Document:

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                                                                    Exhibit 4.C

                     $150,000,000 AGGREGATE PRINCIPAL AMOUNT

                           MENTOR GRAPHICS CORPORATION

                 6 7/8% CONVERTIBLE SUBORDINATED NOTES DUE 2007

                      Resale Registration Rights Agreement

                            Dated as of June 3, 2002

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         RESALE REGISTRATION RIGHTS AGREEMENT, dated as of June 3, 2002, among
Mentor Graphics Corporation, an Oregon corporation (together with any successor
entity, herein referred to as the "Company"), Banc of America Securities LLC,
Fleet Securities, Inc. and Scotia Capital (USA) Inc., as representatives of the
several initial purchasers (the "Initial Purchasers") under the Purchase
Agreement (as defined below).

         Pursuant to the Purchase Agreement, dated as of May 29, 2002, among the
Company and Banc of America Securities LLC, Fleet Securities, Inc., Scotia
Capital (USA) Inc. and Needham & Company, Inc., as representatives of the
Initial Purchasers (the "Purchase Agreement"), the Initial Purchasers have
agreed to purchase from the Company $150,000,000 ($172,500,000 if the Initial
Purchasers exercise their option in full) in aggregate principal amount of 6
7/8% Convertible Subordinated Notes Due 2007 (the "Notes"). The Notes will be
convertible into fully paid, nonassessable shares of common stock, no par value
per share, of the Company together with the rights (the "Rights") evidenced by
such common stock to the extent provided in the Rights Agreement, dated as of
February 10, 1999, between the Company and American Stock, Transfer & Trust Co.
(collectively, the "Common Stock"). The Notes will be convertible on the terms,
and subject to the conditions, set forth in the Indenture (as defined herein).
To induce the Initial Purchasers to purchase the Notes, the Company has agreed
to provide the registration rights set forth in this Agreement pursuant to
Section 5(g) of the Purchase Agreement.

         The parties hereby agree as follows:

         1.   Definitions. Capitalized terms used in this Agreement without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized terms shall have
the following meanings:

         "Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with, such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

         "Agreement":  This Resale Registration Rights Agreement.

         "Amendment Effectiveness Deadline Date" has the meaning set forth in
Section 2(e) hereof.

         "Blue Sky Application":  As defined in Section 6(a)(i) hereof.

         "Business Day":  The definition of "Business Day" in the Indenture.

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         "Commission": Securities and Exchange Commission.

         "Common Stock": As defined in the preamble hereto.

         "Company": As defined in the preamble hereto.

         "Edgar": Electronic Data Gathering and Retrieval System.

         "Effectiveness Period": As defined in Section 2(a)(iii) hereof.

         "Effectiveness Target Date": As defined in Section 2(a)(ii) hereof.

         "Exchange Act": Securities Exchange Act of 1934, as amended.

         "Holder": A Person who owns, beneficially or otherwise, Transfer
Restricted Securities.

         "Indemnified Holder": As defined in Section 6(a) hereof.

         "Indenture": The Indenture, dated as of June 3, 2002 between the
Company and Wilmington Trust Company, as trustee (the "Trustee"), pursuant to
which the Notes are to be issued, as such Indenture is amended, modified or
supplemented from time to time in accordance with the terms thereof.

         "Initial Purchasers":  As defined in the preamble hereto.

         "Liquidated Damages":  As defined in Section 3(a) hereof.

         "Liquidated Damages Payment Date":  Each June 15 and December 15.

         "Majority of Holders": Holders holding over 50% of the aggregate
principal amount of Notes outstanding; provided that, for the purpose of this
definition, a holder of shares of Common Stock which constitute Transfer
Restricted Securities and issued upon conversion of the Notes shall be deemed to
hold an aggregate principal amount of Notes (in addition to the principal amount
of Notes held by such holder) equal to the quotient of (x) the number of such
shares of Common Stock held by such holder and (y) the conversion rate in effect
at the time of such conversion as determined in accordance with the Indenture.

         "NASD":  National Association of Securities Dealers, Inc.

         "Notes":  As defined in the preamble hereto.

         "Notice and Questionnaire" means a written notice executed by the
respective Holder and delivered to the Company containing substantially the
information called for by the Selling Securityholder Notice and Questionnaire
attached as Annex A to the Offering Memorandum of the Company issued May 29,
2002 relating to the Notes.

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         "Notice Holder" means, on any date, any Holder that has delivered a
Notice and Questionnaire to the Company on such date.

         "Person": An individual, partnership, corporation, company,
unincorporated organization, trust, joint venture or a government or agency or
political subdivision thereof.

         "Prospectus": The prospectus included in a Shelf Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such prospectus.

         "Purchase Agreement": As defined in the preamble hereto.

         "Record Holder": With respect to any Liquidated Damages Payment Date,
each Person who is a Holder on the 15/th/ day preceding the relevant Liquidated
Damages Payment Date. In the case of a Holder of shares of Common Stock issued
upon conversion of the Notes, "Record Holder" shall mean each Person who is a
Holder of shares of Common Stock which constitute Transfer Restricted Securities
on the 15/th/ day preceding the relevant Liquidated Damages Payment Date.

         "Registration Default": As defined in Section 3(a) hereof.

         "Securities Act": Securities Act of 1933, as amended.

         "Shelf Filing Deadline": As defined in Section 2(a)(i) hereof.

         "Shelf Registration Statement": As defined in Section 2(a)(i) hereof.

         "Subsequent Shelf Registration Statement" has the meaning set forth in
Section 2(c) hereof.

         "Suspension Notice": As defined in Section 4(c) hereof.

         "Suspension Period": As defined in Section 4(b)(i) hereof.

         "TIA": Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission thereunder, in each case, as in effect on the date
the Indenture is qualified under the TIA.

         "Transfer Restricted Securities": Each Note and each share of Common
Stock issued upon conversion of Notes until the earlier of:

                  (i) the date on which such Note or such share of Common Stock
         issued upon conversion has been effectively registered under the
         Securities Act and disposed of in accordance with the Shelf
         Registration Statement;

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                  (ii)  the date on which such Note or such share of Common
         Stock issued upon conversion is transferred in compliance with Rule
         144 under the Securities Act or may be sold or transferred by a person
         who is not an affiliate of the Company pursuant to Rule 144 under the
         Securities Act (or any other similar provision then in force) without
         any volume or manner of sale restrictions thereunder; or

                  (iii) the date on which such Note or such share of Common
         Stock issued upon conversion ceases to be outstanding (whether as a
         result of redemption, repurchase and cancellation, conversion or
         otherwise).

         "Underwritten Registration": A registration in which Notes of the
Company are sold to an underwriter for reoffering to the public.

         Unless the context otherwise requires, the singular includes the
plural, and words in the plural include the singular.

         2. Shelf Registration.

              (a) The Company shall:

                    (i)   not later than 90 days after the date hereof (the
              "Shelf Filing Deadline"), cause to be filed a registration
              statement pursuant to Rule 415 under the Securities Act (the
              "Shelf Registration Statement"), which Shelf Registration
              Statement shall provide for resales of all Transfer Restricted
              Securities held by Holders that have provided the information
              required pursuant to the terms of Section 2(b) hereof;

                    (ii)  use its reasonable efforts to cause the Shelf
              Registration Statement to be declared effective by the Commission
              not later than 180 days after the date hereof (the "Effectiveness
              Target Date"); and

                    (iii) subject to Section 4(b)(i) hereof, use its reasonable
              efforts to keep the Shelf Registration Statement continuously
              effective, supplemented and amended as required by the provisions
              of Section 4(b) hereof to the extent necessary to ensure that (A)
              it is available for resales by the Holders of Transfer Restricted
              Securities entitled, subject to Section 2(b), to the benefit of
              this Agreement and (B) conforms with the requirements of this
              Agreement and the Securities Act and the rules and regulations of
              the Commission promulgated thereunder as announced from time to
              time, for a period (the "Effectiveness Period") until the earliest
              of:

                                    (1) two years following the last date of
                          original issuance of any of the Notes;

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                                        (2) the date when the Holders of
                                   Transfer Restricted Securities are able to
                                   sell all such Transfer Restricted Securities
                                   immediately without restriction pursuant to
                                   the volume limitation provisions of Rule 144
                                   under the Securities Act or any successor
                                   rule thereto; or

                                        (3) the date when all of the Transfer
                                   Restricted Securities are registered under
                                   the Shelf Registration Statement and disposed
                                   of in accordance with the Shelf Registration
                                   Statement.

                  (b) At the time the Shelf Registration Statement is declared
         effective, each Holder that became a Notice Holder on or prior to the
         date five (5) Business Days prior to such time of effectiveness shall
         be named as a selling securityholder in the Shelf Registration
         Statement and the related Prospectus in such a manner as to permit such
         Holder to deliver such Prospectus to purchasers of Transfer Restricted
         Securities in accordance with applicable law. None of the Company's
         security holders (other than the Holders of Transfer Restricted
         Securities) shall have the right to include any of the Company's
         securities in the Shelf Registration Statement.

                  (c) If the Shelf Registration Statement or any Subsequent
         Shelf Registration Statement ceases to be effective for any reason at
         any time during the Effectiveness Period (other than because all
         Transfer Restricted Securities registered thereunder shall have been
         resold pursuant thereto or shall have otherwise ceased to be Transfer
         Restricted Securities), the Company shall use its reasonable efforts to
         obtain the prompt withdrawal of any order suspending the effectiveness
         thereof, and in any event shall within thirty (30) days of such
         cessation of effectiveness amend the Shelf Registration Statement in a
         manner reasonably expected to obtain the withdrawal of the order
         suspending the effectiveness thereof, or file an additional Shelf
         Registration Statement covering all of the securities that as of the
         date of such filing are Transfer Restricted Securities (a "Subsequent
         Shelf Registration Statement"). If a Subsequent Shelf Registration
         Statement is filed, the Company shall use its reasonable efforts to
         cause the Subsequent Shelf Registration Statement to become effective
         as promptly as is practicable after such filing and to keep such
         Registration Statement (or subsequent Shelf Registration Statement)
         continuously effective until the end of the Effectiveness Period.

                  (d) The Company shall supplement and amend the Shelf
         Registration Statement if required by the rules, regulations or
         instructions applicable to the registration form used by the Company
         for such Shelf Registration Statement, if required by the Securities
         Act or as reasonably requested by the Initial Purchasers or by the
         Trustee on behalf of the Holders of the Transfer Restricted Securities
         covered by such Shelf Registration Statement.

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              (e)     Each Holder agrees that if such Holder wishes to sell
         Transfer Restricted Securities pursuant to a Shelf Registration
         Statement and related Prospectus, it will do so only in accordance with
         this Section 2(e) and Section 4(b). Each Holder wishing to sell
         Transfer Restricted Securities pursuant to a Shelf Registration
         Statement and related Prospectus agrees to deliver a Notice and
         Questionnaire to the Company at least five (5) Business Days prior to
         any intended distribution of Transfer Restricted Securities under the
         Shelf Registration Statement. From and after the date the Shelf
         Registration Statement is declared effective, the Company shall, as
         promptly as practicable after the date a Notice and Questionnaire is
         delivered, and in any event upon the later of (x) five (5) Business
         Days after such date (but no earlier than five (5) Business Days after
         effectiveness) or (y) five (5) Business Days after the expiration of
         any Suspension Period in effect when the Notice and Questionnaire is
         delivered:

                         (i)   if required by applicable law, file with the SEC

              a post-effective amendment to the Shelf Registration Statement or
              prepare and, if required by applicable law, file a supplement to
              the related Prospectus or a supplement or amendment to any
              document incorporated therein by reference or file any other
              required document so that the Holder delivering such Notice and
              Questionnaire is named as a selling securityholder in the Shelf
              Registration Statement and the related Prospectus in such a manner
              as to permit such Holder to deliver such Prospectus to purchasers
              of the Transfer Restricted Securities in accordance with
              applicable law and, if the Company shall file a post-effective
              amendment to the Shelf Registration Statement, use its reasonable
              efforts to cause such post-effective amendment to be declared
              effective under the Securities Act as promptly as is practicable,
              but in any event by the date (the "Amendment Effectiveness
              Deadline Date") that is forty-five (45) days after the date such
              post-effective amendment is required by this clause to be filed;

                        (ii)   provide such Holder copies of any documents filed
              pursuant to Section 2(e)(i); and

                       (iii)   notify such Holder as promptly as practicable
              after the effectiveness under the Securities Act of any
              post-effective amendment filed pursuant to Section 2(e)(i);

provided that if such Notice and Questionnaire is delivered during a Suspension
Period, the Company shall so inform the Holder delivering such Notice and
Questionnaire and shall take the actions set forth in clauses (i), (ii) and
(iii) above

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upon expiration of the Suspension Period in accordance with Section 4(b).
Notwithstanding anything contained herein to the contrary, (i) the Company shall
be under no obligation to name any Holder that is not a Notice Holder as a
selling securityholder in any Registration Statement or related Prospectus and
(ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten
(10) Business Days from the expiration of a Suspension Period (and the Company
shall incur no obligation to pay Liquidated Damages during such extension) if
such Suspension Period shall be in effect on the Amendment Effectiveness
Deadline Date; and provided further, that after the date that is 180 days after
the date of effectiveness of the Shelf Registration Statement, the Company shall
not be obligated to file more than one post-effective amendment or supplement in
any 30-day period for the purpose of naming Holders as selling securityholders
who were not so named in the Shelf Registration Statement at the time of
effectiveness.

         3. Liquidated Damages.

              (a)  If:

                        (i)   the Shelf Registration Statement is not filed with
              the Commission prior to or on the Shelf Filing Deadline;

                        (ii)  the Shelf Registration Statement has not been
              declared effective by the Commission prior to or on the
              Effectiveness Target Date;

                        (iii) the Company has failed to perform its obligations
              set forth in Section 2(e) within the time period required
              therein;

                        (iv)  any post-effective amendment to a Shelf
              Registration filed pursuant to Section 2(e)(i) has not become
              effective under the Securities Act on or prior to the Amendment
              Effectiveness Deadline Date;

                        (v)   except as provided in Section 4(b)(i) hereof, the
              Shelf Registration Statement is filed and declared effective but,
              during the Effectiveness Period, shall thereafter cease to be
              effective or fail to be usable for its intended purpose without
              being succeeded within five (5) Business Days by a post-effective
              amendment to the Shelf Registration Statement, a supplement to
              the Prospectus or a report filed with the Commission pursuant to
              Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures
              such failure and, in the case of a post-effective amendment, is
              itself declared effective within such five (5) Business Day
              period; or

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                    (vi) (A) prior to or on the 45th or 60th day, as applicable
              under the provisions of Section 4(b), of any Suspension Period,
              such suspension has not been terminated or (B) Suspension Periods
              exceed an aggregate of 90 days in any 360 day period,

(each such event referred to in foregoing clauses (i) through (iv), a
"Registration Default"), the Company hereby agrees to pay interest ("Liquidated
Damages") with respect to the Transfer Restricted Securities from and including
the day following the Registration Default to but excluding the earlier of (1)
the day on which the Registration Default has been cured and (2) the date the
Shelf Registration Statement is no longer required to be kept effective,
accruing at a rate:

                              (A) in respect of the Notes, to each holder of
                         Notes, (x) with respect to the first 90-day period
                         during which a Registration Default shall have occurred
                         and be continuing, equal to 0.25% per annum of the
                         aggregate principal amount of the Notes, and (y) with
                         respect to the period commencing on the 91st day
                         following the day the Registration Default shall have
                         occurred and be continuing, equal to 0.50% per annum of
                         the aggregate principal amount of the Notes; provided
                         that in no event shall Liquidated Damages accrue at a
                         rate per year exceeding 0.50% of the aggregate
                         principal amount of the Notes; and

                              (B) in respect of any shares of Common Stock, to
                         each holder of shares of Common Stock issued upon
                         conversion of Notes, (x) with respect to the first
                         90-day period in which a Registration Default shall
                         have occurred and be continuing, equal to 0.25% per
                         annum of the aggregate principal amount of each Note
                         converted, and (y) with respect to the period
                         commencing on the 91st day following the day the
                         Registration Default shall have occurred and be
                         continuing, equal to 0.50% per annum of the aggregate
                         principal amount of each Note converted; provided that
                         in no event shall Liquidated Damages accrue at a rate
                         per year exceeding 0.50% of the aggregate principal
                         amount of the converted Notes.

                    (b)  All accrued Liquidated Damages shall be paid in arrears
         to Record Holders by the Company on each Liquidated Damages Payment
         Date. Upon the cure of all Registration Defaults relating to any
         particular Note or share of Common Stock, the accrual of Liquidated
         Damages with respect to such Note or share of Common Stock will cease.

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         All obligations of the Company set forth in this Section 3 that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such Transfer Restricted Security
shall have been satisfied in full.

         The Liquidated Damages set forth above shall be the exclusive monetary
remedy available to the Holders of Transfer Restricted Securities for each
Registration Default.

         4.  Registration Procedures.

                (a)  In connection with the Shelf Registration Statement, the
         Company shall comply with all the provisions of Section 4(b) hereof
         and shall prepare and file with the Commission a Shelf Registration
         Statement relating to the registration on any appropriate form under
         the Securities Act in accordance with Section 2 hereof.

