NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 11, 2014
To the Shareholders of Mentor Graphics Corporation:
The Annual Meeting of Shareholders of Mentor Graphics
Corporation, an Oregon corporation, will be held on Wednesday, June 11, 2014 at 5:00 p.m., Pacific Daylight Time, at our principal executive offices located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777 (the Annual
Meeting), for the following purposes, as more fully described in the accompanying Proxy Statement:
|
1.
|
To elect directors to serve for the ensuing year and until their successors are elected;
|
|
2.
|
To conduct a shareholder advisory vote on executive compensation;
|
|
3.
|
To amend the Companys 1987 Restated Articles of Incorporation to provide for majority voting in uncontested elections of directors;
|
|
4.
|
To amend the Companys 2010 Omnibus Incentive Plan to increase the number of shares reserved for issuance under the plan;
|
|
5.
|
To amend the Companys 1989 Employee Stock Purchase Plan and Foreign Subsidiary Employee Stock Purchase Plan to increase the number of shares reserved for issuance
under each of the plans;
|
|
6.
|
To ratify the appointment of KPMG LLP as the Companys independent registered public accounting firm for its fiscal year ending January 31, 2015; and
|
|
7.
|
To transact any other business that may properly come before the meeting.
|
The above items of business are more fully described in the
Proxy Statement accompanying this Notice. Only shareholders of record at the close of business on April 7, 2014 are entitled to notice of, and to vote at, the Annual Meeting.
YOUR VOTE IS IMPORTANT.
The Company cordially invites
all shareholders to attend the meeting in person. Whether or not you personally plan to attend, please take a few minutes now to vote by telephone or by Internet by following the instructions on the proxy card, or to sign, date and return the
enclosed proxy card in the enclosed postage-paid envelope. If you are a beneficial owner or you hold your shares in street name, please follow the voting instructions provided by your bank, broker or other nominee. Regardless of the
number of Mentor Graphics Corporation shares you own, your presence by proxy is helpful to establish a quorum and your vote is important.
Sincerely,
Dean
Freed
Vice President, General Counsel and Secretary
Wilsonville, Oregon
May 12, 2014
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 11, 2014:
The Notice of Annual Meeting, the Proxy Statement and the
Annual Report/Form 10-K are available at
www.mentor.com/company/investor_relations/filings/index.cfm
Mailed to Shareholders on
or about May 12, 2014
MENTOR GRAPHICS CORPORATION 8005 S.W. Boeckman Road Wilsonville, Oregon 97070-7777
PROXY STATEMENT
Mentor Graphics Corporation (Mentor or the
Company) is soliciting the enclosed proxy card for use at its Annual Meeting of Shareholders to be held Wednesday, June 11, 2014 at 5:00 p.m., Pacific Daylight Time, or at any adjournment of that meeting (the Annual
Meeting). The Company will hold the Annual Meeting at its principal executive offices located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. The Companys telephone number at its principal executive offices is
(503) 685-7000.
Procedural Matters
Shareholders of record at the close of business on
April 7, 2014 are entitled to notice of, and to vote at, the meeting. At the record date, 114,060,627 shares of Mentor Graphics Corporation Common Stock were issued and outstanding. Each share of Common Stock outstanding on the record date is
entitled to one vote at the Annual Meeting. For information regarding holders of 5% or more of the outstanding Common Stock, see Information Regarding Beneficial Ownership of Principal Shareholders and Management.
Shareholders may revoke any proxy given pursuant to this
solicitation by delivering to the Corporate Secretary a written notice of revocation or a duly executed proxy bearing a later date or by attending the meeting and voting in person. The designated proxy holders will vote all valid, unrevoked proxies
at the Annual Meeting in accordance with the instructions given. If you are a shareholder of record, please vote by telephone or by Internet by following the instructions on the proxy card or sign, date and return the enclosed proxy card in the
postage-paid envelope provided. If your shares are not held in your name, but rather held in an account at a brokerage firm, bank or other nominee (this is called street name), please follow the instructions provided by your bank, broker
or other nominee to vote or to change your vote. In most cases, you may submit voting instructions by telephone or by Internet to your bank, broker or other nominee, or you can sign, date and return a voting instruction form to your bank, broker or
other nominee.
1
ELECTION OF DIRECTORS
(Proposal No. 1)
The directors of the Company are elected at the Annual Meeting to serve until the next annual meeting of shareholders and until their
respective successors are elected and qualified. The nominees for director are listed below together with certain information about each of them. Each nominee other than Jeffrey M. Stafeil is currently serving as a director of the Company. Each of
the nominees has agreed to be named in this Proxy Statement and to serve as a director if elected. Current director Kevin C. McDonough, who has served on the Board for fifteen years, is not nominated for re-election this year. Mr. McDonough has
made a wide variety of contributions to the company as an expert in design technology and as an experienced leader in the semiconductor business. The Board would like to thank him for his fifteen years of service and wish him well in his future
pursuits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Director
Since
|
|
|
Shares of Common Stock
Beneficially Owned as of
April 7,
2014
|
|
|
|
|
Number of
Shares
|
|
|
Percent of
Total
|
|
Keith L. Barnes
|
|
|
62
|
|
|
|
2012
|
|
|
|
13,956
|
(1)
|
|
|
*
|
|
Sir Peter L. Bonfield
|
|
|
69
|
|
|
|
2002
|
|
|
|
66,835
|
(2)
|
|
|
*
|
|
Gregory K. Hinckley
|
|
|
67
|
|
|
|
2000
|
|
|
|
1,091,866
|
(3)
|
|
|
*
|
|
J. Daniel McCranie
|
|
|
70
|
|
|
|
2012
|
|
|
|
17,187
|
(1)
|
|
|
*
|
|
Patrick B. McManus
|
|
|
74
|
|
|
|
2003
|
|
|
|
132,335
|
(4)
|
|
|
*
|
|
Walden C. Rhines
|
|
|
67
|
|
|
|
1993
|
|
|
|
1,201,929
|
(5)
|
|
|
1.0
|
|
David S. Schechter
|
|
|
38
|
|
|
|
2011
|
|
|
|
26,835
|
(1)
|
|
|
*
|
|
Jeffrey M. Stafeil
|
|
|
44
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
(1)
|
Includes 4,958 shares subject to restricted stock units under which shares are issuable within 60 days of April 7, 2014. Also includes 7,272
shares subject to restricted stock units under which shares become issuable upon leaving the Board for any reason.
|
(2)
|
Includes 12,000 shares subject to options exercisable within 60 days of April 7, 2014 and 4,958 shares subject to restricted stock units under
which shares are issuable within 60 days of April 7, 2014. Also includes 7,272 shares subject to restricted stock units under which shares become issuable upon leaving the Board for any reason.
|
(3)
|
Includes 687,998 shares subject to options exercisable within 60 days of April 7, 2014.
|
(4)
|
Includes 82,800 shares subject to options exercisable within 60 days of April 7, 2014 and 4,958 shares subject to restricted stock units under
which shares are issuable within 60 days of April 7, 2014. Also includes 4,200 shares subject to options that become exercisable upon leaving the Board for any reason and 7,272 shares subject to restricted stock units under which shares become
issuable upon leaving the Board for any reason.
|
(5)
|
Includes 827,317 shares subject to options exercisable within 60 days of April 7, 2014.
|
2
Business Experience and Qualifications of Nominees:
Dr. Walden C. Rhines
Dr. Rhines has been Chairman of the Board and Chief
Executive Officer of the Company since 2000, and was President and Chief Executive Officer of the Company from 1993 to 2000. He is currently a director of TriQuint Semiconductor, Inc. (a manufacturer of semiconductors), and served as a director of
Cirrus Logic, Inc. (a manufacturer of semiconductors) from 1995 to 2009. Dr. Rhines is currently vice chair of the Electronic Design Automation Consortium and has served five two-year terms as chair. He is also a board member of the
Semiconductor Research Corporation. He has previously served as chair of the Semiconductor Technical Advisory Committee of the Department of Commerce, and as a member of the boards of directors of the Computer and Business Equipment
Manufacturers Association (CBEMA), SEMI-Sematech/SISA (a semiconductor equipment suppliers board), University of Michigan National Advisory Council, Lewis and Clark College and SEMATECH. Prior to joining Mentor, Dr. Rhines was Executive
Vice President, Semiconductor Group of Texas Instruments Incorporated from 1987 to 1993. During a 21-year career at Texas Instruments, he held numerous executive and management positions. He is co-inventor of a patented invention that is fundamental
to solid state lighting and DVDs.
Dr. Rhines
is nominated for election because he is our CEO, has extensive executive management experience, and has deep and broad knowledge of the semiconductor and electronics design industries.
Gregory K. Hinckley
Mr. Hinckley has been President of the Company since
2000, and was Executive Vice President, Chief Operating Officer and Chief Financial Officer of the Company from 1997 to 2000. He continued to function as the Companys Chief Financial Officer from 2000 to July 2007, and again became the Chief
Financial Officer in December 2008. He is a director of Super Micro Computer, Inc. (a server board, chassis and server systems supplier), and SI Bone, Inc. (a privately held medical device company). Until 2013, Mr. Hinckley was a director of
Intermec, Inc. (a provider of integrated system solutions). Prior to joining Mentor, Mr. Hinckley was Vice President, and then Senior Vice President, of VLSI Technology, Inc. (a semiconductor company) from 1992 to 1997.
Mr. Hinckley is nominated for election because he is our
Chief Operating Officer and has broad business management experience with technology companies.
Keith L. Barnes
Mr. Barnes has been self-employed as a private investor since June 2011. From 2006 through December 2010, Mr. Barnes served as member of the Board of Directors and President and Chief Executive
Officer of Verigy Ltd. (a provider of advanced semiconductor test solutions). He continued to serve as Verigys Chairman of the Board until its acquisition in June 2011 by Advantest. From 2003 through 2006, Mr. Barnes was Chairman and
Chief Executive Officer of Electroglas, Inc. (an integrated circuit probe manufacturer) located in San Jose, California. From August 2002 to October 2003, Mr. Barnes was Vice Chairman of the Board of Directors of Oregon Growth Account and a
management consultant. He served as Chief Executive Officer of Integrated Measurement Systems, Inc. (IMS) (a manufacturer of engineering test stations and test software) from 1995 until 2001, and also as Chairman of the Board of Directors of IMS
from 1998 through 2001 when it was acquired by Credence Systems Corporation. Prior to becoming CEO of IMS, Mr. Barnes was a Division President at Valid Logic Systems and later Cadence Design Systems. Mr. Barnes currently serves on the
Board of Directors of JDS Uniphase Corporation (a provider of communications test and measurement solutions and optical products), Spansion, Inc. (a semiconductor manufacturer) and Knowles Corporation (a supplier of advanced micro-acoustic,
specialty components and human interface solutions). Mr. Barnes previously served on the Board of Directors of Cascade Microtech, Inc. (a developer of wafer probe solutions) and Intermec, Inc.
3
Mr. Barnes is nominated for election because he has extensive CEO experience, and has
deep and broad knowledge of the electronic design automation and semiconductor related industries.
Sir Peter Bonfield
Sir Peter Bonfield has been a self-employed international business advisor since 2002 and has been Chairman of NXP Semiconductor N.V. (a semiconductor company) since 2006. He served as Chairman of the
Executive Committee and Chief Executive Officer of British Telecommunications PLC (a provider of telecom services) from 1996 to 2002 and before that served as Chairman and Chief Executive Officer of ICL plc (a UK-based information technology
company). Sir Peter is a director of Sony Corporation (a worldwide provider of electronics, games, music, movies and financial services), Taiwan Semiconductor Manufacturing Company Ltd. (a manufacturer of semiconductors), and Telefonak-tiebolaget LM
Ericsson (a telecommunications equipment manufacturer). He is Chair of Council and Senior Pro-Chancellor for Loughborough University in the United Kingdom and is a Board Director for the East West Institute and Global Logic located in the United
States. He is a senior advisor to N.M. Rothschild London and a member of the advisory boards of the Longreach Group and New Venture Partners. He also serves as a board mentor to CMi. He previously served as a director of AstraZeneca PLC (a
pharmaceuticals company) from 1995 to 2007. He has received numerous honors for his contributions to business, including a knighthood, and is a fellow of the Royal Academy of Engineering.
