Document:

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                                                                    Exhibit 10.4

                                 VENGINES, INC.

                           2000 STOCK INCENTIVE PLAN

                               (Effective 6/1/00)
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                                VENGINES, INC.

                           2000 STOCK INCENTIVE PLAN

                           (Effective June 1, 2000)

                               TABLE OF CONTENTS
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SECTION 1.  PURPOSE................................................................................................      1

SECTION 2.  DEFINITIONS............................................................................................      1

   (a)   "Award"...................................................................................................      1
   (b)   "Board"...................................................................................................      1
   (c)   "Change in Control".......................................................................................      1
   (d)   "Code"....................................................................................................      2
   (e)   "Committee"...............................................................................................      2
   (f)   "Common-Law Employee".....................................................................................      2
   (g)   "Common Stock"............................................................................................      2
   (h)   "Company".................................................................................................      2
   (i)   "Consultant"..............................................................................................      2
   (j)   "Disability"..............................................................................................      2
   (k)   "Exchange Act"............................................................................................      2
   (l)   "Exercise"................................................................................................      2
   (m)   "Exercise Price"..........................................................................................      2
   (n)   "Fair Market Value".......................................................................................      2
   (o)   "Incentive Stock Option"..................................................................................      3
   (p)   "Key Contributor".........................................................................................      3
   (q)   "Non-Employee Director"...................................................................................      3
   (r)   "Nonstatutory Option".....................................................................................      3
   (s)   "Offeree".................................................................................................      3
   (t)   "Option"..................................................................................................      3
   (u)   "Optionee"................................................................................................      3
   (v)   "Parent"..................................................................................................      3
   (w)   "Participant".............................................................................................      3
   (x)   "Plan"....................................................................................................      3
   (y)   "Preferred Stock".........................................................................................      3
   (z)   "Purchase Price"..........................................................................................      3
   (aa)  "Restricted Share"........................................................................................      4
   (bb)  "Service".................................................................................................      4
   (cc)  "Stock Award Agreement"...................................................................................      4
   (dd)  "Stock Option Agreement"..................................................................................      4
   (ee)  "Stock Purchase Agreement"................................................................................      4
   (ff)  "Subsidiary"..............................................................................................      4
   (gg)  "10% Stockholder".........................................................................................      4
   (hh)  "Vesting".................................................................................................      4
   (ii)  "W-2 Payroll".............................................................................................      4

SECTION 3.  ADMINISTRATION.........................................................................................      4

   (a)   Committees of the Board...................................................................................      4
   (b)   Committee Procedures......................................................................................      5
   (c)   Authority of the Committee................................................................................      5
   (d)   Committee Liability.......................................................................................      5

SECTION 4.  ELIGIBILITY............................................................................................      5
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                                 VENGINES, INC.

                            2000 STOCK INCENTIVE PLAN

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SECTION 5.  STOCK SUBJECT TO PLAN..........................................................................      5

   (a)   Basic Limitation..................................................................................      5
   (b)   Additional Shares.................................................................................      6

SECTION 6.  TERMS AND CONDITIONS OF GRANTS OR SALES........................................................      6

   (a)   Stock Purchase Agreement..........................................................................      6
   (b)   Duration of Offers................................................................................      6
   (c)   Purchase Price....................................................................................      6
   (d)   Restrictions on Transfer of Common Stock..........................................................      6

SECTION 7.  ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES...........................................      7

   (a)   Form and Amount of Award..........................................................................      7
   (b)   Vesting...........................................................................................      7
   (c)   Effect of Change in Control.......................................................................      7
   (d)   Voting Rights.....................................................................................      7

SECTION 8.  TERMS AND CONDITIONS OF OPTIONS................................................................      7

   (a)   Stock Option Agreement............................................................................      7
   (b)   Number of Shares..................................................................................      7
   (c)   Exercise Price....................................................................................      7
   (d)   Exercisability....................................................................................      8
   (e)   Effect of Change in Control.......................................................................      8
   (f)   Term..............................................................................................      8
   (g)   Exercise of Options on Termination of Service.....................................................      8
   (h)   No Rights as a Stockholder........................................................................      8
   (i)   Modification, Extension and Assumption of Options.................................................      9
   (j)   Restrictions on Transfer..........................................................................      9

