International Distributor Agreement Dated 1/1/99

EXHIBIT 10.16
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DISTRIBUTOR AGREEMENT


BETWEEN


VERISITY DESIGN, INC.


AND


CYBERTEC YUGEN KAISHA


INTERNATIONAL DISTRIBUTOR AGREEMENT


This Agreement (the "Agreement") is made and entered into effective as of January 1, 1999 (the "Effective Date"), between Verisity Design, Inc., a California corporation, with its principal offices at 2041 Landings Drive, Mountain View, California 94043, U.S.A. ("Verisity") and CyberTec Yugen Kaisha, a Japanese corporation, with its registered offices at 3-1-13 Chigasaki-Minami, Tsuzuki-ku, Yokohama, Kanagawa 224, Japan ("Company").


Verisity Ltd develops certain software programs related to the design of semiconductor circuits and Verisity, its wholly owned subsidiary, is in the business of selling such programs. Verisity and Company desire to establish a business relationship between themselves.


In consideration of the premises and mutual promises contained herein, the parties agree as follows:


1. DEFINITIONS


The capitalized terms below will have the respective meanings indicated:


(a) Products means those standard products offered for sale or license by
-------- Verisity listed from time to time on Exhibit A attached hereto at the prices
--------- listed from time to time on Exhibit A, which product list may be amended by
--------- Verisity in its sole discretion from time to time upon ninety (90) days prior written notice without obligation to Company and which prices may be amended by Verisity in its sole discretion from time to time upon ninety (90) days prior written notice to Company. Products that have been deleted from Exhibit A
--------- pursuant to the preceding sentence will be deemed to be Products under each provision of this Agreement, except Sections 2(a), 2(c), 4(a), 4(b), 5(a) through (f) and 5(i) hereof.


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(b) Services means those services offered for sale by Verisity listed from
-------- time to time on Exhibit B attached hereto at the prices listed from time to time
--------- on Exhibit B, which service list may be amended by Verisity in its sole
--------- discretion from time to time upon ninety (90) days prior written notice without obligation to Company and which prices may be amended by Verisity in its sole discretion from time to time upon ninety (90) days prior written notice to Company. Services that have been deleted from Exhibit B pursuant to the
--------- preceding sentence will be deemed to be Services under each provision of this Agreement, except Sections 2(a), 2(c), 5(a) through (f) and 5(i) hereof.


(c) Territory means Japan.
---------


(d) End-User means a person or entity in the Territory who purchases any
-------- Product and uses that Product on a non-exclusive basis solely for its own benefit.


(e) Software License Agreement means a license agreement entered into
-------------------------- between Verisity and an End-User under which the End-User obtains a non- exclusive, nontransferable license to use a Product solely for its own benefit.


(f) As used herein, purchase or sale with respect to the Products refers to
-------- ---- the purchase or sale of a license to the Products pursuant to a Software License Agreement.


2. APPOINTMENT; AUTHORITY


(a) Subject to the terms and conditions hereunder, Verisity hereby appoints Company as its exclusive distributor in the Territory to market, demonstrate and perform the Products and Services and sell, license and distribute the Products and Services, and Company hereby accepts such appointment.


(b) In carrying out its obligations under this Agreement, but subject to the terms and conditions hereunder, Company may translate, at its expense, Verisity's standard Software License Agreement or promotional materials of Verisity into the local languages within the Territory or otherwise adapt the same to comply with any relevant local law and regulation so long as (i) such Software License Agreement and other materials are provided by Company to Verisity in advance of distribution thereof for Verisity's review and approval and (ii) any translations by Company hereunder are done in a first class and professional manner, and do not diminish Verisity's proprietary rights in the Products or, without Verisity's prior written consent, conflict with this Agreement or Verisity's then-current standard Software License Agreement.


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(c) Company is not granted a license or right to receive, use or distribute source code versions of the Products nor is Company granted a license or right to modify or alter in any manner or create derivative works of the Products. Company will not have the right to appoint sub-distributors or sub-agents. Company will not (i) promote or market Products or Services outside of the Territory, (ii) sell or license Products or Services outside of the Territory or (iii) register as a distributor or representative of Verisity in any country outside the Territory.