Sir Peter is nominated for election because he has extensive international business and CEO experience.
J. Daniel McCranie
Since January 2014, Mr. McCranie has been the Executive
Vice President of Sales and Applications for Cypress Semiconductor Corporation (a supplier of diversified, broadline semiconductor products). From September 2010 to January 2014, Mr. McCranie was self-employed as a private
investor. Mr. McCranie has served as Chairman of the Board for ON Semiconductor Corporation (a supplier of semiconductors) since August 2002 and as a Director for ON Semiconductor Corporation since November 2001. Mr. McCranie is also
Chairman of the Board for Freescale Semiconductor Holdings I, Ltd. (a semiconductor manufacturer) and serves on the board of directors of Cypress Semiconductor Corporation. From October 2008 to September 2010, Mr. McCranie served as Executive
Chairman of Virage Logic (a provider of semiconductor intellectual property). Previously, Mr. McCranie served at Virage Logic as President and Chief Executive Officer from January 2007 to October 2008, Executive Chairman from March 2006 to
January 2007, and Chairman of the Board of Directors from August 2003 to March 2006. From 1993 until 2001, Mr. McCranie was employed in various positions, including as Executive Vice President, Marketing and Sales, with Cypress Semiconductor
Corporation. From 1986 to 1993, Mr. McCranie was President, Chief Executive Officer and Chairman of SEEQ Technology, Inc. (a manufacturer of semiconductor devices). Within the last five years, Mr. McCranie also served on the board of
directors of Actel Corporation (a designer and provider of field programmable gate arrays and programmable system chips).
Mr. McCranie is nominated for election because of his nearly 40 years of sales and marketing experience in the semiconductor and
communications industries, including management experience as a CEO of two publicly held semiconductor companies.
Patrick B. McManus
Mr. McManus has been self-employed as a private investor since 1987. He was Chief Financial Officer of Charles Schwab Corporation
from 1984 to 1987, and Chief Financial Officer of various companies prior to 1984 including Univest, Pacific Express Airlines, Acurex Solar Corporation and Itel Corporation. Earlier in his career, he was controller of the African and Middle East
division of Singer Corporation.
Mr. McManus
is nominated for election because he has strong financial credentials that he brings to his role as Chair of our Audit Committee, and broad business experience, including international experience.
4
David S. Schechter
Mr. Schechter currently is responsible for co-executing an investment strategy across all industries as a
Portfolio Manager of the Sargon Portfolio for Icahn Capital LP, the entity through which Carl C. Icahn manages third party investment funds. Prior to April 2010, Mr. Schechter served as a Managing Director for Icahn Capital LP and in a variety
of investment advisory roles for Mr. Icahn since 2004, providing investment and strategic advice across multiple industries, asset classes, and geographies. Mr. Schechter serves on the board of directors of Nuance Communications, Inc. (a
provider of voice and language software solutions). Mr. Schechter previously served as a director of XO Communications (a telecommunications company), Federal Mogul Corporation (an automotive and industrial equipment supplier), The Hain
Celestial Group, Inc. (a natural and organic food and personal care products company) and WebMD Health Corp. (an online health information services provider). With respect to each company mentioned above, Carl C. Icahn, directly or indirectly,
either (i) controls the company or (ii) has an interest in the company through the ownership of securities. Prior to joining Mr. Icahn in January 2004, Mr. Schechter served as a Vice President of Global Special Situations at
Citigroup, a unit responsible for making proprietary investments in distressed situations.
Mr. Schechter is nominated for election because he brings significant finance and investment experience to the Board. He has served on a number of public and private boards, which have provided him
with a broad understanding of the operational, financial and strategic issues facing public and private companies.
Jeffrey M. Stafeil
Mr. Stafeil has been Executive Vice President and Chief Financial Officer of Visteon Coporation, a global supplier of automotive
components, since 2012. He joined Visteon Corporation from DURA Automotive Systems, an automotive supplier, where he had been Chief Executive Officer since October 2010, after serving as Executive Vice President and Chief Financial Officer since
2008. From 2007 2008, Mr. Stafeil was Chief Financial Officer and a member of the board at the Klöckner Pentaplast Group, based in Germany. Before that, he was Executive Vice President and Chief Financial Officer at Metaldyne Corp,
an automotive supplier. From 2009-2012, he served on the Board of Directors and was Audit Committee Chairman of J.L. French Automotive Castings Inc. From 2006-2009, he served on the Board of Directors and was co-chairman of the Audit Committee for
Meridian Automotive Systems. He also has served in management positions at Booz Allen and Hamilton, Peterson Consulting and Ernst and Young.
Mr. Stafeil is nominated for election because he has strong financial credentials and broad automotive industry experience. He was
recommended by a third-party director search firm hired by the Nominating and Corporate Governance Committee to identify and recruit candidates for consideration as director nominees.
Vote Required For Approval
Under Oregon law, if a quorum is present at the meeting, the eight nominees for election as directors who receive the greatest number of
eligible votes cast will be elected directors. Abstention from voting or nonvoting by brokers will have no effect on the results of the vote but will be considered to determine whether a quorum exists at the Annual Meeting. Unless otherwise
instructed, proxy holders will vote the proxies they receive for the eight nominees named above.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDER ELECTION OF THE ABOVE-NAMED NOMINEES AS DIRECTORS OF THE COMPANY.
5
INFORMATION REGARDING THE BOARD OF DIRECTORS
Board Leadership, Corporate Governance, Board Independence, Committees and
Meetings
Our Board of Directors recognizes
that one of its key corporate governance responsibilities is to determine its optimal leadership structure to provide independent oversight of management. The Board understands that there is no generally accepted approach to providing Board
leadership and that given the fast moving and competitive environment in which we operate, the right Board leadership structure may vary over time. Consistent with this understanding, the independent Directors review the Boards leadership
structure on a periodic basis, including consideration of alternative leadership structures in light of our operating and governance environment at the time, with the goal of achieving the optimal model for effective oversight of management by the
Board. The Board, which consists of a substantial majority of independent Directors who are highly qualified and experienced, exercises a strong, independent oversight function. This oversight function is enhanced by the fact that all of the
Boards key CommitteesAudit, Compensation and Nominating and Corporate Governanceare comprised entirely of independent Directors.
The Board has adopted Corporate Governance Guidelines (available on our website at
www.mentor.com/company/investor_relations/charters_ethics
) which set forth principles regarding the composition of the Board, director selection and independence, and Board committee structure. The Corporate Governance Guidelines establish
the position of Lead Independent Director, and Sir Peter Bonfield currently serves in that capacity. The Lead Independent Director, along with the Chairman of the Board, establishes the agenda for regular Board meetings, acts as a formal liaison
between the independent Directors and the Chairman to encourage frequent communication and serves as chairman of regular Board meetings when the Chairman is absent. Dr. Rhines currently serves as Chairman of the Board and Chief Executive
Officer, and has served in those roles since 2000. The Board of Directors believes that its current leadership structure, combining an executive chairman with a strong independent lead director and a substantial majority of independent directors,
provides the Company with appropriate balance as well as decisive and effective leadership.
The Board of Directors has determined that all directors and director nominees other than Dr. Rhines and Mr. Hinckley are or will be independent directors as defined in NASDAQ rules.
With respect to Director McCranie, the Board considered that he recently became an executive officer of one of our customers, and concluded that his new position did not affect his independence. With respect to Director Nominee Stafeil, the Board
considered that he is an executive officer of one of our customers, and concluded that his position does not affect his independence. The independent directors meet regularly without the presence of any management directors.
The Board of Directors has three standing committees: the
Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.
The Audit Committee, which consists of Directors Barnes, McManus and Schechter, held eight meetings during fiscal year 2014. This committee oversees the internal audit, accounting and financial reporting
processes of the Company and the audits of its financial statements and internal controls over financial reporting; appoints, compensates, retains and oversees the independent auditors; reviews and approves all audit and non-audit services performed
by the independent auditors; and meets from time to time with management and our independent auditors to consider financial and accounting matters. The Audit Committee also meets with the independent auditors from time to time in executive session
without members of management present. Company policy requires the Audit Committee to review any transaction or proposed transaction with a related person and to determine whether to ratify or approve the transaction, with ratification or approval
to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. The Board of Directors has determined that Director McManus is an
audit committee financial expert as defined in regulations adopted by the Securities and Exchange Commission (the SEC). The Board of Directors has determined that no Audit Committee member has financial or personal ties to
the Company (other than director compensation and equity ownership as described in this Proxy Statement),
6
and that each Audit Committee member meets all additional independence and financial literacy requirements for Audit Committee membership under NASDAQ rules. The Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is posted on our website at
http://www.mentor.com/company/investor_relations/charters_ethics
/.
The Compensation Committee, which consists of Directors Bonfield, McCranie and McDonough, held five meetings during fiscal year 2014. See
Compensation Discussion and Analysis below for more information about the Compensation Committee.
The Nominating and Corporate Governance Committee, which consists of Directors Barnes, Bonfield and McDonough, held three meetings during
fiscal year 2014. The Nominating and Corporate Governance Committee has a written charter, a copy of which is posted on our website at
www.mentor.com/company/investor_relations/charters_ethics
. This committee meets from time to time to
administer policies and procedures for board membership and to identify and recommend board candidates. In seeking nominees, the Nominating and Corporate Governance Committee uses its network of contacts to compile a list of potential candidates and
it also may engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee also considers director candidates recommended by shareholders in writing to the Corporate Secretary at 8005 S.W. Boeckman
Road, Wilsonville, Oregon 97070-7777. The recommendation should include the nominees name, qualifications for Board membership and consent to nomination, as well as the name, number of shares of Mentor Graphics Corporation stock owned and
contact information of the person making the recommendation. A shareholder wishing to formally nominate a director for election at a shareholder meeting must comply with the provisions in our bylaws addressing shareholder nominations of directors.
In selecting or recommending candidates, the
Nominating and Corporate Governance Committee applies the factors in our Corporate Governance Guidelines. These factors include personal qualities and characteristics; accomplishments and reputation in the business community; current knowledge and
contacts in our industry or other industries relevant to our business; lack of preconception as to our business; ability and willingness to commit adequate time to Board and committee matters; the fit of the individuals skills and personality
with those of other directors and potential directors in building a Board that is effective and responsive to the needs of the Company; and, diversity of viewpoints, background, experience and other demographics. The Nominating and Corporate
Governance Committee does not have a formal policy with respect to diversity; however, the Committee believes it is essential that Board members represent diverse viewpoints, professional experience, education, skill and other individual qualities
and attributes that contribute to Board heterogeneity. The Nominating and Corporate Governance Committees process for identifying and evaluating nominees is as follows, irrespective of whether the candidate was identified by the committee or
recommended by a shareholder: (1) in the case of incumbent directors, the committee reviews such directors overall service to the Company during their term, including the number of meetings attended, level of participation, quality of
performance and any related party transactions with the Company during the applicable time period; and (2) in the case of a new director candidate, the Committee first conducts any appropriate and necessary inquiries into the background and
qualifications of possible candidates after considering the functions and needs of the Board of Directors. The Committee meets to discuss and consider such candidates qualifications, including whether each candidate is independent for purposes
of NASDAQ rules, and then selects candidates for recommendation to the Board of Directors by majority vote.
