<PAGE>

                                                                   EXHIBIT 10.40


                    INTERNATIONAL REPRESENTATIVE AGREEMENT

                                    BETWEEN

                             VERISITY DESIGN, EURL

                                      AND

                     INTEGRATED SYSTEMS SCANDINAVIA EDA AB



     This Agreement (the "Agreement") is made and entered into effective as of
June 15, 2000 (the "Effective Date"), between Verisity Design, EURL., a French
corporation, with its principal offices at BC La Grande Arche, 92044 Paris La
Defense, France Paris  ("Verisity") and Integrated Systems Scandinavia EDA AB, a
Swedish corporation, with its registered offices at Minnebergsvaegen (turning
area exit), Box 14049, SE-16714, Bromma Sweden, excluding all other ISS
affiliates ("Company").

     Verisity Ltd. develops certain software programs related to the design of
semiconductor circuits and Verisity Design, EURL, its wholly owned subsidiary,
is in the business of licensing such programs and providing related services.
Verisity and Company desire to establish a business relationship between
themselves, pursuant to which Verisity shall appoint Company as its exclusive
representative in the Territory, as defined below, all subject to the terms and
conditions hereof.

     In consideration of the mutual promises and undertakings 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 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 and prices may be amended by
                ---------
Verisity in its sole discretion from time to time, without obligation to Company
or to any third party.  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), 4, 5(a) and 5(c) through (f) hereof.

     (b) Services means those services offered by Verisity as listed from time
         --------
to time on Exhibit B attached hereto at the prices listed from time to time on
           ---------
Exhibit B, which service list and prices may be amended by Verisity in its sole
----------
discretion from time to time, without obligation to Company or to any third
party.  Services that have
<PAGE>

                                      -2-




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), 4,
5(a) and 5(c) through (f) hereof.

     (c) Territory means Norway, Sweden, Finland, Denmark, Latvia, Lithuania,
         ---------
Estonia and Poland. Notwithstanding the above, it is hereby clarified that for
multi-national entities whose headquarters are located within any of the above
countries, branches located outside the above countries are not included within
the Territory, and therefore Company is not granted exclusivity in respect
thereof and will not be entitled to receive commission and/or any other payment
in connection with orders made by such entities, unless and to the extent
determined, on a case by case basis, by Verisity through its Vice President and
General Manager of European Operations, at its sole and absolute discretion.

     (d) End-User means a person or entity within the Territory who purchases
         --------
from Verisity a license to use 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, non-transferable and non-assignable 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 contained herein, Verisity hereby
appoints Company as its exclusive representative in the Territory to (i) promote
and demonstrate the Products and Services on behalf of Verisity, (ii) solicit
orders for Products and Services, and (iii) provide first level customer
support, 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 promotional materials 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 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
conflict with this Agreement.

     (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-representatives or sub-agents.
Company will not (i) promote or market Products or Services outside of the
Territory, unless specifically requested in writing by Verisity to do so, and
within the specific scope and time frame
<PAGE>

                                      -3-

of such specific request, (ii) sell or license Products outside the Territory,
or (iii) register as a representative of Verisity in any country outside the
Territory. Notwithstanding the above, upon any independent use of Verisity's
products the Company will sign, at the request of Verisity, a standard Verisity
Software License Agreement.

     (d) Notwithstanding any other provision of this Agreement, Company will not
take or accept any orders from End-Users for Products, and it shall only forward
all such orders to Verisity for written acceptance or rejection of same, in
whole or in part, by Verisity. Verisity may, at its sole discretion, accept or
reject orders, in whole or in part. Company agrees that it shall advise
prospective End-Users of Verisity's right to reject orders, or any part thereof,
as per the above, and further agrees not to purport to bind Verisity under any
such order.

     It is hereby clarified that if Company will perform Services by itself and
on its own account such as training and consulting and be paid directly by the
End Users, it shall offer such Services only after receiving Verisity's prior
written approval and only at their full price as listed from time to time on
Exhibit B, as amended by Verisity as per the above, without any deduction and/or
---------
reduction therefrom or under different prices agreed by Verisity in advance and
in writing.

