NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 15, 2016
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 15, 2016 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:
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1.
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To elect directors to serve for the ensuing year and until their successors are elected;
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2.
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To conduct a shareholder advisory vote to approve executive compensation;
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To amend the Company’s 2010 Omnibus Incentive Plan to increase the number of shares reserved for issuance under the plan;
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To amend the Company’s 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;
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5.
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To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for its fiscal year ending January 31, 2017; and
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To transact any other business that may properly come before the meeting.
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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 18, 2016 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 via the 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 18, 2016
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 15, 2016:
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 18, 2016
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 15, 2016 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 Company’s telephone number at its principal executive offices is
(503) 685-7000.
Procedural Matters
Shareholders of record at the close of business on
April 18, 2016 are entitled to notice of, and to vote at, the meeting. At the record date, 106,935,250 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 via the 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 Dr. Cheryl Shavers 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 Patrick B. McManus, who has served on the Board for 13 years, is not nominated for re-election this year. Director McManus has
made a wide variety of contributions to the Company as an expert in finance. The Board would like to thank him for his years of service and wish him well in the future. Gregory K. Hinckley, the Company’s President who has also served as a
director since 2000, is not nominated for re-election this year. The Nominating and Corporate Governance Committee decided to reduce the number of Company officers serving as directors from two to one.
The Company’s Articles of Incorporation include a
majority vote standard for uncontested elections of directors under which shareholders may vote “for” or “against”, or abstain with respect to each nominee, and a nominee will be elected only if shares voted “for”
exceed shares voted “against.” Under Oregon law, an incumbent director nominee who is not re-elected continues to serve on the Board until his or her successor is elected and qualified or until there is a decrease in the number of
directors. The Company’s Corporate Governance Guidelines require any incumbent director nominee who receives more “against” votes than “for” votes in an uncontested director election to tender his or her resignation subject
to acceptance or rejection by the Board of Directors. The Nominating and Corporate Governance Committee would then make a recommendation, and the Board would decide whether to accept or reject the tendered resignation, within 90 days after
certification of the election results.
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Shares of Common Stock
Beneficially Owned as of
April 18,
2016
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Name
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Age
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Director
Since
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Number of
Shares
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Percent of
Total
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Keith L. Barnes
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64
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2012
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11,542
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(1)
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*
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Sir Peter L. Bonfield
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71
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2002
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68,318
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(1)
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*
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Paul A. Mascarenas, OBE
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54
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2015
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7,681
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(2)
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*
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J. Daniel McCranie
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72
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2012
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40,670
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(1)
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*
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Dr. Walden C. Rhines
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69
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1993
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1,215,780
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(3)
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1.1
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Dr. Cheryl Shavers
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62
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—
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0
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*
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Jeffrey M. Stafeil
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46
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2014
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11,679
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(1)
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*
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(1)
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Includes 5,965 shares subject to restricted stock units under which shares are issuable within 60 days of April 18, 2016.
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(2)
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Includes 7,681 shares subject to restricted stock units under which shares are issuable within 60 days of April 18, 2016.
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(3)
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Includes 1,020,444 shares subject to options exercisable within 60 days of April 18, 2016.
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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 Qorvo, Inc. (a manufacturer of semiconductors) and GlobalLogic (a private company), served as
a director of
2
Cirrus Logic, Inc. (a manufacturer of semiconductors) from 1995 to 2009 and TriQuint Semiconductor (a manufacturer of semiconductors) from 1995 until its merger with RFMD to form Qorvo in 2015.
Dr. Rhines is currently a board member 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.
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 Verigy’s 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 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 Viavi (a provider of network application solutions), Knowles Corporation (a supplier of advanced micro-acoustic, specialty components and human interface solutions) and
Rogers Corporation (a provider of power electronics solutions and high-frequency printed circuit materials). Mr. Barnes previously served on the Board of Directors of JDS Uniphase (a provider of communications test and measurement solutions and
optical products), Spansion, Inc. (a semiconductor manufacturer) and Intermec, Inc. (a provider of integrated system solutions).