The Board of Directors held nine meetings during fiscal year 2014. No director attended fewer than 75% of the aggregate of all meetings of
the Board of Directors and the committees of which he was a member during the portion of fiscal year 2014 in which he was a director. It is our practice that directors attend our annual meeting of shareholders. All but one of the directors elected
at the 2013 Annual Meeting of Shareholders attended that meeting. Any shareholder who wishes to communicate to the entire Board of Directors, or to any individual director, may send that communication in writing addressed to our Corporate Secretary
at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. The Corporate Secretary will forward all written shareholder communications to the designated recipient(s) on the Board of Directors.
7
Boards Role in Risk Oversight
Our executive officers have the primary responsibility for risk management within our Company. Our Board of
Directors oversees risk management to ensure that the processes designed and implemented by our executives are adapted to and integrated with the Companys strategy and function as directed. The primary means by which the Board oversees our
risk management structures and policies is through its regular communications with management. We believe that our leadership structure is conducive to comprehensive risk management practices, and that the Boards involvement is appropriate to
ensure effective oversight. As noted below, we conducted a detailed compensation risk assessment of our compensation policies and practices.
The Board of Directors and its committees meet in person approximately four times a year. At each of these meetings, our President and
Chief Financial Officer; Senior Vice President, World Trade; Vice President and Chief Human Resources Officer; Corporate Controller and Chief Accounting Officer, Treasurer; and General Counsel are asked to report to the Board or, when appropriate,
specific committees. Additionally, other members of management and employees are regularly requested to attend meetings and present information, including those responsible for our Internal Audit function. One of the purposes of these presentations
is to provide direct communication between members of the Board and members of management as well as individual key contributors; the presentations provide members of the Board with the information necessary to understand the risk profile of the
Company, exposures affecting our operations and our plans to address such risks. In addition to general updates on our operational and financial condition, management reports to the Board on a number of specific issues meant to inform the Board
about our outlook and forecasts, and any impediments to meeting those or its pre-defined strategies generally. These direct communications between management and the Board of Directors allow the Board to assess managements evaluation and
management of the day-to-day risks of the Company.
Management is encouraged to communicate with the Board of Directors with respect to extraordinary risk issues or developments that may
require more immediate attention between regularly scheduled Board meetings. Sir Peter Bonfield, as Lead Director, facilitates communications with the Board of Directors as a whole and is tasked with initiating the frank, candid discussions among
the independent Board members necessary to ensure management is adequately evaluating and managing our risks. These intra-Board communications are essential in its oversight function. These practices ensure that important issues affecting the
Company are considered in relation to each other and, by doing so, risks that affect one aspect of our Company can be taken into consideration when considering other risks.
SHAREHOLDER PROPOSALS
Our bylaws require shareholders to give us
advance notice of any proposal or director nomination to be submitted at any meeting of shareholders. The bylaws prescribe the information to be contained in any such notice. For any shareholder proposal or nomination to be considered at the 2015
Annual Meeting of Shareholders, the shareholders notice must be received at our principal executive office no later than April 12, 2015. In addition, SEC rules require that any shareholder proposal to be considered for inclusion in the
Companys Proxy Statement for the 2015 Annual Meeting of Shareholders must be received at our principal executive office no later than January 12, 2015.
By Order of the Board of Directors
Dean
Freed
Vice President, General Counsel and Secretary
50
Exhibit A
Mentor Graphics Corporation
2010 Omnibus Incentive Plan
(1)
Article 1. Establishment, Purpose, and Duration
1.1
Establishment
. Mentor Graphics Corporation, an Oregon corporation (hereinafter referred to as the Company),
establishes an incentive compensation plan to be known as the Mentor Graphics Corporation 2010 Omnibus Incentive Plan (hereinafter referred to as the Plan), as set forth in this document. This Plan permits the issuance of Nonqualified
Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards. This Plan shall become
effective upon stockholder approval and shall remain in effect as provided in Section 1.3 hereof.
1.2
Purpose of this Plan
. The purpose of this Plan is to provide a means whereby Employees, Non-employee Directors, and Third Party
Service Providers of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing
the interests of the Company and its stockholders. A further purpose of this Plan is to provide a means through which the Company may attract and retain able individuals to become Employees, Non-employee Directors or Third Party Service Providers of
the Company. This Plan is intended to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance can acquire and maintain stock ownership, thereby
strengthening their concern for the welfare of the Company.
1.3
Duration of this Plan
. Unless sooner terminated as provided herein, this Plan shall terminate on March 10, 2020; provided, however, that the term of this Plan shall be extended for ten
years following any action by the Board approving an increase in the number of Shares available for issuance under the Plan, which action is subsequently approved within 12 months by the stockholders. After this Plan is terminated, no Awards may be
granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plans terms and conditions.
Article 2. Definitions
Whenever used in this Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1
Affiliate
shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company) that is affiliated with the Company through an
interest of more than fifty percent (50%) by reason of stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Committee.
2.2
Annual Award Limit
or
Annual
Award Limits
have the meaning set forth in Section 4.3.
2.3
Award
means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Deferred Stock Units, Performance Shares, Performance Units, Cash-Based Awards or Other Stock-Based Awards, in each case subject to the terms of this Plan.
2.4
Award Agreement
means either
(i) a written or electronic agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, including
(1)
|
Double-underlined matter is new; matter crossed out is proposed to be deleted.
|
A - 1
any amendment or modification thereof, or (ii) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any
amendment or modification thereof. The Committee may modify the Companys Award process from time to time in its sole discretion, including by providing for the use of electronic, internet or other non-paper Award Agreements, and the use of
electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.
2.5
Beneficial Owner
or
Beneficial Ownership
shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Exchange Act.
2.6
Board
or
Board of Directors
means the Board of Directors of the Company.
2.7
Cash-Based Awards
means an Award,
denominated in cash, granted to a Participant as described in Article 10.
2.8
Change of Control
means a situation where any of the following events occur:
(a)
Acquisition of Stock by Third Party.
The acquisition by any Person of Beneficial Ownership of 40% or more of either the
then-outstanding shares of common stock of the Company or the Outstanding Voting Securities; provided, however, that, for purposes of this Section 2.8(a), the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company, or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary of the Company;
(b)
Change in Board of Directors.
Individuals who, as
of the Grant Date of an Award, constitute the Board, and any new director whose election by the Board or nomination for election by the Companys stockholders was approved by a vote of at least two thirds of the directors then still in office
who were directors on the Grant Date or whose election or nomination for election was previously so approved (collectively, the Continuing Directors), cease for any reason to constitute at least a majority of the members of the Board;
(c)
Corporate Transactions.
The effective
date of a reorganization, merger or consolidation of the Company (a Business Combination), in each case, unless immediately following such Business Combination: (i) all or substantially all of the Persons who were Beneficial Owners
of Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 51% of the combined voting power of the then outstanding securities entitled to vote generally in the election of
directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction either owns the Company or all or substantially all of the Companys assets either
directly or through one or more Subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Voting Securities; (ii) no Person (excluding any corporation resulting
from such Business Combination) is the Beneficial Owner, directly or indirectly, of 40% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of such corporation except to the
extent that such ownership existed prior to such Business Combination; and (iii) at least a majority of the board of directors of the corporation resulting from such Business Combination were Continuing Directors at the time of the execution of
the initial agreement, or of the action of the Board, providing for such Business Combination;
(d)
Liquidation.
The approval by the shareholders of the Company of a complete liquidation of the Company or an agreement or series of agreements for the sale or disposition by the Company of all
or substantially all of the Companys assets, other than factoring the Companys current receivables or escrows due (or, if such approval is not required, the decision by the Board to proceed with such a liquidation, sale or disposition in
one transaction or a series of related transactions); or
(e)
Other Events.
There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar or
successor item on any similar or successor schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
A - 2
2.9
Code
means the U.S. Internal Revenue Code of 1986, as amended from
time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations and any successor or similar provision.
2.10
Committee
means the Compensation Committee of the Board or another committee appointed
by the Board to administer the Plan. Each member of the Compensation Committee or any other such committee must be an independent director under NASDAQ rules, an outside director for purposes of Code Section 162(m), and
a non-employee director under Rule 16b-3(b)(3) under the Exchange Act, as such requirements may change from time to time.
2.11
Company
means Mentor Graphics Corporation, an Oregon corporation, and any successor thereto as provided in
Article 19 herein.
2.12
Covered
Employee
means any Employee who is or may become a Covered Employee, as defined in Code Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of
(i) ninety (90) days after the beginning of the Performance Period, or (ii) twenty-five percent (25%) of the Performance Period has elapsed, as a Covered Employee under this Plan for such applicable Performance
Period.
2.13
Deferred Stock
Unit
means an Award granted to a Participant pursuant to Article 8 giving the Participant a contractual right to receive a stated number of Shares or, if provided by the Committee on the Grant Date, cash equal to the Fair Market Value of
such Shares, under the Plan at the end of a specified period of time or upon the occurrence of a specified event.
2.14
Director
means any individual who is a member of the Board of Directors of the Company.
2.15
Employee
means any individual
performing services for the Company, an Affiliate, or a Subsidiary and designated as an employee of the Company, the Affiliate, or the Subsidiary on the payroll records. An Employee shall not include any individual during any period he or she is
classified or treated by the Company, Affiliate, or Subsidiary as a contingent worker, independent contractor, consultant, or any employee of a franchise, master distributor, employment, consulting, or temporary agency or any other entity other than
the Company, Affiliate, or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a employee of the Company, Affiliate, or Subsidiary during such period. An
individual shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company for purposes protected under law including, without limitation, medical leave, leave to care for a family member, maternity- paternity-
or adoptive leave, leave for military service or leave to participate in mandatory legal process or (ii) transfers or Company-initiated relocations between locations of the Company or between the Company, any Affiliates, or any Subsidiaries.
For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months following the commencement of such leave, any Incentive Stock Option held by a Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonqualified Stock Option. Neither service as a Director nor payment of a directors fee by the Company shall be sufficient to constitute employment by the Company.
2.16
Exchange Act
means the Securities Exchange Act of 1934, as amended from time to time,
or any successor act thereto.
2.17
Fair
Market Value
or
FMV
means
(a) A price of a Share that is based on the opening, closing, actual, high, low, or average selling prices of a Share reported on any established stock exchange or national market system including without
limitation the
A - 3
New York Stock Exchange and the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System on the applicable date, the preceding trading day, the
next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Unless the Committee determines otherwise, Fair Market Value on any day shall be deemed to be equal to the closing price of a Share of the
Companys common stock on NASDAQ on that day or, if that day is not a trading day, on the prior trading day.
(b) If Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high bid
and low asked prices for a Share on the day of determination or, if that day is not a trading day, the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems
reliable.
(c) In the event Shares are not
publicly traded at the time a determination of their value is required to be made hereunder, the price of a Share as determined by the Committee in such manner as it deems appropriate.
2.18
Grant Date
means the date an Award is granted to a Participant pursuant to the Plan.
2.19
Grant Price
means the
price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.
2.20
Incentive Stock Option
or
ISO
means an Option to purchase Shares granted under Article 6 to an
Employee and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422, or any successor provision.
2.21
Non-employee Director
means a
Director who is not an Employee.
2.22
Nonqualified Stock Option
or
NQSO
means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.
2.23
Option
means an Incentive Stock
Option or a Nonqualified Stock Option, as described in Article 6.
2.24
Option Price
means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.25
Other Stock-Based Award
means an
equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.
2.26
Outstanding Voting Securities
shall mean the combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors.
2.27
Participant
means any eligible individual as set forth in Article 5 to whom an Award is granted.
2.28
Performance-Based Compensation
means
compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan is intended nor shall be
construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.
2.29
Performance Measures
means measures, as described in Article 12, on which the performance goals are based and which are approved by the Companys stockholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.
