SNPS » Topics » Elements of Compensation

This excerpt taken from the SNPS DEF 14A filed Feb 20, 2007.

Elements of Compensation

Each executive officer’s compensation package is comprised of three elements: (1) base salary; (2) a cash bonus tied to Synopsys’ achievement of certain financial targets and individual performance; and (3) equity compensation, in the form of periodic grants of stock options or restricted stock units under Synopsys’ stock option plans.

Base Salary.   In establishing the base salary for each executive officer, the Compensation Committee considers (1) compensation data from peer group companies, (2) each executive officer’s performance relative to corporate, business group and individual objectives, (3) each executive officer’s responsibility level and objectives for the ensuing year, and (4) each executive officer’s base compensation relative to other Synopsys executive officers. As a result of its analysis of these factors, the Compensation Committee determined not to increase base salaries of any of Synopsys’ executive officers during fiscal 2006 other than those of the Chief Executive Officer and one other executive officer. The Compensation Committee believes that current executive officer base salaries are reasonable in light of the factors described above.

Bonus Compensation.   In March 2006, the Compensation Committee approved an Executive Incentive Plan (“EIP”) for the year. The EIP establishes the performance goals and weightings against which related achievement will fund the bonus pool available for all executive officers, excluding Synopsys’ Senior Vice President of Worldwide Sales, and the Senior Vice President of Worldwide Application Services for whom the Compensation Committee approved individual compensation plans that are driven

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primarily by revenue, accepted orders and individual objectives. The EIP is funded at different levels depending on the extent of Synopsys’ achievement of certain target levels of accepted orders, revenue, deferred revenue, expenses, business objectives and business unit contributions, with a target amount of funding if Synopsys achieves its financial targets in full. If Synopsys does not fully achieve the targets, then the actual bonus pool is less than the target pool. If Synopsys exceeds its targets, then the actual pool is greater than the target pool. If Synopsys’ level of achievement is below 90%, the bonus pool is not funded, and therefore no bonuses are payable under the EIP. The EIP contains an “accelerator” feature such that Synopsys’ over or under achievement of its targets yields more than a proportional increase or decrease in the target bonus pool. In any case, the total bonus pool is capped at 150% of the target pool. The Compensation Committee believes this compensation structure provides significant incentive for management to maximize its efforts since higher levels of performance will lead to greater overall bonus availability. Following the end of the fiscal year, when financial results and, therefore, the total bonus pool is known, the Compensation Committee determines the actual bonus to be paid to each executive officer based upon his or her individual performance during the fiscal year.

In addition to the standard executive incentive plan, during fiscal 2006, the Compensation Committee approved the Operative Plan Incentive (“OPI”), which provides for fixed cash bonuses payable and stock option grants vested upon Synopsys’ achievement of certain operating margin targets for fiscal 2006 and fiscal 2007. The targets for fiscal 2006 were achieved and, as a result, the cash bonuses and stock option grants were paid and vested. The Compensation Committee believes that such plan separately motivates executive officers to effectively manage their business units and to increase overall corporate financial performance.

As a result of their assessment of the named executive officers’ performance during fiscal 2006 and application of Synopsys 2006 financial results to the OPI, the Compensation Committee approved payment of the bonuses set forth in the Summary Compensation Table above in December 2006. As a result of Synopsys’ overachievement of its financial targets for fiscal 2006, all of such bonuses were in excess of such individuals’ target bonuses. The Compensation Committee believes that such levels of bonus compensation fairly reflect achievement of the named executive officers during the year.

Equity Compensation.   The Compensation Committee believes that equity based compensation closely aligns the interests of executive officers with those of stockholders. The Compensation Committee awards equity compensation to Synopsys’ executive officers in the form of stock options and restricted stock units. The exercise price of stock options is 100% of the fair market value of the common stock on the date of grantand restricted stock units are valued at 100% of the fair market value of the underlying common stock. Most awards vest in a series of monthly installments over four years provided that the executive officer continues his or her employment with Synopsys, although some grants, including those granted pursuant to the OPI, vest upon Synopsys’ achievement of certain financial results.

