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                                                                    EXHIBIT 10.1


                           INDEMNIFICATION AGREEMENT
                           -------------------------


     This Indemnification Agreement (the "Agreement"), dated as of February 13,
2001, between Magma Design Automation, Inc., a Delaware corporation (the
"Corporation"), and _____________ ("Indemnitee"),

                             W I T N E S S E T H:

     WHEREAS, Indemnitee is either a member of the board of directors of the
Corporation (the "Board of Directors") or an officer of the Corporation, or
both, and in such capacity or capacities, or otherwise as an Agent (as
hereinafter defined) of the Corporation, is performing a valuable service for
the Corporation; and

     WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Corporation on the condition that he
or she be indemnified as herein provided; and

     WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein:

     NOW, THEREFORE, in consideration of the premises and the covenants in this
Agreement, and of Indemnitee continuing to serve the Corporation as an Agent and
intending to be legally bound hereby, the parties hereto agree as follows:

     1.   Services by Indemnitee.  Indemnitee agrees to serve (a) as a director
          ----------------------
or an officer of the Corporation, or both, so long as Indemnitee is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Certificate of Incorporation and bylaws of the Corporation, and until
such time as Indemnitee resigns or fails to stand for election or is removed
from Indemnitee's position, or (b) otherwise as an Agent (as hereinafter
defined) of the Corporation. Indemnitee may from time to time also perform other
services at the request or for the convenience of, or otherwise benefiting the
Corporation. Indemnitee may at any time and for any reason resign or be removed
from such position (subject to any other contractual obligation or other
obligation imposed by operation of law), in which event the Corporation shall
have no obligation under this Agreement to continue Indemnitee in any such
position.

     2.   Indemnification.  Subject to the limitations set forth herein and in
          ---------------
Section 6 hereof, the Corporation hereby agrees to indemnify Indemnitee as
follows:

     The Corporation shall, with respect to any Proceeding (as hereinafter
defined) associated with Indemnitee's being an Agent of the Corporation,
indemnify Indemnitee to the fullest extent permitted by applicable law and the
Certificate of Incorporation of the Corporation in effect on the date hereof or
as such law or Certificate of Incorporation may from time to time be amended
(but, in the case of any such amendment, only to the extent such amendment
permits the Corporation to provide broader indemnification rights than the law
or Certificate of Incorporation permitted the Corporation to provide before such
amendment).  The right to indemnification conferred herein and in the
Certificate of

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Incorporation shall be presumed to have been relied upon by Indemnitee in
serving or continuing to serve the Corporation as an Agent and shall be
enforceable as a contract right. Without in any way diminishing the scope of the
indemnification provided by this Section 2, the Corporation will indemnify
Indemnitee to the full extent permitted by law if and wherever Indemnitee is or
was a party or is threatened to be made a party to any Proceeding, including any
such Proceeding brought by or in the right of the Corporation, by reason of the
fact that Indemnitee is or was an Agent or by reason of anything done or not
done by Indemnitee in such capacity, against Expenses (as hereinafter defined)
and Liabilities (as hereinafter defined) actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with the investigation,
defense, settlement or appeal of such Proceeding. In addition to, and not as a
limitation of, the foregoing, the rights of indemnification of Indemnitee
provided under this Agreement shall include those rights set forth in Sections 3
and 8 below. Notwithstanding the foregoing, the Corporation shall be required to
indemnify Indemnitee in connection with a Proceeding commenced by Indemnitee
(other than a Proceeding commenced by Indemnitee to enforce Indemnitee's rights
under this Agreement) only if the commencement of such Proceeding was authorized
by the Board of Directors.

