Exhibit 10.K

MENTOR GRAPHICS CORPORATION

RETENTION BONUS PLAN

1. Establishment and Purpose. The Plan is hereby established effective as of
September 1, 2008 (the “Effective Date”). The purpose of the Plan is to
reinforce and encourage the continued attention and dedication of certain key
employees by providing the opportunity for such employees to receive retention
bonus payments under the circumstances set forth herein and to provide an
incentive for such individuals to remain in the employ of the Company (and its
Subsidiaries) or its successor in order to provide transition assistance for a
period of time in the event of an acquisition of the Company.

2. Definitions. The following terms as used herein shall have the meanings set
forth in this Section 2.

2.1 “Administrator” shall mean (a) the Board or such committee thereof as shall
be designated by the Board to administer the Plan, or (b) the Independent
Committee (as defined in Section 3.1), to the extent provided in Section 3.1.

2.2 “Base Salary” shall mean (a) for Participants in the sales organization of
the Company or a Subsidiary with pay based on product sales, the total targeted
compensation payable to such a Participant by the Company or such Subsidiary
assuming full quota attainment, before deductions or voluntary deferrals
authorized by the Participant or required by law to be withheld from such
compensation, and (b) for all other Participants, the annual base rate of
compensation payable to a Participant by the Company or a Subsidiary, before
deductions or voluntary deferrals authorized by the Participant or required by
law to be withheld from such compensation. For purposes of determining the
amount of a Participant’s Retention Bonus, Base Salary shall mean the higher of
Participant’s Base Salary immediately prior to the date of payment of such
Retention Bonus, or Participant’s Base Salary in effect at any time after the
Effective Date.

2.3 “Beneficial Owner” and “Beneficial Ownership” shall have the meanings set
forth in Rule 13d-3 promulgated under the Exchange Act.

2.4 “Board” shall mean the Board of Directors of the Company, as constituted
from time to time.

2.5 “Cause” shall mean, the occurrence by a Participant of any one or more of
the following events:

(a) the conviction of, or entry of a plea of “guilty” or “no contest” to, a
felony or a crime involving moral turpitude or;

(b) an unauthorized use or disclosure of confidential information or trade
secrets of the Company (or a Subsidiary) or any successor or parent or
subsidiary thereof;

(c) other intentional misconduct, fraud, embezzlement or act of dishonesty that
has a material adverse impact on the Company (and its Affiliates) or any
successor or parent or subsidiary thereof; or

(d) an intentional and continued refusal or failure to act in accordance with
any lawful and proper direction or order of the Board or the appropriate
individual to whom Participant reports.

2.6 “Change in Control” shall mean the first to occur of any of the following:

(a) 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
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding Voting
Securities”); provided, however, that, for purposes of this Section 2.6, the
following acquisitions shall not constitute a Change in 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 of its Subsidiaries;

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(b) Individuals who, as of the Effective Date, constitute the Board, and any new
director whose election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least two thirds of the directors then
still in office who were directors on the Effective 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) The effective date of a reorganization, merger or consolidation of the
Company (a “Business Combination”), in each case, unless immediately following
such Business Combination: (a) 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; (b) 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 (c) 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) 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) 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, whether or not the Company is then
subject to such reporting requirement.

2.7 “Code” shall mean the Internal Revenue Code of 1986, as amended.

2.8 “Company” shall mean Mentor Graphics Corporation, an Oregon corporation.

2.9 “Covered Termination” shall mean (a) a termination of Participant’s
employment due to Participant’s death or Disability, or (b) following a Change
in Control, either a termination of Participant’s employment by the Company (or
any Subsidiary) for any reason other than Cause or the termination of
Participant’s employment by Participant for Good Reason (which must occur within
180 days following the existence of the condition giving rise to Good Reason).
Notwithstanding anything herein to the contrary, to the extent that the benefits
provided hereunder constitute a deferral of compensation which is subject to
Section 409A of the Code, the termination of Participant’s employment shall not
constitute a Covered Termination unless such termination constitutes a
Separation from Service.