     It is clarified that Verisity has given its approval to Company giving
training in Territory, at full Verisity list price as listed from time to time
on Exhibit B, or according to signed agreements between customers and Verisity.
   ---------

3.   DURATION OF THE AGREEMENT

     This Agreement shall commence on the Effective Date, and continue until
[*], if not terminated prior to such date pursuant to Section 12 below. The
parties hereto may mutually decide, not later then by September 1, 2002, to
extend the duration of this Agreement for a term which shall be mutually agreed.

4.   DUTIES OF VERISITY

     Verisity agrees to provide such support and training in the Products and
Services to the Company as Verisity may consider, in its sole discretion,
appropriate, and which shall be substantially, and to the extent possible and
applicable (as determined by Verisity in its sole discretion), at the same level
of support and training as it does for any of its sales offices.  Any such
support and training shall be of a type, in an amount and on terms to be agreed
separately between Verisity and Company.

Verisity shall have the following obligations under this Agreement:

     (a) Verisity shall provide to the Company Product training, demonstration
software, descriptive literature, instructional material, price lists and
product availability information, as available, in support of the promotion and
sales of the Products.

     (b) Verisity shall periodically provide to the Company the names and the


[*] 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.
<PAGE>

                                      -4-

addresses of customer prospects, within the assigned Territories, which Verisity
has received as a result of advertising, trade shows and referrals by present
customers or cooperative marketing partners.

     (c) Verisity shall make the best commercial efforts to keep the Company
informed of the market trends, competitive issues, technical developments within
the Products marketplace and other pertinent information, which may aid the
Company in promoting the Products.

     (d) Verisity shall keep the Company informed of Verisity's technical
developments and new products and shall make the best commercial efforts to
provide such information in advance of the initial introduction or sales of such
products.

     (e) Verisity shall be solely responsible for the return and replacement of
defective Products and for the provision of warranty or software error fixes in
accordance with Verisity's published policies.

     (f) Verisity shall make best commercial efforts to make deliveries of
satisfactory Products within the promised delivery schedules.


5.   DUTIES OF COMPANY

     (a) Company will use its best efforts to vigorously promote and demonstrate
the Products and Services, and to solicit orders for Products and Services in
the Territory.  Company will conduct the sales process including demonstrating,
issuing quotations etc., as per Verisity's direction and guidelines given to
Company by Verisity from time to time. Company will devote such management
attention, manpower, time and effort as may be necessary to fully develop the
market for the Products and Services within the Territory. Company undertakes to
receive Verisity's prior approval of Consulting Engineers ("CE") it intends to
employ.
     Without derogating from the generality of the above, upon Verisity's
request Company shall hire additional CEs and/or replace any CE then hired by
Company.

     (b) Company will conduct business in its own name and on its own account
only, 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 costs and/or expenses incurred by
Company.

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

     (d) During the term of this Agreement and for a period of an additional 6
months thereafter, Company will refrain from distributing, representing,
promoting or selling products or services which, at the sole discretion of
Verisity, compete with, are similar to or are the same as the Products or
Services.  Exhibit D specifies all products and services, which Company offers
           ---------
to its customers.  Company undertakes to update Exhibit D at least annually and
                                                ---------
notify Verisity of any new product or service
<PAGE>

                                      -5-

it offers. For the removal of doubt the above shall not limit Company's right to
enter into business arrangements concerning complementary products. 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 reports at a frequency as may be
determined by Verisity from time to time, on the status of and activities
related to its acts under this Agreement.  Such reports shall be in English and
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. So long as Verisity has not determined differently and so notified
Company in writing, the reports will be delivered weekly.

     (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 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.

     (h) Company shall avoid any deceptive, misleading, illegal, or unethical
practices, 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's CE(s) will assist in general activities of Verisity, such as
giving demonstrations in conferences, assisting in alpha/beta sites, review
specifications of new features etc., at the same level as Verisity's own CEs are
assisting. It is hereby clarified that except as specifically set forth in
Section C of Exhibit C, neither Company nor CE(s) shall be entitled to any
             ---------
payment, including without limitation compensation and/or reimbursement, in
addition to the payment specifically set forth herein. It is hereby further
clarified that each Company CE shall be at all times considered as an employee
of Company only and not an employee of Verisity, all as set forth in Section 18
(c) below.

