<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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 10, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Adobe
Systems Incorporated, a California corporation (the "Company"), will be held on
April 10, 1996, at 1:30 p.m., local time, at The Westin Hotel, 5101 Great
America Parkway, Santa Clara, California 95054 for the following purposes:
1. To elect three (3) Class I directors of the Company to serve for a
two-year term.
2. To approve an amendment to the Company's 1994 Stock Option Plan,
increasing by 3,600,000 the number of shares reserved for issuance
under the Plan.
3. To approve the new stock option plan for the Company's Outside
Directors, to be known as the 1996 Outside Directors Stock Option
Plan. THIS PLAN IS INTENDED TO REPLACE THE RESTRICTED STOCK OPTION
PLAN, WHICH EXPIRES MARCH 1997, WITH NO INCREASE IN THE SHARE RESERVE
OVER THAT IN THE RESTRICTED STOCK OPTION PLAN, AND NO INCREASE IN THE
ANNUAL OR INITIAL GRANTS TO DIRECTORS.
4. To ratify the appointment of KPMG Peat Marwick LLP as the
independent public accountants of the Company for the fiscal year
ending November 29, 1996.
5. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on February 21, 1996 are
entitled to notice of and to vote at this Annual Meeting and at any adjournment
or postponement thereof.
By Order of the Board of Directors
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
Mountain View, California
March 4, 1996
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 10, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION CONCERNING SOLICITATION AND VOTING........................... 1
PROPOSAL ONE -- ELECTION OF DIRECTORS.................................... 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 5
EXECUTIVE COMPENSATION................................................... 7
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE........................... 11
DIRECTOR COMPENSATION.................................................... 14
PERFORMANCE GRAPH........................................................ 15
PROPOSAL TWO -- APPROVAL OF AN INCREASE IN THE SHARE RESERVE UNDER THE
1994 STOCK OPTION PLAN................................................. 16
PROPOSAL THREE -- APPROVAL OF THE 1996 OUTSIDE DIRECTORS STOCK OPTION
PLAN................................................................... 19
PROPOSAL FOUR -- RATIFICATION OF APPOINTMENT OF AUDITORS................. 21
OTHER BUSINESS........................................................... 22
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING............. 22
</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 10, 1996, at The Westin Hotel, 5101 Great America Parkway, Santa
Clara, California 95054 at 1:30 p.m., local time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting.
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
March 4, 1996, the approximate date on which these proxy solicitation materials
and the Annual Report to Shareholders for the fiscal year ended December 1,
1995, 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 Beacon Hill Partners, Inc. ("Beacon Hill") to assist in the solicitation
of proxies for the meeting. The Company will pay $4,000 in fees for Beacon
Hill's services and will reimburse Beacon Hill for reasonable out-of-pocket
expenses.
In addition to solicitation by mail and by Beacon Hill, Management may use
the services of its directors, officers and others to solicit proxies,
personally or by telephone or telegram. No additional compensation will be paid
to directors, officers or other regular employees for such services.
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 21, 1996 (the "Record Date"),
73,305,975 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.
1
<PAGE>
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.
Attendance at the meeting will not, by itself, revoke a proxy.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board has nominated Messrs. Geschke, Hambrecht and Yocam to serve as
Class I directors of the Company. Mr. Paul Brainerd has declined to stand for
re-election as discussed below. 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.
Mr. Brainerd was appointed to the Board upon the closing of the Company's
acquisition of Aldus Corporation in August 1994. Mr. Brainerd was to serve on
the Board until the Company's 1996 Annual Meeting. Due to his increasing
involvement with not-for-profit entities, Mr. Brainerd has declined to stand for
re-election to the Board. Accordingly, his directorship expires on April 10,
1996, immediately prior to the Annual Meeting. At a meeting to be held prior to
the Annual Meeting, the Board plans to amend the Company's By-Laws to reduce the
fixed number of directors to seven. It is the intention of the Board to search
for a qualified replacement director.
THE BOARD RECOMMENDS VOTING "FOR" THE THREE 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 reasonably
possible, with the classes of directors serving for staggered, two-year terms.
Vacancies on the Board not caused by removal may be filled by a majority of the
directors then in office. The shareholders may elect a director at any time to
fill any vacancy not filled, or which cannot be filled, by the Board. All
directors, including directors elected to fill vacancies, shall hold office
until the expiration of the term for which elected and until their successors
are elected and qualified, except in the case of death, resignation or removal
of any director.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the three nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as Management may propose. Each person nominated for election
has agreed to serve if elected and Management has no reason to believe that any
nominee will be unable to serve.
Each nominee for election to Class I director is currently a director of the
Company who was previously elected by the shareholders. The three Class I
directors to be elected at the 1996 Annual Meeting will hold office until the
1998 Annual Meeting and until their successors have been elected and qualified,
or until such director's earlier death, resignation or removal.
2
<PAGE>
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:
NOMINEES FOR ELECTION AS CLASS I DIRECTORS FOR A TERM EXPIRING IN 1998:
<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 56 1982
been its President 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 59 1982
since December 1982. He is Chairman of Hambrecht &
Quist Group and its principal subsidiary,
Hambrecht & Quist LLC. Mr. Hambrecht has been a
director of RvR Securities Corp., a wholly-owned
subsidiary of Hambrecht & Quist Group, since its
inception in 1993. He has continuously served as
an officer, director or principal of those
entities or their predecessors since he and the
late George Quist co-founded Hambrecht & Quist in
1968. Mr. Hambrecht also serves on the Board of
Directors of Redbrick Systems, Castelle and
Vanguard Airlines. He holds a B.A. degree from
Princeton University.
Delbert W. Yocam Mr. Yocam has been a director of the Company since 52 1991
February 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, and as President of Apple Pacific, a
division of Apple Computer, Inc., from 1988 to
1989. Mr. Yocam is a director of Oracle
Corporation, Integrated Measurement Systems, Inc.,
and several privately-held technology companies.
