2004 Employment Inducement Award Plan



 Exhibit 10.1 
  
 MAGMA DESIGN AUTOMATION, INC. 
  

2004 EMPLOYMENT INDUCEMENT AWARD PLAN 
  
 (Adopted on August 30, 2004 and amended on January 24, 2006) 







 MAGMA DESIGN AUTOMATION, INC. 
  
 2004 EMPLOYMENT INDUCEMENT AWARD PLAN 
  
 SECTION 1. ESTABLISHMENT AND PURPOSE. 
  
 The Plan was adopted on August 30, 2004. The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging the attraction and retention of Employees with exceptional qualifications and (b) linking the compensation of Employees directly to stockholder interests through increased stock
ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares, Stock Units, Options, or stock appreciation rights. 
  

SECTION 2. DEFINITIONS. 
  
 (a) “Affiliate” shall mean any entity other than a Subsidiary, if the Company and/or one of more Subsidiaries own not less than 50% of such
entity. 
  
 (b) “Award” shall mean any award of an
Option, a SAR, a Restricted Share or a Stock Unit under the Plan. 
  
 (c) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time. 
  
 (d) “Change in Control” shall mean the occurrence of any of the following events: 
  
 (i) A change in the composition of the Board of Directors occurs, as a result of which fewer than two-thirds
of the incumbent directors are directors who either: 
  
 (A) Had been directors of the Company on the “look-back date” (as defined below) (the “original directors”); or 
  
 (B) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the aggregate
of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved (the “continuing directors”); or 
  
 (ii) Any “person” (as defined below) who by the
acquisition or aggregation of securities, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting
power of the Company’s then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the “Base Capital Stock”); except that any change in the
relative beneficial ownership 
  

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 of the Company’s securities by any person resulting solely from a reduction in the aggregate number
of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership
of any securities of the Company; 
  
 (iii) The
consummation of a merger or consolidation of the Corporation with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (A) the continuing or surviving entity and (B) any direct or indirect parent
corporation of such continuing or surviving entity; 
  
 (iv) The sale, transfer or other disposition of all or substantially all of the Company’s assets; 
  
 (v) Both: 
  
 (A) Any “person” (as defined below) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s Base Capital Stock; except that any change in the relative beneficial ownership of the Company’s
securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person
increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities of the Company; and 
  
 (B) The beneficial ownership by such person of securities representing such percentage has not been approved by a majority of the
continuing directors. 
  
 For purposes of subsection (d)(i) above,
the term “look-back” date shall mean the date 24 months prior to the date of the event that may constitute a Change in Control. 
  
 For purposes of subsections (d)(ii) and (v) above, the term “person” shall have the same meaning as when used in Sections 13(d) and
14(d) of the Exchange Act but shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and (2) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their ownership of the Stock. 
  
 Any other provision of this Section 2(d) notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the
state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. 
  

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 (e) “Code” shall mean the Internal Revenue Code of 1986, as amended. 
  
 (f) “Committee” shall mean a committee of the Board of Directors,
which is authorized to administer the Plan, as described in Section 3 hereof. 
  
 (g) “Company” shall mean Magma Design Automation, Inc., a Delaware corporation. 
  
 (h) “Consultant” shall mean a consultant or advisor who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor or a member of the board of directors of a Parent or a Subsidiary who is not an Employee. Service as a Consultant shall be considered Service for all purposes of the Plan. 
  
 (i) “Employee” shall mean any individual who is a common-law
employee of the Company, a Parent or a Subsidiary. 
  
 (j)
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
  
 (k) “Exercise Price” shall mean, in the case of an Option, the amount for which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement.
“Exercise Price,” in the case of a SAR, shall mean an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in determining the amount payable upon exercise of such SAR.

  
 (l) “Fair Market Value” with respect to a Share,
shall mean the market price of one Share of Stock, determined by the Committee as follows: 
  
 (i) If the Stock was traded over-the-counter on the date in question but was not traded on The Nasdaq Stock Market, then the Fair Market
Value shall be equal to the last transaction price quoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representative bid and asked prices quoted for such date by the principal
automated inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on any such system, by the “Pink Sheets” published by the National Quotation Bureau, Inc.; 
  
 (ii) If the Stock was traded on The Nasdaq Stock Market,
then the Fair Market Value shall be equal to the last reported sale price quoted for such date by The Nasdaq Stock Market; 
  
 (iii) If the Stock was traded on a United States stock exchange on the date in question, then the Fair Market Value shall be equal to the
closing price reported for such date by the applicable composite-transactions report; and 
  

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 (iv) If none of the foregoing provisions is applicable, then the Fair Market Value shall
be determined by the Committee in good faith on such basis as it deems appropriate. 
  