SECTION 9.  FORMS OF PAYMENT...............................................................................      9

   (a)   General Rule......................................................................................      9
   (b)   Surrender of Stock................................................................................      9
   (c)   Promissory Notes..................................................................................      9
   (d)   Cashless Exercise.................................................................................      9
   (e)   Other Forms of Payment............................................................................     10

SECTION 10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.......................................................     10

   (a)   General...........................................................................................     10
   (b)   Mergers and Consolidations........................................................................     10
   (c)   Reservation of Rights.............................................................................     10

SECTION 11. WITHHOLDING TAXES..............................................................................     11

   (a)   General...........................................................................................     11
   (b)   Common Stock Withholding..........................................................................     11
   (c)   Cashless Exercise/Pledge..........................................................................     11
   (d)   Other Forms of Payment............................................................................     11

SECTION 12. LEGAL REQUIREMENTS.............................................................................     11

   (a)   Restrictions on Issuance..........................................................................     11
   (b)   Financial Reports.................................................................................     11

SECTION 13. ASSIGNMENT OR TRANSFER OF AWARDS...............................................................     12

   (a)   General...........................................................................................     12
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   (b)   Trusts............................................................................................     12

SECTION 14. NO EMPLOYMENT RIGHTS...........................................................................     12

SECTION 15. DURATION AND AMENDMENTS........................................................................     12

   (a)   Term of the Plan..................................................................................     12
   (b)   Right to Amend or Terminate the Plan..............................................................     12
   (c)   Effect of Amendment or Termination................................................................     13

SECTION 16. EXECUTION......................................................................................     14
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                                VENGINES, INC.

                           2000 STOCK INCENTIVE PLAN

SECTION 1.     Purpose

     The purpose of the Plan is to offer selected Employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such persons to remain
in the employ of the Company and to attract new employees with outstanding
qualifications. The Plan seeks to achieve this purpose by providing for the
direct grant or sale of Common Stock and for the grant of Options to purchase
Common Stock. Options granted under the Plan may include Nonstatutory Options as
well as Incentive Stock Options intended to qualify under Section 422 of the
Internal Revenue Code. While this Plan is intended to satisfy federal Rule 701
and Section 25102(o) of the California Corporations Code, Awards may be granted
under this Plan in reliance upon other federal and state securities law
exemptions and to the extent another exemption is relied upon, the terms of this
Plan which are required only because of Rule 701 or Section 25102(o) need not
apply to the extent provided by the Board in the award agreement. To the extent
that an Employee, director or consultant, whose legal residence is in a foreign
jurisdiction and who is not a United States taxpayer, is provided an Award under
the Plan, the laws of the foreign jurisdiction will govern the extent that an
Award can be granted, purchased or exercised under the Plan.

SECTION 2.     Definitions

          (a)  "Award" shall mean any award of an Option, Restricted Share or
other right under the Plan.

          (b)  "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.

          (c)  "Change in Control" shall mean:

               (i)  The consummation of a merger or consolidation of the Company
          with or into another entity or any other corporate reorganization, if
          more than 50% of the combined voting power of the continuing or
          surviving entity's securities outstanding immediately after such
          merger, consolidation or other reorganization is owned by persons who
          were not stockholders of the Company immediately prior to such merger,
          consolidation or other reorganization; or

               (ii) The sale, transfer or other disposition of all or
          substantially all of the Company's assets other than in connection
          with a dissolution of the Company.

A transaction shall not constitute a Change in Control if: (a) its sole purpose
is to change the state of the Company's incorporation, (b) its sole purpose is
to create a holding company that will be owned in substantially the same
proportions by the persons who held the Company's securities immediately before
such transaction or (c) such transaction constitutes the Company's initial
public offering of its securities.
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     (d)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (e)  "Committee" shall mean a committee consisting of one or more members
of the Board that is appointed by the Board to administer the Plan under Section
3.