2.10 “Disability” shall mean a Participant’s absence from full-time performance
of Participant’s duties with the Company or a Subsidiary for six (6) consecutive
months as a result of the incapacity of Participant due to physical or mental
illness.

2.11 “Employee” shall mean an individual who is an employee of the Company (or
any Subsidiary) within the meaning of Section 3401(c) of the Code.

2.12 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

2.13 “Executive” shall mean a Participant who is (a) an officer of the Company
for purposes of Section 16 of the Exchange Act, or (b) a division officer or
general manager.

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2.14 “Good Reason” shall mean the occurrence of any one or more of the following
events without a Participant’s written consent, unless the Company (or
Subsidiary) fully corrects the circumstances constituting Good Reason within
thirty (30) days after its receipt of a written notice from Participant
specifying the event giving rise to Good Reason, such written notice to be
received within ninety (90) days of the first occurrence of such event:

(a) a diminution in the nature or status of Participant’s position, authority,
title, duties or responsibilities;

(b) with respect to a Participant who is in the sales organization of the
Company or a Subsidiary and whose pay is directly determined in part by bookings
and shipment of product or services, a material increase in Participant’s sales
quota or material changes in Participant’s account responsibilities or sales
territory;

(c) a reduction in Participant’s Base Salary;

(d) a reduction in Participant’s target bonus;

(e) a relocation of Participant’s place of employment by more than twenty-five
(25) miles from Participant’s place of employment immediately prior to such
relocation;

(f) a failure of the Company to expressly require, in writing, any successor to
the Company to assume the Plan; or

(g) a material breach by the Company (or a Subsidiary) or its successor, of any
material obligation owed to Participant under the Plan or any other written
compensation agreement with Participant.

2.15 “Participant” shall mean an Employee who has been selected by the
Administrator to receive a Retention Bonus pursuant to the Plan.

2.16 “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of
the Exchange Act; provided, however, that Person shall exclude (a) the Company,
(b) any Subsidiary of the Company, (c) any employment benefit plan of the
Company or Subsidiary of the Company or of any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, and (d) any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or Subsidiary of the Company or of a corporation owned, directly or indirectly,
by the shareholders of the Company in substantially the same proportions as
their ownership of stock of the Company.

2.17 “Plan” shall mean this Mentor Graphics Corporation Retention Bonus Plan.

2.18 “Retention Bonus” shall mean a retention bonus payable to a Participant
pursuant to the terms of this Plan.

2.19 “Separation from Service” shall mean a “separation from service” within the
meaning of Section 409A of the Code and the Department of Treasury regulations
and other guidance promulgated thereunder, including Treasury Regulation
Section 1.409A-1(h).

2.20 “Subsidiary” shall mean, with respect to any Person, any business
organization or legal entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
that Person.

3. Administration.

3.1 General. The Plan shall be administered by the Board, or a committee thereof
as designated by the Board. However, in the event of an impending Change in
Control, the Administrator may (a) appoint a person (or persons) independent of
the third party effectuating the Change in Control to be the Administrator
effective upon the occurrence of such Change in Control (the “Independent
Committee”) and (b) provide that each member of such Independent Committee shall
be entitled to reasonable compensation for his or her service on the Independent
Committee;

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such Independent Committee shall not be involuntarily removed following such
Change in Control and any rate of reasonable compensation established prior to
the Change in Control shall not be involuntarily reduced by the Company
following such Change in Control.

3.2 Authority of the Administrator. Subject to the provisions of the Plan, the
Administrator shall have full authority and discretion to take any actions it
deems necessary or advisable for the administration of the Plan. Subject to the
provisions of the Plan, the Administrator has authority to determine, in its
sole discretion, to whom, and the time at which, Retention Bonuses may be paid
as well as the determination of the Retention Bonus amounts. Subject to the
provisions of the Plan, the Administrator has authority to prescribe, amend and
rescind rules and regulations relating to the Plan and to make all other
determinations necessary or advisable for Plan administration. All decisions,
interpretations and other actions of the Administrator shall be final,
conclusive and binding on all parties who have an interest in the Plan, provided
that in the event of a dispute between a Participant and the Company involving
any determination by the Administrator following a Change in Control of whether
“Cause”, “Disability” or “Good Reason” exists, such determination shall be
conclusive only if an Independent Committee was appointed and acting as the
Administrator when such determination was made.