 In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons. 
  
 (m) “Nonstatutory Option” or “NSO” shall mean an Option that is not intended to be an “incentive stock option” under
Section 422 of the Code. 
  
 (n) “Offeree” shall
mean an individual to whom the Committee has offered the right to acquire Shares under the Plan (other than upon exercise of an Option). 
  
 (o) “Option” shall mean a Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares. 
  
 (p) “Optionee” shall mean an individual or estate who holds an
Option or SAR. 
  
 (q) “Outside Director” shall mean a
member of the Board of Directors who is not a common-law employee of the Company, a Parent or a Subsidiary. Service as an Outside Director shall be considered Service for all purposes of the Plan. 
  
 (r) “Parent” shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such
chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be a Parent commencing as of such date. 
  
 (s) “Participant” shall mean an individual or estate who holds an Award. 
  
 (t) “Plan” shall mean this 2004 Employment Inducement Award Plan of Magma Design Automation, Inc., as amended from
time to time. 
  
 (u) “Purchase Price” shall mean the
consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Committee. 
  
 (v) “Restricted Share” shall mean a Share awarded under the Plan. 
  
 (w) “Restricted Share Agreement” shall mean the agreement between the Company and the recipient of a Restricted
Share which contains the terms, conditions and restrictions pertaining to such Restricted Shares. 
  
 (x) “SAR” shall mean a stock appreciation right granted under the Plan. 
  
 (y) “SAR Agreement” shall mean the agreement between the Company and an Optionee which contains the terms,
conditions and restrictions pertaining to his or her SAR. 
  
 (z)
“Service” shall mean service as an Employee, Consultant or Outside Director. 
  

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 (aa) “Share” shall mean one share of Stock, as adjusted in accordance with Section 9 (if
applicable). 
  
 (bb) “Stock” shall mean the Common
Stock of the Company. 
  
 (cc) “Stock Option Agreement”
shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his Option. 
  
 (dd) “Stock Purchase Agreement” shall mean the agreement between the Company and an Offeree who acquires Shares under the Plan that contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares. 
  
 (ee) “Stock Unit” shall mean a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan. 
  

(ff) “Stock Unit Agreement” shall mean the agreement between the Company and the recipient of a Stock Unit which contains the terms,
conditions and restrictions pertaining to such Stock Unit. 
  
 (gg) “Subsidiary” shall mean any corporation, if the Company and/or one or more other Subsidiaries own not less than 50% of the total combined voting power of all classes of outstanding stock of such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. 
  
 (hh) “Total and Permanent Disability” shall mean that the Participant is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death or that has lasted, or can be expected to last, for a continuous period of not less than 12 months. 
  
 SECTION 3. ADMINISTRATION. 
  
 In all events the Plan shall be administered by the Board or Committee in
compliance with Rule 4350(i)(1)(A) (and any successor thereto) of the National Association of Securities Dealers, Inc. (“NASD”). The grant of any Award under the Plan must be approved by a majority of the members of the Board (each of whom
is an “independent director” as defined in the rules of the NASD) or by the Company’s independent compensation committee (as intended under the rules of the NASD). 
  
 (a) Committee Composition. The Committee shall consist of two or more directors of the Company, who shall be
appointed by the Board and each of whom shall be an “independent director” (except as otherwise permitted under the rules of the NASD). In addition, the composition of the Committee shall satisfy such requirements as the Securities and
Exchange Commission may establish for administrators acting under plans intended to qualify the grant of Awards for the exemption provided under Rule 16b-3 (or its successor) under the Exchange Act. 
  
 (b) Committee Procedures. The Board of Directors shall designate one
of the members of the Committee as chairman. The Committee may hold meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved
in writing by all Committee members, shall be valid acts of the Committee. 
  