                (b)  In connection with the Shelf Registration Statement and
         any Prospectus required by this Agreement to permit the sale or resale
         of Transfer Restricted Securities, the Company shall:

                           (i)   Subject to any notice by the Company in
                accordance with this Section 4(b) of the existence of any fact
                or event of the kind described in Section 4(b)(iii)(D), use its
                reasonable efforts to keep the Shelf Registration Statement
                continuously effective during the Effectiveness Period; upon the
                occurrence of any event that would cause the Shelf Registration
                Statement or the Prospectus contained therein (A) to contain a
                material misstatement or omission or (B) not to be effective and
                usable for resale of Transfer Restricted Securities during the
                Effectiveness Period, the Company shall file promptly an
                appropriate amendment to the Shelf Registration Statement, a
                supplement to the Prospectus or a report filed with the
                Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
                Exchange Act, in the case of clause (A), correcting any such
                misstatement or omission, and, in the case of either clause (A)
                or (B), use its reasonable efforts to cause such amendment to be
                declared effective and the Shelf Registration Statement and the
                related Prospectus to become usable for resale of Transfer
                Restricted Securities during the Effectiveness Period as soon as
                practicable thereafter. Notwithstanding the foregoing, the
                Company may suspend the use of the Prospectus and may elect to
                suspend the effectiveness of the Shelf Registration Statement by
                written notice to the Holders for a period not to exceed an
                aggregate of 45 days in any 90-day period (each such period, a
                "Suspension Period") if:

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                     (x)    an event occurs and is continuing as a result of
                which the Shelf Registration Statement, the Prospectus, any
                amendment or supplement thereto, or any document incorporated by
                reference therein would, in the Company's judgment, contain an
                untrue statement of a material fact or omit to state a material
                fact required to be stated therein or necessary to make the
                statements therein not misleading; and

                     (y)    the Company determines in good faith that the
                disclosure of such event at such time would be seriously
                detrimental to the Company and its subsidiaries;

         provided that, in the event the disclosure relates to a previously
         undisclosed proposed or pending material business transaction, the
         disclosure of which the Company determines in good faith would be
         reasonably likely to impede the Company's ability to consummate such
         transaction, the Company may extend a Suspension Period from 45 days to
         60 days; provided, however, that Suspension Periods shall not exceed an
         aggregate of 90 days in any 360-day period. The Company shall not be
         required to specify in the written notice to the Holders the nature of
         the event giving rise to the Suspension Period.

                     (ii)   Prepare and file with the Commission such amendments
                and post-effective amendments to the Shelf Registration
                Statement as may be necessary to keep the Shelf Registration
                Statement effective during the Effectiveness Period; cause the
                Prospectus to be supplemented by any required Prospectus
                supplement, and as so supplemented to be filed pursuant to Rule
                424 under the Securities Act, and to comply fully with the
                applicable provisions of Rules 424 and 430A under the Securities
                Act in a timely manner; and comply with the provisions of the
                Securities Act with respect to the disposition of all securities
                covered by the Shelf Registration Statement during the
                applicable period in accordance with the intended method or
                methods of distribution by the sellers thereof set forth in the
                Shelf Registration Statement or supplement to the Prospectus.

                     (iii)  Advise the selling Holders promptly and, if
                requested by such selling Holders, to confirm such advice in
                writing, except as provided in clause (D) below:

                                 (A)  when the Prospectus or any Prospectus
                     supplement or post-effective amendment has been filed, and,
                     with respect to the Shelf Registration Statement or any
                     post-effective amendment thereto, when the same has become
                     effective;

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                            (B) of any request by the Commission for amendments
                     to the Shelf Registration Statement or amendments or
                     supplements to the Prospectus or for additional information
                     relating thereto;

                            (C) of the issuance by the Commission of any stop
                     order suspending the effectiveness of the Shelf
                     Registration Statement under the Securities Act or of the
                     suspension by any state securities commission of the
                     qualification of the Transfer Restricted Securities for
                     offering or sale in any jurisdiction, or the initiation of
                     any proceeding for any of the preceding purposes; or

                            (D) of the existence of any fact or the happening
                     of any event, during the Effectiveness Period, that makes
                     any statement of a material fact made in the Shelf
                     Registration Statement, the Prospectus, any amendment or
                     supplement thereto, or any document incorporated by
                     reference therein untrue, or that requires the making of
                     any additions to or changes in the Shelf Registration
                     Statement or the Prospectus in order to make the statements
                     therein not misleading.

         If at any time the Commission shall issue any stop order suspending the
         effectiveness of the Shelf Registration Statement, or any state
         securities commission or other regulatory authority shall issue an
         order suspending the qualification or exemption from qualification of
         the Transfer Restricted Securities under state securities or Blue Sky
         laws, the Company shall use its reasonable efforts to obtain the
         withdrawal or lifting of such order at the earliest possible time and
         will provide to each Holder who is named in the Shelf Registration
         Statement prompt notice of the withdrawal of any such order.

                     (iv)   Make available at reasonable times for inspection by
                one or more representatives of the selling Holders, designated
                in writing by a Majority of Holders whose Transfer Restricted
                Securities are included in the Shelf Registration Statement, and
                any attorney or accountant retained by such selling Holders, all
                financial and other records, pertinent corporate documents and
                properties of the Company as shall be reasonably necessary to
                enable them to conduct a reasonable investigation within the
                meaning of Section 11 of the Securities Act, and cause the
                Company's officers, directors, managers and employees to supply
                all information reasonably requested by any such representative
                or representatives of the selling Holders, attorney or
                accountant in connection therewith; provided, however, that the
                Company shall have no obligation to deliver information to any
                selling Holder or

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         representative pursuant to this Section 4(b)(iv) unless such selling
         Holder or representative shall have executed and delivered a
         confidentiality agreement in a form reasonably acceptable to the
         Company relating to such information.

                   (v)    If requested by any selling Holders, promptly
         incorporate in the Shelf Registration Statement or Prospectus,
         pursuant to a supplement or post-effective amendment if necessary,
         such information as such selling Holders may reasonably request to
         have included therein, including, without limitation, information
         relating to the "Plan of Distribution" of the Transfer Restricted
         Securities.

                   (vi)   Furnish to each selling Holder upon such Holder's
         written request, without charge, at least one copy of the Shelf
         Registration Statement, as first filed with the Commission, and of each
         amendment thereto (and any documents incorporated by reference therein
         or exhibits thereto (or exhibits incorporated in such exhibits by
         reference) as such Person may request).

                   (vii)  Deliver to each selling Holder, without charge, as
         many copies of the Prospectus (including each preliminary Prospectus)
         and any amendment or supplement thereto as such Persons reasonably may
         request; subject to any notice by the Company in accordance with this
         Section 4(b) of the existence of any fact or event of the kind
         described in Section 4(b)(iii)(D) or 4(b)(i), the Company hereby
         consents to the use of the Prospectus and any amendment or supplement
         thereto by each of the selling Holders in connection with the offering
         and the sale of the Transfer Restricted Securities covered by the
         Prospectus or any amendment or supplement thereto.

                   (viii) Before any public offering of Transfer Restricted
         Securities, cooperate with the selling Holders and their counsel in
         connection with the registration and qualification of the Transfer
         Restricted Securities under the securities or Blue Sky laws of such
         jurisdictions in the United States as the selling Holders may
         reasonably request and do any and all other acts or things necessary or
         advisable to enable the disposition in such jurisdictions of the
         Transfer Restricted Securities covered by the Shelf Registration
         Statement; provided, however, that the Company shall not be required
         (A) to register or qualify as a foreign corporation or a dealer of
         securities where it is not now so qualified or to take any action that
         would subject it to the service of process in any jurisdiction where it
         is not now so subject or (B) to subject itself to general or unlimited
         service of process or to taxation in any such jurisdiction if it is not
         now so subject.

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                   (ix)   Cooperate with the selling Holders to facilitate the
          timely preparation and delivery of certificates representing Transfer
          Restricted Securities to be sold and not bearing any restrictive
          legends (unless required by applicable securities laws); and enable
          such Transfer Restricted Securities to be in such denominations and
          registered in such names as the Holders may reasonably request at
          least two Business Days before any sale of Transfer Restricted
          Securities made by such Holders.

                   (x)    Subject to Section 4(b)(i) hereof and the provision in
          clause (viii) above, use its reasonable efforts to cause the Transfer
          Restricted Securities covered by the Shelf Registration Statement to
          be registered with or approved by such other U.S. governmental
          agencies or authorities as may be necessary to enable the seller or
          sellers thereof to consummate the disposition of such Transfer
          Restricted Securities.

                   (xi)   Subject to Section 4(b)(i) hereof, if any fact or
          event contemplated by Section 4(b)(iii)(D) hereof shall exist or have
          occurred, use its reasonable efforts to prepare a supplement or
          post-effective amendment to the Shelf Registration Statement or
          related Prospectus or any document incorporated therein by reference
          or file any other required document so that, as thereafter delivered
          to the purchasers of Transfer Restricted Securities, the Prospectus
          will not contain an untrue statement of a material fact or omit to
          state any material fact required to be stated therein or necessary to
          make the statements therein, in light of the circumstances in which
          they are made, not misleading.

                   (xii)  Provide CUSIP numbers for all Transfer Restricted
          Securities not later than the effective date of the Shelf Registration
          Statement and provide the Trustee under the Indenture with
          certificates for the Notes that are in a form eligible for deposit
          with The Depository Trust Company.

                   (xiii) Cooperate and assist in any filings required to be
          made with the NASD and in the performance of any due diligence
          investigation by any underwriter that is required to be retained in
          accordance with the rules and regulations of the NASD.

                   (xiv)  Subject to Section 4(b)(i) hereof, otherwise use its
          reasonable efforts to comply with all applicable rules and regulations
          of the Commission and all reporting requirements under the rules and
          regulations of the Exchange Act.

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                          (xv)   Cause the Indenture to be qualified under the
                   TIA not later than the effective date of the Shelf
                   Registration Statement required by this Agreement, and, in
                   connection therewith, cooperate with the Trustee and the
                   holders of Notes to effect such changes to the Indenture as
                   may be required for such Indenture to be so qualified in
                   accordance with the terms of the TIA; and execute and use
                   its reasonable efforts to cause the Trustee thereunder to
                   execute all documents that may be required to effect such
                   changes and all other forms and documents required to be
                   filed with the Commission to enable such Indenture to be so
                   qualified in a timely manner.

                          (xvi)  Cause all Common Stock covered by the Shelf
                   Registration Statement to be listed or quoted, as the case
                   may be, on each securities exchange or automated quotation
                   system on which Common Stock is then listed or quoted.

                          (xvii) Provide to each Holder upon written request
                   each document filed with the Commission pursuant to the
                   requirements of Section 13 and Section 15 of the Exchange Act
                   after the effective date of the Shelf Registration Statement,
                   unless such document is available through the Commission's
                   EDGAR system.

                   (c)    Each Holder agrees by acquisition of a Transfer
          Restricted Security that, upon receipt of any notice (a "Suspension
          Notice") from the Company of the existence of any fact of the kind
          described in Section 4(b)(iii)(D) or 4(b)(i) hereof, such Holder will
          forthwith discontinue disposition of Transfer Restricted Securities
          pursuant to the Shelf Registration Statement until:

                          (i)  such Holder has received copies of the
                   supplemented or amended Prospectus contemplated by Section
                   4(b)(xi) hereof; or

                          (ii) such Holder is advised in writing by the Company
                   that the use of the Prospectus may be resumed, and has
                   received copies of any additional or supplemental filings
                   that are incorporated by reference in the Prospectus.

If so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such Suspension Notice.

                   (d)    Each Holder agrees, by acquisition of the Transfer
          Restricted Securities, that no Holder shall be entitled to sell any of
          such Transfer Restricted Securities pursuant to a Registration
          Statement or to receive a Prospectus relating thereto, unless such
          Holder has furnished the Company with a Notice and Questionnaire as
          required pursuant to Section

                                       14

<PAGE>

         2(e) hereof (including the information required to be included in such
         Notice and Questionnaire) and the information set forth in the next
         sentence. Each Notice Holder agrees promptly to furnish to the Company
         all information required to be disclosed in order to make the
         information previously furnished to the Company by such Notice Holder
         not misleading and any other information regarding such Notice Holder
         and the distribution of such Transfer Restricted Securities as the
         Company may from time to time reasonably request in writing. Any sale
         of any Transfer Restricted Securities by any Holder shall constitute a
         representation and warranty by such Holder that the information
         relating to such Holder and its plan of distribution is as set forth in
         the Prospectus delivered by such Holder in connection with such
         disposition, that such Prospectus does not as of the time of such sale
         contain any untrue statement of a material fact relating to or provided
         by such Holder or its plan of distribution and that such Prospectus
         does not as of the time of such sale omit to state any material fact
         relating to or provided by such Holder or its plan of distribution
         necessary to make the statements in such Prospectus, in the light of
         the circumstances under which they were made, not misleading.

         5.    Registration Expenses.

         All expenses incident to the Company's performance of or compliance
with this Agreement shall be borne by the Company regardless of whether a Shelf
Registration Statement becomes effective, including, without limitation:

                          (i)   all registration and filing fees and expenses
               (including filings made with the NASD);

                          (ii)  all fees and expenses of compliance with federal
               securities and state Blue Sky or securities laws;

                          (iii) all expenses of printing (including printing of
               Prospectuses and certificates for the Common Stock to be issued
               upon conversion of the Notes) and the Company's expenses for
               messenger and delivery services and telephone;

                          (iv)  all fees and disbursements of counsel to the
               Company;

                          (v)   all application and filing fees in connection
               with listing (or authorizing for quotation) the Common Stock on a
               national securities exchange or automated quotation system
               pursuant to the requirements hereof; and

                          (vi)  all fees and disbursements of independent
               certified public accountants of the Company.

                                       15

<PAGE>

         The Company shall bear its internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal, accounting or other duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.

         6.  Indemnification And Contribution.

                 (a)    The Company agrees to indemnify and hold harmless each
         Holder of Transfer Restricted Securities (including each Initial
         Purchaser), such Holder's directors, officers, and employees and each
         person, if any, who controls any such Holder within the meaning of the
         Securities Act (each, an "Indemnified Holder"), against any loss,
         claim, damage, liability or expense, joint or several, or any action in
         respect thereof (including, but not limited to, any loss, claim,
         damage, liability or action relating to resales of the Transfer
         Restricted Securities), to which such Indemnified Holder may become
         subject, insofar as any such loss, claim, damage, liability or action
         arises out of, or is based upon:

                        (i)  any untrue statement or alleged untrue statement of
                 a material fact contained in (A) the Shelf Registration
                 Statement as originally filed or in any amendment thereof, in
                 any Prospectus, or in any amendment or supplement thereto or
                 (B) any blue sky application or other document or any amendment
                 or supplement thereto prepared or executed by the Company (or
                 based upon written information furnished by or on behalf of the
                 Company expressly for use in such blue sky application or other
                 document or amendment on supplement) filed in any jurisdiction
                 specifically for the purpose of qualifying any or all of the
                 Transfer Restricted Securities under the securities law of any
                 state or other jurisdiction (such application or document being
                 hereinafter called a "Blue Sky Application"); or

                        (ii) the omission or alleged omission to state therein
                 any material fact required to be stated therein or necessary to
                 make the statements therein, in the light of the circumstances
                 under which they were made, not misleading,

and agrees to reimburse each Indemnified Holder promptly upon demand for any
legal or other expenses reasonably incurred by such Indemnified Holder in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability, expense or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holder (or its related
Indemnified Holder) specifically for use therein. The foregoing indemnity
agreement is in addition to any liability which the Company may otherwise have.

                                       16

<PAGE>

                 (b) Each Holder, severally and not jointly, agrees to indemnify
         and hold harmless the Company, its directors, officers and employees
         and each person, if any, who controls the Company within the meaning of
         the Securities Act to the same extent as the foregoing indemnity from
         the Company to each such Holder, but only with reference to written
         information relating to such Holder furnished to the Company by or on
         behalf of such Holder specifically for inclusion in the documents
         referred to in the foregoing indemnity. This indemnity agreement set
         forth in this Section shall be in addition to any liabilities which any
         such Holder may otherwise have. In no event shall any Holder, its
         directors, officers or any person who controls such Holder be liable or
         responsible for any amount in excess of the amount by which the net
         proceeds received by such Holder with respect to its sale of Transfer
         Restricted Securities pursuant to a Shelf Registration Statement
         exceeds the amount of any damages that such Holder, its directors,
         officers or any person who controls such Holder has otherwise been
         required to pay by reason of such untrue or alleged untrue statement or
         omission or alleged omission.

                 (c) Promptly after receipt by an indemnified party under this
         Section 6 of notice of any claim or the commencement of any action, the
         indemnified party shall, if a claim in respect thereof is to be made
         against the indemnifying party under this Section 6, notify the
         indemnifying party in writing of the claim or the commencement of that
         action; provided, however, that the failure to notify the indemnifying
         party shall not relieve it from any liability which it may have under
         this Section 6 except to the extent it has been materially prejudiced
         by such failure and, provided, further, that the failure to notify the
         indemnifying party shall not relieve it from any liability which it may
         have to an indemnified party otherwise than under this Section 6. If
         any such claim or action is brought against an indemnified party, and
         it notifies the indemnifying party thereof, the indemnifying party
         shall be entitled to participate therein and, to the extent that it
         wishes, jointly with any other similarly notified indemnifying party,
         to assume the defense thereof with counsel satisfactory to the
         indemnified party. After notice from the indemnifying party to the
         indemnified party of its election to assume the defense of such claim
         or action, the indemnifying party shall not be liable to the
         indemnified party under this Section 6 for any legal or other expenses
         subsequently incurred by the indemnified party in connection with the
         defense thereof other than reasonable costs of investigation; provided,
         however, that the indemnified parties shall have the right to employ a
         single counsel to represent jointly the indemnified parties and their
         officers, employees and controlling persons who may be subject to
         liability arising out of any claim in respect of which indemnity may be
         sought by the indemnified parties against the indemnifying party under
         this Section 6 if the indemnified party shall have

                                       17

<PAGE>

         been advised by legal counsel that there may be one or more legal
         defenses available to such indemnified party and their respective
         officers, employees and controlling persons that are different from or
         additional to those available to the indemnifying party, and in that
         event, the fees and expenses of such separate counsel shall be paid by
         the indemnifying party. No indemnifying party shall:

                         (i)  without the prior written consent of the
                   indemnified parties (which consent shall not be unreasonably
                   withheld) settle or compromise or consent to the entry of any
                   judgment with respect to any pending or threatened claim,
                   action, suit or proceeding in respect of which
                   indemnification or contribution may be sought hereunder
                   (whether or not the indemnified parties are actual or
                   potential parties to such claim or action), unless such
                   settlement, compromise or consent includes an unconditional
                   release of such indemnified party from all liability arising
                   out of such claim, action, suit or proceeding, or

                         (ii) be liable for any settlement of any such action
                   effected without its written consent (which consent shall not
                   be unreasonably withheld), but if settled with its written
                   consent or if there be a final judgment for the plaintiff in
                   any such action, the indemnifying party agrees to indemnify
                   and hold harmless any indemnified party from and against any
                   loss of liability by reason of such settlement or judgment in
                   accordance with this Section 6.