The Compensation Committee determines the size of each award by considering, among other things, Synopsys’ financial performance, the performance of the executive officer’s individual business unit and the officer’s individual performance. The Compensation Committee also considers the executive officer’s responsibility level, the value of awards granted to similarly situated executive officers of comparable companies and the executive officer’s existing holdings of unvested equity awards. The Compensation Committee believes that the equity compensation awarded to its executive officers during fiscal 2006 was reasonable in light of the factors described above.

This excerpt taken from the SNPS DEF 14A filed Mar 17, 2006.

Elements of Compensation

Each executive officer’s compensation package is comprised of three elements: (1) base compensation, (2) bonus compensation tied to Synopsys’ achievement of certain financial targets and individual performance and (3) equity compensation, in the form of periodic grants of stock options or stock awards under Synopsys’ stock option plans.

Base Compensation.   In establishing the base compensation for each executive officer, the Compensation Committee considers the following factors: (1) compensation data from peer group companies, (2) each executive officer’s past performance relative to corporate, business group and individual objectives, (3) each executive officer’s responsibility level and objectives for the ensuing year, and (4) each executive officer’s base compensation relative to other Synopsys executive officers. As a result of its analysis of these factors, the Compensation Committee determined not to increase base salaries of any of Synopsys’ executive officers during fiscal 2005. However, effective as of October 31, 2005, the Compensation Committee increased the base salary of the Chief Executive Officer and one other executive officer. The Compensation Committee believes that current executive officer base salaries are reasonable in light of the factors described above.

Bonus Compensation.   In April 2005, the Compensation Committee approved an Executive Incentive Plan (“EIP”) for the year. The EIP set out the annual bonus pool available for all executive officers, excluding Synopsys’ Senior Vice President of Worldwide Sales, for whom the Compensation Committee approved an individual compensation plan. The EIP is funded at different levels depending on the extent of Synopsys’ achievement of certain target levels of accepted orders, revenue, expense and business unit contributions, with a target amount of funding if Synopsys achieves its financial targets in full. If Synopsys

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does not fully achieve the targets, then the actual bonus pool is less than the target pool. If Synopsys exceeds its targets, then the actual pool is greater than the target pool. If Synopsys’ level of achievement is below 90%, the bonus pool is not funded, and therefore no bonuses are payable under the EIP. The EIP contains an “accelerator” feature such that Synopsys’ over or under achievement of its targets yields more than a proportional increase or decrease in the target bonus pool. In any case, the total bonus pool is capped at 167% of the target pool. The Compensation Committee believes this compensation structure provides significant incentive for management to maximize its efforts since higher levels of performance will lead to greater overall bonus availability.

Once the target pool is set, the Compensation Committee determines the actual bonus to be paid to each executive officer based upon his or her individual performance during the fiscal year. The sum of all executive officer bonuses cannot exceed the amount of bonus pool funding established by the EIP. As a result of their assessment of the named executive officers’ performance during fiscal 2005, the Compensation Committee approved payment of the bonuses set forth in the Summary Compensation Table above in December 2005. As a result of Synopsys’ overachievement of its financial targets for fiscal 2005, all of such bonuses were in excess of such individuals’ target bonuses. The Compensation Committee believes that such levels of bonus compensation fairly reflect the levels of achievement of the named executive officers during the year.

Long-Term Incentive Compensation.   The Compensation Committee also awards long-term compensation to Synopsys’ executive officers in the form of stock options granted under the 1992 Plan. The exercise price of stock options granted under the 1992 Plan is 100% of the fair market value of the common stock on the date of grant. All options vest in a series of monthly installments over four years provided that the executive officer continues his or her employment with Synopsys. Executive officers may also participate in Synopsys’ Employee Stock Purchase Plan, which permits participants to purchase a limited amount of common stock every six months at a discount. The Compensation Committee believes that equity-based compensation closely aligns the interests of executive officers with those of stockholders.

The Compensation Committee determines the size of each option grant by considering, among other things, Synopsys’ financial performance, the performance of the executive officer’s individual business unit and the officer’s individual performance. The Compensation Committee also considers the executive officer’s responsibility level, the value of options granted to similarly situated executive officers of comparable companies and the executive officer’s existing holdings of unvested stock options. The Compensation Committee believes that the equity compensation awarded to its executive officers during fiscal 2005 was reasonable in light of the factors described above.