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 (c) Committee Responsibilities. Subject to the provisions of the Plan, the Committee shall have
full authority and discretion to take the following actions: 
  
 (i) To interpret the Plan and to apply its provisions; 
  
 (ii) To adopt, amend or rescind rules, procedures and forms relating to the Plan; 
  
 (iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan; 
  
 (iv) To determine when Shares are to be awarded or offered for sale and when Options are to be granted under the Plan; 
  
 (v) To select the Offerees and Optionees; 
  
 (vi) To determine the number of Shares to be offered to each Offeree or to be made subject to each Option; 
  
 (vii) To prescribe the terms and conditions of each award or
sale of Shares, including (without limitation) the Purchase Price, the vesting of the award (including accelerating the vesting of awards) and to specify the provisions of the Stock Purchase Agreement relating to such award or sale; 
  
 (viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, the vesting or duration of the Option (including accelerating the vesting of the Option), and to specify the provisions of the Stock Option Agreement relating to such Option; 
  
 (ix) To amend any outstanding Stock Purchase Agreement or
Stock Option Agreement, subject to applicable legal restrictions and to the consent of the Offeree or Optionee who entered into such agreement; 
  
 (x) To prescribe the consideration for the grant of each Option or other right under the Plan and to determine the sufficiency of such
consideration; 
  
 (xi) To determine the
disposition of each Option or other right under the Plan in the event of an Optionee’s or Offeree’s divorce or dissolution of marriage; 
  
 (xii) To determine whether Options or other rights under the Plan will be granted in replacement of other grants under an incentive or
other compensation plan of an acquired business; 
  

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 (xiii) To correct any defect, supply any omission, or reconcile any inconsistency in the
Plan, any Stock Option Agreement or any Stock Purchase Agreement; and 
  
 (xiv) To take any other actions deemed necessary or advisable for the administration of the Plan. 
  
 Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe
such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Awards under the Plan. All decisions, interpretations and other
actions of the Committee shall be final and binding on all Offerees, all Optionees, and all persons deriving their rights from an Offeree or Optionee. No member of the Committee shall be liable for any action that he has taken or has failed to take
in good faith with respect to the Plan, any Option, or any right to acquire Shares under the Plan. 
  
 SECTION 4. ELIGIBILITY. 
  
 General Rule. Awards may be granted only to Employees who: (a) are not executive officers of the Company; (b) have not negotiated grants
outside the Company’s option guidelines; and (c) are “New Hires”, and then only as an inducement material to such persons entering into employment with the Company or any Parent or Subsidiary. For this purpose, a “New
Hire” is a person who either (i) was not previously an employee or director of the Company or any Parent or Subsidiary or (ii) has either (x) completed a period of bona fide non-employment by the Company, and any Parent or
Subsidiary, of at least 1 year, or (y) is returning to service as an employee of the Company, or any Parent or Subsidiary, after a period of bona fide non-employment of less than 1 year due to the Company’s acquisition of such
person’s employer. A person eligible for an Award under this Plan may be granted more than one Award under this Plan. 
  
 SECTION 5. STOCK SUBJECT TO PLAN. 
  
 (a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares. The maximum aggregate number of
Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed Two Million (2,000,000) Shares. 
  
 (b) Further Limitation. The aggregate number of Shares that may be issued under the Plan shall at all times be subject to adjustment pursuant to
Section 12. The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares then remaining available for issuance under the Plan. The Company, during the term of the Plan,
shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. 
  
 (c) Additional Shares. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become
available for Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any other reason before being exercised, then the corresponding Shares shall again become available for Awards under the Plan. If Stock Units are
settled, then only the number of Shares (if any) actually issued in settlement of such 
  

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 Stock Units shall reduce the number available under Section 5(a) and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Shares (if any) actually issued in settlement of such SARs shall reduce the number available in Section 5(a) and the balance shall again become available for Awards under the
Plan. 
  
 (d) Dividend Equivalents. Any dividend
equivalents paid or credited under the Plan shall not be applied against the number of Restricted Shares, Stock Units, Options or SARs available for Awards, whether or not such dividend equivalents are converted into Stock Units. 
  
 SECTION 6. RESTRICTED SHARES. 
  
 (a) Restricted Stock Agreement. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the
Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. 
  
