Carter, 83,504 shares are held in trust for
the benefit of Mr. Carter's family. Includes 30,000 shares issuable upon
exercise of outstanding options.
(14) Of the shares attributed to Mr. Brainerd, 890,000 shares are held in the
name of The Brainerd Foundation. Mr. Brainerd disclaims beneficial ownership
of any shares held by the foundation. Includes 7,500 shares issuable upon
exercise of outstanding options.
(15) Includes 1,610,964 shares issuable upon exercise of outstanding options.
</TABLE>
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides information concerning the compensation of the
Chief Executive Officer and each of the four other most highly compensated
executive officers ("named executive officers") of the Company for the fiscal
years ended November 27, 1992, November 26, 1993, and November 25, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
-----------------------
ANNUAL COMPENSATION SECURITIES UNDERLYING
NAME AND ---------------------------------- OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) SARS (#)(2) COMPENSATION ($)(3)
- --------------------------------- --------- ---------- ----------- ----------------------- -------------------
<S> <C> <C> <C> <C> <C>
John E. Warnock ................. 1994 $ 318,762 $ 268,069 100,000 $ 45,754
Chairman of the Board 1993 273,011 186,836 90,000 37,841
and Chief Executive 1992 259,992 146,247 80,000 36,683
Officer
Charles M. Geschke .............. 1994 318,762 268,069 100,000 46,841
President 1993 273,011 186,836 90,000 38,849
and Director 1992 259,992 146,247 80,000 37,651
Stephen A. MacDonald ............ 1994 251,010 169,425 50,000 37,532
Senior Vice President and 1993 240,609 131,729 70,000 32,470
General Manager, 1992 227,016 102,156 130,000(4) 30,427
System Products Division
David B. Pratt .................. 1994 239,209 160,264 50,000 43,733
Senior Vice President and 1993 204,817 112,132 70,000 38,070
General Manager, 1992 196,932 88,620 50,000 38,657
Application Products
Division
M. Bruce Nakao .................. 1994 218,021 121,215 44,000 37,797
Senior Vice President, 1993 200,008 91,250 50,000 32,207
Finance and 1992 180,000 92,250 40,000 31,291
Administration, Chief
Financial Officer
<FN>
- --------------
(1) Some of the amounts shown in this column reflect payments under the
Company's Profit Sharing Plan in which all employees of the Company
participate.
(2) These numbers reflect the two-for-one stock split effective July 27, 1993.
(3) The amounts disclosed in this column for fiscal 1994 include payment by
the Company on behalf of the named executive officers of:
(a) Life insurance premiums in the following amounts: Dr. Warnock, $13,360;
Dr. Geschke, $14,235; Mr. MacDonald, $11,100; Mr. Pratt, $14,235; and
Mr. Nakao, $12,015.
(b) The dollar value of the remainder of the life insurance premium as
follows: Dr. Warnock, $12,797; Dr. Geschke, $12,690; Mr. MacDonald,
$10,462; Mr. Pratt, $13,295; and Mr. Nakao, $11,298.
(c) Disability insurance premiums in the following amounts: Dr. Warnock,
$11,181; Dr. Geschke, $11,408; Mr. MacDonald, $8,745; Mr. Pratt,
$9,110; and Mr. Nakao, $7,814.
(d) Company contributions under the Company's 401(k) Plan in the following
amounts: Dr. Warnock, $8,416; Dr. Geschke, $8,508; Mr. MacDonald,
$7,225; Mr. Pratt, $7,093; and Mr. Nakao, $6,670.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
(4) Includes grant of option to buy 70,000 shares of Common Stock under the
Company's 1984 Stock Option Plan in September 1991 at $22.375 per
share, which was amended in April 1992 as part of a repricing and
extended vesting schedule made available to all optionees.