6.   COMPENSATION; PAYMENT

     All compensation and payment terms are set forth in Exhibit C.
                                                         ---------

7.   WARRANTY; LIMITATION OF LIABILITY; INSURANCE

     Verisity provides a limited warranty to End-Users.  Verisity provides no
independent warranty, express or implied, to Company.  VERISITY EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. IN NO EVENT SHALL VERISITY
<PAGE>

                                      -6-

BE LIABLE TO COMPANY OR ANYONE ELSE 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 acts and/or omissions by Company or use by such
third parties of the Products or Services.

8.   OWNERSHIP AND USE OF INTELLECTUAL PROPERTY

     (a) Company acknowledges that (i) it is obtaining only the right to promote
and demonstrate the Products and Services on behalf of Verisity, and solicit
orders for Products and Services, as provided hereunder; (ii) all ownership,
right, title or interest in or to any trademarks, tradenames, insignias, logos,
proprietary marks and the like related to the Products (together, "Proprietary
Marks") or patents, copyrights, or other proprietary rights relating to the
Products or technical documentation, promotional or demonstration materials or
training session materials relating to the same (including, without limitation,
any translations), whether these are registered or unregistered (all of the
above, including the Proprietary Marks, together - the "Rights"), will remain at
all times with Verisity and/or its licensors even if suggestions made by Company
and/or any person or entity related thereto are incorporated into subsequent
versions of the Products; (iii) none of the Rights or any part thereof are
transferred from Verisity and/or its licensors to Company hereunder; and (iv)
any permitted use of the Rights or any part thereof hereunder will inure to the
benefit of Verisity and/or its licensors, and that Company will not itself claim
any exclusive rights in the Rights or in any part thereof or the goodwill and
rights related thereto.

     (b) Subject to Verisity's right to review all marketing materials,
packaging and documentation prior to their use by Company, Verisity hereby
grants Company a non-exclusive right to use within the Territory the Proprietary
Marks under which the Products and Services are marketed by Verisity, during the
term of this Agreement, subject to Company's agreement hereby: (i) to use the
Proprietary Marks in proper trademark or service mark manner (including such
notices of ownership as Verisity may require from time to time) on the Products
and materials related to the Products and Services and only in connection with
their promotion and marketing, and not to use the Proprietary Marks, or any
other marks confusingly similar thereto, in any other connection and (ii) that
registration for the Proprietary Marks shall be sought, maintained and enforced
only by Verisity, within its sole discretion and without any obligation to do
so, and that Company agrees to assist Verisity in such efforts at Verisity's
request. Company will not alter, infringe or do anything to lessen the value of
any Proprietary Marks. Company will not use any of the Proprietary Marks as part
of the business name of Company. Company will assign "Verisity Scandinavia" to
Verisity LTD. free of charge in a form, to be prepared, which will permit
Verisity to accept that assignment before April 30, 2001. Company will not
attach any name or mark to any Products or materials relating to Products and
Services other than the names or marks originally appearing thereon and will not
obfuscate, cover or remove any name or Proprietary Mark on the Products or
materials relating to Products and Services.
<PAGE>

                                      -7-

     (c) Company shall promptly notify Verisity of any infringement of which it
may become aware of any Proprietary Mark, patent, copyright, the Rights or any
other proprietary right of Verisity and/or its licensors, and will assist
Verisity in prosecuting same.

     (d) To the extent that Company takes possession of any physical copies of
any Products or related documentation, Company will hold and care for the same
as Verisity's and/or its licensors' property.  In no event will Company be
deemed to own any such copies of the Products, and Verisity and/or its licensors
will maintain the sole and absolute title to any and all such items.

