S-3

As filed with the Securities and Exchange Commission on August 28, 2002

Registration No. 333-    

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

MENTOR GRAPHICS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Oregon
(State or other jurisdiction of
incorporation or organization) Mentor Graphics Corporation
8005 SW Boeckman Road
Wilsonville, Oregon 97070-7777
(Address, including Zip Code,
of Principal Executive
Offices) 93-0786033
(I.R.S. Employer Identification No.)

Dean M. Freed
Vice President and General Counsel
Mentor Graphics Corporation
8005 SW Boeckman Road
Wilsonville, Oregon 97070-7777
(503) 685-7000
(Name, Address and Telephone Number, including Area Code, of Agent For Service)

Copy to:
Christopher L. Kaufman
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
(650) 328-4600

Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective.

     If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [   ]

     If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X]

     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [   ]

     If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [   ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [   ]

CALCULATION OF REGISTRATION FEE

			Proposed			Proposed Maximum		Amount Of
Title Of Each Class Of	Amount To		Maximum Offering			Aggregate Offering		Registration
Securities To Be Registered	Be Registered		Price Per Unit			Price(1)		Fee
6 7/8% Convertible Subordinated Notes Due 2007	$	172,500,000		100	%	$	172,500,000	$	15,870.00
Common Stock, no par value per share	7,412,978 shares(2)			—			—		—

(1)

Equals the aggregate principal amount of the Notes being registered. Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

(2)

Represents the number of shares of common stock that are currently issuable upon conversion of the Notes. Pursuant to Rule 416(a) under the Securities Act, this registration statement shall be deemed to cover any additional number of shares of common stock as may be issued from time to time upon conversion of the Notes as a result of stock splits, stock dividends or similar transactions. No additional consideration will be received for the common stock, and therefore no registration fee is required pursuant to Rule 457(i).

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

TABLE OF CONTENTS

Exhibit 4.3

Exhibit 5.1

Exhibit 5.2

Exhibit 12.1

Exhibit 23.1

Exhibit 23.2

Exhibit 23.3

Exhibit 25.1

SUBJECT TO COMPLETION, DATED AUGUST 28, 2002

The information in this prospectus is incomplete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS
$172,500,000

Mentor Graphics Corporation

6 7/8% Convertible Subordinated Notes Due 2007

     In June 2002, we issued and sold $172,500,000 aggregate principal amount of our 6 7/8% Convertible Subordinated Notes Due 2007 in a private offering.

     This prospectus will be used by selling securityholders to resell the Notes and the common stock issuable upon conversion of the Notes. The Notes are our unsecured obligations, subordinated in right of payment to all our existing and future Senior Debt, as defined in this prospectus.

     The Notes bear interest at a rate of 6 7/8% per annum. We will pay interest on the Notes on June 15 and December 15 of each year, beginning December 15, 2002.

     Each $1,000 principal amount of the Notes is convertible at the holder’s option, into approximately 42.97 shares of our common stock, no par value, subject to adjustment. The conversion rate of approximately 42.97 shares per $1,000 principal amount is equivalent to an initial conversion price of $23.27 per share of common stock. Upon conversion, holders will not receive any cash representing accrued and unpaid interest.

     Shares of our common stock are quoted on the Nasdaq National Market under the symbol “MENT.” The last reported sale price of our common stock on August 27, 2002 was $7.61 per share.

     We may redeem some or all of the Notes for cash on or after June 20, 2005 at the prices described in this prospectus. Holders may require us to purchase all or a portion of their Notes upon the occurrence of a change of control as described in this prospectus. We will pay the repurchase price in cash.

     Investing in the Notes involves risk. See “Risk Factors” beginning on page 3 of this prospectus.

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                , 2002.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		1
FORWARD LOOKING STATEMENTS		2
RISK FACTORS		3
USE OF PROCEEDS		11
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY		11
CAPITALIZATION		12
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA		13
DESCRIPTION OF NOTES		14
DESCRIPTION OF CAPITAL STOCK		27
SELLING SECURITYHOLDERS		28
PLAN OF DISTRIBUTION		31
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS		33
LEGAL MATTERS		42
EXPERTS		42
INCORPORATION BY REFERENCE		42
WHERE YOU CAN FIND MORE INFORMATION		43

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PROSPECTUS SUMMARY

     The following summary is qualified in its entirety by the more detailed information, historical consolidated financial statements, including the notes to those financial statements, and the pro forma financial information appearing elsewhere or incorporated by reference in this prospectus. Investors should carefully consider the information in this prospectus, including the information set forth under “Risk Factors” and the information incorporated by reference in this prospectus. Unless the context otherwise requires, the terms “Mentor Graphics,” “Mentor Graphics Corporation,” “company,” “we,” “us” and “our” refer to Mentor Graphics Corporation and its subsidiaries.

Mentor Graphics Corporation

     Mentor Graphics Corporation is a technology leader in electronic design automation, or EDA, providing software and hardware design tools that enable companies to send better electronic products to market faster and more cost-effectively. We manufacture, market and support our EDA products and provide related services, which together are used by engineers to design, analyze, simulate, model, implement and verify the components of electronic systems.

     We market our products and services worldwide, primarily to large companies in the communications, computer, consumer electronics, semiconductor, aerospace, networking, multimedia and transportation industries. Customers use our products in the design of such diverse products as automotive electronics, video game consoles, telephone-switching systems, cellular handsets, computer network hubs and routers, signal processors, personal computers, video conferencing equipment, 3-D graphics boards, digital audio broadcast radios, smart cards and products enabled with Bluetooth short-range wireless radio technology. We license our products through our direct sales force and, where a direct sales presence is not warranted or cost effective, a channel of distributors and sales representatives.

     We were incorporated in Oregon in 1981, and our common stock is quoted on the Nasdaq National Market under the symbol “MENT.” Our executive offices are located at 8005 SW Boeckman Road, Wilsonville, Oregon 97070-7777, and the telephone number at that address is (503) 685-7000.

The Offering

Issuer	Mentor Graphics Corporation
Securities Offered	$172,500,000 aggregate principal amount of 6 7/8% Convertible Subordinated Notes Due 2007.
Maturity Date	June 15, 2007.
Interest	The Notes bear interest at an annual rate of 6 7/8%. Interest is payable on December 15 and June 15 of each year, beginning on December 15, 2002.
Ranking	The Notes are subordinate in right of payment to all of our existing and future Senior Debt. The indenture governing the Notes does not restrict the amount of Senior Debt or other Indebtedness that we or any of our subsidiaries can incur. At June 30, 2002, we had no Senior Debt outstanding. The Notes are not guaranteed by any of our subsidiaries and, accordingly, the Notes are effectively subordinated to the indebtedness and other liabilities of our subsidiaries, including trade creditors. As of June 30, 2002, our subsidiaries had approximately $10 million of outstanding indebtedness. For more information, see “Description of Notes—Subordination.”
Conversion Rights	Holders may convert their Notes prior to stated maturity at their option. For each $1,000 principal amount of Notes surrendered for conversion, a holder initially will receive approximately 42.97 shares of our common stock. This represents an initial conversion price of $23.27 per share of common stock. The conversion price may be adjusted for certain reasons. Upon conversion, holders will not receive any cash payment representing accrued interest. Instead, accrued interest will be deemed paid by the common stock received by holders on conversion. Notes called for redemption may be surrendered for conversion until the close of business on the business day prior to the redemption date. For more information, see “Description of Notes—Conversion Rights.”
Sinking Fund	None.

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Optional Redemption by Us	We may not redeem the Notes prior to June 20, 2005. We may redeem some or all of the Notes for cash on or after June 20, 2005, upon at least 20 days but not more than 60 days notice by mail to holders of Notes at the redemption prices set forth under “Description of Notes — Optional Redemption by Us.”
Repurchase of the Notes Upon a      Change of Control	Upon a change of control of Mentor Graphics, holders may require us, subject to certain conditions, to repurchase all or a portion of their Notes. We will pay a purchase price equal to the issue price of such Notes plus accrued and unpaid interest and accrued and unpaid liquidated damages, if any, to the repurchase date. We will pay the repurchase price in cash.
Events of Default	If there is an event of default under the Notes, the principal amount of the Notes, plus accrued and unpaid interest and accrued and unpaid liquidated damages, if any, may be declared immediately due and payable. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.
Use of Proceeds	The selling securityholders will receive all of the proceeds from the sale under this prospectus of Notes and the common stock issuable upon conversion of the Notes. We will not receive any proceeds from these sales. From the private sale of the Notes, we received net proceeds of approximately $167 million after deducting the initial purchasers’ discount and commissions and estimated offering expenses paid by us. We used the net proceeds to fund our acquisition of Innoveda, Inc.
Common Stock	Our common stock is quoted on the Nasdaq National Market under the symbol “MENT.”

     We have not authorized any dealer, salesperson or other person to give any information or to make any representations to you other than the information contained in this prospectus. You must not rely on any information or representations not contained in this prospectus as if we had authorized it. The information contained in this prospectus is current only as of the date on the cover page of this prospectus, and may change after that date. We do not imply that there has been no change in the information contained in this prospectus or in our affairs since that date by delivering this prospectus.

     This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. This information is available without charge to you upon written or oral request. If you would like a copy of any of this information, please submit your request to 8005 SW Boeckman Road, Wilsonville, Oregon 97070-7777 Attention: Investor Relations, or call (503) 685-1462 to make your request.

FORWARD-LOOKING STATEMENTS

     All statements other than statements of historical facts included or incorporated by reference in this prospectus, including, without limitation, statements in the sections entitled “Risk Factors” and “Prospectus Summary” and elsewhere in, or incorporated by reference in, this prospectus regarding our future financial position, our business strategy and our management’s plan and objectives for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not prove to be correct. Important factors that could cause actual results to differ materially from our expectations are disclosed under the section “Risk Factors” and elsewhere in, and incorporated by reference in, this prospectus. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. You are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update forward-looking statements.

     Mentor Graphics is a registered trademark of Mentor Graphics Corporation. Other terms used to identify companies and products may be trademarks of their respective owners.

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RISK FACTORS

     You should consider the risk factors below as well as the other information set forth or incorporated by reference in this prospectus. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected. In such case, our ability to make payments on the Notes could be impaired, the trading price of the Notes and our common stock could decline, and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below, elsewhere in this prospectus and in the documents incorporated by reference in this prospectus.

Risks Related to Our Business

Weakness in the United States and international economies may materially adversely affect us.

     United States and international economies are experiencing an economic downturn which has had an adverse affect on our results of operations. Continued weakness in these economies is likely to continue to adversely effect the timing and receipt of orders for our products and our results of operations. Our revenue levels are dependent on the level of technology capital spending, which include expenditures for electronic design automation, or EDA, software and other consulting services, in the United States and abroad. A number of telecommunications companies have recently filed for bankruptcy protection, and others have announced significant reductions and deferrals in capital spending. A significant portion of our business has historically come from businesses operating in this sector. In addition, demand for our products and services may be adversely affected by mergers and company restructurings in the electronics industry worldwide which could result in decreased or delayed capital spending patterns.

We are subject to the cyclical nature of the integrated circuit and electronics systems industries, and the current downturn has and any future downturns may materially adversely affect us.

     Purchases of our products and services are highly dependent upon new design projects initiated by integrated circuit manufacturers and electronics systems companies. The integrated circuit industry is highly cyclical and is subject to constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The integrated circuit and electronics systems industries have experienced significant downturns, often connected with, or in anticipation of, maturing product cycles of both companies in these industries and their customers’ products and a decline in general economic conditions. These downturns have caused diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Certain integrated circuit manufacturers and electronics systems companies announced a slowdown of demand and production in 2001, which slowdown has continued in 2002. During downturns such as the current one, the number of new design projects decreases. The current slowdown has reduced, and any future downturns are likely to further reduce, our revenue and could materially adversely affect us.

We expect to acquire other companies and may not successfully integrate them or the companies we have recently acquired.

     We have acquired numerous businesses before and are likely to acquire other businesses in the future. In particular, we recently consummated our acquisitions of IKOS Systems, Inc. and Innoveda, Inc. While we expect to carefully analyze all potential transactions before committing to them, we cannot assure you that any transaction that is completed will result in long-term benefits to us or our shareholders or that our management will be able to manage the acquired businesses effectively. In addition, growth through acquisition involves a number of risks. If any of the following events occurs after we acquire another business, it could materially adversely affect us:

• difficulties in combining previously separate businesses into a single unit;

• the substantial diversion of management’s attention from day-to-day business when evaluating and negotiating acquisition transactions and then integrating the acquired business;

• the discovery after the acquisition has been completed of liabilities assumed with the acquired business;

• the failure to realize anticipated benefits, such as cost savings and revenue enhancements;

• the failure to retain key personnel of the acquired business;

• difficulties related to assimilating the products of an acquired business in, for example, distribution, engineering and customer support areas;

• unanticipated costs;

• adverse effects on existing relationships with suppliers and customers; and

• failure to understand and compete effectively in markets in which we have limited previous experience.

     Acquired businesses may not perform as projected which could result in impairment of acquisition-related intangible assets. Additional challenges include integration of sales channels, training and education of the sales force for new product offerings, integration of product development efforts, integration of systems of internal controls and integration of information systems. Accordingly, in any acquisition there will be uncertainty as to the achievement and timing of projected synergies, cost savings and sales levels for acquired products. All of these factors can impair our ability to forecast, meet revenue and earnings targets and manage effectively the business for long-term growth. We cannot assure you that we can effectively meet these challenges.

Fluctuations in quarterly results of operations due to the timing of significant orders and the mix of licenses used to sell our products could hurt our business and the market price of our common stock.

     We have experienced, and may continue to experience, varied quarterly operating results. Various factors affect our quarterly operating results and some of these are not within our control, including the timing of significant orders and the mix of licenses used to sell our products. We receive a material amount of our software product revenue from current quarter order performance of which a substantial amount is usually booked in the last few weeks of each quarter. A portion of our revenue often comes from multi-million dollar contracts, the timing of the completion of and the terms of delivery of which can have a material impact on revenue recognition for a given quarter. If we fail to receive expected orders in a particular quarter, particularly large orders, our revenues for that quarter could be adversely affected, and we could fail to meet analysts’ expectations.

     We use term installment sales agreements as a standard business practice. These multi-year, multi-element term license agreements are typically three years in length and are used with customers that we believe are credit-worthy. These agreements increase the risk associated with collectibility from customers that can arise for a variety of reasons including ability to pay, product dissatisfaction, disagreements and disputes. If we are unable to collect under any of these multi-million dollar agreements, our results of operations could be adversely affected.

     Our revenue is also affected by the mix of licenses entered into in connection with the sale of software products. Our software licenses fall into three categories: perpetual, fixed-term and subscription. With perpetual and fixed-term licenses we recognize software product revenue at the beginning of the license period, while with subscription licenses we recognize software product revenue ratably over the license period. Accordingly, a shift in the license mix toward increased subscription licenses would result

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in increased deferral of software product revenue to future periods and would decrease current revenue, possibly resulting in us not meeting revenue projections.

     The accounting rules governing software revenue recognition have been subject to authoritative interpretations that have generally made it more difficult to recognize software product revenue up front. These new and revised standards and interpretations could adversely affect our ability to meet revenue projections and affect the value of your investment in us.

     The gross margin on our software products is greater than that for our hardware products, software support and professional services. Therefore, our gross margin may vary as a result of the mix of products and services sold. Additionally, the margin on software products varies year to year depending on the amount of third-party royalties due to third parties from us for the mix of products sold. We also have a significant amount of fixed or relatively fixed costs, such as professional service employee costs and purchased technology amortization, and variable costs which are committed in advance and can only be adjusted periodically. If anticipated revenue does not materialize as expected, our gross margins and operating results could be materially adversely affected.

The lengthy sales cycle for our products and services and delay in customer consummation of projects makes the timing of our revenue difficult to predict and may cause our operating results to fluctuate unexpectedly.

     We have a lengthy sales cycle that generally extends between three and six months. The complexity and expense associated with our business generally requires a lengthy customer evaluation and approval process. Consequently, we may incur substantial expenses and devote significant management effort and expense to develop potential relationships that do not result in agreements or revenue and may prevent us from pursuing other opportunities.

     In addition, sales of our products and services may be delayed if customers delay approval or commencement of projects because of customers’ budgetary constraints, internal acceptance review procedures, timing of budget cycles or timing of competitive evaluation processes. If customers decide to delay approval or commencement of a project, or decide not to proceed with a project, we may not learn of it in a timely manner, and therefore we may not be able to communicate revenue or earnings shortfalls to the public until late in a quarter.

Intense competition in the EDA industry could materially adversely affect us.

     Competition in the EDA industry is intense, which can lead to, among other things, price reductions, longer selling cycles, lower product margins, loss of market share and additional working capital requirements. Our success depends upon our ability to acquire or develop and market products and services that are innovative and cost-competitive and that meet customer expectations. We must also gain industry acceptance for our design and methodology services and offer better strategic concepts, technical solutions, prices and response times than those of other design companies and internal design departments of electronics manufacturers. We cannot assure you that we will be able to compete successfully in these industries. Factors that could affect our ability to succeed include, among other things:

• the development of EDA products and design and methodology services by our competitors and the corresponding shift of customer preferences away from our products and services;

• the relatively recent development of the electronics design and methodology services industries;

• uncertainty surrounding the levels of products and services that companies will purchase from outside vendors, particularly given that such companies have only recently begun to make such purchases;

• the decision by potential customers to perform design and methodology services internally, rather than purchase these services from us; and

• the demands of keeping pace with rapid technological changes in order to meet next-generation product requirements.

     We currently compete primarily with two large companies: Cadence Design Systems, Inc. and Synopsys, Inc. In June 2002, Synopsys completed its acquisition of Avant! Corporation and the combined company could improve its competitive position with respect to us. We also compete with numerous smaller companies, a number of which have combined with other EDA companies. We also compete with manufacturers of electronic devices that have developed, or have the capability to develop, their own EDA products internally.

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Risks of international operations and the effects of foreign currency fluctuations can adversely impact our business and operating results.

     We realized approximately 51% of our revenue from customers outside the United States for the year ended December 31, 2001 and the six months ended June 30, 2002. To hedge against the impact of foreign currency fluctuations, we enter into foreign currency forward and option contracts. However, significant changes in exchange rates may have a material adverse impact on us. In addition, international operations subject us to other risks including, but not limited to, longer receivables collection periods, changes in a specific country’s or region’s economic or political conditions, trade protection measures, import or export licensing requirements, loss or modification of exemptions for taxes and tariffs, limitations on repatriation of earnings and difficulties with licensing and protecting our intellectual property rights.

Delay in production of components or the ordering of excess components for our Mentor Emulation Division hardware products could materially adversely affect us.

     The success of our Mentor Emulation Division depends on our ability to:

• procure hardware components worldwide on a timely basis from a limited number of suppliers;

• assemble and ship systems on a timely basis with appropriate quality control;

• develop worldwide distribution and shipment processes;

• manage inventory and related obsolescence issues; and

• develop processes to deliver customer support for hardware.

     Our inability to be successful in any of the foregoing could materially adversely affect us.

     We occasionally commit to purchase component parts from suppliers based on sales forecasts of our Mentor Emulation Division’s products. If we cannot change or be released from these non-cancelable purchase commitments, or if orders for our products do not materialize as anticipated, we could incur significant costs related to the purchase of excess components which could become obsolete before we can use them. Additionally, a delay in production of the components could materially adversely affect our operating results.

Current litigation with Quickturn, a subsidiary of Cadence Design Systems, Inc., over certain patents could affect our ability to sell our emulation products.

     We have been sued by Quickturn, which alleges that we and certain of our emulation products have infringed certain Quickturn patents. As a result, we have been prohibited from using, selling or marketing our first generation SimExpress emulation products in the United States. Related legal proceedings and litigation continue. These actions could adversely affect our ability to sell our emulation products in other jurisdictions worldwide and may decrease demand for our emulation products worldwide. Such litigation could also result in lower sales of emulation products, increase the risk of inventory obsolescence and have a material adverse effect on us.

Our failure to obtain software or other intellectual property licenses or adequately protect our proprietary rights could materially adversely affect us.

     Our success depends, in part, upon our proprietary technology. Some of our products include software or other intellectual property licensed from third parties, and we may have to seek new licenses or renew existing licenses for software and other intellectual property in the future. Our failure to obtain software or other intellectual property licenses or rights on favorable terms, or the need to engage in litigation over these licenses or rights, could materially adversely affect us.

     We generally rely on patents, copyrights, trademarks, trade secret laws, licenses and restrictive agreements to establish and protect our proprietary rights in technology and products. Despite precautions we may take to protect our intellectual property, we cannot assure you that third parties will not try to challenge, invalidate, or circumvent these safeguards. We also cannot assure you that the rights granted under our patents will provide us with any competitive advantages, that patents will be issued on any of our pending applications or that future patents will be sufficiently broad to protect our technology. Furthermore, the laws of foreign countries may not protect our proprietary rights in those countries to the same extent as United States law protects these rights in the United States.

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     We cannot assure you that our reliance on licenses from or to, or restrictive agreements with, third parties, or that patent, copyright, trademark and trade secret protections, will be sufficient for success and profitability in the industries in which we compete.

Intellectual property infringement by or against us could materially adversely affect us.

     There are numerous patents held by us and our competitors in the EDA industry, and new patents are being issued at a rapid rate. It is not always economically practicable to determine in advance whether a product or any of its components infringes the patent rights of others. As a result, from time to time, we may be forced to respond to, or prosecute, intellectual property infringement claims to protect our rights or defend a customer’s rights. These claims, regardless of merit, could consume valuable management time, result in costly litigation and cause product shipment delays, all of which could materially adversely affect us. If we elect to settle these claims, we may be required to enter into royalty or licensing agreements with the third parties claiming infringement. These royalty or licensing agreements, if available, may not have terms acceptable to us. Any potential intellectual property litigation could force us to do one or more of the following:

• pay damages to the party claiming infringement;

• stop licensing, or providing services that use, the challenged intellectual property;

• obtain a license from the owner of the infringed intellectual property to sell or use the relevant technology, which license may not be available on reasonable terms; or

• redesign the challenged technology, which could be time-consuming and costly.

     If we were forced to take any of these actions, our business could be materially adversely affected.

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Terrorist attacks, such as the attacks that occurred on September 11, 2001, and other acts of violence or war may materially adversely affect the markets on which our securities trade, the markets in which we operate, our operations and our profitability.

     Terrorist attacks may negatively affect our operations and investment in our business. These attacks or armed conflicts may directly impact our physical facilities or those of our suppliers or customers. Furthermore, these attacks may make travel and the transportation of our products more difficult and more expensive and ultimately affect our sales.

     Political and economic instability in some regions of the world may also result from such terrorist attacks. The consequences of any of these terrorist attacks are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.

     More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. They also could result in or exacerbate economic recession in the United States or abroad. Any of these occurrences could have a significant impact on our operating results, revenues and costs and may result in volatility of the market price for our securities.

Our articles of incorporation, Oregon law and our shareholder rights plan may have anti-takeover effects.

     Our board of directors has the authority, without action by the shareholders, to designate and issue up to 1,200,000 shares of incentive stock in one or more series and to designate the rights, preferences and privileges of each series without any further vote or action by the shareholders. Additionally, the Oregon Control Share Act and the Business Combination Act limit the ability of parties who acquire a significant amount of voting stock to exercise control over us. These provisions may have the effect of lengthening the time required for a person to acquire control of us through a proxy contest or the election of a majority of the

Our failure to attract and retain key employees may harm us.

     We depend on the efforts and abilities of our senior management, our research and development staff and a number of other key management, sales, support, technical and services personnel. Competition for experienced, high-quality personnel is intense, and we cannot assure you that we can continue to recruit and retain such personnel. The failure by us to hire and retain such personnel would impair our ability to develop new products, provide design and methodology services to our customers and manage our business effectively.

Errors or defects in our products and services could expose us to liability and harm our reputation.

     Our customers use our products and services in designing and developing products that involve a high degree of technological complexity and have unique specifications. Because of the complexity of the systems and products with which we work, some of our products and designs can be adequately tested only when put to full use in the marketplace. As a result, our customers or their end users may discover errors or defects in our software or the systems we design, or the products or systems incorporating our designs and intellectual property may not operate as expected. Errors or defects could result in:

• loss of current customers and loss of, or delay in, revenue and loss of market share;

• failure to attract new customers or achieve market acceptance;

• diversion of development resources to resolve the problems resulting from errors or defects;

• increased service costs; and

• liability for damages.

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board of directors. In February 1999, we adopted a shareholder rights plan which has the effect of making it more difficult for a person to acquire control of us in a transaction not approved by our board of directors. The potential issuance of incentive stock, the provisions of the Oregon Control Share Act and the Business Combination Act and our shareholder rights plan may have the effect of delaying, deferring or preventing a change of control of us, may discourage bids for our common stock at a premium over the market price of our common stock and may adversely affect the market price of, and the voting and other rights of the holders of, our common stock and the Notes.

Risks Related to the Notes

Our indebtedness could adversely affect our financial condition, and we may incur substantially more debt.

     As of June 30, 2002, we had approximately $183 million aggregate principle amount of consolidated indebtedness. Our indebtedness could adversely affect us. For example, it could:

• increase our vulnerability to general adverse economic and industry conditions;

• limit our ability to obtain additional financing;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry; and

• place us at a competitive disadvantage relative to our competitors with less debt.

     In addition, the Notes will require the dedication of a substantial portion of our cash flow from operations to the payment of the principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund our growth strategy, working capital, capital expenditures and other general corporate purposes.

     We may incur additional indebtedness in the future. The terms of the Notes will not, and the terms of our existing and future indebtedness may not, prohibit us from doing so. If new debt is added to our current levels, the related risks described above could intensify.

