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                                                                   Exhibit 10.16

            MAGMA DESIGN  AUTOMATION, INC. 1998 STOCK INCENTIVE PLAN

                          NOTICE OF STOCK OPTION GRANT

     You have been granted the following option to purchase Common Stock of
MAGMA DESIGN AUTOMATION, INC., a Delaware corporation (the "Company"):

Name of Optionee:                   Mehrdad Shahabi

Total Number of Shares Granted:     54,855

Type of Option:                     X  Incentive Stock Option
                                   ---
                                   ___  Nonstatutory Stock Option

Exercise Price Per Share:          $5.8333

Date of Grant:                     September 28, 2001

Date Exercisable:                  This option may be exercised, in whole or in
                                   part, for 100% of the Shares subject to this
                                   option at any time after the Date of Grant.

Vesting Commencement Date:         September 1, 2001

Vesting Schedule:                  Subject to the terms and conditions of the
                                   attached Stock Option Agreement, this option
                                   will vest, and if you exercise before this
                                   option is vested, the Right of Repurchase
                                   shall lapse, (a) with respect to 25% of the
                                   Shares subject to this option, upon your
                                   completion of one full year of Service from
                                   the Vesting Commencement Date, and (b)
                                   thereafter, with respect to 1/48th of the
                                   Shares subject to this option, upon your
                                   completion of each additional full month of
                                   Service, for full vesting on the fourth
                                   anniversary of the Vesting Commencement Date.

Acceleration Events (if any):      Subject to the terms and conditions of the
                                   attached Stock Option Agreement, this option
                                   will vest, and if you exercise before this
                                   option is vested, the Right of Repurchase
                                   shall lapse, with respect to 25% of the
                                   Shares subject to the option, upon a "Change
                                   in Control". In addition, subject to the
                                   terms and conditions of the attached Stock
                                   Option Agreement, this option will vest, and
                                   if you exercise before this option is vested,
                                   the Right of Repurchase shall lapse, with
                                   respect to an additional 25% of the Shares
                                   subject to the option, upon a "Change in
                                   Control", followed by either an involuntary
                                   Termination without "Cause" or "Constructive
                                   Termination" within 12 months of such "Change
                                   in Control", as such terms are defined in the
                                   Attachment To Notice Of Stock Option Grant,
                                   attached hereto.

                                   Expiration Date:   SEPTEMBER 28, 2011
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     By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1998 Stock Incentive Plan and the attached Stock
Option Agreement, both of which are made a part of this document.

OPTIONEE                             MAGMA DESIGN AUTOMATION, INC.

/s/ Mehrdad Shahabi                      /s/ Roy Jewell
_________________________            By __________________________
                                        Roy Jewell, President
Mehrdad Shahabi
_________________________
        Print Name

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THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE
EXERCISE THEREOF HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION AND
QUALIFICATION THEREOF UNDER SUCH ACT AND LAWS OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION AND
QUALIFICATION IS NOT REQUIRED.

            MAGMA DESIGN AUTOMATION, INC. 1998 STOCK INCENTIVE PLAN

                             STOCK OPTION AGREEMENT

      1. Grant of Option.

      (a) Option. On the terms and conditions set forth in the Notice of Stock
Option Grant and this Agreement, the Company grants to the Optionee on the Date
of Grant the option to purchase at the Exercise Price the number of Shares set
forth in the Notice of Stock Option Grant. The Exercise Price is agreed to be at
least one hundred percent (100%) of the Fair Market Value per Share on the Date
of Grant (one hundred ten percent (110%) of Fair Market Value if Section 4(b) of
the Plan applies). This option is intended to be an ISO or a Nonstatutory
Option, as provided in the Notice of Stock Option Grant.

      (b) Stock Plan and Defined Terms. This option is granted pursuant to the
Plan, a copy of which the Optionee acknowledges having received. The provisions
of the Plan are incorporated into this Agreement by this reference. Each
capitalized term not otherwise defined in this Agreement shall have the meaning
as defined in Section 2 of the Plan.