9.   INFRINGEMENT INDEMNITY

     (a) Verisity will indemnify Company against any damages finally awarded in
connection with any suit brought against Company that any of the Products or
Services furnished and used within the scope of this Agreement infringes
copyright of a third party within the Territory, provided that: (i) Company
notifies Verisity in writing immediately of any such suit, (ii) Verisity has
sole control of the defense and all related settlement negotiations and (iii)
Company provides Verisity with the assistance, information and authority
necessary to perform the above. Verisity will reimburse reasonable out-of-pocket
expenses incurred by Company in providing such assistance.

     (b) Verisity shall have no liability for any claim of infringement based on
(i) use of a superseded or altered release of the Products if such infringement
would have likely been avoided by the use of current unaltered releases of the
Products or (ii) the combination, operation or use of any of the Products or
Services furnished under this Agreement with products or data not furnished by
Verisity if such infringement would have likely been avoided by the use of the
Products or Services without such products or data.

     (c) In the event the Products are held or are believed by Verisity to
infringe, Verisity shall have the option, but not the obligation, at its
expense, to modify the Products to be non-infringing.

     This Section 9 states Company's exclusive and entire remedy for any
infringement and Verisity's entire liability for any infringement.

10.  GENERAL INDEMNITY BY COMPANY

     Company will defend and indemnify Verisity against any and all claims,
actions, suits, losses, costs, liabilities or expenses (including attorneys'
fees) arising out of or related to any breach by Company of its representations,
warranties or covenants made hereunder.

11.  CONFIDENTIALITY
<PAGE>

                                      -8-

     Company acknowledges that it may be furnished or may otherwise receive or
have access to non-public, confidential information relating to Verisity's past,
present or future customers, strategic directions, products (including Products
or Services), software, research, development, inventions, processes,
techniques, designs, price-data, price-list, service materials or other
technical data and information (all of such information, and the existence and
terms of this Agreement and any related agreements is referred to as the
Confidential Information or "Verisity Proprietary Information").  Company and
any of its employees, including but without limitation CE(s), shall hold the
Confidential Information (and all physical or other forms thereof) in strict
confidence and shall not publish or disclose it to third parties, or use it or
permit others to use it in any way, commercially or otherwise, without the prior
written consent of Verisity, except as expressly permitted by this Agreement.
Company will cause all of its employees, including but without limitation CE(s),
subcontractors (including employees of subcontractors) and any other persons
that obtain, receive or have access to any Confidential Information to enter
into confidentiality agreements prohibiting the use or disclosure of any such
Confidential Information, except as expressly permitted by this Agreement.

The obligations set forth in this Section above shall not apply, or cease to
apply, as the case may be, as follows:

          i.   they shall not apply to specific Verisity Proprietary Information
     that is publicly known when first disclosed to Company, and shall cease to
     apply to specific Verisity Proprietary Information that thereafter becomes
     publicly known through no act or fault of Company or its employees;

          ii.  they shall not apply to specific Verisity Proprietary Information
     that appropriate documentary evidence clearly demonstrates was already
     known to Company at the time the same is first disclosed to Company by
     Verisity or its representatives; or

          iii. they shall cease applying to specific Verisity Proprietary
     Information that is rightfully received by Company, without restriction on
     disclosure, from a third party which is not under an obligation of
     nondisclosure to Verisity.

12.  TERMINATION

     (a) If either party defaults in the performance of any provision of this
Agreement, the non-defaulting party may give written notice, at any reasonable
time, to the defaulting party specifying the default.  If the defaulting party
does not cure the default within thirty (30) days of such notice thereof, this
Agreement will terminate as of the end of such thirty (30) day period.

     (b) Verisity may terminate this Agreement immediately by delivery of
written notice to Company upon the occurrence of any of the following events:
(i) the institution by or against Company of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of Company's
debts, (ii) the Company is making an assignment for the benefit of creditors, or
(iii) dissolution of Company.
<PAGE>

                                      -9-



    (c) Verisity may terminate this Agreement immediately by delivery of written
notice to Company if during two consecutive financial quarters Company has not
met [*] of its yearly quota, or at the end of the year it has not met [*] of its
Quota as defined in Exhibit C.

    (d) Verisity may terminate this Agreement without cause immediately at any
time by delivery of prior written notice of ninety (90) days to Company.