3.3 Administrator Liability. All expenses and liabilities which members of the
Administrator incur in connection with the administration of this Plan shall be
borne by the Company or its successor. No members of the Administrator shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan or any Retention Bonus paid hereunder, and all
members of the Administrator shall be fully indemnified and held harmless by the
Company or its successor in respect of any such action, determination or
interpretation.

4. Eligibility. Only Employees shall be eligible to participate in the Plan.
Subject to the provisions of this Plan, the Administrator shall select the
Participants in its sole discretion.

5. Terms and Conditions of the Retention Bonuses.

5.1 Retention Bonus Amounts. The amount of each Retention Bonus for a
Participant who is an Executive shall be equal to such Participant’s Base
Salary. The amount of the Retention Bonus for other Participants shall be
determined by the Administrator, in its sole discretion. Unless otherwise
determined by the Administrator, the amount of each Participant’s Retention
Bonus shall be expressed as a percentage of Participant’s Base Salary. The
Administrator shall notify each Participant of the amount of his or her
Retention Bonus at any time after determining such Retention Bonus amount, and
such amount may not subsequently be reduced without Participant’s written
consent. Such notice shall be in a form specified by the Administrator and may
contain such provisions as the Administrator deems appropriate (the “Retention
Bonus Agreement”); the Administrator may, in its discretion, require a
Participant to acknowledge the terms of such notice in order to be eligible to
receive a Retention Bonus pursuant to the Plan.

5.2 Vesting. A Participant shall become vested in his or her Retention Bonus if
(a) Participant remains an Employee from the Effective Date through February 14,
2010, or (b) Participant’s employment is terminated prior to February 14, 2010
as a result of a Covered Termination, provided that in either case, Participant
has complied with the terms and conditions set forth in his or her Retention
Bonus Agreement. In no event shall a Participant be entitled to receive a
Retention Bonus payment that does not become vested in accordance with this
Section 5.2.

5.3 Form of Payment; Timing. A Participant’s vested Retention Bonus shall be
paid in a cash lump sum on the next regularly scheduled payroll day after the
date on which the Retention Bonus becomes vested (but in no event later than 30
days after the date on which such Retention Bonus becomes vested).

6. Effect on Other Arrangements. A Participant’s rights hereunder shall be in
addition to any rights Participant may otherwise have under all benefit plans or
agreements of the Company or its Subsidiaries to which Participant is a party or
in which Participant is a participant, including, but not limited to, any
employee benefit plans, bonus plans and equity incentive plans. The provisions
of the Plan shall not in any way abrogate the Participant’s rights under such
other plans and agreements. Notwithstanding the foregoing, with respect to a
Participant who (a) is not an Executive, (b) receives payment of a Retention
Bonus pursuant to the Plan, and (c) terminates employment within six (6) months
following a Change in Control, such Participant shall not be entitled to receive
any other severance payment pursuant to another plan, guideline, practice or
agreement with the Company or a Subsidiary (except as required under applicable
law or such Participant’s written employment agreement).

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7. Withholding Taxes. All amounts payable hereunder shall be subject to
withholding of any applicable federal, state, local, and foreign income,
employment and excise taxes as are required to be withheld pursuant to any
applicable law or regulation.

8. Assignment or Transfer of Rights and Obligations. The Company shall require
any corporation, entity, individual or other person who is the successor
(whether direct or indirect by purchase, merger, consolidation, reorganization
or otherwise) to all or substantially all the business and/or assets of the
Company to expressly assume and agree to perform, by a written agreement in form
and in substance satisfactory to the Company, all of the obligations of the
Company under this Plan. As used in this Plan, the term “Company” shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Plan by operation of law,
written agreement or otherwise. No Participant’s rights hereunder shall be
assigned, attached, garnished, optioned, transferred or made subject to any
creditor’s process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Administrator.