      2. Right to Exercise. Subject to Section 9 below and the other conditions
set forth in this Agreement, all or part of this option may be exercised (prior
to its expiration) at the time or times set forth in the Notice of Stock Option
Grant. Shares purchased by exercising this option may be subject to the Right of
Repurchase under Section 7.

      3. No Transfer or Assignment of Option. Except as otherwise provided in
this Agreement, this option and the rights and privileges conferred hereby shall
not be sold, pledged or otherwise transferred (whether by operation of law or
otherwise) and shall not be subject to sale under execution, attachment, levy or
similar process.

      4. Exercise Procedures.

      (a) Notice of Exercise. The Optionee or the Optionee's representative may
exercise this option by giving written notice to the Company pursuant to Section
13(c) in the form attached to this Agreement as EXHIBIT A. The notice shall
specify the number of Shares for which it is being exercised and the form of
payment. The notice shall be signed by the person exercising this option. In the
event that this option is being exercised by the representative of the Optionee,
the notice shall be accompanied by proof (satisfactory to the Company) of the
representative's right


<PAGE>

to exercise this option. The Optionee or the Optionee's representative shall
deliver to the Company, at the time of giving the notice, payment in a form
permissible under Section 5 for the full amount of the Purchase Price.

      (b) Issuance of Shares. After receiving a proper notice of exercise, and
upon determining the Optionee's compliance with the provisions of Section 10
below, the Company shall cause to be issued a certificate or certificates for
the Shares as to which this option has been exercised, registered in the name of
the person exercising this option (or in the names of such person and his or her
spouse as community property or as joint tenants with right of survivorship).
The Company shall cause such certificate or certificates to be deposited in
escrow or delivered to or upon the order of the person exercising this option.

      (c) Withholding Taxes. In the event that the Company determines that it is
required to withhold any tax as a result of the exercise of this option, the
Optionee, as a condition to the exercise of this option, shall make arrangements
satisfactory to the Company to enable it to satisfy all withholding
requirements. The Optionee shall also make arrangements satisfactory to the
Company to enable it to satisfy any withholding requirements that may arise in
connection with the vesting or disposition of Shares purchased by exercising
this option.

      5. Payment for Stock.

      (a) Cash. All or part of the Purchase Price may be paid in cash or cash
equivalents.

      (b) Surrender of Stock. All or part of the Purchase Price may be paid by
the surrender of Shares in good form for transfer. Such Shares must have a fair
market value (as determined by the Board of Directors) on the date of exercise
of this option which, together with any amount paid in another form permissible
under this Section 5, is equal to the Purchase Price. The Optionee shall not
surrender Shares in payment of the Exercise Price if such surrender would cause
the Company to recognize compensation expense with respect to the option for
financial reporting purposes.

      (c) Exercise/Sale. If Stock is publicly traded, all or part of the
Purchase Price and any withholding taxes may be paid by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell Shares and to deliver all or part of the sales
proceeds to the Company.

      (d) Exercise/Pledge. If Stock is publicly traded, all or part of the
Purchase Price and any withholding taxes may be paid by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge Shares to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company.

      6. Term and Expiration.

      (a) Basic Term. This option shall in any event expire on the expiration
date set forth in the Notice of Stock Option Grant, which date is ten (10) years
after the Date of Grant (five (5) years after the Date of Grant if this option
is designated as an ISO in the Notice of Stock Option Grant and Section 4(b) of
the Plan applies).


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      (b) Termination of Service (Except by Death). If the Optionee's Service
terminates for any reason other than death, then this option shall expire at the
close of business at Company headquarters on the earliest of the following
occasions:

            (i) The expiration date determined pursuant to Subsection (a) above;

            (ii) The date one (1) month after the termination of the Optionee's
      Service for any reason other than Disability; or

            (iii) The date six (6) months after the termination of the
      Optionee's Service by reason of Disability.