    (e) In the event of termination of this Agreement pursuant to the terms
hereof Verisity shall not be liable to Company for any claims, damages or
liabilities arising by reason of the exercise of such right of termination.

13. EFFECT OF TERMINATION

    (a) Immediately upon expiration of the term of this Agreement under Section
3 above or upon any termination of this Agreement for any reason whatsoever,
Company's appointment as Verisity's exclusive representative in Section 2 above
will automatically terminate, all amounts and debts of Company to Verisity, and
from Verisity to Company, shall become due and payable without notice, Company
will promptly return to Verisity all Confidential Information then in Company's
possession, the license granted to Company in Section 8(b) above will
automatically terminate, Company will remove and not thereafter use Verisity's
Proprietary Marks and any other material that identifies or appears to identify
Company with Verisity and shall promptly deliver same to Verisity.

    (b) In the event of expiration of the term of this Agreement under Section 3
above or upon termination of this Agreement under Section 12(c) or 12(d) above
only, Company shall be entitled to (i) with respect to orders received in
Territory prior to the date of termination and which were executed no later than
90 days after expiration or termination of this Agreement as per the above, the
amounts determined in accordance with Section A of Exhibit C, (ii) with respect
                                                   ---------
to orders received in Territory prior to the date of termination and which were
executed no later than [*] days after expiration or termination of this
Agreement as per the above, [*] of the amounts determined in accordance with
Section A of Exhibit C. It is hereby clarified that Company shall not be
             ---------
entitled to any and all amounts with respect to orders received in Territory
prior to the date of termination and which were executed 180 days or more after
expiration or termination of this Agreement. Payment of said amounts by
Verisity, if and to the extent Company is entitled thereto as per the above,
shall constitute Company's exclusive and entire remedy in connection with the
expiration or termination of this Agreement as per the above.

    (c) Termination of this Agreement under Section 12 above shall not prejudice
and/or limit Verisity's rights under any applicable law and/or agreement, and it
shall not derogate from any remedy available to Verisity under any applicable
law and/or agreement under such circumstances.


[*] 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.


<PAGE>

                                      -10-

    (d) The provisions of the following Sections will survive the expiration of
the term of this Agreement under Section 3 above or its termination for any
reason whatsoever: 1, 7, 8(a), 10, 11, 12, 13, 15 and 18.

14.  LEGAL COMPLIANCE

     (a) Company agrees, at its expense, to take all steps that may be required
for this Agreement, and all actions taken pursuant to or contemplated by this
Agreement, to comply with the laws of all countries and their political
subdivisions within the Territory.

     (b) Company will ascertain whether the law of any country or political
subdivisions thereof within the Territory requires this Agreement to be filed
for notice or approval with any governmental entity or agency within the
Territory.  If such filing or filings are required, Company will comply with
such requirements at its own cost and expense, and will provide copies of such
filings to Verisity.

     (c) Company hereby assures Verisity that it does not intend to and will not
knowingly transmit directly or indirectly, or permit others to so transmit
Products to any foreign country or to any person in violation of applicable laws
pertaining to export of Products or technical data.

15.  NOTICES

     Any notice required or permitted to be given under this Agreement shall be
in English and in writing, and shall be duly given if delivered personally or
sent by telecopier/fax or posted in the mail, postage prepaid, registered or
certified, return receipt requested, addressed to the parties at their addresses
hereinabove set forth or at such other address as such party may designate in
writing with respect to itself from time to time.  Notice shall be deemed to be
effective on the fifth business day after such notice is mailed or if sent by
telecopier/fax, notice shall be deemed to be effective on the date such notice
is sent (but only if a confirming copy is delivered by any of the other means of
dispatch for notices permitted hereunder).