 (b) Payment for Awards. Subject to the following sentence, Restricted Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services. To the extent that an Award consists of newly issued Restricted Shares, the Award recipient shall
furnish consideration with a value not less than the par value of such Restricted Shares in the form of cash, cash equivalents, or past services rendered to the Company (or a Parent or Subsidiary), as the Committee may determine. 
  
 (c) Vesting. Each Award of Restricted Shares may or may not be subject
to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant’s
death, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares of thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with
respect to the Company. 
  
 (d) Voting and Dividend Rights.
The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest
any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid. 
  
 SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR
SALES. 
  
 (a) Duration of Offers and Nontransferability
of Rights. Any right to acquire Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Offeree 30 days after the grant of such right was communicated to him by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was granted. 
  

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 (b) Withholding Taxes. As a condition to the purchase of Shares, the Offeree shall make such
arrangements as the Committee may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such purchase. 
  
 (c) Restrictions on Transfer of Shares. Any Shares awarded or sold under the Plan shall be subject to such special
forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in addition to any
general restrictions that may apply to all holders of Shares. 
  
 SECTION 8. TERMS AND CONDITIONS OF OPTIONS. 
  
 (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Agreement. The Stock Option Agreement shall specify the
Option is a NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in the Optionee’s other compensation. A Stock Option Agreement may
provide that a new Option will be granted automatically to the Optionee when he or she exercises a prior Option and pays the Exercise Price in a form described in Section 9(b). 
  
 (b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option
and shall provide for the adjustment of such number in accordance with Section 12. 
  
 (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of a NSO shall not be less than the par value of the Shares subject to such NSO. Subject to the foregoing in
this Section 8(c), the Exercise Price under any Option shall be determined by the Committee at its sole discretion. The Exercise Price shall be payable in one of the forms described in Section 9. 
  
 (d) Withholding Taxes. As a condition to the exercise of an Option,
the Optionee shall make such arrangements as the Committee may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as
the Committee may require for the satisfaction of any federal, state or local withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option. 
  
 (e) Exercisability and Term. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the Option. A Stock Option Agreement may provide for accelerated exercisability in the event of the
Optionee’s death, disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s service. Options may be awarded in combination with SARs, and such an
Award may provide that the Options will not be exercisable unless the related SARs are forfeited. Subject to the foregoing in this Section 8(e), the Committee at its sole discretion shall determine when all or any installment of an Option is to
become exercisable and when an Option is to expire. 
  

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 (f) Nontransferability. During an Optionee’s lifetime, his or her Option(s) shall be
exercisable only by the Optionee and shall not be transferable. In the event of an Optionee’s death, his or her Option(s) shall not be transferable other than by will or by the laws of descent and distribution. 
  
 (g) Exercise of Options Upon Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionee’s Service with the Company and its Subsidiaries, and the right to exercise the Option of any executors
or administrators of the Optionee’s estate or any person who has acquired such Option(s) directly from the Optionee by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform
among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service. 
  
 (h) Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company. 
  
 (i) Leaves of Absence. An Employee’s Service shall cease when such Employee ceases to be actively employed by, or a consultant or adviser to,
the Company (or any subsidiary) as determined in the sole discretion of the Board of Directors. For purposes of Options, Service does not terminate when an Employee goes on a bona fide leave of absence, that was approved by the Company in writing,
if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active
work. The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan. 
  
 (j) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 12. 
  
 (k) Modification, Extension and Renewal of Options. Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of new Options for the same or a different number of Shares
and at the same or a different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such Option. 
  
 (l) Restrictions on Transfer of Shares. Any Shares issued upon
exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock
Option Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares. 
  

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 (m) Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in
cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

  
 SECTION 9. PAYMENT FOR SHARES.

  
 (a) General Rule. The entire Exercise Price of Shares
issued under the Plan shall be payable in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Sections 9(b) through 9(g) below. 
  
 (b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, payment may be made all or in part
by surrendering, or attesting to the ownership of, Shares which have already been owned by the Optionee or his representative for more than 12 months. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with
respect to the Option for financial reporting purposes. 
  
 (c)
Services Rendered. At the discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Company or a Subsidiary prior to the award. If Shares are awarded without the payment of a Purchase Price
in cash, the Committee shall make a determination (at the time of the award) of the value of the services rendered by the Offeree and the sufficiency of the consideration to meet the requirements of Section 6(b). 
  