INCUMBENT CLASS II DIRECTORS FOR A TERM EXPIRING IN 1997:
John E. Warnock Dr. Warnock was a founder of the Company and has 55 1982
been its Chairman 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, Netscape Communications Corporation,
and Redbrick Systems.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE YEAR
- ----------------------------------- -------------------------------------------------- --- ----
<S> <C> <C> <C>
Robert Sedgewick Dr. Sedgewick has been a director of the Company 49 1990
since January 1990. Since 1985, he has been a
Professor of Computer Science at Princeton
University, where he was the founding Chairman of
the Department of Computer Science from 1985 to
1994. He is the author of a widely used series of
textbooks on algorithms. Dr. Sedgewick holds a
Ph.D. in computer science from Stanford
University.
William J. Spencer Dr. Spencer has been a director of the Company 65 1992
since October 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, CNRI, and SRI
International.
Gene P. Carter Mr. Carter has been a director of the Company 61 1994
since August 1994. Mr. Carter has been a private
investor since 1984, and since 1989 has been a
director of Portable Energy Products, Inc., a
privately held manufacturer of rechargeable energy
cells for the portable instrumentation market. Mr.
Carter is a director of Chips & Technologies,
Inc., and is on the Board of Regents of the
Milwaukee School of Engineering.
</TABLE>
BOARD MEETINGS AND COMMITTEES
During fiscal 1995, the Board of Directors held eight meetings. The Board
has an Audit Committee, an Executive Compensation Committee, an Investment
Committee (all of the foregoing committees' members are non-employee directors),
and an Employee Grant Committee. All directors attended at least 75% of the
meetings of the Board and all committees of the Board of which they were
members. The Company does not have a nominating committee nor any committee
performing such functions.
Messrs. Brainerd and Spencer served as members of the Audit Committee
throughout fiscal 1995. The Audit Committee meets with the Company's independent
auditors at least annually and 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. The Audit Committee held
two meetings during fiscal 1995.
Messrs. Hambrecht, Sedgewick and Yocam served as members of the Executive
Compensation Committee throughout fiscal 1995. The Executive Compensation
Committee held four meetings and took action once by unanimous written consent
during fiscal 1995. The responsibilities of the Executive Compensation Committee
are set forth under "Report of the Executive Compensation Committee."
Messrs. Carter, Sedgewick and Yocam served as members of the Investment
Committee throughout fiscal 1995. The Investment Committee held two meetings and
took action once by unanimous written consent during fiscal 1995. 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.
Messrs. Warnock and Geschke served as members of the Employee Grant
Committee throughout fiscal 1995. 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 the 1994 Performance and
Restricted Stock Plan, respectively) acted thirty-five times by written consent
during fiscal 1995.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 1, 1996, there was outstanding 73,263,292 shares of the
Company's Common Stock. Except as set forth in the footnotes to the table, the
following table sets forth information regarding the beneficial ownership of the
Company's Common Stock as of February 1, 1996: (a) by each person known by the
Company to own beneficially more than 5% of the Company's 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, 1995); (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>
Jennison Associates Capital Corp. ..................................... 4,593,540(3) 6.4%
466 Lexington Avenue
New York, NY 10017
Twentieth Century Companies, Inc. ..................................... 3,856,900(4) 5.3%
4500 Main Street
P.O. Box 418210
Kansas City, MO 64141-9210
Capital Group Companies, Inc. ......................................... 3,272,000(5) 5.1%
333 South Hope Street
52nd floor
Los Angeles, CA 90071
John E. Warnock........................................................ 1,263,428(6) 1.7%
Charles M. Geschke..................................................... 909,880(7) 1.2%
Stephen A. MacDonald................................................... 434,205(8) *
David B. Pratt......................................................... 174,388(9) *
M. Bruce Nakao......................................................... 212,651(10) *
William R. Hambrecht................................................... 93,484(11) *
Robert Sedgewick....................................................... 38,700(12) *
William J. Spencer..................................................... 37,500(13) *
Delbert W. Yocam....................................................... 20,625(14) *
Gene P. Carter......................................................... 93,604(15) *
Paul Brainerd.......................................................... 9,100(16) *
All directors and executive officers as a group (13 persons)........... 3,396,077(17) 4.5%
</TABLE>
- --------------
* Less than 1%.
(1) The persons named in the table above 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 February 1, 1996
or within 60 days thereafter are included.
(3) Of the shares attributed to Jennison Associates Capital Corp., it has sole
voting power for 547,700 shares; shared dispositive power for 4,593,540
shares; and shared voting power for 3,488,940 shares. This information was
provided to the Company pursuant to Schedule 13G and is current as of
December 31, 1995.
(4) Of the shares attributed to Twentieth Century Companies, Inc. ("TCC"), it
has sole voting and dispositive power for the entire 3,856,900 shares. This
information was provided to the Company pursuant to Schedule 13G and is
current as of December 31, 1995. The Schedule 13G was filed on behalf of
TCC, Twentieth Century Investors, Inc. ("TCI"), an investment company
registered under Section 8 of the Investment Advisors Act of 1940 (the
"Investment Act"), Investors Research Corporation ("IRC"), an investment
advisor registered under Section 203 of the Investment Act, and Mr. James E.
Stowers, Jr., who controls TCC by virtue of his beneficial ownership of a
majority of the voting stock of TCC.
As a result of its status as investment advisor to TCI, IRC is deemed to be
the beneficial owner of 3,856,900 shares of the Company.
TCC, as a result of its control of IRC, and Mr. Stowers, as a result of his
control of TCC, are also deemed to beneficially own all such shares deemed
to be beneficially owned by IRC. Mr. Stowers, TCC and IRC all disclaim
beneficial ownership of such 3,856,900 shares.
5
<PAGE>
(5) Of the shares attributed to Capital Group Companies, Inc. ("CGC"), it has
sole dispositive power for the entire 3,272,000 shares. This information was
provided to the Company pursuant to Schedule 13G filed jointly by CGC and
Capital Research and Management Company ("CRMC") and is current as of
December 31, 1995. CRMC is an investment advisor registered under Section
203 of the Investment Act, and is a wholly-owned subsidiary of CGC. CRMC
acts as an advisor to American Funds Group ("AFG"), a mutual fund which is
the beneficial owner of the shares. AFG has sole voting power as to the
shares. As a result of its status as investment advisor to AFG, CRMC is
deemed to be the beneficial owner of 3,272,000 shares of the Company. CGC,
as a result of its control of CRMC, is also deemed to be the beneficial
owner of all such shares deemed to be beneficially owned by CRMC. CGC and
CRMC both disclaim beneficial ownership of such 3,272,000 shares.