                   (d)   The indemnifying party under this Section shall not be
         liable for any settlement of any proceeding effected without its
         written consent, which shall not be withheld unreasonably, but if
         settled with such consent or if there is a final judgment for the
         plaintiff, the indemnifying party agrees to indemnify the indemnified
         party against any loss, claim, damage, liability or expense by reason
         of such settlement or judgment. Notwithstanding the foregoing sentence,
         if at any time an indemnified party shall have validly requested an
         indemnifying party to reimburse the indemnified party for fees and
         expenses of counsel as contemplated by Section 6(c) hereof, the
         indemnifying party agrees that it shall be liable for any settlement of
         any proceeding effected without its written consent if (i) such
         settlement is entered into more than 30 days after receipt by such
         indemnifying party of the aforesaid valid request and (ii) such
         indemnifying party shall not have reimbursed the indemnified party in
         accordance with such valid request prior to the date of such
         settlement. No indemnifying party shall, without the prior written
         consent of the indemnified party, effect any settlement, compromise or
         consent to the entry of judgment in any pending or threatened action,
         suit or proceeding in respect of which any indemnified party is or
         could have been a party and indemnity was or could have been sought
         hereunder by such indemnified party, unless such settlement, compromise
         or consent (x)

                                       18

<PAGE>

         includes an unconditional release of such indemnified party from all
         liability on claims that are the subject matter of such action, suit or
         proceeding and (y) does not include a statement as to or an admission
         of fault, culpability or a failure to act by or on behalf of any
         indemnified party.

                  (e) If the indemnification provided for in this Section 6
         shall for any reason be unavailable or insufficient to hold harmless an
         indemnified party under Section 6(a) or 6(b) in respect of any loss,
         claim, damage or liability (or action in respect thereof) referred to
         therein, each indemnifying party shall, in lieu of indemnifying such
         indemnified party, contribute to the amount paid or payable by such
         indemnified party as a result of such loss, claim, damage or liability
         (or action in respect thereof):

                            (i)  in such proportion as is appropriate to reflect
                  the relative benefits received by the Company from the
                  offering and sale of the Transfer Restricted Securities on the
                  one hand and a Holder with respect to the sale by such Holder
                  of the Transfer Restricted Securities on the other, or

                            (ii) if the allocation provided by Section (6)(e)(i)
                  is not permitted by applicable law, in such proportion as is
                  appropriate to reflect not only the relative benefits referred
                  to in Section 6(e)(i) but also the relative fault of the
                  Company on the one hand and the Holders on the other in
                  connection with the statements or omissions or alleged
                  statements or alleged omissions that resulted in such loss,
                  claim, damage or liability (or action in respect thereof), as
                  well as any other relevant equitable considerations.

The relative benefits received by the Company on the one hand and a Holder on
the other with respect to such offering and such sale shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Notes
purchased under the Purchase Agreement (before deducting expenses) received by
the Company, on the one hand, bear to the total proceeds received by such Holder
with respect to its sale of Transfer Restricted Securities on the other. The
relative fault of the parties shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Holders on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder agree that it would not
be just and equitable if the amount of contribution pursuant to this Section
6(e) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the
first sentence of this paragraph (e).

                                       19

<PAGE>

         The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 6 shall be deemed to include, for purposes of this Section
6, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim.

         Notwithstanding the provisions of this Section 6, no Holder shall be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holder with respect to its sale of Transfer Restricted
Securities exceeds the amount of any damages which such Holder has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute as provided in this
Section 6(d) are several and not joint.

                 (f) The provisions of this Section 6 shall remain in full force
         and effect, regardless of any investigation made by or on behalf of any
         Holder or the Company or any of the officers, directors or controlling
         persons referred to in Section 6 hereof, and will survive the sale by a
         Holder of Transfer Restricted Securities.

         7. Rule 144A and Rule 144. The Company agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13
or 15 (d) of the Exchange Act, to make all filings required thereby in a timely
manner in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144.

         8. Miscellaneous.

                 (a) Remedies. The Company acknowledges and agrees that any
         failure by the Company to comply with its obligations under Section 2
         hereof may result in material irreparable injury to the Initial
         Purchasers or the Holders for which there is no adequate remedy at law,
         that it will not be possible to measure damages for such injuries
         precisely, and that, in the event of any such failure, the Initial
         Purchasers or any Holder may seek such relief as may be required to
         specifically enforce the Company's obligations under Section 2 hereof.

                                       20

<PAGE>

                 (b) No Inconsistent Agreements. The Company will not on or
         after the date hereof, enter into any agreement with respect to its
         securities that is inconsistent with the rights granted to the Holders
         in this Agreement or otherwise conflicts with the provisions hereof. In
         addition, the Company shall not grant to any of its securityholders
         (other than the Holders of Transfer Restricted Securities in such
         capacity) the right to include any of its securities in the Shelf
         Registration Statement provided for in this Agreement other than the
         Transfer Restricted Securities. The Company has not previously entered
         into any agreement (which has not expired or been terminated) granting
         any registration rights with respect to its securities to any Person,
         which rights conflict with the provisions hereof.

                 (c) Amendments and Waivers. This Agreement may not be amended,
         modified or supplemented, and waivers or consents to or departures from
         the provisions hereof may not be given, unless the Company has obtained
         the written consent of a Majority of Holders. Notwithstanding the
         foregoing, a waiver or consent to depart from the provisions hereof,
         with respect to a matter, which relates exclusively to the rights of
         Holders whose securities are being sold pursuant to a Shelf
         Registration Statement and does not directly or indirectly adversely
         affect the rights of other Holders, may be given by the Majority
         Holders, determined on the basis of Notes being sold rather than
         registered under such Shelf Registration Statement.

                 (d) Notices. All notices and other communications provided for
         or permitted hereunder shall be made in writing by hand-delivery,
         first-class mail (registered or certified, return receipt requested),
         telex, facsimile transmission, or air courier guaranteeing overnight
         delivery:

                          (i)  if to a Holder, at the address set forth on the
                 records of the registrar under the Indenture or the transfer
                 agent of the Common Stock, as the case may be; and

                          (ii) if to the Company, initially at its address set
                 forth in the Purchase Agreement,

                           With a copy to:

                           Latham & Watkins
                           135 Commonwealth Drive
                           Menlo Park, California 94025
                           Fax No.: (650) 433-2600
                           Attn: Christopher L. Kaufman

                                       21

<PAGE>

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if transmitted by
facsimile; and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.

         Any party hereto may change the address for receipt of communications
by giving written notice to the others.

                 (e) Successors and Assigns. This Agreement shall inure to the
         benefit of and be binding upon the successors, assigns and transferees
         of each of the parties, including without limitation and without the
         need for an express assignment, subsequent Holders of Transfer
         Restricted Securities, provided, however, that nothing contained herein
         shall be deemed to permit any assignment, transfer or other disposition
         of Transfer Restricted Securities in violation of the terms of the
         Purchase Agreement or the Indenture. If any transferee of any Holder
         shall acquire Transfer Restricted Securities, in any manner, whether by
         operation of law or otherwise, such Transfer Restricted Securities
         shall be held subject to all the terms of this Agreement, and by taking
         and holding such Transfer Restricted Securities such person shall be
         conclusively deemed to have agreed to be bound by and to perform all of
         the terms and provisions of this Agreement.

                 (f) Counterparts. This Agreement may be executed in any number
         of counterparts and by the parties hereto in separate counterparts,
         each of which when so executed shall be deemed to be an original and
         all of which taken together shall constitute one and the same
         agreement.

                 (g) Notes Held by the Company or Their Affiliates. Whenever the
         consent or approval of Holders of a specified percentage of Transfer
         Restricted Securities is required hereunder, Transfer Restricted
         Securities held by the Company or its Affiliates (other than subsequent
         Holders if such subsequent Holders are deemed to be Affiliates solely
         by reason of their holding of such Notes) shall not be counted in
         determining whether such consent or approval was given by the Holders
         of such required percentage.

                 (h) Headings. The headings in this Agreement are for
         convenience of reference only and shall not limit or otherwise affect
         the meaning hereof.

                 (i) Governing Law. This Agreement shall be governed by and
         construed in accordance with the law of the State of New York.

                 (j) Severability. If any one or more of the provisions
         contained herein, or the application thereof in any circumstance, is
         held invalid, illegal or unenforceable, the validity, legality and
         enforceability of

                                       22

<PAGE>

         any such provision in every other respect and of the remaining
         provisions contained herein shall not be affected or impaired thereby,
         it being intended that all of the rights and privileges of the parties
         shall be enforceable to the fullest extent permitted by law.

                 (k)   Entire Agreement. This Agreement, together with the
         Purchase Agreement and the Indenture, is intended by the parties as a
         final expression of their agreement and intended to be a complete and
         exclusive statement of the agreement and understanding of the parties
         hereto in respect of the subject matter contained herein. There are no
         restrictions, promises, warranties or undertakings, other than those
         set forth or referred to herein with respect to the registration rights
         granted by the Company with respect to the Transfer Restricted
         Securities. This Agreement supersedes all prior agreements and
         understandings between the parties with respect to such subject matter.

                                       23

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                        MENTOR GRAPHICS CORPORATION

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

                                        BANC OF AMERICA SECURITIES LLC
                                        FLEET SECURITIES, INC.
                                        SCOTIA CAPITAL (USA) INC.
                                        NEEDHAM & COMPANY, INC.

                                        Acting severally on behalf of themselves
                                        and the several Initial Purchasers

                                        BANC OF AMERICA SECURITIES LLC

                                        By:  /s/   Trevor Ganshaw
                                            ------------------------------------
                                            Name:  Trevor Ganshaw
                                            Title: Managing Director

                                       24<PAGE>

                                                                    Exhibit 10.A

                                                                  EXECUTION COPY

                      SECOND AMENDMENT TO CREDIT AGREEMENT

           This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into as of April 16, 2002, by and among Mentor Graphics Corporation, an
Oregon corporation (the "Company"), the several financial institutions party to
the Credit Agreement referred to below (each a "Bank" and, collectively, the
"Banks"), The Bank of Nova Scotia, as documentation agent, Fleet National Bank,
N.A., as syndication agent, and Bank of America, N.A., as administrative agent
for the Banks (in such capacity, the "Agent").

           WHEREAS, the Company, the Banks and the Agent entered into a Credit
Agreement dated as of January 10, 2001, as amended pursuant to that certain
First Amendment to Credit Agreement dated as of January 24, 2002 (as so amended,
and as otherwise amended, modified or supplemented from time to time, the
"Credit Agreement");

           WHEREAS, the Company presently intends to acquire all of the
outstanding shares of Innoveda, Inc., a Delaware corporation (the "Innoveda
Acquisition");

           WHEREAS, the Company has requested the right to obtain a bridge loan
of up to $125,000,000 (the "Bridge Loan Facility") and to issue subordinated
debt (the "Subordinated Indebtedness");

           WHEREAS, the Company has requested that the Majority Banks agree to
certain amendments to the Credit Agreement in contemplation of the Innoveda
Acquisition, the issuance of Subordinated Indebtedness and the execution of the
Bridge Loan Facility and the Majority Banks have agreed to such request, subject
to the terms and conditions of this Amendment;

     NOW, THEREFORE, the parties hereto agree as follows:

1.  Definitions; References; Interpretation.

     (a) Unless otherwise specifically defined herein, each term used herein
which is defined in the Credit Agreement shall have the meaning assigned to such
term in the Credit Agreement.

     (b) Each reference to "this Amendment", "hereof", "hereunder", "herein" and
"hereby" and each other similar reference contained in the Credit Agreement, and
each reference to "the Credit Agreement" and each other similar reference in the
other Loan Documents, shall from and after the Second Amendment Effective Date
(as defined in Section 4(a) hereof) refer to the Credit Agreement as amended
hereby.

     (c) The rules of interpretation set forth in Section 1.02 of the Credit
Agreement shall be applicable to this Amendment.

<PAGE>

2. Amendments to Credit Agreement. Subject to the terms and conditions hereof,
the Credit Agreement is amended as follows:

     (a) Effective as of the Second Amendment Effective Date:

          (1) The following new terms are hereby added to Section 1.01 of the
Credit Agreement in proper alphabetical order:

                ""ATI" means Accelerated Technology Inc."

                ""ATI Acquisition" means the Acquisition by the Company or a
          Subsidiary of ATI."

                ""Bridge Loan Facility" means that certain $125,000,000 Bridge
          Loan Agreement dated as of April 16, 2002, by and among the Company,
          BofA, as administrative agent, and the other lenders party thereto."

                ""IKOS Acquisition" means the Acquisition by the Company or a
          Subsidiary of IKOS."

                ""Innoveda" means Innoveda, Inc., a Delaware corporation."

                ""Innoveda Acquisition" means the Acquisition by the Company or
          a Subsidiary of Innoveda."

                ""Innoveda Acquisition Agreement" means the agreement between
          the Company and Innoveda pursuant to which the Innoveda Acquisition
          takes place."

                ""Second Amendment Effective Date" has the meaning assigned to
          such term in that certain Second Amendment to Credit Agreement dated
          as of April 16, 2002 by and among the Company, BofA, as administrative
          agent, and the Banks party thereto."

                ""Subordinated Indebtedness" means Indebtedness incurred from
          time to time and subordinated in right of payment to the Obligations
          hereunder."

          (1) The following defined terms set forth in Section 1.01 of the
Credit Agreement are hereby amended and restated in their entirety to read as
follows:

                ""Base Rate" means for any day a fluctuating rate per annum
          equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and
          (b) the rate of interest in effect for such day as publicly announced
          from time to time by BofA as its "prime rate." Such rate is a rate set
          by BofA based upon various factors including BofA's costs and desired
          return, general economic conditions and other factors, and is used as
          a reference point for pricing some loans, which may be priced at,
          above, or below such announced rate. Any change in such rate announced
          by BofA shall

                                        2

<PAGE>

          take effect at the opening of business on the day specified in the
          public announcement of such change."

                ""Federal Funds Rate" means, for any day, the rate per annum
          equal to the weighted average of the rates on overnight Federal funds
          transactions with members of the Federal Reserve System arranged by
          Federal funds brokers on such day, as published by the Federal Reserve
          Bank on the Business Day next succeeding such day; provided that (a)
          if such day is not a Business Day, the Federal Funds Rate for such day
          shall be such rate on such transactions on the next preceding Business
          Day as so published on the next succeeding Business Day, and (b) if no
          such rate is so published on such next succeeding Business Day, the
          Federal Funds Rate for such day shall be the average rate charged to
          BofA on such day on such transactions as determined by the Agent."

                ""Offshore Rate" means, for any Interest Period, with respect to
          Offshore Rate Loans:

                (a) the rate per annum equal to the rate determined by the Agent
          to be the offered rate that appears on the page of the Telerate screen
          (or any successor thereto) that displays an average British Bankers
          Association Interest Settlement Rate for deposits in Dollars (for
          delivery on the first day of such Interest Period) with a term
          equivalent to such Interest Period, determined as of approximately
          11:00 a.m. (London time) two Business Days prior to the first day of
          such Interest Period, or

                (b) if the rate referenced in the preceding subsection (a) does
          not appear on such page or service or such page or service shall cease
          to be available, the rate per annum equal to the rate determined by
          the Agent to be the offered rate on such other page or other service
          that displays an average British Bankers Association Interest
          Settlement Rate for deposits in Dollars (for delivery on the first day
          of such Interest Period) with a term equivalent to such Interest
          Period, determined as of approximately 11:00 a.m. (London time) two
          Business Days prior to the first day of such Interest Period, or

                (c) if the rates referenced in the preceding subsections (a) and
          (b) are not available, the rate per annum determined by the Agent as
          the rate of interest at which deposits in Dollars for delivery on the
          first day of such Interest Period in same day funds in the approximate
          amount of the Offshore Rate Loan being made, continued or converted by
          Bank of America and with a term equivalent to such Interest Period
          would be offered by Bank of America's London Branch to major banks in
          the London interbank offshore market at their request at approximately
          4:00 p.m. (London time) two Business Days prior to the first day of
          such Interest Period."