</TABLE>
STOCK OPTIONS
The following table provides details regarding stock options granted to the
named executive officers in fiscal 1994 under the Company's 1994 Stock Option
Plan. In addition, in accordance with Securities and Exchange Commission ("SEC")
rules, there are shown the hypothetical gains or "option spreads" that would
exist for the respective options. These gains are based on assumed rates of
annual compound stock price appreciation of 5% and 10% from the date the options
were granted over the full option term. The actual value, if any, an executive
may realize will depend on the spread between the market price and the exercise
price on the date the option is exercised.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES AT ASSUMED ANNUAL RATES OF
UNDERLYING % OF TOTAL OPTIONS/ STOCK PRICE APPRECIATION
OPTIONS/ SARS GRANTED TO EXERCISE OR FOR OPTION TERM(3)
SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---------------------------- ------------- --------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock............. 100,000 4.38% $ 25.38 6/23/04 $ 1,595,820 $ 4,044,121
Charles M. Geschke.......... 100,000 4.38 25.38 6/23/04 1,595,820 4,044,121
Stephen A. MacDonald........ 50,000 2.19 25.38 6/23/04 797,910 2,022,061
David B. Pratt.............. 50,000 2.19 25.38 6/23/04 797,910 2,022,061
M. Bruce Nakao.............. 44,000 1.93 25.38 6/23/04 702,161 1,779,413
<FN>
- --------------
(1) The options were granted June 23, 1994 and became exercisable beginning
July 23, 1994. The options vest in the amount of 2.08% per month for the
first 24 months, and 4.17% per month for the next 12 months. The options
permit withholding of shares to satisfy tax obligations upon exercise. The
price of each option share, paid at the time of exercise, is the fair
market value of a share of the Company's Common Stock on the date of
grant. The option term is for a period of ten years from the date of grant
unless (1) the optionee's employment terminates sooner, in which event the
options expire three months after the date of termination, (2) the
termination is caused by optionee's death or disability, in which event
the exercise period is twelve months from the date of death or disability,
or (3) a change of control in which the Company is not the surviving
corporation, in which event the outstanding options will become fully
exercisable prior to such change of control unless the acquiring
corporation assumes the options or issues substitute options as a
condition precedent to concluding the transaction. If the exercise of
options within the applicable time periods would subject the optionee to
suit under Section 16(b) of the Securities Exchange Act of 1934, as
amended, the options will remain exercisable until the earliest to occur
of (i) the tenth day following the day on which the optionee would no
longer be subject to such suit, (ii) the 190th day after the optionee's
termination of employment, or (iii) the option termination date.
(2) The exercise price may be paid in cash, by delivery of already-owned
shares subject to certain conditions, or pursuant to a cashless exercise
procedure under which the optionee provides irrevocable instructions to a
brokerage firm to sell the purchased shares and to remit to the Company,
out of the sale proceeds, an amount equal to the exercise price plus all
applicable withholding taxes.
(3) The potential gain is calculated from the closing price of the Company's
Common Stock on the date of grant. These amounts represent certain assumed
rates of appreciation only as set by the SEC. Actual
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
gains, if any, on stock option exercises and Common Stock holdings are
dependent upon the future performance of the Company and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved.
Using the same analysis, all holders of Common Stock as of the Company's
fiscal year-end would potentially gain approximately $978 million at 5%,
and $2.5 billion at 10% rates of stock price appreciation.
</TABLE>
STOCK OPTION EXERCISES AND HOLDINGS
The following table shows stock options exercised by named executive
officers during fiscal 1994, including the aggregate value of gains on the date
of exercise. In addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options as of fiscal year-end. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FY-END (#) AT FY-END ($)(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ------------ ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock.............. 77,046 $ 1,745,297 279,830 182,918 $ 4,101,195 $ 1,419,235
Charles M. Geschke........... 209,376 4,481,272 187,082 182,918 1,974,515 1,419,235
Stephen A. MacDonald......... 30,000 717,188 356,472 131,044 7,464,729 1,079,159
David B. Pratt............... 23,334 443,263 143,706 112,294 1,680,931 845,569
M. Bruce Nakao............... 9,000 184,875 134,581 89,419 1,950,160 685,590
<FN>
- --------------
(1) Fiscal year ended November 25, 1994. The closing market price on that date
for the Company's Common Stock was $32.25.