(6) Of the shares attributed to Dr. Warnock, 8,400 shares are held in trusts
for the benefit of his children; Dr. Warnock shares voting and investment
power over these trusts with his spouse and Charles M. Geschke. Dr. Warnock
disclaims beneficial ownership of any shares held in his childrens' trusts.
Includes 353,905 shares issuable upon exercise of outstanding options.
(7) Of the shares attributed to Dr. Geschke, 13,470 shares are held in trusts
for the benefit of his children, and 800 shares are held by Dr. Geschke's
father; Dr. Geschke and his spouse share voting and investment power over
the childrens' trusts. Dr. Geschke disclaims beneficial ownership of any
shares held in his childrens' trusts and in the shares held by his father.
In addition, 596,860 shares are held in the name of the Geschke Family Trust
dated 9/25/87, over which Dr. Geschke shares voting and investment power
with his spouse. Includes 298,750 shares issuable upon exercise of
outstanding options.
(8) Includes 407,724 shares issuable upon exercise of outstanding options.
(9) Of the shares attributed to Mr. Pratt, 2,348 shares are held in a living
trust over which Mr. Pratt shares voting and investment power with his
spouse. Includes 160,208 shares issuable upon exercise of outstanding
options.
(10) Of the shares attributed to Mr. Nakao, 100 shares are held for the benefit
of his son. The remaining shares are held in a trust. Includes 183,586
shares issuable upon exercise of outstanding options.
(11) Includes 87,500 shares issuable upon exercise of outstanding options.
(12) Includes 37,500 shares issuable upon exercise of outstanding options.
(13) Consists entirely of 37,500 shares issuable upon exercise of outstanding
options.
(14) Consists entirely of 20,625 shares issuable upon exercise of outstanding
options.
(15) Of the shares attributed to Mr. Carter, 86,104 shares are held in trust for
the benefit of Mr. Carter's family. Includes 7,500 shares issuable upon
exercise of outstanding options.
(16) Includes 7,500 shares issuable upon exercise of outstanding options.
(17) Includes 1,706,692 shares issuable upon exercise of outstanding options.
6
<PAGE>
EXECUTIVE COMPENSATION
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 (the "Named Executive Officers") of the Company for the
fiscal years ended November 26, 1993, November 25, 1994 and December 1, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
-----------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ---------------------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) AWARDS(S) ($)(2) OPTION/SARS (#)(3) COMPENSATION ($)(4)
- ---------------------------------- --------- ---------- ----------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock .................. 1995 $ 375,014 $ 293,308 -0- 42,000 $ 44,572
Chairman of the Board and Chief 1994 318,762 268,069 -0- 100,000 45,754
Executive Officer 1993 273,011 186,836 -0- 90,000 37,841
Charles M. Geschke ............... 1995 375,014 293,308 -0- 42,000 45,531
President and Director 1994 318,762 268,069 -0- 100,000 46,841
1993 273,011 186,836 -0- 90,000 38,849
Stephen A. MacDonald ............. 1995 271,010 168,272 107,500 25,000 37,887
Senior Vice President and Chief 1994 251,010 169,425 -0- 50,000 37,532
Operating Officer 1993 240,609 131,729 -0- 70,000 32,470
David B. Pratt ................... 1995 271,010 168,272 107,500 25,000 44,797
Senior Vice President and Chief 1994 239,209 160,264 -0- 50,000 43,733
Operating Officer 1993 204,817 112,132 -0- 70,000 38,070
M. Bruce Nakao ................... 1995 237,009 121,873 107,500 18,000 38,639
Senior Vice President, Finance 1994 218,021 121,215 -0- 44,000 37,797
and Administration, Chief 1993 200,008 91,250 -0- 50,000 32,207
Financial Officer
</TABLE>
- --------------
(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) For the Named Executive Officers, the aggregate number of restricted stock
holdings at the end of fiscal 1995 was 6,000 shares; the closing price of
the Company's Common Stock at December 1, 1995, the fiscal year-end, was
$67.00/share for an aggregate value of $402,000.00. For the Named Executive
Officers, there was a total of 6,000 restricted shares awarded. All awards
were granted on May 10, 1995 and vested fully on September 1, 1995.
(3) These numbers reflect the two-for-one stock split effective July 27, 1993.
(4) The amounts disclosed in this column for fiscal 1995 include payment by the
Company on behalf of the Named Executive Officers as follows:
(a) Life insurance premiums in the following amounts: Dr. Warnock, $13,630;
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 premiums as
follows: Dr. Warnock, $12,683; Dr. Geschke, $13,182; Mr. MacDonald,
$10,412; Mr. Pratt, $13,182; and Mr. Nakao, $11,251.
(c) Disability insurance premiums in the following amounts: Dr. Warnock,
$11,599; Dr. Geschke, $11,454; Mr. MacDonald, $9,078; Mr. Pratt, $9,445;
and Mr. Nakao, $8,107.
(d) Company contributions under the Company's 401(k) Plan in the following
amounts: Dr. Warnock, $6,660; Dr. Geschke, $6,660; Mr. MacDonald, $7,296;
Mr. Pratt, $7,350; and Mr. Nakao, $7,266.
(e) Preventive health care program in the following amount: Mr. Pratt, $585.