          (1) Subsection (b) of the defined term "Cash Equivalents" set forth in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

                                       3

<PAGE>

                "(b) certificates of deposit, time deposits, Eurodollar time
          deposits, repurchase agreements, reverse repurchase agreements, or
          bankers' acceptances, having in each case a tenor of not more than 12
          months, issued by (i) any U.S. commercial bank or any commercial bank
          organized under the laws of any other country which is a member of the
          Organization for Economic Cooperation and Development (but including,
          in any event, Singapore, Israel, India and Egypt), or a political
          subdivision of any such country, in each case having combined capital
          and surplus of not less than $100,000,000 and whose short-term
          securities are rated at least A-1 by Standard & Poor's Corporation
          ("S&P") or at least P-1 by Moody's Investor Service, Inc. ("Moody's"),
          or (ii) any Bank;"

          (1) Subsection (b) of the defined term "Permitted Investments" set
forth in Section 1.01 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:

                "(b) certificates of deposit, time deposits, Eurodollar time
          deposits, repurchase agreements, reverse repurchase agreements, or
          bankers' acceptances, having in each case a tenor of not more than
          three years, issued by any U.S. commercial bank or any commercial bank
          organized under the laws of any other country which is a member of the
          Organization for Economic Cooperation and Development (but including,
          in any event, Singapore, Israel, India and Egypt), or a political
          subdivision of any such country, in each case having combined capital
          and surplus of not less than $100,000,000 and whose short-term
          securities are rated at least A-2 by Standard & Poor's Corporation
          ("S&P") or at least P-2 by Moody's Investor Service, Inc.
          ("Moody's");"

          (1) The defined terms "Eurodollar Reserve Percentage", "Joint
Venture", "Net Cash Consideration" and "Subordination Agreement" set forth in
Section 1.01 of the Credit Agreement are hereby deleted in their entirety.

          (2) Subsection 6.02(c) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "(c) promptly upon request of the Agent, a certificate of a
          Responsible Officer of the Company certifying (i) the aggregate dollar
          amount of Returned Accounts for the Company and its Subsidiaries for
          the most recently-ended calendar month, measured on a consolidated
          basis, (ii) the aggregate dollar amount of accounts receivable (after
          reserves have been deducted) of the Company and its Subsidiaries,
          measured on a consolidated basis, as of the last day of such calendar
          month, (iii) the aggregate dollar amount of accounts receivable (after
          reserves have been deducted) of the Company and its Subsidiaries that
          are 90 days or more past due, measured on a consolidated basis, as of
          the last day of such calendar month, and (iv) the aggregate dollar
          amount of accounts receivable (after reserves have been deducted) of
          the Company and its Subsidiaries that are 90 days or more past due
          expressed as a percentage of the aggregate dollar amount of accounts
          receivable (after reserves have been deducted) of the Company and its

                                       4

<PAGE>

          Subsidiaries, in each case, measured on a consolidated basis, as of
          the last day of such calendar month; provided, however, that unless
          and until a Borrowing has occurred hereunder, the Company shall be
          under no obligation to deliver the monthly certificates required under
          this subsection 6.02(c); provided, further, however, that it shall be
          an additional condition precedent to the initial Borrowing after the
          Bridge Termination Effective Date that the Company deliver to the
          Agent a certificate of a Responsible Officer of the Company certifying
          retroactively the information required under the preceding clauses (i)
          through (iv) for each calendar month ended from the Bridge Termination
          Effective Date through the first Borrowing thereafter;"

          (1) Section 6.13 of the Credit Agreement is hereby amended by deleting
the word "diligently" therefrom.

          (2) Section 7.01 of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of subsection (q) thereof; (ii) deleting the
period at the end of subsection (r) thereof and inserting "; and" therefor; and
(iii) adding the following as new subsection (s) thereof:

                "(s) Liens on Margin Stock of Innoveda."

          (1) Section 7.02 of the Credit Agreement is hereby amended by (i)
amending and restating subsections (d) and (f) thereof in their entirety to read
as set forth below; (ii) deleting the word "and" at the end of subsection (h)
thereof; (iii) deleting the period at the end of subsection (i) thereof and
inserting "; and" therefor; and (iv) adding the following as new subsection (j)
thereof:

                "(d) dispositions of Permitted Receivables pursuant to Permitted
          Receivables Purchase Facilities; provided that (i) for those Permitted
          Receivables having a final maturity date which is less than 12 months
          after the date such obligations arise, the value of such accounts
          receivable so sold by the Company and its Subsidiaries shall not
          exceed $50,000,000 at any time outstanding, and (ii) the value of all
          Permitted Receivables (whether or not having a final maturity date
          which is less than 12 months after the date such obligations arise) so
          sold by the Company and its Subsidiaries shall not exceed $50,000,000
          at any time outstanding; and provided, further, however, that no
          dispositions of any Permitted Receivables shall be permitted at any
          time that any of the following circumstances exist: (A) Returned
          Accounts for the Company and its Subsidiaries for any calendar month
          shall have exceeded $10,000,000 in the aggregate, measured on a
          consolidated basis, (B) accounts receivable (after reserves have been
          deducted) of the Company and its Subsidiaries that are 90 days or more
          past due shall be greater than 10% of accounts receivable (after
          reserves have been deducted) of the Company and its Subsidiaries, in
          each case, measured on a consolidated basis, (C) the TNW Buffer
          measured as of the last day of any full fiscal quarter, commencing
          with the second full fiscal quarter following the fiscal quarter in
          which the Innoveda Acquisition is consummated, shall be less than 50%
          of the

                                       5

<PAGE>

          TNW Buffer measured as of the last day of the fiscal quarter
          immediately preceding such fiscal quarter, (D) if after giving effect
          to such disposition, the Company would not be in pro forma compliance
          with the financial covenants set forth in Subsections 7.14(a) through
          (d), measured as of the last day of the fiscal quarter then most
          recently ended for which a Compliance Certificate has been delivered
          to the Agent and the Banks pursuant to subsection 6.02(b), or (E) any
          Event of Default then exists or would result from such disposition;"

                "(f) the sale or lease of any property set forth on Schedule
          7.02 hereof and any excess facilities acquired at the time of the ATI
          Acquisition, the IKOS Acquisition or the Innoveda Acquisition, in each
          case for fair market value (as determined in good faith at the time of
          such sale by the board of directors of the Company or the applicable
          Subsidiary, as the case may be); provided that no Default or Event of
          Default then exists or would result from such sale;"

                "(j) the sale of Margin Stock of Innoveda for fair market value
          (as determined in good faith at the time of such sale by the board of
          directors of the Company or the applicable Subsidiary, as the case may
          be)."

          (1) Section 7.04 of the Credit Agreement is hereby amended by (i)
amending and restating subsections (d), (e), (h) and (k) thereof in their
entirety to read "reserved", (ii) deleting the word "and" at the end of
subsections (j) and (k) thereof; (iii) deleting the period at the end of
subsection (l) thereof and inserting "; and" therefor, and (iv) adding the
following as new subsections (m) and (n) thereof, respectively:

                "(m) the purchase by the Company of the capital stock of
          Innoveda and ATI; and"

                "(n) other Investments, the value of which as reflected on the
          Company's balance sheet does not exceed $10,000,000 in the aggregate
          in any fiscal year."

          (1) Section 7.05 of the Credit Agreement is hereby amended by (i)
amending and restating subsection (g) thereof in its entirety to read
"reserved", (ii) deleting the period at the end of subsection (i) thereof and
inserting a semicolon therefor, (iii) deleting the word "and" at the end of
subsection (h) thereof, and (iv) adding the following as new subsections (j) and
(k) thereof:

                "(j) Subordinated Indebtedness, provided that (i) the maturity
          date of such Subordinated Indebtedness shall be at least six months
          after the Revolving Termination Date (as defined on the Second
          Amendment Effective Date), (ii) such Subordinated Indebtedness shall
          not have any scheduled payment of principal, scheduled prepayment,
          scheduled mandatory redemption or repurchase or sinking fund payment
          prior to at least six months after the Revolving Termination Date (as
          defined on the Second Amendment Effective Date), (iii) such
          Subordinated Indebtedness shall be subordinated in right of payment to
          the Obligations

                                       6

<PAGE>

          hereunder and under the Bridge Loan Facility on terms reasonably
          satisfactory to the Agent and the Majority Banks, and (iv) the
          proceeds thereof shall be used to prepay outstanding loans under the
          Bridge Loan Facility; and"

                "(k) during the period prior to October 31, 2002, Indebtedness
          incurred pursuant to the Bridge Loan Facility, in an aggregate
          principal amount not to exceed $125,000,000."

          (1) Section 7.07 of the Credit Agreement is hereby amended by (a)
amending and restating subsection (a) thereof in its entirety to read as set
forth below, and (b) adding the following as new subsection (d) thereof:

                "(a) The Company shall not, and shall not suffer or permit any
          Subsidiary to, use any portion of the Loan proceeds, directly or
          indirectly, otherwise than in connection with the purchase of shares
          of its own stock for retirement, (i) to purchase or carry Margin
          Stock, (ii) to repay or otherwise refinance indebtedness of the
          Company or others incurred to purchase or carry Margin Stock, (iii) to
          extend credit for the purpose of purchasing or carrying any Margin
          Stock, in the case of each of the preceding clauses (i) (ii) and
          (iii), in violation of Regulation T, U or X of the FRB, or (iv) to
          acquire any security (other than IKOS Margin Stock and Margin Stock of
          Innoveda) in any transaction that is subject to Section 13(d) or 14(d)
          of the Exchange Act."

                "(d) The Company shall not, and shall not suffer or permit any
          Subsidiary to, use any portion of the Loan proceeds, directly or
          indirectly, to repay Indebtedness under the Bridge Loan Facility."

          (1) Subsection 7.08(c) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "(c) Contingent Obligations of the Company and its Subsidiaries
          existing as of the Closing Date and set forth on Schedule 7.08 hereof
          and any equivalent replacements thereof;"

          (1) Section 7.10 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "7.10 The Company shall not declare or make any dividend payment
          or other distribution of assets, properties, cash, rights, obligations
          or securities on account of any shares of any class of its capital
          stock, or purchase, redeem or otherwise acquire for value any shares
          of its capital stock or any warrants, rights or options to acquire
          such shares, now or hereafter outstanding; or make any payment or
          prepayment of principal of, premium, if any, or interest on, or
          redeem, purchase, retire, defease (including in-substance or legal
          defeasance), or make any sinking fund or similar payment with respect
          to, Subordinated Indebtedness, except that:

                                       7

<PAGE>

                (a) the Company may declare and make dividend payments or other
          distributions payable solely in its common stock;

                (b) so long as no Default or Event of Default exists or would
          result therefrom, the Company may purchase, redeem or otherwise
          acquire shares of its common stock or warrants or options to acquire
          any such shares pursuant to any employee stock option or purchase
          plan; provided that all such purchases, redemptions or other
          acquisitions otherwise permitted under this clause (b) do not exceed
          $5,000,000 in the aggregate in any fiscal year; and

                (c) the Company may make regularly scheduled payments of
          interest in respect of Subordinated Indebtedness in accordance with
          the terms of, and only to the extent required by, and subject to the
          subordination provisions contained in, any agreement or instrument
          governing such Subordinated Indebtedness."

          (1) Subsection 8.01(m) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "(m) Invalidity of Subordination Provisions. The subordination
          provisions of any agreement or instrument governing any Subordinated
          Indebtedness and subordinating such Subordinated Indebtedness to the
          Obligations hereunder is for any reason revoked, invalidated or
          otherwise breached by the Company or any Subsidiary, or otherwise
          ceases to be in full force and effect as a result of any act or
          omission of the Company or any Subsidiary, or the Company or any
          Subsidiary otherwise contests in any manner the validity or
          enforceability thereof or denies that it has any further liability or
          obligation thereunder."

          (1) Exhibit G of the Credit Agreement is hereby amended and restated
in its entirety to read "reserved".

          (2) Schedules 5.05, 5.07, 5.12, 5.15, 5.16, 5.17, 7.01, 7.02, 7.04,
7.05 and 7.08 attached to the Credit Agreement are hereby amended and restated
in their entirety to read as set forth on Schedules 5.05, 5.07, 5.12, 5.15,
5.16, 5.17, 7.01, 7.02, 7.04, 7.05 and 7.08, respectively, attached hereto.

     (b) Effective as of the Bridge Funding Effective Date (as defined in
Section 4(b) hereof):

          (1) The following new terms shall be added to Section 1.01 of the
Credit Agreement in proper alphabetical order:

                ""Attributable Indebtedness" means, on any date, (a) in respect
          of any capital lease of any Person, the capitalized amount thereof
          that would appear on a balance sheet of such Person prepared as of
          such date in accordance with GAAP, and (b) in respect of any Synthetic
          Lease Obligation, the capitalized amount of the remaining lease
          payments under the relevant lease that would appear on a balance

                                       8

<PAGE>

          sheet of such Person prepared as of such date in accordance with GAAP
          if such lease were accounted for as a capital lease."

                ""Bridge Funding Effective Date" has the meaning assigned to
          such term in that certain Second Amendment to Credit Agreement dated
          as of April 16, 2002, by and among the Company, BofA, as
          administrative agent, and the Banks party thereto."

                ""Consolidated EBITDA" means, for any period, for the Company
          and its Subsidiaries on a consolidated basis, an amount equal to the
          sum of (i) Consolidated Net Income, (ii) Consolidated Interest
          Charges, (iii) the amount of taxes, based on or measured by income,
          used or included in the determination of such Consolidated Net Income,
          (iv) the amount of depreciation and amortization expense deducted in
          determining such Consolidated Net Income, (v) restructuring charges
          taken in the third and fourth fiscal quarters of fiscal year 2001 and
          the first fiscal quarter of fiscal year 2002, and (vi) any
          Acquisition-related expenses, restructuring charges and write-offs
          (relating to in-process research and development, goodwill and other
          intangibles associated with the ATI Acquisition, the IKOS Acquisition
          or the Innoveda Acquisition) taken in the fiscal quarter in which
          consummation of the applicable Acquisition occurs or in the
          immediately following fiscal quarter."

                ""Consolidated Funded Indebtedness" means, as of any date of
          determination, for the Company and its Subsidiaries on a consolidated
          basis, the sum of (a) the outstanding principal amount of all
          obligations, whether current or long-term, for borrowed money
          (including Obligations hereunder) and all obligations evidenced by
          bonds, debentures, notes, loan agreements or other similar
          instruments, (b) Attributable Indebtedness (other than that of ATI,
          IKOS and Innoveda) in respect of capital leases and Synthetic Lease
          Obligations, and (c) without duplication, all Guaranty Obligations
          with respect to Indebtedness of the types specified in subsections (a)
          and (b) above of Persons other than the Company or any Subsidiary,
          except with respect to automobile leasing programs for employees in
          Europe."

                ""Consolidated Interest Charges" means, for any period, for the
          Company and its Subsidiaries on a consolidated basis, the sum of (a)
          all interest, premium payments, fees, charges and related expenses of
          the Company and its Subsidiaries in connection with borrowed money
          (including capitalized interest) or in connection with the deferred
          purchase price of assets, in each case to the extent treated as
          interest in accordance with GAAP, and (b) the portion of rent expense
          of the Company and its Subsidiaries with respect to such period under
          capital leases that is treated as interest in accordance with GAAP."

                ""Consolidated Net Income" means, for any period, for the
          Company and its Subsidiaries on a consolidated basis, the net income
          of the Company and its Subsidiaries."

                                       9

<PAGE>

                ""Consolidated Tangible Net Worth" means, at any time of
          determination, in respect of the Company and its Subsidiaries,
          determined on a consolidated basis, total assets (exclusive of
          goodwill, trademarks, trade names, organization expense, treasury
          stock, unamortized debt discount and premium and other like
          intangibles) minus total liabilities (including accrued and deferred
          income taxes), at such time, all as determined in accordance with
          GAAP."

                ""Synthetic Lease Obligation" means the monetary obligation of a
          Person under (a) a so-called synthetic, off-balance sheet or tax
          retention lease, or (b) an agreement for the use or possession of
          property creating obligations that do not appear on the balance sheet
          of such Person but which, upon the insolvency or bankruptcy of such
          Person, would be characterized as the indebtedness of such Person
          (without regard to accounting treatment)."

          (1) The defined term "Applicable Margin" set forth in Section 1.01 of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:

                ""Applicable Margin" means (a) with respect to Offshore Rate
          Loans (i) 2.50% for the period from and including the Bridge Funding
          Effective Date to but excluding August 1, 2002, (ii) 3.25% for the
          period from and including August 1, 2002 to but excluding September
          15, 2002, and (iii) 4.25% thereafter; and (b) with respect to Base
          Rate Loans, (i) 1.25% for the period from and including the Bridge
          Funding Effective Date to but excluding August 1, 2002, (ii) 2.00% for
          the period from and including August 1, 2002 to but excluding
          September 15, 2002, and (iii) 3.00% thereafter."

          (1) The defined terms "Consolidated Current Liabilities", "EBITDA",
"FDIC" and "Leverage Ratio" set forth in Section 1.01 of the Credit Agreement
are hereby deleted in their entirety.

          (2) Subsection 2.09(b) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "(b) Commitment Fees. The Company shall pay to the Agent for the
          account of each Bank a commitment fee of 0.50% on the actual daily
          unused portion of such Bank's Commitment, computed on a quarterly
          basis in arrears on the last Business Day of each calendar quarter
          based upon the daily utilization for that quarter calculated by the
          Agent. Such commitment fee shall accrue from the Bridge Funding
          Effective Date to the Revolving Termination Date and shall be due and
          payable quarterly in arrears on the last Business Day of each calendar
          quarter commencing on the last day of the first full calendar quarter
          following the Bridge Funding Effective Date through the Revolving
          Termination Date, with the final payment to be made on the Revolving
          Termination Date; provided that, in connection with any reduction or
          termination of Commitments under Section 2.05, the accrued commitment
          fee calculated for the period ending on such date shall also be paid
          on the date of such reduction or termination, with the

                                       10

<PAGE>

          following quarterly payment being calculated on the basis of the
          period from such reduction or termination date to such quarterly
          payment date. The commitment fees provided in this subsection shall
          accrue at all times after the above-mentioned commencement date,
          including at any time during which one or more conditions in Article
          IV are not met."

          (1) Subsection 2.09(c) of the Credit Agreement is hereby deleted in
its entirety.

          (2) Section 6 of the Credit Agreement is hereby amended by adding the
following as new Section 6.14 thereof:

                "6.14 Innoveda Acquisition. The Company shall cause Innoveda to
          become a Wholly-Owned Subsidiary on, or within a reasonable period of
          time after, the consummation of the Innoveda Acquisition."

