Prolific sues Magma for breach of contract

SAN MATEO, Calif. (11/05/01, 3:15 p.m. EST) - Prolific Inc., a supplier of tools to automate standard-cell creation, has filed a complaint against Magma Design Automation Inc. in Santa Clara County Superior Court seeking $3.2 million in compensatory damages.

The eight-page complaint, filed Aug. 8, alleges breach of contract, fraud and deceit, unfair business practices, and intentional interference with prospective economic relations, all surrounding an OEM agreement the two companies entered in May 2000. Magma made reference to the suit in a recent S-1A filing with the Securities and Exchange Commission. Magma is waiting for market conditions to improve to make a public offering.

In the complaint, Prolific contends that the two companies had signed an OEM distribution agreement under which Prolific would develop a version of its cell-generation software for Magma's Blast Fusion physical design system. Magma, in turn, was to bundle the Prolific software with sales of Blast Fusion and pay royalties to Prolific.

According to the complaint, the agreement fell apart during the development of the technology. Magma was contracted to pay Prolific for reaching three defined milestones. Prolific contends it was only paid for accomplishing the first two milestones and was not paid for accomplishing the third. Magma then severed the relationship, according to Prolific.

"Magma has repudiated its duties to pay Prolific guaranteed payments of at least $3,150,000 under the agreement," states the complaint.

Prolific also alleges in the complaint that Prolific lost potential revenue because the original contract gave Magma the right of first refusal, essentially arranging it so that Prolific could not do business with or get purchased by Magma competitors. The complaint does not specify whether Prolific is seeking damages for lost business, however.

"We made an agreement with Magma, and we expected them to honor it," Dan Nenni, vice president of marketing at Prolific, said in a prepared statement. "Magma has refused to deal reasonably with us, so we are forced to litigate."

Magma, which is in a quiet period as it waits to make its IPO, declined to comment on the case other than to state through a spokesman that it intends to defend itself rigorously.



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