 (d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the
aggregate Exercise Price. 
  
 (e) Exercise/Pledge. To the
extent that a Stock Option Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to
deliver all or part of the loan proceeds to the Company in payment of the aggregate Exercise Price. 
  
 (f) Promissory Note. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by delivering (on a form
prescribed by the Company) a full-recourse promissory note. However, the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents. 
  
 (g) Other Forms of Payment. To the extent that a Stock Option
Agreement so provides, payment may be made in any other form that is consistent with applicable laws, regulations and rules. 
  

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 SECTION 10. STOCK APPRECIATION RIGHTS. 
  
 (a) SAR Agreement. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Participant’s other compensation. 
  

(b) Number of Shares. Each SAR Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Section 12. 
  
 (c)
Exercise Price. Each SAR Agreement shall specify the Exercise Price. A SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. 
  
 (d) Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR. A SAR Agreement may provide for accelerated exercisability in the event of the Participant’s death, disability or
retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Participant’s service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be included in a NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.

  
 (e) Effect of Change in Control. The Committee may
determine, at the time of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company. 
  
 (f) Exercise of SARs. If, on the date when a SAR expires, the Exercise
Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion. Upon
exercise of a SAR, the Participant (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the Committee shall
determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds
the Exercise Price. 
  
 (g) Special Holding Period. To the
extent required by Section 16 of the Exchange Act or any rule thereunder, an SAR shall not be exercised for cash unless both it and the related Option have been outstanding for more than six months. 
  
 (h) Special Exercise Window. To the extent required by Section 16
of the Exchange Act or any rule thereunder, an SAR may only be exercised for cash during a period which (a) begins on the third business day following a date when the Company’s quarterly summary statement of 
  

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 sales and earnings is released to the public and (b) ends on the twelfth business day following such date. This
Section 10(h) shall not apply if the exercise occurs automatically on the date when the related Option expires, and the Committee may determine that it shall not apply to limited SARs that are exercisable only in the event of a Change in
Control. 
  
 (i) Modification or Assumption of SARs. Within
the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the Participant, may alter or impair his or her rights or obligations under such SAR.

  
 SECTION 11. STOCK UNITS. 

 
 (a) Stock Unit Agreement. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions
of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipient’s other compensation. 
  
 (b) Payment for Awards. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award recipients. 
  
 (c) Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit
Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or
part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company. 
  
 (d) Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is outstanding.
Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not
paid shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the Stock Units to which they attach. 
  

(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or
(c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. Methods
of converting Stock Units into cash may include (without limitation) a method based on 
  

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 the average Fair Market Value of Shares over a series of trading days. Vested Stock Units may be settled in a lump sum or
in installments. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by
an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 12. 
  
 (f) Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be
distributed to the recipient’s beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the Company at any time before the Award recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award
that becomes payable after the recipient’s death shall be distributed to the recipient’s estate. 
  
 (g) Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement. 
  
 SECTION 12. ADJUSTMENT OF SHARES. 
  
 (a) Adjustments. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a recapitalization, a
spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of: 
  
 (i) The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Section 5; 
  
 (ii) The limitations set forth in Sections 8(b) and
10(b); 
  
 (iii) The number of Shares covered by
each outstanding Option and SAR; 
  
 (iv) The
Exercise Price under each outstanding Option and SAR; or 
  
 (v) The number of Stock Units included in any prior Award which has not yet been settled. 
  
 Except as provided in this Section 12, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into
stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 
  

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 (b) Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs
and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. 
  
 (c) Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for: 
  
 (i) The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; 
  
 (ii) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary; 
  
 (iii) The substitution by the surviving corporation or its
parent or subsidiary of its own awards for the outstanding Awards; 
  
 (iv) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or 
  
 (v) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards.

  
 (d) Reservation of Rights. Except as provided in this
Section 12, an Optionee or Offeree shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. 
  
 SECTION 13. DEFERRAL OF AWARDS. 
  