          (1) Section 7.14 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "7.14 Financial Covenants

                (a) Minimum Liquidity. The Company shall not permit the ratio
          (determined in respect of the Company and its Subsidiaries on a
          consolidated basis) of (i) cash plus the value (valued in accordance
          with GAAP) of all Cash Equivalents plus net current accounts
          receivable (valued in accordance with GAAP), other than cash, Cash
          Equivalents and net current accounts receivable subject to a Lien
          securing Indebtedness, to (ii) Consolidated Funded Indebtedness, as of
          June 30, 2002 to be less than 0.95 to 1.00 and as of the end of each
          fiscal quarter thereafter to be less than 1.00 to 1.00.

                (b) Minimum Tangible Net Worth. The Company shall not as of the
          end of any fiscal quarter permit Consolidated Tangible Net Worth to be
          less than the sum of (i) Consolidated Tangible Net Worth as of the
          last day of the fiscal quarter in which the consummation of the
          Innoveda Acquisition occurs, less (ii) $5,000,000, plus (iii) 75% of
          Consolidated Net Income (before write-offs related to or incurred in
          respect of the ATI Acquisition, the IKOS Acquisition and the Innoveda
          Acquisition relating to goodwill and other intangibles previously
          capitalized on the Company's balance sheet associated with any such
          Acquisition excluding write-offs for in-process research and
          development not previously capitalized on the Company's balance sheet)
          for each fiscal quarter commencing after the last day of the fiscal
          quarter in which the consummation of the Innoveda Acquisition occurs
          (to the extent such Consolidated Net Income for any such fiscal
          quarter is positive), plus (iv) 100% of the Net Issuance Proceeds of
          any new equity issued by the Company after the last day of the fiscal
          quarter in which the consummation of the Innoveda Acquisition occurs
          (excluding equity issued under employee stock option or purchase
          plans); provided, however, that in no event shall Consolidated
          Tangible Net Worth as of the last day of the fiscal quarter in

                                       11

<PAGE>

          which the consummation of the Innoveda Acquisition occurs be less than
          $-75,000,000.

                (c) Minimum Net Income. The Company shall not as of the end of
          any fiscal quarter permit Consolidated Net Income (excluding
          amortization of intangibles and restructuring charges and non-cash
          expenses and write-offs related to or incurred in respect of the ATI
          Acquisition, the IKOS Acquisition and the Innoveda Acquisition taken
          in the fiscal quarter in which the consummation of such Acquisition
          occurs, or in the immediately following fiscal quarter) to be less
          than $0 at any time.

                (d) Maximum Consolidated Funded Indebtedness to Consolidated
          EBITDA. The Company shall not as of the end of any fiscal quarter
          permit the ratio of (i) Consolidated Funded Indebtedness as of such
          date to (ii) Consolidated EBITDA for the four fiscal quarter period
          ended on such date to be more than (A) 2.35 to 1.00 for the fiscal
          quarter ended June 30, 2002, and (B) 2.00 to 1.00 for each fiscal
          quarter thereafter.

                (e) Maximum Capital Expenditures. The Company shall not, and
          shall not suffer or permit any Subsidiary to, make or become legally
          obligated to make any expenditure in respect of the purchase or other
          acquisition of any fixed or capital asset (excluding normal
          replacements and maintenance which are properly charged to current
          operations), except for capital expenditures in the ordinary course of
          business not exceeding, in the aggregate for the Company and its
          Subsidiaries during fiscal year 2002, $35,000,000."

          (1) Section 7 of the Credit Agreement is hereby amended by adding the
following as new Section 7.15 thereof:

                "7.15 Amendments to Innoveda Acquisition Agreement. The Company
          shall not agree to any material amendment to, or waive any of its
          material rights under, the terms of the Innoveda Acquisition after the
          Bridge Funding Effective Date without obtaining the prior written
          consent of the Agent and Majority Banks."

          (1) Schedule 2 to Exhibit C of the Credit Agreement is hereby amended
and restated in its entirety as set forth on Schedule 2-2 attached hereto.

          (2) Annex I of the Credit Agreement is hereby amended and restated in
its entirety to read "reserved".

     (b) Effective as of the Bridge Termination Effective Date (as defined in
Section 4(c) hereof):

          (1) The following new defined terms shall be added to Section 1.01 of
the Credit Agreement in proper alphabetical order:

                                       12

<PAGE>

                ""Bridge Termination Effective Date" has the meaning assigned to
          such term in that certain Second Amendment to Credit Agreement dated
          as of April 16, 2002, by and among the Company, Bank of America, as
          administrative agent, and the Banks party thereto."

                ""Consolidated Current Liabilities" means, at any time of
          determination, all amounts which would, in accordance with GAAP, be
          included under current liabilities on a consolidated balance sheet of
          the Company and its Subsidiaries, but in any event including all
          outstanding Loans, at such time."

                ""Leverage Ratio" means, as of any date of determination, the
          ratio of (a) total consolidated liabilities of the Company and its
          Subsidiaries on such date, as determined in accordance with GAAP,
          minus Subordinated Indebtedness, to (b) the sum of Consolidated
          Tangible Net Worth, plus Subordinated Indebtedness, in each case on
          such date."

                ""Net Cash Consideration" means, in respect of any Acquisition,
          the cash consideration paid by the Company or any of its Subsidiaries
          in respect of such Acquisition less the unencumbered cash and Cash
          Equivalents of the target Person (including, without limitation,
          unencumbered cash and Cash Equivalents tendered by holders of options
          to purchase the target Person's capital stock upon the exercise of
          such options), in each case, which are acquired by the Company or any
          of its Subsidiaries as a result of such Acquisition."

                ""Senior Leverage Ratio" means, as of any date of determination,
          the ratio of (a) Consolidated Funded Indebtedness minus Subordinated
          Indebtedness on such date to (b) the sum of Consolidated Tangible Net
          Worth plus Subordinated Indebtedness on such date."

          (1) The following defined terms set forth in Section 1.01 of the
Credit Agreement are hereby amended and restated in their entirety to read as
follows:

                ""Applicable Margin" means, for any day, with respect to any
          Base Rate Loan or Offshore Rate Loan, the applicable margin (on a per
          annum basis) set forth on the pricing grid attached as Annex I in
          accordance with the parameters for calculation and adjustment of such
          applicable margin also set forth on Annex I."

                ""Subordinated Indebtedness" means Indebtedness of the Company
          incurred from time to time and subordinated in right of payment to the
          Obligations hereunder, including Indebtedness incurred pursuant to
          Subsection 7.05(g)."

          (1) Subsection 2.09(b) of the Credit Agreement is hereby amended and
restated in it entirety as follows:

                "(b) Commitment Fees. The Company shall pay to the Agent for the
          account of each Bank a commitment fee on the actual daily unused
          portion of

                                       13

<PAGE>

          such Bank's Commitment, computed on a quarterly basis in arrears on
          the last Business Day of each calendar quarter based upon the daily
          utilization for that quarter as calculated by the Agent, equal to the
          applicable "Commitment Fee" set forth on the pricing grid attached as
          Annex I in accordance with the parameters for calculation and
          adjustment of such Commitment Fee also set forth on Annex I. Such
          commitment fee shall accrue from the Bridge Termination Effective Date
          to the Revolving Termination Date and shall be due and payable
          quarterly in arrears on the last Business Day of each calendar quarter
          commencing on the last day of the first full calendar quarter
          following the Bridge Termination Effective Date through the Revolving
          Termination Date, with the final payment to be made on the Revolving
          Termination Date; provided that, in connection with any reduction or
          termination of Commitments under Section 2.05, the accrued commitment
          fee calculated for the period ending on such date shall also be paid
          on the date of such reduction or termination, with the following
          quarterly payment being calculated on the basis of the period from
          such reduction or termination date to such quarterly payment date. The
          commitment fees provided in this subsection shall accrue at all times
          after the above-mentioned commencement date, including at any time
          during which one or more conditions in Article IV are not met."

          (1) Section 2.09 of the Credit Agreement is hereby amended by adding
the following as new subsection 2.09(c) thereof:

                "(c) Utilization Fees. The Company shall pay to the Agent for
          the account of each Bank a utilization fee on the actual daily
          utilized portion of such Bank's Commitment, computed on a quarterly
          basis in arrears on the last Business Day of each calendar quarter
          based upon the daily utilization for that quarter, as calculated by
          the Agent, at a rate per annum equal to the applicable "Utilization
          Fee" set forth on the pricing grid attached as Annex I for each day
          during such quarter on which utilization of the combined Commitments
          equals or exceeds 33% at the close of the Agent's business on such day
          (or the close of the Agent's business on the next preceding Business
          Day in the case of a Saturday or Sunday or other day not a Business
          Day). For purposes of calculating utilization under this subsection,
          the Commitments shall be deemed utilized to the extent of the
          aggregate principal amount of Loans then outstanding. Such utilization
          fee shall accrue from the Bridge Termination Effective Date and shall
          be due and payable quarterly in arrears on the last Business Day of
          each calendar quarter commencing on the last day of the first full
          calendar quarter following the Bridge Termination Effective Date
          through the Revolving Termination Date, with the final payment to be
          made on the Revolving Termination Date; provided that, in connection
          with any reduction or termination of Commitments under Section 2.05,
          the accrued utilization fee calculated for the period ending on such
          date shall also be paid on the date of such reduction or termination,
          with the following quarterly payment being calculated on the basis of
          the period from such reduction or termination date to such quarterly
          payment date. The utilization fees provided in this subsection shall
          accrue at all times after the above-mentioned commencement date."

                                       14

<PAGE>

          (1) Subsection 7.02(d) of the Credit Agreement is hereby amended by
deleting the figure "$50,000,000" in clause (ii) thereof and substituting
"$100,000,000" therefor.

          (2) Section 7.04 of the Credit Agreement is hereby amended by (i)
amending and restating subsections (d), (e), (h) and (k) thereof in their
entirety to read, respectively, as follows, and (ii) amending and restating
subsection (n) thereof in its entirety to read "reserved":

                "(d) Investments incurred in order to consummate Acquisitions
          otherwise permitted herein, provided that (i) the Net Cash
          Consideration given for any such Acquisition, together with the Net
          Cash Consideration given for all prior Acquisitions (other than the
          ATI Acquisition, the IKOS Acquisition and the Innoveda Acquisition)
          undertaken by the Company and its Subsidiaries shall not exceed (A)
          $20,000,000 in fiscal 2002, and (B) $50,000,000 per annum in any other
          fiscal year, (ii) such Acquisitions are undertaken in accordance with
          all applicable Requirements of Law, and (iii) the prior, effective
          written consent or approval to such Acquisition of the board of
          directors or equivalent governing body of the acquiree is obtained;"

                "(e) Subject to clause (i) in subsection 7.04(d) above,
          Investments incurred in order to consummate Acquisitions otherwise
          permitted herein for which all or a portion of the consideration given
          for any such Acquisition is common stock of the Company or any
          Subsidiary, provided that (i) such Acquisitions are undertaken in
          accordance with all applicable Requirements of Law and (ii) the prior,
          effective written consent or approval to such Acquisition of the board
          of directors or equivalent governing body of the acquiree is obtained
          (notwithstanding this clause (ii), if all of the consideration given
          for any such Acquisition is common stock of the Company or any
          Subsidiary, then the prior, effective written consent or approval to
          such Acquisition of the board of directors or equivalent governing
          body of the acquiree shall not be required hereby);"

                "(h) Investments incurred in order to consummate Acquisitions
          not otherwise permitted herein subject to the prior written consent of
          the Majority Banks;"

                "(k) other Investments not exceeding $30,000,000 in any fiscal
          year as to all such Investments in the aggregate; provided that if all
          such Investments permitted by this subsection (k) exceed $15,000,000
          in the aggregate in any fiscal year, then the $50,000,000 limitation
          set forth in the preceding subsection (d) shall be reduced for such
          fiscal year by the amount of such excess; "

          (1) Subsection 7.05(i) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "other unsecured Indebtedness in an aggregate principal amount
          outstanding not exceeding $20,000,000 at any time;"

                                       15

<PAGE>

          (1) Section 7.10 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "7.10 The Company shall not declare or make any dividend payment
          or other distribution of assets, properties, cash, rights, obligations
          or securities on account of any shares of any class of its capital
          stock, or purchase, redeem or otherwise acquire for value any shares
          of its capital stock or any warrants, rights or options to acquire
          such shares, now or hereafter outstanding; or make any payment or
          prepayment of principal of, premium, if any, or interest on, or
          redeem, purchase, retire, defease (including in-substance or legal
          defeasance), or make any sinking fund or similar payment with respect
          to, Subordinated Indebtedness, except that:

                (a) the Company may declare and make dividend payments or other
          distributions payable solely in its common stock;

                (b) so long as no Default or Event of Default exists or would
          result therefrom, the Company may purchase, redeem or otherwise
          acquire shares of its common stock or warrants or options to acquire
          any such shares pursuant to any employee stock option or purchase
          plan; provided that all such purchases, redemptions or other
          acquisitions otherwise permitted under this clause (b) do not exceed
          $15,000,000 in the aggregate in any fiscal year;

                (c) so long as no Default or Event of Default exists or would
          result therefrom, the Company may otherwise purchase, redeem or
          acquire shares of its common stock or warrants or options to acquire
          any such shares; provided that all such purchases, redemptions or
          other acquisitions otherwise permitted under this clause (c) do not
          exceed (i) $180,000,000 in the aggregate and (ii) 20,100,000 shares
          (as such number may be adjusted for stock dividends and stock splits
          occurring after the Closing Date). For the sake of clarity, the
          parties hereto acknowledge and agree that whenever assets or property
          other than cash is given for any purchase, redemption or other
          acquisition otherwise permitted under this clause (c), the value of
          such purchase, redemption or other acquisition shall be equal to the
          net book value at such time of such non-cash assets or property for
          purposes of determining the Company's compliance with the $180,000,000
          limitation set forth in the preceding clause (i). Notwithstanding
          anything to the contrary in this subsection 7.10(c), the Company may
          not at any time purchase, redeem or acquire shares of its capital
          stock or warrants or options to acquire any such shares unless the
          Company delivers a duly completed Compliance Certificate pursuant to
          subsection 6.02(a) demonstrating all of the following: (A) an adjusted
          quick ratio under subsection 7.14(a) of not less than 1.10 to 1.00;
          and (B) a ratio of cash and accounts receivable to Loans under
          subsection 7.14(e) of not less than 1.25 to 1.00, in each case,
          measured as of the last day of the fiscal quarter most recently ended
          prior to such purchase, redemption or acquisition; and

                                       16

<PAGE>

                (d) the Company may make regularly scheduled payments of
          interest in respect of Subordinated Indebtedness in accordance with
          the terms of, and only to the extent required by, and subject to the
          subordination provisions contained in, any agreement or instrument
          governing such Subordinated Indebtedness."

          (1) Section 7.14 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "7.14 Financial Covenants

                (a) Adjusted Quick Ratio. The Company shall not as of the end of
          any fiscal quarter suffer or permit its ratio (determined in respect
          of the Company and its Subsidiaries on a consolidated basis) of (i)
          cash plus the value (valued in accordance with GAAP) of all Cash
          Equivalents plus net current accounts receivable (valued in accordance
          with GAAP), other than cash, Cash Equivalents and net current accounts
          receivable subject to a Lien securing Indebtedness, to (ii)
          Consolidated Current Liabilities (other than liabilities secured by a
          Lien on cash, Cash Equivalents or net current accounts receivable), to
          be less than the correlative ratio indicated.

          ----------------------------------------------------------------------
                             Period                              Ratio
          ----------------------------------------------------------------------
          Fiscal quarter ended June 30, 2002                   0.65:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended September 30, 2002 and          0.75:1.00
          Fiscal quarter ended December 31, 2002
          ----------------------------------------------------------------------
          Fiscal quarter ended March 31, 2003                  0.80:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended June 30, 2003                   0.85:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended September 30, 2003 and          0.90:1.00
          thereafter
          ----------------------------------------------------------------------

                (b) Minimum Tangible Net Worth. The Company shall not as of the
          end of any fiscal quarter permit Consolidated Tangible Net Worth to be
          less than the sum of (i) Consolidated Tangible Net Worth as of the
          last day of the fiscal quarter in which the consummation of the
          Innoveda Acquisition occurs, less (ii) $5,000,000, plus (iii) 75% of
          Consolidated Net Income (before write-offs related to or incurred in
          respect of the ATI Acquisition, the IKOS Acquisition and the Innoveda
          Acquisition relating to goodwill and other intangibles previously
          capitalized on the Company's balance sheet associated with any such
          Acquisition excluding write-offs for in-process research and
          development not previously capitalized on the Company's balance sheet)
          for each fiscal quarter commencing after the last day of the fiscal
          quarter in which the consummation of the Innoveda Acquisition occurs
          (to the extent such Consolidated Net Income for any such fiscal
          quarter is positive), plus (iv) 100% of the Net Issuance Proceeds of
          any new equity issued by the Company after the last day of the fiscal
          quarter in which the consummation of the Innoveda Acquisition occurs
          (excluding equity issued under

                                       17

<PAGE>

          employee stock option or purchase plans); provided, however, that in
          no event shall Consolidated Tangible Net Worth as of the last day of
          the fiscal quarter in which the consummation of the Innoveda
          Acquisition occurs be less than $-75,000,000.

                (c) Leverage Ratio. The Company shall not as of the end of any
          fiscal quarter suffer or permit the Leverage Ratio to be greater than
          the correlative ratio indicated.