7
<PAGE>
STOCK OPTIONS
The following table provides details regarding stock options granted to the
Named Executive Officers in fiscal 1995 under the Company's 1994 Stock Option
Plan. In addition, in accordance with Securities and Exchange Commission ("SEC")
rules, there are shown the hypothetical gains or "option spreads" that would
exist for the respective options. These gains are based on assumed rates of
annual compound stock price appreciation of 5% and 10% from the date the options
were granted over the full option term. The actual value, if any, an executive
may realize will depend on the spread between the market price and the exercise
price on the date the option is exercised.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS/SARS GRANTED EXERCISE OR FOR OPTION TERM (3)
OPTIONS/SARS TO EMPLOYEES IN BASE EXPIRATION --------------------------
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH)(2) DATE 5% ($) 10% ($)
- ---------------------------- --------------- --------------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock............. 42,000 1.76% $ 50.75 8/1/05 $ 1,318,283 $ 3,328,200
Charles M. Geschke.......... 42,000 1.76 50.75 8/1/05 1,318,283 3,328,200
Stephen A. MacDonald........ 25,000 1.05 50.75 8/1/05 784,692 1,981,071
David B. Pratt.............. 25,000 1.05 50.75 8/1/05 784,692 1,981,071
M. Bruce Nakao.............. 18,000 0.75 50.75 8/1/05 564,978 1,426,371
</TABLE>
- --------------
(1) The options were granted September 18, 1995 and became exercisable beginning
October 18, 1995. 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, which
was equal to the closing price per share of the Company's Common Stock as
quoted on the National Association of Securities Dealers Automated
Quotations. The option term is for a period of ten years from the date of
grant, unless the optionee terminates employment with the Company as
follows:
(a) if the termination is due to the optionee's normal retirement, death or
disability, the exercise period is twelve months from such date; or
(b) if the termination is due to the optionee's early retirement pursuant to
an early retirement program, the exercise period is three months from the
date of early retirement or such greater period as established pursuant
to the early retirement program; or
(c) if there is a transfer of control of the Company in which the Company is
not the surviving corporation, and termination occurs within twelve
months thereafter due to (i) constructive termination or (ii) any reason
other than termination for cause, the exercise period is twelve months
from the date on which the optionee's employment terminated, and he/she
will be given credit for an additional twelve months of vesting for
his/her option; or
(d) if the termination is for cause, the option shall terminate and cease to
be exercisable from the date of termination; or
(e) if the termination is for any reason other than stated above, the
exercise period is three months from the date of such termination.
(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.
8
<PAGE>
(3) The potential gain is calculated from the closing price of the Company's
Common Stock on September 18, 1995, the date of grant to the Named Executive
Officers. These amounts represent certain assumed rates of appreciation
only, as set by the SEC. Actual 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 $2.3 billion at 5%, and
$5.9 billion at 10% rates of stock price appreciation.
STOCK OPTION EXERCISES AND HOLDINGS
The following table shows stock options exercised by Named Executive
Officers during fiscal 1995, including the aggregate value of gains on the date
of exercise. In addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options as of fiscal year-end. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
SHARES FY-END (#) FY-END ($)(1)
ACQUIRED ON VALUE -------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------- ------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock............. -0- $ -0- 370,073 134,675 $ 17,784,885 $ 4,498,538
Charles M. Geschke.......... -0- -0- 277,325 134,675 12,435,212 4,498,538
Stephen A. MacDonald........ 40,000 1,842,500 393,025 79,491 20,743,057 2,633,262
David B. Pratt.............. 56,000 2,293,000 145,509 79,491 6,200,488 2,633,262
M. Bruce Nakao.............. 5,000 102,500 174,733 62,267 8,312,630 2,105,870
</TABLE>
- --------------
(1) Fiscal year ended December 1, 1995. The closing market price on that date
for the Company's Common Stock was $67.00.
LONG-TERM INCENTIVE PLAN
In June 1994, the Company's Board of Directors adopted the 1994 Performance
and Restricted Stock Plan, the Company's form of Long-Term Incentive Plan, which
plan was subsequently approved by the Company's shareholders in August 1994 (the
"Performance Plan"). The Performance Plan is a compensation plan tied to
corporate performance and measured by the achievement of financial goals.
The Performance Plan has a three-year cycle. At the start of each three-year
performance cycle, each participant is given a contingent award of a number of
shares of the Company's Common Stock. The actual number of shares earned by the
participant is determined based upon the Company meeting pre-defined performance
objectives over the three-year performance period. The measures for the first
three-year performance period consist of the Company's (i) compound annual
revenue growth and (ii) operating margin. If the minimum targets for the first
two measures are met, a third modifying measure based on the Company's stock
price performance relative to the Hambrecht & Quist ("H&Q") Technology Index is
used to modify the number of shares actually awarded, with the maximum number of
shares possible for award as noted in the last column of the following chart.
9
<PAGE>
Fiscal 1995 was the first year that Performance Plan contingent awards were
granted, with the initial three-year cycle to be fiscal 1995 through fiscal
1997. The following table provides certain information with respect to awards
during fiscal 1995 to the Named Executive Officers under the Performance Plan:
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
NUMBER OF SHARES, UNTIL PRICE-BASED PLANS
UNITS OR OTHER MATURATION OR ---------------------------------------------
NAME RIGHTS (#) PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
- ----------------------------------- ----------------- --------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
John E. Warnock.................... 15,500 FY95 - FY97 581 15,500 46,500
Charles M. Geschke................. 15,500 FY95 - FY97 581 15,500 46,500
Stephen A. MacDonald............... 8,675 FY95 - FY97 325 8,675 26,025
David B. Pratt..................... 8,675 FY95 - FY97 325 8,675 26,025
M. Bruce Nakao..................... 6,450 FY95 - FY97 242 6,450 19,350
</TABLE>
SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
In September 1995, the Company entered into retention agreements (the
"Agreements") with its executive officers, providing for certain cash payments
in the event of termination of his or her employment following a
change-in-control of the Company.
For purposes of these Agreements, a "change-in-control" is defined as: (i)
the sale or exchange by the shareholders of all or substantially all of the
stock of the Company; (ii) a merger or consolidation in which the Company is a
party; (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company (other than to a subsidiary); or (iv) a liquidation or
dissolution of the Company. If, within one year after a change-in-control (the
"Covered Period"), the executive's employment is terminated without cause or if
the executive resigns following a change in duties as defined in the Agreements,
such executive officer will receive a cash payment equal to his or her base
salary plus annual target incentive bonus. In addition, the executive officer
will receive continued medical, dental, vision and life insurance coverage for
himself or herself and dependents for one year after the date of termination,
unless the executive is covered by another employer's health plan. Also, if the
executive is terminated by the Company without cause at any time other than
during a Covered Period, the executive will receive the cash payment and
benefits described above.