The Notes are subordinated to all of our senior indebtedness.

     The Notes are subordinated in right of payment to all of our existing and future senior indebtedness. As a result, in the event of bankruptcy, liquidation or reorganization or upon acceleration of the Notes due to an event of default and in specific other events, our assets will be available to pay obligations on the Notes only after all senior indebtedness has been paid in full in cash or other payment satisfactory to the holders of senior indebtedness has been made. There may not be sufficient assets remaining to pay amounts due on any or all of the Notes then outstanding. The indenture governing the Notes does not prohibit or limit the incurrence of senior indebtedness by us or the incurrence of other indebtedness and liabilities by us. The incurrence of additional indebtedness and liabilities could adversely affect our ability to pay our obligations on the Notes. As of June 30, 2002, we had no outstanding senior indebtedness. We anticipate that from time to time we may incur additional indebtedness, including senior indebtedness.

     In addition, the Notes will not be guaranteed by any of our subsidiaries and, accordingly, the Notes are effectively subordinated to the indebtedness and other liabilities of our subsidiaries, including trade creditors. As of June 30, 2002, our subsidiaries had approximately $10 million of outstanding indebtedness.

The Notes are not protected by restrictive covenants.

     The indenture governing the Notes does not contain any financial covenants or restrictions on the payment of dividends. The indenture does not restrict the issuance or repurchase of securities by us or our subsidiaries. The indenture contains no covenants or other provisions to afford you protection in the event of a highly leveraged transaction, such as a leveraged recapitalization, that would increase the level of our indebtedness, or a change in control except as described under “Description of Notes — Repurchase of Notes upon the Occurrence of a Change of Control.”

We may not have the ability to repurchase the Notes in the event of a change of control.

     Upon the occurrence of a change of control, we would be required under the indenture governing the Notes to repurchase up to all outstanding Notes at the option of the holders of such Notes. We cannot assure you that we would have sufficient financial resources, or would be able to arrange financing, to pay the repurchase price for all Notes tendered by the holders. A change of control would also constitute an event of default under our credit agreement, which would prohibit us from repurchasing any

8

Notes. Any future credit agreements or other agreements relating to other indebtedness to which we become a party may contain similar restrictions and provisions. If we do not obtain a consent to the repurchase of the Notes upon a change of control, we may remain prohibited from repurchasing the Notes. Any failure to repurchase the Notes when required following a change of control will result in an event of default under the indenture. For more information, see “Description of Notes — Repurchase of Notes upon the Occurrence of a Change of Control.”

You cannot be sure that a public market will develop for the Notes.

     On June 3, 2002, we issued the Notes to the initial purchasers in a private placement. The Notes are eligible to trade in PORTAL, the Private Offering, Resale and Trading through Automated Linkages Market of the National Association of Securities Dealers, Inc., a screen-based automated market for trading securities for qualified institutional buyers. However, the Notes resold pursuant to this prospectus will no longer trade on the PORTAL market. As a result, there may be a limited market for the Notes. We do not intend to list the Notes on any national securities exchange or on the Nasdaq National Market.

     A public market may not develop for the Notes. Although the initial purchasers have advised us that they intend to make a market in the Notes, they are not obligated to do so and may discontinue such market making at any time without notice. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. Accordingly, we cannot assure you that any market for the Notes will develop or, if one does develop, that it will be maintained. If a public market for the Notes fails to develop or be sustained, the trading price of the Notes could be materially adversely affected.

     In addition, the liquidity and the market price of the Notes may be adversely affected by changes in the overall market for convertible securities and by changes in our financial performance or prospects, or in the prospects of the companies in our industry. The market price of the Notes may also be significantly affected by the market price of our common stock, which could be subject to wide fluctuations in response to a variety of factors, including those described in this “Risk Factors” section. As a result, you cannot be sure that a public market will develop for the Notes.

Volatile trading prices may require you to hold the Notes for an indefinite period of time.

     If a market develops for the Notes, the Notes might trade at prices higher or lower than their initial offering price. The trading price would depend on many factors, such as prevailing interest rates, the market for similar securities, general economic conditions and our financial condition, performance and prospects. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial fluctuation in the prices of these securities. The market for the Notes may be subject to such fluctuations or disruptions, which could have an adverse effect on the price of the Notes. You should be aware that you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

The price of our common stock continues to be highly volatile.

     Based on the trading history of our common stock, we believe that the following factors have caused and are likely to continue to cause the market price of our common stock to fluctuate substantially and are likely to have an effect on the trading price of the Notes:

• quarterly fluctuations in our operating and financial results;

• announcements of new technologies, products and/or pricing by us or our competitors;

• changes in earnings estimates or buy/sell recommendations by financial analysts;

• changes in the ratings of our Notes or other securities;

• developments with respect to intellectual property disputes;

• the pace of development of our new products and services; and

• general conditions in the EDA industry.

     In addition, an actual or anticipated shortfall in revenue, gross margins or results of operations from securities analysts’ expectations could have an immediate effect on the trading price of our common stock and the Notes. Technology company stocks in general have experienced extreme price and volume fluctuations that are often unrelated to the operating performance of

9

these companies. Market volatility may adversely affect the market price of our common stock, which could affect the price of the Notes and limit our ability to raise capital or to make acquisitions, which could have an adverse effect on our business.

10

USE OF PROCEEDS

     The selling securityholders will receive all of the proceeds from the sale under this prospectus of the Notes and the common stock issuable upon conversion of the Notes. We will not receive any proceeds from these sales.

     From the private sale of the Notes, we received net proceeds of approximately $167 million after deducting the initial purchasers’ discount and commissions and estimated offering expenses paid by us. We used the net proceeds to fund our acquisition of Innoveda, Inc.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

     Our common stock is listed and traded on the Nasdaq National Market under the symbol “MENT.” The following table shows, for the periods indicated, the high and low sales prices on the Nasdaq National Market.

		High		Low
Year ended December 31, 2000
	First quarter	$	18.06	$	11.75
	Second quarter		20.20		12.06
	Third quarter		24.06		17.88
	Fourth quarter		28.88		17.81
Year ended December 31, 2001
	First quarter	$	33.63	$	19.94
	Second quarter		28.94		16.72
	Third quarter		18.96		13.11
	Fourth quarter		25.55		13.24
Year ended December 31, 2002
	First quarter	$	26.85	$	20.57
	Second quarter		21.15		12.85
	Third quarter (through August 27, 2002)		14.45		6.33

     On August  27, 2002 the last sale price of our common stock as reported on the Nasdaq National Market was $7.61 per share. As of June 30, 2002, there were approximately 728 holders of record of our common stock.

     We do not intend to pay cash dividends in the foreseeable future. Our credit agreement also prohibits our payment of cash dividends.

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CAPITALIZATION

     The following table sets forth our consolidated short-term debt and capitalization as of June 30, 2002. This table should be read in conjunction with our consolidated financial statements and the related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations incorporated by reference in this prospectus.

			As of June 30, 2002
			Actual
			(in thousands)
Short-term debt:
	Credit agreement		$	—
	Other short-term debt			4,665
		Total short-term debt		4,665
Long-term debt:
	6 7/8% Convertible Subordinated Notes Due 2007			172,500
	Notes payable			5,331
		Total long-term debt		177,831
Stockholders’ equity:
	Common stock, no par value, 100,000 authorized; 65,694 issued and outstanding(1)			271,131
	Incentive stock, no par value, 1,200 authorized; none issued and outstanding			—
	Deferred compensation			(6,270	)
	Retained earnings			29,455
	Accumulated other comprehensive income			15,276
		Total stockholders’ equity		309,592
Total capitalization				487,423

(1) Does not include 16,260,957 shares of common stock reserved for issuance under outstanding options as of June 30, 2002 or shares issuable upon conversion of the Notes.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

     The following table sets forth our selected statement of operations data, other financial data and balance sheet data. The selected statement of operations data and selected balance sheet data for the fiscal years ended 1997, 1998, 1999, 2000 and 2001 are derived from our audited consolidated financial statements and should be read in conjunction with our most recent Annual Report on Form 10-K, as amended, incorporated by reference in this prospectus. The selected statement of operations data and balance sheet data as of and for the six months ended June 30, 2001 and June 30, 2002 are derived from our unaudited consolidated financial statements and should be read in conjunction with our most recent Quarterly Report on Form 10-Q incorporated by reference in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results of the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2002.

			Six Months Ended
			June 30,					Year Ended December 31,
			2002			2001		2001		2000		1999		1998			1997
			(in thousands, except per share and ratio data)
Statement of Operations Data:
	Total revenues		$	263,413		$	303,994	$	600,371	$	589,835	$	511,134	$	490,393		$	454,727
	Expenses:
		Cost of revenues		58,597			60,616		114,673		118,688		118,054		123,497			159,033
		Research and development		75,913			67,732		137,799		125,952		116,867		117,001			107,752
		Marketing and selling		102,080			101,958		198,639		197,733		172,386		168,375			157,157
		General and administration		35,261			34,043		64,954		66,707		62,446		56,126			48,311
		Amortization of intangibles		537			4,469		7,520		2,965		2,217		1,511			4,661
		Special charges		(3,594	)		3,512		46,343		2,611		25,821		20,942			18,858
		Merger and acquisition related charges		28,700			—		—		11,590		12,775		8,500			—
Operating income (loss)				(34,081	)		31,664		30,443		63,589		568		(5,559	)		(41,045	)
Other income, net				820			5,714		8,428		6,907		2,301		5,580			7,994
Income (loss) before income taxes				(33,261	)		37,378		38,871		70,496		2,869		21			(33,051	)
Provision (benefit) for income taxes				1,572			7,476		7,767		15,509		635		540			(1,744	)
Net income (loss)			$	(34,833	)	$	29,902	$	31,104	$	54,987	$	2,234	$	(519	)	$	(31,307	)
Net income (loss) per share:
	Basic		$	(0.53	)	$	0.46	$	0.48	$	0.86	$	0.03	$	(0.01	)	$	(0.48	)
	Diluted		$	(0.53	)	$	0.44	$	0.46	$	0.81	$	0.03	$	(0.01	)	$	(0.48	)
Weighted average number of shares outstanding:
	Basic			65,364			64,308		64,436		64,125		65,629		65,165			64,885
	Diluted			65,364			68,302		67,681		67,509		66,324		65,165			64,885
Balance Sheet Data:
	Cash and cash equivalents		$	38,266		$	115,599	$	124,029	$	109,112	$	95,637	$	118,512		$	84,402
	Working capital			(5,929	)		144,033		149,293		132,695		133,203		148,313			148,191
	Total assets			773,306			510,091		521,221		530,914		451,386		464,123			402,302
	Long-term liabilities			198,229			6,264		14,466		7,247		1,221		1,425			617
	Stockholders’ equity			309,592			315,713		326,208		316,537		288,780		295,282			277,537
Other Financial Data:
	EBITDA(1)		$	(21,279	)	$	46,494	$	58,937	$	88,767	$	26,025	$	25,179		$	(1,925	)
	Ratio of earnings to fixed charges(2)			—			9.36		5.24		8.32		1.35		1.00			—

(1)

EBITDA is defined as our operating income (loss) plus our depreciation and amortization. EBITDA does not include the addition of non-cash write-downs of assets. EBITDA is not intended to represent cash flow from operations as defined by accounting principles generally accepted in the United States and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. EBITDA is presented because it is a widely accepted financial indicator of a company’s ability to service debt. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

(2)

For purposes of computing the ratio of earnings to fixed charges, fixed charges consist of interest expense on long-term debt and capital leases, amortization of deferred financing costs and that portion of rental expense deemed to be representative of interest. Earnings consist of income (loss) before income taxes and equity in joint venture, plus fixed charges. Earnings were insufficient to cover fixed charges by $33,051 and $33,261 for the year ended December 31, 1997 and the six months ended June 30, 2002, respectively.

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DESCRIPTION OF NOTES

     We issued the Notes under an indenture, dated June 3, 2002, between us and Wilmington Trust Company as trustee. Initially, Wilmington Trust Company will also act as paying agent, conversion agent and calculation agent for the Notes. The terms of the Notes include those provided in the indenture.

     The following description is only a summary of the material provisions of the Notes and the indenture. We urge you to read these documents in their entirety because they, and not this description, define your rights as holders of the Notes.

     When we refer to “Mentor Graphics Corporation,” “Mentor Graphics,” “we,” “our” or “us” in this section, we refer only to Mentor Graphics Corporation, an Oregon corporation, and not its subsidiaries.

Brief Description of the Notes

     The Notes:

• are $172,500,000 in aggregate principal amount;

• bear interest at a per annum rate of 6 7/8%, payable semi-annually on each June 15 and December 15, beginning December 15, 2002;

• are issued only in denominations of $1,000 principal amount and integral multiples thereof;

• are unsecured obligations of Mentor Graphics, subordinated in right of payment to all of our existing and future Senior Debt; as indebtedness of Mentor Graphics, the Notes are also effectively subordinated to all indebtedness and liabilities of our subsidiaries;

• are convertible into our common stock initially at a conversion rate of approximately 42.97 shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of $23.27 per share), under the conditions and subject to such adjustments as are described under “— Conversion Rights”;

• are redeemable at our option in whole or in part beginning on June 20, 2005 upon the terms set forth under “— Optional Redemption by Us”;

• are subject to repurchase by us upon the occurrence of a change of control of Mentor Graphics, upon the terms set forth below under “— Repurchase of Notes Upon the Occurrence of a Change of Control”; and

• are due on June 15, 2007, unless earlier converted, redeemed by us at our option or repurchased by us upon the occurrence of a change of control of Mentor Graphics.

     The indenture does not contain any financial covenants and does not restrict us from paying dividends, incurring additional indebtedness or issuing or repurchasing our other securities. The indenture also does not protect you in the event of a highly leveraged transaction or a change of control of Mentor Graphics, except to the extent described under “— Repurchase of Notes Upon the Occurrence of a Change of Control” below.

     No sinking fund is provided for the Notes, and the Notes will not be subject to defeasance. The Notes will be issued only in registered form, without coupons, in denominations of $1,000 principal amount and integral multiples thereof.

     You may present definitive Notes for conversion, registration of transfer and exchange at our office or agency in New York City, which shall initially be the principal corporate trust office of the trustee currently located at Wilmington Trust Company, c/o Computershare Investor Services, 80 Pine Street, New York, New York 10005. For information regarding conversion, registration of transfer and exchange of global Notes, see “— Form, Denomination and Registration. No service charge will be made for any registration of transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

     You may not sell or otherwise transfer the Notes or the common stock issuable upon conversion of the Notes except in compliance with the provisions set forth below under “Plan of Distribution.”

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Subordination

     The Notes will be subordinate in right of payment to all of our existing and future Senior Debt. The indenture does not restrict the amount of Senior Debt or other Indebtedness that we or any of our subsidiaries can incur. As of June 30, 2002, we had no Senior Debt outstanding. As of June 30, 2002 our subsidiaries had approximately $5 million of outstanding long-term debt.

     The payment of the principal of, interest on or any other amounts due on, the Notes is subordinated in right of payment to the prior payment in full of all of our existing and future Senior Debt. No payment on account of principal of, interest on or any other amounts due on the Notes, including, without limitation, any payments in connection with a redemption of the Notes or a repurchase of the Notes following a change of control may be made if:

• a default in the payment of Designated Senior Debt occurs and is continuing beyond any applicable period of grace (called a “Payment Default”); or

• a default other than a payment default on any Designated Senior Debt occurs and is continuing that permits the holders of, or the trustee or agent on behalf of the holders of, Designated Senior Debt to accelerate maturity, and the trustee receives a notice of such default (called a “Payment Blockage Notice”) from us or any other person permitted to give such notice under the indenture (called a “Non-Payment Default”).

     We may resume payments and distributions on the Notes:

• in case of a Payment Default, upon the date on which such default is cured or waived or ceases to exist; and

• in the case of a Non-Payment Default, upon the earlier of the date on which such Non-Payment Default is cured or waived or ceases to exist or 180 days from the date notice is received, if the maturity of the Designated Senior Debt has not been accelerated.

     Notwithstanding the foregoing, only one Payment Blockage Notice with respect to the same event of default or any other events of default existing or continuing (even if unknown to the person giving notice) at the time of notice on the same issue of Designated Senior Debt may be given during any period of 360 consecutive days unless the event of default or other events of default have been cured or waived for a period of not less than 90 consecutive days. No new Payment Blockage Period may be commenced by the holders of Designated Senior Debt during any period of 360 consecutive days unless all events of default which triggered the preceding Payment Blockage Notice, and any other event of default existing or continuing at the time of such notice, have been cured or waived.

     Upon any distribution of our assets in connection with any dissolution, winding-up, liquidation or reorganization of us or acceleration of the principal amount due on the Notes because of any event of default, all Senior Debt must be paid in full in cash before the holders of the Notes are entitled to any payments whatsoever.

     As a result of these subordination provisions, in the event of our insolvency, holders of the Notes may recover ratably less than the holders of our Senior Debt and our general creditors.

     If the trustee or any holder of Notes receives any payment or distribution of our assets of any kind in contravention of any of the terms of the indenture, whether in cash, property or securities, including, without limitation by way of set-off or otherwise, in respect of the Notes before all Senior Debt is paid in full in cash, then the payment or distribution will be held by the recipient in trust for the benefit of holders of Senior Debt, and will be immediately paid over or delivered to the holders of Senior Debt or their representative or representatives to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution, or provision therefor, to or for the holders of Senior Debt.

     The Notes are our exclusive obligations. Since a significant amount of our operations are conducted through our subsidiaries, our cash flow and our consequent ability to service debt, including the Notes, will depend in part upon the earnings of our subsidiaries and the distribution of those earnings to, or under loans or other payments of funds by those subsidiaries to, us. The payment of dividends and the making of loans and advances to us by our subsidiaries may be subject to statutory or contractual restrictions, will depend upon the earnings of those subsidiaries and are subject to various business considerations.

     Our right to receive assets of any of our subsidiaries upon their liquidation or reorganization (and the consequent right of the holders of the Notes to participate in those assets) is effectively subordinated to the claims of that subsidiary’s creditors (including trade creditors), except to the extent that we are recognized as a creditor of that subsidiary, in which case our claims would still be

15

subordinate to any security interests in the assets of that subsidiary and any indebtedness of that subsidiary senior to that held by us.

     The indenture does not limit the amount of additional indebtedness, including Senior Debt, which we can create, incur, assume or guarantee, nor does the indenture limit the amount of indebtedness and other liabilities which any subsidiary can create, incur, assume or guarantee.

     “Credit Agreement” means the Credit Agreement dated as of January 10, 2001 among us, Bank of America, N.A., The Bank of Nova Scotia, Fleet National Bank, N.A., and the other financial institutions from time to time parties thereto, as amended from time to time, and all refundings, refinancings and replacements of the Credit Agreement.

     “Designated Senior Debt” means any Indebtedness from time to time outstanding under the Credit Agreement and any particular Senior Debt that we have designated “Designated Senior Debt” for purposes of the indenture (provided that the instrument, agreement or other document may place limitations and conditions on the right of the Senior Debt to exercise rights of Designated Senior Debt).

     “Indebtedness” means, with respect to any person, any indebtedness of such person, whether or not contingent, in respect of borrowed money or evidenced by bonds, Notes, the Notes or similar instruments or letters of credit, bank guarantees or bankers’ acceptances, or reimbursement agreements in respect thereof, or representing the balance deferred and unpaid of the purchase price of any property, including pursuant to capital leases and sale-and-leaseback transactions, or representing our obligations and liabilities, contingent or otherwise, in respect of leases required, in conformity with GAAP, to be accounted for as capitalized lease obligations on our balance sheet, or under other leases for facilities, equipment or related assets, whether or not capitalized, entered into or leased for financing purposes, or representing any hedging obligations under an Exchange Rate Contract or an Interest Rate Agreement, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness, other than obligations under an Exchange Rate Contract or an Interest Rate Agreement, would appear as a liability upon a balance sheet of such person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, the Guarantee of items which would be included within this definition. The amount of any Indebtedness outstanding as of any date shall be the accreted value thereof, in the case of any Indebtedness issued with original issue discount. Indebtedness shall not include liabilities for taxes of any kind.

     “Senior Debt” with respect to us means Indebtedness (including any monetary obligation in respect of the Credit Agreement, and interest, whether or not allowable, accruing on Indebtedness incurred pursuant to the Credit Agreement after the filing of a petition initiating any proceeding under any bankruptcy, insolvency or similar law) of ours arising under the Credit Agreement or any other Indebtedness of ours, whether outstanding on the date of the indenture or thereafter created, incurred, assumed or guaranteed by us.

     Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include: (a) Indebtedness of or amounts owed by us for compensation to employees, or for goods or materials purchased or for services obtained in the ordinary course of business; (b) our Indebtedness to any of our subsidiaries; or (c) our Indebtedness that expressly provides that it shall not be senior in right of payment to the Notes or expressly provides that it is on the same basis as or junior to the Notes.

     “Exchange Rate Contract” means, with respect to any person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or combination thereof, the principal purpose of which is to provide protection against fluctuations in currency exchange rates. An Exchange Rate Contract may also include an Interest Rate Agreement.

     “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are applied on a consistent basis.

     “Guarantee” means a guarantee, other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner, including, without limitation, letters of credit and reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

     “Interest Rate Agreement” means, with respect to any person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement the principal purpose of which is to protect the party indicated therein against fluctuations in interest rates.

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Interest

     The Notes bear interest at a rate of 6 7/8% per annum from June 3, 2002. We will pay interest semi-annually on June 15 and December 15 of each year beginning December 15, 2002, to the holders of record at the close of business on the preceding June 1 or December 1, respectively. There are two exceptions to the preceding sentence:

• In general, we will not pay accrued interest on any Notes that are converted into our common stock. See “— Conversion Rights.” If a holder of Notes converts after a record date for an interest payment but prior to the corresponding interest payment date, the holder on the record date will receive on that interest payment date accrued interest on those Notes, notwithstanding the conversion of those Notes prior to that interest payment date, because that holder will have been the holder of record on the corresponding record date. However, at the time that holder surrenders Notes for conversion, the holder must pay to us an amount equal to the interest that has accrued and that will be paid on the related interest payment date. The preceding sentence does not apply, however, to a holder that converts Notes that are called by us for redemption after a record date for an interest payment but prior to the corresponding interest payment date. Accordingly, if we elect to redeem Notes on a date that is after a record date and a holder of Notes selected for redemption chooses to convert those Notes, the holder will not be required to pay us, at the time that holder surrenders those Notes for conversion, the amount of interest it will receive on the interest payment date.

• We will pay interest to a person other than the holder of record on the record date if we elect to redeem the Notes on a date that is after a record date but on or prior to the corresponding interest payment date. In this instance, we will pay accrued interest on the Notes being redeemed to, but not including, the redemption date to the same person to whom we will pay the principal of those Notes.

     Except as provided below, we will pay interest on:

• global Notes to DTC in immediately available funds;

• any definitive Notes having an aggregate principal amount of $5,000,000 or less by check mailed to the holders of those Notes; and

• any definitive Notes having an aggregate principal amount of more than $5,000,000 by check mailed to the holders of those Notes or wire transfer in immediately available funds if requested by the holders of those Notes.

     At maturity we will pay interest on the definitive Notes at our office or agency in New York City which initially will be the principal corporate trust office of the trustee presently located at Wilmington Trust Company, c/o Computershare Investor Services, 80 Pine Street, New York, New York 10005.

     We will pay principal on:

• global Notes to DTC in immediately available funds; and

• any definitive Notes at our office or agency in New York City, which initially will be the office or agency of the trustee in New York City.

     Interest generally will be computed on the basis of a 360-day year comprised of twelve 30-day months.

Conversion Rights

General

     You may convert any outstanding Notes as described below into our common stock, initially at a conversion rate of approximately 42.97 shares per $1,000 principal amount of the Notes (equal to an initial conversion price of $23.27 per share). The conversion rate is subject to adjustment as described below. We will not issue fractional shares of common stock upon conversion of the Notes. Instead, we will pay the cash value of such fractional shares based upon the closing price of our common stock on the business day immediately preceding the conversion date. You may convert Notes only in denominations of $1,000 principal amount and integral multiples thereof.

     If you have exercised your right to require us to repurchase your Notes as described under “— Repurchase of Notes Upon the Occurrence of a Change of Control,” you may convert your Notes into our common stock only if you withdraw your change of

17

control repurchase notice and convert your Notes prior to the close of business on the business day immediately preceding the applicable repurchase date.

Conversion Procedures

     By delivering to the holder the number of shares issuable upon conversion, together with a cash payment in lieu of any fractional shares, we will satisfy our obligation with respect to the Notes. That is, accrued interest will be deemed to be paid in full rather than canceled, extinguished or forfeited. We will not adjust the conversion rate to account for any accrued interest or accrued and unpaid liquidated damages, if any.

     If you convert after a record date for an interest payment but prior to the corresponding interest payment date, you will receive on the interest payment date interest accrued on those Notes, notwithstanding the conversion of Notes prior to the interest payment date, assuming you were the holder of record on the corresponding record date. However, at the time you surrender any Notes for conversion, you must pay us an amount equal to the interest that has accrued and that will be paid on the Notes being converted on the interest payment date. The preceding sentence does not apply to Notes that are converted after being called by us for redemption after a record date for an interest payment date but prior to the corresponding interest payment date. If in such case prior to the redemption date you choose to convert your Notes, you will not be required to pay us at the time you surrender your Notes for conversion the amount of interest on the Notes you would receive on the date that has been fixed for redemption.

     You will not be required to pay any transfer taxes or duties directly relating to the issuance or delivery of our common stock if you exercise your conversion rights, but you will be required to pay any tax or duty which may be payable relating to any transfer involved in the issuance or delivery of the common stock in a name other than your own. Certificates representing shares of common stock will be issued or delivered only after all applicable taxes and duties, if any, payable by you have been paid.