          ----------------------------------------------------------------------
                                Period                                Ratio
          ----------------------------------------------------------------------
          Fiscal quarter ended June 30, 2002                        4.75:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended September 30, 2002                   3.75:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended December 31, 2002                    3.25:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended March 31, 2003                       2.75:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended June 30, 2003                        2.50:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended September 30, 2003 and               2.25:1.00
          thereafter
          ----------------------------------------------------------------------

                (d) Senior Leverage Ratio. The Company shall not as of the end
          of any fiscal quarter suffer or permit the Senior Leverage Ratio to be
          greater than the correlative ratio indicated.

          ----------------------------------------------------------------------
                                Period                                Ratio
          ----------------------------------------------------------------------
          Fiscal quarter ended June 30, 2002                        1.35:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended September 30, 2002                   1.10:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended December 31, 2002 through
          June 30, 2003                                             0.75:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended September 30, 2003 and               0.60:1.00
          thereafter
          ----------------------------------------------------------------------

                (e) Minimum Cash and Accounts Receivable. The Company shall not
          as of the end of any fiscal quarter suffer or permit its ratio
          (determined on a consolidated basis) of (i) cash plus the value
          (valued in accordance with GAAP) of all Cash Equivalents plus 75% of
          net current accounts receivable (valued in accordance with GAAP) owing
          by account obligors located in the United States, other than cash,
          Cash Equivalents and net current accounts receivable subject to a Lien
          securing Indebtedness, to (ii) the then outstanding principal amount
          of the Loans, to be less than the correlative ratio indicated.

          ----------------------------------------------------------------------
                                Period                                Ratio
          ----------------------------------------------------------------------
          Fiscal quarter ended June 30, 2002 through
          December 31, 2002                                         1.10:1.00
          ----------------------------------------------------------------------
          Fiscal quarter ended March 31, 2003 and thereafter        1.30:1.00
          ----------------------------------------------------------------------

                                     18

<PAGE>

                For the avoidance of doubt, (i) Unrestricted Subsidiaries shall
          not be included in the calculation of any of the financial measures
          set forth in the preceding clauses (a), (c), (d) or (e), and (ii)
          Permitted Receivables sold pursuant to any Permitted Receivables
          Purchase Facility permitted hereunder shall not be included in the
          calculation of any of the financial measures set forth in the
          preceding clauses (a) through (e)."

          (1) Subsection 8.01(m) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                "(m) Invalidity of Subordination Provisions. Any Subordination
          Agreement or the subordination provisions of any agreement or
          instrument governing any Subordinated Indebtedness and subordinating
          such Subordinated Indebtedness to the Obligations hereunder is for any
          reason revoked, invalidated or otherwise breached by the Company or
          any Subsidiary, or otherwise ceases to be in full force and effect as
          a result of any act or omission of the Company or any Subsidiary, or
          the Company or any Subsidiary otherwise contests in any manner the
          validity or enforceability thereof or denies that it has any further
          liability or obligation thereunder."

          (1) Exhibit G of the Credit Agreement is hereby amended and restated
in its entirety as set forth on Exhibit G attached hereto.

          (2) Annex I of the Credit Agreement is hereby amended and restated in
its entirety as set forth on Annex I attached hereto.

          (3) Schedule 2 to Exhibit C of the Credit Agreement is hereby amended
and restated in its entirety as set forth on Schedule 2-3 attached hereto.

2. Representations and Warranties.  The Company hereby represents and warrants
to the Agent and the Banks as follows:

     (a) No Default or Event of Default has occurred and is continuing (or would
result from the amendment of the Credit Agreement contemplated hereby).

     (b) The execution, delivery and performance by the Company of this
Amendment and the Credit Agreement (as amended by this Amendment) have been duly
authorized by all necessary corporate action and do not and will not require any
registration with, consent or approval of, or notice to or action by, any
Governmental Authority in order to be effective and enforceable.

     (c) This Amendment and the Credit Agreement (as amended by this Amendment)
constitute the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability.

                                       19

<PAGE>

     (d) All representations and warranties of the Company contained in the
Credit Agreement are true and correct in all material respects (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct in all material respects as of such
earlier date and except that this subsection (d) shall be deemed instead to
refer to the last day of the most recent quarter and year for which financial
statements have then been delivered in respect of the representation and
warranty made in subsections 5.11(a) and 5.11(b) of the Credit Agreement).

     (e) The Company is entering into this Amendment on the basis of its own
investigation and for its own reasons, without reliance upon the Agent and the
Banks or any other Person.

3. Conditions to Effectiveness

     (a) The effectiveness of Section 2(a) of this Amendment shall be subject to
the satisfaction of each of the following conditions precedent (the date of such
satisfaction being referred to as the "Second Amendment Effective Date"):

            (1) This Amendment shall have been executed by the Agent and each of
the Majority Banks.

            (2) The Bridge Loan Facility shall have been executed by the
Company, the Agent and all lenders party thereto and shall have become effective
in accordance with its terms.

            (3) On the Second Amendment Effective Date, (i) after giving effect
to Section 2(a) hereof, the representations and warranties contained in Section
3 hereof shall be true and correct in all material respects as of such date, as
though made on and as of such date (except to the extent such representations
and warranties expressly refer to an earlier date); (ii) after giving effect to
Section 2(a) hereof, no Default or Event of Default shall then exist; and (iii)
the Company shall deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Company confirming the foregoing.

            (4) The terms of the Innoveda Acquisition shall be reasonably
satisfactory in all material respects to the Agent and the Majority Banks.

            (5) The Company shall have paid to the Agent a non-refundable
amendment fee for the benefit of each Bank that executes this Amendment by the
close of business on April 16, 2002 in an amount equal to 0.25% of each such
Bank's Commitment, and any other fees referenced in Section 7(g) hereof (to the
extent invoiced) of this Amendment.

            (6) For purposes of determining compliance with the conditions
specified in this Section 4(a), each Bank that has executed this Amendment shall
be deemed to have consented to, approved or accepted, or to be satisfied with,
each document or other matter either sent, or made available for inspection, by
the Agent to such Bank for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to such Bank.

                                       20

<PAGE>

     (b) The effectiveness of Section 2(b) of this Amendment shall be subject to
the satisfaction of each of the following conditions precedent (the date of such
satisfaction being referred to as the "Bridge Funding Effective Date"):

            (1) The initial Borrowing Date (as defined in the Bridge Loan
Facility) shall have occurred.

            (2) The Company shall have acquired and/or have tendered to it
and/or have pledged to it under a binding shareholder agreement more than 50% of
the issued and outstanding capital stock of Innoveda in accordance with the
terms and conditions of the Innoveda Acquisition Agreement.

            (3) Any material changes to the terms of the Innoveda Acquisition
since the Second Amendment Effective Date shall be reasonably satisfactory to
the Agent and Majority Banks.

            (4) All governmental and third-party approvals necessary in
connection with the Innoveda Acquisition shall have been obtained and be in full
force and effect and all applicable waiting periods shall have expired without
notice of any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose material adverse conditions on the
Innoveda Acquisition.

            (5) On the Bridge Funding Effective Date, (i) after giving effect to
Section 2(b) hereof, the representations and warranties contained in Section 3
hereof shall be true and correct in all material respects as of such date, as
though made on and as of such date (except to the extent such representations
and warranties expressly refer to an earlier date); (ii) after giving effect to
Section 2(b) hereof, no Default or Event of Default shall then exist; and (iii)
the Company shall deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Company confirming the foregoing and the matters in
subpart (1) above.

            (6) On or prior to the Bridge Funding Effective Date, the Company
shall have paid to the Agent for the pro rata benefit of the Banks an additional
non-refundable fee in an amount equal to $500,000, together with any other fees
to the extent required to be paid pursuant to Section 5 hereof.

     (c) The effectiveness of Section 2(c) of this Amendment shall be subject to
the satisfaction of each of the following conditions precedent (the date of such
satisfaction being referred to as the "Bridge Termination Effective Date"):

            (1) On the Bridge Termination Effective Date, (i) after giving
effect to Section 2(c) hereof, the representations and warranties contained in
Section 3 hereof shall be true and correct in all material respects as of such
date, as though made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct in all material respects as of such earlier
date); (ii) after giving effect to Section 2(c) hereof, no Default or Event of
Default shall then exist; and (iii) the

                                       21

<PAGE>

Company shall deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Company confirming the foregoing.

          (2) All commitments under the Bridge Loan Facility shall have
terminated and all outstanding loans under the Bridge Loan Facility, if any,
shall have been repaid in full.

          (3) The Company shall have paid to the Agent any fees to the extent
required to be paid pursuant to Section 6 or 7(g) hereof.

     (d) From and after the Second Amendment Effective Date, the Bridge Funding
Effective Date, and the Bridge Termination Effective Date, as applicable, the
Credit Agreement is amended as set forth herein. Except as expressly amended
pursuant hereto, the Credit Agreement shall remain unchanged and in full force
and effect and is hereby ratified and confirmed in all respects.

     (e) The Agent will notify the Company and the Banks of the occurrence of
the Second Amendment Effective Date, the Bridge Funding Effective Date, and the
Bridge Termination Effective Date, as applicable.

4. Termination of Amendment. This Amendment (other than Section 2(a)(2) through
2(a)(4), Section 2(a)(6), Section 2(a)(7), Section 2(a)(9)(f), Section
2(a)(10)(n), Section 2(a)(13) and Section 2(a)(17) hereof) shall be void and of
no further force or effect in the event the acquisition by the Company or a
Subsidiary of more than 50% of the issued and outstanding capital stock of
Innoveda shall not have occurred by October 31, 2002.

5. Fees.  In the event the Bridge Loan Facility is in full force and effect as
of August 1, 2002, the Company shall pay to the Agent for the pro rata benefit
of the Banks an additional non-refundable fee in an amount equal to $1,000,000
on such date.

6. Miscellaneous.

     (a) The Company acknowledges and agrees that the execution and delivery by
the Agent and the Banks of this Amendment shall not be deemed to create a course
of dealing or an obligation to execute similar waivers or amendments under the
same or similar circumstances in the future.

     (b) This Amendment shall be binding upon and inure to the benefit of the
Company, the Agent and the Banks and their respective successors and assigns.

     (c) This Amendment shall be governed by and construed in accordance with
the law of the State of California, provided that the Agent and the Banks shall
retain all rights arising under Federal law.

     (d) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an

                                       22

<PAGE>

executed original or an executed original sent by facsimile transmission to be
followed promptly by mailing of a hard copy original, and that receipt by the
Agent of a facsimile transmitted document purportedly bearing the signature of a
Bank or the Company shall bind such Bank or the Company, respectively, with the
same force and effect as the delivery of a hard copy original. Any failure by
the Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.

     (e) This Amendment contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein. This Amendment
supersedes all prior drafts and communications with respect hereto or thereto.
This Amendment may not be amended except in accordance with the provisions of
Section 10.01 of the Credit Agreement.

     (f) If any term or provision of this Amendment shall be deemed prohibited
by or invalid under any applicable law, such provision shall be invalidated
without affecting the remaining provisions of this Amendment, the Credit
Agreement or the Loan Documents.

     (g) The Company agrees to pay or reimburse BofA (including in its capacity
as Agent), upon demand, for all reasonable costs and expenses (including
reasonable Attorney Costs) incurred by BofA (including in its capacity as Agent)
in connection with the development, preparation, negotiation, execution and
delivery of this Amendment.

                            [signature pages follow]

                                       23

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Credit Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.

                                   MENTOR GRAPHICS CORPORATION

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

                                   By: /s/ Dennis Weldon
                                       -----------------------------------------
                                   Name: Dennis Weldon
                                   Title: Treasurer

                                   BANK OF AMERICA, N.A., as Agent and as a
                                   Bank

                                   By: /s/ Kevin McMahon
                                       -----------------------------------------
                                   Name: Kevin McMahon
                                   Title: Managing Director

                                   BNP PARIBAS

                                   By: /s/ Jean Plassard
                                       -----------------------------------------
                                   Name: Jean Plassard
                                   Title: Managing Director

                                   By: /s/ James F. McCann
                                       -----------------------------------------
                                   Name: James F. McCann
                                   Title: Director

                                   FLEET NATIONAL BANK, N.A.

                                   By: /s/ John B. Desmond
                                       -----------------------------------------
                                   Name: John B. Desmond
                                   Title: Director

                                       S-1

<PAGE>

                                     THE BANK OF NOVA SCOTIA

                                     By: /s/ Chris Osborn
                                         ---------------------------------------
                                     Name: Chris Osborn
                                     Title: Managing Director

                                     MIZUHO CORPORATE BANK, LIMITED

                                     By: /s/ Masahito Fukuda
                                         ---------------------------------------
                                     Name: Masahito Fukuda
                                     Title: Senior Vice President

                                       S-2

<PAGE>

                                     ANNEX I

                                  PRICING GRID

                                (in basis points)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Consolidated       Senior Leverage ***.90                      Senior Leverage **.90
EBITDA for
rolling four
quarter
period(x)
                   ------------------------------------------------------------------------------------------
                   x*         $70MM      $100MM     x****      x*        $70MM       $100MM     x****$125MM
                   $70MM      *** x *    *** x *    $125MM     $70MM     *** x *     *** x *
                             $100MM     $125MM                          $100MM      $125MM
------------------------------------------------------------------------------------------------------------
<S>                <C>        <C>        <C>        <C>        <C>       <C>         <C>        <C>
Commitment Fee     35.0       30.0       25.0       20.0       42.5      35.0        30.0       27.5
------------------------------------------------------------------------------------------------------------
Utilization Fee    12.5       12.5       12.5       12.5       12.5      12.5        12.5       12.5
---------------------------------------------------------------------------------------------- -------------
Base Rate          12.5       0.0        0.0        0.0        50.0      25.0        0.0        0.0
 LoanSpread
------------------------------------------------------------------------------------------------------------
Offshore Rate      137.5      100.0      75.0       50.0       175.0     150.0       112.5      87.5
Loan Spread
(Utilization *
33%)

------------------------------------------------------------------------------------------------------------
Offshore Rate      150.0      112.5      87.5       62.5       187.5     162.5       125.0      100.0
Spread
(Utilization ****
33%)
------------------------------------------------------------------------------------------------------------
</TABLE>

          The Senior Leverage Ratio and Consolidated EBITDA used to compute the
Commitment Fee, Utilization Fee and the Applicable Margin shall be the Senior
Leverage Ratio and Consolidated EBITDA set forth in the Compliance Certificate
most recently delivered by the Company to the Agent pursuant to Section 6.02(a)
of the Credit Agreement; changes in the Commitment Fee, the Utilization Fee and
the Applicable Margin resulting from a change in the Senior Leverage Ratio or
Consolidated EBITDA shall become effective on the date of delivery by the
Company to the Agent of a new Compliance Certificate and accompanying financial
statements pursuant to Section 6.02(a). If the Company shall fail to deliver a
Compliance Certificate within the number of days after the end of any fiscal
quarter or fiscal year as required pursuant to Section 6.02(a) (without giving
effect to any grace period), the Commitment Fee, Utilization Fee and the
Applicable Margin from the first day after the date on which such Compliance
Certificate was required to be delivered to the Agent until the day on which the
Company delivers to the Agent a Compliance Certificate and accompanying
financial statements shall conclusively equal the highest Commitment Fee,
Utilization Fee and Applicable Margin set forth above.