     (f)  "Common-Law Employee" shall mean an individual paid from W-2 Payroll
of the Company or a Subsidiary. If, during any period, the Company (or
Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not paid such individual in a manner which
results in the issuance of a Form W-2 and withheld taxes with respect to him or
her, then that individual shall not be an eligible Common-Law Employee for that
period, even if any person, court or government agency determines,
retroactively, that that individual is or was a Common-Law Employee during all
or any portion of that period.

     (g)  "Common Stock" shall mean the Company's common stock.

     (h)  "Company" shall mean vEngines, Inc., a Delaware corporation.

     (i)  "Consultant" shall mean an individual who performs bona fide services
to the Company, a Parent or a Subsidiary other than as a Common-Law Employee, or
a member of the Board, or a member of the board of directors of a Subsidiary.

     (j)  "Disability" shall mean that the Optionee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment.

     (k)  "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.

     (l)  "Exercise" shall mean the process by which an Optionee tenders payment
for shares subject to  an Option.

     (m)  "Exercise Price" shall mean the amount for which one share of Common
Stock may be purchased upon exercise of an Option, as specified by the Board in
the applicable Stock Option Agreement.

     (n)  "Fair Market Value" shall mean the market price of shares of Common
Stock, determined by the Board as follows:

          (i)  If the shares were traded over-the-counter on the date in
     question but were not traded on the Nasdaq Stock Market or the Nasdaq
     National Market System, then the Fair Market Value shall be equal to the
     mean between the last reported representative bid and asked prices quoted
     for such date by the principal automated inter-dealer quotation system on
     which the shares are quoted or, if the shares are not quoted on any such
     system, by the "Pink Sheets" published by the National Quotation Bureau,
     Inc.;

          (ii) If the shares were traded over-the-counter on the date in
     question and were traded on the Nasdaq Stock Market or the Nasdaq National
     Market System, then the Fair Market Value shall be equal to the last-
     transaction price quoted for such date by the Nasdaq Stock Market or the
     Nasdaq National Market;

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          (iii)  If the shares were traded on a stock exchange on the date in
     question, then the Fair Market Value shall be equal to the closing price
     reported by the applicable composite transactions report for such date; and

          (iv)   If none of the foregoing provisions is applicable, then the
     Fair Market Value shall be determined by the Board in good faith on such
     basis as it deems appropriate.

     In all cases, the determination of Fair Market Value by the Board shall be
conclusive and binding on all persons.

     (o)  "Incentive Stock Option" or "ISO" shall mean an incentive stock option
described in Code Section 422(b).

     (p)  "Key Contributor" shall mean (i) any individual who is a Common-Law
Employee of the Company, a Parent or a Subsidiary, (ii) a member of the Board,
including (without limitation) a Non-Employee Director, or an affiliate of a
member of the Board, (iii) a member of the board of directors of a Subsidiary,
or (iv) a Consultant. Service as a member of the Board, a member of the board of
directors of a Subsidiary or a Consultant shall be considered employment for all
purposes of the Plan except the second sentence of Section 4(a).

     (q)  "Non-Employee Director"

     shall mean a member of the Board who is not a Common-Law Employee of the
Company or a Subsidiary.

     (r)  "Nonstatutory Option" or "NSO" shall mean a stock option that is not
an ISO.

     (s)  "Offeree" shall mean an individual to whom the Board has offered the
right to acquire Common Stock under the Plan (other than upon exercise of an
Option).

     (t)  "Option" shall mean an ISO or NSO granted under the Plan entitling the
holder to purchase Common Stock.

     (u)  "Optionee" shall mean an individual who holds an Option.

     (v)  "Parent" shall have the meaning set forth in Section 424(e) of the
Code.

     (w)  "Participant" shall mean an individual or estate who holds an Award.

     (x)  "Plan" shall mean this 2000 Stock Incentive Plan of vEngines, Inc.

     (y)  "Preferred Stock" shall mean the Company's preferred stock.

     (z)  "Purchase Price" shall mean the consideration for which one share of
Common Stock may be acquired under the Plan (other than upon exercise of an
Option) pursuant to a grant or sale under Section 6, as specified by the Board.

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     (aa)   "Restricted Share" shall mean a share of Common Stock sold or
granted to an eligible Key Contributor which is nontransferable and subject to
substantial risk of forfeiture until restrictions lapse.

     (bb)   "Service" shall mean service as a Key Contributor.