A - 4
2.30
Performance Period
means the period of time during which the
performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.
2.31
Performance Share
means an Award under Article 9 and subject to the terms of this Plan, denominated in
Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance goals, as described in Article 12, have been achieved.
2.32
Performance Unit
means an Award under Article 9 and subject to the terms of this Plan,
denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance goals, as described in Article 12, have been achieved.
2.33
Period of Restriction
means the
period, if any, when Restricted Stock, Restricted Stock Units or Deferred Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, in its discretion), as provided in Article 8.
2.34
Person
shall have the meaning ascribed to such term in Section 3(a) (9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group as
defined in Section 13(d) thereof.
2.35
Plan
means the Mentor Graphics Corporation 2010 Omnibus Incentive Plan.
2.36
Plan Year
means the Companys fiscal year that begins February 1 and ends January 31.
2.37
Prior Plans
means the Mentor Graphics
Corporation 1982 Stock Option Plan, the Mentor Graphics Corporation Nonqualified Stock Option Plan, the Mentor Graphics Corporation 1986 Stock Plan and the Mentor Graphics Corporation 1987 Non-Employee Directors Stock Plan.
2.38
Restricted Stock
means an Award
granted to a Participant pursuant to Article 8 under which Shares are actually issued to the Participant on the Grant Date, subject to forfeiture or repurchase during the Period of Restriction.
2.39
Restricted Stock Unit
means an Award
granted to a Participant pursuant to Article 8, except no Shares are actually issued to the Participant on the Grant Date.
2.40
Share
means a share of common stock of the Company.
2.41
Stock Appreciation Right
or
SAR
means an Award, designated as an
SAR, pursuant to the terms of Article 7.
2.42
Subsidiary
means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, an interest of more than fifty percent (50%) by reason of stock ownership or
otherwise.
2.43
Third Party Service
Provider
means any consultant, agent, advisor, or independent contractor who is a natural person and who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in connection with the offer and sale of the
Companys securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Companys securities.
Article 3. Administration
3.1
General
. The Committee shall be responsible for
administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and
A - 5
other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such
individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.
3.2
Authority of the Committee
. Subject to any express
limitations set forth in the Plan, including, without limitation, the requirements to obtain stockholder approval, the Committee shall have full and exclusive discretionary power and authority to take such actions as it deems necessary and advisable
with respect to the administration of the Plan including, but not limited to, the following:
(a) To determine from time to time which of the persons eligible under the Plan shall be granted Awards, when and how each Award shall be granted, what type or combination of types of Awards shall be
granted, the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Shares pursuant to an Award;
(b) To construe and interpret the Plan and Awards granted
under it, and to establish, amend, and revoke rules and regulations for its administration. The Committee, in the exercise of this power, may correct any defect, omission, or inconsistency in the Plan or in an Award Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective;
(c) To approve forms of Award Agreements for use under the Plan;
(d) To determine Fair Market Value of a Share in accordance with Section 2.17 of the Plan;
(e) To amend the Plan or any Award Agreement as provided in
the Plan;
(f) To adopt sub-plans and/or special
provisions applicable to Awards regulated by the laws of a jurisdiction other than and outside of the United States. Such sub-plans and/or special provisions may take precedence over other provisions of the Plan, but unless otherwise superseded by
the terms of such sub-plans and/or special provisions, the provisions of the Plan shall govern;
(g) To authorize any person to execute on behalf of the Company any instrument required to grant an Award previously granted by the Committee;
(h) To determine whether Awards will be settled in Shares, cash, or in any combination;
(i) To determine whether Awards will be adjusted for dividend
equivalents, meaning a credit, made at the discretion of the Committee, to the account of a Participant in an amount equal to the cash dividends paid on one Share for each Share represented by an Award held by such Participant;
(j) To establish a program whereby Participants designated by
the Committee may reduce compensation otherwise payable in cash in exchange for Awards under the Plan;
(k) Subject to Section 17.1(b), to authorize a program permitting eligible Participants to surrender outstanding Awards in exchange
for newly granted Awards;
(l) To impose such
restrictions, conditions, or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares, including, without limitation, (i) restrictions
under an insider trading policy and (ii) restrictions as to the use of a specified brokerage firm for such resales or other transfers; and
(m) To provide, either at the time an Award is granted or by subsequent action, that an Award shall contain as a term thereof, a right,
either in tandem with the other rights under the Award or as an alternative
A - 6
thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash or a combination thereof, the amount of which is determined by reference to the value of Shares.
Article 4. Shares Subject to this Plan and Maximum Awards
4.1
Number of Shares Authorized and
Available for Awards
. Subject to adjustment as provided in Section 4.4 of the Plan, the maximum number of Shares authorized and available for issuance under the Plan shall be
13,200,000
10,000,000
plus the number of Shares subject to outstanding stock options or restricted stock units under the Prior Plans as of the date of stockholder
approval of this Plan that thereafter expire or terminate without issuance of the Shares. In connection with approving this Plan, the Board of Directors has approved a resolution that, effective upon receipt of stockholder approval of this Plan, any
Shares available for issuance under the Prior Plans that are not subject to outstanding awards under the Prior Plans will no longer be available for issuance under the Prior Plans.
4.2
Shares Available for Issuance
. Shares covered by
an Award shall be counted as used only to the extent they are issued. Any Shares related to Awards under this Plan or under Prior Plans that terminate by expiration, forfeiture (including through repurchase of the Shares at original cost),
cancellation, or otherwise without the issuance of the Shares, or are settled in cash in lieu of Shares, or are exchanged with the Committees permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available
again for grant under this Plan. In addition, any Shares that are not issued or delivered as a result of the net settlement of an outstanding SAR or Option under this Plan or Prior Plans, and any Shares withheld or used to pay the Option Price or
withholding taxes related to an outstanding Award under this Plan or Prior Plans, shall be available again for grant under this Plan. Cash-Based Awards, Performance Units and any other Awards that are not settled by issuance of Shares shall not
reduce the Shares available for issuance under the Plan.
4.3
Annual Award Limits
. No Participant may be granted Options or SARs under the Plan for more than an aggregate of 1,000,000 Shares in an Plan Year, as may be adjusted pursuant to
Section 4.4. The maximum dollar amount payable under all Performance Unit Awards and Cash-Based Awards that are intended to qualify as Performance-Based Compensation plus the maximum value of Shares under all Performance Share Awards and Other
Stock-Based Awards that are intended to qualify as Performance-Based Compensation, in the aggregate, granted to any one Participant in any one Plan Year shall not exceed $5,000,000; for this purpose, the value of Shares shall be the FMV of the
Shares on the Grant Date of the applicable Award.
4.4
Adjustments in Authorized Shares
. Adjustment in authorized Shares available for issuance under the Plan or under an outstanding
Award and adjustments in Annual Award Limits shall be subject to the following provisions:
(a) In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation,
reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of
Shares, dividend in kind, or other like change in capital structure, number of outstanding Shares or distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee, in
order to prevent dilution or enlargement of Participants rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under particular forms of Awards, the number and
kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards; provided that the Committee, in its sole
discretion, shall determine the methodology or manner of making such substitution or adjustment. The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect such changes or
distributions and may modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods.
A - 7
(b) The determination of the Committee as to the foregoing adjustments, if any, shall be
conclusive and binding on Participants under this Plan.
(c) Subject to the provisions of Article 17 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may authorize
the issuance or assumption of benefits either under this Plan or outside of this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate,
subject to compliance with the rules under Code Sections 422, 424 and 409A, as and where applicable.
Article 5. Eligibility and Participation
5.1
Eligibility
. Individuals eligible to participate in this Plan include all Employees, Non-employee Directors, and Third Party Service Providers.
5.2
Actual Participation
. Subject to the provisions of
this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount
of each Award.
Article 6. Stock Options
6.1
Grant of Options
. Subject to the terms and
provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion.
6.2
Award Agreement
. Each Option grant shall be
evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other
provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO.
6.3
Option Price
. The Option Price for each grant of
an Option under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price must be at least equal to one hundred percent (100%) of the FMV of a Share
as of the Options Grant Date.
6.4
Term of Options
. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later
than the tenth (10
th
) anniversary date of
its grant.
6.5
Exercise of Options
.
Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for
each Participant.
6.6
Payment
. Options
granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form and using a means specified or accepted by the Committee, or by complying with any alternative
procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. A condition of the issuance of the Shares as to which an Option
shall be exercised shall be the payment of the Option Price, as specified in the Award Agreement. The Option Price of any exercised Option shall be payable to the Company in accordance with one of the following methods:
(a) in cash or its equivalent;
(b) by tendering (either by actual delivery or attestation)
previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price;
A - 8
(c) by a cashless (broker-assisted) exercise;
(d) by any combination of (a), (b) and (c); or
(e) any other method approved or accepted by the
Committee in its sole discretion.
Subject to any
governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry
Shares, or upon the Participants request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). Unless otherwise determined by the Committee, all payments under all of the methods indicated
above shall be paid in United States dollars or Shares, as applicable.
6.7
Special Rules Regarding ISOs
. Notwithstanding any provision of the Plan to the contrary, an ISO granted to a Participant shall be subject to the following rules:
(a)
Special ISO Definitions
:
(i)
Parent Corporation
shall mean as of
any applicable date a corporation in respect of the Company that is a parent corporation within the meaning of Code Section 424(e).
(ii)
ISO Subsidiary
shall mean as of any applicable date any corporation in respect of the Company that is a
subsidiary corporation within the meaning of Code Section 424(f).
(iii) A
10% Owner
is an individual who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its Parent
Corporation or any ISO Subsidiary.
(b)
Eligible employees
. ISOs may be granted solely to eligible Employees of the Company, Parent Corporation, or ISO Subsidiary (as permitted under Code Sections 422 and 424).
(c)
Specified as an ISO
. The Award Agreement
evidencing the grant of an ISO shall specify that such grant is intended to be an ISO.
(d)
Option price
. The Option Price of an ISO granted under the Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the
Option Price must at least equal one hundred percent (100%) of the Fair Market Value of a Share as of the ISOs Grant Date (in the case of a 10% owner, the Option Price may not be not less than 110% of such Fair Market Value).
(e)
Right to exercise
. Any ISO granted to a
Participant under the Plan shall be exercisable during his or her lifetime solely by such Participant or, in the event of the Participants death, by his estate or heirs (as permitted under Code Section 422(b)(5)).
(f)
Exercise period
. The period during which a
Participant may exercise an ISO shall not exceed ten (10) years (five (5) years in the case of a Participant who is a 10% Owner) from the date on which the ISO was granted.
(g)
Dollar limitation
. To the extent that the aggregate Fair Market Value of (a) the Shares with
respect to which Options designated as Incentive Stock Options plus (b) the shares of stock of the Company, Parent Corporation, and any ISO Subsidiary with respect to which other Incentive Stock Options are exercisable for the first time by a
holder of an ISO during any calendar year under all plans of the Company and any Affiliate and Subsidiary exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. For purposes of the
A - 9
preceding sentence, (a) Options shall be taken into account in the order in which they were granted, and (b) the Fair Market Value of the Shares shall be determined as of the time the
Incentive Stock Options were granted.
(h)
Notification of disqualifying disposition
. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO, such Participant shall notify the Company of such disposition within thirty (30) days thereof.
The Company shall use such information to determine whether a disqualifying disposition as described in Code Section 421(b) has occurred.
(i)
Transferability
. No ISO granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution (as permitted under Code Section 422(b) (5)); provided, however, at the discretion of the Committee, an ISO may be transferred to a grantor trust under which the
Participant making the transfer is the sole beneficiary.