     3.   Advancement of Expenses; Letter of Credit.
          ------------------------------------------

     (a)  Advancement of Expenses. All reasonable Expenses incurred by or on
          -----------------------
behalf of Indemnitee (including costs of enforcement of this Agreement) shall be
advanced from time to time by the Corporation to Indemnitee within thirty (30)
days after the receipt by the Corporation of a written request for an advance of
Expenses, whether prior to or after final disposition of a Proceeding (except to
the extent that there has been a Final Adverse Determination (as hereinafter
defined) that Indemnitee is not entitled to be indemnified for such Expenses),
including without limitation any Proceeding brought by or in the right of the
Corporation. The written request for an advancement of any and all expenses
under this paragraph shall contain reasonable detail of the Expenses incurred by
Indemnitee. In the event that such written request shall be accompanied by an
affidavit of counsel to Indemnitee to the effect that such counsel has reviewed
such expenses and that such expenses are reasonable in such counsel's view, then
such expenses shall be deemed reasonable in the absence of clear and convincing
evidence to the contrary. By execution of this Agreement, Indemnitee shall be
deemed to have made whatever undertaking may be required by law at the time of
any advancement of Expenses with respect to repayment to the Corporation of such
Expenses. In the event that the Corporation shall breach its obligation to
advance Expenses under this Section 3, the parties hereto agree that
Indemnitee's remedies available at law would not be adequate and that Indemnitee
would be entitled to specific performance.

     (b)  Letter of Credit. In order to secure the obligations of the
          ----------------
Corporation to indemnify and advance Expenses to Indemnitee pursuant to this
Agreement, the Corporation shall obtain at the time of any Change in Control (as
hereinafter defined) an irrevocable standby letter of credit naming Indemnitee
as the sole beneficiary (the "Letter of Credit"). The Letter of Credit shall be
in an appropriate amount not less than one million dollars ($1,000,000), shall
be issued by a commercial bank headquartered in the United States having assets
in excess of $10 billion and capital according to its most recent published
reports equal to or greater than the then applicable minimum capital standards
promulgated by such bank's primary federal regulator and shall contain terms and
conditions reasonably acceptable to

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Indemnitee. The Letter of Credit shall provide that Indemnitee may from time to
time draw certain amounts thereunder, upon written certification by Indemnitee
to the issuer of the Letter of Credit that (i) Indemnitee has made written
request upon the Corporation for an amount not less than the amount Indemnitee
is drawing under the Letter of Credit and that the Corporation has failed or
refused to provide Indemnitee with such amount in full within thirty (30) days
after receipt of the request, and (ii) Indemnitee believes that he or she is
entitled under the terms of this Agreement to the amount that Indemnitee is
drawing upon under the Letter of Credit. The issuance of the Letter of Credit
shall not in any way diminish the Corporation's obligation to indemnify
Indemnitee against Expenses and Liabilities to the full extent required by this
Agreement.

     (c)  Term of Letter of Credit. Once the Corporation has obtained the Letter
          ------------------------
of Credit, the Corporation shall maintain and renew the Letter of Credit or a
substitute letter of credit meeting the criteria of Section 3(b) during the term
of this Agreement so that the Letter of Credit shall have an initial term of
five (5) years, be renewed for successive five-year terms, and always have at
least one (1) year of its term remaining.

     4.   Presumptions and Effect of Certain Proceedings. Upon making a request
          ----------------------------------------------
for indemnification, Indemnitee shall be presumed to be entitled to
indemnification under this Agreement and the Corporation shall have the burden
of proof to overcome that presumption in reaching any contrary determination.
The termination of any Proceeding by judgment, order, settlement, arbitration
award or conviction, or upon a plea of nolo contendere or its equivalent shall
not affect this presumption or, except as determined by a judgment or other
final adjudication adverse to Indemnitee, establish a presumption with regard to
any factual matter relevant to determining Indemnitee's rights to
indemnification hereunder. If the person or persons so empowered to make a
determination pursuant to Section 5 hereof shall have failed to make the
requested determination within ninety (90) days after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a plea of
nolo contendere or its equivalent, or other disposition or partial disposition
of any Proceeding or any other event that could enable the Corporation to
determine Indemnitee's entitlement to indemnification, the requisite
determination that Indemnitee is entitled to indemnification shall be deemed to
have been made.

     5.   Procedure for Determination of Entitlement to Indemnification.
          --------------------------------------------------------------

     (a)  Whenever Indemnitee believes that Indemnitee is entitled to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation.  Any request for indemnification
shall include sufficient documentation or information reasonably available to
Indemnitee for the determination of entitlement to indemnification.  In any
event, Indemnitee shall submit Indemnitee's claim for indemnification within a
reasonable time, not to exceed five (5) years after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a plea of
nolo contendere or its equivalent, or final termination, whichever is the later
date for which Indemnitee requests indemnification.  The Secretary or other
appropriate officer shall, promptly upon receipt of Indemnitee's request for
indemnification, advise the Board of Directors in writing that Indemnitee has
made such request.  Determination of Indemnitee's entitlement to indemnification
shall be made not later than ninety (90) days after the Corporation's receipt of

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Indemnitee's written request for such indemnification, provided that any request
for indemnification for Liabilities, other than amounts paid in settlement,
shall have been made after a determination thereof in a Proceeding.