     (cc)   "Stock Award Agreement" shall mean the agreement between the Company
and the recipient of a Restricted Share which contains the terms, conditions and
restrictions pertaining to such Restricted Share.

     (dd)   "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to an Option .

     (ee)   "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Common Stock under the Plan (other than
pursuant to an Option) that contains the terms, conditions and restrictions
pertaining to the acquisition of such Common Stock.

     (ff)   "Subsidiary" shall have the meaning set forth in Section 424(f) of
the Code.

     (gg)   "10% Stockholder" shall mean an individual who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company, its Parent or any of its Subsidiaries. For purposes of this Subsection
(gg), in determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied. For purposes of this Subsection (gg), "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant, but shall not include Common Stock authorized for issuance under
outstanding Options held by the Key Contributor or by any other person.

     (hh)   "Vesting" shall mean the process by which (1) an Optionee acquires
non-forfeitable rights to purchase shares of Common Stock subject to an Option
or non-forfeitable ownership of shares of Common Stock acquired upon Exercise of
an Option or (2) an Offeree acquires non-forfeitable ownership of shares of
Common Stock subject a Stock Award Agreement.

     (ii)   "W-2 Payroll" shall mean whatever mechanism or procedure that the
Company or a Subsidiary utilizes to pay any individual which results in the
issuance of Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a consultant.
Whether a mechanism or procedure qualifies as a "W-2 Payroll" shall be
determined in the absolute discretion of the Company (or Subsidiary, as
applicable), and the Company or Subsidiary determination shall be conclusive and
binding on all persons.

SECTION 3.  Administration

     (a)    Committees of the Board . The Plan shall be administered by the
Board. However, any or all administrative functions otherwise exercisable by the
Board may be delegated to a Committee. Members of the Committee shall serve for
such period of time as the

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Board may determine and shall be subject to removal by the Board at any time.
The Board may also at any time terminate the functions of the Committee and
reassume all powers and authority previously delegated to the Committee. Any
reference to the Board in the Plan shall be construed as a reference to the
Committee (if any) to whom the Board has assigned a particular function.

     In the event that the Company's Common Stock becomes publicly traded, the
Board may appoint a Committee which, if appointed, shall be comprised solely of
two or more Non-Employee Directors (although Committee functions may be
delegated to officers to the extent the Awards relate to persons who are not
subject to the reporting requirements of Section 16 of the Exchange Act).

     (b)    Committee Procedures . The Board shall designate one of the members
of the Committee as chairperson. The Committee may hold meetings at such times
and places as it shall determine. The acts of a majority of the Committee
members present at meetings at which a quorum exists, or acts reduced to or
approved in writing by all Committee members, shall be valid acts of the
Committee.

     (c)    Authority of the Committee . Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take any actions it
deems necessary or advisable for the administration of the Plan. The Committee
has authority in its discretion to determine eligible Key Contributors to whom,
and the time or times at which, Awards may be granted and the number of Shares
subject to each Award. Subject to the express provisions of the respective Award
agreements (which need not be identical) and to make all other determinations
necessary or advisable for Plan administration, the Committee has authority to
prescribe, amend and rescind rules and regulations relating to the Plan. All
decisions, interpretations and other actions of the Committee shall be final,
conclusive and binding on all parties who have an interest in the Plan or any
option or shares issued thereunder.

     (d)    Committee Liability . No member of the Board or the Committee will
be liable for any action or determination made in good faith by the Committee
with respect to the Plan or any Award made under the Plan.

SECTION 4.  Eligibility.

     Only Key Contributors shall be eligible for designation as Participants by
the Board.  In addition, only individuals who are employed as Common-Law
Employees by the Company or a Subsidiary shall be eligible for the grant of
ISOs.

SECTION 5.  Stock Subject to Plan.

     (a)    Basic Limitation . The stock issuable under the Plan shall be shares
of authorized but unissued or reacquired Common Stock. The maximum number of
shares of Common Stock which may be issued under the Plan shall not exceed
2,000,000 shares, subject to adjustment pursuant to Section 10.