          For each day on which utilization of the combined Commitments equals
or exceeds 33% at the close of the Agent's business on such day (or the close of
the Agent's business on the next preceding Business Day in the case of a
Saturday or Sunday or other day not a Business Day), the Applicable Margin for
Offshore Rate Loans outstanding on such day shall be increased by 12.5 bps

* denotes less than
** denotes greater than
*** denotes less than equal to
**** denotes greater than or equal to

                                    Annex 1

<PAGE>

                                  SCHEDULE 2-2

                                   Schedule 2:
                           Mentor Graphics Corporation
                            Financial Covenant Review
                                     [Date]
<TABLE>
<S>                                                                                     <C>
Covenant 7.14a - Minimum Liquidity

1.  Cash                                                                                $_____________
2.  Cash Equivalents                                                                    $_____________
3.  Net current accounts receivable                                                     $_____________
4.  Cash, Cash Equivalents and net current accounts receivable subject                  $_____________
      to a Lien securing Indebtedness
5.  Total (1+2+3-4)                                                                     $_____________
6.  Consolidated Funded Indebtedness                                                    $_____________
7.  Ratio of (5) to (6)                                                                  _____________
8.  Covenant - must not be less than.                                                    _____________

Covenant 7.14b - Minimum Tangible Net Worth

1.  Consolidated Tangible Net Worth as of the last day of the fiscal quarter in which   $_____________
    the consummation of the Innoveda Acquisition occurs
2.  $5,000,000                                                                          $_____________
3.  75% of Consolidated Net Income (to the extent positive) for each fiscal quarter     $_____________
      commencing after the last day of the fiscal quarter in which the
      consummation of the Innoveda Acquisition occurs (before
      (a) write-offs related to or incurred in respect of the ATI Acquisition,
      the IKOS Acquisition and the Innoveda Acquisition relating to goodwill and
      other intangibles previously capitalized on the Company's balance sheet
      associated with any such Acquisition,
      (b) excluding write-offs for in-process research and development not
      previously capitalized on the Company's balance sheet)

4.  100% of Net Issuance Proceeds of new equity issued                                  $_____________
      after the last day of the fiscal quarter in which the consummation of the
      Innoveda Acquisition occurs (excluding employee plans)
5.  Total (1-2+3+4)                                                                     $_____________
6.  Consolidated Tangible Net Worth _____                                               $_____________
7.  Excess (6-5)                                                                        $_____________

Covenant 7.14c - Minimum Net Income

1.  Consolidated Net Income                                                             $_____________
      (excluding
          (a) amortization of intangibles and
           (b) restructuring charges and non-cash expenses and write-offs
      related to or incurred in respect of the ATI Acquisition, the IKOS
      Acquisition and the Innoveda Acquisition taken in the fiscal quarter in
      which the consummation of such Acquisition occurs, or in the immediately
      following fiscal quarter)
2.  Covenant - must not be less than $0                                                 $_____________
</TABLE>

                                 Schedule 2-2-1

<PAGE>

<TABLE>
<S>                                                                                     <C>
Covenant 7.14d - Maximum Consolidated Funded Indebtedness to
Consolidated EBITDA

1.  Consolidated Funded Indebtedness                                                    $_____________
2.  Consolidated EBITDA (rolling four fiscal quarters)                                  $_____________
         (a)  Consolidated Net Income
         (b)  Consolidated Interest Charges
         (c)  the amount of taxes, based on or measured by income, used or included
              in the determination of such Consolidated Net Income
         (d)  the amount of depreciation and amortization expense deducted in
              determining such Consolidated Net Income
         (e)  restructuring charges taken in the third and fourth fiscal quarters
              of fiscal year 2001 and the first fiscal quarter of fiscal year 2002
         (f)  any Acquisition-related expenses, restructuring charges and
              write-offs (relating to in-process research and development, goodwill
              and other intangibles associated with the ATI Acquisition, the IKOS
              Acquisition or the Innoveda Acquisition) taken in the fiscal quarter
              in which consummation of the applicable Acquisition occurs or in the
              immediately following fiscal quarter
3.  Ratio of (1) to (2)                                                                 $_____________
4.  Covenant - must not be more than _________                                           _____________

Covenant 7.14e - Capital Expenditures                                                   $=============

1.  Capital Expenditures from January 1, 2002 to date                                   $_____________
2.  Covenant - must not be more than $35,000,000                                        $_____________
</TABLE>

                                 Schedule 2-2-2

<PAGE>

                                  SCHEDULE 2-3

                                   Schedule 2:
                           Mentor Graphics Corporation
                            Financial Covenant Review
                                     [Date]

Covenant 7.14a - Adjusted Quick Ratio

<TABLE>
<S>                                                                                     <C>
1.  Cash                                                                                $_________________
2.  Cash Equivalents                                                                    $_________________
3.  Net current accounts receivable                                                     $_________________
4.  Cash, Cash Equivalents and net current accounts receivable subject to a Lien
    securing Indebtedness                                                               $_________________
5.  Total (1 + 2 + 3 - 4)                                                               $_________________
6.  Consolidated Current Liabilities (other than liabilities secured by a Lien on
    cash, Cash Equivalents or net current accounts receivable)                          $_________________
7.  Ratio of (5) to (6)                                                                 _________________
8.  Covenant - must not be less than ______

Covenant 7.14b - Minimum Tangible Net Worth

1.  Consolidated Tangible Net Worth as of the last day of the fiscal quarter in which   $_____________
    the consummation of the Innoveda Acquisition occurs
2.  $5,000,000                                                                          $_____________
3.  75% of Consolidated Net Income (to the extent positive) for each fiscal quarter     $_____________
      commencing after the last day of the fiscal quarter in which the
      consummation of the Innoveda Acquisition occurs (before
      (a) write-offs related to or incurred in respect of the ATI Acquisition,
      the IKOS Acquisition and the Innoveda Acquisition relating to goodwill and
      other intangibles previously capitalized on the Company's balance sheet
      associated with any such Acquisition,
      (b) excluding write-offs for in-process research and development not
      previously capitalized on the Company's balance sheet)

4.  100% of Net Issuance Proceeds of new equity issued                                  $_____________
      after the last day of the fiscal quarter in which the consummation of the
      Innoveda Acquisition occurs (excluding employee plans)
5.  Total (1-2+3+4)                                                                     $_____________
6.  Consolidated Tangible Net Worth _____                                               $_____________
7.  Excess (6-5)                                                                        $_____________

Covenant 7.14c - Leverage Ratio

1.  Total consolidated liabilities                                                      $_________________
2.  Subordinated Indebtedness                                                           $_________________
3.  Consolidated Tangible Net Worth                                                     $_________________
4.  Ratio of ((1) - (2)) to ((3) + (2))                                                 _________________
5.  Covenant - must be less than __________                                             _________________

Covenant 7.14d - Senior Leverage Ratio

1.  Consolidated Funded Indebtedness                                                    $_________________
2.  Subordinated Indebtedness                                                           $_________________
3.  Consolidated Tangible Net Worth                                                     $_________________
4.  Ratio of ((1) - (2)) to ((3) + (2))
5.  Covenant - must be less than _____________                                          _________________

Covenant 7.14e - Minimum Cash and Accounts Receivable
</TABLE>

                                 Schedule 2-3-1

<PAGE>

<TABLE>
<S>                                                                                     <C>
1.  Cash                                                                                $__________________
2.  Cash Equivalents                                                                    $__________________
3.  75% of net current accounts receivable owing by U.S. obligors
                                                                                        $__________________
4.  Cash, Cash Equivalents and net current accounts receivable subject to a Lien
    securing Indebtedness                                                               $__________________
5.  Total (1 + 2 + 3 - 4)                                                               $
                                                                                        ===================
6.  Outstanding Loans                                                                   $
                                                                                        ===================
7.  Ratio of (5) to (6)                                                                 __________________
8.  Covenant - must be greater than _______                                             __________________
</TABLE>

<PAGE>

                                    EXHIBIT G

                         FORM OF SUBORDINATION AGREEMENT

          THIS SUBORDINATION AGREEMENT (this "Agreement"), dated as of
__________, 20__, is made among Mentor Graphics Corporation, an Oregon
corporation (the "Borrower"), each of the financial institutions named on the
signature pages hereof under the heading "BANKS" (each a "Bank" and,
collectively, the "Banks"), Bank of America, N.A., as administrative agent for
the Banks (in such capacity, the "Agent") and __________, a __________
corporation (the "Creditor").

          The Borrower, the Banks and the Agent are parties to a Credit
Agreement dated as of January 10, 2001 (as amended, modified, renewed, extended
or replaced from time to time, the "Credit Agreement"), pursuant to which the
Banks have agreed to make certain revolving loans to the Borrower. Additionally,
the Borrower intends to become indebted to the Creditor in the principal amount
of $__________, [pursuant to a __________ Agreement, dated [as of] __________,
20__ (as amended, modified, renewed, extended or replaced from time to time, the
"__________ Agreement") and the__________ Note dated __________, 20__ (the
"Subordinated Note") outstanding thereunder] [pursuant to a __________ Note
dated ___________, 20__ (as amended, modified, renewed, extended or replaced
from time to time, the "Subordinated Note")]. It is a requirement under the
Credit Agreement that the Borrower deliver this Agreement to the Agent and the
Banks to provide for the subordination of the Borrower's indebtedness to the
Creditor. The Creditor has agreed to the subordination of such indebtedness to
it, upon the terms and subject to the conditions set forth in this Agreement.

          Accordingly, the parties hereto agree as follows:

          SECTION 1. Definitions; Interpretation.

          (a) Terms Defined in Credit Agreement. All capitalized terms used in
this Agreement and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.

          (b) Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:

          (c) "Creditor Collateral" means any property now existing or hereafter
acquired which may at any time be or become subject to a Lien in favor of the
Creditor pursuant to the [__________ Agreement,] the Subordinated Note or
otherwise, securing payment and performance of the Subordinated Debt.

          (d) "Insolvency Event" has the meaning set forth in Section 3.

          (e) "Net Cash Flow from Operations" means net cash flow from
operations less capital expenditures less cash dividends, in each case, of the
Subsidiary whose Acquisition is financed in whole or in part by the Subordinated
Debt.

                                      G-1

<PAGE>

           (f) "Senior Debt" means the indebtedness, liabilities and other
obligations of the Borrower to the Agent and the Banks under or in connection
with the Credit Agreement, the Notes and the other Loan Documents, including all
unpaid principal of the Loans, all interest accrued thereon, all fees due under
the Credit Agreement and all other amounts payable by the Borrower to the Agent
and the Banks thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined.

           (g) "Subordinated Debt" means all indebtedness, liabilities and other
obligations of the Borrower to the Creditor, whether now existing or hereafter
arising, and whether due or to become due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, including all principal on [the credit
extensions made by the Creditor to the Borrower under the ____________
Agreement] [the Subordinated Note], all interest accrued thereon, all fees and
all other amounts payable by the Borrower to the Creditor under or in connection
with [the _________ Agreement,] the Subordinated Note and any other documents or
instruments related thereto.

           (h) "Subordinated Debt Payment" means any payment or distribution by
or on behalf of the Borrower, directly or indirectly, of assets of the Borrower
of any kind or character, whether in cash, property or securities, including on
account of the purchase, redemption or other acquisition of Subordinated Debt,
as a result of any collection, sale or other disposition of collateral, or by
setoff, exchange or in any other manner, for or on account of the Subordinated
Debt.

           (i) Interpretation. In this Agreement, except to the extent the
context otherwise requires:

     (i)   Any reference in this Agreement to an Article, a Section, a Schedule
     or an Exhibit is a reference to an article hereof, a section hereof, a
     schedule hereto or an exhibit hereto, respectively, and to a subsection
     hereof or a clause hereof is, unless otherwise stated, a reference to a
     subsection or a clause of the Section or subsection in which the reference
     appears.

     (ii)  The words "hereof," "herein," "hereto," "hereunder" and the like mean
     and refer to this Agreement as a whole and not merely to the specific
     Article, Section, subsection, paragraph or clause in which the respective
     word appears.

     (iii) The meaning of defined terms shall be equally applicable to both the
     singular and plural forms of the terms defined.

     (iv)  The words "including," "includes" and "include" shall be deemed to be
     followed by the words "without limitation."

     (v)   References to agreements and other contractual instruments shall be
     deemed to include all subsequent amendments and other modifications
     thereto.

                                      G-2

<PAGE>

           (vi)  References to statutes or regulations are to be construed as
           including all statutory and regulatory provisions consolidating,
           amending or replacing the statute or regulation referred to.

           (vii) The captions and headings are for convenience of reference only
           and shall not affect the construction of this Agreement.

                 SECTION 2. Agreement of Subordination.

                 (a) Subordination to Payment of Senior Debt. All payments on
account of the Subordinated Debt shall be subject, subordinate and junior, in
right of payment and exercise of remedies, to the extent and in the manner set
forth herein, to the prior indefeasible payment in full in cash or cash
equivalents of the Senior Debt.

                 (b) Subordination of Liens. All Liens now or hereafter existing
of the Creditor in any Creditor Collateral shall be subject, subordinate and
junior in all respects and at all times to the Liens now or hereafter existing
of the Banks (or the Agent on behalf of the Banks) therein, regardless of the
time or order of attachment or perfection of such Liens, the time or order of
filing of financing statements, the acquisition of purchase money or other
Liens, the time of giving or failure to give notice of the acquisition or
expected acquisition of any purchase money or other Liens, or any other
circumstances whatsoever.

                 SECTION 3. Subordination Upon Any Distribution of Assets of the
Borrower. In the event of any payment or distribution of assets of the Borrower
of any kind or character, whether in cash, property or securities, upon the
dissolution, winding up or total or partial liquidation or reorganization,
readjustment, arrangement or similar proceeding relating to the Borrower or its
property, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership, arrangement or similar proceedings or upon an assignment for the
benefit of creditors, or upon any other marshalling or composition of the assets
and liabilities of the Borrower, or otherwise (such events, collectively, the
"Insolvency Events"): (i) all amounts owing on account of the Senior Debt shall
first be indefeasibly paid in full in cash, or payment provided for in cash or
in cash equivalents, before any Subordinated Debt Payment is made; and (ii) to
the extent permitted by applicable law, any Subordinated Debt Payment to which
the Creditor would be entitled except for the provisions hereof, shall be paid
or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of
creditors or other liquidating agent making such payment or distribution
directly to the Agent (on behalf of the Banks) for application to the payment of
the Senior Debt in accordance with clause (i), after giving effect to any
concurrent payment or distribution or provision therefor to the Agent or the
Banks in respect of such Senior Debt.

                 SECTION 4. Payments on Subordinated Debt.

                 (a) Permitted Payments. Prior to the occurrence of any Event of
Default, the Borrower may make, and the Creditor shall be entitled to accept and
receive, only regularly scheduled payments on account of principal of and
interest on the Subordinated Debt, in accordance with the terms of [the
_________ Agreement and] the Subordinated Note; provided,

                                      G-3

<PAGE>

however, that notwithstanding the foregoing provisions of this Section 4 the
Borrower shall not make, and the Creditor shall not accept or receive, in any
fiscal quarter of the Borrower, any payments on account of the Subordinated Debt
in an aggregate amount in excess of 50% of Net Cash Flow from Operations for
such fiscal quarter.

                 (b) No Payment Upon Senior Debt Defaults. Upon the occurrence
of any Event of Default, and until such Event of Default is cured or waived, the
Borrower shall not make, and the Creditor shall not accept or receive, any
Subordinated Debt Payment.

                 SECTION 5. Subordination of Remedies. As long as any Senior
Debt shall remain outstanding and unpaid, the Creditor shall not, without the
prior written consent of the Agent (acting on instructions from the Majority
Banks):

          (i)    accelerate, make demand or otherwise make due and payable prior
          to the original stated maturity thereof any Subordinated Debt or bring
          suit or institute any other actions or proceedings to enforce its
          rights or interests under or in respect of [the __________ Agreement
          and] the Subordinated Note;

          (ii)   exercise any rights under or with respect to (A) any guaranties
          of the Subordinated Debt, or (B) any Creditor Collateral, including
          causing or compelling the pledge or delivery of any Creditor
          Collateral, any attachment of, levy upon, execution against,
          foreclosure upon or the taking of other action against or institution
          of other proceedings with respect to any Creditor Collateral,
          notifying any account debtors of the Borrower or asserting any claim
          or interest in any insurance with respect to the Creditor Collateral,
          or attempt to do any of the foregoing;

          (iii)  exercise any rights to set-offs and counterclaims in respect of
          any indebtedness, liabilities or obligations of the Creditor to the
          Borrower against any of the Subordinated Debt; or

          (iv)   commence, or cause to be commenced, or join with any creditor
          other than the Banks in commencing, any bankruptcy, insolvency or
          receivership proceeding against the Borrower.

                 SECTION 6. Payment Over to Agent. In the event that,
notwithstanding the provisions of Sections 3, 4 and 5, any Subordinated Debt
Payments shall be received in contravention of such Sections 3, 4 and 5 by the
Creditor before all Senior Debt is indefeasibly paid in full in cash or cash
equivalents, such Subordinated Debt Payments shall be held in trust for the
benefit of the Banks and the Agent and shall be paid over or delivered to the
Agent for application to the payment in full in cash or cash equivalents of all
Senior Debt remaining unpaid to the extent necessary to give effect to such
Sections 3, 4 and 5, after giving effect to any concurrent payments or
distributions to the Agent and the Banks in respect of the Senior Debt.

                 SECTION 7. Authorization to Agent. If, while any Subordinated
Debt is outstanding, any Insolvency Event shall occur relating to the Borrower
or its property: (i) the Agent, when so instructed by the Majority Banks, is
hereby irrevocably authorized and

                                      G-4

<PAGE>

empowered (in the name of the Banks or in the name of the Creditor or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution in respect of the Subordinated Debt and
give acquittance therefor and to file claims and proofs of claim and take such
other action (including voting the Subordinated Debt) as it may deem necessary
or advisable for the exercise or enforcement of any of the rights or interests
of the Agent and the Banks; and (ii) the Creditor shall promptly take such
action as the Agent (on instruction from the Majority Banks) may reasonably
request (A) to collect the Subordinated Debt for the account of the Banks and to
file appropriate claims or proofs of claim in respect of the Subordinated Debt,
(B) to execute and deliver to the Agent such powers of attorney, assignments and
other instruments as it may request to enable it to enforce any and all claims
with respect to the Subordinated Debt, and (C) to collect and receive any and
all Subordinated Debt Payments.

               SECTION 8. Representations and Warranties. The Creditor
represents and warrants to each Bank and the Agent that:

               (a) Organization and Powers. The Creditor is a corporation duly
organized; validly existing and in good standing under the law of the
jurisdiction of its incorporation and has all requisite power and authority to
own its assets and carry on its business and to execute, deliver and perform its
obligations under this Agreement.

               (b) Authorization; No Conflict. The execution, delivery and
performance by the Creditor of this Agreement have been duly authorized by all
necessary corporate action of the Creditor, and do not and will not: (i)
contravene the terms of the certificate or articles, as the case may be, of
incorporation and the bylaws of the Creditor, (ii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Creditor is a party or by
which it or its properties may be bound or affected; or (iii) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree or the like binding on or affecting the Creditor.

               (c) Binding Obligation. This Agreement constitutes the legal,
valid and binding obligation of the Creditor, enforceable against the Creditor
in accordance with its terms.

               (d) Consents. No authorization, consent, approval, license,
exemption of, or filing or registration with, any Governmental Authority, or
approval or consent of any other Person, is required for the due execution,
delivery or performance by the Creditor of this Agreement.

               (e) No Prior Assignment. The Creditor has not previously assigned
any interest in the Subordinated Debt or any Creditor Collateral, no Person
other than the Creditor owns an interest in the Subordinated Debt or Creditor
Collateral (whether as joint holders of the Subordinated Debt, participants or
otherwise), and the entire Subordinated Debt is owing only to the Creditor.

               (f) Independent Investigation. The Creditor hereby acknowledges
that it has undertaken its own independent investigation of the financial
condition of the Borrower and all other matters pertaining to this Agreement and
further acknowledges that it is not relying in any

                                      G-5

<PAGE>

manner upon any representation or statement of the Agent or the Banks with
respect thereto. The Creditor represents and warrants that it is aware of the
terms of the Loan Documents and that it is in a position to obtain, and it
hereby assumes full responsibility for obtaining, any additional information
concerning the financial condition of the Borrower and any other matters
pertinent hereto that the Creditor may desire. The Creditor is not relying upon
or expecting the Agent or the Banks to furnish to the Creditor any information
now or hereafter in the Agent's or the Banks' possession concerning the
financial condition of the Borrower or any other matter.