9. No Employment Rights. No provision of the Plan shall be construed to give any
person any right to become, to be treated as, or to remain an Employee. The
Company and its Subsidiaries reserve the right to terminate any Participant’s
employment at any time and for any reason or for no reason, with or without
cause and with or without advance notice.

10. No Equity Interest. Neither the Plan nor any Retention Bonus payable
hereunder creates or conveys any equity or ownership interest in the Company nor
any rights commonly associated with such interests, including, without
limitation, the right to vote on any matters put before the shareholders of the
Company.

11. Duration and Amendments.

11.1 Term of the Plan. This Plan shall be effective as of the Effective Date,
and shall terminate upon the payment of all Retention Bonuses benefits payable
hereunder.

11.2 Right to Amend or Terminate the Plan. Except as otherwise provided herein,
the Plan may be amended or terminated at any time or from time to time by the
Board; provided, however, that no such amendment or termination shall impair the
then-existing rights of a Participant with regard to the Plan without such
Participant’s written consent.

12. Choice of Law. All questions concerning the construction, validation and
interpretation of the Plan will be governed by the law of the State of Oregon
without regard to its conflict of laws provision.

13. Funding. No provision of the Plan shall require the Company, for purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Participants shall have no
rights under the Plan other than as unsecured general creditors of the Company
or its successor.

14. Code Section 409A. Notwithstanding anything herein to the contrary, if a
Participant is deemed by the Company at the time of his or her Separation from
Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of
the Code, to the extent delayed commencement of any portion of the benefits to
which Participant is entitled hereunder is required in order to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion
of Participant’s benefits shall not be provided to Participant prior to the
earlier of (a) the expiration of the six-month period measured from the date of
the Participant’s Separation from Service with the Company or a Subsidiary or
(b) the date of Participant’s death. Upon the first business day following the
expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments
deferred pursuant to this Section 14 shall be paid in a lump sum to Participant
(or Participant’s estate or beneficiaries), and any remaining payments due under
the Agreement shall be paid as otherwise provided herein. In addition,
notwithstanding anything herein to the contrary, within the time period
permitted by the applicable Treasury Regulations or other Internal Revenue
Service or Treasury Department authority, if any compensation or benefits
provided by this Plan may result in accelerated taxation or tax penalties under
Section 409A of the Code, the Company shall modify the Plan in the least
restrictive manner necessary in order to exclude such compensation from the
definition of “deferred compensation” within the meaning of Section 409A of the
Code or in order to comply with the provisions of Section 409A of the Code,
other applicable provision(s) of the Code and/or any rules, regulations or other
regulatory guidance issued under such statutory provisions and without any
diminution in the value of the payments to any Participant.

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15. Attorney Fees. The Company agrees to reimburse each Participant, to the full
extent permitted by law, for all legal fees and expenses that the Participant
may reasonably incur as a result of any contest by the Company, the Participant
or others of the validity or enforceability of, or liability under, any
provision of this Plan or any guarantee of performance thereof (including as a
result of any contest by the Participant about the amount of any payment
pursuant to this Plan) (each, a “Contest”); provided, that the Company shall not
be obligated to reimburse a Participant for such legal fees and expenses unless
the Participant prevails on at least one material claim (regardless of by whom
brought) and that the Participant shall have submitted an invoice for such fees
and expenses not later than 30 days after the final resolution of such Contest,
and the Company shall make such payment within 30 days after the date on which
the invoice is so submitted. To the extent necessary to comply with Section 409A
of the Code, (a) in no event shall the payments by the Company under this
Section 15 be made later than the end of the calendar year next following the
calendar year in which such fees and expenses were incurred, (b) the amount of
such legal fees and expenses that the Company is obligated to pay in any given
calendar year shall not affect the legal fees and expenses that the Company is
obligated to pay in any other calendar year and (c) the Participant’s right to
have the Company pay such legal fees and expenses may not be liquidated or
exchanged for any other benefit.

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I hereby certify that the foregoing Plan was duly adopted by the Board on the
Effective Date set forth above.

 

MENTOR GRAPHICS CORPORATION By:  

/s/ Dean M. Freed

Title:  

Vice President, Legal Counsel