</TABLE>
CERTAIN TRANSACTIONS
Derek J. Gray, Senior Vice President and General Manager of Adobe Systems
Europe, is a major shareholder of McQueen Holdings Limited, a U.K. company of
which the Company is also a 10% shareholder, and to which the Company in 1994
paid approximately $13.5 million for services for production of application
products distributed outside of the U.S. and Japan. In addition, the Company has
guaranteed a total payment over the next three years to McQueen of $15.8 million
for additional services such as customer support and information systems. Also,
the Company has guaranteed a total payment of $2.3 million to McQueen for rent
of a building over five years. In January 1995, Mr. Gray sold his shares back to
McQueen in exchange for a promissory note for approximately 2 million pounds
sterling. The principal amount of the note is payable in five annual
installments, with interest at a rate of 8% payable semi-annually.
Prior to its acquisition by Adobe, Aldus entered into Senior Management
Employment Agreements with its executive officers, including Mr. Gray. The
acquisition of Aldus triggered "change in control" provisions of such
agreements, which provide for continued employment terms substantially
equivalent to those immediately prior to the acquisition for the two years
following the acquisition. The agreements also provide that an immediate payment
of a lump sum is triggered if, following a change in control, employment is
terminated by the executive for "good reason" or by the Company for any reason
other than for death, disability or "cause." The lump sum is equal to (i) three
years base salary (reduced each month following a change in control by .015
times the aggregate base salary, but not below two years' base salary) and (ii)
two times a percentage of the executive's annual base salary that approximates
an average annual bonus. The agreements also provide for two years' continuation
of life, health and other employee welfare benefit plans
8
<PAGE>
and the cash payment of vacation and other accrued benefits. In connection with
his acceptance of his position with Adobe, Mr. Gray acknowledged that this
position was substantially equivalent to his position with Aldus and does not
trigger the "good reason" provision in the agreement.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "34
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file with the SEC reports of ownership and changes in ownership of common stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. The Company does prepare
Section 16(a) forms on behalf of its officers and directors based on the
information provided by them. Based solely on review of this information,
including written representations that no other reports were required, the
Company believes that, during the 1994 fiscal year, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with; except that one report, covering three transactions
by a member of his immediate family sharing the same household, was filed late
by its Director John E. Warnock.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors (the
"Committee") is composed entirely of outside, non-management directors. No
member of the Committee is a former or current officer of the Company. The
Committee is responsible for setting and administering the policies governing
annual compensation of executive officers, including cash compensation and stock
ownership programs.
COMPENSATION POLICIES
The Company operates in the competitive and rapidly changing high technology
business environment. The goals of the Company's executive compensation program
are to motivate executives to achieve the Company's business objectives in this
environment and reward them for their achievement, foster teamwork, and attract
and retain executive officers who contribute to the long-term success of the
Company. During fiscal 1994, the Committee utilized salary, bonus and stock
options to meet these goals. In December 1994, the Committee also granted
performance units to the executive officers under the 1994 Performance and
Restricted Stock Plan (the "Performance Plan") approved by the shareholders in
August 1994.
Guiding principles are to provide compensation levels which are comparable
to those offered by other leading high technology companies, and align the
interests of officers with the long-term interests of shareholders through stock
compensation. Another principle is that a substantial portion of each
executive's compensation be in the form of a bonus contingent upon the
Committee's judgment of the operating performance of the Company. However, the
Committee retains the authority to alter the bonus amounts because qualitative
factors and long-term results need to be evaluated as well as the short-term
operating results. In 1994, the Committee considered factors such as market
share increases, new product development and return on equity.
In January 1994, the Committee adopted a revised management incentive bonus
program in which executive officers participate. In an effort to more directly
link executives' bonuses to Company performance, the program contained targets
specifically tied to revenue and operating profit levels for fiscal 1994.
However, the Committee has retained the authority to alter the incentive payout
based on other factors related to Company performance in the discretion of the
Committee. Additional factors would include market share increases, new product
development and return on shareholders equity. In addition, the Board revised
the Company's corporate bonus plan in December 1993 to be structured as a profit
sharing plan beginning the first quarter of fiscal 1994. Executive officers, as
well as all employees, participate in this plan.
In June 1994, the Board revised the 1989 Restricted Stock Plan to provide
for performance-based awards and to increase the share reserve under that plan
(the "Performance Plan"). Following shareholder approval of these revisions in
August 1994, the Committee granted performance units to executive officers in
December 1994 covering a three-year performance period beginning with the
Company's 1995 fiscal year.