For a description of the "transfer of control" terms under the Company's
1994 Stock Option Plan, please see "Proposal No. 2".
CERTAIN TRANSACTIONS
Derek J. Gray, Senior Vice President and General Manager of Adobe Systems
Europe, was a major shareholder of McQueen Holdings Limited, a U.K. company of
which the Company is also a 16% shareholder, and to which the Company in 1995
paid approximately $23.6 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 two years to McQueen of $6.1 million
for additional services such as customer support and information systems. Also,
the Company has guaranteed a total payment of approximately $1.8 million to
McQueen for rent of a building over the next four 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. The current principal outstanding is 1.6 million pounds sterling.
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.
10
<PAGE>
The Company prepares 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 1995 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 the
exchange of a few thousand shares of Frame Technology Corporation shares for the
Company's shares for the October 1995 acquisition of Frame, was filed late by
each of Director Warnock, Director Geschke, Director Carter and Senior Vice
President Nakao, and one report covering a gift of shares to an educational
institution was filed late by Director Geschke.
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 1995, the Committee utilized salary, bonus, stock options
and performance units to meet these goals. In addition, on the recommendation of
the CEO and the President, the Committee determined to provide a special,
one-time grant of restricted stock with a 4-month vesting period to the officers
other than the CEO and the President to recognize their efforts in the
successful integration of Aldus Corporation into the Company following the
August 1994 acquisition.
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. For example, in fiscal 1995 stock compensation included
performance units granted under the Performance Plan which cover a three-year
performance period and measure growth in revenue and operating margin. Another
principle is that a substantial portion of each executive's compensation be in
the form of an incentive bonus contingent upon the Company's revenue and
operating profit levels for the relevant fiscal year. For example, in 1995 each
of the Named Executive Officers' target bonus percentage equaled or exceeded 50%
of salary, payable quarterly. 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 1995, the
Committee considered factors such as market share increases, new product
development and return on equity.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "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
ANNUAL COMPENSATION. 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,
11
<PAGE>
organizational level and revenue. Given the officers' levels of responsibility
and the past performance of the Company, the Committee targets a median or
slightly higher percentile competitive position as stated by the survey in
determining salary for each executive officer. As the executives mature in their
respective positions for the size of the Company, the Committee expects to
target a high percentile competitive position for salary compensation. The
annual total cash compensation (salary plus incentive bonus) for each executive
is targeted at a very high percentile competitive position 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 at the beginning of the fiscal year. In fiscal 1995,
the target level of bonus equaled or exceeded 50% of salary for each of the
Named Executive Officers. The actual amount of each bonus was determined by
reference to the 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 1995, the Committee awarded bonuses on a quarterly basis. The following
percentages of the target, consistent with the management incentive bonus
program, were paid for the quarters indicated: first quarter, 100%; second
quarter, 100%; third quarter, 40%; and fourth quarter, 30%. For the year, an
additional bonus was paid consistent with the program since the Company exceeded
the annual targeted revenue and operating profit levels. Executive officers also
participated with all Company employees in the 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. However, should the Company
fail to pay the full ten percent cash bonus in any quarter, and if the Company's
performance meets or exceeds the targets on an annual basis, the Company has the
option to pay the difference between the quarterly cash bonus shortage and the
quarterly cash bonus maximum in the form of an extra 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 fiscal 1995, this bonus was
paid in the following percentages for the relevant quarter: first quarter, 100%;
second quarter, 100%; third quarter, 40%; and fourth quarter, 30%. An additional
amount was awarded for the year, consistent with the plan, since the Company
exceeded the annual targets for revenue and operating profit.
LONG-TERM COMPENSATION. The Committee utilized stock options and
performance units to motivate and retain executive officers for the long-term.
The Committee believes that these forms of compensation closely align the
officers' interests with those of shareholders and provide a major incentive to
officers in building shareholder value. In addition, the Committee believes that
the performance awards further its objective of forging a closer link between
the executives' compensation and the Company's longer-term financial performance
since the awards are based upon a three-year performance cycle.
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 officer's anticipated performance and responsibilities. Additionally,
the Committee considers a hypothetical return assuming a specific increased
market value for the size of the grant, and balances that against the size of
the performance unit award for the fiscal year. 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
12
<PAGE>
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.
The Committee granted performance units pursuant to the Performance Plan to
executive officers at the beginning of fiscal 1995 covering a three-year
performance period. 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. In addition,
the target number of shares that will be payable is modified depending upon the
Company's relative stock price performance to the H&Q Technology Index for the
three-year performance period. The Committee reduced the size of annual option
grants in fiscal 1995 since performance units were also granted.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee established the Chief Executive Officer's salary and target
bonus levels at the beginning of fiscal 1995. Consistent with the analysis
described above, the Committee increased Dr. Warnock's base salary and
maintained his target bonus percentage. For the first two quarters, the
Committee approved full payment of Dr. Warnock's target bonus; for the third
quarter, 40% of target was paid, and for the fourth quarter, 30% of target was
paid. For the year the Committee, consistent with the management incentive bonus
program, approved an additional bonus since the Company's fiscal 1995
performance on revenue and operating profit exceeded the targets against the
annual budget as updated.
For Dr. Warnock's long-term compensation, the Committee granted stock
options under the 1994 Stock Option Plan for 42,000 shares of Common Stock in
consideration of his individual performance in 1995 and expected performance in
1996. These options were not related to Company performance in 1995. 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 42,000 shares subject to options was appropriate.
In addition, the Committee granted 15,500 performance units covering a
three-year performance period beginning in fiscal 1995. 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. In addition, the target number of shares that will be payable
is modified depending upon the Company's relative stock price performance to the
H&Q Technology Index for the three-year performance period. The number of
performance units awarded was determined by the Committee based on Dr. Warnock's
senior position and a hypothetical return based on the closing market price for
the Company's Common Stock on the date of grant.