     To convert an interest in a global Note, you must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program. To convert a definitive Note, you must:

• complete the conversion notice on the back of the Note (or a facsimile thereof);

• deliver the completed conversion notice and the Note to be converted to the specified office of the conversion agent; and

• pay all taxes or duties, if any, as described in the preceding paragraph.

     The conversion date will be the date on which all of the foregoing requirements have been satisfied. The Notes will be deemed to have been converted on the conversion date. A certificate for the number of shares of common stock into which the Notes are converted (and cash in lieu of any fractional shares) will be delivered to you as soon as practicable on or after the conversion date.

Conversion Price Adjustments

     We will adjust the conversion price if any of the following events occur:

(1)	we issue common stock as a dividend or distribution on our common stock;
(2)	we issue to all holders of common stock certain rights or warrants to purchase our common stock at a price per share less than the then current market price per share;
(3)	we subdivide or combine our common stock;
(4)	we distribute to all holders of our common stock, capital stock, evidences of indebtedness or assets, including securities but excluding:

     • rights or warrants listed in (2) above;

     • dividends or distributions listed in (1) above; and

     • cash distributions listed in (5) below;

(5) we make a cash dividend or distribution, excluding any dividend or distribution in connection with our liquidation, dissolution or winding up, to all holders of common stock if the aggregate amount of these distributions combined together with (A) all other all-cash distributions made within the preceding 12 months in respect of which we made no

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	adjustment plus (B) any cash and the fair market value of other consideration payable in any tender offers by us or any of our subsidiaries for common stock within the preceding 12 months in respect of which we made no adjustment, exceeds 10% of our market capitalization, being the product of the then current market price of the common stock multiplied by the number of shares of our common stock then outstanding;
(6)	we or one of our subsidiaries make a payment in respect of a tender offer for our common stock that, together with (A) any cash and the fair market value of any other consideration payable in any other tender offer by us or any of our subsidiaries for common stock expiring within the 12 months preceding the expiration of the tender offer plus (B) the aggregate amount of any such all-cash distributions referred to in (5) above to all holders of common stock within the 12 months preceding the expiration of the tender offer, in each case for which we have made no adjustment, exceeds 10% of our market capitalization on the expiration of such tender offer; or
(7)	someone other than us or one of our subsidiaries makes a payment in respect of a tender offer or exchange offer in which, as of the closing date of the offer, our board of directors is not recommending rejection of the offer. The adjustment referred to in this clause (7) will be made only if:

• the tender offer or exchange offer is for an amount that increases the offeror’s ownership of common stock to more than 25% of the total shares of common stock outstanding; and

• the cash and value of any other consideration included in the payment per share of common stock exceeds the current market price per share of common stock on the business day next succeeding the last date on which tenders or exchanges may be made pursuant to the tender or exchange offer.

However, the adjustment referred to in this clause (7) will generally not be made if, as of the closing of the offer, the offering documents disclose a plan or an intention to cause us to engage in a consolidation or merger or a sale of all or substantially all of our assets.

     To the extent that we have a rights plan in effect upon conversion of the Notes into common stock, you will receive, in addition to the common stock, the rights under the rights plan whether or not the rights have separated from the common stock at the time of conversion, subject to limited exceptions.

     In the event of:

• any reclassification of our common stock;

• a consolidation, merger, binding share exchange or combination involving us; or

• a sale or conveyance to another person or entity of all or substantially all of our property or assets;

in which holders of common stock would be entitled to receive stock, other securities, other property, assets or cash for their common stock, upon conversion of your Notes you will be entitled to receive the same type of consideration which you would have been entitled to receive if you had converted the Notes into our common stock immediately prior to any of these events.

     You may in certain situations be deemed to have received a distribution subject to United States federal income tax as a dividend in the event of any taxable distribution to holders of common stock or in certain other situations requiring a conversion rate adjustment. See “Material United States Federal Tax Considerations — Consequences to U.S. Holders — Conversion of the Notes.”

     To the extent permitted by law, we may, from time to time, decrease the conversion price for a period of at least 20 days if our board of directors has made a determination that this decrease would be in our best interests. Any such determination by our board will be conclusive. We would give holders at least 15 days notice of any decrease in the conversion price. In addition, we may decrease the conversion price if our board of directors deems it advisable to avoid or diminish any income tax to holders of common stock resulting from any stock distribution.

     We will not be required to make an adjustment in the conversion rate unless the adjustment would require a change of at least one percent in the conversion rate. However, we will carry forward any adjustments that are less than one percent of the conversion rate. Except as described above in this section, we will not adjust the conversion rate for any issuance of our common stock or convertible or exchangeable securities or rights to purchase our common stock or convertible or exchangeable securities.

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Optional Redemption by Us

     Prior to June 20, 2005, the Notes will not be redeemable at our option. Beginning on June 20, 2005, we may redeem the Notes for cash at any time as a whole, or from time to time in part, at the following redemption prices expressed as a percentage of principal amount:

	Redemption
Period	Price
Beginning on June 20, 2005 and ending on June 14, 2006		102.750	%
Beginning on June 15, 2006 and ending on June 14, 2007		101.375	%

and 100% at June 15, 2007. In each case, we will pay interest to, but excluding, the redemption date. If the redemption date is an interest payment date, interest will be paid to the record holder on the relevant record date. We will give at least 20 days but not more than 60 days notice of redemption by mail to holders of Notes. Notes or portions of Notes called for redemption will be convertible by the holder until the close of business on the business day prior to the redemption date.

     If we do not redeem all of the Notes, the trustee will select the Notes to be redeemed in principal amounts of $1,000 or integral multiples of $1,000 by lot or on a pro rata basis. If any Notes are to be redeemed in part only we will issue a new Note or Notes in principal amount equal to the unredeemed principal portion thereof. If a portion of your Notes is selected for partial redemption and you convert a portion of your Notes, the converted portion will be deemed to be taken from the portion selected for redemption.

Repurchase of Notes upon the Occurrence of a Change of Control

     A holder may require us to purchase any outstanding Notes for which the holder has properly delivered and not withdrawn a written notice only upon the occurrence of a change of control.

     If a change of control, as described below, occurs, you will have the right (subject to certain exceptions set forth below) to require us to repurchase all of your Notes not previously called for redemption, or any portion of those Notes that is equal to $1,000 in principal amount or integral multiples thereof, at a purchase price equal to the issue price of all Notes you require us to repurchase plus accrued and unpaid interest and accrued and unpaid liquidated damages, if any, on those Notes to the repurchase date. We will pay the repurchase price in cash. Notwithstanding the foregoing, we may be required to offer to repurchase our Senior Debt prior to the Notes, upon a change of control, if similar change of control offers are or will be required by our Senior Debt.

     Within 30 days after the occurrence of a change of control, we are required to give you notice of the occurrence of the change of control and of your resulting repurchase right. The repurchase date will be a date set by us that is no earlier than 25 days and no later than 35 days after the date on which we give notice of a change of control. To exercise the repurchase right, you must deliver prior to the close of business on the business day that is five business days prior to the repurchase date, written notice to the trustee of your exercise of your repurchase right, together with the Notes with respect to which your right is being exercised. You may withdraw this notice by delivering to the paying agent a notice of withdrawal prior to the close of business on the business day immediately preceding the repurchase date.

     A “change of control” will be deemed to have occurred at such time after the original issuance of the Notes when any of the following has occurred:

• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d) (3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchase, merger or other acquisition transactions, of shares of our capital stock entitling that person to exercise 50% or more of the total voting power of all shares of our capital stock entitled to vote generally in elections of directors, other than any acquisition by us, any of our subsidiaries or any of our employee benefit plans; or

• the first day on which a majority of the members of the board of directors of Mentor Graphics are not continuing directors; or

• our consolidation or merger with or into any other person, any merger of another person into us, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of our properties and assets to another person, other than:

• any transaction pursuant to which holders of our capital stock immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote

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generally in elections of directors of the continuing or surviving person immediately after giving effect to such issuance; and

•

any merger, share exchange, transfer of assets or similar transaction solely for the purpose of changing our jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock, if at all, solely into shares of common stock, ordinary shares or American Depositary Shares of the surviving entity or a direct or indirect parent of the surviving corporation.

     However, a change of control will not be deemed to have occurred if:

• the last sale price of our common stock for any five trading days during the 10 trading days immediately before the change of control is equal to at least 105% of the conversion price; or

• all of the consideration, excluding cash payments for fractional shares in the transaction constituting the change of control, consists of common stock traded on a United States national securities exchange or quoted on the Nasdaq National Market, and as a result of the transaction the Notes become convertible solely into that common stock.

     Beneficial ownership shall be determined in accordance with Rule 13d-3 promulgated by the SEC under the Exchange Act. The term “person” includes any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

     Rule 13e-4 under the Exchange Act requires the dissemination of certain information to security holders if an issuer tender offer occurs and may apply if the repurchase option becomes available to holders of the Notes. We will comply with this rule and file a Schedule TO (or any similar schedule) to the extent applicable at that time.

     The definition of change of control includes a phrase relating to the conveyance, transfer, sale, lease or disposition of “all or substantially all” of our assets. There is no precise, established definition of the phrase “substantially all” under applicable law. Accordingly, your ability to require us to repurchase your Notes as a result of a conveyance, transfer, sale, lease or other disposition of less than all our assets may be uncertain.

     If the paying agent holds money sufficient to pay the purchase price of the Notes which holders have elected to require us to repurchase on the business day following the repurchase date in accordance with the terms of the indenture, then, immediately after the repurchase date, those Notes will cease to be outstanding and liquidated damages, if any, on those Notes will cease to accrue, whether or not the Notes are delivered to the paying agent. Thereafter, all other rights of the holder shall terminate, other than the right to receive the purchase price upon delivery of the Notes.

     The foregoing provisions would not necessarily protect holders of the Notes if highly leveraged or other transactions involving us occur that may affect holders adversely. We could, in the future, enter into certain transactions, including certain recapitalizations, that would not constitute a change of control with respect to the change of control purchase feature of the Notes but that would increase the amount of our (or our subsidiaries’) outstanding indebtedness.

     Our ability to repurchase Notes upon the occurrence of a change of control is subject to important limitations. Our ability to repurchase the Notes may be limited by restrictions on the ability of Mentor Graphics to obtain funds for such repurchase through dividends from its subsidiaries and the terms of our then existing borrowing agreements or Senior Debt. In addition, the occurrence of a change of control could cause an event of default under, or be prohibited or limited by the terms of, our Senior Debt. We cannot assure you that we would have the financial resources, or would be able to arrange financing, to pay the purchase price in cash for all the Notes that might be delivered by holders of Notes seeking to exercise the repurchase right.

     The change of control purchase feature of the Notes may in certain circumstances make more difficult or discourage a takeover of our company. The change of control purchase feature, however, is not the result of our knowledge of any specific effort:

• to accumulate shares of our common stock;

• to obtain control of us by means of a merger, tender offer solicitation or otherwise; or

• by management to adopt a series of anti-takeover provisions.

     Instead, the change of control purchase feature is a standard term contained in securities similar to the Notes.

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Merger and Sales of Assets

     The indenture provides that Mentor Graphics may not consolidate with or merge into any other person or convey, transfer, sell, lease or otherwise dispose of all or substantially all of its properties and assets to another person unless, among other things:

• the resulting, surviving or transferee person is organized and existing under the laws of the United States, any state thereof or the District of Columbia;

• such person assumes all obligations of Mentor Graphics under the Notes and the indenture; and

• Mentor Graphics or such successor is not then or immediately thereafter in default under the indenture.

     The occurrence of certain of the foregoing transactions could constitute a change of control.

     This covenant includes a phrase relating to the conveyance, transfer, sale, lease or disposition of “all or substantially all” of our assets. There is no precise, established definition of the phrase “substantially all” under applicable law. Accordingly, there may be uncertainty as to whether a conveyance, transfer, sale, lease or other disposition of less than all our assets is subject to this covenant.

Events of Default

     Each of the following constitutes an event of default under the indenture:

• default in our obligation to repurchase Notes upon the occurrence of a change of control;

• default in our obligation to redeem Notes after we have exercised our redemption option;

• default in our obligation to pay any accrued interest when due and payable, and continuance of such default for a period of 30 days;

• default in our obligation to pay any liquidated damages when due and payable, and continuance of such default for a period of 30 days;

• our failure to perform or observe any other term, covenant or agreement contained in the Notes or the indenture for a period of 60 days after written notice of such failure, provided that such notice requiring us to remedy the same shall have been given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding;

• a failure to pay when due at maturity or a default that results in the acceleration of maturity of any indebtedness for borrowed money of Mentor Graphics or our designated subsidiaries in an aggregate amount of $20 million or more, unless the acceleration is rescinded, stayed or annulled within 30 days after written notice of default is given to us by the trustee or to us and the trustee by the holders of not less than 25% in aggregate principal amount of the Notes then outstanding; and

• certain events of bankruptcy, insolvency or reorganization with respect to us or any of our subsidiaries that is a designated subsidiary.

     A “designated subsidiary” shall mean any existing or future, direct or indirect, subsidiary of Mentor Graphics whose assets constitute 15% or more of the total assets of Mentor Graphics on a consolidated basis.

     The indenture will provide that the trustee shall, within 90 days of the occurrence of a default, give to the registered holders of the Notes notice of all uncured defaults known to it, but the trustee shall be protected in withholding such notice if it, in good faith, determines that the withholding of such notice is in the best interest of such registered holders, except in the case of a default under any of the first four bullets above.

     If certain events of default specified in the last bullet point above shall occur and be continuing, then automatically the principal amount of the Notes plus accrued interest and accrued and unpaid liquidated damages, if any, through such date shall become immediately due and payable. If any other event of default shall occur and be continuing (the default not having been cured or waived as provided under “Modification and Waiver” below), the trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare the Notes due and payable at their issue price plus accrued interest

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and accrued and unpaid liquidated damages, if any, and thereupon the trustee may, at its discretion, proceed to protect and enforce the rights of the holders of Notes by appropriate judicial proceedings. Such declaration may be rescinded or annulled with the written consent of the holders of a majority in aggregate principal amount of the Notes then outstanding upon the conditions provided in the indenture.

     The indenture provides that the holders of a majority in aggregate principal amount of the Notes then outstanding, through their written consent, may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred upon the trustee and that the trustee shall not be liable for any action taken or omitted to be taken by it in good faith upon such request.

     We will be required to furnish annually to the trustee a statement as to the fulfillment of our obligations under the indenture.

Modification and Waiver

Changes Requiring Approval of Each Affected Holder

     The indenture (including the terms and conditions of the Notes) cannot be modified or amended without the written consent or the affirmative vote of the holder of each Note affected by such change to:

• change the maturity of any Note or the payment date of any installment of interest or liquidated damages payable on any Notes;

• reduce the principal amount of, or any liquidated damages, redemption price or change of control purchase price on, any Note;

• reduce the interest rate on the Notes;

• impair or adversely affect the conversion rights of any holder of Notes;

• change the currency of payment of the Notes or interest or liquidated damages thereon;

• alter the manner of calculation or rate of accrual of liquidated damages on any Note or extend the time for payment of any such amount;

• impair the right to institute suit for the enforcement of any payment on or with respect to, or conversion of, any Note;

• except as otherwise permitted or contemplated by provisions concerning corporate reorganizations, adversely affect the repurchase rights of holders upon the occurrence of a change of control;

• modify the redemption provisions of the indenture in a manner adverse to the holders of Notes;

• reduce the percentage in aggregate principal amount of Notes outstanding necessary to modify or amend the indenture or to waive any past default; or

• reduce the percentage in aggregate principal amount of Notes outstanding required for any other waiver under the indenture.

Changes Requiring Majority Approval

     The indenture (including the terms and conditions of the Notes) may be modified or amended, subject to the provisions described above, with the written consent of the holders of at least a majority in aggregate principal amount of the Notes at the time outstanding.

Changes Requiring No Approval

     The indenture (including the terms and conditions of the Notes) may be modified or amended by us and the trustee, without the consent of the holder of any Note, for the purposes of, among other things:

• adding to our covenants for the benefit of the holders of Notes;

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• surrendering any right or power conferred upon us;

• providing for conversion rights of holders of Notes if any reclassification or change of our common stock or any consolidation, merger or sale of all or substantially all of our assets occurs;

• providing for the assumption of our obligations to the holders of Notes in the case of a merger, consolidation, conveyance, transfer or lease;

• decreasing the conversion price, provided that the decrease will not adversely affect the interests of the holders of Notes;

• complying with the requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended;

• evidencing and providing for the acceptance of appointment under the indenture of a successor trustee;

• making any changes or modifications necessary in connection with the registration of the Notes under the Securities Act as contemplated in the registration rights agreement; provided that such change or modification does not, in the good faith opinion of our board of directors and the trustee, adversely affect the interests of the holders of Notes in any material respect;

• curing any ambiguity or correcting or supplementing any defective provision contained in the indenture; provided that such modification or amendment does not, in the good faith opinion of our board of directors and the trustee, adversely affect the interests of the holders of Notes in any material respect; or

• adding or modifying any other provisions with respect to matters or questions arising under the indenture which we and the trustee may deem necessary or desirable and which will not adversely affect the interests of the holders of Notes in any material respect.

Form, Denomination and Registration

     Denomination and Registration. The Notes will be issued in fully registered form in denominations of $1,000 principal amount and integral multiples thereof.

     Global Notes. Book-Entry Form. Notes will be evidenced by one or more global Notes deposited with the trustee as custodian for DTC, and registered in the name of Cede & Co. as DTC’s nominee.

     Record ownership of the global Notes may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee, except as set forth below. A holder may hold its interests in the global Notes directly through DTC if such holder is a participant in DTC, or indirectly through organizations which are direct DTC participants if such holder is not a participant in DTC. Transfers between direct DTC participants will be effected in the ordinary way in accordance with DTC’s rules and will be settled in same-day funds. Holders may also beneficially own interests in the global Notes held by DTC through certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a direct DTC participant, either directly or indirectly.

     So long as Cede & Co., as nominee of DTC, is the registered owner of the global Notes, Cede & Co. for all purposes will be considered the sole holder of the global Notes. Except as provided below, owners of beneficial interests in the global Notes:

• will not be entitled to have certificates registered in their names;

• will not receive or be entitled to receive physical delivery of certificates in definitive form; and

• will not be considered holders of the global Notes.

     The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, the ability of an owner of a beneficial interest in a global security to transfer the beneficial interest in the global security to such persons may be limited.

     We will wire, through the facilities of the trustee, payments of principal, interest and liquidated damages, if any, on the global Notes to Cede & Co., the nominee of DTC, as the registered owner of the global Notes. None of Mentor Graphics, the trustee and

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any paying agent will have any responsibility or be liable for paying amounts due on the global Notes to owners of beneficial interests in the global Notes.

     It is DTC’s current practice, upon receipt of any payment of principal, interest and liquidated damages, if any, on the global Notes, to credit participants’ accounts on the payment date in amounts proportionate to their respective beneficial interests in the Notes represented by the global Notes, as shown on the records of DTC, unless DTC believes that it will not receive payment on the payment date. Payments by DTC participants to owners of beneficial interests in Notes represented by the global Notes held through DTC participants will be the responsibility of DTC participants, as is now the case with securities held for the accounts of customers registered in “street name.”

     If you would like to convert your Notes into common stock pursuant to the terms of the Notes, you should contact your broker or other direct or indirect DTC participant to obtain information on procedures, including proper forms and cut-off times, for submitting those requests.

     Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants and other banks, your ability to pledge your interest in the Notes represented by global Notes to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate.

     Neither Mentor Graphics nor the trustee (nor any registrar, paying agent or conversion agent under the indenture) will have any responsibility for the performance by DTC or direct or indirect DTC participants of their obligations under the rules and procedures governing their operations. DTC has advised us that it will take any action permitted to be taken by a holder of Notes, including, without limitation, the presentation of Notes for conversion as described below, only at the direction of one or more direct DTC participants to whose account with DTC interests in the global Notes are credited and only for the principal amount of the Notes for which directions have been given.

     DTC has advised us as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act, as amended. DTC was created to hold securities for DTC participants and to facilitate the clearance and settlement of securities transactions between DTC participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations, such as the initial purchasers of the Notes. Certain DTC participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a participant, either directly or indirectly.

     Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the global Notes among DTC participants, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days, we will cause Notes to be issued in definitive form in exchange for the global Notes. None of Mentor Graphics, the trustee or any of their respective agents will have any responsibility for the performance by DTC or direct or indirect DTC participants of their obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to or payments made on account of beneficial ownership interests in global Notes.

     According to DTC, the foregoing information with respect to DTC has been provided to its participants and other members of the financial community for information purposes only and is not intended to serve as a representation, warranty or contract modification of any kind.

Governing Law

     The indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York.

Information Concerning the Trustee

     Wilmington Trust Company, as trustee under the indenture, has been appointed by us as paying agent, conversion agent, calculation agent, registrar and custodian with regard to the Notes. The trustee or its affiliates may from time to time in the future provide banking and other services to us in exchange for a fee.

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Calculations in Respect of Notes

     We or our agents will be responsible for making all calculations called for under the Notes. These calculations include, but are not limited to, determination of the market price of our common stock. We or our agents will make all these calculations in good faith and, absent manifest error, our and their calculations will be final and binding on holders of Notes. We or our agents will provide a schedule of these calculations to the trustee, and the trustee is entitled to conclusively rely upon the accuracy of these calculations without independent verification.

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DESCRIPTION OF CAPITAL STOCK

     Our authorized capital stock consists of 100,000,000 shares of common stock, no par value per share, and 1,200,000 shares of incentive stock, no par value per share. As of August 1, 2002, approximately 66,039,186 shares of common stock were issued and outstanding. As of June 30, 2002, there were no shares of incentive stock issued and outstanding.

Common Stock

     The holders of common stock are entitled to one vote per share on all matters to be voted on by shareholders, including the election of directors. Shareholders are not entitled to cumulative voting rights, and, accordingly, the holders of a majority of the shares voting for the election of directors can elect the entire board if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any person to the board of directors.

     The holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the board of directors, in our discretion, from funds legally available therefore and subject to prior dividend rights of holders of any shares of preferred stock which may be outstanding. However, the terms of our current credit agreement restrict our ability to declare or pay dividends on our common stock. Upon liquidation or dissolution of our company subject to prior liquidation rights of the holders of incentive stock, the holders of common stock are entitled to receive on a pro rata basis our remaining assets available for distribution. Holders of common stock have no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect to such shares. All outstanding shares of common stock are, and all shares of common stock issued upon conversion of the Notes being offered in this Offering Memorandum will be, fully paid and non-assessable by us.

Incentive Stock

     The board of directors has the authority, without action by the shareholders, to designate and issue the incentive stock in one or more series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of the common stock. It is not possible to state the actual effect of the issuance of any shares of incentive stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of such incentive stock. However, the effects might include, among other things, restricting dividends on the common stock and impairing the liquidation rights of the common stock.

Shareholder Rights Plan

     On February 10, 1999, the board of directors adopted a Shareholder Rights Plan and declared a dividend distribution of one incentive share purchase right (a “Right”) for each outstanding share of common stock, payable to holders of record on March 5, 1999 and any shares that become outstanding before the earlier of the triggering or expiration of the Rights. Under certain conditions, each Right may be exercised to purchase 1/100 of a share of Series A Junior Participating Incentive Stock at a purchase price of $95, subject to adjustment. The Rights are not presently exercisable and will only become exercisable if a person or group other than exempted parties acquires or commences a tender or exchange offer to acquire 15% of the common stock. If a person or group acquires 15% of the common stock, each Right will be adjusted to entitle its holder to receive, upon exercise, common stock (or, in certain circumstances, our other assets) having a value equal to two times the exercise price of the Right or each Right will be adjusted to entitle its holder to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the Right, depending on the circumstances. The Rights expire on February 10, 2009, may be redeemed by us for $0.01 per Right, are terminated upon the consummation of a merger or acquisition transaction approved by the board of directors in advance of the Rights becoming exercisable and exercisable Rights may be exchanged for common stock at the option of the board of directors. The Rights do not have voting or dividend rights, and until they become exercisable, have no dilutive effect on our earnings.

Transfer Agent

     The transfer agent and registrar for our common stock is American Stock Transfer & Trust, and its telephone number is (877) 777-0800.

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SELLING SECURITYHOLDERS

     The Notes were originally issued by us and sold by the initial purchasers of the Notes in a transaction exempt from the registration requirements of the Securities Act to persons reasonably believed by the initial purchasers to be qualified institutional buyers in reliance on Rule 144A under the Securities Act. Selling securityholders, including their transferees, pledgees or donees or their successors, may from time to time offer and sell pursuant to this prospectus any or all of the Notes and shares of common stock issuable upon conversion of the Notes.

     The following table sets forth information, as of August  28, 2002, with respect to the selling securityholders and the principal amounts of Notes beneficially owned by each selling securityholder that may be offered pursuant to this prospectus. The information is based on information provided by or on behalf of the selling securityholders. The selling securityholders may offer all, some or none of the Notes or the common stock issuable upon conversion of the Notes. Because the selling securityholders may offer all or some portion of the Notes or the common stock, we cannot estimate the amount of the Notes or the common stock that will be held by the selling securityholders upon termination of any of these sales. In addition, the selling securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their Notes since the date on which they provided the information regarding their Notes in transactions exempt from the registration requirements of the Securities Act. The percentage of Notes outstanding beneficially owned by each selling securityholder is based on $172,500,000 aggregate principal amount of Notes outstanding. The number of shares of common stock owned prior to the offering includes shares of common stock issuable upon conversion of the Notes. The percentage of common stock outstanding beneficially owned by each selling securityholder is based on 66,039,186 shares of common stock outstanding on August 1, 2002. The number of shares of common stock issuable upon conversion of the Notes offered hereby is based on a conversion price of $23.27 per share and a cash payment in lieu of any fractional share.