9
<PAGE>
The performance units will be payable in stock of the Company at the end of the
three-year performance cycle, but only if the Company achieves targeted levels
of revenue growth and operating margin. The Committee believes that these
performance awards further its objective of foregoing a closer link between the
executives' compensation and the Company's longer-term financial performance.
The Committee expects that the size of annual option grants beginning in fiscal
1995 will be reduced since performance units are expected to be granted
annually. The Committee believes that annual option grants continue to provide
motivation for the executive officers and align their interests with the
interests of shareholders.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code adopted under the Federal Revenue Reconciliation Act of
1993. This section disallows a tax deduction for any publicly-held corporation
for individual compensation exceeding $1 million in any taxable year for the
named executive officers, unless compensation is performance-based. Since the
targeted cash compensation of each of the named executive officers is well below
the $1 million threshold and any options granted under the 1994 Stock Option
Plan or performance units or shares granted under the Performance Plan will meet
the requirement of being performance-based, the Committee believes that this
section will not reduce the tax deduction available to the Company. The
Company's policy is to qualify to the maximum extent possible its executives'
compensation for deductibility under applicable tax laws.
COMPENSATION COMPONENTS
The salary portion of executive compensation, including that of the Chief
Executive Officer, is determined annually by reference to the Radford Associates
Management survey of high technology companies. The executive officers are
matched to each position by comparing their responsibilities to the survey
description most accurately representing their position with the Company by
content, organizational level and revenue. Given the officers' levels of
responsibility and the past performance of the Company, the Committee targets a
high percentile competitive position as stated by the survey in determining
salary for each executive officer. The annual total cash compensation (salary
plus incentive bonus) for each executive officer is targeted at a very high
percentile competitive position as stated by the survey.
Following the Company's acquisition of Aldus Corporation in August 1994, the
Committee evaluated changes in the executives' compensation since, as a result
of the merger, the category of comparable companies as stated by the survey had
changed from the $200-$500 million range to the $500 million-$1 billion range.
The Committee decided that, since each executive was new to the position by
virtue of the change in the size of the Company, the Committee would target the
median or slightly higher percentile in the Radford survey for the salary
compensation. As the executives mature in their respective positions, the
Committee expects to return to its targeted high percentile competitive position
for salary compensation as stated by the survey.
A substantial portion of the annual compensation of each executive officer
is in the form of an incentive bonus, which becomes a greater portion of an
officer's potential total compensation as the executive's level of
responsibility increases. The bonus is computed as a percentage of base salary
and is established annually. In fiscal 1994, the target level of bonus equaled
or exceeded 50% of salary for each of the top five executive officers. The
actual amount of each bonus was determined by reference to the revised
management incentive bonus program, which contains targets specifically tied to
revenue and operating profit levels on a quarterly basis. If the Company's
performance exceeds the targets on an annual basis, then an additional bonus up
to twenty percent of the annual target bonus is included in the program. The
Committee has the authority to alter the incentive payout based on other factors
related to Company performance, such as market share increases, new product
development and return on equity. The Committee did not assign weights to each
of these factors but considered overall profitability and operating results as
measured against the annual budget as updated more important than the other
performance measures listed.
In 1994, the Committee awarded bonuses on a quarterly basis. Full target
bonuses were paid for each quarter based on the revised management incentive
bonus program, which focused on the Company's revenue and operating profit
performance against the budget in those quarters. Also, for the year, an
additional bonus was paid consistent with the program since the Company exceeded
the targeted revenue and operating profit levels. Executive officers also
participated with all Company employees in the
10
<PAGE>
Company's corporate profit sharing plan, under which a bonus up to ten percent
of each employee's base salary, payable quarterly, is awarded depending upon the
Company's overall performance based on revenue, expenses and earnings. In
addition, if the Company's performance exceeds the targets on an annual basis,
then an additional bonus up to two percent of the base salary is paid in the
form of a Company contribution into the employee's 401(k) account. Based on the
Company's level of revenue and operating profit versus budget for each quarter
of 1994, this bonus also was paid in full for each quarter, and an additional
amount was awarded for the year.
In addition, in fiscal 1994, the Committee utilized stock options to
motivate and retain executive officers. The Committee believes that this form of
compensation closely aligns the officers' interests with those of shareholders
and provides a major incentive to officers in building shareholder value.