EXECUTIVE COMPENSATION COMMITTEE
William R. Hambrecht
Delbert W. Yocam
Robert Sedgewick
13
<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive annual retainers of
$10,000, 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 following the
annual meeting of shareholders of the Company a restricted option to purchase
10,000 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. New non-employee directors
joining the Board receive an option to purchase 15,000 shares of the Company's
Common Stock under the Restricted Option Plan.
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 subject to the Company's repurchase at cost of the unvested portion
of such stock. Options cease to be exercisable 30 days after termination of
director status, unless such an exercise would subject the resigning director to
a forfeiture of profits 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 forfeiture of profits under Section 16(b), or (ii) the
190th day after termination of services as director. In the event of a change in
control, any unexercisable portion of an option shall be fully exercisable prior
to the transaction resulting in a change in control. The option will terminate
to the extent it is not exercised effective as of the date of such a
transaction. See "Proposal Three" for a description of the proposed 1996 Outside
Directors Stock Plan, intended to replace the Restricted Option Plan.
14
<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 H&Q Technology Index as an industry standard for the five
fiscal-year period commencing November 30, 1990 and ending December 1, 1995. 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 may
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>
ADOBE SYSTEMS H & Q TECHNOLOGY INDEX S & P 500
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 191.29 139.80 120.34
1992 133.53 175.67 142.57
1993 190.13 194.59 156.97
1994 264.83 226.09 158.61
1995 553.13 358.02 217.27
</TABLE>
- --------------
* Assumes $100 invested on November 30, 1990 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.
15
<PAGE>
PROPOSAL TWO
APPROVAL OF AN
INCREASE IN THE SHARE RESERVE UNDER THE
1994 STOCK OPTION PLAN
The Board of Directors and the shareholders approved the adoption of the
1994 Stock Option Plan (the "Option Plan") in December 1993 and April 1994,
respectively.
An aggregate of 20,000,000 shares of the Company's Common Stock is currently
reserved for issuance under the Option Plan. The Board believes that the
availability of an adequate number of shares in the share reserve of the Option
Plan is an important factor in attracting, retaining and motivating qualified
employees essential to the success of the Company.
On January 11, 1996, subject to shareholder approval, the Board increased
the share reserve under the Option Plan by 3,600,000 shares to a total of
23,600,000 shares in contemplation of using these shares to grant options over a
one-year period. In light of historical usage and expected future grants, the
Company expects that 3,600,000 share increase will be adequate to meet these
foreseeable requirements.
The Company intends to register the 3,600,000 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 OPTION PLAN TERMS
The following summary of the Option Plan is qualified in its entirety by the
specific language of the Option Plan, a copy of which will be available to any
shareholder upon written request.
ELIGIBILITY. All employees of the Company (including officers and directors
who are employees), as well as consultants, advisors, or other independent
contractors to the Company, and prospective employees of the Company to whom
options are granted in connection with written offers of employment with the
Company may, in the discretion of the Board of Directors or the Committees (as
defined below) be granted options under the Option Plan. As of February 1, 1996,
2,185 non-executive officer employees and seven executive officers were eligible
to participate in the Option Plan. As of February 1, 1996, 7,509,562 options
have been granted and are outstanding under the Option Plan; 11,044,090 options
have been granted and exercised under the Option Plan; and options for 1,446,348
shares remain available for grant. The closing market price for the Company's
Common Stock on February 1, 1996 was $34.25.
During the fiscal year ended December 1, 1995, the Named Executive Officers
as a group were granted options under the Option Plan to purchase a total of
152,000 shares of Common Stock of the Company as follows: Dr. Geschke, 42,000;
Dr. Warnock, 42,000; Mr. MacDonald, 25,000; Mr. Pratt, 25,000; and Mr. Nakao,
18,000. Non-employee directors of the Company are not eligible to participate in
the Option Plan, and did not, therefore, receive any options under the Option
Plan.
ADMINISTRATION. The Executive Compensation Committee of the Board will
administer the Option Plan for executive officers, including those persons
subject to Section 16 of the 34 Act who are not corporate officers. The Employee
Grant Committee will administer the Option Plan for all other eligible persons
(collectively, the "Committees"). In addition, the Company's Chief Financial
Officer ("CFO") pursuant to Board delegation has the authority to grant options,
without further approval of the Board or the Committees, to any person eligible
under the Option Plan other than a person who, at the time of the grant, is
subject to Section 16 under the 34 Act; provided (i) the CFO shall not grant
options to any one person for more than 20,000 shares, (ii) the exercise price
per share of each such option shall be equal to the closing price per share of
the Company's Common Stock as quoted on the National Association of Securities
Dealers Automated Quotations ("Nasdaq") system on the date of grant, and (iii)
each option granted by the CFO shall be subject to the terms and conditions of
the appropriate standard form of stock option agreement previously approved by
the Board and shall conform to the provisions of the Option Plan and any
guidelines established by the Board. In any event, the maximum number of option
shares granted to any eligible person in any one twelve-
16
<PAGE>
month period shall not exceed 1,200,000 shares of the Company's Common Stock.
Furthermore, to the extent allowed under SEC Rule 16b-3 (exempting certain
transactions by corporate insiders from Section 16 "short-swing" profit
liability) and the terms of the Option Plan, the Option Plan permits the Board
to amend options granted to Section 16 insiders without the need to obtain
shareholder approval.
PRICE AND EXERCISABILITY. Option agreements specify the number of shares
covered thereby and the option exercise price, which shall not be less than the
fair market value of the shares as of the date of grant of the option, which
shall be equal to the closing price per share of the Company's Common Stock as
quoted on Nasdaq on the date of grant. Options may be granted which are either
(i) exercisable over time, or (ii) immediately exercisable but subject to
repurchase by the Company in a decreasing amount over time upon the employee's
termination of employment. The Committees have the power to set the time within
which each option may be exercisable or the events upon which all or a portion
of each option shall be exercisable and the term of each option. Options granted
under the Option Plan may be either incentive stock options as defined in
Section 422 of the Code, or nonqualified stock options. Unless otherwise
specified by the Committees, shares subject to an option granted to an existing
employee become exercisable at a rate of 2.08% per month for the first two years
after the date of grant and at a rate of 4.17% per month for the third year
after the date of grant. Unless otherwise specified by the Committees, shares
subject to an option granted to a new employee become exercisable at a rate of
25% upon completion of the first year after the date of grant, at a rate of
2.08% per month for the second year, and at a rate of 4.17% per month for the
third year.