     In any event, (i) the number of shares which are subject to Awards or other
rights outstanding at any time under the Plan shall not exceed the number of
shares which then remain

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available for issuance under the Plan; and (ii) to the extent an award is made
in reliance upon the exemption available under Section 25102(o) of the
California Corporations Code, the number of Shares which are subject to Awards
or other rights outstanding at any time under the Plan or otherwise shall not
exceed the limitation imposed by Section 260.140.45 of Title 10 of the
California Code of Regulations. The Company, during the term of the Plan, shall
at all times reserve and keep available sufficient shares of Common Stock to
satisfy the requirements of the Plan.

     (b)       Additional Shares . If any outstanding Option or other right to
acquire Common Stock for any reason expires or is canceled, forfeited or
otherwise terminated, the Common Stock allocable to the unexercised portion of
such Option or other right shall again be available for the purposes of the
Plan. If shares of Common Stock issued under the Plan are reacquired by the
Company pursuant to any right of repurchase or right of first refusal, such
shares of Common Stock shall again be available for the purposes of the Plan,
except that the aggregate number of shares of Common Stock that may be issued
upon the exercise of ISOs shall in no event exceed the number of shares of
Common Stock reserved for issuance pursuant to paragraph (a) above plus the
number of previously optioned shares returned to the Plan pursuant to the first
sentence of this paragraph 5(b), as adjusted pursuant to Section 10.

SECTION 6.  Terms and Conditions of Grants or Sales.

     (a)    Stock Purchase Agreement . Each grant or sale of Common Stock under
the Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such grant or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions that are not inconsistent with the Plan and
that the Board deems appropriate for inclusion in a Stock Purchase Agreement.
The provisions of the various Stock Purchase Agreements entered into under the
Plan need not be identical.

     (b)    Duration of Offers . Any right to acquire Common Stock under the
Plan other than an Option shall automatically expire if not exercised by the
Offeree within thirty (30) days after the grant of such right was communicated
by the Board to the Offeree.

     (c)    Purchase Price . The Purchase Price of Common Stock offered under
the Plan shall be established by the Board and set forth in the Stock Purchase
Agreement and, to the extent required by applicable law, including the
California Corporations Code or the regulations thereunder, shall not be less
than 85% of Fair Market Value (100% for 10% Stockholders). The Purchase Price
shall be payable in a form described in Section 9 or, in the discretion of the
Board, in consideration for past services rendered to the Company or for its
benefit.

     (d)    Restrictions on Transfer of Common Stock . No Common Stock granted
or sold under the Plan may be sold or otherwise transferred or disposed of by
the Offeree during the one hundred eighty (180) day period following the
effective date of a registration statement covering securities of the Company
filed under the Securities Act of 1933 (unless such restriction is consented to
or waived by the managing underwriter). Subject to the preceding sentence, any
Common Stock granted or sold under the Plan shall be subject to such special
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Board may determine.

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Such restrictions shall apply in addition to any general restrictions that may
apply to all holders of Common Stock.

SECTION 7.   Additional Terms and Conditions of Restricted Shares.

        (a)  Form and Amount of Award. Each Stock Award Agreement shall specify
the number of shares of Common Stock that are subject to the Award. Restricted
Shares may be awarded in combination with NSOs and such an Award may provide
that the Restricted Shares will be forfeited in the event that the related NSOs
are exercised.

        (b)  Vesting. Each Stock Award Agreement shall specify the conditions
upon which Restricted Shares shall become vested, in full or in installments. To
the extent required by applicable law, each Stock Award shall vest no less
rapidly than the rate of 20% per year for each of the first five years from the
date of grant. Subject to the preceding sentence, the vesting period of any
Stock Award shall be determined by the Board in its sole discretion.

        (c)  Effect of Change in Control. The Board may determine at the time of
making an Award or thereafter, that such Award shall become fully vested, in
whole or in part, in the event that a Change in Control occurs with respect to
the Company.

        (d)  Voting Rights. Holders of Restricted Shares awarded under the Plan
shall have the same voting, dividend and other rights as the Company's other
stockholders. A Stock Award Agreement, however, may require the holders to
invest any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid. Such
additional Restricted Shares shall not reduce the number of Shares available
under Section 5.