     (b)  The Corporation shall be entitled to select the forum in which
Indemnitee's entitlement to indemnification will be heard; provided, however,
that if there is a Change in Control of the Corporation, Independent Legal
Counsel (as hereinafter defined) shall determine whether Indemnitee is entitled
to indemnification.  The forum shall be any one of the following:

          (i)   the stockholders of the Corporation;

          (ii)  a majority vote of Disinterested Directors (as hereinafter
     defined), even though less than a quorum;

          (iii) Independent Legal Counsel, whose determination shall be made in
     a written opinion; or

          (iv)  a panel of three arbitrators, one selected by the Corporation,
     another by Indemnitee and the third by the first two arbitrators; or if for
     any reason three arbitrators are not selected within thirty (30) days after
     the appointment of the first arbitrator, then selection of additional
     arbitrators shall be made by the American Arbitration Association. If any
     arbitrator resigns or is unable to serve in such capacity for any reason,
     the American Arbitration Association shall select such arbitrator's
     replacement. The arbitration shall be conducted pursuant to the commercial
     arbitration rules of the American Arbitration Association now in effect.

     6.   Specific Limitations on Indemnification.  Notwithstanding anything in
          ---------------------------------------
this Agreement to the contrary, the Corporation shall not be obligated under
this Agreement to make any payment to Indemnitee with respect to any Proceeding:

     (a)  To the extent that payment is actually made to Indemnitee under any
insurance policy, or is made to Indemnitee by the Corporation or an affiliate
otherwise than pursuant to this Agreement. Notwithstanding the availability of
such insurance, Indemnitee also may claim indemnification from the Corporation
pursuant to this Agreement by assigning to the Corporation any claims under such
insurance to the extent Indemnitee is paid by the Corporation;

     (b)  Provided there has been no Change in Control, for Liabilities in
connection with Proceedings settled without the Corporation's consent, which
consent, however, shall not be unreasonably withheld;

     (c)  For an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Corporation within the meaning of section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
similar provisions of any state statutory or common law; or

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     (d)  To the extent it would be otherwise prohibited by law, if so
established by a judgment or other final adjudication adverse to Indemnitee.

     7.   Fees and Expenses of Independent Legal Counsel.  The Corporation
          ----------------------------------------------
agrees to pay the reasonable fees and expenses of Independent Legal Counsel or a
panel of three arbitrators should such Independent Legal Counsel or such
arbitrators be retained to make a determination of Indemnitee's entitlement to
indemnification pursuant to Section 5(b) of this Agreement, and to fully
indemnify such Independent Legal Counsel or arbitrators against any and all
expenses and losses incurred by any of them arising out of or relating to this
Agreement or their engagement pursuant hereto.

     8.   Remedies of Indemnitee.
          -----------------------

     (a)  In the event that (i) a determination pursuant to Section 5 hereof is
made that Indemnitee is not entitled to indemnification, (ii) advances of
Expenses are not made pursuant to this Agreement, (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to this Agreement, or (iv) Indemnitee otherwise seeks enforcement of this
Agreement, Indemnitee shall be entitled to a final adjudication in the Court of
Chancery of the State of Delaware of the remedy sought.  Alternatively, unless
(i) the determination was made by a panel of arbitrators pursuant to Section
5(b)(iv) hereof, or (ii) court approval is required by law for the
indemnification sought by Indemnitee, Indemnitee at Indemnitee's option may seek
an award in arbitration to be conducted by a single arbitrator pursuant to the
commercial arbitration rules of the American Arbitration Association now in
effect, which award is to be made within ninety (90) days following the filing
of the demand for arbitration.  The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or arbitration award.  In any such
proceeding or arbitration Indemnitee shall be presumed to be entitled to
indemnification and advancement of Expenses under this Agreement and the
Corporation shall have the burden of proof to overcome that presumption.

     (b)  In the event that a determination that Indemnitee is not entitled to
indemnification, in whole or in part, has been made pursuant to Section 5
hereof, the decision in the judicial proceeding or arbitration provided in
paragraph (a) of this Section 8 shall be made de novo and Indemnitee shall not
be prejudiced by reason of a determination that Indemnitee is not entitled to
indemnification.