	Principal Amount					Shares of Common
	of Notes		Percentage of			Stock Owned		Percentage of
	Beneficially Owned		Notes			Prior to the		Common Stock			Conversion Shares
Name	and Offered Hereby		Outstanding			Offering(1)		Outstanding(2)			Offered Hereby(3)
Akela Capital Master Fund, Ltd.		2,000,000		1.16	%		85,947		*			85,947
American Samoa Government		15,000		*			644		*			644
B.C. McCabe Foundation		200,000		*			8,594		*			8,594
Bank Austria Cayman Island		2,000,000		1.16	%		85,947		*			85,947
Boilermaker-Blacksmith Pension Trust		710,000		*			30,511		*			30,511
BP Amoco PLC Master Trust		485,000		*			20,842		*			20,842
Chrysler Corporation Master Retirement Trust		535,000		*			22,990		*			22,990
Clinton Convertible Managed Trading Account, Ltd.		3,200,000		1.86	%		137,516		*			137,516
Clinton Multistrategy Master Fund, Ltd.		8,500,000		4.93	%		365,277		*			365,277
Clinton Riverside Convertible Portfolio Ltd.		12,450,000		7.22	%		535,023		*			535,023
The Coast Fund, L.P.		2,000,000		1.16	%		85,947		*			85,947
Cobra Fund U.S.A. LP		27,000		*			1,160		*			1,160
Cobra Master Fund Ltd.		173,000		*			7,434		*			7,434
Delta Air Lines Master Trust		140,000		*			6,016		*			6,016
Delta Pilots D&S Trust		70,000		*			3,008		*			3,008
Dorinco Reinsurance Company		395,000		*			16,974		*			16,974
The Estate of James Campbell		286,000		*			12,290		*			12,290
Grace Brothers Management LLC		2,250,000		1.30	%		96,691		*			96,691
HFR CA Select Fund		100,000		*			4,297		*			4,297
Highbridge International LLC		24,500,000		14.20	%		1,052,857		1.57	%		1,052,857
Hotel Union and Hotel Industry of Hawaii Pension Plan		163,000		*			7,004		*			7,004
The James Campbell Corporation		243,000		*			10,442		*			10,442
Jefferies and Company, Inc.		4,000		*			171		*			171
Jersey (IMA) Ltd.		1,250,000		*			53,717		*			53,717
KBC Financial Products (Cayman Island) Ltd.		2,000,000		1.16	%		85,947		*			85,947
Libertyview Fund, LLC		750,000		*			32,230		*			32,230
Libertyview Funds, LP		3,000,000		1.74	%		128,921		*			128,921
Lord Abbett Bond Debenture Fund, Inc.		6,000,000		3.48	%		257,842		*			257,842
Man Convertible Bond Master Fund, Ltd.		6,727,000		3.90	%		289,084		*			289,084
Met Investors Bond Debenture Fund		500,000		*			21,486		*			21,486
Microsoft Corporation		175,000		*			7,520		*			7,520

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	Principal Amount					Shares of Common
	of Notes		Percentage of			Stock Owned		Percentage of
	Beneficially Owned		Notes			Prior to the		Common Stock			Conversion Shares
Name	and Offered Hereby		Outstanding			Offering(1)		Outstanding(2)			Offered Hereby(3)
MLQA Convertible Securities Arbitrage, LTD		5,000,000		2.90	%		214,868		*			214,868
Motion Picture Industry Health Plan — Active Member Fund		30,000		*			1,289		*			1,289
Motion Picture Industry Health Plan — Retiree Member Fund		20,000		*			859		*			859
National Fuel and Gas Retirement Plan		100,000		*			4,297		*			4,297
Nomura Securities International, Inc.		3,000,000		1.74	%		159,784		*			128,921
OCM Convertible Trust		300,000		*			12,892		*			12,892
Onex Industrial Partners Limited		1,200,000		*			51,568		*			51,568
Oxford, Lord Abbett and Co.		1,500,000		*			64,460		*			64,460
Partner Reinsurance Company Ltd.		105,000		*			4,512		*			4,512
Pebble Capital		520,000		*			22,346		*			22,346
Pioneer High Yield Fund		3,000,000		1.74	%		128,921		*			128,921
Qwest Occupational Health Trust		25,000		*			1,074		*			1,074
RCG Halifax Master Fund, Ltd.		1,500,000		*			64,460		*			64,460
RCG Latitude Master Fund, Ltd.		2,500,000		1.45	%		107,434		*			107,434
RCG Muti Strategy, LP		4,000,000		2.32	%		171,895		*			171,895
Robertson Stephens		5,000,000		2.90	%		214,868		*			214,868
San Diego County Employees Retirement Association		1,225,000		*			52,642		*			52,642
Silvercreek II Limited		280,000		*			12,032		*			12,032
St. Thomas Trading, Ltd.		11,173,000		6.48	%		480,146		*			480,146
State Employees’ Retirement Fund of the State of Delaware		200,000		*			8,594		*			8,594
State of Connecticut Combined Investment Funds		415,000		*			17,834		*			17,834
Total Fina Elf Finance U.S.A., Inc.		200,000		*			8,594		*			8,594
TQA Master Fund, Ltd.		500,000		*			21,486		*			21,486
TQA Master Plus Fund, Ltd.		500,000		*			21,486		*			21,486
Tribeca Investments LLC		2,000,000		1.16	%		85,947		*			85,947
UBS O’Conner LLC F/B/O UBS Global Equity Arbitrage Master Ltd.		2,000,000		1.16	%		85,947		*			85,947
UBS O’Connor LLC F/B/O O’Connor Global Convertible Portfolio		500,000		*			21,486		*			21,486
Union Carbide Retirement Account		720,000		*			30,941		*			30,941
Vanguard Convertible Securities Fund, Inc.		485,000		*			20,842		*			20,842
Viacom Inc. Pension Plan Master Trust		16,000		*			687		*			687
Victus Capital		3,500,000		2.03	%		150,408		*			150,408
WPG Convertible Arbitrage
Overseas Master Fund L.P.		1,200,000		*			51,568		*			51,568
Zazove Hedged Convertible Fund L.P.		1,475,000		*			63,386		*			63,386
Zazove Income Fund L.P.		1,475,000		*			63,386		*			63,386
Zurich Institutional Benchmarks Master Fund L.P.		1,225,000		*			52,642		*			52,642
Zurich Institutional Benchmarks Master Fund Ltd.		788,000		*			33,863		*			33,863
Any other holder of Notes or future transferee, pledgee, donee or successor of any holder(5)		33,975,000		19.70	%		1,460,034		2.16	%		1,460,034
		172,500,000
Total	$	172,500,000		100.0	%		7,443,806		11.23	%		7,412,941

*	Less than one percent of the Notes or common stock outstanding, as applicable
(1)	Includes shares of common stock issuable upon conversion of the Notes, assuming a conversion price of $23.27 and a cash payment in lieu of any fractional share interest. The conversion price is subject to adjustment as described under “Description of Notes—Conversion Rights.”

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(2)	Calculated based on Rule 13d-3(d)(i) under the Securities Exchange Act of 1934 using 66,039,186 shares of common stock outstanding on August 1, 2002. In calculating this amount, we treated as outstanding the number of shares of common stock issuable upon conversion of all of that particular holder’s Notes. However, we did not assume the conversion of any other holder’s Notes.
(3)	Consists of shares of common stock issuable upon conversion of the Notes, assuming a conversion price of $23.27 per share and a cash payment in lieu of any fractional share interest. The conversion price is subject to adjustment as described under “Description of Notes—Conversion Rights.”
(4)	We will identify additional selling securityholders by prospectus supplement or post-effective amendment before they offer or sell their securities.

     Information concerning other selling securityholders will be set forth in prospectus supplements or post-effective amendments from time to time, if required. Information concerning the securityholders may change from time to time and any changed information will be set forth in supplements to this prospectus if and when necessary. In addition, the conversion price, and therefore, the number of shares of common stock issuable upon conversion of the Notes, is subject to adjustment under certain circumstances. Accordingly, the number of shares of common stock into which the Notes are convertible may increase or decrease.

     The initial purchasers purchased all of the Notes from us in a private transaction in June 2002. All of the Notes were “restricted securities” under the Securities Act prior to this registration. The selling securityholders have represented to us that they purchased the Notes for their own account for investment only and not with a view toward selling or distributing them, except pursuant to sales registered under the Securities Act or exempt from such registration.

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PLAN OF DISTRIBUTION

     The selling securityholders and their successors, which term includes their transferees, pledgees or donees or their successors may sell the Notes and the underlying common stock directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers. These discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may be in excess of those customary in the types of transactions involved.

     The common stock may be sold in one or more transactions at:

• fixed prices;

• prevailing market prices at the time of sale;

• prices related to the prevailing market prices;

• varying prices determined at the time of sale; or

• negotiated prices.

     These sales may be effected in transactions:

• on any national securities exchange or quotation service on which our common stock may be listed or quoted at the time of sale, including the Nasdaq National Market;

• in the over-the-counter market;

• otherwise than on such exchanges or services or in the over-the-counter market;

• through the writing of options, whether the options are listed on an options exchange or otherwise; or

• through the settlement of short sales.

These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as agent on both sides of the trade.

     In connection with the sale of the Notes and the underlying common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions. These broker-dealers or financial institutions may in turn engage in short sales of the common stock in the course of hedging the positions they assume with selling securityholders. The selling securityholders may also sell the Notes and the underlying common stock short and deliver these securities to close out such short positions, or loan or pledge the Notes or the underlying common stock to broker-dealers that in turn may sell these securities.

     The aggregate proceeds to the selling securityholders from the sale of the Notes or the underlying common stock offered by them hereby will be the purchase price of the Notes or common stock less discounts and commissions, if any. Each of the selling securityholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering.

     Our outstanding common stock is listed for trading on the Nasdaq National Market. We do not intend to list the Notes for trading on any national securities exchange or on the Nasdaq National Market and can give no assurance about the development of any trading market for the Notes.

     In order to comply with the securities laws of some states, if applicable, the Notes and the underlying common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers.

     The selling securityholders and any broker-dealers or agents that participate in the sale of the debentures and the underlying common stock may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act. Profits on the sale of the debentures and the underlying common stock by selling securityholders and any discounts, commissions or concessions received by any broker-dealers or agents might be deemed to be underwriting discounts and commissions under the

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Securities Act. Selling securityholders who are deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. To the extent the selling securityholders may be deemed to be “underwriters,” they may be subject to statutory liabilities, including, but not limited to, Sections 11, 12 and 17 of the Securities Act.

     The selling securityholders and any other person participating in a distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder. Regulation M of the Exchange Act may limit the timing of purchases and sales of any of the securities by the selling securityholders and any other person. In addition, Regulation M may restrict the ability of any person engaged in the distribution of the securities to engage in market-making activities with respect to the particular securities being distributed for a period of up to five business days before the distribution. The selling securityholders have acknowledged that they understand their obligations to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M, and have agreed that they will not engage in any transaction in violation of such provisions.

     To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholder and any underwriter, broker-dealer or agent regarding the sale of the common stock by the selling securityholders.

     A selling securityholder may decide not to sell any Notes or the underlying common stock described in this prospectus. We cannot assure holders that any selling securityholder will use this prospectus to sell any or all of the Notes or the underlying common stock. Any securities covered by this prospectus which qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. In addition, a selling securityholder may transfer, devise or gift the Notes and the underlying common stock by other means not described in this prospectus.

     With respect to a particular offering of the Notes and the underlying common stock, to the extent required, an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is a part will be prepared and will set forth the following information:

• the specific Notes or common stock to be offered and sold;

• the names of the selling securityholders;

• the respective purchase prices and public offering prices and other material terms of the offering;

• the names of any participating agents, broker-dealers or underwriters; and

• any applicable commissions, discounts, concessions and other items constituting, compensation from the selling securityholders.

     We entered into the registration rights agreement for the benefit of holders of the Notes to register their Notes and the underlying common stock under applicable federal and state securities laws under certain circumstances and at certain times. The registration rights agreement provides that the selling securityholders and Mentor Graphics will indemnify each other and their respective directors, officers and controlling persons against specific liabilities in connection with the offer and sale of the Notes and the underlying common stock, including liabilities under the Securities Act, or will be entitled to contribution in connection with those liabilities. We will pay all of our expenses and specified expenses incurred by the selling securityholders incidental to the registration, offering and sale of the Notes and the underlying common stock to the public, but each selling securityholder will be responsible for payment of commissions, concessions, fees and discounts of underwriters, broker-dealers and agents.

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MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS

     The following is a summary of material United States federal income and estate tax considerations relating to the purchase, ownership and disposition of the Notes and common stock into which the Notes are convertible, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, administrative rulings and judicial decisions as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in United States federal income and estate tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service (“IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.

     This summary is limited to holders who hold the Notes and the common stock into which such Notes are convertible as capital assets within the meaning of Section 1221 of the Code. This summary also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

• banks, insurance companies, or other financial institutions;

• holders subject to the alternative minimum tax;

• tax-exempt organizations;

• dealers in securities or currencies;

• traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

• foreign persons or entities (except to the extent specifically set forth below);

• persons that own, or are deemed to own, more than 5% of our Company;

• certain former citizens or long-term residents of the United States;

• U.S. holders whose functional currency is not the U.S. dollar;

• persons that will hold Notes as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction for tax purposes; or

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• persons deemed to sell Notes or common stock under the constructive sale provisions of the Code.

     In addition, if a holder is an entity treated as a partnership for United States federal income tax purposes, the tax treatment of each partner of such partnership will generally depend upon the status of the partner and upon the activities of the partnership. Partners in partnerships which hold Notes or common stock should consult their tax advisors.

     THIS SUMMARY OF UNITED STATES FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. WE URGE YOU TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

Consequences to U.S. Holders

     The following is a summary of material United States federal income tax consequences that will apply to you if you are a U.S. holder of the Notes. Certain consequences to “non-U.S. holders” of the Notes are described under “Consequences to Non-U.S. Holders” below. “U.S. holder” means a beneficial owner of a Note that is:

• an individual citizen or resident of the United States;

• a corporation or other entity taxable as a corporation for United States federal income tax purposes, or partnership, or other entity taxable as a partnership for United States federal income tax purposes, created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia;

• an estate, the income of which is subject to United States federal income taxation regardless its source; or

• a trust that (1) is subject to the primary supervision of a United States court and the control of one or more United States persons or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.

Interest

     You must include interest paid on the Notes as ordinary income at the time it is received or accrued, in accordance with your regular method of accounting for United States federal income tax purposes.

Market Discount

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     If you acquire a Note at a cost that is less than the stated redemption price (i.e., the principal) at maturity of the Notes, the amount of such difference is treated as “market discount” for federal income tax purposes, unless such difference is less than .0025 multiplied by the stated redemption price at maturity multiplied by the number of complete years to maturity (from the date of acquisition).

     Under the market discount rules of the Code, you are required to treat any gain on the sale, exchange, retirement or other disposition of a Note as ordinary income to the extent of the accrued market discount that has not previously been included in income. Thus, principal payments and payments received upon the sale or exchange of a Note are treated as ordinary income to the extent of accrued market discount that has not previously been included in income. If you dispose of a Note with market discount in certain otherwise nontaxable transactions, you must include accrued market discount as ordinary income as if you had sold the Note at its then fair market value.

     In general, the amount of market discount that has accrued is determined on a ratable basis. You may, however, elect to determine the amount of accrued market discount on a constant yield to maturity basis. This election is made on a note-by-note basis and is irrevocable.

     With respect to Notes with market discount, you may not be allowed to deduct immediately a portion of the interest expense on any indebtedness incurred or continued to purchase or to carry the Notes. You may elect to include market discount in income currently as it accrues, in which case the interest deferral rule set forth in the preceding sentence will not apply. This election will apply to all debt instruments that you acquire on or after the first day of the first taxable year to which the election applies and is irrevocable without the consent of the IRS. Your tax basis in a Note will be increased by the amount of market discount included in your income under the election.

Amortizable Bond Premium

     If you purchase a Note for an amount in excess of the stated redemption price at maturity, you will be considered to have purchased the Note with “amortizable bond premium” equal in amount to the excess. Generally, you may elect to amortize the premium as an offset to interest income otherwise required to be included in income in respect of the Note during the taxable year, using a constant yield method, over the remaining term of the Note (or, if it results in a smaller amount of amortizable premium, until an earlier call date). Under Treasury Regulations, the amount of amortizable bond premium that you may deduct in any accrual period is limited to the amount by which your total interest inclusions on the Note in prior accrual periods exceed the total amount treated by you as a bond premium deduction in prior accrual periods. If any of the excess bond premium is not deductible, that amount is carried forward to the next accrual period. If you elect to amortize bond premium, you must reduce your tax basis in the Note by the amount of the premium used to offset interest income as set forth above. An election to amortize bond premium applies to all taxable debt obligations then owned and thereafter acquired by you and may be revoked only with the consent of the IRS.

Sale, Exchange or Redemption of the Notes

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     Upon the sale, exchange (other than a conversion or other tax-free exchange) or redemption of a Note, you generally will recognize capital gain or loss equal to the difference between (i) the amount of cash proceeds and the fair market value of any property received on the sale, exchange or redemption (except to the extent such amount is attributable to accrued interest income not previously included in income, which will be taxable as ordinary income) and (ii) your adjusted tax basis in the Note. Your adjusted tax basis in a Note generally will equal the amount you paid for the Note and will be subsequently increased by market discount previously included in income in respect of the Note and will be reduced by any amortizable bond premium in respect of the Note which has been taken into account.

     Any gain or loss recognized on a disposition of the Note will be capital gain or loss except as described under “Market Discount” above. If you are an individual and have held the Note for more than one year, such capital gain will generally be subject to tax at a maximum rate of 20%. Your ability to deduct capital losses may be limited.

Conversion of the Notes

     You generally will not recognize any income, gain or loss upon conversion of a Note into common stock except with respect to cash received in lieu of a fractional share of common stock. Your aggregate tax basis in the common stock received on conversion of a Note will be the same as your aggregate tax basis in the Note at the time of conversion (reduced by any basis allocable to a fractional share interest), and the holding period for the common stock received on conversion will generally include the holding period of the Note converted. However, your tax basis in shares of common stock considered attributable to accrued interest generally will equal the amount of such accrued interest included in income, and the holding period for such shares will begin on the date of conversion.

     You will recognize gain or loss for federal income tax purposes upon the receipt of cash in lieu of a fractional share of common stock in an amount equal to the difference between the amount of cash received and your tax basis in such fractional share. This gain or loss should be capital gain or loss and should be taxable as described under “Sale, Exchange, or Redemption of the Notes,” above. The fair market value of shares of common stock received which are attributable to accrued interest will be taxable as ordinary interest income except to the extent the accrued interest has been previously included as ordinary income.

     As a holder of convertible debt instruments such as the Notes, you may, in certain circumstances, be deemed to have received distributions of stock if the conversion price of such instruments is adjusted. However, adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula which has the effect of preventing the dilution of your interest in our company will generally not be deemed to result in a constructive distribution of stock. Certain of the possible adjustments provided in the Notes (including, without limitation, adjustments in respect of taxable dividends to our stockholders) will not qualify as being pursuant to a bona fide reasonable adjustment formula. If such adjustments are made, you will be deemed to have received constructive distributions includible in your income in the manner described under “Dividends” below even though you have not received any cash or property as a result of such adjustments. In certain circumstances, the failure to provide for such an adjustment may also result in a constructive distribution to you.

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Dividends

     Distributions, if any, made on our common stock you receive upon conversion of a Note generally will be included in your income as ordinary dividend income to the extent of our current or accumulated earnings and profits. Distributions in excess of our current and accumulated earnings and profits will be treated as a return of capital to the extent of your basis in the common stock and thereafter as capital gain from the sale or exchange of such common stock. Subject to certain restrictions, if you are a corporate U.S. holder, dividends received by you will be eligible for a dividends received deduction.

Sale, Exchange or Redemption of Common Stock

     Upon the sale, exchange or redemption of our common stock you generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) your adjusted tax basis in the common stock. Such capital gain or loss will be long-term capital gain or loss if your holding period in the common stock is more than one year at the time of the sale, exchange or redemption. Long-term capital gains recognized by certain non-corporate U.S. holders, including individuals, will generally be subject to a reduced rate of United States federal income tax. Your basis and holding period in common stock received upon conversion of a Note are determined as discussed above under “Conversion of the Notes.” Your ability to deduct capital losses may be limited.

Backup Withholding and Information Reporting

     We are required to furnish to the record holders of the Notes and common stock, other than corporations and other exempt holders, and to the IRS, information with respect to interest paid on the Notes and dividends paid on the common stock.

     You may be subject to backup withholding with respect to interest paid on the Notes, dividends paid on the common stock or with respect to proceeds received from a disposition of the Notes or shares of common stock. Certain holders (including, among others, corporations and certain tax-exempt organizations) are generally not subject to backup withholding. You will be subject to backup withholding if you are not otherwise exempt and you (i) fail to furnish your taxpayer identification number (“TIN”), which, for an individual is ordinarily his or her social security number; (ii) furnish an incorrect TIN; (iii) are notified by the IRS that you have failed to properly report payments of interest or dividends; or (iv) fail to certify, under penalties of perjury, that you have furnished a correct TIN and that the IRS has not notified you that you are subject to backup withholding. Backup withholding is not an additional tax but, rather, is a method of tax collection. U.S. holders will be entitled to credit any amounts withheld under the backup withholding rules against your actual tax liabilities provided the required information is furnished to the IRS.

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Consequences to Non-U.S. Holders

     The following is a summary of material United States federal income and estate tax consequences that will apply to you if you are a non-U.S. holder of the Notes. For purposes of this discussion, a “non-U.S. holder” means a beneficial owner of Notes that is not a U.S. holder:

     In general, subject to the discussion below concerning backup withholding:

Interest

     Payments of interest on the Notes by us or any paying agent to you, as a beneficial owner of a Note, will not be subject to 30% United States federal withholding tax, provided that:

• you do not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote;

• you are not a “controlled foreign corporation” with respect to which we are, directly or indirectly, a “related person;”

• you are not a bank receiving interest pursuant to a loan agreement entered into in the ordinary course of its trade or business; and

• you provide your name and address, and certify, under penalties of perjury, that you are not a United States person (which certification may be made on an IRS Form W-8BEN (or successor form)), or you hold your Notes through certain foreign intermediaries, and you and the foreign intermediary satisfy the certification requirements of applicable Treasury Regulations.

     Special certification rules apply to non-U.S. holders that are pass-through entities rather than corporations or individuals. Prospective investors should consult their tax advisors regarding the certification requirements for non-U.S. holders.

     If you cannot satisfy the requirements described above, payments of interest to you will be subject to the 30% United States federal withholding tax, unless you provide us with a properly executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction in withholding under the benefit of an applicable United States income tax treaty or (2) IRS Form W-8ECI (or successor form) stating that interest paid on the Note is not subject to withholding tax because it is effectively connected with the conduct of a United States trade or business. If you are engaged in a trade or business in the United States and interest on a Note is effectively connected with your conduct of that trade or business, you will be subject to United States federal income tax on that interest on a net income basis (although you will be exempt from the 30% withholding tax, provided the certification requirements described above are satisfied) in the same manner as if you were a United States person as defined under the Code. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or lower rate as may be prescribed under an applicable United States income tax treaty) of your earnings

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and profits for the taxable year, subject to adjustments, that are effectively connected with your conduct of a trade or business in the United States.

Sale, Exchange or Redemption of the Notes or Common Stock

     Any gain realized by you on the sale, exchange, redemption or other disposition of a Note or a share of common stock generally will not be subject to United States federal income tax unless:

• the gain is effectively connected with your conduct of a trade or business in the United States;

• you are an individual who is present in the United States for 183 days or more in the taxable year of sale, exchange or other disposition, and certain conditions are met; or

• in the case of common stock, we are or have been a “United States real property holding corporation” for United States federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that you held our common stock.

     If your gain is effectively connected with your conduct of a United States trade or business, you generally will be subject to United States federal income tax on the net gain derived from the sale. If you are a corporation, any such effectively connected gain received by you may also, under certain circumstances, be subject to the branch profits tax at a 30% rate (or such lower rate as may be prescribed under an applicable United States income tax treaty). If you are an individual described in the second bullet point above, you will be subject to a flat 30% United States federal income tax on the gain derived from the sale, which may be offset by United States source capital losses, even though you are not considered a resident of the United States. Such holders are urged to consult their tax advisers regarding the tax consequences of the acquisition, ownership and disposition of the Notes.

     We do not believe that we are currently, and do not anticipate becoming, a United States real property holding corporation. Even if we were, or were to become, a United States real property holding corporation, no adverse tax consequences would apply to you if you hold, directly and indirectly, at all times during the applicable period, less than five percent of our common stock, provided that our common stock was regularly traded on an established securities market.

Conversion of the Notes

     You generally will not recognize any income, gain or loss on the conversion of a Note into common stock. To the extent you receive cash in lieu of a fractional share of common stock upon conversion of a Note, you generally would be subject to the rules described under “— Sale, Exchange or Redemption of the Notes or Common Stock” above.

Dividends

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     In general, dividends, if any, received by you with respect to our common stock (and any deemed distributions resulting from certain adjustments, or failures to make adjustments, to the conversion price of the Notes, see “— Consequences to U.S. Holders-Dividends” above) will be subject to withholding of United States federal income tax at a 30% rate, unless such rate is reduced by an applicable United States income tax treaty. Dividends that are effectively connected with your conduct of a trade or business in the United States are generally subject to United States federal income tax at on a net income basis and are exempt from the 30% withholding tax (assuming compliance with certain certification requirements). If you are a corporation, any such effectively connected dividends received by you may also, under certain circumstances, be subject to the branch profits tax at a 30% rate or such lower rate as may be prescribed under an applicable United States income tax treaty.