The Optionee may exercise all or part of this option at any time before its
expiration under the preceding sentence, but only to the extent that this option
had become exercisable before the Optionee's Service terminated. When the
Optionee's Service terminates, this option shall expire immediately with respect
to the number of Shares for which this option is not yet exercisable and with
respect to any Restricted Shares. In the event that the Optionee dies after
termination of Service but before the expiration of this option, all or part of
this option may be exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person who has acquired this
option directly from the Optionee by beneficiary designation, bequest or
inheritance, but only to the extent that this option had become exercisable
before the Optionee's Service terminated.

      (c) Death of the Optionee. If the Optionee dies while in Service, then
this option shall expire at the close of business at Company headquarters on the
earlier of the following dates:

            (i) The expiration date determined pursuant to Subsection (a) above;
      or

            (ii) The date six (6) months after the Optionee's death.

All or part of this option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this option directly from
the Optionee by beneficiary designation, bequest or inheritance, but only to the
extent that this option had become exercisable before the Optionee's death. When
the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect
to any Restricted Shares.

      (d) Leaves of Absence. For any purpose under this Agreement, Service shall
be deemed to continue while the Optionee is on a bona fide leave of absence, if
such leave was approved by the Company in writing and if continued crediting of
Service for such purpose is expressly required by the terms of such leave or by
applicable law (as determined by the Company).

      (e) Notice Concerning ISO Treatment. If this option is designated as an
ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax
treatment as an ISO to the extent it is exercised (i) more than three (3) months
after the date the Optionee ceases to be an Employee for any reason other than
death or permanent and total disability (as defined in section 22(e)(3) of the
Code), (ii) more than twelve (12) months after the date the Optionee ceases to
be an Employee by reason of such permanent and total disability or (iii) after
the Optionee has been


<PAGE>



on a leave of absence for more than ninety (90) days, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.

      7. Right of Repurchase.

      (a) Scope of Repurchase Right. Unless they have become vested in
accordance with the Notice of Stock Option Grant and Subsection (c) below, the
Shares acquired under this Agreement initially shall be "Restricted Shares" and
shall be subject to a right (but not an obligation) of repurchase by the
Company. The Optionee shall not transfer, assign, encumber or otherwise dispose
of any Restricted Shares, except as provided in the following sentence. The
Optionee may transfer Restricted Shares (i) by beneficiary designation, will or
intestate succession.

      (b) Condition Precedent to Exercise. The Right of Repurchase shall be
exercisable only during the sixty (60) day period next following the later of:

            (i) The date when the Optionee's Service terminates for any reason,
      with or without cause, including (without limitation) death or disability;
      or

            (ii) The date when this option was exercised by the Optionee, the
      executors or administrators of the Optionee's estate or any person who has
      acquired this option directly from the Optionee by bequest, inheritance or
      beneficiary designation.

      (c) Lapse of Repurchase Right. The Right of Repurchase shall lapse with
respect to the Shares subject to this option in accordance with the vesting
schedule and acceleration provisions, if any, set forth in the Notice of Stock
Option Grant.

      (d) Repurchase Cost. If the Company exercises the Right of Repurchase, it
shall pay the Optionee an amount equal to the Exercise Price for each of the
Restricted Shares being repurchased.

      (e) Exercise of Repurchase Right. The Right of Repurchase shall be
exercisable only by written notice delivered to the Optionee prior to the
expiration of the sixty (60) day period specified in Subsection (b) above. The
notice shall set forth the date on which the repurchase is to be effected. Such
date shall not be more than thirty (30) days after the date of the notice. The
certificate(s) representing the Restricted Shares to be repurchased shall, prior
to the close of business on the date specified for the repurchase, be delivered
to the Company properly endorsed for transfer. The Company shall, concurrently
with the receipt of such certificate(s), pay to the Optionee the purchase price
determined according to Subsection (d) above. Payment shall be made in cash or
cash equivalents or by canceling indebtedness to the Company incurred by the
Optionee in the purchase of the Restricted Shares. The Right of Repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Subsection (e).

      (f) Additional Shares or Substituted Securities. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a

<PAGE>

spin-off, a stock split, an adjustment in conversion ratio, a recapitalization
or a similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as an ordinary cash dividend) which
are by reason of such transaction distributed with respect to any

Restricted Shares or into which such Restricted Shares thereby become
convertible shall immediately be subject to the Right of Repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the Right of Repurchase in order to
reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.

