MENTOR GRAPHICS CORP
EX-10.D
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<TYPE>EX-10.D
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<FILENAME>j1255_ex10dd.htm
<DESCRIPTION>EX-10.D
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<title>Prepared by MerrillDirect</title>

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<p align=right><font size=2>&nbsp;</font></p>

<p align=right><font size=2>EXHIBIT 10.D</font></p>

<p align=center><b><font size=2>&nbsp;</font></b></p>

<p align=center><b><font size=2>MENTOR GRAPHICS
CORPORATION</font></b></p>

<p align=center><b><font size=2>1987 NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN</font></b></p>

<p><font size=2>Mentor Graphics recognizes that its
continuing success depends upon the initiative, ability and significant
contributions of non-employee directors.&nbsp;
Mentor Graphics believes that by affording its non-employee directors
the opportunity to purchase shares of Mentor Graphics it will enhance its
ability to attract and retain non-employee directors and will provide an
incentive for them to exert their best efforts on its behalf.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Plan is
as follows:</font></p>

<p><font size=2>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Shares Subject
to Option</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Options granted under this Plan shall
be for authorized but unissued or reacquired Common Stock of Mentor Graphics.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Options may be granted under sections
5 and 6 of the Plan for a total of not more than 1,100,000shares of Common Stock,
subject to adjustment under section 11.&nbsp;
Shares subject to options that are terminated or expire without being
exercised, other than options that are surrendered upon exercise of a related
stock appreciation right, shall be added to the shares remaining for future
options.</font></p>

<p><font size=2>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Effective Date;
Duration</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This
Plan shall be effective May 21, 1987 and continue until options covering all of
the available shares have been granted and exercised unless sooner terminated
by the Board of Directors of Mentor Graphics (Board).&nbsp; Expiration or termination of the Plan shall not affect
outstanding options or stock appreciation rights.</font></p>

<p><font size=2>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Eligibility;
Non-Employee Directors</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Options may
be granted under this Plan only to persons who are or have been elected as
Non-Employee Directors of Mentor Graphics.&nbsp;
A &quot;Non-Employee Director&quot; is a director who is not otherwise
an employee of Mentor Graphics or any of its subsidiaries and has not been an
employee of Mentor Graphics or any of its subsidiaries within 2 years of any
date as of which a determination of eligibility is made.</font></p>

<p><font size=2>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Administration</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Plan shall be administered in
accordance with the express provisions of the Plan by a compensation committee
appointed by the Board (Committee).&nbsp; The
Committee may delegate any of its administrative duties to one or more agents
and may retain advisors to assist it.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Committee shall have general
responsibility to interpret and administer the Plan and shall have authority to
adopt rules and to make other determinations not inconsistent with the Plan
deemed necessary for the administration of the Plan.&nbsp; Any decision of the Committee shall be final and bind all
parties.&nbsp; Notwithstanding the foregoing,
the Committee's exclusive power to make final and binding interpretations of
the Plan shall immediately terminate upon the occurrence of a Change in Control
(as defined in section 8.2).</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No Committee member shall participate
in the decision of any question relating exclusively to an option granted to
that member.</font></p>

<p><font size=2>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Non-Discretionary
AnnualOption
Grants</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; On the date
of each annual meeting of shareholders of Mentor Graphics beginning with the
annual meeting held in 1987 (Grant Dates), each Non-Employee Director elected
at the annual meeting who served as a director continuously since the prior
annual meeting shall be automatically granted an option to purchase 12,000
shares of Common Stock of Mentor Graphics.&nbsp;
Any incumbent Non-Employee Director elected at an annual meeting who did
not serve as a director for the full period since the prior annual meeting
shall instead be automatically granted an option for a pro rata portion of
12,000 shares based on the number of full or partial months during the period
that the director did serve.&nbsp; If the
number of shares available for grant is insufficient to make all automatic
grants required on any Grant Date, the number of shares for which options are
granted to each Non-Employee Director shall be proportionately reduced.</font></p>

<p><font size=2>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Non<b>-</b>Discretionary
Option Grants for New Directors</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; An option to
purchase 30,000 shares of Common Stock shall be automatically grantedto
any person who (i) is elected a director of Mentor Graphics, (ii) has not
previously served as a director of Mentor Graphics, and (iii) at the time of
the initial election, qualifies as a Non-Employee Director under section
3.&nbsp; The automatic grant of an option
under this section 6 shall occur on the date the new Non-Employee Director is
first elected as a director (Grant Date).</font></p>

<p><font size=2>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Terms of Options</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each option
granted under this Plan shall have the following provisions:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Price.</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The exercise price of the option shall beequal to the last price forthe
Common Stock reported on the Grant Date in the NASDAQ National Market
System.&nbsp; If the Common Stock is no
longer quoted in the NASDAQ National Market System, the exercise price shall be
equal to the fair market value of the Common Stock determined in a reasonable
manner specified by the Committee.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Term</u>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The term of the option shall be 10 years from the Grant Date. </font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Time of Exercise; Option Year</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Until it expires or is terminated and
except as provided in section 7.3.2, the option may be exercised from time to
time to purchase shares up to the following limits:</font></p>