Options may be exercised by payment of the option price (i) in cash or cash
equivalent, (ii) by tender to the Company of shares of the Company's Common
Stock owned by the optionee having a value, as determined by the Board, not less
than the exercise price, and which either have been owned by the optionee for
more than six months or which were not acquired, directly or indirectly, from
the Company, (iii) by the assignment of the proceeds of a sale of some or all of
the shares being acquired upon the exercise of the option ("Same Day Sale"),
(iv) by the optionee's recourse promissory note, (v) by the withholding of
shares being acquired upon exercise of the option having a value, as determined
by the Board, not less than the exercise price, or (vi) by such other
consideration and method of payment as the Board, in its sole discretion, may
allow. The Board or Committees may restrict the forms of payment permitted in
connection with any option grant. Any permitted promissory note shall be due and
payable not more than five years after the option is granted, and interest shall
be payable at least annually and be at least equal to the minimum interest rate
necessary to avoid imputed interest under the Code. The Board has the authority
to permit or require the optionee to secure any promissory note used to exercise
an option with the shares of stock acquired on exercise of the option and/or
with other collateral acceptable to the Company. Optionees may elect to have
shares withheld upon exercise to satisfy tax withholding obligations.
TRANSFER OF CONTROL. The following corporate transactions may be deemed a
"Transfer of Control" of the Company, if, after such corporate transaction, the
shareholders of the Company before the corporate transaction do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Company after such corporate transaction or in which the
Company is not the surviving corporation: (i) the direct or indirect sale or
exchange by the shareholders of the Company of all or substantially all of the
stock of the Company; (ii) a merger or consolidation in which the Company is a
party, (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company (other than a sale, exchange or transfer to one or more
subsidiary corporations of the Company); or (iv) a liquidation or dissolution of
the Company. Upon a Transfer of Control, if an employee is terminated within
twelve months thereafter due to (i) constructive termination, or (ii) any reason
other than termination for cause, the exercise period will be extended to twelve
months from termination and he/she will be given credit for an additional twelve
months of vesting.
CHANGE IN CAPITALIZATION. In the event any change is made to the Common
Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares or recapitalization, appropriate adjustment will
be made to the share reserve of the Option Plan and the number of shares and
price per share of the Common Stock subject to outstanding options.
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<PAGE>
AMENDMENTS. The Committees have the authority, at any time and from time to
time, with the consent of the affected optionees, to amend, terminate, or cancel
any outstanding option. The Board of Directors may terminate or amend the Option
Plan at any time, but, without the approval of the Company's shareholders, the
Board of Directors may not amend the Option Plan to increase the number of
shares available for grant, or to change the class of persons eligible to
receive incentive stock options under the Option Plan. In addition, shareholder
approval shall be sought for any amendment to the Option Plan, or option granted
thereunder, for which the Board deems shareholder approval necessary in order to
comply with Rule 16b-3 of the 34 Act. Unless subsequently modified, the Option
Plan will terminate on December 17, 2004.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE 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
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. For example, special tax rules apply to affiliates of the
Company, or if shares acquired on the exercise of the option are subject to
repurchase rights in favor of the Company.
INCENTIVE STOCK OPTIONS. Options designated as incentive stock options are
intended to satisfy the requirements of the provisions of Section 422 of the
Code. An optionee recognizes no taxable income as the result of the grant or
exercise of such an option.
For optionees who do not dispose of their shares within two years following
the date the option was granted and within one year following the transfer of
the shares acquired upon exercise of the option, the gain on sale of the shares
(which is the difference between the sale price and the purchase price of the
shares) will be taxed as capital gain. If an optionee disposes of shares within
two years from the date of grant or within one year from the date of exercise (a
"disqualifying disposition"), the difference between the option exercise price
and the fair market value of the shares on the date of exercise, or the option
exercise price and the sale price, whichever is less, will be taxed as ordinary
income at the time of disposition. Any additional gain and any loss upon the
disqualifying disposition will constitute 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. Long-term capital gains currently are generally subject to lower tax
rates than ordinary income. In the event of a Same Day Sale of the option, the
difference between the option exercise price and sale price will be taxed as
ordinary income. Any ordinary income recognized by the optionee upon a
disqualifying disposition of stock should be deductible by the Company for
federal income tax purposes.
Any excess of the fair market value of the shares acquired on the exercise
of an incentive stock option over the option exercise price is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Such excess is measured on the determination date (which is
generally the date of exercise). Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares, and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
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 twelve 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
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<PAGE>
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.
PROPOSAL THREE
APPROVAL OF THE
1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Company's Restricted Stock Option Plan (the "Old Plan") will terminate
March 1997. Thereafter, no further options may be granted under the Old Plan,
although options previously granted will remain outstanding for the duration of
their terms. An aggregate of 500,000 shares of the Company's Common Stock is
currently reserved for issuance under the Old Plan. On December 20, 1995,
subject to shareholder approval, the Company's Board of Directors adopted the
1996 Outside Directors Stock Option Plan (the "New Plan") and related stock
option agreements, in contemplation of the Old Plan terminating March 1997. The
Board of Directors believes that the ability to grant stock options is an
important factor in attracting, motivating and retaining qualified non-employee
directors essential to the success of the Company.
The Board adopted the New Plan, subject to shareholder approval, in
contemplation of using the shares remaining for grant in the Old Plan for
options to be granted under the New Plan. As of February 1, 1996, there were
227,500 shares available for grant of options under the Old Plan. In light of
historical usage and expected future grants, the Company expects that the
current share reserve will be adequate to meet these foreseeable requirements
during the next two years.