     In order to claim the benefit of a United States income tax treaty or to claim exemption from withholding because dividends paid to you on our common stock are effectively connected with your conduct of a trade or business in the United States, you must provide a properly executed IRS Form W-8BEN for treaty benefits or W-8ECI for effectively connected income (or such successor form as the IRS designates), prior to the payment of dividends. These forms must be periodically updated. You may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund.

United States Federal Estate Tax

     A Note held by an individual who at the time of death is not a citizen or resident of the United States (as specially defined for United States federal estate tax purposes) will not be subject to United States federal estate tax if the individual did not actually or constructively own 10% or more of the total combined voting power of all classes of our stock and, at the time of the individual’s death, payments with respect to such Note would not have been effectively connected with the conduct by such individual of a trade or business in the United States. Common stock held by an individual who at the time of death is not a citizen or resident of the United States (as specially defined for United States federal estate tax purposes) will be included in such individual’s estate for United States federal estate tax purposes, unless an applicable United States estate tax treaty provides otherwise.

     Prospective non-U.S. holders who are individuals should be aware that there have been recent amendments to the United States federal estate tax rules, and such persons should consult with their tax advisors before considering an investment in the Notes.

Backup Withholding and Information Reporting

     If you are a non-U.S. holder, you may have to comply with specific certification procedures to establish that you are not a United States person in order to avoid backup withholding with respect to payments of principal and interest on the Notes and dividends on the common stock. Even if certification is provided, we may still be required to report annually to the IRS the amount of, and the tax withheld with respect to, any interest or dividends paid to you, regardless of whether any tax was actually withheld. Copies of these information returns may also be made

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available under the provisions of a specific treaty or agreement to the tax authorities of the country in which you reside.

     Information reporting requirements and backup withholding generally will not apply to any payments of the proceeds of the disposition of Notes or shares of common stock effected outside the United States by a foreign office of a foreign broker (as defined in applicable Treasury Regulations). However, unless such broker has documentary evidence in its records that the beneficial owner is a non-U.S. Holder and certain other conditions are met, or the beneficial owner otherwise establishes an exemption, information reporting (but not backup withholding) will apply to any such payments effected outside the United States by such a broker if it:

• derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States;

• is a controlled foreign corporation for United States federal income tax purposes; or

• is a foreign partnership that, at any time during its taxable year, has 50% or more of its income or capital interests owned by United States persons or is engaged in the conduct of a United States trade or business.

     Payments of the proceeds of a disposition of Notes or shares of common stock effected by the United States office of a broker will be subject to information reporting requirements and backup withholding tax unless you properly certify under penalties of perjury as to your foreign status and certain other conditions are met or you otherwise establish an exemption.

     You should consult your tax advisor regarding application of withholding and backup withholding in your particular circumstance and the availability of and procedure for obtaining an exemption from withholding and backup withholding under current Treasury Regulations. In this regard, the current Treasury Regulations provide that a certification may be relied on if we or our agent (or other payor) knows or has reason to know that the certification may be false. Any amounts withheld under the backup withholding rules from a payment to you will be allowed as a refund or credit against your United States federal income tax liability provided that the required information is furnished to the IRS in a timely manner.

THE PRECEDING DISCUSSION OF MATERIAL UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, YOU ARE URGED TO CONSULT YOUR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS TO YOU OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK INTO WHICH THE NOTES ARE CONVERTIBLE, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, AS WELL AS THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

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LEGAL MATTERS

     Certain legal matters relating to the offering will be passed upon for us by Latham & Watkins, San Francisco, California.

EXPERTS

The consolidated financial statements and schedules of Mentor Graphics Corporation and Subsidiaries as of December 31, 2001 and for each of the years in the three-year period ended December 31, 2001, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of IKOS Systems, Inc. for the year ended September 29, 2001, appearing in Mentor Graphics Corporation’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on May 29, 2002, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Innoveda, Inc. as of December 29, 2001 and December 30, 2000 and for each of the three years in the period ended December 29, 2001 incorporated in this prospectus by reference from the Current Report on Form 8-K of Mentor Graphics Corporation dated May 29, 2002 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

INCORPORATION BY REFERENCE

     We have elected to “incorporate by reference” certain information into this prospectus. By incorporating by reference, we can disclose important information to you by referring you to another document we have filed with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. This prospectus incorporates by reference the documents set forth below that we have previously filed with the SEC:

Mentor Graphics SEC Filings (File No. 0-13442)	Period Ended
Annual Report on Form 10-K (including information specifically incorporated by reference into our      Form 10-K from our 2001 Annual Report to Stockholders and Proxy Statement for our      2002 Annual Meeting of Stockholders), as amended	December 31, 2002
Quarterly Report on Form 10-Q	March 31, 2002
Quarterly Report on Form 10-Q	June 30, 2002
Current Report on Form 8-K	filed on March 13, 2002
Current Report on Form 8-K	filed on April 10, 2002
Current Report on Form 8-K	filed on April 24, 2002
Current Report on Form 8-K	filed on May 3, 2002
Current Reports on Form 8-K	filed on May 29, 2002
Amended Current Report on Form 8-K/A	filed on May 29, 2002
Current Report on Form 8-K	filed on May 30, 2002
Current Report on Form 8-K	filed on June 3, 2002
Current Report on Form 8-K	filed on June 11, 2002
Amended Current Report on Form 8-K/A	filed on August 12, 2002
The description of our common stock as set forth in our Registration Statement on Form 8-A	filed on April 29, 1985

     All documents that we file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this prospectus to the end of the offering of the Notes under this prospectus shall also be deemed to be incorporated in this prospectus by reference.

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     You may obtain copies of these documents from us without charge (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents) by writing to us at Mentor Graphics Corporation, 8005 SW Boeckman Road, Wilsonville, Oregon 97070-7777, or calling us at (503) 685-7000.

WHERE YOU CAN FIND MORE INFORMATION

     We are subject to the informational requirements of the Exchange Act and in accordance therewith file periodic reports, proxy statements and other information with the SEC relating to our business, financial condition and other matters. We are required to disclose in such proxy statements certain information, as of particular dates, concerning our directors and officers, their remuneration, stock options granted to them, the principal holders of our securities and any material interest of such persons in transactions with us. Such reports, proxy statements and other information may be inspected at the SEC’s public reference facilities at Room 1024 — Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can also be obtained at prescribed rates by writing to the SEC’s Public Reference Section at the address set forth above, by calling (800) SEC-0330 or by accessing the SEC’s web site at www.sec.gov. Information contained in our web site is not part of this prospectus.

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$172,500,000

MENTOR GRAPHICS CORPORATION

6 7/8 % CONVERTIBLE SUBORDINATED NOTES DUE 2007

PROSPECTUS

     You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date of this prospectus. We are not making an offer of these securities in any state where the offer is not permitted.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following table sets forth the costs and expenses payable by the registrant in connection with the registration for resale of the 6 7/8 % Convertible Subordinated Notes due 2007. All of the amounts shown are estimates except the Securities and Exchange Commission (the “Commission”) registration fee.

		Amount
Commission Registration Fee		$	15,870
*Costs of Printing			10,000
*Legal Fees and Expenses			100,000
*Accounting Fees and Expenses			30,000
*Miscellaneous Expenses			4,130
	*Total	$	160,000

*Estimated

ITEM 15. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     We are an Oregon corporation. Article V of our bylaws indemnifies directors and officers to the fullest extent permitted by the Oregon Business Corporation Act (the “Act”). The effects of Article V are summarized as follows:

(a)	The Article grants a right of indemnification in respect of any action, suit, or proceeding (other than an action by or in the right of Mentor) against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred, if the persons concerned acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of Mentor, and, with respect to any criminal action or proceeding had no reasonable cause to believe the conduct was unlawful. The termination of an action, suit or proceeding by judgment, order, settlement, conviction, or plea of nolo contendere does not, of itself, create a presumption that the person did not meet the required standards of conduct.
(b)	The Article grants a right of indemnification in respect of any action or suit by or in the right of Mentor against the expenses (including attorneys’ fees) actually and reasonably incurred if the person concerned acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of Mentor, except that no right of indemnification will be granted if the person is adjudged to be liable to us.
(c)	Every person who has been wholly successful on the merits of a controversy described in (a) or (b) above is entitled to indemnification as a matter of right.
(d)	We are required to promptly indemnify a director or officer unless it is determined by a majority of disinterested directors or by independent counsel that the person’s actions did not meet the relevant standard for indemnification. If the disinterested directors or independent counsel determine that indemnification is not required, the person seeking indemnification may petition a court for an independent determination. In any court action, we will have the burden of proving that indemnification would not be proper. Neither the disinterested directors’ failure to make a determination regarding indemnification for the claim nor an actual determination that the person failed to meet the applicable standard will be a defense to such action or create a presumption that the person is not entitled to indemnification.
(e)	We will advance to a director or officer the expenses incurred in defending any action, suit or proceeding in advance of its final disposition if the director or officer affirms in good faith that he or she is entitled to indemnification and undertakes to repay any amount advanced if it is determined by a court that the person is not entitled to indemnification.
(f)	We may obtain insurance for the protection of its directors and officers against any liability asserted against them in their official capacities.

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     The rights of indemnification described above are not exclusive of any other rights of indemnification to which the persons indemnified may be entitled under any bylaw, agreement, vote of shareholders or directors or otherwise.

     We have also entered into Indemnity Agreements with all directors and officers. While the Indemnity Agreements in large part incorporate the indemnification provisions of the Act as described above, they vary from the Act in several respects. The Indemnity Agreements obligate us to provide the maximum indemnification protection allowed under Oregon law, which is intended to provide indemnification broader than that expressly authorized by the Act. The most significant effect of the Indemnity Agreements is to add indemnification for judgments and settlements of derivative lawsuits to the fullest extent permitted by law as may be limited by public policy considerations applied by the courts.

ITEM 16. INDEX TO EXHIBITS.

Number	Exhibit
3.1	Restated Articles of Incorporation of the Registrant, as amended. Incorporated by reference to Exhibit 4A to Mentor Graphics’ Registration Statement on Form S-3 (Registration No. 33-23024) and Exhibit 3B to Mentor Graphics’ Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
3.2	Bylaws of the Registrant. Incorporated by reference to Exhibit 3C to Mentor Graphics’ Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
4.1	Rights Agreement, dated as of February 10, 1999, between Mentor Graphics Corporation and American Stock, Transfer & Trust Co. Incorporated by reference to Exhibit 4.1 to Mentor Graphics’ Current Report on Form 8-K filed on February 19, 1999.
4.2	Indenture dated as of June 3, 2002. Incorporated by reference to Exhibit 4B to Mentor Graphics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
4.3	Form of Mentor Graphics Corporation 6 7/8% Convertible Subordinated Note Due 2007.
4.4	Registration Rights Agreement dated as of June 3, 2002. Incorporated by reference to Exhibit 4C to Mentor Graphics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
5.1	Opinion of Latham & Watkins.
5.2	Opinion of Dean M. Freed.
12.1	Statement of Computation of Ratios.
23.1	Consent of KPMG LLP.
23.2	Consent of Deloitte & Touche LLP.
23.3	Consent of Ernst & Young LLP, Independent Auditors.
23.4	Consent of Latham & Watkins (included in Exhibit 5.1).
23.5	Consent of Dean M. Freed (included in Exhibit 5.2).
24.1	Power of Attorney (incorporated by reference in the signature page to the Registration Statement).
25.1	Statement of Eligibility under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee of Wilmington Trust Company (Form T-1).

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

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     (1)  To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;

     (i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

     (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

     (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.

     (2)  That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b)  The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c)  Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilsonville, State of Oregon on this 28th day of August, 2002.

MENTOR GRAPHICS CORPORATION
By:
	/s/ Dean M. Freed
	Dean M. Freed Vice President and General Counsel

POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Dean M. Freed and Dennis Weldon, and each of them, with full power of substitution and full power to act without the other, such person’s true and lawful attorney-in-fact and agent to act for such person in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any related registration statement filed pursuant to Rule 462(b) under the Securities Act, and to file this registration statement, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in order to effectuate the same as fully, to all intents and purposes, as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on August  28, 2002.

Signature	Title
/s/ Walden C. Rhines Walden C. Rhines	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
/s/ Gregory K. Hinckley Gregory K. Hinckley	President and Chief Operating Officer (Principal Financial Officer)
/s/ Anthony B. Adrian Anthony B. Adrian	Vice President, Corporate Controller (Principal Accounting Officer)
/s/ Sir Peter Bonfield Sir Peter Bonfield	Director
/s/ Marsha B. Congdon Marsha B. Congdon	Director
/s/ James R. Fiebiger James R. Fiebiger	Director
/s/ Kevin C. McDonough Kevin C. McDonough	Director
/s/ Fontaine K. Richardson Fontaine K. Richardson	Director

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EXHIBIT INDEX

Number	Exhibit
3.1	Restated Articles of Incorporation of the Registrant, as amended. Incorporated by reference to Exhibit 4A to Mentor Graphics’ Registration Statement on Form S-3 (Registration No. 33-23024) and Exhibit 3B to Mentor Graphics’ Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
3.2	Bylaws of the Registrant. Incorporated by reference to Exhibit 3C to Mentor Graphics’ Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
4.1	Rights Agreement, dated as of February 10, 1999, between Mentor Graphics Corporation and American Stock, Transfer & Trust Co. Incorporated by reference to Exhibit 4.1 to Mentor Graphics’ Current Report on Form 8-K filed on February 19, 1999.
4.2	Indenture dated as of June 3, 2002. Incorporated by reference to Exhibit 4B to Mentor Graphics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
4.3	Form of Mentor Graphics Corporation 6 7/8% Convertible Subordinated Note Due 2007.
4.4	Registration Rights Agreement dated as of June 3, 2002. Incorporated by reference to Exhibit 4C to Mentor Graphics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
5.1	Opinion of Latham & Watkins.
5.2	Opinion of Dean M. Freed.
12.1	Statement of Computation of Ratios.
23.1	Consent of KPMG LLP.
23.2	Consent of Deloitte & Touche LLP.
23.3	Consent of Ernst & Young LLP, Independent Auditors.
23.4	Consent of Latham & Watkins (included in Exhibit 5.1).
23.5	Consent of Dean M. Freed (included in Exhibit 5.2).
24.1	Power of Attorney (incorporated by reference in the signature page to the Registration Statement).
25.1	Statement of Eligibility under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee of Wilmington Trust Company (Form T-1).

II-5 EX-4.3 3 f84046exv4w3.txt EXHIBIT 4.3 EXHIBIT 4.3 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. MENTOR GRAPHICS CORPORATION 6 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2007 CUSIP: 587200AB2 No. R-1 $172,500,000 Mentor Graphics Corporation, a corporation duly organized and validly existing under the laws of the State of Oregon (herein called the "COMPANY", which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to Cede & Co., or registered assigns, the principal sum of one hundred seventy-two million five hundred thousand dollars ($172,500,000) on June 15, 2007, at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semi-annually on June 15 and December 15 of each year, commencing December 15, 2002, on said principal sum at said office or agency, in like coin or currency, at the rate per annum of 6 7/8%, from the most recent date to which interest has been paid or duly provided for, or if no interest has been paid or duly provided for, from June 3, 2002, until payment of said principal sum has been made or duly provided for. Except as otherwise provided in the Indenture, the interest payable on the Note pursuant to the Indenture on any June 15 or December 15 will be paid to the Person entitled thereto as it appears in the Note register at the close of business on the record date, which shall be the June 1 or December 1 (whether or not a Business Day) next preceding such June 15 or December 15, as provided in the Indenture; provided, however, that any such interest not punctually paid or duly provided for shall be payable as provided in the Indenture. Interest may, at the option of the Company, be paid either (i) by check mailed to the registered address of such Person (provided that the holder of Notes with an aggregate principal amount in excess of $5,000,000 shall, at the written election of such holder, be paid by wire transfer of immediately available funds) or (ii) by transfer to an account maintained by such Person located in the United States; provided, however, that payments to the Depositary will be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions subordinating the payment of principal of and premium, if any, and interest on the Notes to the prior payment in full of all Senior Debt, as defined in the Indenture, and provisions giving the holder of this Note the right to convert this Note into Common Stock of the Company on the terms and subject to the limitations referred to on the reverse hereof and as more fully specified in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of laws. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed. MENTOR GRAPHICS CORPORATION By: -------------------------------------- Name: Gregory K. Hinckley Title: President Attest: ---------------------------------- Name: Dean M. Freed Title: Secretary Date: __________, 2002 2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-named Indenture. WILMINGTON TRUST COMPANY, as Trustee By: ----------------------------- Name: Title: By: ----------------------------- As Authenticating Agent (if different from Trustee) 3 FORM OF REVERSE OF NOTE MENTOR GRAPHICS CORPORATION 6 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2007 This Note is one of a duly authorized issue of Notes of the Company, designated as its 6 7/8% Convertible Subordinated Notes Due 2007 (herein called the "NOTES"), limited to the aggregate principal amount of $172,500,000 all issued or to be issued under and pursuant to an Indenture dated as of June 3, 2002 (herein called the "INDENTURE"), between the Company and Wilmington Trust Company, as trustee (herein called the "TRUSTEE"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes. In case an Event of Default (as defined in the Indenture) shall have occurred and be continuing, the principal of, premium, if any, and accrued interest (including Liquidated Damages (as defined in the Registration Rights Agreement), if any) on all Notes may be declared by either the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Note; (ii) reduce the rate or extend the time of payment of interest or Liquidated Damages on any Note; (iii) reduce the principal amount of any Note or premium, if any, thereon, or reduce any amount payable on redemption or repurchase thereof or reduce the amount of Liquidated Damages payable thereon; (iv) impair the right of any Noteholder to institute suit for any payment on a Note or with respect to the conversion of a Note; (v) make the principal of any Note or interest or premium, if any, or Liquidated Damages on any Note payable in any coin or currency other than that provided in the Notes; (vi) modify the provisions of this Indenture with respect to the redemption of the Notes in a manner adverse to the Noteholders in any material respect; (vii) change the obligation of the Company to repurchase any Note upon the happening of a Change of Control in a manner adverse to the holder of Notes; (viii) impair the right to convert the Notes into Common Stock subject to the terms set forth herein without the consent of the holder of each Note so affected; (ix) alter the manner of calculation or rate of accrual of Liquidated Damages on any Note or extend the time for payment of such amount; or (x) reduce the percentage of Notes, the holders of which are required to consent to any supplemental indenture or the percentage of Notes or the holders of which are required for any other waiver under the Indenture. Subject to the provisions of the Indenture, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the holders of all of the Notes waive any past default or Event of Default under the Indenture and its consequences except a default in the payment of interest (including Liquidated Damages, if any) or any premium on, or the principal of, any of the Notes, or a failure by the Company to convert any Notes into Common Stock of the Company, or a default in the payment of the redemption price pursuant to Article 3 of the Indenture, or a default in respect of a covenant or provisions of the Indenture which under Article 11 of 4 the Indenture cannot be modified without the consent of the holders of each or all Notes then outstanding or affected thereby. Any such consent or waiver by the holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Note and any Notes which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Note or such other Notes. The indebtedness evidenced by the Notes is, to the extent and in the manner provided in the Indenture, expressly subordinated and subject in right of payment to the prior payment in full of all Senior Debt of the Company, whether outstanding at the date of the Indenture or thereafter incurred, and this Note is issued subject to the provisions of the Indenture with respect to such subordination. Each holder of this Note, by accepting the same, agrees to and shall be bound by such provisions and authorizes the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and appoints the Trustee his attorney-in-fact for such purpose. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest (including Liquidated Damages, if any) on this Note at the place, at the respective times, at the rate and in the coin or currency herein prescribed. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are issuable in fully registered form, without coupons, in denominations of $1,000 principal amount and any integral multiple of $1,000. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration or exchange of Notes, Notes may be exchanged for a like aggregate principal amount of Notes of any other authorized denominations. The Notes will not be redeemable at the option of the Company prior to June 20, 2005. At any time on or after June 20, 2005, and prior to maturity, the Notes may be redeemed at the option of the Company, in whole or in part, upon mailing a notice of such redemption not less than 20 days but not more than 60 days before the date fixed for redemption to the holders of Notes at their last registered addresses, all as provided in the Indenture, at the following optional redemption prices (expressed as percentages of the principal amount), together in each case with accrued and unpaid interest (including Liquidated Damages, if any) to, but excluding, the date fixed for redemption:

Period Redemption Price - ------ ---------------- Beginning on June 20, 2005 and ending on June 14, 2006 102.750% Beginning on June 15, 2006 and ending on June 14, 2007 101.375%