<dir><dir><dir><dir>
<table border=0 cellspacing=0 cellpadding=0 width="64%">
 <tr>
  <td  align=center width="19%" valign=bottom>&nbsp;</td>
  <td  align=center width="38%" valign=top>&nbsp;</td>
  <td  align=center width="19%" valign=bottom>&nbsp;</td>
  <td  align=center width="22%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="19%" valign=bottom><font size=2>Years After</font></td>
  <td  align=center width="38%" valign=top>&nbsp;</td>
  <td  align=center width="41%" colspan=2 valign=bottom><font   size=2>Exercisable &nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom><font size=2>Grant Date</font></td>
  <td  align=center width="38%" valign=top>&nbsp;</td>
  <td  align=center width="41%" colspan=2 valign=bottom><font   size=2>Percent &nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>
<hr size=1 width="100%" noshade color=black align=left>
</td>
  <td  align=center width="38%" valign=top>&nbsp;</td>
  <td width="41%" colspan=2 valign=bottom>
<hr size=1 width="50%" noshade color=black align=center>
</td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>&nbsp;</td>
  <td  align=center width="38%" valign=top>&nbsp;</td>
  <td  align=center width="19%" valign=bottom>&nbsp;</td>
  <td width="22%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="19%" valign=bottom bgcolor="#cceeff"><font size=2>Less than 1</font></td>
  <td  align=right width="38%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>0</font></td>
  <td width="22%" valign=bottom bgcolor="#cceeff"><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom><font size=2>1 to 2</font></td>
  <td  align=right width="38%" valign=top>&nbsp;</td>
  <td  align=right width="19%" valign=bottom><font   size=2>20</font></td>
  <td width="22%" valign=bottom><font size=2>%</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom bgcolor="#cceeff"><font size=2>2 to 3</font></td>
  <td  align=right width="38%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>40</font></td>
  <td width="22%" valign=bottom bgcolor="#cceeff"><font size=2>%</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom><font size=2>3 to 4</font></td>
  <td  align=right width="38%" valign=top>&nbsp;</td>
  <td  align=right width="19%" valign=bottom><font   size=2>60</font></td>
  <td width="22%" valign=bottom><font size=2>%</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom bgcolor="#cceeff"><font size=2>4 to 5</font></td>
  <td  align=right width="38%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="19%" valign=bottom bgcolor="#cceeff"><font   size=2>80</font></td>
  <td width="22%" valign=bottom bgcolor="#cceeff"><font size=2>%</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom><font size=2>over 5</font></td>
  <td  align=right width="38%" valign=top>&nbsp;</td>
  <td  align=right width="19%" valign=bottom><font   size=2>100</font></td>
  <td width="22%" valign=bottom><font size=2>%</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>&nbsp;</td>
  <td  align=right width="38%" valign=top>&nbsp;</td>
  <td  align=right width="19%" valign=bottom>&nbsp;</td>
  <td width="22%" valign=bottom>&nbsp;</td>
 </tr>
</table>
</dir></dir></dir></dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; On death the exercise limit will be at
least 50 percent.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.3.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The table in section 7.3.1 is based on
an Option Year.&nbsp; An Option Year is a
12-month period starting on the Grant Date or an anniversary of that date.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Continuation as Director</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If an optionee ceases to be a director
for any reason, an Option Reference Date will be established.&nbsp; Any portion of the option that is not
exercisable on the Option Reference Date will lapse.&nbsp; The Option Reference Date will be fixed as follows:</font></p>

<dir><dir><dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If the termination
is by death or disability, the first day of the next Option Year will be the
Option Reference Date.</font></p>
</dir></dir></dir>

<dir><dir><dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In all other cases,
the optionee's last day as a director will be the Option Reference Date.</font></p>
</dir></dir></dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any portion of the option that is
exercisable on the Option Reference Date may be exercised up to the earlier of
the last day of the term of the option or a date fixed as follows:</font></p>

<dir><dir><dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If the termination
is by death or disability, one year after the last day as a director.</font></p>
</dir></dir></dir>

<dir><dir><dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In all other cases,
one month after the Option Reference Date.</font></p>
</dir></dir></dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment of Exercise Price.</u>&nbsp; At the time of exercise of an option, the
full exercise price must be paid in cash or by delivery of Common Stock of
Mentor Graphics valued at fair market value, which shall be the last sale price
for the Common Stock reported on the NASDAQ National Market System on the trading
day immediately preceding the date of exercise or such other price as would be
determined by the method used under section 7.1.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Nonassignability.</u>&nbsp; Except as otherwise determined by the
Committee, the option may not be assigned or transferred except on death, by
will or operation of law.&nbsp; Except as
otherwise determined by the Committee, the option may be exercised only by the
optionee or by a successor or representative after death.</font></p>