     (c)  If a determination that Indemnitee is entitled to indemnification has
been made pursuant to Section 5 hereof, or is deemed to have been made pursuant
to Section 4 hereof or otherwise pursuant to the terms of this Agreement, the
Corporation shall be bound by such determination in the absence of a
misrepresentation or omission of a material fact by Indemnitee in connection
with such determination.

     (d)  The Corporation shall be precluded from asserting that the procedures
and presumptions of this Agreement are not valid, binding and enforceable.  The
Corporation shall stipulate in any such court or before any such arbitrator that
the Corporation is bound by all the provisions of this Agreement and is
precluded from making any assertion to the contrary.

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     (e)  Expenses reasonably incurred by Indemnitee in connection with
Indemnitee's request for indemnification under, seeking enforcement of or to
recover damages for breach of this Agreement shall be borne by the Corporation
when and as incurred by Indemnitee irrespective of any Final Adverse
Determination (as hereinafter defined) that Indemnitee is not entitled to
indemnification.

     9.   Contribution. To the fullest extent permissible under applicable law,
          ------------
if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Corporation, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Corporation and Indemnitee
as a result of the event(s) and/or transaction(s) giving cause to such
Proceeding; and/or (ii) the relative fault of the Corporation (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).

     10.  Maintenance of Insurance.  Upon the Corporation's purchase of
          ------------------------
directors' and officers' liability insurance policies covering its directors and
officers, then, subject only to the provisions within this Section 10, the
Corporation agrees that so long as Indemnitee shall have consented to serve or
shall continue to serve as a director or officer of the Corporation or both, or
as an Agent of the Corporation, and thereafter so long as Indemnitee shall be
subject to any possible Proceeding (such periods being hereinafter sometimes
referred to as the "Indemnification Period"), the Corporation will use all
reasonable efforts to maintain in effect for the benefit of Indemnitee one or
more valid, binding and enforceable policies of directors' and officers'
liability insurance providing, in all respects, coverage both in scope and
amount which is no less favorable than that provided by such preexisting
policies. Notwithstanding the foregoing, the Corporation shall not be required
to maintain said policies of directors' and officers' liability insurance if
such insurance is not reasonably available or if it is in good faith determined
by the then directors of the Corporation either that:

          (i)  The premium cost of maintaining such insurance is substantially
     disproportionate to the amount of coverage provided thereunder; or

          (ii) The protection provided by such insurance is so limited by
     exclusions, deductions or otherwise that there is insufficient benefit to
     warrant the cost of maintaining such insurance.

     Anything in this Agreement to the contrary notwithstanding, to the extent
that and for so long as the Corporation shall choose to continue to maintain any
policies of directors' and officers' liability insurance during the
Indemnification Period, the Corporation shall maintain similar and equivalent
insurance for the benefit of Indemnitee during the Indemnification Period
(unless such insurance shall be less favorable to Indemnitee than the
Corporation's existing policies).

                                      -6-
<PAGE>

     11.  Modification, Waiver, Termination and Cancellation. No supplement,
          --------------------------------------------------
modification, termination, cancellation or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.

     12.  Subrogation. In the event of payment under this Agreement, the
          -----------
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.

     13.  Notice by Indemnitee and Defense of Claim. Indemnitee shall promptly
          -----------------------------------------
notify the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
matter, whether civil, criminal, administrative or investigative, but the
omission so to notify the Corporation will not relieve it from any liability
that it may have to Indemnitee if such omission does not prejudice the
Corporation's rights. If such omission does prejudice the Corporation's rights,
the Corporation will be relieved from liability only to the extent of such
prejudice; nor will such omission relieve the Corporation from any liability
that it may have to Indemnitee otherwise than under this Agreement. With respect
to any Proceeding as to which Indemnitee notifies the Corporation of the
commencement thereof:

     (a)  The Corporation will be entitled to participate therein at its own
expense; and

     (b)  The Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee; provided, however, that the Corporation shall not be
entitled to assume the defense of any Proceeding if there has been a Change in
Control or if Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Corporation and Indemnitee with respect to such
Proceeding.  After notice from the Corporation to Indemnitee of its election to
assume the defense thereof, the Corporation will not be liable to Indemnitee
under this Agreement for any Expenses subsequently incurred by Indemnitee in
connection with the defense thereof, other than reasonable costs of
investigation or as otherwise provided below.  Indemnitee shall have the right
to employ Indemnitee's own counsel in such Proceeding, but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of Indemnitee unless:

          (i)   the employment of counsel by Indemnitee has been authorized by
     the Corporation;

          (ii)  Indemnitee shall have reasonably concluded that counsel engaged
     by the Corporation may not adequately represent Indemnitee; or

          (iii) the Corporation shall not in fact have employed counsel to
     assume the defense in such Proceeding or shall not in fact have assumed
     such defense and be

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<PAGE>

     acting in connection therewith with reasonable diligence; in each of which
     cases the fees and expenses of such counsel shall be at the expense of the
     Corporation.

     (c)  The Corporation shall not settle any Proceeding in any manner that
would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; provided, however, that Indemnitee will not unreasonably
withhold his or her consent to any proposed settlement.

     14.  Notices. All notices, requests, demands and other communications
          -------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:

     (a)  If to Indemnitee, to:

          ___________________
          ___________________
          ___________________
          ___________________

     (b)  If to the Corporation, to:
          Magma Design Automation, Inc.
          2 Results Way
          Cupertino, CA 94014
          Attn: Secretary

or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.

     15.  Nonexclusivity.  The rights of Indemnitee hereunder shall not be
          --------------
deemed exclusive of any other rights to which Indemnitee may be entitled under
applicable law, the Corporation's Certificate of Incorporation or bylaws, or any
agreements, vote of stockholders, resolution of the Board of Directors or
otherwise, and to the extent that during the Indemnification Period the rights
of the then existing directors and officers are more favorable to such directors
or officers than the rights currently provided to Indemnitee thereunder or under
this Agreement, Indemnitee shall be entitled to the full benefits of such more
favorable rights.

     16.  Certain Definitions.
          -------------------

     (a)  "Agent" shall mean any person who is or was, or who has consented to
           -----
serve as, a director, officer, employee, agent, fiduciary, joint venturer,
partner, manager or other official of the Corporation or a subsidiary or an
affiliate of the Corporation, or any other entity (including without limitation,
an employee benefit plan) either at the request of, for the convenience of, or
otherwise to benefit the Corporation or a subsidiary of the Corporation.

     (b)  "Change in Control" shall mean the occurrence of any of the following:
           -----------------

                                      -8-
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          (i)   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 Corporation representing at
     least 20% of the total voting power represented by the Corporation's then
     outstanding voting securities; and (b) the beneficial ownership by such
     person of securities representing such percentage has not been approved by
     a majority of the "continuing directors" (as defined below);

          (ii)  Any "person" is or becomes the "beneficial owner" (as defined in
     Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
     of the Corporation representing at least 50% of the total voting power
     represented by the Corporation's then outstanding voting securities;

          (iii) A change in the composition of the Board occurs, as a result of
     which fewer than two-thirds of the incumbent directors are directors who
     either (A) had been directors of the Corporation on the "look-back date"
     (as defined below) (the "Original Directors") or (B) were elected, or
     nominated for election, to the Board with the affirmative votes of at least
     a majority in the aggregate of the Original Directors who were still in
     office at the time of the election or nomination and directors whose
     election or nomination was previously so approved (the "continuing
     directors");

          (iv)  The stockholders of the Corporation approve a merger or
     consolidation of the Corporation with any other corporation, if such merger
     or consolidation would result in the voting securities of the Corporation
     outstanding immediately prior thereto representing (either by remaining
     outstanding or by being converted into voting securities of the surviving
     entity) 50% or less of the total voting power represented by the voting
     securities of the Corporation or such surviving entity outstanding
     immediately after such merger or consolidation; or

          (v)   The stockholders of the Corporation approve (A) a plan of
     complete liquidation of the Corporation or (B) an agreement for the sale or
     disposition by the Corporation of all or substantially all of the
     Corporation's assets.

     For purposes of Subsection (i) 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 (x) a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or of a parent or subsidiary of the Corporation
or (y) a corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership of the
common stock of the Corporation.

     For purposes of Subsection (iii) above, the term "look-back date" shall
mean the later of (x) February 13, 2001 or (y) the date 24 months prior to the
date of the event that may constitute a "Change in Control."