(d) Notwithstanding any other provision of this Agreement, until such time as Verisity notifies Company otherwise in writing, Company will not take or accept any orders from End-Users for Products or Services before forwarding all such orders to Verisity, for written acceptance or rejection, in whole or in part, by Verisity.


3. DURATION OF THE AGREEMENT


This Agreement shall commence on January 1, 1999, and continue for a period of [*] months thereafter with mutually agreed changes every twelve months (12) unless terminated pursuant to Section 14 or 15 below.


4. DUTIES OF VERISITY


(a) Verisity agrees to make reasonable efforts to deliver Products to Company in sufficient quantities to meet Company's business requirements.


(b) Verisity agrees to provide such support and training in the Products and Services to the Company as Verisity may consider appropriate. Any such support and training shall be of a type, in an amount and on terms to be agreed separately between Verisity and Company.


5. DUTIES OF COMPANY


(a) Company will use its best efforts to vigorously market, promote, sell and distribute Products and Services in the Territory. Company will devote such management, attention, manpower, time and effort as may be reasonably necessary to fully develop the market for the Products and Services.


(b) Company will conduct business in its own name and pay and bear any and all expenses, charges or fees imposed on or incurred by it in performing its obligations hereunder. Verisity shall not be obligated in any manner whatsoever for expenses incurred by Company.


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[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


(c) Company will maintain appropriate demonstration equipment and an adequate facility capable of handling technical support and customer demonstrations and provide technical assistance to End-Users in the installation and use of the Products.


(d) During the term of this Agreement, Company will refrain from representing, promoting or selling products or services which compete with the Products or Services. Company hereby represents and warrants that its rights and obligations under this Agreement do not, and during the term of this Agreement will not, breach or otherwise conflict with any other agreement to which it is a party or by which it is bound.


(e) Company agrees to deliver to Verisity quarterly reports on the status of, and activities related to, its acts under this Agreement. Such quarterly reports shall include information relating to the status of current sales efforts and the prospects for future sales and any other reasonable information specified by Verisity.


(f) Company will give Verisity timely notice of any legislation, rule, regulation and/or governmental order that is in effect or that may come into effect in the Territory that materially affects the distribution, sale or license of the Products or Services or the proprietary rights of Verisity.


(g) Company agrees not to make any representations or give any warranties or guarantees to any person with respect to the Products or Services, other than those representations, warranties or guarantees that Verisity has specifically authorized in writing to be given to that person or as set forth in Verisity's standard software license agreement.


(h) Company shall avoid any deceptive, misleading, illegal or unethical practices that may be detrimental to Verisity or the Products or Services or the reputation or good will of any of them, including, without limitation, advertising, communicating or otherwise representing any Product or its characteristics or capabilities or any Service in a manner that is false or misleading.


(i) Company shall facilitate the execution of a Software License Agreement by each End-User that purchases Products hereunder.


6. LSI SYSTEMS, INC.


Company and Verisity acknowledge and agree that Company has engaged LSI Systems, Inc. ("LSI") as a subcontractor to perform on behalf of the Company certain demonstrations and other sales support and substantially all technical


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assistance to End-Users that Company is required to perform hereunder. Company represents, warrants and covenants that LSI will provide such services to Company during the term of this Agreement, unless Verisity otherwise agrees in writing. Company will be responsible for the services performed by LSI on behalf of Company hereunder to the same extent as if Company had performed such services. The parties agree that neither LSI nor any other third party is an intended third party beneficiary of this Agreement.


7. COMPENSATION; PAYMENT


All compensation and payment terms are set forth in Exhibit C.
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8. WARRANTY; LIMITATION OF LIABILITY; INSURANCE


(a) Verisity provides a limited warranty to End-Users. No independent warranty, express or implied, is provided to Company. VERISITY EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL VERISITY BE LIABLE TO COMPANY OR ANYONE ELSE (INCLUDING, WITHOUT LIMITATION, LSI) FOR ANY LOSS OF PROFITS, GOODWILL, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES SUFFERED WITH RESPECT TO OR RESULTING FROM THE USE OF THE PRODUCTS OR SERVICES SUPPLIED HEREUNDER, EVEN IF VERISITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSS OF PROFITS. Verisity will not be liable to Company for any damages payable by Company to third parties related to the distribution by Company or use by suc ...