Options are granted annually and are subject to vesting provisions to encourage
officers to remain employed with the Company. Each executive officer receives
stock options based upon that officer's relative position, responsibilities and
performance by the individual over the previous fiscal year and the officers'
anticipated performance and responsibilities in the upcoming year. Additionally,
the Committee considers a hypothetical return assuming a specific increased
market value for the size of the grant. The Committee also reviews the prior
level of grants to the officers and to other members of senior management
including the number of shares which continue to be subject to vesting under
outstanding options, in setting the level of options to be granted to the
executive officers. The size of the option grants is not related to Company
performance. The Committee also utilizes data compiled by Ernst & Young,
Certified Public Accountants, on stock options granted in a group of select
software companies. These stock options are granted at the market price on the
date of grant and will provide value to the officers only when the price of the
Company's Common Stock increases over the exercise price.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee established the Chief Executive Officer's salary and target
bonus levels at the beginning of fiscal 1994. Consistent with the analysis
described above, the Committee increased Dr. Warnock's base salary and
maintained his target bonus percentage. For all quarters, the Committee approved
full payment of Dr. Warnock's target bonus. For the year, the Committee approved
an additional bonus since the Company's fiscal 1994 performance on operating
profit and revenue exceeded the targets, consistent with the management
incentive bonus program. These approvals were based upon the revised management
incentive program which focused on the Company's revenue and operating profit
performance against the annual budget as updated.
In September 1994, following the successful completion of the Company's
acquisition of Aldus Corporation, the Committee increased Dr. Warnock's base
salary to a midlevel percentile competitive position as stated by the Radford
Associates Management survey for companies in the $500 million to $1 billion
revenue range. In addition, during the fiscal year the Committee granted stock
options for 100,000 shares of Common Stock to Dr. Warnock in consideration of
his individual performance during 1994 and expected performance in 1995. These
options were not related to Company performance in 1994. Based on Dr. Warnock's
senior position, a hypothetical return assuming a specific increased market
value in the Company's Common Stock, and the number of shares which continue to
be subject to vesting under outstanding options, the Committee determined that a
grant of 100,000 shares was appropriate.
EXECUTIVE COMPENSATION COMMITTEE
William R. Hambrecht
Delbert W. Yocam
Robert Sedgewick
11
<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive annual retainers of
$8,000 (increased to $10,000 beginning in 1995), meeting fees of $1,000 for each
Board of Directors meeting attended (other than telephonic meetings) and $800
for each committee meeting attended, and reimbursement for reasonable travel
expenses. In addition, each person who is a non-employee director is
automatically granted on the date of the annual meeting of shareholders of the
Company a restricted option to purchase shares of the Company's Common Stock
under the Company's Restricted Stock Option Plan ("Restricted Option Plan") at a
price per share equal to the closing price of the Company's Common Stock on that
date. On December 21, 1994, the Board approved an increase of 2,500 shares to
10,000 shares as the number of options automatically granted annually to its
non-employee directors, and set at 15,000 the number of options to be granted to
a new director upon joining the Board. This increase will be implemented with
the April 1995 grants, subject to shareholder approval.
Each option has a term of ten years and a vesting schedule of (i) 25% at the
end of twelve months from the date of grant; (ii) 25% at the end of twenty-four
months from the date of grant; and (iii) the remaining 50% at the end of
thirty-six months from the date of grant. The options are immediately
exercisable. Options cease to be exercisable 30 days after termination of
director status, unless such an exercise would subject the resigning director to
a lawsuit under Section 16(b) of the 34 Act. In such an event, the timeframe for
exercising vested options would be extended until the earlier of (i) the 10th
day following the date on which the resigning director would no longer be
subject to a 16(b) lawsuit, or (ii) the 190th day after termination of services
as director. In the event of a change of control, any unexercisable portion of
an option shall be fully exercisable prior to the transaction resulting in a
change of control. The option will terminate to the extent it is not exercised
effective as of the date of such a transaction. See "Proposal Two" for a
description of the Restricted Option Plan.