     Any other provision of this Section 17(b) notwithstanding, the term "Change
in Control" shall not include a transaction, if undertaken at the election of
the Corporation, the result of which is to sell all or substantially all of the
assets of the Corporation to another corporation (the "surviving corporation");
provided that the surviving corporation is owned

                                      -9-
<PAGE>

directly or indirectly by the stockholders of the Corporation immediately
following such transaction in substantially the same proportions as their
ownership of the Corporation's common stock immediately preceding such
transaction; and provided, further, that the surviving corporation expressly
assumes this Agreement.

     (c)  "Disinterested Director" shall mean a director of the Corporation who
           ----------------------
is not or was not a party to or otherwise involved in the Proceeding in respect
of which indemnification is being sought by Indemnitee.

     (d)  "Expenses" shall include all direct and indirect costs (including,
           --------
without limitation, attorneys' fees, retainers, court costs, transcripts, fees
of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, all other
disbursements or out-of-pocket expenses and reasonable compensation for time
spent by Indemnitee for which Indemnitee is otherwise not compensated by the
Corporation or any third party) actually and reasonably incurred in connection
with either the investigation, defense, settlement or appeal of a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.

     (e)  "Final Adverse Determination" shall mean that a determination that
           ---------------------------
Indemnitee is not entitled to indemnification shall have been made pursuant to
Section 5 hereof and either (1) a final adjudication in the Court of Chancery of
the State of Delaware or decision of an arbitrator pursuant to Section 8(a)
hereof shall have denied Indemnitee's right to indemnification hereunder, or (2)
Indemnitee shall have failed to file a complaint in a Delaware court or seek an
arbitrator's award pursuant to Section 8(a) for a period of one hundred twenty
(120) days after the determination made pursuant to Section 5 hereof.

     (f)  "Independent Legal Counsel" shall mean a law firm or a member of a
           -------------------------
firm selected by the Corporation and approved by Indemnitee (which approval
shall not be unreasonably withheld) or, if there has been a Change in Control,
selected by Indemnitee and approved by the Corporation (which approval shall not
be unreasonably withheld), that neither is presently nor in the past five (5)
years has been retained to represent: (i) the Corporation or any of its
subsidiaries or affiliates, or Indemnitee or any corporation of which Indemnitee
was or is a director, officer, employee or agent, or any subsidiary or affiliate
of such a corporation, in any material matter, or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Legal Counsel" shall not include any person
who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Corporation or
Indemnitee in an action to determine Indemnitee's right to indemnification under
this Agreement.

     (g)  "Liabilities" shall mean liabilities of any type whatsoever including,
           -----------
but not limited to, any judgments, fines, ERISA excise taxes and penalties,
penalties and amounts paid in settlement (including all interest assessments and
other charges paid or payable in connection with or in respect of such
judgments, fines, penalties or amounts paid in settlement) of any Proceeding.

                                      -10-
<PAGE>

     (h)  "Proceeding" shall mean any threatened, pending or completed action,
           ----------
claim, suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative, that is associated with Indemnitee's being an
Agent of the Corporation.

     17.  Binding Effect; Duration and Scope of Agreement. This Agreement shall
          -----------------------------------------------
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Corporation), spouses, heirs
and personal and legal representatives. This Agreement shall continue in effect
during the Indemnification Period, regardless of whether Indemnitee continues to
serve as an Agent.

     18.  Severability.  If any provision or provisions of this Agreement (or
          ------------
any portion thereof) shall be held to be invalid, illegal or unenforceable for
any reason whatsoever:

     (a)  the validity, legality and enforceability of the remaining provisions
of this Agreement shall not in any way be affected or impaired thereby; and

     (b)  to the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any provision
held invalid, illegal or unenforceable.

     19.  Governing Law. This Agreement shall be governed by and construed and
          -------------
enforced in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within the State of Delaware, without regard to conflict of laws rules.

     20.  Consent to Jurisdiction. The Corporation and Indemnitee each
          -----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding that arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.

     21.  Entire Agreement. This Agreement represents the entire agreement
          ----------------
between the parties hereto, and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein or as provided in
Section 15 hereof.

                                      -11-
<PAGE>

     22.  Counterparts.  This Agreement may be executed in one or more
          ------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.

     Executed as of the 13th day of February, 2001.

                                    Magma Design Automation, Inc., a Delaware
                                    corporation



                                    By________________________________________


                                    INDEMNITEE



                                    __________________________________________
                                                 _____________________

                                      -12-