16.  ASSIGNABILITY

     Neither this Agreement nor any rights or obligations hereunder may be
assigned, delegated, pledged or otherwise transferred, in whole or in part, by
either party without the prior written consent of the other party, except that
Verisity may assign (or delegate, as the case may be) this Agreement and any
rights or obligations hereunder to (i) any entity controlled by, controlling or
under common control with Verisity, (ii) any purchaser of all of Verisity's
rights to sell or license Products and Services and (iii) to a successor
corporation in the event of a merger, acquisition or consolidation.  A change of
control of Company will be considered an assignment by Company.  This Agreement
shall be binding upon and shall inure to the benefit of each party's permitted
successors and assigns.

17.  FORCE MAJEURE
<PAGE>

                                      -11-

     Neither party shall be liable for damages or delay arising out of causes
beyond its reasonable control and without its fault or negligence, such as
governmental acts or directives, strikes, acts of God, war, insurrection, riot
or civil commotion, fires, earthquakes, flooding or water damage, explosions,
embargoes, except with respect to payments to be made to the other party.

18.  GENERAL PROVISIONS

     (a) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California, without giving effect to its rules
of conflicts of law. This Agreement or any agreement that may be executed to
implement this Agreement will not be governed by or construed in accordance with
the United Nations Convention on Contracts for the International Sale of Goods.

     (b) If there is any disagreement that cannot be resolved between the
parties arising out of or relating to this Agreement (other than a dispute
arising out or relating to any copyrights, trade secrets, patents or other
intellectual property of either party), any such dispute will be settled by
binding arbitration on a confidential basis in Santa Clara County, California in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and otherwise under California law. Any arbitration shall be
conducted by an arbitrator who shall have recognized expertise in the field of
electronic design automation. The parties reserve the right to object to any
proposed arbitrator who is employed by or affiliated with a competing entity. An
award of arbitration will be final and binding on the parties hereto, and
judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The prevailing party in any dispute will be
entitled to receive from the other party its reasonable attorneys' fees.

     (c) Company is and shall remain at all times an independent contractor. No
employee of Company, including but without limitation Company CE(s), shall be
deemed to be an employee of Verisity. The parties agree that this Agreement does
not constitute a partnership or joint venture between them for any purpose
whatsoever.  Company shall not have any right or authority to assume or create
any obligation or responsibility, express or implied, on behalf of or in the
name of Verisity or to bind Verisity in any manner whatsoever except as
specifically and expressly authorized hereunder.

     (d) Company shall be fully and solely responsible for, shall pay when due,
and shall indemnify Verisity for all local, municipal, state, provincial and
Federal taxes, imposed upon the Company including but not limited to taxes on
Company's income. Company further agrees to execute such documents as Verisity
may require as evidence of Company's payment of applicable taxes.  Verisity
shall deduct at source any and all Taxes or any part thereof, to the extent it
is required to do so under any applicable law and adjust payments to Company as
appropriate.

     (e) The official text of the Agreement is in the English language and if a
translation is made to any other language, such translation shall be solely for
the convenience of the parties, it being agreed that in the construction and
interpretation of this Agreement, the executed English language Agreement shall
govern.
<PAGE>

                                      -12-

     (f) In the event that any of the provisions of this Agreement are
determined to be invalid under applicable rules, statutes or laws, they are
deemed to that extent to be omitted and shall not affect the validity of the
remainder of the Agreement which will continue without the said provisions.

     (g) This Agreement, including all exhibits attached hereto, constitutes the
entire agreement between the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties relating thereto.  The terms of this Agreement may not be changed,
waived, discharged or terminated except by a statement in writing signed by the
party against whom enforcement of the change, waiver, discharge or termination
is sought; except that Verisity may (as provided herein) amend Products and
Product prices listed on Exhibit A and Services and Service prices listed on
                         ---------
Exhibit B.
---------

     (h) The failure of a party to require performance by the other party of any
provision hereof shall in no way affect the right of the party thereafter to
enforce same against the other party, nor shall waiver by either party of a
breach of any provision hereof by the other party be taken or be held to be a
waiver of any succeeding breach of such provision or as a waiver of the
provision itself.

     (i) The section headings herein are for convenience of reference only and
shall not effect the construction of this Agreement.

     (j) This Agreement may be executed in counterparts, each of which will be
deemed an original, but all of such counterparts together will constitute one
and the same agreement.