      (g) Termination of Rights as Stockholder. If the Company makes available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with
this Section 7, then after such time the person from whom such Restricted Shares
are to be repurchased shall no longer have any rights as a holder of such
Restricted Shares (other than the right to receive payment of such consideration
in accordance with this Agreement). Such Restricted Shares shall be deemed to
have been repurchased in accordance with the applicable provisions hereof,
whether or not the certificate(s) therefor have been delivered as required by
this Agreement.

      (h) Escrow. Upon issuance following exercise, the certificates for
Restricted Shares shall be deposited in escrow with the Company to be held in
accordance with the provisions of this Agreement. Each deposited certificate
shall be accompanied by a duly executed Assignment Separate from Certificate in
the form attached hereto as Exhibit B. Any new, substituted or additional
securities or other property described in Subsection (f) above shall immediately
be delivered to the Company to be held in escrow, but only to the extent the
Shares are at the time Restricted Shares. All regular cash dividends, if any, on
Restricted Shares (or other securities at the time held in escrow) shall be paid
directly to the Optionee and shall not be held in escrow. Restricted Shares,
together with any other assets or securities held in escrow hereunder, shall be
(i) surrendered to the Company for repurchase and cancellation upon the
Company's exercise of its Right of Repurchase or Right of First Refusal or (ii)
released to the Optionee upon the Optionee's request to the extent the Shares
are no longer Restricted Shares (but not more frequently than once every six (6)
months). In any event, all Shares which have vested (and any other vested assets
and securities attributable thereto) shall be released within sixty (60) days
after the earlier of (A) the Optionee's cessation of Service or (B) the lapse of
the Right of First Refusal.

      (i) Section 83(b) Election. Under section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), the different between the Exercise Price paid
for the Shares and their fair market value on the date any forfeiture
restrictions applicable to such Shares lapse will be reportable as ordinary
income at that time. For this purposes, "forfeiture restrictions" include the
Company's Right of Repurchase described above. The Optionee may elect to be
taxed at the time Restricted Shares are acquired to the extent the fair market
value of the Restricted Shares differs from the Exercise Price rather than when
such Restricted Shares cease to be subject to such forfeiture restrictions, by
filing an election under section 83(b) of the Code with the Internal Revenue
Service within thirty (30) days after the date of exercise. The form for making
this


<PAGE>

election is attached as Exhibit C hereto. Failure to make this filing within the
thirty (30) day period will result in the recognition of ordinary income by the
Optionee (in the event the fair market value of the Shares increases after the
date of exercise) as the forfeiture restrictions lapse. OPTIONEE ACKNOWLEDGES
THAT IT IS HIS/HER SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY
ELECTION UNDER SECTION 83(B), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON HIS/HER BEHALF. OPTIONEE IS RELYING
SOLELY ON HIS/HER OWN ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT
TO FILE AN 83(B) ELECTION.

      8. Right of First Refusal.

      (a) Right of First Refusal. In the event that the Optionee proposes to
sell, pledge or otherwise transfer to a third party any Shares acquired under
this Agreement, or any interest in such Shares, the Company shall have the Right
of First Refusal with respect to all (and not less than all) of such Shares. If
the Optionee desires to transfer Shares acquired under this Agreement, the
Optionee shall give a written Transfer Notice to the Company describing fully
the proposed transfer, including the number of Shares proposed to be
transferred, the proposed transfer price, the name and address of the proposed
Transferee and proof satisfactory to the Company that the proposed sale or
transfer will not violate any applicable federal or state securities laws. The
Transfer Notice shall be signed both by the Optionee and by the proposed
Transferee and must constitute a binding commitment of both parties to the
transfer of the Shares. The Company shall have the right to purchase all, and
not less than all, of the Shares on the terms of the proposal described in the
Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First
Refusal within thirty (30) days after the date when the Transfer Notice was
received by the Company. The Company's rights under this Subsection (a) shall be
freely assignable, in whole or in part.