12
<PAGE>
PERFORMANCE GRAPH
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
In accordance with SEC rules, the following table shows a line-graph
presentation comparing cumulative, five-year shareholder returns on an indexed
basis with a broad equity market index and either a nationally recognized
industry standard or an index of peer companies selected by the Company. The
Company has selected the Standard & Poor ("S&P 500") Index for the broad equity
index and the Hambrecht & Quist ("H&Q") Technology Index as an industry standard
for the five fiscal year period commencing December 1, 1989 and ending November
25, 1994. The stock price information shown on the graph below is not
necessarily indicative of future price performance.
Although including a stock performance graph in this proxy statement seems
to suggest that executive compensation should be based on stock performance
alone, the Executive Compensation Committee considers many factors in
determining compensation. These factors include the Company's operating results,
overall profitability, new product development, increases in market share and
growth in shareholders' equity. See "Report of the Executive Compensation
Committee."
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Adobe Systems 100.00 135.89 260.76 182.02 259.18 361.02
H & Q Technology 100.00 85.23 119.15 149.72 165.84 192.69
S & P 500 100.00 96.53 116.17 137.62 151.52 153.11
<FN>
- --------------
* Assumes $100 invested on December 1, 1989 in the Company's Common Stock, the
S&P 500 Index and the H&Q Technology Index, with reinvestment of dividends.
** For each reported year, the Company's reported dates are the last trading
dates of its fiscal year ending in November, and the S&P 500 and H&Q
Technology index dates are the last trading date in November.
</TABLE>
13
<PAGE>
PROPOSAL TWO
APPROVAL OF AN
INCREASE IN THE (I) SHARE RESERVE; (II) AUTOMATIC ANNUAL GRANTS TO
NON-EMPLOYEE DIRECTORS (AND AVAILABLE GRANTS TO CONSULTANTS);
AND (III) INITIAL GRANT TO A NEW NON-EMPLOYEE DIRECTOR UNDER THE
RESTRICTED STOCK OPTION PLAN
The Board of Directors and the shareholders approved the adoption of the
Restricted Option Plan in March 1987 and May 1988, respectively. The Restricted
Option Plan was revised by the Board in March 1989 to increase automatic annual
grants to non-employee directors to 5,000 shares; in February 1990 to provide
for an initial option grant of 5,000 shares to each non-employee director first
elected to the Board after January 1, 1990; in December 1990 to set formally the
plan share reserve at 200,000 shares; in September 1991 to provide for new SEC
rule changes; and in February 1994 to increase automatic annual grants to non-
employee directors to 7,500 shares and to increase the share reserve by 50,000
shares.
An aggregate of 250,000 shares of the Company's Common Stock is currently
reserved for issuance under the Restricted Option Plan. On December 21, 1994,
the Board increased the share reserve under the Restricted Option Plan by
250,000 shares to a total of 500,000 shares, increased the automatic annual
grant of option shares to each non-employee director (and available grants to
consultants) from 7,500 to 10,000 shares, and set the initial grant for a new
non-employee director at 15,000 shares, subject to shareholder approval. The
Board believes that the availability of an adequate number of shares in the
share reserve of the Restricted Option Plan is necessary in order to adequately
compensate its non-employee directors for their services to the Company and is
essential to the success of the Company. Due to the Company's recent acquisition
of Aldus Corporation and resulting increase in its outstanding shares of Common
Stock, the Board believes an increase in the number of shares granted to its
non-employee directors each year is warranted.
THE BOARD INCREASED THE SHARE RESERVE OF THE RESTRICTED OPTION PLAN, SUBJECT
TO SHAREHOLDER APPROVAL, BY 250,000 SHARES IN CONTEMPLATION OF USING THESE
SHARES FOR FUTURE GRANTS TO THE COMPANY'S NON-EMPLOYEE DIRECTORS AND
CONSULTANTS, IF ANY, FOR FISCAL YEARS 1995 AND 1996. IN LIGHT OF HISTORICAL
USAGE AND EXPECTED FUTURE GRANTS, THE COMPANY EXPECTS THAT A 250,000 SHARE
INCREASE WILL BE ADEQUATE TO MEET THESE FORESEEABLE REQUIREMENTS.
The Company intends to register the 250,000 share increase on Form S-8 under
the Securities Act of 1933 as soon as is practicable after receiving shareholder
approval.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SUMMARY OF RESTRICTED OPTION PLAN TERMS
The following summary of the Restricted Option Plan is qualified in its
entirety by the specific language of the Restricted Option Plan, a copy of which
will be available to any shareholder upon written request.