Article 7. Stock Appreciation Rights
7.1
Grant of SARs
. Subject to the terms and conditions of this Plan, SARs may be awarded to Participants at any time and from time
to time as shall be determined by the Committee. Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this
Plan, in determining the terms and conditions pertaining to such SARs.
7.2
Grant Price
. The Grant Price for each grant of an SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided, however, the Grant Price must be at least
equal to one hundred percent (100%) of the FMV of a Share as of the Grant Date.
7.3
SAR Agreement
. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.4
Term of SAR
. The
term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth
(10
th
) anniversary date of its grant.
7.5
Exercise of SARs
. SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes.
7.6
Settlement of SARs
. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(a) the excess of the Fair Market Value of a Share on the
date of exercise over the Grant Price; by
(b) the
number of Shares with respect to which the SAR is exercised.
7.7
Form of Payment
. Payment, if any, with respect to an SAR settled in accordance with Section 7.6 of the Plan shall be made in accordance with the terms of the applicable Award Agreement, in
cash, Shares, or a combination thereof, as the Committee determines.
7.8
Other Restrictions
. The Committee shall impose such other conditions or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem advisable or
desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
A - 10
Article 8. Restricted Stock, Restricted Stock Units and Deferred Stock Units
8.1
Grant of Restricted Stock, Restricted Stock Units or
Deferred Stock Units
. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may award Shares of Restricted Stock, Restricted Stock Units and/or Deferred Stock Units to Participants in such amounts as
the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually issued to the Participant until the Period of Restriction has expired and any other performance-based or other vesting
conditions have been satisfied. Deferred Stock Units shall be similar to Restricted Stock Units except that the issuance of Shares shall be further delayed after vesting as specified under the terms of the Award.
8.2
Restricted Stock, Restricted Stock Unit or Deferred
Stock Unit Agreement
. Each Restricted Stock, Restricted Stock Unit and/or Deferred Stock Unit award shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number
of Restricted Stock Units or Deferred Stock Units granted, and such other provisions as the Committee shall determine.
8.3
Other Restrictions
. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock,
Restricted Stock Units or Deferred Stock Units awarded pursuant to this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each
Restricted Stock Unit or Deferred Stock Unit, restrictions based upon the achievement of specific performance goals, as provided for in Article 12, time-based restrictions on vesting following the attainment of the performance goals, time-based
restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon
vesting of such Restricted Stock, Restricted Stock Units or Deferred Stock Units. To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Companys possession
until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely
transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units and Deferred Stock Units
shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion, shall determine.
8.4
Certificate Legend
. In addition to any legends placed on certificates pursuant to Section 8.3, each certificate
representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion:
The sale or transfer of Shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Mentor Graphics Corporation 2010 Omnibus Incentive Plan, and in the associated Award Agreement. A copy of the
Plan and such Award Agreement may be obtained from Mentor Graphics Corporation.
8.5
Voting Rights
. Unless otherwise determined by the Committee and set forth in a Participants Award Agreement, to the extent permitted or required by law, as determined by the Committee,
Participants holding Shares of Restricted Stock awarded hereunder shall have the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any
Restricted Stock Units or Deferred Stock Units awarded hereunder until Shares are issued.
Article 9. Performance Units/Performance Shares
9.1
Award of Performance Units/Performance Shares
. Subject to the terms and provisions of this Plan, the Committee, at any time and
from time to time, may award Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.
A - 11
9.2
Value of Performance Units/Performance Shares
. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Grant Date. The Committee shall, in its sole discretion, set performance
goals, as provided for in Article 12. The extent to which the performance goals are met will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.
9.3
Earning of Performance Units/Performance Shares
.
Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned
by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4
Form and Timing of Payment of Performance
Units/Performance Shares
. Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion,
may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as
soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set
forth in the Award Agreement pertaining to the grant of the Award.
Article 10. Cash-Based Awards and Other Stock-Based Awards
10.1
Grant of Cash-Based Awards
. Subject to the terms
and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.
10.2
Other Stock-Based Awards
. The Committee may grant other types of equity-based or equity-related
Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer
of actual Shares to Participants, or payment in cash of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United
States.
10.3
Value of Cash-Based Awards or
Other Stock-Based Awards
. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the
Committee. The Committee may, in its sole discretion, establish performance goals, as provided for in Article 12. If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards and/or
the amount of the Cash-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
10.4
Payment of Cash-Based Awards or Other Stock-Based Awards
. Payment, if any, with respect to a Cash-Based Award or an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.
Article 11. Transferability of Awards and Shares
11.1
Transferability of Awards
. Except as provided in Section 11.2, during a Participants lifetime, his or her Awards
shall be exercisable only by the Participant. Awards shall not be transferable other than by will or the laws of descent and distribution or, subject to the consent of the Committee, pursuant to a domestic relation order
A - 12
entered into by a court of competent jurisdiction. No Awards shall be subject, in whole or in part, to attachment, execution or levy of any kind. Any purported transfer in violation of this
Section 11.1 shall be null and void. The Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable or Shares deliverable in the event of, or following, the
Participants death may be provided.
11.2
Committee Action
. Except as provided in Section 6.7(i), the Committee may, in its discretion, determine that notwithstanding Section 11.1, any or all Awards shall be transferable to and exercisable by such transferees, and subject
to such terms and conditions, as the Committee may deem appropriate; provided, however, no Award may be transferred for value without stockholder approval.
11.3
Restrictions on Share Transferability
. The Committee may impose such restrictions on any Shares acquired by a Participant
under the Plan as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are
then listed or traded, or under any blue sky or state securities laws applicable to such Shares.
Article 12. Performance Measures
12.1
Performance Measures
. The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited
to the following Performance Measures:
|
(c)
|
gross profit or margin;
|
|
(d)
|
operating income or margin;
|
|
(e)
|
exit rate operating income margin (derived by annualizing the cost of sales and operating expense structure in place at fiscal year-end compared to the actual revenues
generated in that fiscal year);
|
|
(f)
|
earnings before or after taxes, interest, depreciation, and/or amortization;
|
|
(g)
|
net earnings or net income (before or after taxes);
|
|
(i)
|
share price (including, but not limited to, growth measures and total stockholder return);
|
|
(j)
|
operating expenses (including cost reductions);
|
|
(k)
|
return measures (including return on assets, capital, invested capital, equity, sales, or revenue);
|
|
(l)
|
cash flow (including operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);
|
|
(m)
|
asset turnover (including days sales outstanding);
|
|
(n)
|
reduction in leverage;
|
|
(q)
|
economic value added or
EVA
®
(net operating profit after tax minus the sum of capital multiplied by the cost of capital).
|
Any of the above Performance
Measure(s), or any combination thereof, may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate, as the Committee may deem appropriate.
Performance Measures may be compared to (i) the performance of a group of comparator companies, (ii) a published or special index that the Committee, in its sole discretion, deems appropriate, and/or (iii) other benchmarks approved by
the Committee. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals.
A - 13
12.2
Evaluation of Performance
. The Committee may provide in any such Award that any
evaluation of performance may include or exclude any of the following events or income or expense items that occur during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of
changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, executive termination costs or other special charges, (e) extraordinary items as defined
by generally accepted accounting principles or any successor there to, (f) acquisitions or divestitures, including asset sales, (g) the positive or negative impact of foreign exchange movements, (h) stock-based compensation expense,
(i) in-process research and development expenses, (j) intangible asset amortization, (k) integration and other one-time expenditures or other adjustments related to acquisitions, (l) acquisition costs, (m) merger costs,
including severance, lease and other facility costs of the acquired company, (n) gains or losses associated with either the repurchase or potential settlement of any or all of the Companys outstanding debt or convertible debt instruments
issued by the Company from time to time, and (o) the positive or negative impacts associated with the implementation of International Financial Reporting Standards (IFRS). To the extent such inclusions or exclusions affect Awards to
Covered Employees that are intended to qualify as Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
12.3
Adjustment of Performance-Based Compensation
. Subject to Section 12.4, Awards that are
intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.
12.4
Committee Discretion
. In the event
that applicable tax or securities laws or regulations or court or regulatory decisions change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have
sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may
make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1.
Article 13. Dividend Equivalents
Any Participant selected by the Committee may be granted dividend
equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests, or expires, as
determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing, the
Committee may not grant dividend equivalents based on the dividends declared on Shares that are subject to a NQSO, ISO, or SAR Award, and if any Award for which dividend equivalents have been granted has its vesting dependent upon the achievement of
one or more Performance Measures, then the dividend equivalents shall accrue and only be paid to the extent the Award becomes vested.
Article 14. Beneficiary Designation
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any
benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and
will be effective only when filed by the Participant in writing with the Company during the Participants lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the
Participants death shall be paid to or exercised by the Participants executor, administrator, or legal representative.
A - 14
Article 15. Rights of Participants
15.1
Employment
. Nothing in this Plan or an Award Agreement shall (a) interfere with or limit in
any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participants employment or service on the Board or to the Company, its Affiliates, and/or its Subsidiaries at any time or for any reason not prohibited
by law, or (b) confer upon any Participant any right to continue his employment or service as a Non-employee Director for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment
contract with the Company or any Affiliate or Subsidiary and, accordingly, subject to Articles 3 and 17, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to
any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.
15.2
Participation
. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
15.3
Rights as a Stockholder
. Except as otherwise
provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 16. Change of Control
16.1
Change of Control of the Company
. Notwithstanding any other provision of this Plan to the contrary, the provisions of this
Article 16 shall apply in the event of a Change of Control, unless otherwise determined by the Committee in connection with the grant of an Award as reflected in the applicable Award Agreement.
(a)
Outstanding Options and SARs exchanged for Replacement
Awards
. Upon a Change of Control, if an award meeting the requirements of Section 16.2 (a Replacement Award) is provided to a Participant to replace the Participants then outstanding Options or Stock Appreciation Rights
(the Replaced Award), then the Replaced Award shall be deemed cancelled and shall have no further force or effect and the Company shall have no further obligation with respect to the Replaced Award.
(b)
Outstanding Options and SARs not exchanged for
Replacement Awards
. Upon a Change of Control, to the extent a Participants then-outstanding Options and Stock Appreciation Rights are not exchanged for Replacement Awards as provided for in paragraph (a) above, then such Options and
Stock Appreciation Rights may become fully vested and exercisable if approved by the Committee or provided for in the Award Agreement.
(c)
Service-Based Outstanding Awards other than Options and SARs
. Upon a Change of Control, all then-outstanding Awards, other than
Options and SARs, that are not vested and as to which vesting depends solely on the satisfaction of a service obligation by a Participant to the Company, Subsidiary, or Affiliate may vest in full and be free of restrictions related to the vesting or
transferability of such Awards if approved by the Committee or provided for in the Award Agreement.
(d)
Other Awards
. Upon a Change of Control, the treatment of then-outstanding Awards not subject to subparagraphs (a), (b) or (c) above shall be determined by the terms and conditions set
forth in the applicable Award Agreement.
(e)
Committee discretion regarding treatment of Awards not exchanged for Replacement Awards
. Except to the extent that a Replacement Award is provided to the Participant, the Committee may, in its sole discretion, (i) determine that any or
all outstanding Awards granted under the Plan, whether or not exercisable, will be canceled and terminated and that in connection with such cancellation and termination the holder of such Award may receive for each Share subject to such Awards a
cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment)
A - 15
equal to the difference, if any, between the consideration received by stockholders of the Company in respect of a Share in connection with such transaction and the purchase price per Share, if
any, under the Award multiplied by the number of Shares subject to such Award; provided that if such product is zero or less or to the extent that the Award is not then exercisable, the Awards will be canceled and terminated without payment
therefore or (ii) provide that the period to exercise Options or Stock Appreciation Rights granted under the Plan shall be extended (but not beyond the expiration date of such Option or Stock Appreciation Right).