      (b) Transfer of Shares. If the Company fails to exercise its Right of
First Refusal within thirty (30) days after the date when it received the
Transfer Notice, the Optionee may, not later than ninety (90) days following
receipt of the Transfer Notice by the Company, conclude a transfer of the Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice, provided that any such sale is made in compliance with
applicable federal and state securities laws and not in violation of any other
contractual restrictions to which the Optionee is bound. Any proposed transfer
on terms and conditions different from those described in the Transfer Notice,
as well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance with the
procedure described in Subsection (a) above. If the Company exercises its Right
of First Refusal, the parties shall consummate the sale of the Shares on the
terms set forth in the Transfer Notice within sixty (60) days after the date
when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that in the
event the Transfer Notice provided that payment for the Shares was to be made in
a form other than cash or cash equivalents paid at the time of transfer, the
Company shall have the option of paying for the Shares with cash or cash
equivalents equal to the present value of the consideration described in the
Transfer Notice.


<PAGE>

      (c) Additional Shares or Substituted Securities. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Shares subject to this Section 8 or into which
such Shares thereby become convertible shall immediately be subject to this
Section 8. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Shares
subject to this Section 8.

      (d) Termination of Right of First Refusal. Any other provision of this
Section 8 notwithstanding, in the event that the Stock is readily tradable on an
established securities market when the Optionee desires to transfer Shares, the
Company shall have no Right of First Refusal, and the Optionee shall have no
obligation to comply with the procedures prescribed by Subsections (a) and (b)
above.

      (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer
by beneficiary designation, will or intestate succession or (ii) a transfer to
the Optionee's spouse, children or grandchildren or to a trust established by
the Optionee for the benefit of the Optionee or the Optionee's spouse, children
or grandchildren, provided in either case that the Transferee agrees in writing
on a form prescribed by the Company to be bound by all provisions of this
Agreement, including without limitation the Market Stand-off provisions of
Section 11(b) below. If the Optionee transfers any Shares acquired under this
Agreement, either under this Subsection (e) or after the Company has failed to
exercise the Right of First Refusal, then this Section 8 shall apply to the
Transferee to the same extent as to the Optionee.

      (f) Termination of Rights as Stockholder. If the Company makes available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Shares to be purchased in accordance with this Section 8,
then after such time the person from whom such Shares are to be purchased shall
no longer have any rights as a holder of such Shares (other than the right to
receive payment of such consideration in accordance with this Agreement). Such
Shares shall be deemed to have been purchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.

      9. Limited Irrevocable Proxy. As a condition to the issuance of the Shares
as to which this option has been exercised, the Optionee shall execute and
deliver to the Company a Limited Irrevocable Proxy (the "Proxy") in
substantially the form attached as Exhibit D hereto, such Proxy shall be
irrevocable for the period specified therein pursuant to the provisions of the
Delaware General Corporation Law, and it is hereby acknowledged that such Proxy,
when given, shall be given for a good and valuable consideration and to secure
the performance of the Optionee's agreement, hereby made, to vote the Shares in
accordance with the Proxy.

      10. Legality of Initial Issuance. No Shares shall be issued upon the
exercise of this option unless and until the Company has determined that:


<PAGE>

      (a) It and the Optionee have taken any actions required to register the
Shares under the Securities Act or to perfect an exemption from the registration
requirements thereof;

      (b) Any applicable listing requirement of any stock exchange on which
Stock is listed has been satisfied;

      (c) Any other applicable provision of state or federal law has been
satisfied; and

      (d) The Optionee has executed and delivered the Notice of Exercise, the
Proxy and, if applicable, the Assignment Separate from Certificate relating to
the Shares to be issued.

      Any other provision of this Agreement notwithstanding, in the event the
Plan is not approved by the Company's shareholders within one (1) year of the
date the Plan was adopted by the Company's board of directors, any exercises of
this option and purchases of Shares pursuant thereto shall automatically be
deemed null and void and the Company shall have the right thereupon to cancel
the certificate(s) representing any such Shares so acquired upon its
reimbursement to the Optionee of the Exercise Price therefor.