SECTION 8.   Terms and Conditions of Options

        (a)  Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions that are not
inconsistent with the Plan and that the Board deems appropriate for inclusion in
a Stock Option Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical.

        (b)  Number of Shares. Each Stock Option Agreement shall specify the
number of shares of Common Stock that are subject to the Option and shall
provide for the adjustment of such number in accordance with Section 10. The
Stock Option Agreement shall also specify whether the Option is an ISO or an
NSO.

        (c)  Exercise Price. An Option's Exercise Price shall be established by
the Board and set forth in a Stock Option Agreement. The Exercise Price of an
ISO shall not be less than 100% of the Fair Market Value (110% for 10%
Stockholders) on the date of grant. To the extent required by applicable law,
including the California Corporations Code or the regulations thereunder, the
Exercise Price of a Nonstatutory Option shall not be less than 85% of the Fair
Market Value (110% for 10% Stockholders) on the date of grant. The Exercise
Price shall be payable in a form described in Section 9. Notwithstanding the
foregoing, an Option may be

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granted with an exercise price lower than that prescribed in this paragraph 8(c)
if the Option grant is attributable to the issuance or assumption of an Option
in a transaction to which Code Section 424(a) applies.

        (d)  Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to vest or become exercisable. To
the extent required by applicable law, including the California Corporations
Code or the regulations thereunder, an Option granted to Key Contributors who
are not officers shall vest and become exercisable no less rapidly than the rate
of 20% per year for each of the first five (5) years from the date of grant.
Subject to the preceding sentence, the vesting of any Option shall be determined
by the Board in its sole discretion. A Stock Option Agreement may permit an
Optionee to exercise an Option before it is vested, subject to the Company's
right of repurchase over any shares acquired under the unvested portion of the
Option (an "early exercise"), which right of repurchase shall lapse at the same
rate the Option would have vested had there been no early exercise.

        (e) Effect of Change in Control. The Board may determine, at the time of
granting an Option or thereafter, that such Option shall become fully
exercisable as to all shares of Common Stock subject to such Option in the event
that a Change in Control occurs with respect to the Company.

        (f)  Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of grant (five
(5) years in the case of an ISO granted to a 10% Stockholder). Subject to the
preceding sentence, the Board in its sole discretion shall determine when an
Option is to expire.

        (g) Exercise of Options on Termination of Service. Each Option shall set
forth the extent to which the Optionee shall have the right to exercise the
Option following termination of the Optionee's Service with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Board, need not be uniform among all Options issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination of Service.
Notwithstanding the foregoing in this Section 8(g), to the extent required by
applicable law, including the California Corporations Code or the regulations
thereunder, each Stock Option Agreement shall provide that the Optionee shall
have the right to exercise the Option following termination of the Optionee's
Service, during the Option's term, for at least thirty (30) days following
termination of Service for any reason except Cause, death or Disability, and for
at least six (6) months following termination of Service due to death or
Disability.

        (h)  No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Common Stock
covered by an Option until such person becomes entitled to receive such Common
Stock by filing a notice of exercise, paying the Exercise Price pursuant to the
terms of such Option, and entering into a Notice of Exercise and Common Stock
Purchase Agreement.

        (i)  Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Board may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of shares of Common

                                      -8-
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Stock and at the same or a different Exercise Price. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, impair the Optionee's rights or increase the Optionee's obligations
under such Option.

        (j)  Restrictions on Transfer. No shares of Common Stock issued upon
exercise of an Option may be sold or otherwise transferred or disposed of by the
Optionee during the one hundred eighty (180) day period following the effective
date of a registration statement covering securities of the Company filed under
the Securities Act of 1933 (unless such restriction is waived by the managing
underwriter of the offering with respect to which such registration statement
was filed). Subject to the preceding sentence, any Common Stock issued upon
exercise of an Option shall be subject to such rights of repurchase, rights of
first refusal and other transfer restrictions as the Board may determine. Such
restrictions shall apply in addition to any restrictions that may apply to
holders of Common Stock generally. Any right to repurchase an Optionee's Common
Stock at the original Exercise Price upon termination of the Optionee's Service
shall lapse at least as rapidly as the schedule set forth in Subsection (d)
above. Any such repurchase right may be exercised only within ninety (90) days
after the termination of the Optionee's Service for cash or for cancellation of
indebtedness incurred in purchasing the Common Stock.