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). He is currently a director of Taiwan Semiconductor Manufacturing Company Ltd. (a manufacturer of semiconductors) and Chairman of GlobalLogic (a private company). Sir Peter is Chair of Council and Senior Pro-Chancellor for Loughborough
University in the United Kingdom and is a Board Director for the EastWest Institute (a non-governmental organization working to reduce international conflict) located in the United States. He is a member of the advisory boards of the Longreach Group
and an advisor in London to AlixPartners (a global business advisory firm) and G3 Group (a web design and marketing company). He also serves as a board mentor to CMi (a mentoring organization for top executives). Until April 2015, Sir Peter served
as a director of Telefonak-tiebolaget LM Ericsson (a telecommunications equipment manufacturer). He previously served as a senior independent director of AstraZeneca PLC (a pharmaceuticals
3
company) and from 2005 to 2014 served as a director of Sony Corporation (a worldwide provider of electronic equipment, instruments, software and devices for consumer electrical and industrial
markets). 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.
Paul A. Mascarenas OBE
Mr. Mascarenas served as the Chief Technical Officer
and Vice President of Research and Advanced Engineering at Ford Motor Co. from January 1, 2011 to September 30, 2014, where he oversaw Ford’s worldwide research organization as well as the development and implementation of the
company’s technology strategy and plans. From 2007 to 2010, Mr. Mascarenas served as Ford’s Vice President of Engineering, and from 2005 to 2007, he served as Vice President of North American Vehicle Programs. During his tenure with
Ford, which began in 1982, Mr. Mascarenas held various development and engineering positions in both the U.S. and Europe. Mr. Mascarenas holds a mechanical engineering degree from the University of London, King’s College in the United
Kingdom as well as an honorary doctorate degree from Chongqing University in China. He currently serves as a director of ON Semiconductor Corporation (a supplier of semiconductors) and United States Steel Corporation (an integrated steel producer)
and as the President of FISITA—The International Federation of Automotive Engineering Societies. In January 2015, he was appointed an OBE by Her Majesty, Queen Elizabeth II, for his services to the automotive industry.
Mr. Mascarenas is nominated for election because he has
extensive management experience, strong automotive experience and deep knowledge of mechanical and electrical automotive technologies.
J. Daniel McCranie
Mr. McCranie is a self-employed private investor. From January 2014 to April 2015, Mr. McCranie was the Executive Vice President
of Sales and Applications for Cypress Semiconductor Corporation (a supplier of semiconductors). 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 served on the board of directors of Cypress Semiconductor Corporation from October 2006 to May 2014. 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) and as Chairman of the Board for Freescale Semiconductor Holdings I, Ltd. (a semiconductor manufacturer).
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 CEO of two publicly held semiconductor companies.
Dr. Cheryl L. Shavers
Dr. Shavers currently serves as Chief Executive Officer
of Global Smarts, Inc., an advisory services and strategy firm, which she founded in 2001. Dr. Shavers is a director of Rockwell Collins, Inc. (a communications and avionics company), serving on the company’s Nominating and Governance
Committee, and chairing its
4
Technology/Cybersecurity Committee. She served on the board of ATMI, a semiconductor materials company acquired by Entegris and on the Advisory Board for E.W. Scripps Company. Formerly she was
the Under Secretary of Commerce for Technology for the United States Department of Commerce from November 1999 to February 2001 after having served as its Under Secretary Designate from April 1999 to November 1999. She served as Sector Manager,
Microprocessor Products Group for Intel Corporation prior to April 1999. She served as Non-Executive Chairman of BitArts Ltd. from 2001 to December 2003. Additionally, she is a Distinguished Dean’s Professor at the Leavey School of Business at
Santa Clara University. Dr. Shavers holds a B.S. degree in Chemistry, a Ph.D. in Solid State Chemistry and an Honorary Master’s degree in Engineering Management from California Polytechnic State University. She is also a practicing
registered Patent Agent with the Patent & Trademark Office of the Department of Commerce.
Dr. Shavers has been nominated because she is a highly regarded technical and business expert on issues of technology, business and policy. She was recommended by a third-party director search firm
engaged by the Nominating and Corporate Governance Committee to identify and recruit candidates for consideration as director nominees.