<p><font size=2>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Acceleration
Upon Change in Control</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding any limitation on
exercisability contained in any option agreement or in the Plan, each
outstanding option shall automatically become exercisable in full for the
remainder of its term upon the occurrence of a Change in Control.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;Change in Control&quot; means
the occurrence of any of the following events:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.2.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the approval by the shareholders of
Mentor Graphics of:</font></p>

<dir><dir><dir>
<p align=left><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any consolidation, merger or plan of
share exchange involving Mentor Graphics (Merger) in which Mentor Graphics is
not the continuing or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or other property, other
than a Merger involving Mentor Graphics in which the holders of Mentor
Graphics' Common Stock immediately prior to the Merger have the same
proportionate ownership of Common Stock of the surviving corporation
immediately after the Merger;</font></p>
</dir></dir></dir>

<dir><dir><dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, the assets of Mentor Graphics; or</font></p>
</dir></dir></dir>

<dir><dir><dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the adoption of any
plan or proposal for the liquidation or dissolution of Mentor Graphics;</font></p>
</dir></dir></dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.2.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; at any time during a period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (Incumbent Directors) shall cease for any reason to
constitute at least a majority thereof, unless each new director elected during
such two-year period was nominated or appointed by two-thirds of the Incumbent
Directors then in office and voting (new directors nominated or appointed by
two-thirds of the Incumbent Directors shall also be deemed to be Incumbent
Directors); or</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.2.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any person (as such term is used in
Section 13(d) of the Securities Exchange Act of 1934 (1934 Act) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of Mentor Graphics ordinarily having the right to vote in the
election of directors (Voting Securities) representing twenty percent (20%) or
more of the combined voting power of the then outstanding Voting Securities.</font></p>

<p><font size=2>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Limited Stock
Appreciation Rights</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each option granted under the Plan
shall include a related limited stock appreciation right.&nbsp; Effective as of December 14, 1988 and
subject to shareholder approval of the amendment to the Plan adding this
section 9, a limited stock appreciation right is automatically granted in tandem
with each option outstanding under the Plan on December 14, 1988.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Limited stock appreciation rights
shall be exercisable only during the 60 calendar days immediately following a
Change in Control and only if the immediate resale of shares acquired upon
exercise of the related option would subject the optionee to liability under
Section 16(b) of the 1934 Act, provided, however, that a limited stock
appreciation right may not be exercised within six months of its date of grant.&nbsp; Upon exercise of a limited stock
appreciation right, the option or portion thereof to which the right relates
must be surrendered.&nbsp; The shares subject
to an option or portion thereof that is surrendered upon exercise of a limited
stock appreciation right shall not be available for future option grants under
the Plan.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each limited stock appreciation right
shall entitle the holder to receive from Mentor Graphics an amount equal to the
excess of the fair market value at the time of exercise of one share of Mentor
Graphics Common Stock over the option price per share under the related option,
multiplied by the number of shares covered by the related option or portion of
the related option.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payment upon exercise of a limited
stock appreciation right by Mentor Graphics may be made only in cash.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Limited stock appreciation rights may
not be assigned or transferred except on death, by will or operation of law and
may be exercised only by the holder or by a successor or representative after
death.</font></p>

<p><font size=2>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Option Agreement</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each option
shall be evidenced by a stock option agreement which shall set forth the number
of shares for which the option was granted, the provisions called for in
section 7, 8 and 9 relating to the option, and such other terms and conditions
consistent with the Plan as the Committee shall determine from time to time.</font></p>

<p><font size=2>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Changes in
Capital Structure</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If any change
is made in the outstanding Common Stock without Mentor Graphics receiving any
consideration, such as a stock split, reverse stock split, stock dividend, or
combination or reclassification of the Common Stock, corresponding changes
shall be made in the number of shares remaining available for option under
section 1, without any further approval of the shareholders.&nbsp; Fractional shares shall be disregarded.&nbsp; The adjustment shall be made by the
Committee whose determination shall be conclusive.&nbsp; No corresponding changes shall be made to the number of shares
for which automatic grants are made under sections 5 and 6; provided, however,
that stock option agreements evidencing options may provide that the number of
shares issuable under outstanding options and the exercise price of such
options shall be appropriately adjusted in the event of changes in capital
structure covered by this Section 11.</font></p>

<p><font size=2>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Amendment or
Termination of the Plan</u>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Board may amend or terminate this
Plan at any time subject to section 12.2.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unless the amendment is approved by the
shareholders, no amendment shall be made in the Plan that would (a) increase
the total number of shares available for option grants under section 1or
the number of shares for which automatic grants are made under section 5 or
section 6, (b) increase the term for which options are granted, (c) change the
formula for determining the exercise price of options to provide a lower
exercise price, (d) modify the requirements for eligibility under the Plan, or
(e) materially increase the benefits accruing under the Plan.</font></p>

<p><font size=2>&nbsp;</font></p>

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