16.2
Replacement Awards
. An award shall qualify as a
Replacement Award if: (i) it has a value in the aggregate at least equal to the value of the Replaced Award as determined by the Committee in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its
successor in the Change of Control or of another entity that is affiliated with the Company or of its successor following the Change of Control; and (iii) its other terms and conditions are in the aggregate not less favorable to the Participant
than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a
continuation of the Replaced Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 16.2 are satisfied shall be made by the Committee, as constituted immediately before the
Change of Control, in its sole discretion.
Article 17.
Amendment and Termination
17.1
Amendment
and Termination of the Plan and Award Agreements
.
(a) Subject to subparagraphs (b) and (c) of this Section 17.1 and Section 17.3 of the Plan, the Board may at any time terminate the Plan or an outstanding Award Agreement and the
Committee may, at any time and from time to time, amend the Plan or an outstanding Award Agreement.
(b) Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock
split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of an outstanding Award may not be amended to reduce the Option Price of outstanding
Options or to reduce the Grant Price of outstanding SARs or cancel outstanding Options or SARs in exchange for cash, other awards or options or SARs with an Option Price or Grant Price, as applicable, that is less than the Option Price of the
cancelled Options or the Grant Price of the cancelled SARs without stockholder approval.
(c) Notwithstanding the foregoing, no amendment of this Plan shall be made without stockholder approval if stockholder approval is required pursuant to rules promulgated by any stock exchange or quotation
system on which Shares are listed or quoted or by applicable U.S. state corporate laws or regulations, applicable U.S. federal laws or regulations or the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted
under the Plan.
17.2
Adjustment of Awards Upon
the Occurrence of Certain Unusual or Nonrecurring Events
. Subject to Section 12.3, the Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing
adjustments, if any, shall be conclusive and binding on Participants under this Plan. By accepting an Award under this Plan, a Participant agrees to any adjustment to the Award made pursuant to this Section 17.2 without further consideration or
action.
A - 16
17.3
Awards Previously Granted
. Notwithstanding any other provision of this Plan to
the contrary, other than Sections 17.2, 17.4, or 20.14, no termination or amendment of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the
Participant holding such Award.
17.4
Amendment
to Conform to Law
. Notwithstanding any other provision of this Plan to the contrary, the Committee may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of
conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature, and to the administrative regulations and rulings. By accepting an Award under this Plan, a Participant agrees to any amendment made
pursuant to this Section 17.4 to any Award granted under the Plan without further consideration or action.
Article 18. Withholding
18.1
Tax Withholding
. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state,
and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
18.2
Share Withholding
. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions
on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award (collectively and individually referred to as a Share
Payment), Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold from a Share Payment the number of Shares having a Fair Market Value on the
date the withholding is to be determined equal to the minimum statutory withholding requirement but in no event shall such withholding exceed the minimum statutory withholding requirement. All such elections shall be irrevocable, made in writing,
and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
Article 19. Successors
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 20. General Provisions
20.1
Forfeiture Events
.
(a) The Committee may specify in an Award Agreement that the Participants rights, payments, and benefits with respect to an Award
shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be
limited to, termination of employment for cause, termination of the Participants provision of services to the Company, Affiliate, or Subsidiary, violation of material Company, Affiliate, or Subsidiary policies, breach of non-competition,
confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, any Affiliate, or Subsidiary.
(b) The Committee may specify in an Award Agreement that, if
any of the Companys financial statements are required to be restated resulting from errors, omissions, or fraud, the Company may recover all or a portion of any Award granted or paid to a Participant with respect to any fiscal year of the
Company the financial results of which are negatively affected by such restatement. Unless otherwise specified in the Award
A - 17
Agreement, the amount to be recovered from the Participant shall be the amount by which the Award exceeded the amount that would have been payable to the Participant had the financial statements
been initially filed as restated, or any greater or lesser amount (including, but not limited to, the entire Award) that the Committee shall determine. In no event shall the amount to be recovered by the Company be less than the amount required to
be repaid or recovered as a matter of law (including but not limited to amounts that are required to be recovered or forfeited under Section 304 of the Sarbanes-Oxley Act of 2002). The Committee shall determine whether the Company shall effect
any such recovery: (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be payable to the
Participant under any compensatory plan, program, or arrangement maintained by the Company, an Affiliate, or any Subsidiary, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus
amount) or grants of compensatory awards that would otherwise have been made in accordance with the companys otherwise applicable compensation practices, or (iv) by any combination of the foregoing.
20.2
Legend
. The certificates for Shares may include
any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
20.3
Gender and Number
. Except where otherwise indicated by the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular, and the singular shall include the plural.
20.4
Severability
. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this
Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
20.5
Requirements of Law
. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. The Company, in its discretion, may postpone the granting and exercising of Awards, the issuance or delivery of Shares under any Award or any other action permitted under the
Plan to permit the Company, with reasonable diligence, to complete such national securities exchange listing or registration or qualification of such Shares or other required action under any federal or state law, rule, or regulation and may require
any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Shares in compliance with applicable laws, rules, and regulations. The Company shall not be
obligated by virtue of any provision of the Plan to recognize the exercise of any Award or to otherwise sell or issue Shares in violation of any such laws, rules, or regulations, and any postponement of the exercise or settlement of any Award under
this provision shall not extend the term of such Awards. Neither the Company nor its directors or officers shall have any obligation or liability to a Participant with respect to any Award (or Shares issuable thereunder) that shall lapse because of
such postponement.
20.6
Delivery of Title
.
The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) completion of any registration or other qualification of
the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
20.7
Inability to Obtain Authority
. The inability of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Companys counsel to be necessary to the lawful issuance and sale of any Shares, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
A - 18
20.8
Investment Representations
. The Committee may require any individual receiving
Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
20.9
Participants Based Outside of the United States
.
Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees, Non-employee Directors or Third Party Service
Providers, the Committee, in its sole discretion, shall have the power and authority to:
(a) determine which Affiliates and
Subsidiaries shall be covered by this Plan;
(b)
determine which Employees, Non-employee Directors or Third Party Service Providers outside the United States are eligible to participate in this Plan;
(c) modify the terms and conditions of any Award granted to Employees, Non-employee Directors or Third Party Service Providers outside the
United States to comply with applicable foreign laws;
(d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable, and any such subplans and modifications to Plan terms and
procedures established under this Section 20.9 by the Committee shall be attached to this Plan document as appendices; and
(e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local
government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable
law.
20.10
Uncertificated Shares
. To the
extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
20.11
Unfunded Plan
. Participants shall
have no right, title, or interest whatsoever in or to any investments that the Company, its Subsidiaries, or its Affiliates may make to aid them in meeting their obligations under this Plan. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any
individual acquires a right to receive payments from the Company or any Affiliate or Subsidiary under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or the Subsidiary or Affiliate, as the
case may be. All payments to be made hereunder shall be paid from the general funds of the Company, or the Subsidiary or Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to
assure payment of such amounts except as expressly set forth in this Plan.
20.12
No Fractional Shares
. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be
issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
20.13
Retirement and Welfare Plans
. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be
included as compensation for purposes of computing the benefits payable to any Participant under the Companys or any Subsidiarys or Affiliates retirement plans (both qualified and nonqualified) or welfare benefit plans
unless such other plan expressly provides that such compensation shall be taken into account in computing a Participants benefit.
A - 19
20.14
Deferred Compensation
.
(a) The Committee may grant Awards under the Plan that provide for the deferral of compensation within the
meaning of Code Section 409A. It is intended that such Awards comply with the requirements of Code Section 409A so that amounts deferred thereunder are not includible in income and are not subject to an additional tax of twenty percent
(20%) at the time the deferred amounts are no longer subject to a substantial risk of forfeiture.
(b) Notwithstanding any provision of the Plan or Award Agreement to the contrary, if one or more of the payments or benefits to be
received by a Participant pursuant to an Award would constitute deferred compensation subject to Code Section 409A and would cause the Participant to incur any penalty tax or interest under Code Section 409A or any regulations or Treasury
guidance promulgated thereunder, the Committee may reform the Plan and Award Agreement to comply with the requirements of Code Section 409A and to the extent practicable maintain the original intent of the Plan and Award Agreement. By accepting
an Award under this Plan, a Participant agrees to any amendments to the Award made pursuant to this Section 20.14(b) without further consideration or action.
20.15
Nonexclusivity of this Plan
. The adoption of
this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
20.16
No Constraint on Corporate Action
. Nothing in this Plan shall be construed to: (i) limit,
impair, or otherwise affect the Companys or a Subsidiarys or an Affiliates right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or
dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.
20.17
Governing Law
. The Plan and each
Award Agreement shall be governed by the laws of the State of Oregon, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Oregon to resolve any and all issues that may arise out of or
relate to this Plan or any related Award Agreement.
20.18
Delivery and Execution of Electronic Documents
. To the extent permitted by applicable law, the Company may (i) deliver
by email or other electronic means (including posting on a web site maintained by the Company or by a third party under contract with the Company) all documents relating to the Plan or any Award thereunder (including without limitation,
prospectuses) and all other documents that the Company is required to deliver to its security holders (including without limitation, annual reports and proxy statements) and (ii) permit Participants to electronically execute applicable Plan
documents (including, but not limited to, Award Agreements) in a manner prescribed by the Committee.
20.19
No Representations or Warranties Regarding Tax Effect
. Notwithstanding any provision of the Plan to the contrary, the
Company, its Affiliates and Subsidiaries, the Board and the Committee neither represent nor warrant the tax treatment under any federal, state, local or foreign laws and regulations thereunder (individually and collectively referred to as the
Tax Laws) of any Award granted or any amounts paid to any Participant under the Plan including, but not limited to, when and to what extent such Awards or amounts may be subject to tax, penalties and interest under the Tax Laws.
A - 20
EXHIBIT B
MENTOR GRAPHICS CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
(1)
1.
Purpose of the Plan
. Mentor Graphics Corporation (Company) believes that ownership of shares of its common stock by its employees, and by the employees of any participating subsidiary
(hereinafter defined), is desirable as an incentive to better performance and improvement of profits, and as a means by which employees may share in the Companys growth and success. The purpose of the Companys 1989 Employee Stock
Purchase Plan (Plan) is to provide a convenient means by which employees of the Company and subsidiaries may purchase the Companys shares and a method by which the Company may assist and encourage employees to become shareholders. In May 2002,
the Company adopted its Foreign Subsidiary Employee Stock Purchase Plan (Foreign Sub Plan) pursuant to which employees of selected foreign subsidiaries are provided a similar opportunity to purchase common stock as an alternative to the Plan.
2.
Shares Reserved for the Plan
. There are
34,650,000
31,650,000
shares of the Companys authorized but unissued or reacquired Common Stock, no par value (Common Stock), reserved for the Plan. The number of
shares reserved is subject to adjustment in the event of stock dividends, stock splits, combinations of shares, recapitalizations or other changes in the outstanding Common Stock. The determination of whether an adjustment shall be made and the
manner of any adjustment shall be made by a compensation committee (Committee) appointed by the Board of Directors of the Company without any further approval from the shareholders, which determination shall be conclusive.
3.
Administration of the Plan
. The Plan shall be
administered by the Committee. The Committee may promulgate rules and regulations for the operation of the Plan, adopt forms for use in connection with the Plan, and decide any question of interpretation of the Plan or rights arising thereunder. All
determinations and decisions of the Committee shall be conclusive.
4.
Eligible Employees
. Except as provided below, all regular employees of the Company and all regular employees of each of the Companys subsidiary corporations that is designated by the
Committee as a participant in the Plan (Participating Subsidiary) are eligible to participate in the Plan. Any employee who would after an offering pursuant to the Plan own or be deemed (under section 424(d) of the Internal Revenue Code of 1986, as
amended (IRC)) to own stock (including stock that may be purchased under any outstanding options) possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or, if applicable, its parent or
subsidiaries, shall be ineligible to participate in the Plan. A regular employee is one who has been in the active service of the Company or any Participating Subsidiary for at least one full month prior to the applicable Offering Date (as defined
below), excluding, however, any employee whose customary employment is 20 or fewer hours per week or whose customary employment is for not more than five months per calendar year.