Jeffrey M. Stafeil
Mr. Stafeil is acting as Executive Vice President and Chief Financial Officer of Adient, an automotive-related division of Johnson
Controls, Inc., since April 2016. Adient is expected to become a separate independent public company in October 2016. From 2012 to March, 2016, Mr. Stafeil was Executive Vice President and Chief Financial Officer of Visteon Corporation, a
global supplier of automotive components. 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. Since 2014, Mr. Stafeil has been a director and Audit Committee Chairman of Metaldyne Performance Group, Inc., a vehicle component manufacturer. 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.
Vote Required For Approval
If a quorum is present at the meeting, the nominees for
election as directors who receive more votes in favor of their election than against their election 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 seven 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 Board’s 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
Board’s key Committees—Audit, Compensation and Nominating and Corporate Governance—are 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 are or will be “independent directors” as defined in NASDAQ rules. With respect to
Director Stafeil, the Board considered that he is an executive officer of one of our customers, and concluded that his position does not affect independence. With respect to Director McCranie, the Board considered that during part of fiscal year
2016 he was an executive officer of one of our customers, and concluded that this position did not affect 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 Stafeil, McManus and Mascarenas, held eight meetings during fiscal year 2016. 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 both Directors McManus
and Stafeil are “audit committee financial experts” 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
6
or personal ties to the Company (other than director compensation and equity ownership as described in this Proxy Statement), 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 Barnes, held five meetings during fiscal year 2016. 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 McCranie, held four meetings during fiscal year 2016. 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 nominee’s 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 individual’s 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
Committee’s 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 six
meetings during fiscal year 2016. 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 2016 in which he was a director. It is our
practice that directors attend our annual meeting of shareholders. All directors elected at the 2015 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
Board’s 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 Company’s 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 Board’s 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 Senior Vice
President, World Trade; Chief Human Resources Officer; Vice President 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 management’s 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 2017 Annual Meeting of Shareholders, the shareholder’s notice must be received at our principal executive office no later than April 18, 2017. In addition, SEC
rules require that any shareholder proposal to be considered for inclusion in the Company’s Proxy Statement for the 2017 Annual Meeting of Shareholders must be received at our principal executive office no later than January 18, 2017.
By Order of the Board of
Directors
Dean
Freed
Vice President, General Counsel and Secretary
49
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 Plan’s 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 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
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(1)
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Double-underlined matter is new; matter crossed out is proposed to be deleted.
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thereof. The Committee may modify the Company’s 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 Company’s 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 Company’s 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 Company’s assets, other than factoring the Company’s 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.
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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 director’s 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
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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
Company’s 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 Company’s stockholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.
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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 Company’s 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
Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s 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
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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
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(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 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
15,700,000
13,200,000
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 Committee’s 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
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may modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods.
(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 Option’s 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
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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;
(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 Participant’s 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 ISO’s 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 Participant’s 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.
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(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 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.
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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.
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 Company’s 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 Participant’s 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.
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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.
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.
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Article 11. Transferability of Awards and Shares
11.1
Transferability of Awards
. Except as provided in
Section 11.2, during a Participant’s 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 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
Participant’s 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:
(a)
revenue;
(b) bookings;
(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);
(h) earnings per share;
(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);
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(m) asset turnover (including days sales outstanding);
(n) reduction in leverage;
(o) market share;
(p) working capital; and
(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.
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 Company’s 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
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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 Participant’s lifetime. In the absence of any such beneficiary
designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid to or exercised by the Participant’s executor, administrator, or legal representative.
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 Participant’s 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 Participant’s 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 Participant’s
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.
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(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) 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
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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.
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.
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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
Participant’s 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 Participant’s 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 Company’s 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 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 company’s 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
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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 Company’s 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.
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.
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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 Company’s or any Subsidiary’s or Affiliate’s
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 Participant’s benefit.
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 Company’s or a Subsidiary’s or an Affiliate’s 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.
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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.
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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 Company’s growth and success. The purpose of the Company’s 1989 Employee Stock
Purchase Plan (Plan) is to provide a convenient means by which employees of the Company and subsidiaries may purchase the Company’s 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
37,150,000
34,650,000
shares of the Company’s 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 Company’s 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 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
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Purchase Date, and (ii) no option may be granted pursuant to the Plan that would allow an Optionee’s 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 Company’s 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
Optionee’s 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 Optionee’s 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 participant’s employing corporation shall be a Participating Subsidiary under this Plan and shall no longer be a participating subsidiary under the Foreign Sub Plan, the
participant’s 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 employee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s
participation in the Plan, the Company will pay to the Optionee all amounts deducted from the Optionee’s pay and not yet used to purchase shares under the Plan.