This excerpt taken from the SNPS DEF 14A filed Apr 19, 2005.

Elements of Compensation

        Each executive officer's compensation package is comprised of three elements: (1) base compensation, (2) subject to Synopsys' achievement of certain financial targets, bonus compensation tied to individual performance and (3) equity compensation, in the form of periodic grants of stock options under Synopsys' stock option plans.

        Base Compensation.    In establishing the base compensation for each executive officer, the Compensation Committee considers the following factors: (1) compensation data from peer group companies, including companies included in the S&P Information Technology Index, (2) each executive officer's past performance relative to corporate, business group (if applicable) and individual objectives, (3) each executive officer's responsibility level and objectives for the ensuing year, and (4) compensation relative to other Synopsys executive officers. As a result of its analysis of these factors, the Compensation Committee increased the base salaries of the executive officers slightly during fiscal 2004. In the case of the named executive officers, the increased base salaries are shown in the summary compensation table on page 11. The Compensation Committee believes the base salaries paid to its executive officers are reasonable in light of the factors described above.

        Bonus Compensation.    In the first part of each fiscal year, the Compensation Committee approves a Corporate Incentive Plan ("CIP") for the year. The CIP sets out the annual bonus pool available for all employees, including executive officers but excluding those on commission-based plans, contingent upon Synopsys' (and, in some cases, the employee's specific product group's) achievement of not less than 90% of certain financial targets, including targets for bookings, revenue and expenses. The CIP includes an "accelerator" mechanism by which the bonus pool is increased if Synopsys' performance exceeds the financial targets. Conversely performance in excess of 90% of the targets (but less than

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100%) results in a reduction of the bonus pool. The actual bonus paid to each executive officer depends upon his or her individual performance during the fiscal year. The Compensation Committee annually approves an individual compensation plan for Synopsys' Senior Vice President of Worldwide Sales each year that is based primarily on revenue and accepted orders and that contains a similar accelerator clause.

        The Company did not achieve its fiscal 2004 CIP financial targets and, accordingly, no bonuses were paid under the plan. However, subsequent to the fiscal year end, the Board determined it would be in Synopsys' best interests to make available a smaller bonus pool available to reward our highest performing employees, including executive officers, for their contributions to the business during fiscal 2004 and to provide incentive for their continued performance. For this reason, in December 2004, the Board approved the FY2004 Recognition Bonus Plan (the "Recognition Plan") which established a bonus pool approximately 20% lower than the one that would have been available had Synopsys achieved 100% of the financial targets contained in the fiscal 2004 CIP. As a result of their assessment of the performance of the named executive officers during fiscal 2004, the Compensation Committee approved payment of the bonuses set forth in the Summary Compensation Table above under the Recognition Plan; in the case of the Senior Vice President, Worldwide Sales, a portion of her bonus was paid pursuant to her individual compensation plan. All of such bonuses to the named executive officers were less than the individuals' target bonuses under the fiscal 2004 CIP.

        Long-Term Incentive Compensation.    The Compensation Committee awards long-term compensation to Synopsys' executive officers in the form of stock options granted under the 1992 Plan. The Committee typically awards stock options to executive officers quarterly. The exercise price of stock options granted under the 1992 Plan is 100% of the fair market value of the common stock on the date of grant. All options vest in a series of monthly installments over four years provided that the executive officer continues his or her employment with Synopsys. Executive officers may also participate in Synopsys' Employee Stock Purchase Plan,which permits participants to purchase a limited amount of common stock every six months at a discount. The Compensation Committee believes that equity-based compensation closely aligns the interests of executive officers with those of stockholders.

        The Compensation Committee determines the size of each option grant by considering, among other things, Synopsys' financial performance, the performance of the executive officer's individual business unit and the officer's individual performance, in each case during the previous quarter. The Compensation Committee also considers the executive officer's responsibility level, the value of options granted to similarly situated executive officers of comparable companies and the executive officer's existing holdings of unvested stock options. The Compensation Committee believes that the equity compensation awarded to its executive officers during fiscal 2004 was reasonable in light of the factors described above.

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