ELIGIBILITY. Only non-employee directors and consultants of the Company are
eligible to receive options ("Restricted Options") to purchase shares of the
Company's Common Stock. Each non-employee director is automatically granted a
Restricted Option to purchase 7,500 shares during each fiscal year. The Board in
its discretion may grant a consultant a Restricted Option for up to an aggregate
of 7,500 shares during each fiscal year. On December 21, 1994, the Board
increased the number of shares automatically granted each year to non-employee
directors to 10,000 shares, and increased the available grant to a consultant to
10,000 shares, and set the initial grant to a new non-employee director at
15,000 shares, subject to shareholder approval. As of February 16, 1995, six
non-employee directors were eligible to participate in the Restricted Option
Plan. There were no consultants eligible to participate in the plan as of
February 16, 1995.
VESTING AND CHANGE IN CONTROL OR CAPITALIZATION. The shares vest (i) 25% at
the end of twelve months from the date of grant; (ii) 25% at the end of
twenty-four months from the date of grant; and (iii) the remaining 50% at the
end of thirty-six months from the date of grant. Unvested shares are subject to
14
<PAGE>
repurchase by the Company in the event that the recipient ceases to be a
director or consultant to the Company. In the event of any merger,
reorganization, or sale of substantially all of the Company's assets, in which
there is a change in control of the Company, all Restricted Option shares shall
be immediately and fully vested. If a recipient becomes an employee of the
Company, the shares shall continue to vest on the schedule listed above during
the recipient's employment. Appropriate adjustments are made to any outstanding
options in the event of a stock dividend, stock split, or other change in the
capital structure of the Company.
ADMINISTRATION. The Restricted Option Plan is administered by the Board of
Directors or a committee appointed by the Board of Directors. The closing market
price for the Company's Common Stock as of January 13, 1995 was $31.25.
AMENDMENTS. The Board may at any time amend or terminate the Restricted
Option Plan, except that shareholder approval is required to increase the number
of shares authorized for issuance under the Restricted Option Plan. In addition,
the rights of a recipient of Restricted Option shares granted prior to any such
action by the Board may not be impaired without such recipient's consent.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE RESTRICTED OPTION PLAN
The following summary is intended only as a general guide as to the federal
income tax consequences under current law of options granted pursuant to the
Restricted Option Plan and does not attempt to describe all potential tax
consequences. Furthermore, the tax consequences are complex and subject to
change, and a taxpayer's particular situation may be such that some variation of
the described rules is applicable.
Options granted pursuant to the Restricted Option Plan are nonqualified
stock options. Nonqualified stock options have no special tax status. An
optionee generally recognizes no taxable income as the result of the grant of
such an option. Upon exercise of a nonqualified stock option, the optionee
normally recognizes ordinary income on the excess of the fair market value on
the date of exercise over the option exercise price. If the optionee is an
employee, such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of stock acquired by the exercise of a
nonqualified stock option, any gain or loss, based on the difference between the
sale price and the fair market value on the date of recognition of income, will
be taxed as a capital gain or loss. A capital gain or loss will be long-term if
the optionee's holding period is more than 12 months. In the event of a same day
sale of the option, the optionee recognizes ordinary income on the difference
between the option exercise price and the sale price. No tax deduction is
available to the Company with respect to the grant of the option or the sale of
stock acquired upon exercise of the option. The Company should be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee as a
result of the exercise of the nonqualified stock option, provided the Company
collects the required withholding amounts. Generally, the recipients will be
subject to the restrictions of Section 16(b) of the 34 Act.