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7.
Purchase of Shares
. All amounts withheld from the pay of an Optionee shall be
credited to the Optionee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s personal representative or other authorized person may (a) obtain transfer of all or part of the shares held by the Custodian for the Optionee’s account into the name of the person or persons
entitled thereto under the Optionee’s will or the laws of descent and distribution, or (b) obtain transfer of all or part of the shares held for the Optionee’s account by the Custodian to a regular individual brokerage account in the
name of the person or persons entitled thereto under the Optionee’s 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 Optionee’s 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 Optionee’s 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.
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 Optionee’s account to be voted in accordance with instructions from the Optionee or, if
requested by an Optionee, will
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furnish to the Optionee a proxy authorizing the Optionee to vote the shares held by the Custodian for the Optionee’s 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 Company’s 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 Optionee’s pay and not yet used to purchase shares under the Plan.
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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 Company’s 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 Company’s 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 Company’s 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
8,400,000
6,900,000
shares of the Company’s 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 determined under paragraph 8 of the Plan exclusively through payroll deductions authorized
under paragraph 6 of
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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 Optionee’s 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 Company’s 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 Optionee’s 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 Optionee’s 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 participant’s
employing corporation shall be a Participating Subsidiary under this Plan and shall no longer be a participating subsidiary under the 1989 Plan, the participant’s 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 employee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s employing corporation ceasing to be a
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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 Optionee’s participation in the Plan, the Company will pay to the Optionee all amounts deducted from the Optionee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s 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 Optionee’s personal representative or other authorized person may (a) obtain transfer of all or part of the shares held by the Custodian for the Optionee’s account into the name of the person or persons
entitled thereto under the Optionee’s will or the laws of descent and distribution, or (b) obtain transfer of all or part of the shares held for the Optionee’s account by the Custodian to a regular individual brokerage account in the
name of the person or persons entitled thereto under the Optionee’s 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 Optionee’s 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 Optionee’s 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
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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 Optionee’s 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 Optionee’s 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 Company’s 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 Optionee’s pay and not yet used to purchase shares under the Plan.
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ANNUAL MEETING OF SHAREHOLDERS OF MENTOR GRAPHICS CORPORATION
June 15, 2016 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing
costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at
http://www.mentor.com/company/investor_relations/.
Please sign, date and mail your proxy card in the envelope
provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20733030300000000000 6 061516 PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE x 1. Election of directors: NOMINEES: FOR ALL NOMINEES Keith L. Barnes Sir Peter L. Bonfield WITHHOLD AUTHORITY FOR ALL NOMINEES Paul A. Mascarenas J. Daniel McCranie Walden C. Rhines FOR ALL EXCEPT (See instructions below) Cheryl L. Shavers
Jeffrey M. Stafeil INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: To change the address on your account,
please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. FOR AGAINST ABSTAIN 2. Shareholder advisory vote to
approve executive compensation. 3. Shareholder proposal to amend the Company’s 2010 Omnibus Incentive Plan to increase the number of shares reserved for issuance under the plan. 4. Shareholder proposal to amend the Company’s 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. 5. Proposal to ratify the appointment of KPMG LLP as the Company’s independent registered
public accounting firm for its fiscal year ending January 31, 2017. THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NOS. 1, 2, 3, 4 AND 5. THE PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY AS SPECIFIED, BUT IF NO SPECIFICATION
IS MADE, THE PROXIES WILL VOTE THE SHARES FOR THE ELECTION OF DIRECTORS, FOR APPROVAL OF PROPOSAL NOS. 2, 3, 4 AND 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS THAT MAY COME BEFORE THE MEETING. YOU WILL SAVE THE COMPANY EXPENSE
AND TIME IF YOU DATE, SIGN AND RETURN THIS PROXY AS SOON AS POSSIBLE BEFORE JUNE 15, 2016. Signature of Shareholder Date: Signature of Shareholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title
as such. If signer is a partnership, please sign in partnership name by authorized person.
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