      11. No Registration Rights. The Company may, but shall not be obligated
to, register or qualify the sale of Shares under the Securities Act or any other
applicable law. The Company shall not be obligated to take any affirmative
action in order to cause the sale of Shares under this Agreement to comply with
any law.

      12. Restrictions on Transfer.

      (a) Securities Law Restrictions. Regardless of whether the offering and
sale of Shares under the Plan have been registered under the Securities Act or
have been registered or qualified under the securities laws of any state, the
Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of such Shares (including the placement of appropriate legends on stock
certificates or the imposition of stop-transfer instructions) if, in the
judgment of the Company, such restrictions are necessary or desirable in order
to achieve compliance with the Securities Act, the securities laws of any state
or any other law.

      (b) Market Stand-Off. The Optionee agrees in connection with any
registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any public offering of the
Company's securities, Optionee will not sell or otherwise dispose of any Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for a period of time (not to exceed one hundred eighty (180) days
in connection with the Company's initial public offering and ninety (90) days in
connection with any subsequent public offerings) from the effective date of such
registration as the Company or the underwriters may specify for
employee-shareholders generally. The Optionee agrees to enter into a similar
market stand-off agreement reasonably requested by the Company's underwriters.

      (c) Investment Intent at Grant. The Optionee represents and agrees that
the Shares to be acquired upon exercising this option will be acquired for
investment, and not with a view to the sale or distribution thereof.


<PAGE>

      (d) Investment Intent at Exercise. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are deemed necessary or appropriate by the Company and
its counsel.

      (e) Legends. All certificates evidencing Shares purchased under this
Agreement shall bear the following legend:

      "THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
      ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
      TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER
      OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH
      AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN
      ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS UPON
      TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL
      UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF
      WITHOUT CHARGE."

All certificates evidencing Shares purchased under this Agreement in an
unregistered transaction shall bear the following legend (and such other
restrictive legends as are required or deemed advisable under the provisions of
any applicable law):

      "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
      OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
      ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
      THAT SUCH REGISTRATION IS NOT REQUIRED."

      (f) Removal of Legends. If, in the opinion of the Company and its counsel,
any legend placed on a stock certificate representing Shares sold under this
Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but without such legend.

      (g) Administration. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 11 shall be
conclusive and binding on the Optionee and all other persons.

      13. Adjustment of Shares. In the event of any transaction described in
Section 9(a) of the Plan, the terms of this option (including, without
limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 9(a) of the Plan. In
the event that the Company is a party to a merger or consolidation, this option
shall be subject to the agreement of merger or consolidation, as provided in
Section 9(b) of the Plan.


<PAGE>

      14. Miscellaneous Provisions.

      (a) Rights as a Stockholder. Neither the Optionee nor the Optionee's
representative shall have any rights as a stockholder with respect to any Shares
subject to this option until the Optionee or the Optionee's representative
becomes entitled to receive such Shares by filing a notice of exercise and
paying the Purchase Price pursuant to Sections 4 and 5.

      (b) No Retention Rights. Nothing in this option or in the Plan shall
confer upon the Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the Optionee)
or of the Optionee, which rights are hereby expressly reserved by each, to
terminate his or her Service at any time and for any reason, with or without
cause.

      (c) Notice. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail,
with postage and fees prepaid. Notice shall be addressed to the Company at its
principal executive office and to the Optionee at the address that he or she
most recently provided to the Company.

      (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and
the Plan constitute the entire contract between the parties hereto with regard
to the subject matter hereof. They supersede any other agreements,
representations or understandings (whether oral or written and whether express
or implied) which relate to the subject matter hereof.

      (e) Choice of Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.