           SECTION 9. Certain Agreements of the Creditor.

           (a) No Benefits. The Creditor understands that there may be various
agreements among the Agent, the Banks and the Borrower evidencing and governing
the Senior Debt, and the Creditor acknowledges and agrees that such agreements
are not intended to confer any benefits on the Creditor and that the Agent and
the Banks shall have no obligation to the Creditor or any other Person to
exercise any rights, enforce any remedies, or take any actions which may be
available to it under such agreements.

           (b) No Interference. The Creditor acknowledges that the Borrower has
granted or may hereafter grant the Agent and the Banks a security interest in
all or certain of the Borrower's assets, including the Creditor Collateral, and
agrees not to interfere with or in any manner oppose a disposition of any such
collateral by the Agent or the Banks in accordance with applicable law.

           (c) Reliance by Agent and Banks. The Creditor acknowledges and agrees
that the Agent and the Banks will have relied upon and will continue to rely
upon the subordination provisions provided for herein and the other provisions
hereof in entering into the Loan Documents and making the Loans thereunder.

           (d) Waivers. The Creditor waives any and all notice of the incurrence
of the Senior Debt or any part thereof and any right to require marshalling of
assets.

           (e) Obligations of Creditor Not Affected. The Creditor agrees that at
any time and from time to time, without notice to or the consent of the
Creditor, without incurring responsibility to the Creditor, and without
impairing or releasing the subordination provided for herein or otherwise
impairing the rights of the Agent and the Banks hereunder:

     (i)   the time for the Borrower's performance of or compliance with any of
     its agreements contained in the Loan Documents may be extended or such
     performance or compliance may be waived by the Agent and the Banks in
     accordance with the Loan Documents;

     (ii)  the agreements of the Borrower with respect to the Loan Documents may
     from time to time be modified by the Borrower, the Banks and the Agent in
     accordance with the Loan Documents for the purpose of adding any
     requirements thereto or changing in any manner the rights and obligations
     of the Borrower, the Banks or the Agent thereunder;

                                      G-6

<PAGE>

     (iii) the manner, place or terms for payment of Senior Debt or any portion
     thereof may be altered or the terms for payment extended, or the Senior
     Debt may be renewed in whole or in part;

     (iv)  the maturity of the Senior Debt may be accelerated in accordance with
     the terms of any present or future agreement by the Borrower, the Agent and
     the Banks;

     (v)   any collateral may be sold, exchanged, released or substituted and
     any Lien in favor of the Agent or the Banks may be terminated, subordinated
     or fail to be perfected or become unperfected;

     (vi)  any Person liable in any manner for Senior Debt may be discharged,
     released or substituted; and

     (vii) all other rights against the Borrower, any other Person or with
     respect to any collateral may be exercised (or the Agent and the Banks may
     waive or refrain from exercising such rights).

           (f) Rights of Agent and Banks Not to Be Impaired. No right of the
Agent or the Banks to enforce the subordination provided for herein or to
exercise their other rights hereunder shall at any time in any way be prejudiced
or impaired by any act or failure to act by the Borrower, the Agent or the Banks
hereunder or under or in connection with the other Loan Documents or by any
noncompliance by the Borrower with the terms and provisions and covenants herein
or in any other Loan Document, regardless of any knowledge thereof the Agent or
the Banks may have or otherwise be charged with.

           (g) Financial Condition of Borrower. The Creditor shall not have any
right to require the Agent or the Banks to obtain or disclose any information
with respect to: (i) the financial condition or character of the Borrower or the
ability of the Borrower to pay and perform Senior Debt; (ii) the Senior Debt;
(iii) any collateral or other security for any or all of the Senior Debt; (iv)
the existence or nonexistence of any guarantees of, or any other subordination
agreements with respect to, all or any part of the Senior Debt; (v) any action
or inaction on the part of the Agent, the Banks or any other Person; or (vi) any
other matter, fact or occurrence whatsoever.

           (h) Acquisition of Liens or Guaranties. The Creditor shall not,
without the prior consent of the Agent and the Majority Banks, acquire any right
or interest in or to any Creditor Collateral or accept any guaranties for the
Subordinated Debt.

           SECTION 10. Subrogation.

           (a) Subrogation. Until the indefeasible payment and performance in
full of all Senior Debt, the Creditor shall not have, and shall not directly or
indirectly exercise, any rights that it may acquire by way of subrogation under
this Agreement, by any payment or distribution to the Agent or the Banks
hereunder or otherwise. Upon the indefeasible payment and performance in full of
all Senior Debt, the Creditor shall be subrogated to the rights of the Agent and
the Banks to receive payments or distributions applicable to the Senior Debt
until the

                                      G-7

<PAGE>

Subordinated Debt shall be paid in full. For the purposes of the foregoing
subrogation, no payments or distributions to the Agent or the Banks of any cash,
property or securities to which the Creditor would be entitled except for the
provisions of Section 3, 4 or 5 shall, as among the Borrower, its creditors
(other than the Banks and the Agent) and the Creditor, be deemed to be a payment
by the Borrower to or on account of the Senior Debt.

           (b) Payments Over to Creditor. If any payment or distribution to
which the Creditor would otherwise have been entitled but for the provisions of
Section 3, 4 or 5 shall have been applied pursuant to the provisions of Section
3, 4 or 5 to the payment of all amounts payable under the Senior Debt, the
Creditor shall be entitled to receive from the Agent and the Banks any payments
or distributions received by the Agent and the Banks in excess of the amount
sufficient to pay in full all amounts payable under or in respect of the Senior
Debt. If any such excess payment is made to the Agent and the Banks, the Agent
and the Banks shall promptly remit such excess to the Creditor and until so
remitted shall hold such excess payment for the benefit of the Creditor.

           SECTION 11. Continuing Agreement; Reinstatement.

           (a) Continuing Agreement. This Agreement is a continuing agreement of
subordination and shall continue in effect and be binding upon the Creditor
until indefeasible payment and performance in full of the Senior Debt and
termination of the Commitments. The subordinations, agreements, and priorities
set forth herein shall remain in full force and effect regardless of whether any
party hereto in the future seeks to rescind, amend, terminate or reform, by
litigation or otherwise, its respective agreements with the Borrower.

           (b) Reinstatement. This Agreement shall continue to be effective or
shall be reinstated, as the case may be, if, for any reason, any payment of the
Senior Debt by or on behalf of the Borrower shall be rescinded or must otherwise
be restored by the Agent or any Bank, whether as a result of an Insolvency Event
or otherwise.

           SECTION 12. Payments. The Creditor shall make each payment hereunder
unconditionally in full without set-off, counterclaim or other defense, on the
day when due to the Agent in Dollars and in same day or immediately available
funds, to the Agent's Payment Office.

           SECTION 13. Transfer of Subordinated Debt. The Creditor may not
assign or transfer its rights and obligations under the [__________ Agreement or
the] Subordinated Note or any interest in the Subordinated Debt or any Creditor
Collateral without the prior written consent of the Majority Banks, and any such
transferee or assignee, as a condition to acquiring the Subordinated Note or
interest in the Subordinated Debt or Creditor Collateral shall agree to be bound
hereby, in form satisfactory to the Agent.

           SECTION 14. Amendments of Subordinated Debt. Each of the Borrower and
the Creditor shall not, without the prior written consent of the Majority Banks,
agree to or permit any amendment, modification or waiver of any material
provisions of [the __________Agreement,] the Subordinated Note or any other
agreement relating to any Subordinated Debt (including any amendment,
modification or waiver pursuant to an exchange of other securities or
instruments

                                      G-8

<PAGE>

for outstanding Subordinated Debt) if the effect of such amendment, modification
or waiver is to: (i) increase the interest rate on the Subordinated Debt or
change (to earlier dates) the dates upon which principal and interest are due
thereon; (ii) alter the redemption, prepayment or subordination provisions
thereof; (iii) alter the covenants and events of default in a manner which would
make such provisions more onerous or restrictive to the Borrower or any
Subsidiary; or (iv) otherwise increase the obligations of the Borrower in
respect of the Subordinated Debt or confer additional rights upon the Creditor
which individually or in the aggregate would be adverse to the Borrower, its
Subsidiaries or the Banks.

           SECTION 15. Obligations of Borrower Not Affected. The provisions of
this Agreement are intended solely for the purpose of defining the relative
rights against the Borrower of the Creditor, on the one hand, and the Agent and
the Banks, on the other hand. Nothing contained in this Agreement shall (i)
impair, as between the Borrower and the Creditor, the obligation of the Borrower
to pay the principal of or interest on the Subordinated Note and its other
obligations with respect to the Subordinated Debt as and when the same shall
become due and payable in accordance with the terms thereof, or (ii) otherwise
affect the relative rights against the Borrower of the Creditor, on the one
hand, and the creditors of the Borrower (other than the Banks and the Agent), on
the other hand.

           SECTION 16. Endorsement of Subordinated Notes; Further Assurances and
Additional Acts.

           (a) Endorsement of Subordinated Note. At the request of the Agent,
the Subordinated Note and all other documents and instruments evidencing any of
the Subordinated Debt shall be endorsed with a legend noting that the
Subordinated Note and such other documents and instruments are subject to this
Agreement, and the Creditor shall promptly deliver to the Agent evidence of the
same.

           (b) Further Assurances and Additional Acts. Each of the Creditor and
the Borrower shall execute, acknowledge, deliver, file, notarize and register at
its own expense all such further agreements, instruments, certificates,
financing statements, documents and assurances, and perform such acts as the
Agent or the Majority Banks shall deem necessary or appropriate to effectuate
the purposes of this Agreement, and promptly provide the Agent with evidence of
the foregoing satisfactory in form and substance to the Agent and the Majority
Banks.

           SECTION 17. Notices. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including by
           facsimile transmission) and shall be mailed, sent or delivered at or
to the
address or facsimile number of the respective party or parties set forth on the
signature pages hereof, or at or to such other address or facsimile number as
such party or parties shall have designated in a written notice to the other
party or parties. All such notices and communications shall be effective (i) if
delivered by hand, when delivered; (ii) if sent by mail, upon the earlier of the
date of receipt or five Business Days after deposit in the mail, first class (or
air mail, with respect to communications to be sent to or from the United
States), postage prepaid; and (iii) if sent by facsimile transmission, when
sent.

                                      G-9

<PAGE>

           SECTION 18. No Waiver; Cumulative Remedies. No failure on the part of
the Agent or any Bank to exercise, and no delay in exercising, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, remedy, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights and remedies under this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to the Agent or any Bank.

                                      G-10

<PAGE>

          SECTION 19. Costs and Expenses.

          (a) Payments by Borrower. The Borrower agrees to pay to the Agent on
demand the reasonable out-of-pocket costs and expenses of the Agent, and the
reasonable fees and disbursements of counsel to the Agent (including allocated
costs of internal counsel), in connection with the negotiation, preparation,
execution, delivery and administration of this Agreement, and any amendments,
modifications or waivers of the terms thereof.

          (b) Payments by Borrower and Creditor. Each of the Borrower and the
Creditor jointly and severally agrees to pay to the Agent on demand all costs
and expenses of the Agent and the Banks, and the fees and disbursements of
counsel (including allocated costs of internal counsel), in connection with the
enforcement or attempted enforcement of, and preservation of rights or interests
under, this Agreement, including any losses, costs and expenses sustained by the
Agent and any Bank as a result of any failure by the Creditor to perform or
observe its obligations contained in this Agreement.

          SECTION 20. Survival. All covenants, agreements, representations and
warranties made in this Agreement shall, except to the extent otherwise provided
herein, survive the execution and delivery of this Agreement, and shall continue
in full force and effect so long as any Senior Debt remains unpaid or the Banks
have any Commitments. Without limiting the generality of the foregoing, the
obligations of the Borrower and the Creditor under Section 19 shall survive the
satisfaction of the Senior Debt and the termination of the Commitments.

          SECTION 21. Benefits of Agreement. This Agreement is entered into for
the sole protection and benefit of the parties hereto and their successors and
assigns, and no other Person shall be a direct or indirect beneficiary of, or
shall have any direct or indirect cause of action or claim in connection with,
this Agreement.

          SECTION 22. Binding Effect. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the Borrower, the Creditor, the
Agent and each Bank and their respective successors and assigns.

          SECTION 23. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.

          SECTION 24. Submission to Jurisdiction.

          (a) Submission to Jurisdiction. The Creditor hereby (i) submits to the
nonexclusive jurisdiction of the courts of the State of California and the
federal courts of the United States sitting in the State of California for the
purpose of any action or proceeding arising out of or relating to this
Agreement, (ii) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such courts, (iii) irrevocably waives
(to the extent permitted by applicable law) any objection which it now or
hereafter may have to the laying of venue of any such action or proceeding
brought in any of the foregoing courts, and any objection on the ground that any
such action or proceeding in any such court has been brought in an

                                      G-11

<PAGE>

inconvenient forum, and (iv) agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner permitted by law.

          (b) [Appointment of Process Agent. The Creditor hereby irrevocably
appoints __________ (the "Process Agent"), with an office on the date hereof
at__________, as its authorized agent with all powers necessary to receive on
its behalf service of copies of the summons and complaint and any other process
which may be served in any action or proceeding arising out of or relating to
this Agreement in any of the courts in and of the State of California. Such
service may be made by mailing or delivering a copy of such process to the
Creditor in care of the Process Agent at the Process Agent's above address, and
the Creditor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf and agrees that the failure of the Process
Agent to give any notice of any such service to the Creditor shall not impair or
affect the validity of such service or of any judgment rendered in any action or
proceeding based thereon. As an alternative method of service, the Creditor also
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to the Creditor at its
address specified in Section 17. If for any reason __________ shall cease to act
as Process Agent, the Creditor shall appoint forthwith, in the manner provided
for herein, a successor Process Agent qualified to act as an agent for service
of process with respect to all courts in and of the State of California and
acceptable to the Agent.]

          (c) No Limitation. Nothing in this Section 24 shall limit the right of
the Agent or the Banks to bring any action or proceeding against the Creditor or
its property in the courts of other jurisdictions.

          SECTION 25. Entire Agreement; Amendments and Waivers.

          (a) Entire Agreement. This Agreement constitutes the entire agreement
of the Borrower, the Banks, the Agent and the Creditor with respect to the
matters set forth herein and supersedes any prior agreements, commitments,
drafts, communications, discussions and understandings, oral or written, with
respect thereto.

          (b) Amendments and Waivers. No amendment to any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by the Borrower, the Creditor, the Agent and the Majority Banks (or
the Agent with the written consent of the Majority Banks); and no waiver of any
provision of this Agreement, or consent to any departure by the Borrower or the
Creditor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Agent and the Majority Banks (or the Agent with the
consent of the Majority Banks). Any such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

          SECTION 26. Conflicts. In case of any conflict or inconsistency
between any terms of this Agreement, on the one hand, and [the__________
Agreement,] the Subordinated Note or any other document or instrument relating
to the Subordinated Debt, on the other hand, then the terms of this Agreement
shall control.

                                      G-12

<PAGE>

          SECTION 27. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement or the validity or effectiveness of such provision
in any other jurisdiction.

          SECTION 28. Interpretation. This Agreement is the result of
negotiations between, and have been reviewed by counsel to, the Agent, the
Creditor, the Borrower and other parties, and is the product of all parties
hereto. Accordingly, this Agreement shall not be construed against any of the
Banks or the Agent merely because of the Agent's or any Bank's involvement in
the preparation thereof.

          SECTION 29. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.

          SECTION 30. Termination of Agreement. Upon indefeasible payment and
performance in full in cash or cash equivalents of the Senior Debt and the
termination of the Commitments, this Agreement shall terminate and the Agent and
the Banks shall promptly execute and deliver to the Borrower and the Creditor
such documents and instruments as shall be necessary to evidence such
termination; provided, however, that the obligations of the Borrower and the
Creditor under Section 19 shall survive such termination.

          IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.

                             THE BORROWER

                             MENTOR GRAPHICS CORPORATION

                             By:_______________________________________
                             Title:

                             Address:

                             __________________________________________
                             __________________________________________
                             __________________________________________
                             Attn.:____________________________________
                             Fax No.___________________________________

                                      G-13

<PAGE>

                                   THE AGENT

                                   BANK OF AMERICA, N.A., as Agent

                                   By:__________________________________________
                                   Title:

                                   Address:

                                   _____________________________________________
                                   _____________________________________________
                                   _____________________________________________
                                   Attn.:_______________________________________
                                   Fax No.______________________________________

                                   THE BANKS

                                   [BANK]

                                   By:__________________________________________
                                   Title:

                                   Address:
                                   _____________________________________________
                                   _____________________________________________
                                   _____________________________________________
                                   Attn.:_______________________________________
                                   Fax No.______________________________________

                                   [BANK]

                                   By:__________________________________________
                                   Title:

                                   Address:

                                   _____________________________________________
                                   _____________________________________________
                                   _____________________________________________
                                   Attn.:_______________________________________
                                   Fax No.______________________________________

                                      G-14

<PAGE>

                                   [BANK]

                                   By:__________________________________________
                                   Title:

                                   Address:

                                   _____________________________________________
                                   _____________________________________________
                                   _____________________________________________
                                   Attn.:_______________________________________
                                   Fax No.______________________________________

                                   THE CREDITOR

                                   [CREDITOR]

                                   By:__________________________________________
                                   Title:

                                   Address:

                                   _____________________________________________
                                   _____________________________________________
                                   _____________________________________________
                                   Attn.:_______________________________________
                                   Fax No.______________________________________

                                      G-15

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