5.
Offerings
.
(a)
Offering and Purchase Dates
. The Plan shall be
implemented by a series of six-month offerings (Offerings) with a new Offering commencing on January 1 and July 1 of each year. Each Offering commencing on January 1 of any year shall end on June 30 of that year, and each
Offering commencing on July 1 of any year shall end on December 31 of that year. The first day of each Offering is the Offering Date for that Offering and the last day of each Offering is the Purchase Date for that
Offering.
(b)
Grants; Limitations
. On each
Offering Date, each eligible employee (Optionee) shall be granted an option under the Plan to purchase shares of Common Stock on the Purchase Date for the Offering for the price
(1)
|
Double-underlined matter is new; matter crossed out is proposed to be deleted.
|
B - 1
determined under paragraph 8 of the Plan exclusively through payroll deductions authorized under paragraph 6 of the Plan; provided, however, that (i) no option shall permit the purchase of
more than 6,000 shares on any Purchase Date, and (ii) no option may be granted pursuant to the Plan that would allow an Optionees right to purchase shares under all stock purchase plans of the Company and its parent and subsidiaries to
which IRC Section 423 applies to accrue at a rate that exceeds $25,000 of fair market value of shares (determined at the date of grant) for each calendar year in which such option is outstanding. For this purpose, the right to purchase shares
pursuant to a subscription accrues on the Purchase Date.
6.
Participation in the Plan
.
(a)
Initiating Participation.
Optionees may participate in an Offering under the Plan by submitting to the Company, in the form specified by the Company, a subscription and payroll deduction
authorization. The subscription and payroll deduction authorization must be submitted no later than the Subscription Deadline for the Offering, which shall be a date approximately two weeks prior to the Offering Date as determined for
each Offering by the Companys senior human resources executive and communicated to Optionees. Once submitted, a subscription and payroll deduction authorization shall remain in effect unless amended or terminated, and upon the expiration of an
Offering the participants in that Offering will be automatically enrolled in the new Offering starting the following day. The payroll deduction authorization will authorize the employing corporation to deduct a designated amount from each of the
Optionees regular paychecks during the Offering. The designated amount to be deducted from each paycheck must be a whole percentage of not less than 1 percent or greater than 10 percent of the gross amount of the Optionees base salary,
Bonus Compensation (as defined below), hourly compensation, including overtime pay, and commission earnings, for each payroll period. Bonus Compensation shall consist of compensation paid under regular annual incentive compensation
programs, and shall specifically exclude discretionary spot or merit bonuses, relocation bonuses and promotion bonuses. If payroll deductions are made by a Participating Subsidiary, that corporation will promptly remit the amount of the deduction to
the Company. If an employee who is participating in the Foreign Sub Plan ceases to be eligible to participate in the Foreign Sub Plan and simultaneously becomes eligible to participate in this Plan, either as a result of a change in employing
corporation or a determination by the Committee that the participants employing corporation shall be a Participating Subsidiary under this Plan and shall no longer be a participating subsidiary under the Foreign Sub Plan, the
participants subscription and payroll deduction authorization submitted under the Foreign Sub Plan shall be deemed to have been submitted under this Plan and shall be effective for the next Offering under this Plan commencing on or after the
date of the change in the employees status.
(b)
Amending Participation.
After an Optionee has begun participating in the Plan by initiating payroll deductions, the Optionee
may not amend the payroll deduction authorization except for an amendment effective for the first paycheck in a new Offering submitted no later than the Subscription Deadline for that Offering. Notwithstanding the foregoing, because the amount of
payroll deductions under the Plan from any Optionee during any calendar year that can be applied to purchase shares pursuant to the Plan under the limitation set forth in paragraph 5(b)(ii) of the Plan cannot exceed $21,250, (i) payroll
deductions from any Optionee shall be suspended once the amount of payroll deductions in any calendar year from that Optionee reaches $21,250, (ii) the Optionee shall not as a result of such suspension be considered to have terminated
participation in the current Offering, and (iii) payroll deductions from the Optionee shall resume as of the first Offering in the next calendar year at the rate set forth in the Optionees then effective payroll deduction authorization.
(c)
Terminating Participation.
After an
Optionee has begun participating in the Plan by initiating payroll deductions, the Optionee may terminate participation in the current Offering and the Plan any time prior to the Subscription Deadline for the next Offering by notice to the Company
in the form specified by the Company. Participation in the Plan shall also terminate when an Optionee ceases to be eligible to participate in the Plan for any reason, including death, retirement or the Optionees employing corporation ceasing
to be a Participating Subsidiary. An Optionee may not reinstate participation in the Plan with respect to a particular Offering after once terminating participation in the Plan with respect to that Offering. Upon termination of an
B - 2
Optionees participation in the Plan, the Company will pay to the Optionee all amounts deducted from the Optionees pay and not yet used to purchase shares under the Plan.
7.
Purchase of Shares
. All amounts withheld from the
pay of an Optionee shall be credited to the Optionees account under the Plan by the Custodian appointed under paragraph 9. The amounts withheld may be accumulated by the Company and paid to the Custodian at any time prior to the Purchase Date.
No interest will be paid on the amounts accumulated by the Company or the amounts held in any account maintained by the Custodian. On each Purchase Date, the amount of the account of each Optionee will be applied to purchase of shares by that
Optionee from the Company. Although an Optionees account may reflect a fraction of a share, no fractional shares will be sold by the Company or delivered pursuant to paragraph 9. Any cash balance remaining in an Optionees account after a
Purchase Date or upon termination of participation shall be refunded to the Optionee.
8.
Option Price
. The price at which Common Stock shall be purchased in an Offering shall be the lesser of (i) 85 percent of the fair market value of a share of Common Stock on the Offering
Date of the Offering, or (ii) 85 percent of the fair market value of a share of Common Stock on the Purchase Date of the Offering. The fair market value of a share of Common Stock on any date shall be the closing price on that date as reported
by the Nasdaq National Market or, if the Common Stock is not reported on the Nasdaq National Market, such other reported value of the Common Stock as shall be specified by the Board of Directors; provided, however, that if an Offering Date or
Purchase Date is a date on which the principal market in which the Common Stock trades is not open for trading, then the fair market value shall be the closing price or other reported value on the immediately preceding trading day.
9.
Delivery and Custody of Shares
. Shares purchased by
Optionees pursuant to the Plan shall be delivered to and held in the custody of such investment or financial firms (each a Custodian) as shall be appointed by the Committee. By appropriate instructions to the Custodian on forms to be provided for
that purpose, an Optionee may from time to time sell all or part of the shares held by the Custodian for the Optionees account at the market price at the time the order is executed. By appropriate instructions to the Custodian following the
death of an Optionee, the Optionees personal representative or other authorized person may (a) obtain transfer of all or part of the shares held by the Custodian for the Optionees account into the name of the person or persons
entitled thereto under the Optionees will or the laws of descent and distribution, or (b) obtain transfer of all or part of the shares held for the Optionees account by the Custodian to a regular individual brokerage account in the
name of the person or persons entitled thereto under the Optionees will or the laws of descent and distribution, either with the firm then acting as Custodian or with another firm.
10.
Records and Statements
. The Custodian will maintain the records of the Plan. As soon as practicable
after each Purchase Date each Optionee shall receive a statement showing the activity of the Optionees account since the last Purchase Date and the balance on the Purchase Date as to both cash and shares. Optionees will be furnished such other
reports and statements, and at such intervals, as the Committee shall determine from time to time.
11.
Expenses of the Plan
. The Company will pay all expenses incident to operation of the Plan, including costs of recordkeeping, accounting fees, legal fees, commissions and issue or transfer taxes
on purchases pursuant to the Plan.
12.
Rights
Not Transferable
. The right to purchase shares under this Plan is not transferable by an Optionee and is exercisable during the Optionees lifetime only by the Optionee.
13.
Dividends and Other Distributions
. Cash dividends
and other cash distributions, if any, on shares held by the Custodian will be paid currently to the Optionees entitled thereto unless the Company subsequently adopts a dividend reinvestment plan and the Optionee directs that cash dividends be
invested in accordance with such plan. Stock dividends and other distributions in shares of the Company on shares held by the Custodian shall be issued to the Custodian and held by it for the account of the respective Optionees entitled thereto.
B - 3
14.
Voting and Shareholder Communications
. In connection with voting on any matter
submitted to the shareholders of the Company, the Custodian will cause the shares held by the Custodian for each Optionees account to be voted in accordance with instructions from the Optionee or, if requested by an Optionee, will furnish to
the Optionee a proxy authorizing the Optionee to vote the shares held by the Custodian for the Optionees account. Copies of all general communications to shareholders of the Company will be sent to Optionees participating in the Plan.
15.
Tax Withholding
. Each Optionee who has
purchased shares under the Plan shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding determined by the Company to be required.
If the Company determines that additional withholding is required beyond any amount deposited at the time of purchase, the Optionee shall pay such amount to the Company on demand. If the Optionee fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the Optionee, including salary, subject to applicable law.
16.
Responsibility
. Neither the Company, its Board of Directors, the Committee, any Participating Subsidiary, nor any officer or
employee of any of them shall be liable to any Optionee under the Plan for any mistake of judgment or for any omission or wrongful act unless resulting from willful misconduct or intentional misfeasance.
17.
Conditions and Approvals
. The obligations of the
Company under the Plan shall be subject to compliance with all applicable state and federal laws and regulations, the rules of any stock exchange on which the Companys securities may be listed, and the approval of federal and state authorities
or agencies with jurisdiction in the matter. The Company will use its best efforts to comply with such laws, regulations and rules to obtain required approvals.
18.
Amendment of the Plan
. The Board of Directors may from time to time amend the Plan in any and all respects, except that without
approval of the shareholders of the Company, the Board of Directors may not increase the number of shares reserved for the Plan or decrease the purchase price of shares offered pursuant to the Plan.
19.
Termination of the Plan
. The Plan shall terminate
when all of the shares reserved for purposes of the Plan have been purchased, provided that the Board of Directors in its sole discretion may at any time terminate the Plan. The Company will have no obligations on account of any such termination
other than to pay to each Optionee all amounts deducted from the Optionees pay and not yet used to purchase shares under the Plan.
B - 4
EXHIBIT C
MENTOR GRAPHICS CORPORATION
FOREIGN SUBSIDIARY EMPLOYEE STOCK PURCHASE PLAN
(1)
1.
Purpose of the Plan
. Mentor Graphics Corporation (Company) believes that ownership of shares of its common stock by employees of its subsidiaries is desirable as an incentive to better
performance and improvement of profits, and as a means by which employees may share in the Companys growth and success. The Company has previously operated its 1989 Employee Stock Purchase Plan (1989 Plan) pursuant to which employees of the
Company and designated subsidiaries have had a similar opportunity to purchase common stock. The purpose of the Companys Foreign Subsidiary Employee Stock Purchase Plan (Plan) is to provide an alternative to the 1989 Plan as a means by which
employees of selected foreign subsidiaries may purchase the Companys shares and a method by which the Company may assist and encourage those employees to become shareholders.
2.
Shares Reserved for the Plan
. There are
6,900,000
5,900,000
shares of the Companys authorized but unissued or reacquired Common Stock, no par value (Common Stock), reserved for the Plan. The number of shares reserved is subject to adjustment in the event of
stock dividends, stock splits, combinations of shares, recapitalizations or other changes in the outstanding Common Stock. The determination of whether an adjustment shall be made and the manner of any adjustment shall be made by a compensation
committee (Committee) appointed by the Board of Directors of the Company without any further approval from the shareholders, which determination shall be conclusive.