<PAGE>

                                   EXHIBIT A

                       NOTICE OF EXERCISE OF STOCK OPTION

Magma Design Automation, Inc.
2 Results Way
Cupertino, California 94015

      Re: Exercise of Stock Option to Purchase Shares of Company Stock

Ladies and Gentlemen:

      Pursuant to the Stock Option Agreement dated ______________ (the "Stock
Option Agreement"), between Magma Design Automation, Inc., a Delaware
corporation (the "Company"), and the undersigned, I hereby elect to purchase
_____________ shares of the common stock of the Company (the "Shares"), at the
price of $__________ per Share. My check in the amount of $______________ and
the executed Assignment Separate from Certificate are enclosed. The Shares are
to be issued in _____ certificate(s) and registered in the name(s) of:

                           -------------------------
                           -------------------------

      The undersigned understands there may be tax consequences as a result of
the purchase or disposition of the Shares. The undersigned represents that
he/she has received and reviewed the Plan's federal income information and
consulted with any tax consultants he/she deems advisable in connection with the
purchase or disposition of the Shares and the undersigned is not relying on the
Company for any tax advice.

      The undersigned acknowledges that he/she has received, read and understood
the Stock Option Agreement and agrees to abide by and be bound by their terms
and conditions. The undersigned represents that the Shares are being acquired
solely for its own account and not as a nominee for any other party, or for
investment, and that the undersigned purchaser will not offer, sell or otherwise
dispose of any such Shares except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any state securities
laws.

Dated:
       ------------------------


                                    --------------------------------------------
                                                       (Signature)

                                    --------------------------------------------
                                                (Please Print Name)

                                    Social Security No.
                                                        ------------------------

                                    --------------------------------------------
                                                     (Full Address)


<PAGE>

                                   EXHIBIT B

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

      FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers
unto Magma Design Automation, Inc., a Delaware corporation (the "Company"),
_________________ (________) shares of Common Stock of the Company represented
by Certificate No. _____ herewith and does hereby irrevocably constitute and
appoint _________________________ Attorney to transfer the said stock on the
books of the Company with full power of substitution in the premises.

      Dated:                        .
            ------------------------

                                        ----------------------------------
                                                   Print Name


                                        ----------------------------------
                                                    Signature

                        Spousal Consent (if applicable)

      ________________ (Purchaser's spouse) indicates by the execution of this
Assignment his or her consent to be bound by the terms herein as to his or her
interests, whether as community property or otherwise, if any, in the Shares.


                                             -----------------------------
                                                      Signature

INSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS "RIGHT
OF REPURCHASE" SET FORTH IN THE AGREEMENT WITHOUT REQUIRING ADDITIONAL
SIGNATURES ON THE PART OF PURCHASER.


<PAGE>

                                   EXHIBIT C

Internal Revenue Service Center

      Re: Election Under Section 83(b) of the Internal Revenue Code of 1986

Ladies and Gentlemen:

      I hereby elect under section 83(b) of the Internal Revenue Code of 1986 to
include in gross income any excess of fair market value over purchase price with
respect to the transfer of the property described below:

1.    Name: ____________________________________

2.    Address:____________________________________

3.    Social Security Number: _______________________

4.    Tax Year of Election: Calendar Year of ________.

5.    Description of Property: _________ shares of Common Stock of Magma Design
      Automation, Inc., a Delaware corporation (the "Company").

6.    Date of Property Transfer: ___________________

7.    Nature of Property Restrictions: Property is subject to the Company's
      right to repurchase the stock at the undersigned's original purchase price
      if the undersigned ceases to be associated with the Company, which right
      will generally lapse over a designated four (4) year period.

8.    Fair Market Value at the Time of Transfer: $_____ per share for an
      aggregate of $_________. The Fair Market Value at the time of transfer was
      determined without regard to any lapse restrictions as defined in section
      1.83-3(i) of the Income Tax Regulations.

9.    Amount Paid for Property: $________ per share for an aggregate of
      $________.

10.   A copy of this election has been furnished to the Company, the person for
      whom the services are performed.

                                 Sincerely,


                                             -----------------------------
                                                      Signature

                                             Date
                                                  ------------------------


<PAGE>

                                   EXHIBIT D

                         MAGMA DESIGN AUTOMATION, INC.