and 100% on June 15, 2007; provided, however, that if the date fixed for redemption is on a June 15 or December 15, then the interest payable on such date shall be paid to the holder of record on the preceding June 1 or December 1, respectively. 5 The Company may not give notice of any redemption of the Notes if a default in the payment of interest or premium, if any, on the Notes has occurred and is continuing. The Notes are not subject to redemption through the operation of any sinking fund. If a Change of Control occurs at any time prior to maturity of the Notes, the holders of the Notes shall have the right to require the Company to repurchase, at such holders' option, all of such holders' Notes, or any portion thereof that is an integral multiple of $1,000 principal amount, on the Repurchase Date (as defined in the Indenture), at a repurchase price equal to 100% of the principal amount thereof, together with accrued interest (and Liquidated Damages (as defined in the Indenture), if any) to, but excluding, the date of repurchase; provided, however, that, if such Repurchase Date is a June 15 or December 15, the interest payable on such date shall be paid to the holder of record of the Notes on the preceding June 1 or December 1, respectively. The Company shall mail to all holders of record of the Notes a notice of the occurrence of a Change of Control and of the repurchase right arising as a result thereof on or before the 10th day after the occurrence of such Change of Control. For a Note to be so repurchased at the option of the holder, the Company must receive at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, such Note with the form entitled "Option to Elect Repayment Upon a Change of Control" on the reverse thereof duly completed, together with such Note, duly endorsed for transfer, on or before the close of business on the Business Day that is five (5) Business Days prior to the Repurchase Date. Subject to the provisions of the Indenture, the holder hereof has the right, at its option, at any time after the original issuance of any Notes through the close of business on the final maturity date of the Notes, or, as to all or any portion hereof called for redemption, prior to the close of business on the Business Day immediately preceding the date fixed for redemption (unless the Company shall default in payment due upon redemption thereof), to convert the principal hereof or any portion of such principal which is $1,000 or an integral multiple thereof into that number of shares of the Company's Common Stock (as such shares shall be constituted at the date of conversion) obtained by dividing the principal amount of this Note or portion thereof to be converted by the Conversion Price of $23.27, as may adjusted from time to time as provided in the Indenture, upon surrender of this Note, together with a conversion notice as provided in the Indenture (the form entitled "CONVERSION NOTICE" on the reverse hereof), to the Company at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, or at the option of such holder, the Corporate Trust Office, and, unless the shares issuable on conversion are to be issued in the same name as this Note, duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the holder or by his duly authorized attorney. No adjustment in respect of interest on any Note converted or dividends on any shares issued upon conversion of such Note will be made upon any conversion except as set forth in the next sentence. If this Note (or portion hereof) is surrendered for conversion during the period from the close of business on any record date for the payment of interest to the close of business on the Business Day preceding the following interest payment date and either (x) has not been called for redemption on a redemption date that occurs during such period or (y) is not to be redeemed in connection with a Change of Control on a Repurchase Date that occurs during such period, this Note (or portion hereof being converted) must be accompanied by an amount, in New York Clearing House funds or other funds acceptable to the Company, equal to the interest payable on such interest payment date on the principal amount being converted; provided, however, that no such payment shall be required if there shall exist at the time of conversion a default in the payment of interest on the Notes. No fractional shares will be issued upon any conversion, but an adjustment and 6 payment in cash will be made, as provided in the Indenture, in respect of any fraction of a share which would otherwise be issuable upon the surrender of any Note or Notes for conversion. A Note in respect of which a holder is exercising its right to require redemption upon a Change of Control may be converted only if such holder withdraws its election to exercise such right in accordance with the terms of the Indenture. Any Notes called for redemption, unless surrendered for conversion by the holders thereof on or before the close of business on the Business Day preceding the date fixed for redemption, may be deemed to be redeemed from the holders of such Notes for an amount equal to the applicable redemption price, together with accrued but unpaid interest (including Liquidated Damages, if any) to (but excluding) the date fixed for redemption, by one or more investment banks or other purchasers who may agree with the Company (i) to purchase such Notes from the holders thereof and convert them into shares of the Company's Common Stock and (ii) to make payment for such Notes as aforesaid to the Trustee in trust for the holders. Upon due presentment for registration of transfer of this Note at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange thereof; subject to the limitations provided in the Indenture, without charge except for any tax, assessment or other governmental charge imposed in connection therewith. The Company, the Trustee, any authenticating agent, any paying agent, any conversion agent and any Note registrar may deem and treat the registered holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon made by anyone other than the Company or any Note registrar) for the purpose of receiving payment hereof, or on account hereof, for the conversion hereof and for all other purposes, and neither the Company nor the Trustee nor any other authenticating agent nor any paying agent nor other conversion agent nor any Note registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered holder shall, to the extent of the sum or sums paid, satisfy and discharge liability for monies payable on this Note. No recourse for the payment of the principal of or any premium or interest on this Note, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any supplemental indenture or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer or director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note shall be deemed to be a contract made under the laws of New York, and for all purposes shall be construed in accordance with the laws of New York, without regard to principles of conflicts of laws. Terms used in this Note and defined in the Indenture are used herein as therein defined. ABBREVIATIONS 7 The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common UNIF GIFT MIN ACT - _______ Custodian ______ TEN ENT - as tenant by the entireties (Cust) (Minor) JT TEN - as joint tenants with right under Uniform Gifts to Minors Act of survivorship and not as ____________________________ tenants in common (state) Additional abbreviations may also be used though not in the above list. 8 CONVERSION NOTICE TO: MENTOR GRAPHICS CORPORATION The undersigned registered owner of this Note hereby irrevocably exercises the option to convert this Note, or the portion thereof (which is $1,000 or an integral multiple thereof) below designated, into shares of Common Stock of Mentor Graphics Corporation in accordance with the terms of the Indenture referred to in this Note, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If shares or any portion of this Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will provide the appropriate information below and pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest accompanies this Note. Dated: _______________ _________________________________________ _________________________________________ Signature(s) Signature(s) must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION" meeting the requirements of the Note registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by the Note registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. _________________________________________ Signature Guarantee _______________________________________________________________________________ Fill in the registration of shares of Common Stock if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder: 9 _________________________________ (Name) _________________________________ (Street Address) _________________________________ (City, State and Zip Code) _________________________________ Please print name and address Principal amount to be converted (if less than all): $________________________________ Social Security or Other Taxpayer Identification Number: _________________________________ 10 OPTION TO ELECT REPAYMENT UPON A CHANGE OF CONTROL TO: MENTOR GRAPHICS CORPORATION The undersigned registered owner of this Note hereby irrevocably acknowledges receipt of a notice from Mentor Graphics Corporation (the "COMPANY") as to the occurrence of a Change of Control with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is $1,000 or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Note at the price of 100% of such entire principal amount or portion thereof, together with accrued interest to, but excluding, such repayment date, to the registered holder hereof. Dated: _______________ _________________________________________ _________________________________________ Signature(s) NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. Principal amount to be repaid (if less than all): $________________________________________ _________________________________________ Social Security or Other Tax Identification Number 11 ASSIGNMENT For value received ____________________________________________ hereby sell(s) assign(s) and transfer(s) unto ______________________________ (Please insert social security or other Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints ____________________________________ attorney to transfer said Note on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the Note within the United States or to, or for the account of, U.S. persons and within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision) (other than any transfer pursuant to a registration statement that has been declared effective under the Securities Act), the undersigned confirms that such Note is being transferred: [ ] To Mentor Graphics Corporation or a subsidiary thereof; or [ ] To a "qualified institutional buyer" pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or [ ] To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or [ ] Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; [ ] Pursuant to a registration statement which has been declared effective under the Securities Act of 1933, as amended, and which continues to be effective at the time of such transfer; and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "AFFILIATE" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "AFFILIATE"). [ ] The transferee is an Affiliate of the Company. Dated: _____________ 12 _________________________________________ _________________________________________ Signature(s) must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION" meeting the requirements of the Note registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be determined by the Note registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. _________________________________________ Signature Guarantee NOTICE: The signature of the conversion notice, the option to elect repayment upon a Change of Control or the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. 13 EX-5.1 4 f84046exv5w1.txt EXHIBIT 5.1 EXHIBIT 5.1 Latham & Watkins 505 Montgomery Street, Suite 1900 San Francisco, California 94111 (415) 391-0600 August 28, 2002 FILE NO. 025960-0030 Mentor Graphics Corporation 8005 SW Boeckman Road Wilsonville, Oregon 97070-7777 Re: Mentor Graphics Corporation $172,500,000 Aggregate Principal Amount of 6 7/8% Convertible Subordinated Notes Due 2007 Ladies and Gentlemen: In connection with the registration of $172,500,000 aggregate principal amount of 6 7/8% Convertible Subordinated Notes Due 2007 by Mentor Graphics Corporation, an Oregon corporation (the "Company"), under the Securities Act of 1933, as amended, on Form S-3 filed with the Securities and Exchange Commission on August 28, 2002 (the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The Notes have been issued pursuant to an indenture dated June 3, 2002 (the "Indenture") by and between the Company and Wilmington Trust Company, as trustee (the "Trustee"). Capitalized terms used herein without definition have the meanings assigned to them in the Indenture. In our capacity as your counsel in connection with such registration, we are familiar with the proceedings taken by the Company in connection with the authorization and issuance of the Notes. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals and copies certified or otherwise identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any other local agencies within any state. Dean M. Freed has separately provided to you an opinion with respect to the due incorporation, valid existence and good standing of the Company and the authorization, execution and delivery of the Notes. With your permission and the permission of Dean M. Freed, we have assumed that such opinion is correct. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, the Notes constitute legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. Mentor Graphics Corporation August 28, 2002 Page 2 The opinions rendered in the paragraph above relating to the enforceability of the Notes are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting the rights or remedies of creditors and (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefore may be brought. To the extent that the obligations of the Company under the Indenture may be dependent upon such matters, we assume for purposes of this opinion that the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the legally valid, binding and enforceable obligation of the Trustee enforceable against the Trustee in accordance with its terms; that the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters." Very truly yours, /s/ Latham & Watkins EX-5.2 5 f84046exv5w2.txt EXHIBIT 5.2 EXHIBIT 5.2 [MENTOR GRAPHICS LETTERHEAD] August 28, 2002 Mentor Graphics Corporation 8005 SW Boeckman Road Wilsonville, Oregon 97070-7777 Re: Mentor Graphics Corporation $172,500,000 Aggregate Principal Amount of 6 7/8% Convertible Subordinated Notes Due 2007 Ladies and Gentlemen: In connection with the registration of $172,500,000 aggregate principal amount of 6 7/8% Convertible Subordinated Notes Due 2007 (the "Notes") by Mentor Graphics Corporation, an Oregon corporation (the "Company"), under the Securities Act of 1933, as amended, on Form S-3 filed with the Securities and Exchange Commission on August 28, 2002 (the "Registration Statement"), you have requested my opinion with respect to the matters set forth below. In my capacity as Vice President and General Counsel of the Company in connection with such registration, I am familiar with the proceedings taken and proposed to be taken by the Company in connection with the authorization and issuance of the Notes. In addition, I have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to my satisfaction of such documents, corporate records and instruments, as I have deemed necessary or appropriate for purposes of this opinion. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, and the conformity to authentic original documents of all documents submitted to me as copies. I am opining herein as to the effect on the subject transaction only of the internal laws of the State of Oregon, and I express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to matters of municipal law or the laws of any local agencies within any state. Subject to the foregoing, it is my opinion that as of the date hereof: 1. The Notes have been duly authorized, executed and delivered by the Company. 2. The shares of the Company's common stock issuable upon conversion of the Notes have been duly authorized, and when issued upon conversion of the Notes in accordance with the terms of the Indenture and the Notes, will be validly issued, fully paid and nonassessable. I consent to your filing this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ DEAN M. FREED ----------------------------------- Dean M. Freed Vice President and General Counsel Mentor Graphics Corporation EX-12.1 6 f84046exv12w1.txt EXHIBIT 12.1 Exhibit 12.1 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS) RATIO OF EARNINGS TO FIXED CHARGES:

FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30, --------------------------------------------------------- ----------------------- 1997 1998 1999 2000 2001 2001 2002 --------------------------------------------------------- ----------------------- Interest expense $ 555 $ 768 $ 993 $ 2,034 $ 2,023 $ 898 $ 1,259 Capitalized interest -- -- -- -- -- -- -- Amortization of premiums, discounts and capitalized expenses related to indebtedness -- 166 195 310 185 93 244 Estimated interest portion of rental expense 6,526 7,201 7,115 7,286 6,961 3,480 3,689 --------------------------------------------------------- ----------------------- Fixed charges $ 7,081 $ 8,135 $ 8,303 $ 9,630 $ 9,169 $ 4,471 $ 5,192 ========================================================= ======================= Income (loss) before income taxes $(33,051) $ 21 $ 2,869 $ 70,496 $ 38,871 $ 37,378 $(33,261) Fixed charges 7,081 8,135 8,303 9,630 9,169 4,471 5,192 Less: interest charges capitalized 0 0 0 0 0 0 0 Amortization of capitalized interest 0 0 0 0 0 0 0 --------------------------------------------------------- ----------------------- Earnings (loss) $(25,970) $ 8,156 $ 11,172 $ 80,126 $ 48,040 $ 41,849 $(28,069) ========================================================= ======================= Ratio of earnings to fixed charges * 1.00x 1.35x 8.32x 5.24x 9.36x *

*Earnings are inadequate to cover fixed charges in these periods. The earnings deficiency for the year ended December 31, 1997 is $33,051 and for the six months ended June 30, 2002 is $33,261. EX-23.1 7 f84046exv23w1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Stockholders Mentor Graphics Corporation: We consent to incorporation by reference herein of our reports dated May 24, 2002, relating to the consolidated balance sheets of Mentor Graphics Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 2001, which reports appear in the December 31, 2001 annual report on Form 10-K/A of Mentor Graphics Corporation, and to the reference to our Firm under the heading "Experts" in the prospectus. /s/ KPMG LLP Portland, Oregon August 28, 2002 EX-23.2 8 f84046exv23w2.txt EXHIBIT 23.2 EXHIBIT 23.2 CONSENT DELOITTE & TOUCHE LLP We consent to the incorporation by reference in this Registration Statement of Mentor Graphics Corporation on Form S-3 of our report dated January 28, 2002, relating to the consolidated financial statements of Innoveda Inc. as of December 29, 2001 and December 30, 2000 and for each of the three years in the period ended December 29, 2001, appearing in the Current Report on Form 8-K of Mentor Graphics Corporation dated May 29, 2002, and to the reference to us under the heading "Experts" in the Prospectus, which is part of such Registration Statement. /s/ Deloitte & Touche LLP Boston, Massachusetts August 28, 2002 EX-23.3 9 f84046exv23w3.txt EXHIBIT 23.3 EXHIBIT 23.3 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of Mentor Graphics Corporation for the registration of 6 7/8% Convertible Subordinated Notes Due 2007 and 7,412,978 shares of its common stock and to the incorporation by reference therein of our report dated October 29, 2001 (except for the last six paragraphs of Note 11, as to which the date is December 14, 2001, and the last paragraph of Note 12, as to which the date is December 7, 2001), with respect to the consolidated financial statements of IKOS Systems, Inc. included in the Current Report on Form 8-K/A of Mentor Graphics Corporation filed with the Securities and Exchange Commission on May 29, 2002. /s/ Ernst & Young LLP San Jose, California August 28, 2002 EX-25.1 10 f84046exv25w1.txt EXHIBIT 25.1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) MENTOR GRAPHICS CORPORATION (Exact name of obligor as specified in its charter) Oregon 93-0786033 (State of incorporation) (I.R.S. employer identification no.) 8005 SW Boeckman Road Wilsonville, Oregon 97070-7777 (Address of principal executive offices) (Zip Code) 6 7/8% Convertible Subordinated Notes due 2007 (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 16. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 20th day of August, 2002. WILMINGTON TRUST COMPANY [SEAL] Attest: /s/ Joseph B. Feil By: /s/ Bruce L. Bisson ------------------------------------ ---------------------- Assistant Secretary Name: Bruce L. Bisson Title: Vice President 2 EXHIBIT A AMENDED CHARTER WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON MAY 9, 1987 AMENDED CHARTER OR ACT OF INCORPORATION OF WILMINGTON TRUST COMPANY WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY. SECOND: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. THIRD: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer 2 or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the 3 State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. FOURTH: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per 4 share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and 5 (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article FOURTH), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article FOURTH), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article FOURTH, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article FOURTH), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article FOURTH, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or 6 others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article FOURTH and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article FOURTH that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. FIFTH: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a 7 term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the By-Laws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special 8 meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. SIXTH: - The Directors shall choose such officers, agents and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. SEVENTH: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. EIGHTH: - This Act shall be deemed and taken to be a private Act. NINTH: - This Corporation is to have perpetual existence. TENTH: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. ELEVENTH: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. TWELFTH: - The Corporation may transact business in any part of the world. THIRTEENTH: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class). FOURTEENTH: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. FIFTEENTH: - (a) (1) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article FIFTEENTH: (A) any merger or consolidation of the Corporation or any Subsidiary (as 9 hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article FIFTEENTH shall mean any transaction which is referred to in any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article FIFTEENTH shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation or By-Laws if such business combination 10 has been approved by a majority of the whole Board. (c) For the purposes of this Article FIFTEENTH: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which 11 may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article FIFTEENTH on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,000,000 or more. (e) Nothing contained in this Article FIFTEENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. SIXTEENTH: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation. SEVENTEENTH: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder 12 with respect to any act or omission occurring prior to the time of such repeal or modification." 13 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE AS EXISTING ON FEBRUARY 20, 2000 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I STOCKHOLDERS' MEETINGS Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each share of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II DIRECTORS Section 1. The authorized number of directors that shall constitute the Board of Directors shall be fixed from time to time by or pursuant to a resolution passed by a majority of the Board within the parameters set by the Charter of the Bank. No more than two directors may also be employees of the Company or any affiliate thereof. Section 2. Except as provided in these Bylaws or as otherwise required by law, there shall be no qualifications for election or service as directors of the Company. In addition to any other provisions of these Bylaws, to be qualified for nomination for Election or appointment to the Board of Directors each person must have not attained the age of sixty nine years at the time of such election or appointment, provided however, the Nominating and Corporate Governance Committee may waive such qualification as to a particular candidate otherwise qualified to serve as a director upon a good faith determination by such committee that such a waiver is in the best interests of the Company and its stockholders. The Chairman of the Board of Directors shall not be qualified to continue to serve as a director upon the termination of his or her service in that office for any reason. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or divisions of the Company as it may deem advisable. 2 ARTICLE III COMMITTEES Section 1. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall 3 be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. Section 2. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 3. Compensation Committee (A) The Compensation Committee shall be composed of not more than five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 4. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. 4 (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 5. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE IV OFFICERS Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board of Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors. In the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the 5 Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, 6 the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V STOCK AND STOCK CERTIFICATES Section 1. Shares of stock shall be transferrable on the books of the Company and a transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificates of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI SEAL Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII FISCAL YEAR 7 Section 1. The fiscal year of the Company shall be the calendar year. ARTICLE VIII EXECUTION OF INSTRUMENTS OF THE COMPANY Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as though expressly authorized by the Board of Directors and/or the Executive Committee. ARTICLE IX COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X INDEMNIFICATION Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a 8 partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a Director or officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI AMENDMENTS TO THE BY-LAWS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 9 EXHIBIT C SECTION 321(b) CONSENT Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: August 20, 2002 By: /s/ Bruce L. Bisson --------------------- Name: Bruce L. Bisson Title: Vice President EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. REPORT OF CONDITION Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - ---------------------------------------------------------- -------------- Name of Bank City in the State of DELAWARE , at the close of business on June 30, 2002. ------------

ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins ............... 177,877 Interest-bearing balances ......................................... 0 Held-to-maturity securities ............................................... 14,797 Available-for-sale securities ............................................. 1,171,803 Federal funds sold in domestic offices .................................... 571,570 Securities purchased under agreements to resell ........................... 50,000 Loans and lease financing receivables: Loans and leases held for sale ............... 0 Loans and leases, net of unearned income ..... 5,334,137 LESS: Allowance for loan and lease losses ... 78,604 Loans and leases, net of unearned income, allowance, and reserve .. 5,255,533 Assets held in trading accounts ........................................... 0 Premises and fixed assets (including capitalized leases) .................. 127,429 Other real estate owned ................................................... 352 Investments in unconsolidated subsidiaries and associated companies ....... 1,410 Customers' liability to this bank on acceptances outstanding .............. 0 Intangible assets: a. Goodwill ...................................................... 157 b. Other intangible assets ....................................... 7,747 Other assets .............................................................. 134,258 Total assets .............................................................. 7,512,933

CONTINUED ON NEXT PAGE

LIABILITIES Deposits: In domestic offices........................................................... 6,006,028 Noninterest-bearing ............... 938,949 Interest-bearing .................. 5,067,079 Federal funds purchased in domestic offices .................................. 369,200 Securities sold under agreements to repurchase ............................... 164,046 Trading liabilities (from Schedule RC-D) ..................................... 0 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases: .......................................................... 330,267 Bank's liability on acceptances executed and outstanding ..................... 0 Subordinated notes and debentures ............................................ 0 Other liabilities (from Schedule RC-G) ....................................... 91,488 Total liabilities ............................................................ 6,961,029 EQUITY CAPITAL Perpetual preferred stock and related surplus ................................ 0 Common Stock ................................................................. 500 Surplus (exclude all surplus related to preferred stock) ..................... 62,118 a. Retained earnings ........................................................ 476,639 b. Accumulated other comprehensive income ................................... 12,647 Total equity capital ......................................................... 551,904 Total liabilities, limited-life preferred stock, and equity capital .......... 7,512,933

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EX-4.3

                                                                     EXHIBIT 4.3

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND
ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                           MENTOR GRAPHICS CORPORATION

                  6 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2007

                                                                CUSIP: 587200AB2

No. R-1                                                             $172,500,000

        Mentor Graphics Corporation, a corporation duly organized and validly
existing under the laws of the State of Oregon (herein called the "COMPANY",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of one hundred seventy-two million five
hundred thousand dollars ($172,500,000) on June 15, 2007, at the office or
agency of the Company maintained for that purpose in accordance with the terms
of the Indenture, in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts, and to pay interest, semi-annually on June 15 and December 15 of each
year, commencing December 15, 2002, on said principal sum at said office or
agency, in like coin or currency, at the rate per annum of 6 7/8%, from the most
recent date to which interest has been paid or duly provided for, or if no
interest has been paid or duly provided for, from June 3, 2002, until payment of
said principal sum has been made or duly provided for. Except as otherwise
provided in the Indenture, the interest payable on the Note pursuant to the
Indenture on any June 15 or December 15 will be paid to the Person entitled
thereto as it appears in the Note register at the close of business on the
record date, which shall be the June 1 or December 1 (whether or not a Business
Day) next preceding such June 15 or December 15, as provided in the Indenture;
provided, however, that any such interest not punctually paid or duly provided
for shall be payable as provided in the Indenture. Interest may, at the option
of the Company, be paid either (i) by check mailed to the registered address of
such Person (provided that the holder of Notes with an aggregate principal
amount in excess of $5,000,000 shall, at the written election of such holder, be
paid by wire transfer of immediately available funds) or (ii) by transfer to an
account maintained by such Person located in the United States; provided,
however, that payments to the Depositary will be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee.





        Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Debt, as defined in the Indenture, and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.

        This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York, without regard to principles
of conflicts of laws.

        This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.

        IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.

                             MENTOR GRAPHICS CORPORATION


                             By:
                                --------------------------------------
                             Name: Gregory K. Hinckley
                             Title:   President

                             Attest:
                                    ----------------------------------
                             Name: Dean M. Freed
                             Title:   Secretary

Date:  __________, 2002



                                       2



TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Notes described in the within-named Indenture.

WILMINGTON TRUST COMPANY,
as Trustee

By:
   -----------------------------
     Name:
     Title:


By:
   -----------------------------
     As Authenticating Agent
     (if different from Trustee)



                                       3



                             FORM OF REVERSE OF NOTE

                           MENTOR GRAPHICS CORPORATION

                  6 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2007

        This Note is one of a duly authorized issue of Notes of the Company,
designated as its 6 7/8% Convertible Subordinated Notes Due 2007 (herein called
the "NOTES"), limited to the aggregate principal amount of $172,500,000 all
issued or to be issued under and pursuant to an Indenture dated as of June 3,
2002 (herein called the "INDENTURE"), between the Company and Wilmington Trust
Company, as trustee (herein called the "TRUSTEE"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.

        In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest (including Liquidated Damages (as defined in the Registration Rights
Agreement), if any) on all Notes may be declared by either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.

        The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note; (ii) reduce the rate or extend the time of payment
of interest or Liquidated Damages on any Note; (iii) reduce the principal amount
of any Note or premium, if any, thereon, or reduce any amount payable on
redemption or repurchase thereof or reduce the amount of Liquidated Damages
payable thereon; (iv) impair the right of any Noteholder to institute suit for
any payment on a Note or with respect to the conversion of a Note; (v) make the
principal of any Note or interest or premium, if any, or Liquidated Damages on
any Note payable in any coin or currency other than that provided in the Notes;
(vi) modify the provisions of this Indenture with respect to the redemption of
the Notes in a manner adverse to the Noteholders in any material respect; (vii)
change the obligation of the Company to repurchase any Note upon the happening
of a Change of Control in a manner adverse to the holder of Notes; (viii) impair
the right to convert the Notes into Common Stock subject to the terms set forth
herein without the consent of the holder of each Note so affected; (ix) alter
the manner of calculation or rate of accrual of Liquidated Damages on any Note
or extend the time for payment of such amount; or (x) reduce the percentage of
Notes, the holders of which are required to consent to any supplemental
indenture or the percentage of Notes or the holders of which are required for
any other waiver under the Indenture. Subject to the provisions of the
Indenture, the holders of a majority in aggregate principal amount of the Notes
at the time outstanding may on behalf of the holders of all of the Notes waive
any past default or Event of Default under the Indenture and its consequences
except a default in the payment of interest (including Liquidated Damages, if
any) or any premium on, or the principal of, any of the Notes, or a failure by
the Company to convert any Notes into Common Stock of the Company, or a default
in the payment of the redemption price pursuant to Article 3 of the Indenture,
or a default in respect of a covenant or provisions of the Indenture which under
Article 11 of



                                       4


the Indenture cannot be modified without the consent of the holders of each or
all Notes then outstanding or affected thereby. Any such consent or waiver by
the holder of this Note (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Note and any Notes which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Note or such other Notes.

        The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Debt of the Company, whether
outstanding at the date of the Indenture or thereafter incurred, and this Note
is issued subject to the provisions of the Indenture with respect to such
subordination. Each holder of this Note, by accepting the same, agrees to and
shall be bound by such provisions and authorizes the Trustee on its behalf to
take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.

        No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
(including Liquidated Damages, if any) on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.

        Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.

        The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At
the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.

        The Notes will not be redeemable at the option of the Company prior to
June 20, 2005. At any time on or after June 20, 2005, and prior to maturity, the
Notes may be redeemed at the option of the Company, in whole or in part, upon
mailing a notice of such redemption not less than 20 days but not more than 60
days before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
optional redemption prices (expressed as percentages of the principal amount),
together in each case with accrued and unpaid interest (including Liquidated
Damages, if any) to, but excluding, the date fixed for redemption:



Period                                                          Redemption Price
- ------                                                          ----------------
                                                             
Beginning on June 20, 2005 and ending on June 14, 2006              102.750%

Beginning on June 15, 2006 and ending on June 14, 2007              101.375%


and 100% on June 15, 2007; provided, however, that if the date fixed for
redemption is on a June 15 or December 15, then the interest payable on such
date shall be paid to the holder of record on the preceding June 1 or
December 1, respectively.



                                       5


        The Company may not give notice of any redemption of the Notes if a
default in the payment of interest or premium, if any, on the Notes has occurred
and is continuing.

        The Notes are not subject to redemption through the operation of any
sinking fund.

        If a Change of Control occurs at any time prior to maturity of the
Notes, the holders of the Notes shall have the right to require the Company to
repurchase, at such holders' option, all of such holders' Notes, or any portion
thereof that is an integral multiple of $1,000 principal amount, on the
Repurchase Date (as defined in the Indenture), at a repurchase price equal to
100% of the principal amount thereof, together with accrued interest (and
Liquidated Damages (as defined in the Indenture), if any) to, but excluding, the
date of repurchase; provided, however, that, if such Repurchase Date is a June
15 or December 15, the interest payable on such date shall be paid to the holder
of record of the Notes on the preceding June 1 or December 1, respectively. The
Company shall mail to all holders of record of the Notes a notice of the
occurrence of a Change of Control and of the repurchase right arising as a
result thereof on or before the 10th day after the occurrence of such Change of
Control. For a Note to be so repurchased at the option of the holder, the
Company must receive at the office or agency of the Company maintained for that
purpose in accordance with the terms of the Indenture, such Note with the form
entitled "Option to Elect Repayment Upon a Change of Control" on the reverse
thereof duly completed, together with such Note, duly endorsed for transfer, on
or before the close of business on the Business Day that is five (5) Business
Days prior to the Repurchase Date.

        Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, or, as to
all or any portion hereof called for redemption, prior to the close of business
on the Business Day immediately preceding the date fixed for redemption (unless
the Company shall default in payment due upon redemption thereof), to convert
the principal hereof or any portion of such principal which is $1,000 or an
integral multiple thereof into that number of shares of the Company's Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $23.27, as may adjusted from time to time as provided
in the Indenture, upon surrender of this Note, together with a conversion notice
as provided in the Indenture (the form entitled "CONVERSION NOTICE" on the
reverse hereof), to the Company at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, or at
the option of such holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Note, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney. No
adjustment in respect of interest on any Note converted or dividends on any
shares issued upon conversion of such Note will be made upon any conversion
except as set forth in the next sentence. If this Note (or portion hereof) is
surrendered for conversion during the period from the close of business on any
record date for the payment of interest to the close of business on the Business
Day preceding the following interest payment date and either (x) has not been
called for redemption on a redemption date that occurs during such period or (y)
is not to be redeemed in connection with a Change of Control on a Repurchase
Date that occurs during such period, this Note (or portion hereof being
converted) must be accompanied by an amount, in New York Clearing House funds or
other funds acceptable to the Company, equal to the interest payable on such
interest payment date on the principal amount being converted; provided,
however, that no such payment shall be required if there shall exist at the time
of conversion a default in the payment of interest on the Notes. No fractional
shares will be issued upon any conversion, but an adjustment and



                                       6


payment in cash will be made, as provided in the Indenture, in respect of any
fraction of a share which would otherwise be issuable upon the surrender of any
Note or Notes for conversion. A Note in respect of which a holder is exercising
its right to require redemption upon a Change of Control may be converted only
if such holder withdraws its election to exercise such right in accordance with
the terms of the Indenture. Any Notes called for redemption, unless surrendered
for conversion by the holders thereof on or before the close of business on the
Business Day preceding the date fixed for redemption, may be deemed to be
redeemed from the holders of such Notes for an amount equal to the applicable
redemption price, together with accrued but unpaid interest (including
Liquidated Damages, if any) to (but excluding) the date fixed for redemption, by
one or more investment banks or other purchasers who may agree with the Company
(i) to purchase such Notes from the holders thereof and convert them into shares
of the Company's Common Stock and (ii) to make payment for such Notes as
aforesaid to the Trustee in trust for the holders.

        Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.

        The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.

        No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.

        This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York, without regard to principles of conflicts of laws.

        Terms used in this Note and defined in the Indenture are used herein as
therein defined.

                                  ABBREVIATIONS



                                       7


        The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations.

                                       
TEN COM - as tenants in common            UNIF GIFT MIN ACT - _______ Custodian ______
TEN ENT - as tenant by the entireties                         (Cust)           (Minor)
JT TEN -  as joint tenants with right                         under Uniform Gifts to Minors Act
          of survivorship and not as                          ____________________________
          tenants in common                                             (state)




        Additional abbreviations may also be used though not in the above list.



                                       8


                                CONVERSION NOTICE

TO:     MENTOR GRAPHICS CORPORATION

        The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Mentor Graphics Corporation in accordance with the terms of the
Indenture referred to in this Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Notes representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this Note
not converted are to be issued in the name of a person other than the
undersigned, the undersigned will provide the appropriate information below and
pay all transfer taxes payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.

Dated: _______________

                                      _________________________________________

                                      _________________________________________
                                      Signature(s)

                                      Signature(s) must be guaranteed by an
                                      "ELIGIBLE GUARANTOR INSTITUTION" meeting
                                      the requirements of the Note registrar,
                                      which requirements include membership or
                                      participation in the Security Transfer
                                      Agent Medallion Program ("STAMP") or such
                                      other "SIGNATURE GUARANTEE PROGRAM" as may
                                      be determined by the Note registrar in
                                      addition to, or in substitution for,
                                      STAMP, all in accordance with the
                                      Securities Exchange Act of 1934, as
                                      amended.

                                      _________________________________________
                                      Signature Guarantee

_______________________________________________________________________________

        Fill in the registration of shares of Common Stock if to be issued, and
Notes if to be delivered, other than to and in the name of the registered
holder:



                                       9


_________________________________
(Name)

_________________________________
(Street Address)

_________________________________
(City, State and Zip Code)

_________________________________
Please print name and address

Principal amount to be converted
(if less than all):

$________________________________


Social Security or Other Taxpayer
Identification Number:

_________________________________


                                       10


                            OPTION TO ELECT REPAYMENT

                            UPON A CHANGE OF CONTROL

TO:     MENTOR GRAPHICS CORPORATION

        The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Mentor Graphics Corporation (the
"COMPANY") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the price of 100% of such entire principal
amount or portion thereof, together with accrued interest to, but excluding,
such repayment date, to the registered holder hereof.

Dated: _______________

                                      _________________________________________

                                      _________________________________________
                                       Signature(s)

                                          NOTICE: The above signatures of the
                                          holder(s) hereof must correspond with
                                          the name as written upon the face of
                                          the Note in every particular without
                                          alteration or enlargement or any
                                          change whatever.

                                          Principal amount to be repaid (if less
                                          than all):

                                      $________________________________________

                                      _________________________________________
                                       Social Security or Other
                                       Tax Identification Number



                                       11



                                   ASSIGNMENT

        For value received ____________________________________________ hereby
sell(s) assign(s) and transfer(s) unto ______________________________ (Please
insert social security or other Taxpayer Identification Number of assignee)
the within Note, and hereby irrevocably constitutes and appoints
____________________________________ attorney to transfer said Note on the books
of the Company, with full power of substitution in the premises.

        In connection with any transfer of the Note within the United States or
to, or for the account of, U.S. persons and within the period prior to the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Note is being transferred:

        [ ]    To Mentor Graphics Corporation or a subsidiary thereof; or

        [ ]    To a "qualified institutional buyer" pursuant to and in
               compliance with Rule 144A under the Securities Act of 1933, as
               amended; or

        [ ]    To an Institutional Accredited Investor pursuant to and in
               compliance with the Securities Act of 1933, as amended; or

        [ ]    Pursuant to and in compliance with Rule 144 under the Securities
               Act of 1933, as amended;

        [ ]    Pursuant to a registration statement which has been declared
               effective under the Securities Act of 1933, as amended, and which
               continues to be effective at the time of such transfer;

and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "AFFILIATE" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "AFFILIATE").

        [ ] The transferee is an Affiliate of the Company.

Dated: _____________




                                       12


                                      _________________________________________


                                      _________________________________________

                                      Signature(s) must be guaranteed by an
                                      "ELIGIBLE GUARANTOR INSTITUTION" meeting
                                      the requirements of the Note registrar,
                                      which requirements include membership or
                                      participation in the Security Transfer
                                      Agent Medallion Program ("STAMP") or such
                                      other "SIGNATURE GUARANTEE PROGRAM" as may
                                      be determined by the Note registrar in
                                      addition to, or in substitution for,
                                      STAMP, all in accordance with the
                                      Securities Exchange Act of 1934, as
                                      amended.

                                      _________________________________________
                                      Signature Guarantee

NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Change of Control or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.


                                       13

EX-5.1

                                                                     EXHIBIT 5.1

                                Latham & Watkins
                       505 Montgomery Street, Suite 1900
                        San Francisco, California 94111
                                 (415) 391-0600



                                 August 28, 2002

                                                            FILE NO. 025960-0030

Mentor Graphics Corporation
8005 SW Boeckman Road
Wilsonville, Oregon 97070-7777

               Re:    Mentor Graphics Corporation
                      $172,500,000 Aggregate Principal Amount of
                      6 7/8% Convertible Subordinated Notes Due 2007

Ladies and Gentlemen:

               In connection with the registration of $172,500,000 aggregate
principal amount of 6 7/8% Convertible Subordinated Notes Due 2007 by Mentor
Graphics Corporation, an Oregon corporation (the "Company"), under the
Securities Act of 1933, as amended, on Form S-3 filed with the Securities and
Exchange Commission on August 28, 2002 (the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below. The Notes
have been issued pursuant to an indenture dated June 3, 2002 (the "Indenture")
by and between the Company and Wilmington Trust Company, as trustee (the
"Trustee"). Capitalized terms used herein without definition have the meanings
assigned to them in the Indenture.

               In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken by the Company in
connection with the authorization and issuance of the Notes. In addition, we
have made such legal and factual examinations and inquiries, including an
examination of originals and copies certified or otherwise identified to our
satisfaction of such documents, corporate records and instruments, as we have
deemed necessary or appropriate for purposes of this opinion.

               In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.

               We are opining herein as to the effect on the subject transaction
only of the internal laws of the State of New York, and we express no opinion
with respect to the applicability thereto, or the effect thereon, of the laws of
any other jurisdiction or as to any matters of municipal law or the laws of any
other local agencies within any state. Dean M. Freed has separately provided to
you an opinion with respect to the due incorporation, valid existence and good
standing of the Company and the authorization, execution and delivery of the
Notes. With your permission and the permission of Dean M. Freed, we have assumed
that such opinion is correct.

               Subject to the foregoing and the other matters set forth herein,
it is our opinion that, as of the date hereof, the Notes constitute legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.





Mentor Graphics Corporation
August 28, 2002
Page 2


               The opinions rendered in the paragraph above relating to the
enforceability of the Notes are subject to the following exceptions, limitations
and qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to or affecting the rights or remedies of creditors and (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefore may be brought.

               To the extent that the obligations of the Company under the
Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee is
duly qualified to engage in the activities contemplated by the Indenture; that
the Indenture has been duly authorized, executed and delivered by the Trustee
and constitutes the legally valid, binding and enforceable obligation of the
Trustee enforceable against the Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as a trustee
under the Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.

               We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."

                                               Very truly yours,


                                               /s/ Latham & Watkins

EX-5.2

                                                                     EXHIBIT 5.2



                          [MENTOR GRAPHICS LETTERHEAD]


                                 August 28, 2002

Mentor Graphics Corporation
8005 SW Boeckman Road
Wilsonville, Oregon 97070-7777

                      Re:    Mentor Graphics Corporation
                             $172,500,000 Aggregate Principal Amount of
                             6 7/8% Convertible Subordinated Notes Due 2007

Ladies and Gentlemen:

               In connection with the registration of $172,500,000 aggregate
principal amount of 6 7/8% Convertible Subordinated Notes Due 2007 (the "Notes")
by Mentor Graphics Corporation, an Oregon corporation (the "Company"), under the
Securities Act of 1933, as amended, on Form S-3 filed with the Securities and
Exchange Commission on August 28, 2002 (the "Registration Statement"), you have
requested my opinion with respect to the matters set forth below.

               In my capacity as Vice President and General Counsel of the
Company in connection with such registration, I am familiar with the proceedings
taken and proposed to be taken by the Company in connection with the
authorization and issuance of the Notes. In addition, I have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to my satisfaction of such documents,
corporate records and instruments, as I have deemed necessary or appropriate for
purposes of this opinion.

               In my examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals, and
the conformity to authentic original documents of all documents submitted to me
as copies.

               I am opining herein as to the effect on the subject transaction
only of the internal laws of the State of Oregon, and I express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of any
other jurisdiction or as to matters of municipal law or the laws of any local
agencies within any state.

               Subject to the foregoing, it is my opinion that as of the date
hereof:

               1. The Notes have been duly authorized, executed and delivered
by the Company.

               2. The shares of the Company's common stock issuable upon
conversion of the Notes have been duly authorized, and when issued upon
conversion of the Notes in accordance with the terms of the Indenture and the
Notes, will be validly issued, fully paid and nonassessable.

               I consent to your filing this opinion as an exhibit to the
Registration Statement.

                                             Very truly yours,


                                             /s/ DEAN M. FREED
                                             -----------------------------------
                                             Dean M. Freed
                                             Vice President and General Counsel
                                             Mentor Graphics Corporation

EX-12.1

Exhibit 12.1


COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)

RATIO OF EARNINGS TO FIXED CHARGES:


                                                                                                              FOR THE SIX MONTHS
                                                             FOR THE YEAR ENDED DECEMBER 31,                     ENDED JUNE 30,
                                               ---------------------------------------------------------    -----------------------
                                                 1997         1998        1999        2000        2001        2001          2002
                                               ---------------------------------------------------------    -----------------------
                                                                                                      
Interest expense                               $    555     $    768    $    993    $  2,034    $  2,023    $    898       $  1,259
Capitalized interest                                 --           --          --          --          --          --             --
Amortization of premiums, discounts and
  capitalized expenses related to indebtedness       --          166         195         310         185          93            244
Estimated interest portion of rental expense      6,526        7,201       7,115       7,286       6,961       3,480          3,689
                                               ---------------------------------------------------------    -----------------------
Fixed charges                                  $  7,081     $  8,135    $  8,303    $  9,630    $  9,169    $  4,471       $  5,192
                                               =========================================================    =======================

Income (loss) before income taxes              $(33,051)    $     21    $  2,869    $ 70,496    $ 38,871    $ 37,378       $(33,261)
Fixed charges                                     7,081        8,135       8,303       9,630       9,169       4,471          5,192
Less: interest charges capitalized                    0            0           0           0           0           0              0
Amortization of capitalized interest                  0            0           0           0           0           0              0
                                               ---------------------------------------------------------    -----------------------
Earnings (loss)                                $(25,970)    $  8,156    $ 11,172    $ 80,126    $ 48,040    $ 41,849       $(28,069)
                                               =========================================================    =======================
Ratio of earnings to fixed charges                    *         1.00x       1.35x       8.32x       5.24x       9.36x             *


*Earnings are inadequate to cover fixed charges in these periods. The earnings
deficiency for the year ended December 31, 1997 is $33,051 and for the six
months ended June 30, 2002 is $33,261.

EX-23.1

                                                                    EXHIBIT 23.1

               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
Mentor Graphics Corporation:

We consent to incorporation by reference herein of our reports dated May 24,
2002, relating to the consolidated balance sheets of Mentor Graphics Corporation
and subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows and related
schedule for each of the years in the three-year period ended December 31, 2001,
which reports appear in the December 31, 2001 annual report on Form 10-K/A of
Mentor Graphics Corporation, and to the reference to our Firm under the heading
"Experts" in the prospectus.


/s/ KPMG LLP

Portland, Oregon
August 28, 2002

EX-23.2

                                                                    EXHIBIT 23.2

CONSENT DELOITTE & TOUCHE LLP

We consent to the incorporation by reference in this Registration Statement of
Mentor Graphics Corporation on Form S-3 of our report dated January 28, 2002,
relating to the consolidated financial statements of Innoveda Inc. as of
December 29, 2001 and December 30, 2000 and for each of the three years in the
period ended December 29, 2001, appearing in the Current Report on Form 8-K of
Mentor Graphics Corporation dated May 29, 2002, and to the reference to us under
the heading "Experts" in the Prospectus, which is part of such Registration
Statement.


/s/ Deloitte & Touche LLP

Boston, Massachusetts
August 28, 2002

EX-23.3

                                                                    EXHIBIT 23.3

               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Mentor Graphics
Corporation for the registration of 6 7/8% Convertible Subordinated Notes Due
2007 and 7,412,978 shares of its common stock and to the incorporation by
reference therein of our report dated October 29, 2001 (except for the last six
paragraphs of Note 11, as to which the date is December 14, 2001, and the last
paragraph of Note 12, as to which the date is December 7, 2001), with respect to
the consolidated financial statements of IKOS Systems, Inc. included in the
Current Report on Form 8-K/A of Mentor Graphics Corporation filed with the
Securities and Exchange Commission on May 29, 2002.

                                        /s/ Ernst & Young LLP

San Jose, California
August 28, 2002

EX-25.1

                                                                    EXHIBIT 25.1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM T-1

         STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
                  OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)

                            WILMINGTON TRUST COMPANY
               (Exact name of trustee as specified in its charter)


         Delaware                                       51-0055023
(State of incorporation)                    (I.R.S. employer identification no.)


                               Rodney Square North
                            1100 North Market Street
                           Wilmington, Delaware 19890
                    (Address of principal executive offices)

                               Cynthia L. Corliss
                        Vice President and Trust Counsel
                            Wilmington Trust Company
                               Rodney Square North
                           Wilmington, Delaware 19890
                                 (302) 651-8516
            (Name, address and telephone number of agent for service)


                           MENTOR GRAPHICS CORPORATION
               (Exact name of obligor as specified in its charter)


          Oregon                                        93-0786033
 (State of incorporation)                   (I.R.S. employer identification no.)

     8005 SW Boeckman Road
      Wilsonville, Oregon                               97070-7777
(Address of principal executive offices)                (Zip Code)


                 6 7/8% Convertible Subordinated Notes due 2007
                       (Title of the indenture securities)





ITEM 1.   GENERAL INFORMATION.

                Furnish the following information as to the trustee:

          (a)   Name and address of each examining or supervising authority to
                which it is subject.

                Federal Deposit Insurance Co.        State Bank Commissioner
                Five Penn Center                     Dover, Delaware
                Suite #2901
                Philadelphia, PA

          (b)   Whether it is authorized to exercise corporate trust powers.

                The trustee is authorized to exercise corporate trust powers.

ITEM 2.   AFFILIATIONS WITH THE OBLIGOR.

                If the obligor is an affiliate of the trustee, describe each
          affiliation:

                Based upon an examination of the books and records of the
          trustee and upon information furnished by the obligor, the obligor is
          not an affiliate of the trustee.

ITEM 16.  LIST OF EXHIBITS.

          List below all exhibits filed as part of this Statement of Eligibility
and Qualification.

          A.    Copy of the Charter of Wilmington Trust Company, which includes
                the certificate of authority of Wilmington Trust Company to
                commence business and the authorization of Wilmington Trust
                Company to exercise corporate trust powers.

          B.    Copy of By-Laws of Wilmington Trust Company.

          C.    Consent of Wilmington Trust Company required by Section 321(b)
                of Trust Indenture Act.

          D.    Copy of most recent Report of Condition of Wilmington Trust
                Company.

          Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 20th day
of August, 2002.

                                                   WILMINGTON TRUST COMPANY

[SEAL]

Attest:   /s/ Joseph B. Feil                       By: /s/ Bruce L. Bisson
       ------------------------------------           ----------------------
       Assistant Secretary                         Name:  Bruce L. Bisson
                                                   Title: Vice President



                                       2





                                    EXHIBIT A

                                 AMENDED CHARTER

                            WILMINGTON TRUST COMPANY

                              WILMINGTON, DELAWARE

                           AS EXISTING ON MAY 9, 1987





                                 AMENDED CHARTER
                                       OR
                              ACT OF INCORPORATION
                                       OF
                            WILMINGTON TRUST COMPANY

          WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:

          FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.

          SECOND: - The location of its principal office in the State of
          Delaware is at Rodney Square North, in the City of Wilmington, County
          of New Castle; the name of its resident agent is WILMINGTON TRUST
          COMPANY whose address is Rodney Square North, in said City. In
          addition to such principal office, the said corporation maintains and
          operates branch offices in the City of Newark, New Castle County,
          Delaware, the Town of Newport, New Castle County, Delaware, at
          Claymont, New Castle County, Delaware, at Greenville, New Castle
          County Delaware, and at Milford Cross Roads, New Castle County,
          Delaware, and shall be empowered to open, maintain and operate branch
          offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
          Street, and 3605 Market Street, all in the City of Wilmington, New
          Castle County, Delaware, and such other branch offices or places of
          business as may be authorized from time to time by the agency or
          agencies of the government of the State of Delaware empowered to
          confer such authority.

          THIRD: - (a) The nature of the business and the objects and purposes
          proposed to be transacted, promoted or carried on by this Corporation
          are to do any or all of the things herein mentioned as fully and to
          the same extent as natural persons might or could do and in any part
          of the world, viz.:

                (1) To sue and be sued, complain and defend in any Court of law
                or equity and to make and use a common seal, and alter the seal
                at pleasure, to hold, purchase, convey, mortgage or otherwise
                deal in real and personal estate and property, and to appoint
                such officers and agents as the business of the Corporation
                shall require, to make by-laws not inconsistent with the
                Constitution or laws of the United States or of this State, to
                discount bills, notes or other evidences of debt, to receive
                deposits of money, or securities for money, to buy gold and
                silver bullion and foreign coins, to buy and sell bills of
                exchange, and generally to use, exercise and enjoy all the
                powers, rights, privileges and franchises incident to a




                corporation which are proper or necessary for the transaction of
                the business of the Corporation hereby created.

                (2) To insure titles to real and personal property, or any
                estate or interests therein, and to guarantee the holder of such
                property, real or personal, against any claim or claims, adverse
                to his interest therein, and to prepare and give certificates of
                title for any lands or premises in the State of Delaware, or
                elsewhere.

                (3) To act as factor, agent, broker or attorney in the receipt,
                collection, custody, investment and management of funds, and the
                purchase, sale, management and disposal of property of all
                descriptions, and to prepare and execute all papers which may be
                necessary or proper in such business.

                (4) To prepare and draw agreements, contracts, deeds, leases,
                conveyances, mortgages, bonds and legal papers of every
                description, and to carry on the business of conveyancing in all
                its branches.

                (5) To receive upon deposit for safekeeping money, jewelry,
                plate, deeds, bonds and any and all other personal property of
                every sort and kind, from executors, administrators, guardians,
                public officers, courts, receivers, assignees, trustees, and
                from all fiduciaries, and from all other persons and
                individuals, and from all corporations whether state, municipal,
                corporate or private, and to rent boxes, safes, vaults and other
                receptacles for such property.

                (6) To act as agent or otherwise for the purpose of registering,
                issuing, certificating, countersigning, transferring or
                underwriting the stock, bonds or other obligations of any
                corporation, association, state or municipality, and may receive
                and manage any sinking fund therefor on such terms as may be
                agreed upon between the two parties, and in like manner may act
                as Treasurer of any corporation or municipality.

                (7) To act as Trustee under any deed of trust, mortgage, bond or
                other instrument issued by any state, municipality, body
                politic, corporation, association or person, either alone or in
                conjunction with any other person or persons, corporation or
                corporations.

                (8) To guarantee the validity, performance or effect of any
                contract or agreement, and the fidelity of persons holding
                places of responsibility or trust; to become surety for any
                person, or persons, for the faithful performance of any trust,
                office, duty, contract or agreement, either by itself or in
                conjunction with any other person, or persons, corporation, or
                corporations, or in like manner become surety upon any bond,
                recognizance, obligation, judgment, suit, order, or decree to be
                entered in any court of record within the State of Delaware or
                elsewhere, or which may now or hereafter be required by any law,
                judge, officer



                                       2


                or court in the State of Delaware or elsewhere.

                (9) To act by any and every method of appointment as trustee,
                trustee in bankruptcy, receiver, assignee, assignee in
                bankruptcy, executor, administrator, guardian, bailee, or in any
                other trust capacity in the receiving, holding, managing, and
                disposing of any and all estates and property, real, personal or
                mixed, and to be appointed as such trustee, trustee in
                bankruptcy, receiver, assignee, assignee in bankruptcy,
                executor, administrator, guardian or bailee by any persons,
                corporations, court, officer, or authority, in the State of
                Delaware or elsewhere; and whenever this Corporation is so
                appointed by any person, corporation, court, officer or
                authority such trustee, trustee in bankruptcy, receiver,
                assignee, assignee in bankruptcy, executor, administrator,
                guardian, bailee, or in any other trust capacity, it shall not
                be required to give bond with surety, but its capital stock
                shall be taken and held as security for the performance of the
                duties devolving upon it by such appointment.

                (10) And for its care, management and trouble, and the exercise
                of any of its powers hereby given, or for the performance of any
                of the duties which it may undertake or be called upon to
                perform, or for the assumption of any responsibility the said
                Corporation may be entitled to receive a proper compensation.

                (11) To purchase, receive, hold and own bonds, mortgages,
                debentures, shares of capital stock, and other securities,
                obligations, contracts and evidences of indebtedness, of any
                private, public or municipal corporation within and without the
                State of Delaware, or of the Government of the United States, or
                of any state, territory, colony, or possession thereof, or of
                any foreign government or country; to receive, collect, receipt
                for, and dispose of interest, dividends and income upon and from
                any of the bonds, mortgages, debentures, notes, shares of
                capital stock, securities, obligations, contracts, evidences of
                indebtedness and other property held and owned by it, and to
                exercise in respect of all such bonds, mortgages, debentures,
                notes, shares of capital stock, securities, obligations,
                contracts, evidences of indebtedness and other property, any and
                all the rights, powers and privileges of individual owners
                thereof, including the right to vote thereon; to invest and deal
                in and with any of the moneys of the Corporation upon such
                securities and in such manner as it may think fit and proper,
                and from time to time to vary or realize such investments; to
                issue bonds and secure the same by pledges or deeds of trust or
                mortgages of or upon the whole or any part of the property held
                or owned by the Corporation, and to sell and pledge such bonds,
                as and when the Board of Directors shall determine, and in the
                promotion of its said corporate business of investment and to
                the extent authorized by law, to lease, purchase, hold, sell,
                assign, transfer, pledge, mortgage and convey real and personal
                property of any name and nature and any estate or interest
                therein.

          (b) In furtherance of, and not in limitation, of the powers conferred
          by the laws of the



                                       3

          State of Delaware, it is hereby expressly provided that the said
          Corporation shall also have the following powers:

                (1) To do any or all of the things herein set forth, to the same
                extent as natural persons might or could do, and in any part of
                the world.

                (2) To acquire the good will, rights, property and franchises
                and to undertake the whole or any part of the assets and
                liabilities of any person, firm, association or corporation, and
                to pay for the same in cash, stock of this Corporation, bonds or
                otherwise; to hold or in any manner to dispose of the whole or
                any part of the property so purchased; to conduct in any lawful
                manner the whole or any part of any business so acquired, and to
                exercise all the powers necessary or convenient in and about the
                conduct and management of such business.

                (3) To take, hold, own, deal in, mortgage or otherwise lien, and
                to lease, sell, exchange, transfer, or in any manner whatever
                dispose of property, real, personal or mixed, wherever situated.

                (4) To enter into, make, perform and carry out contracts of
                every kind with any person, firm, association or corporation,
                and, without limit as to amount, to draw, make, accept, endorse,
                discount, execute and issue promissory notes, drafts, bills of
                exchange, warrants, bonds, debentures, and other negotiable or
                transferable instruments.

                (5) To have one or more offices, to carry on all or any of its
                operations and businesses, without restriction to the same
                extent as natural persons might or could do, to purchase or
                otherwise acquire, to hold, own, to mortgage, sell, convey or
                otherwise dispose of, real and personal property, of every class
                and description, in any State, District, Territory or Colony of
                the United States, and in any foreign country or place.

                (6) It is the intention that the objects, purposes and powers
                specified and clauses contained in this paragraph shall (except
                where otherwise expressed in said paragraph) be nowise limited
                or restricted by reference to or inference from the terms of any
                other clause of this or any other paragraph in this charter, but
                that the objects, purposes and powers specified in each of the
                clauses of this paragraph shall be regarded as independent
                objects, purposes and powers.