15
<PAGE>
The following table shows the number of options granted under the Restricted
Option Plan for the fiscal year ended November 25, 1994. There are no option
grants to report from the date of Board approval of the plan amendment to date
under the Restricted Option Plan. Since participation in the Restricted Option
Plan by consultants is at the discretion of the Board, and the number of
non-employee director participants is subject to change, future grants under the
Restricted Option Plan are not determinable.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
RESTRICTED STOCK
OPTION PLAN
------------------
NUMBER OF
SECURITIES
UNDERLYING OPTIONS
NAME AND POSITION GRANTED
- --------------------------------------------------------------------------------------------- ------------------
<S> <C>
John E. Warnock ............................................................................. --
Chairman of the Board and Chief Executive Officer
Charles M. Geschke .......................................................................... --
President and Director
William R. Hambrecht ........................................................................ 7,500
Director
Robert Sedgewick ............................................................................ 7,500
Director
William J. Spencer .......................................................................... 7,500
Director
Delbert W. Yocam ............................................................................ 7,500
Director
Paul Brainerd ............................................................................... 7,500
Director
Gene P. Carter .............................................................................. 7,500
Director
Stephen A. MacDonald ........................................................................ --
Senior Vice President and General Manager,
System Products Division
David B. Pratt .............................................................................. --
Senior Vice President and General Manager,
Application Products Division
M. Bruce Nakao .............................................................................. --
Senior Vice President, Finance and Administration,
Chief Financial Officer
Executive Officer Group...................................................................... --
Non-Employee Director Group.................................................................. 45,000
Non-Executive Officer Employee Group......................................................... --
</TABLE>
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the independent
public accountants for the Company for fiscal year 1995, and recommends that the
shareholders vote for ratification of such appointment. KPMG Peat Marwick has
audited the Company's financial statements since 1983. Notwithstanding the
selection, the Board, in its discretion, may direct the appointment of a new
independent
16
<PAGE>
accounting firm at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its shareholders. A
representative of KPMG Peat Marwick is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she so desires and be
available to respond to appropriate questions.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER BUSINESS
The Company knows of no other matters to be submitted at the Annual Meeting.
If any other matters are properly brought before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent in accordance with their judgment.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented by such shareholders at
next year's Annual Meeting must be received by the Company at its principal
office no later than November 1, 1995 and must satisfy the conditions
established by the SEC for shareholder proposals to be included in the Company's
proxy statement for that meeting.
By Order of the Board of Directors
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
February 28, 1995
17
<PAGE>
ADOBE SYSTEMS INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints John Warnock and Charles Geschke, and each of
them, with full power of substitution to represent the undersigned and to vote
all of the shares of stock in Adobe Systems Incorporated (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of Shareholders of
the Company to be held at the Stanford Park Hotel, 100 El Camino Real, Menlo
Park, California 94025 on Wednesday, April 5, 1995 at 1:30 p.m. local time, and
at any adjournment thereof (1) as hereinafter specified upon the proposals
listed below and as more particularly described in the Company's Proxy Statement
receipt of which is hereby acknowledged, and (2) in their discretion upon such
other matters as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
A vote FOR the following proposals is recommended by the Board of Directors:
The shares represented hereby shall be voted as specified.
If no specification is made, such shares shall be voted FOR
proposals 1 through 4.
Whether or not you are able to attend the meeting, you are
urged to sign and mail the Proxy in the return envelope so
that your stock may be represented at the meeting.
<PAGE>
PLEASE MARK IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
For All
For Withheld Except
O O O
1. Election of the four (4) Class II directors
proposed in the accompanying proxy statement to
serve for a two-year term.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME IN THE LIST BELOW.)
John E. Warnock, Robert Sedgewick, William J.
Spencer, Gene P. Carter.
For Against Abstain
O O O
2. Approval of an increase in the share reserve of
the Restricted Stock Option Plan by 250,000 shares,
increasing to 10,000 from 7,500 the number of
shares subject to options automatically granted
each year to non-employee directors and available
to be granted to a consultant, and increasing to
15,000 from 7,500 the number of shares subject to
options automatically granted to a new non-employee
director upon joining the Board.
For Against Abstain
O O O
3. Ratification of the appointment of KPMG
Peat Marwick as the Company's independant public
accountants for the next fiscal year.
For Against Abstain
O O O
4. Transacting of such other business as may
properly come before the meeting or any
adjournment thereof.
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by a
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant Secretary, and the corporate seal should be affixed
thereto. Executors or administrators or other fiduciaries who execute the above
Proxy for a deceased shareholder should give their full title. Please date the
Proxy.
Signature(s):
________________________________________________________________________________
________________________________________________________________________________
Date______________________________________________________________________,1995.
(Be sure to date your Proxy)