                           LIMITED IRREVOCABLE PROXY

      The undersigned, as recordholder of __________________ (__________) shares
of Common Stock of Magma Design Automation, Inc., a Delaware corporation
("Magma"), hereby revokes any previous proxies and appoints Rajeev Madhavan as
the undersigned's proxy to attend all meetings of Magma's stockholders and to
vote, execute consents, and otherwise represent those shares for the undersigned
in the same manner and with the same effect as if the undersigned were
personally present; provided, however, that the authority granted by this proxy
is limited to the following:

            1. representing those shares to determine a quorum;

            2. voting or otherwise representing those shares with respect to,
      and only in favor of, the election of Rajeev Madhavan to Magma's Board of
      Directors;

            3. voting or otherwise representing those shares with respect to,
      and only in opposition to, the removal of Rajeev Madhavan from Magma's
      Board of Directors, the reduction in the number of positions on the Board
      of Directors, the classification of the Board of Directors, or (except as
      set forth in (4) below) the alteration of the existing voting rights of
      the outstanding shares of capital stock of Magma; and

            4. voting or otherwise representing those shares with respect to,
      and at the sole discretion of Rajeev Madhavan, any action to (a) increase
      the number of positions on the Board of Directors, (b) remove any
      incumbent director (other than Rajeev Madhavan) from the Board of
      Directors, and (c) elect any individual as a director of Magma to fill a
      vacancy caused by the increase in size of the Board, the resignation or
      removal of a director, or otherwise.

      This proxy is irrevocable until September 30, 2002 or until the earlier
termination of the voting agreement set forth in that certain Stock Option
Agreement between Magma and the undersigned pursuant to which the shares that
are the subject of this proxy were issued (the "Voting Trust Agreement"). This
proxy is given to secure the performance of the undersigned under the Voting
Trust Agreement and is thereby and for other valid consideration deemed coupled
with an interest sufficient to render this proxy irrevocable for the period
indicated above.

      Dated:
            ---------------------


                                                 Signature of Stockholder

                                        ----------------------------------------
                                               Printed Name, exactly as it
                                              appears on stock certificate

                                        Address
                                               ---------------------------------


<PAGE>

                   ATTACHMENT TO NOTICE OF STOCK OPTION GRANT

                                 (For Officers)

      If your employment with the Company is terminated without Cause or
"Constructively Terminated" at, or within twelve (12) months following, a Change
in Control, then this option shall vest with respect to fifty percent (50%) of
the option shares not yet vested on the date of such termination.

      For purposes of this option, a "Change in Control" shall mean any one of
the following events:

                        (i) The consummation of a merger, consolidation or other
                  reorganization of the Company (other than a reincorporation of
                  the Company), if after giving effect to such merger,
                  consolidation or other reorganization of the Company, the
                  stockholders of the Company immediately prior to such merger,
                  consolidation or other reorganization do not represent a
                  majority in interest of the holders of voting securities (on a
                  fully diluted basis) with the ordinary voting power to elect
                  directors of the surviving or resulting entity after such
                  merger, consolidation or other reorganization; or

                        (ii) The sale of all or substantially all of the assets
                  or stock or the Company to a third party.

      For purposes of this option, "Cause" shall mean termination of your
employment for (i) conduct materially detrimental to the Company, (ii)
conviction or plea of nolo contendere to a felony, or (iii) any intentional
misconduct that the Company reasonably believes would make it impracticable for
you to discharge substantially all of your duties.

      "Constructively Terminated" means your resignation as a result of any
action by the Company (or its successor or acquiror) which (i) substantially
reduces the amount of your base compensation or otherwise materially and
adversely affects your working conditions, in either case in a manner that
disproportionately adversely affects you, as compared to all other Company
officers, or (ii) unilaterally and substantially changes your title and duties;
provided, however, that the unilateral change by the surviving or acquiring
entity (or its parent) in your title and duties to a position that is
substantially similar in salary, title and responsibilities to your current
position shall not constitute "Constructive Termination."

      No provision of any option or award agreement may be inconsistent with
applicable law and to the extent a provision of any such agreement is determined
by the Board to violate the law or create material adverse legal, financial, or
regulatory problems, such provision shall not apply.