 The Committee (in its sole discretion) may permit or require a Participant to: 
  
 (a) Deferred Credit. Have cash or Shares that otherwise would be paid or delivered to such Participant as a result of
the exercise of a SAR or the settlement of Stock Units converted to amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books. In the case of Shares such amounts
shall be determined by reference to the Fair Market Value of such Shares as of the date when they otherwise would have been delivered to such Participant. 
  
 (b) Conversion of Shares. Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR
converted into an equal number of Stock Units. 
  

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 A deferred compensation account established under this Section 13 may be credited with interest or other forms of
investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and unsecured obligation
of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may
establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 13. 
  
 SECTION 14. AWARDS UNDER OTHER PLANS. 
  
 The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under
this Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares available under Section 5. 
  
 SECTION 15. LEGAL AND REGULATORY REQUIREMENTS.

  
 Shares shall not be issued under the Plan unless the issuance
and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and
regulations and the regulations of any stock exchange on which the Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or
advisable. 
  
 SECTION 16. WITHHOLDING
TAXES. 
  
 (a) General. To the extent required by
applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company
shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied. 
  
 (b) Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having
the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value on the date
when taxes otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the legally required minimum tax withholding. 
  
 SECTION 17. LIMITATION ON PARACHUTE PAYMENTS.

  
 (a) Scope of Limitation. This Section 17 shall
apply to an Award unless the Committee, at the time of making an Award under the Plan or at any time thereafter, specifies in writing that such Award shall not be subject to this Section 17. If this Section 17 applies to an Award, it shall
supersede any contrary provision of the Plan or of any Award granted under the Plan. 
  

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 (b) Basic Rule. In the event that the independent auditors most recently selected by the Board
(the “Auditors”) determine that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a “Payment”) would be nondeductible by the Company for federal income tax purposes because of the
provisions concerning “excess parachute payments” in Section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Section 17, the
“Reduced Amount” shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code.

  
 (c) Reduction of Payments. If the Auditors determine
that any Payment would be nondeductible by the Company because of Section 280G of the Code, then the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount, and
the Participant may then elect, in his or her sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall advise
the Company in writing of his or her election within 10 days of receipt of notice. If no such election is made by the Participant within such 10-day period, then the Company may elect which and how much of the Payments shall be eliminated or
reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Section 17, present value shall be determined in
accordance with Section 280G(d)(4) of the Code. All determinations made by the Auditors under this Section 17 shall be binding upon the Company and the Participant and shall be made within 60 days of the date when a Payment becomes payable
or transferable. As promptly as practicable following such determination and the elections hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under the Plan and shall
promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under the Plan. 
  
 (d) Overpayments and Underpayments. As a result of uncertainty in the application of Section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will have been made by the Company that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by the Company could have
been made (an “Underpayment”), consistent in each case with the calculation of the Reduced Amount hereunder. In the event that the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Participant which he or she shall repay to the Company,
together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and to the extent that such payment would not reduce the
amount subject to taxation under Section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or for the benefit of the
Participant, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code. 
  

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 (e) Related Corporations. For purposes of this Section 17, the term “Company” shall
include affiliated corporations to the extent determined by the Auditors in accordance with Section 280G(d)(5) of the Code. 
  
 SECTION 18. NO EMPLOYMENT RIGHTS. 
  
 No provision of the Plan, nor any right or Option granted under the Plan, shall be construed to give any person any right to become, to be treated as, or
to remain an Employee. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any reason, with or without notice. 
  
 SECTION 19. DURATION AND AMENDMENTS. 
  
 (a) Term of the Plan. The Plan, as set forth herein, shall terminate automatically on May 4, 2011 and may be
terminated on any earlier date pursuant to Subsection (b) below. 
  
 (b) Right to Amend or Terminate the Plan. The Board of Directors may amend the Plan at any time and from time to time. Rights and obligations under any Option granted before amendment of the Plan shall not be materially impaired by
such amendment, except with consent of the person to whom the Option was granted. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.

  
 (c) Effect of Amendment or Termination. No Shares shall
be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan. 
  
 SECTION
20. EXECUTION. 
  
 To record the adoption of the Plan by the
Board of Directors effective as of the most recent date written above, the Company has caused its authorized officer to execute the same. 
  

			
	MAGMA DESIGN AUTOMATION, INC.
		
	 By
	 	 /s/ Rajeev Madhavan


	 Title:
	 	Chief Executive Officer


  

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