          FOURTH: - (a) The total number of shares of all classes of stock which
          the Corporation shall have authority to issue is forty-one million
          (41,000,000) shares, consisting of:

                (1) One million (1,000,000) shares of Preferred stock, par value
                $10.00 per share (hereinafter referred to as "Preferred Stock");
                and

                (2) Forty million (40,000,000) shares of Common Stock, par value
                $1.00 per



                                       4

                share (hereinafter referred to as "Common Stock").

          (b) Shares of Preferred Stock may be issued from time to time in one
          or more series as may from time to time be determined by the Board of
          Directors each of said series to be distinctly designated. All shares
          of any one series of Preferred Stock shall be alike in every
          particular, except that there may be different dates from which
          dividends, if any, thereon shall be cumulative, if made cumulative.
          The voting powers and the preferences and relative, participating,
          optional and other special rights of each such series, and the
          qualifications, limitations or restrictions thereof, if any, may
          differ from those of any and all other series at any time outstanding;
          and, subject to the provisions of subparagraph 1 of Paragraph (c) of
          this Article FOURTH, the Board of Directors of the Corporation is
          hereby expressly granted authority to fix by resolution or resolutions
          adopted prior to the issuance of any shares of a particular series of
          Preferred Stock, the voting powers and the designations, preferences
          and relative, optional and other special rights, and the
          qualifications, limitations and restrictions of such series,
          including, but without limiting the generality of the foregoing, the
          following:

                (1) The distinctive designation of, and the number of shares of
                Preferred Stock which shall constitute such series, which number
                may be increased (except where otherwise provided by the Board
                of Directors) or decreased (but not below the number of shares
                thereof then outstanding) from time to time by like action of
                the Board of Directors;

                (2) The rate and times at which, and the terms and conditions on
                which, dividends, if any, on Preferred Stock of such series
                shall be paid, the extent of the preference or relation, if any,
                of such dividends to the dividends payable on any other class or
                classes, or series of the same or other class of stock and
                whether such dividends shall be cumulative or non-cumulative;

                (3) The right, if any, of the holders of Preferred Stock of such
                series to convert the same into or exchange the same for, shares
                of any other class or classes or of any series of the same or
                any other class or classes of stock of the Corporation and the
                terms and conditions of such conversion or exchange;

                (4) Whether or not Preferred Stock of such series shall be
                subject to redemption, and the redemption price or prices and
                the time or times at which, and the terms and conditions on
                which, Preferred Stock of such series may be redeemed.

                (5) The rights, if any, of the holders of Preferred Stock of
                such series upon the voluntary or involuntary liquidation,
                merger, consolidation, distribution or sale of assets,
                dissolution or winding-up, of the Corporation.

                (6) The terms of the sinking fund or redemption or purchase
                account, if any, to be provided for the Preferred Stock of such
                series; and



                                       5


                (7) The voting powers, if any, of the holders of such series of
                Preferred Stock which may, without limiting the generality of
                the foregoing include the right, voting as a series or by itself
                or together with other series of Preferred Stock or all series
                of Preferred Stock as a class, to elect one or more directors of
                the Corporation if there shall have been a default in the
                payment of dividends on any one or more series of Preferred
                Stock or under such circumstances and on such conditions as the
                Board of Directors may determine.

          (c) (1) After the requirements with respect to preferential dividends
          on the Preferred Stock (fixed in accordance with the provisions of
          section (b) of this Article FOURTH), if any, shall have been met and
          after the Corporation shall have complied with all the requirements,
          if any, with respect to the setting aside of sums as sinking funds or
          redemption or purchase accounts (fixed in accordance with the
          provisions of section (b) of this Article FOURTH), and subject further
          to any conditions which may be fixed in accordance with the provisions
          of section (b) of this Article FOURTH, then and not otherwise the
          holders of Common Stock shall be entitled to receive such dividends as
          may be declared from time to time by the Board of Directors.

                (2) After distribution in full of the preferential amount, if
                any, (fixed in accordance with the provisions of section (b) of
                this Article FOURTH), to be distributed to the holders of
                Preferred Stock in the event of voluntary or involuntary
                liquidation, distribution or sale of assets, dissolution or
                winding-up, of the Corporation, the holders of the Common Stock
                shall be entitled to receive all of the remaining assets of the
                Corporation, tangible and intangible, of whatever kind available
                for distribution to stockholders ratably in proportion to the
                number of shares of Common Stock held by them respectively.

                (3) Except as may otherwise be required by law or by the
                provisions of such resolution or resolutions as may be adopted
                by the Board of Directors pursuant to section (b) of this
                Article FOURTH, each holder of Common Stock shall have one vote
                in respect of each share of Common Stock held on all matters
                voted upon by the stockholders.

          (d) No holder of any of the shares of any class or series of stock or
          of options, warrants or other rights to purchase shares of any class
          or series of stock or of other securities of the Corporation shall
          have any preemptive right to purchase or subscribe for any unissued
          stock of any class or series or any additional shares of any class or
          series to be issued by reason of any increase of the authorized
          capital stock of the Corporation of any class or series, or bonds,
          certificates of indebtedness, debentures or other securities
          convertible into or exchangeable for stock of the Corporation of any
          class or series, or carrying any right to purchase stock of any class
          or series, but any such unissued stock, additional authorized issue of
          shares of any class or series of stock or securities convertible into
          or exchangeable for stock, or carrying any right to purchase stock,
          may be issued and disposed of pursuant to resolution of the Board of
          Directors to such persons, firms, corporations or associations,
          whether such holders or



                                       6


          others, and upon such terms as may be deemed advisable by the Board of
          Directors in the exercise of its sole discretion.

          (e) The relative powers, preferences and rights of each series of
          Preferred Stock in relation to the relative powers, preferences and
          rights of each other series of Preferred Stock shall, in each case, be
          as fixed from time to time by the Board of Directors in the resolution
          or resolutions adopted pursuant to authority granted in section (b) of
          this Article FOURTH and the consent, by class or series vote or
          otherwise, of the holders of such of the series of Preferred Stock as
          are from time to time outstanding shall not be required for the
          issuance by the Board of Directors of any other series of Preferred
          Stock whether or not the powers, preferences and rights of such other
          series shall be fixed by the Board of Directors as senior to, or on a
          parity with, the powers, preferences and rights of such outstanding
          series, or any of them; provided, however, that the Board of Directors
          may provide in the resolution or resolutions as to any series of
          Preferred Stock adopted pursuant to section (b) of this Article FOURTH
          that the consent of the holders of a majority (or such greater
          proportion as shall be therein fixed) of the outstanding shares of
          such series voting thereon shall be required for the issuance of any
          or all other series of Preferred Stock.

          (f) Subject to the provisions of section (e), shares of any series of
          Preferred Stock may be issued from time to time as the Board of
          Directors of the Corporation shall determine and on such terms and for
          such consideration as shall be fixed by the Board of Directors.

          (g) Shares of Common Stock may be issued from time to time as the
          Board of Directors of the Corporation shall determine and on such
          terms and for such consideration as shall be fixed by the Board of
          Directors.

          (h) The authorized amount of shares of Common Stock and of Preferred
          Stock may, without a class or series vote, be increased or decreased
          from time to time by the affirmative vote of the holders of a majority
          of the stock of the Corporation entitled to vote thereon.

          FIFTH: - (a) The business and affairs of the Corporation shall be
          conducted and managed by a Board of Directors. The number of directors
          constituting the entire Board shall be not less than five nor more
          than twenty-five as fixed from time to time by vote of a majority of
          the whole Board, provided, however, that the number of directors shall
          not be reduced so as to shorten the term of any director at the time
          in office, and provided further, that the number of directors
          constituting the whole Board shall be twenty-four until otherwise
          fixed by a majority of the whole Board.

          (b) The Board of Directors shall be divided into three classes, as
          nearly equal in number as the then total number of directors
          constituting the whole Board permits, with the term of office of one
          class expiring each year. At the annual meeting of stockholders in
          1982, directors of the first class shall be elected to hold office for
          a



                                       7


          term expiring at the next succeeding annual meeting, directors of
          the second class shall be elected to hold office for a term expiring
          at the second succeeding annual meeting and directors of the third
          class shall be elected to hold office for a term expiring at the third
          succeeding annual meeting. Any vacancies in the Board of Directors for
          any reason, and any newly created directorships resulting from any
          increase in the directors, may be filled by the Board of Directors,
          acting by a majority of the directors then in office, although less
          than a quorum, and any directors so chosen shall hold office until the
          next annual election of directors. At such election, the stockholders
          shall elect a successor to such director to hold office until the next
          election of the class for which such director shall have been chosen
          and until his successor shall be elected and qualified. No decrease in
          the number of directors shall shorten the term of any incumbent
          director.

          (c) Notwithstanding any other provisions of this Charter or Act of
          Incorporation or the By-Laws of the Corporation (and notwithstanding
          the fact that some lesser percentage may be specified by law, this
          Charter or Act of Incorporation or the By-Laws of the Corporation),
          any director or the entire Board of Directors of the Corporation may
          be removed at any time without cause, but only by the affirmative vote
          of the holders of two-thirds or more of the outstanding shares of
          capital stock of the Corporation entitled to vote generally in the
          election of directors (considered for this purpose as one class) cast
          at a meeting of the stockholders called for that purpose.

          (d) Nominations for the election of directors may be made by the Board
          of Directors or by any stockholder entitled to vote for the election
          of directors. Such nominations shall be made by notice in writing,
          delivered or mailed by first class United States mail, postage
          prepaid, to the Secretary of the Corporation not less than 14 days nor
          more than 50 days prior to any meeting of the stockholders called for
          the election of directors; provided, however, that if less than 21
          days' notice of the meeting is given to stockholders, such written
          notice shall be delivered or mailed, as prescribed, to the Secretary
          of the Corporation not later than the close of the seventh day
          following the day on which notice of the meeting was mailed to
          stockholders. Notice of nominations which are proposed by the Board of
          Directors shall be given by the Chairman on behalf of the Board.

          (e) Each notice under subsection (d) shall set forth (i) the name,
          age, business address and, if known, residence address of each nominee
          proposed in such notice, (ii) the principal occupation or employment
          of such nominee and (iii) the number of shares of stock of the
          Corporation which are beneficially owned by each such nominee.

          (f) The Chairman of the meeting may, if the facts warrant, determine
          and declare to the meeting that a nomination was not made in
          accordance with the foregoing procedure, and if he should so
          determine, he shall so declare to the meeting and the defective
          nomination shall be disregarded.

          (g) No action required to be taken or which may be taken at any annual
          or special



                                       8


          meeting of stockholders of the Corporation may be taken without a
          meeting, and the power of stockholders to consent in writing, without
          a meeting, to the taking of any action is specifically denied.

          SIXTH: - The Directors shall choose such officers, agents and servants
          as may be provided in the By-Laws as they may from time to time find
          necessary or proper.

          SEVENTH: - The Corporation hereby created is hereby given the same
          powers, rights and privileges as may be conferred upon corporations
          organized under the Act entitled "An Act Providing a General
          Corporation Law", approved March 10, 1899, as from time to time
          amended.

          EIGHTH: - This Act shall be deemed and taken to be a private Act.

          NINTH: - This Corporation is to have perpetual existence.

          TENTH: - The Board of Directors, by resolution passed by a majority of
          the whole Board, may designate any of their number to constitute an
          Executive Committee, which Committee, to the extent provided in said
          resolution, or in the By-Laws of the Company, shall have and may
          exercise all of the powers of the Board of Directors in the management
          of the business and affairs of the Corporation, and shall have power
          to authorize the seal of the Corporation to be affixed to all papers
          which may require it.

          ELEVENTH: - The private property of the stockholders shall not be
          liable for the payment of corporate debts to any extent whatever.

          TWELFTH: - The Corporation may transact business in any part of the
          world.

          THIRTEENTH: - The Board of Directors of the Corporation is expressly
          authorized to make, alter or repeal the By-Laws of the Corporation by
          a vote of the majority of the entire Board. The stockholders may make,
          alter or repeal any By-Law whether or not adopted by them, provided
          however, that any such additional By-Laws, alterations or repeal may
          be adopted only by the affirmative vote of the holders of two-thirds
          or more of the outstanding shares of capital stock of the Corporation
          entitled to vote generally in the election of directors (considered
          for this purpose as one class).

          FOURTEENTH: - Meetings of the Directors may be held outside of the
          State of Delaware at such places as may be from time to time
          designated by the Board, and the Directors may keep the books of the
          Company outside of the State of Delaware at such places as may be from
          time to time designated by them.

          FIFTEENTH: - (a) (1) In addition to any affirmative vote required by
          law, and except as otherwise expressly provided in sections (b) and
          (c) of this Article FIFTEENTH:

                (A) any merger or consolidation of the Corporation or any
                Subsidiary (as



                                       9


                hereinafter defined) with or into (i) any Interested Stockholder
                (as hereinafter defined) or (ii) any other corporation (whether
                or not itself an Interested Stockholder), which, after such
                merger or consolidation, would be an Affiliate (as hereinafter
                defined) of an Interested Stockholder, or

                (B) any sale, lease, exchange, mortgage, pledge, transfer or
                other disposition (in one transaction or a series of related
                transactions) to or with any Interested Stockholder or any
                Affiliate of any Interested Stockholder of any assets of the
                Corporation or any Subsidiary having an aggregate fair market
                value of $1,000,000 or more, or

                (C) the issuance or transfer by the Corporation or any
                Subsidiary (in one transaction or a series of related
                transactions) of any securities of the Corporation or any
                Subsidiary to any Interested Stockholder or any Affiliate of any
                Interested Stockholder in exchange for cash, securities or other
                property (or a combination thereof) having an aggregate fair
                market value of $1,000,000 or more, or

                (D) the adoption of any plan or proposal for the liquidation or
                dissolution of the Corporation, or

                (E) any reclassification of securities (including any reverse
                stock split), or recapitalization of the Corporation, or any
                merger or consolidation of the Corporation with any of its
                Subsidiaries or any similar transaction (whether or not with or
                into or otherwise involving an Interested Stockholder) which has
                the effect, directly or indirectly, of increasing the
                proportionate share of the outstanding shares of any class of
                equity or convertible securities of the Corporation or any
                Subsidiary which is directly or indirectly owned by any
                Interested Stockholder, or any Affiliate of any Interested
                Stockholder,

shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.

                  (2) The term "business combination" as used in this Article
                  FIFTEENTH shall mean any transaction which is referred to in
                  any one or more of clauses (A) through (E) of paragraph 1 of
                  the section (a).

                (b) The provisions of section (a) of this Article FIFTEENTH
                shall not be applicable to any particular business combination
                and such business combination shall require only such
                affirmative vote as is required by law and any other provisions
                of the Charter or Act of Incorporation or By-Laws if such
                business combination



                                       10


                has been approved by a majority of the whole Board.

                (c)  For the purposes of this Article FIFTEENTH:

          (1) A "person" shall mean any individual, firm, corporation or other
          entity.

          (2) "Interested Stockholder" shall mean, in respect of any business
          combination, any person (other than the Corporation or any Subsidiary)
          who or which as of the record date for the determination of
          stockholders entitled to notice of and to vote on such business
          combination, or immediately prior to the consummation of any such
          transaction:

                (A) is the beneficial owner, directly or indirectly, of more
                than 10% of the Voting Shares, or

                (B) is an Affiliate of the Corporation and at any time within
                two years prior thereto was the beneficial owner, directly or
                indirectly, of not less than 10% of the then outstanding voting
                Shares, or

                (C) is an assignee of or has otherwise succeeded in any share of
                capital stock of the Corporation which were at any time within
                two years prior thereto beneficially owned by any Interested
                Stockholder, and such assignment or succession shall have
                occurred in the course of a transaction or series of
                transactions not involving a public offering within the meaning
                of the Securities Act of 1933.

          (3)  A person shall be the "beneficial owner" of any Voting Shares:

                (A) which such person or any of its Affiliates and Associates
                (as hereafter defined) beneficially own, directly or indirectly,
                or

                (B) which such person or any of its Affiliates or Associates has
                (i) the right to acquire (whether such right is exercisable
                immediately or only after the passage of time), pursuant to any
                agreement, arrangement or understanding or upon the exercise of
                conversion rights, exchange rights, warrants or options, or
                otherwise, or (ii) the right to vote pursuant to any agreement,
                arrangement or understanding, or

                (C) which are beneficially owned, directly or indirectly, by any
                other person with which such first mentioned person or any of
                its Affiliates or Associates has any agreement, arrangement or
                understanding for the purpose of acquiring, holding, voting or
                disposing of any shares of capital stock of the Corporation.

          (4) The outstanding Voting Shares shall include shares deemed owned
          through application of paragraph (3) above but shall not include any
          other Voting Shares which



                                       11


          may be issuable pursuant to any agreement, or upon exercise of
          conversion rights, warrants or options or otherwise.

          (5) "Affiliate" and "Associate" shall have the respective meanings
          given those terms in Rule 12b-2 of the General Rules and Regulations
          under the Securities Exchange Act of 1934, as in effect on December
          31, 1981.

          (6) "Subsidiary" shall mean any corporation of which a majority of any
          class of equity security (as defined in Rule 3a11-1 of the General
          Rules and Regulations under the Securities Exchange Act of 1934, as in
          effect on December 31, 1981) is owned, directly or indirectly, by the
          Corporation; provided, however, that for the purposes of the
          definition of Investment Stockholder set forth in paragraph (2) of
          this section (c), the term "Subsidiary" shall mean only a corporation
          of which a majority of each class of equity security is owned,
          directly or indirectly, by the Corporation.

                (d) majority of the directors shall have the power and duty to
                determine for the purposes of this Article FIFTEENTH on the
                basis of information known to them, (1) the number of Voting
                Shares beneficially owned by any person (2) whether a person is
                an Affiliate or Associate of another, (3) whether a person has
                an agreement, arrangement or understanding with another as to
                the matters referred to in paragraph (3) of section (c), or (4)
                whether the assets subject to any business combination or the
                consideration received for the issuance or transfer of
                securities by the Corporation, or any Subsidiary has an
                aggregate fair market value of $1,000,000 or more.

                (e) Nothing contained in this Article FIFTEENTH shall be
                construed to relieve any Interested Stockholder from any
                fiduciary obligation imposed by law.

          SIXTEENTH: Notwithstanding any other provision of this Charter or Act
          of Incorporation or the By-Laws of the Corporation (and in addition to
          any other vote that may be required by law, this Charter or Act of
          Incorporation by the By-Laws), the affirmative vote of the holders of
          at least two-thirds of the outstanding shares of the capital stock of
          the Corporation entitled to vote generally in the election of
          directors (considered for this purpose as one class) shall be required
          to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH,
          FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation.

          SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
          the Corporation or its stockholders for monetary damages for breach of
          fiduciary duty as a Director, except to the extent such exemption from
          liability or limitation thereof is not permitted under the Delaware
          General Corporation Laws as the same exists or may hereafter be
          amended.

                (b) Any repeal or modification of the foregoing paragraph shall
                not adversely affect any right or protection of a Director of
                the Corporation existing hereunder



                                       12


                with respect to any act or omission occurring prior to the time
                of such repeal or modification."



                                       13


                                    EXHIBIT B

                                     BY-LAWS

                            WILMINGTON TRUST COMPANY

                              WILMINGTON, DELAWARE

                        AS EXISTING ON FEBRUARY 20, 2000





                       BY-LAWS OF WILMINGTON TRUST COMPANY

                                    ARTICLE I
                             STOCKHOLDERS' MEETINGS

          Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.

          Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.

          Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.

          Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each share of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.

                                   ARTICLE II
                                    DIRECTORS

          Section 1. The authorized number of directors that shall constitute
the Board of Directors shall be fixed from time to time by or pursuant to a
resolution passed by a majority of the Board within the parameters set by the
Charter of the Bank. No more than two directors may also be employees of the
Company or any affiliate thereof.

          Section 2. Except as provided in these Bylaws or as otherwise required
by law, there shall be no qualifications for election or service as directors of
the Company. In addition to any other provisions of these Bylaws, to be
qualified for nomination for Election or appointment to the Board of Directors
each person must have not attained the age of sixty nine years at the time of
such election or appointment, provided however, the Nominating and Corporate
Governance Committee may waive such qualification as to a particular candidate
otherwise qualified to serve as a director upon a good faith determination by
such committee that such a waiver is in the best interests of the Company and
its stockholders. The Chairman of the Board of Directors shall not be qualified
to continue to serve as a director upon the termination of his or her service in
that office for any reason.





          Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.

          Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.

          Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.

          Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.

          Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.

          Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.

          Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.

          Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.

          Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.

          Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or divisions of the Company as it may deem
advisable.



                                       2


                                   ARTICLE III
                                   COMMITTEES

          Section 1.  Executive Committee

                    (A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.

                    (B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.

                    (C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.

                    (D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.

                    (E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.

                    (F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall



                                       3


be suspended during such a disaster period until it shall be determined by any
interim Executive Committee acting under this section that it shall be to the
advantage of the Company to resume the conduct and management of its affairs and
business under all of the other provisions of these By-Laws.

          Section 2.  Audit Committee

                    (A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.

                    (B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.

                    (C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.

          Section 3.  Compensation Committee

                    (A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.

                    (B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.

                    (C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.

          Section 4.  Associate Directors

                    (A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.




                                       4


                    (B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.

          Section 5.  Absence or Disqualification of Any Member of a Committee

                    (A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.

                                   ARTICLE IV
                                    OFFICERS

          Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.

          Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.

          Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors. In the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.

          Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.

          Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the



                                       5


Board or the President and by the officer in charge of the department or
division to which they are assigned.

          Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.

          Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.

          Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.

          There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.

          Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.

          There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.

          Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.

          Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors,



                                       6


the Executive Committee, Chairman of the Board of Directors or the President and
the officer in charge of the department or division to which they are assigned.

                                    ARTICLE V
                          STOCK AND STOCK CERTIFICATES

          Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.

          Section 2. Certificates of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.

          Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.

                                   ARTICLE VI
                                      SEAL

          Section 1. The corporate seal of the Company shall be in the following
form:

                    Between two concentric circles the words "Wilmington Trust
                    Company" within the inner circle the words "Wilmington,
                    Delaware."

                                   ARTICLE VII
                                   FISCAL YEAR



                                       7


          Section 1. The fiscal year of the Company shall be the calendar year.

                                  ARTICLE VIII
                     EXECUTION OF INSTRUMENTS OF THE COMPANY

          Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.

                                   ARTICLE IX
               COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES

          Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.

                                    ARTICLE X
                                 INDEMNIFICATION

          Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a



                                       8


partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The Corporation shall
indemnify a person in connection with a proceeding initiated by such person only
if the proceeding was authorized by the Board of Directors of the Corporation.

                    (B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director or officer in his capacity
as a Director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director or officer to
repay all amounts advanced if it should be ultimately determined that the
Director or officer is not entitled to be indemnified under this Article or
otherwise.

                    (C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses under
applicable law.

                    (D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.

                    (E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.

                                   ARTICLE XI
                            AMENDMENTS TO THE BY-LAWS

          Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.



                                       9


                                    EXHIBIT C

                             SECTION 321(b) CONSENT

          Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.

                                                   WILMINGTON TRUST COMPANY

Dated: August 20, 2002                             By:  /s/ Bruce L. Bisson
                                                      ---------------------
                                                   Name:  Bruce L. Bisson
                                                   Title: Vice President





                                    EXHIBIT D

                                     NOTICE

               This form is intended to assist state nonmember banks and savings
               banks with state publication requirements. It has not been
               approved by any state banking authorities. Refer to your
               appropriate state banking authorities for your state publication
               requirements.


REPORT OF CONDITION

Consolidating domestic subsidiaries of the

           WILMINGTON TRUST COMPANY                        of   WILMINGTON
- ----------------------------------------------------------    --------------
                 Name of Bank                                      City

in the State of   DELAWARE  , at the close of business on June 30, 2002.
                ------------





ASSETS

                                                                  Thousands of dollars
                                                               
Cash and balances due from depository institutions:
        Noninterest-bearing balances and currency and coins ...............    177,877
        Interest-bearing balances .........................................          0
Held-to-maturity securities ...............................................     14,797
Available-for-sale securities .............................................  1,171,803
Federal funds sold in domestic offices ....................................    571,570
Securities purchased under agreements to resell ...........................     50,000
Loans and lease financing receivables:
        Loans and leases held for sale ...............         0
        Loans and leases, net of unearned income ..... 5,334,137
        LESS:  Allowance for loan and lease losses ...    78,604
        Loans and leases, net of unearned income, allowance, and reserve ..  5,255,533
Assets held in trading accounts ...........................................          0
Premises and fixed assets (including capitalized leases) ..................    127,429
Other real estate owned ...................................................        352
Investments in unconsolidated subsidiaries and associated companies .......      1,410
Customers' liability to this bank on acceptances outstanding ..............          0
Intangible assets:
        a.  Goodwill ......................................................        157
        b.  Other intangible assets .......................................      7,747
Other assets ..............................................................    134,258
Total assets ..............................................................  7,512,933




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LIABILITIES

Deposits:
In domestic offices........................................................... 6,006,028
        Noninterest-bearing ...............     938,949
        Interest-bearing ..................   5,067,079
Federal funds purchased in domestic offices ..................................   369,200
Securities sold under agreements to repurchase ...............................   164,046
Trading liabilities (from Schedule RC-D) .....................................         0
Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases: ..........................................................   330,267
Bank's liability on acceptances executed and outstanding .....................         0
Subordinated notes and debentures ............................................         0
Other liabilities (from Schedule RC-G) .......................................    91,488
Total liabilities ............................................................ 6,961,029


EQUITY CAPITAL

Perpetual preferred stock and related surplus ................................         0
Common Stock .................................................................       500
Surplus (exclude all surplus related to preferred stock) .....................    62,118
a.  Retained earnings ........................................................   476,639
b.  Accumulated other comprehensive income ...................................    12,647
Total equity capital .........................................................   551,904
Total liabilities, limited-life preferred stock, and equity capital .......... 7,512,933