3.
Administration of the Plan
. The Plan shall be
administered by the Committee. The Committee may promulgate rules and regulations for the operation of the Plan, adopt forms for use in connection with the Plan, and decide any question of interpretation of the Plan or rights arising thereunder. All
determinations and decisions of the Committee shall be conclusive.
4.
Eligible Employees; Egypt/India Employees
. Except as provided below, all regular employees of each corporate subsidiary of the Company that is designated by the Committee as a participant in the
Plan (Participating Subsidiary) are eligible to participate in the Plan. Any employee who would after an offering pursuant to the Plan own or be deemed (under section 424(d) of the Internal Revenue Code of 1986, as amended (IRC)) to own stock
(including stock that may be purchased under any outstanding options) possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or, if applicable, its parent or subsidiaries, shall be ineligible
to participate in the Plan. A regular employee is one who has been in the active service of any Participating Subsidiary for at least one full month prior to the applicable Offering Date (as defined below), excluding, however, any employee whose
customary employment is 20 or fewer hours per week or whose customary employment is for not more than five months per calendar year. As used in the Plan, the term Egypt/India Employee means a regular employee of a Participating
Subsidiary who has had his or her home office in Egypt or India for at least one full month prior to the applicable Offering Date.
5. Offerings
.
(a)
Offering and Purchase Dates
. The Plan shall be implemented by a series of six-month offerings (Offerings) with a new Offering
commencing on January 1 and July 1 of each year. Each Offering commencing on January 1 of any year shall end on June 30 of that year, and each Offering commencing on July 1 of any year shall end on December 31 of that
year. The first day of each Offering is the Offering Date for that Offering and the last day of each Offering is the Purchase Date for that Offering.
(b)
Grants; Limitations
. On each Offering Date, each
eligible employee (Optionee) shall be granted an option under the Plan to purchase shares of Common Stock on the Purchase Date for the Offering for the price
(1)
|
Double-underlined matter is new; matter crossed out is proposed to be deleted.
|
C - 1
determined under paragraph 8 of the Plan exclusively through payroll deductions authorized under paragraph 6 of the Plan; provided, however, that (i) no option shall permit the purchase of
more than 6,000 shares on any Purchase Date, and (ii) no option may be granted pursuant to the Plan that would allow an Optionees right to purchase shares under all employee stock purchase plans of the Company and its parent and
subsidiaries to accrue at a rate that exceeds US$25,000 of fair market value of shares (determined at the date of grant) for each calendar year in which such option is outstanding. For this purpose, the right to purchase shares pursuant to a
subscription accrues on the Purchase Date.
6.
Participation in the Plan.
(a)
Initiating
Participation.
Optionees may participate in an Offering under the Plan by submitting to the Company, in the form specified by the Company, a subscription and payroll deduction authorization. The subscription and payroll deduction authorization
must be submitted no later than the Subscription Deadline for the Offering, which shall be a date approximately two weeks prior to the Offering Date as determined for each Offering by the Companys senior human resources executive
and communicated to Optionees. Once submitted, a subscription and payroll deduction authorization shall remain in effect unless amended or terminated, and upon the expiration of an Offering the participants in that Offering will be automatically
enrolled in the new Offering starting the following day. The payroll deduction authorization will authorize the employing corporation to deduct a designated amount from each of the Optionees regular paychecks during the Offering. The
designated amount to be deducted from each paycheck must be a whole percentage of not less than 1 percent or greater than 10 percent (20 percent in the case of an Egypt/India Employee) of the gross amount of the Optionees base salary, Bonus
Compensation (as defined below), hourly compensation, including overtime pay, and commission earnings (Covered Compensation), for each payroll period. Bonus Compensation shall consist of compensation paid under regular annual
incentive compensation programs, and shall specifically exclude discretionary spot or merit bonuses, relocation bonuses and promotion bonuses. Each Participating Subsidiary will promptly remit the amount of payroll deductions to the Company. If an
employee who is participating in the 1989 Plan ceases to be eligible to participate in the 1989 Plan and simultaneously becomes eligible to participate in this Plan, either as a result of a change in employing corporation or a determination by the
Committee that the participants employing corporation shall be a Participating Subsidiary under this Plan and shall no longer be a participating subsidiary under the 1989 Plan, the participants subscription and payroll deduction
authorization submitted under the 1989 Plan shall be deemed to have been submitted under this Plan and shall be effective for the next Offering under this Plan commencing on or after the date of the change in the employees status.
(b)
Amending Participation.
After an Optionee has
begun participating in the Plan by initiating payroll deductions, the Optionee may not amend the payroll deduction authorization except for an amendment effective for the first paycheck in a new Offering submitted no later than the Subscription
Deadline for that Offering. If an Optionee who is an Egypt/India Employee, and who has specified a payroll deduction amount greater than 10 percent of Covered Compensation, ceases to be an Egypt/India Employee but continues to be eligible to
participate in this Plan as a result of a change in his or her home office, the Optionees payroll deduction amount shall be reduced to 10 percent of Covered Compensation immediately upon his or her change in status. Notwithstanding the
foregoing, if the amount of payroll deductions from any Optionee during any Offering exceeds the maximum amount that can be applied to purchase shares on the Purchase Date of that Offering under the limitations set forth in paragraph 5(b) of the
Plan, then (i) as soon as practicable following a written request from the Optionee, payroll deductions from the Optionee shall be suspended and all such excess amounts shall be refunded to the Optionee, (ii) the Optionee shall not as a
result of such suspension be considered to have terminated participation in the Offering, and (iii) payroll deductions from the Optionee shall resume as of the next Offering at the rate set forth in the Optionees then effective payroll
deduction authorization.
(c)
Terminating
Participation.
After an Optionee has begun participating in the Plan by initiating payroll deductions, the Optionee may terminate participation in the current Offering and the Plan any time prior to the Subscription Deadline for the next
Offering by notice to the Company in the form specified by the Company. Participation in the Plan shall also terminate when an Optionee ceases to be eligible to participate in
C - 2
the Plan for any reason, including death, retirement or the Optionees employing corporation ceasing to be a Participating Subsidiary. An Optionee may not reinstate participation in the Plan
with respect to a particular Offering after once terminating participation in the Plan with respect to that Offering. Upon termination of an Optionees participation in the Plan, the Company will pay to the Optionee all amounts deducted from
the Optionees pay and not yet used to purchase shares under the Plan.
7.
Purchase of Shares
. All amounts withheld from the pay of an Optionee shall be credited to the Optionees account under the Plan by the Custodian appointed under paragraph 9. The amounts
withheld may be accumulated by the Company and paid to the Custodian at any time prior to the Purchase Date. No interest will be paid on the amounts accumulated by the Company or the amounts held in any account maintained by the Custodian. On each
Purchase Date, the amount of the account of each Optionee will be applied to purchase of shares by that Optionee from the Company. Although an Optionees account may reflect a fraction of a share, no fractional shares will be sold by the
Company or delivered pursuant to paragraph 9. Any cash balance remaining in an Optionees account after a Purchase Date or upon termination of participation shall be refunded to the Optionee.
8.
Option Price
. The price at which Common Stock shall
be purchased in an Offering shall be the lesser of (i) 85 percent of the fair market value of a share of Common Stock on the Offering Date of the Offering, or (ii) 85 percent of the fair market value of a share of Common Stock on the
Purchase Date of the Offering. The fair market value of a share of Common Stock on any date shall be the closing price on that date as reported by the Nasdaq National Market or, if the Common Stock is not reported on the Nasdaq National Market, such
other reported value of the Common Stock as shall be specified by the Board of Directors; provided, however, that if an Offering Date or Purchase Date is a date on which the principal market in which the Common Stock trades is not open for trading,
then the fair market value shall be the closing price or other reported value on the immediately preceding trading day.
9.
Delivery and Custody of Shares
. Shares purchased by Optionees pursuant to the Plan shall be delivered to and held in the custody
of such investment or financial firms (each a Custodian) as shall be appointed by the Committee. By appropriate instructions to the Custodian on forms to be provided for that purpose, an Optionee may from time to time sell all or part of the shares
held by the Custodian for the Optionees account at the market price at the time the order is executed. By appropriate instructions to the Custodian following the death of an Optionee, the Optionees personal representative or other
authorized person may (a) obtain transfer of all or part of the shares held by the Custodian for the Optionees account into the name of the person or persons entitled thereto under the Optionees will or the laws of descent and
distribution, or (b) obtain transfer of all or part of the shares held for the Optionees account by the Custodian to a regular individual brokerage account in the name of the person or persons entitled thereto under the Optionees
will or the laws of descent and distribution, either with the firm then acting as Custodian or with another firm.
10.
Records and Statements
. The Custodian will maintain the records of the Plan. As soon as practicable after each Purchase Date
each Optionee shall receive a statement showing the activity of the Optionees account since the last Purchase Date and the balance on the Purchase Date as to both cash and shares. Optionees will be furnished such other reports and statements,
and at such intervals, as the Committee shall determine from time to time.
11.
Expenses of the Plan
. The Company will pay all expenses incident to operation of the Plan, including costs of recordkeeping, accounting fees, legal fees, commissions and issue or transfer taxes
on purchases pursuant to the Plan.
12.
Rights
Not Transferable
. The right to purchase shares under this Plan is not transferable by an Optionee and is exercisable during the Optionees lifetime only by the Optionee.
13.
Dividends and Other Distributions
. Cash dividends
and other cash distributions, if any, on shares held by the Custodian will be paid currently to the Optionees entitled thereto unless the Company subsequently adopts
C - 3
a dividend reinvestment plan and the Optionee directs that cash dividends be invested in accordance with such plan. Stock dividends and other distributions in shares of the Company on shares held
by the Custodian shall be issued to the Custodian and held by it for the account of the respective Optionees entitled thereto.
14.
Voting and Shareholder Communications
. In connection with voting on any matter submitted to the shareholders of the Company,
the Custodian will cause the shares held by the Custodian for each Optionees account to be voted in accordance with instructions from the Optionee or, if requested by an Optionee, will furnish to the Optionee a proxy authorizing the Optionee
to vote the shares held by the Custodian for the Optionees account. Copies of all general communications to shareholders of the Company will be sent to Optionees participating in the Plan.
15.
Tax Withholding
. In connection with purchases of
shares under the Plan, the Company shall determine the amounts, if any, required to be withheld to satisfy any applicable tax withholding or other withholding obligations of Participating Subsidiaries under the laws of the jurisdictions in which
Optionees perform services. The Participating Subsidiaries shall withhold such amounts from other amounts payable to the Optionee, including salary, subject to applicable law.
16.
Responsibility
. Neither the Company, its Board of
Directors, the Committee, any Participating Subsidiary, nor any officer or employee of any of them shall be liable to any Optionee under the Plan for any mistake of judgment or for any omission or wrongful act unless resulting from willful
misconduct or intentional misfeasance.
17.
Conditions and Approvals
. The obligations of the Company under the Plan shall be subject to compliance with all applicable state and federal laws and regulations, the rules of any stock exchange on which the Companys securities may be
listed, and the approval of federal and state authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to comply with such laws, regulations and rules to obtain required approvals.
18.
Amendment of the Plan
. The Board of Directors may
from time to time amend the Plan in any and all respects.
19.
Termination of the Plan
. The Plan shall terminate when all of the shares reserved for purposes of the Plan have been purchased, provided that the Board of Directors in its sole discretion may
at any time terminate the Plan. The Company will have no obligations on account of any such termination other than to pay to each Optionee all amounts deducted from the Optionees pay and not yet used to purchase shares under the Plan.
C - 4
MENTOR GRAPHICS CORPORATION
Annual Meeting, June 11, 2014