SECTION 9.   Forms of Payment.

        (a)  General Rule. The entire Purchase Price or Exercise Price shall be
payable in cash or cash equivalents acceptable to the Company at the time of
exercise or purchase, except as otherwise provided in this Section 9.

        (b) Surrender of Stock. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, payment may be made all or in part with
shares of Common Stock already owned by the Optionee or the Optionee's
representative for any time period specified by the Board and that are
surrendered to the Company in good form for transfer. Such Common Stock shall be
valued at Fair Market Value on the date when the new Common Stock is purchased
under the Plan.

        (c) Promissory Notes. To the extent that a Stock Option Agreement or
Stock Purchase agreement so provides, payment may be made all or in part with a
full recourse promissory note executed by the Optionee of Offeree. The interest
rate and other terms and conditions of such note shall be determined by the
Board. The Board may require that the Optionee pledge his or her Common Stock to
the Company for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Common Stock be released to the
Optionee or Offeree until such note is paid in full, unless otherwise provided
in the Stock Option Agreement or Stock Purchase Agreement.

        (d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides and a public market for the Common Stock exists, payment may be made
all or in part by delivery (on a form acceptable to the Board) of an irrevocable
direction to a securities broker to sell Common Stock and to deliver all or part
of the sale proceeds to the Company in payment of the aggregate Exercise Price.

                                      -9-
<PAGE>

        (e)  Other Forms of Payment.  To the extent provided in the Stock Option
Agreement, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

SECTION 10.  Adjustments Upon Changes in Common Stock

        (a) General. In the event of a subdivision of the outstanding Common
Stock, a declaration of a dividend payable in Common Stock, a declaration of an
extraordinary dividend payable in a form other than Common Stock in an amount
that has a material effect on the value of Common Stock, a combination or
consolidation of the outstanding Common Stock into a lesser number of shares, a
recapitalization, a reclassification or a similar occurrence, the Board shall
make appropriate adjustments, subject to the limitations set forth in Section
10(c), in one or more of (i) the number of shares of Common Stock available for
future grants of Options or other rights to acquire Common Stock under Section
5, (ii) the number of shares of Common Stock covered by each outstanding Option
or other right to acquire Common Stock or (iii) the Exercise Price of each
outstanding Option or the Purchase Price of each other right to acquire Common
Stock.

        (b)  Mergers and Consolidations. In the event that the Company is a
party to a merger or consolidation, outstanding Options or other rights to
acquire Common Stock shall be subject to the agreement of merger or
reorganization. Such agreement, without an Optionee's consent, may provide for:

             (i)    The continuation of such outstanding Options by the Company
     (if the Company is the surviving corporation);

             (ii)   The assumption of the Plan and such outstanding Options by
     the surviving corporation or its parent;

             (iii)  The substitution by the surviving corporation or its parent
     of options with substantially the same terms for such outstanding Options;
     or

             (iv)   The cancellation of such outstanding Options that were not
     exercised or settled without payment of any consideration.

        (c)  Reservation of Rights.  Except as provided in this Section 10, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend,
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of shares
of Common Stock subject to an Option, or the number of shares subject to any
other right to acquire Common Stock and/or the Exercise Price or Purchase Price.
The grant of an Option or other right to acquire Common Stock pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.

                                      -10-
<PAGE>

SECTION 11.  Withholding Taxes.

        (a)  General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Committee for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any shares or make any cash payment under the Plan until such
obligations are satisfied.

        (b)  Common Stock Withholding. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any shares of Common Stock that
otherwise would be issued to him or her or by surrendering all or a portion of
any shares of Common Stock that he or she previously acquired. Notwithstanding
the previous sentence in this Section 11(b), the maximum amount that may be
subject to Common Stock withholding under this Section 11(b) shall be determined
by the Committee based upon the minimum rates of federal, state and employment
withholding taxes applicable under the circumstances. Shares of Common Stock
that are withheld or surrendered pursuant to this Section 11 shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash. Any payment of taxes by assigning shares of Common Stock to the Company
may be subject to restrictions, including any restrictions required by rules of
any federal or state regulatory body or other authority.