     (k) Company hereby acknowledges that unauthorized disclosure or use of the
Products or any Confidential Information or any other breach of this Agreement
could cause irreparable harm and significant injury to Verisity that may be
difficult to ascertain.  Accordingly, Company agrees that Verisity will have the
right to obtain immediate injunctive relief to enforce obligations under this
Agreement in addition to any other rights or obligations it may have.


The parties hereto have executed this Agreement as of the last day and year
specified below.


Verisity Design, EURL.           Integrated Systems Scandinavia EDA AB


By:        /s/ Coby Hanoch                 By:     /s/ Ronny Stromberg

Name:      Coby Hanoch                     Name:   Ronny Stromberg

Title:    VP and GM European Operations    Title:  President
<PAGE>

                                      -13-


Date:                       Date:
<PAGE>

                                      -14-

                          Exhibit A - Products/Prices
                          ---------------------------


A.   Products

The products and prices as they appear in the Verisity Pricebook, which will be
updated from time to time.
<PAGE>

                                      -15-


                          Exhibit B - Services/Prices
                          ---------------------------

A.   Services

The services and prices as they appear in the Verisity Pricebook, which will be
updated from time to time.
<PAGE>

                                      -16-

                     Exhibit C - Fees/Annual Revenue Quota
                     -------------------------------------

A. Verisity shall pay Company (the "Commission") as follows:

(i)  [*],

(ii) a portion of the Billings, as shall be determined, on a case by case
     basis, by Verisity through its Vice President and General Manager of
     European Operations, at its sole and absolute discretion, in respect of
     orders for Products made by multi-national entities, the branches and/or
     headquarters of which are located within the Territory,

(iii)a portion of the Billings, as shall be determined, on a case by case
     basis, by Verisity through its Vice President and General Manager of
     European Operations, at its sole and absolute discretion, in the case
     where the Product will be delivered to, used, or purchased, in whole or
     in part, by an End-User site which is outside Territory, or when
     salespeople from other territories were involved in the sale,

Billings mean those amounts due and payable to Verisity from End-Users
recognized by Verisity as part of the Company's Quota (less VAT, sales taxes,
withholding taxes if applicable and any other applicable levies and taxes)
provided however, that with respect to Product orders, Billings shall only
include Eligible Product Orders (defined below).

Eligible Product Orders are those which: have been accepted by Verisity; have
had all contingencies removed; have a valid software license agreement on file;
and which have been invoiced with standard payment terms of Net 30 days (or Net
45 days, in the case it is so defined in the agreement with the customer).
Contingent orders are not eligible for payment until End-User acceptance has
been achieved. Commissions on orders from End-Users with indeterminable or
unacceptable credit will be withheld until credit issues are resolved.  Orders
with extended payment terms (beyond 30 or 45 days, as defined above) will be
eligible for Commissions once the payment due date falls within 30 (or 45) days.

Any order which is canceled or revoked by the End-User, or for which payment is
never received, will be "de-booked" by Verisity. Quota and Commission credit for
de-booked order(s) will be subtracted, and Verisity will deduct any Commission
previously paid on the de-booked order(s) from Commissions earned on future
orders and/or may charge Company's account in respect thereof or if, at the time
of such de-booking Company's account is zero, Verisity may request and, if so
requested, Company shall pay promptly the de-booking amount to Verisity.

Any amounts payable by Verisity under this paragraph A will be paid by Verisity
to Company by the end of the month following the month in which invoice is sent
to End User. Payment of such amounts will be in U.S. dollars.


[*] 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.
<PAGE>

                                      -17-

B.   Annual Revenue Quota. The revenue quota for fiscal year 2001 shall be [*].
Revenue quota for each following fiscal year shall be determined by Verisity's
Vice President and General Manager of European Operations, at his/her sole and
absolute discretion, not later then by January 15 of the relevant fiscal year.

C.   If, at the request of Verisity, a CE has to travel outside the Territory in
order to perform his/her duties under Section 5(i) of the Agreement, then,
subject to Verisity's prior written approval, CE will be reimbursed for
reasonable traveling, lodging and dining expenses.


[*] 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.