The following summary of the New Plan is qualified in its entirety by the
specific language of the New Plan, a copy of which will be made available to any
shareholder upon written request.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SUMMARY OF DIRECTORS OPTION PLAN TERMS
GENERAL. The 500,000 shares of the Company's Common Stock currently
reserved for issuance under the Old Plan will be carried over to the New Plan,
subject to reduction by (i) the number of shares issued pursuant to the exercise
of options granted under the Old Plan, and (ii) the number of shares then
subject to outstanding options granted under the Old Plan. The Old Plan will
terminate upon approval of the New Plan by the Company's shareholders. The New
Plan will continue until terminated by the Board, or until all of the shares
reserved under the New Plan have been issued, whichever shall first occur.
ELIGIBILITY. As in the Old Plan, only non-employee directors of the Company
are eligible to receive options ("Outside Directors' Options") to purchase
shares of the Company's Common Stock under the New Plan. All options granted
under the New Plan shall be nonqualified stock options. On the date following
the Company's annual meeting of shareholders, each non-employee director is
automatically granted an Outside Directors' Option to purchase 10,000 shares.
Upon joining the Board, a new non-employee director is granted an Outside
Director's Option of 15,000 shares. However, in light of proposed amendments to
Rule 16b-3 of the 34 Act, the New Plan also provides that, should Rule 16b-3 of
the 34 Act be so amended, the Board may exercise its discretion with respect to
the number of shares to be granted under any initial option or under the annual
option. As of February 1, 1996, six non-employee directors were eligible to
participate in the Old Plan. Unlike the Old Plan, consultants are not eligible
to participate in the New Plan as they may be granted options pursuant to the
Company's 1994 Stock Option Plan.
VESTING AND CHANGE-IN-CONTROL OR CAPITALIZATION. The shares are exercisable
and 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. 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 Outside Directors' Option
shares shall be immediately and fully vested. If a recipient
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<PAGE>
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 New 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 February 1, 1996 was $34.25.
AMENDMENTS. The Board may at any time amend or terminate the New Plan,
except that shareholder approval is required to increase the number of shares
authorized for issuance under the New Plan, or to expand the class of persons
eligible to receive an Outside Director Option. In addition, the rights of a
recipient of an Outside Director Option 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 DIRECTORS 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 New
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 New 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. 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 twelve 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.
Generally, the recipients will be subject to the restrictions of Section 16(b)
of the 34 Act.
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The following table shows the number of options granted under the Old Plan
for the fiscal year ended December 1, 1995. There are no option grants to report
from the date of Board approval of the New Plan to date under the Old Plan. As
the number of non-employee director participants is subject to change, future
grants under the New Plan are not determinable.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING OPTIONS
DOLLAR GRANTED UNDER
NAME AND POSITION VALUE ($)(1) DIRECTORS' OLD PLAN
- ------------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
John E. Warnock ......................................................... -0- -0-
Chairman of the Board and Chief Executive Officer
Charles M. Geschke ...................................................... -0- -0-
President and Director
William R. Hambrecht .................................................... $ 482,500 10,000
Director
Robert Sedgewick ........................................................ $ 482,500 10,000
Director
William J. Spencer ...................................................... $ 482,500 10,000
Director
Delbert W. Yocam ........................................................ $ 482,500 10,000
Director
Paul Brainerd ........................................................... -0- -0-
Director
Gene P. Carter .......................................................... -0- -0-
Director
Stephen A. MacDonald .................................................... -0- -0-
Senior Vice President and Chief Operating Officer
David B. Pratt .......................................................... -0- -0-
Senior Vice President and Chief Operating Officer
M. Bruce Nakao .......................................................... -0- -0-
Senior Vice President, Finance and Administration, Chief Financial
Officer
Executive Officer Group ................................................. -0- -0-
Non-Employee Director Group ............................................. $ 1,930,000 40,000
Non-Executive Officer Employee Group .................................... -0- -0-
</TABLE>
- --------------
(1) The dollar value is calculated assuming full vesting at an exercise price
of $48.25, the closing price of the Company's Common Stock on April 6, 1995,
the date the options were granted.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as the
independent public accountants for the Company for fiscal 1996, and recommends
that the shareholders vote for ratification of such appointment. Shareholder
ratification of the selection of KPMG as the Company's independent auditors is
not required by the Company's By-Laws or otherwise. However, the Board is
submitting the selection of KPMG for shareholder ratification as a matter of
good corporate practice. KPMG has audited
21
<PAGE>
the Company's financial statements since 1983. Notwithstanding the selection,
the Board, in its discretion, may direct the appointment of a new independent
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 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 that are intended to be presented at the Company's
1997 Annual Meeting of Shareholders must be received by the Company not later
than November 4, 1996 in order to be included in the proxy statement and proxy
relating to that Annual Meeting. Shareholders are also advised to review the
Company's By-Laws, which contain additional requirements with respect to advance
notice of shareholder proposals.
By Order of the Board of Directors
[Signature]
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
Mountain View, California
March 4, 1996
22
<PAGE>
ADOBE SYSTEMS INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF 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 Westin Hotel, 5101 Great America Parkway, Santa Clara,
California 95054 on Wednesday, April 10, 1996 at 1:30 p.m., local time, and at
any adjournment or postponement 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.
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.
A vote FOR the following proposals is recommended by the Board of Directors.
(Continued and to be signed on reverse side)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY ////
The shares represented hereby shall be voted as specified. If no specification
is made, such shares shall be voted FOR proposals 1 through 5.
1. Election of the three (3) Class I 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).
Charles M. Geschke, William R. Hambrecht, Delbert W. Yocam
FOR all nominees listed below (except as marked to the contrary below)
/ /
WITHHOLD AUTHORITY to vote for all nominees listed below
/ /
2. Approval of an increase in the share For Against Abstain
reserve of the 1994 Stock Option Plan / / / / / /
by 3,600,000 shares.
3. Approval of the 1996 Outside Directors' For Against Abstain
Stock Option Plan. / / / / / /
4. Ratification of the appointment of For Against Abstain
KPMG Peat Marwick as the Company's / / / / / /
independent public accountants for
the next fiscal year.
5. Transacting of such other business For Against Abstain
as may properly come before the / / / / / /
meeting or any adjournment thereof.
Signature(s) ____________________________________
____________________________________
Date ______________________________, 1996
(Be sure to date your Proxy)
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.