        (c)  Cashless Exercise/Pledge.  The Committee may provide that if
Company shares of Common Stock are publicly traded at the time of exercise,
arrangements may be made to meet the Optionee's withholding obligation by
cashless exercise or pledge.

        (d)  Other Forms of Payment. The Committee may permit such other means
of tax withholding as it deems appropriate.

SECTION 12.  Legal Requirements.

        (a)  Restrictions on Issuance.  Common Stock shall not be issued under
the Plan unless the issuance and delivery of such Common Stock complies with (or
is exempt from) all applicable requirements of law, including (without
limitation) the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, state securities laws and regulations, and the
regulations of any stock exchange on which the Company's securities may then be
listed, and the Company has obtained the approval or favorable ruling from any
governmental agency that the Company determines is necessary or advisable.

        (b)  Financial Reports. To the extent required to comply with the
California Corporations Code or the regulations thereunder, not less often than
annually the Company shall furnish to Optionees and Offerees Company summary
financial information including a balance sheet regarding the Company's
financial condition and results of operations, unless such Optionees or Offerees
have duties with the Company that assure them access to equivalent information.
Such financial statements need not be audited.

                                      -11-
<PAGE>

SECTION 13.  Assignment or Transfer of Awards.

        (a)  General. An Award granted under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs may not
be transferred. Also notwithstanding the foregoing, while the shares of Common
Stock are subject to California Corporations Code Section 25102(o), (i) Offerees
and Optionees may not transfer their rights hereunder except by will,
beneficiary designation or the laws of descent and distribution, and (ii) any
rights of repurchase in favor of the Company shall take into account the
provisions of Sections 260.140.41 or 260.140.42 of Title 10 of the California
Code of Regulations, as applicable.

        (b)  Trusts. Neither this Section 13 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved by the Committee in writing. A transfer or assignment of Restricted
Shares from such trustee to any other person than such Participant shall be
permitted only to the extent approved in advance by the Committee in writing,
and Restricted Shares held by such trustee shall be subject to all the
conditions and restrictions set forth in the Plan and in the applicable Stock
Award Agreement, as if such trustee were a party to such Agreement.

SECTION 14.    No Employment Rights.

        No provision of the Plan, nor any Option granted or other right to
acquire Common Stock granted under the Plan, shall be construed to give any
person any right to become, to be treated as, or to remain a Key Contributor.
The Company and its Subsidiaries reserve the right to terminate any person's
Service at any time and for any reason.

SECTION 15.    Duration and Amendments.

        (a)    Term of the Plan.  The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board, subject to the approval of
the Company's stockholders. In the event that the stockholders fail to approve
the Plan within twelve (12) months after its adoption by the Board, any Option
grant or other right to acquire Common Stock already made shall be null and
void, and no additional Option grant or other right to acquire Common Stock
shall be made after such date. The Plan shall terminate automatically ten (10)
years after its adoption by the Board and may be terminated on any earlier date
pursuant to Subsection (b) below.

        (b)    Right to Amend or Terminate the Plan.  The Board may amend or
terminate the Plan at any time. Except as otherwise provided in Section 10(b),
rights under any Option granted or other right to acquire Common Stock granted
before amendment of the Plan shall not be materially impaired by any amendment
or termination, except with consent of the Optionee or Offeree. An amendment of
the Plan shall be subject to the approval of the Company's stockholders only to
the extent required by applicable laws, regulations or rules.

        (c)    Effect of Amendment or Termination.  No Common Stock shall be
issued or sold under the Plan after the termination thereof, except upon
exercise of an Option granted prior to such

                                      -12-
<PAGE>

termination.  Except as otherwise provided in Section 10(b), the termination of
the Plan, or any amendment thereof, shall not affect any Common Stock previously
issued or Option previously granted under the Plan.

              [The remainder of this page is intentionally blank.]

                                      -13-
<PAGE>

SECTION 16.    Execution.

     To record the adoption of the Plan, the Company has caused its authorized
officer to execute the same.

                                                VENGINES, INC.

                                                By__________________________

                                                Title_______________________

                                      -14-<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.

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