Oregon's Mentor Graphics adds bonuses to retain executives

Mentor Graphics Corp., in the cross hairs of an unwelcome takeover bid by a Silicon Valley rival, disclosed Thursday that it will pay top executives a big bonus if they stay with the company until 2010 -- whether or not the deal goes through.

For rank-and-file workers, Mentor formalized an arrangement that provides at least three months of wages if they lose their job following an acquisition. Mentor said it hopes the measures will help keep employees on board during an uncertain time.

"We're a software company. Our assets are our people," said Mentor spokesman Ry Schwark. "You've got to keep those people in place."

California-based Cadence Design Systems Inc. announced plans to buy Mentor in June after first approaching the Oregon company privately and being rebuffed. Cadence offered $1.6 billion in cash, or $16 a share. That represented a 30 percent premium over Mentor's share price right before the announcement.

Both Cadence and Mentor make software that engineers use when designing and testing computer chips. Cadence continues to pursue the takeover, but following a decline in the California company's business, analysts and investors are increasingly skeptical the deal will come off.

Some changes to Mentor's severance and bonus plans disclosed Thursday make it harder for executives to receive a payment. For example, executives were previously entitled to a lucrative severance payment if a new owner fired them within two years after a takeover. Now, they only get the money if they're fired within a year.

Other changes require executives to do no more than keep working to claim the money, and maybe not even that.

Top executives, including CEO Walden Rhines, receive a bonus equal to their annual salary if they're still employed by Mentor on Feb. 15, 2010 -- or if they've died or been fired by a new owner. Mentor paid Rhines an annual salary of $640,884 last year, in addition to options and other considerations that aren't included in the retention payment....