Document:

<PAGE>

                                                                   EXHIBIT 10.15
                                                                   -------------

[LOGO]

                                                             1/st/ December 1998

Dear Sirs,

Further to our discussions and correspondence, I wish to summarize the
understandings we have reached pertaining to our cooperation with respect to the
sale of non-exclusive licenses to use Verisity's products in Sweden, Denmark,
Finland and Norway ("The Territory").

1.   As agreed, ISS AB shall vigorously act within the Territory in order to
     promote the sale of licenses to use Verisity's products and to that end ISS
     AB shall, inter alia, explore the market for the Products, approach
     potential customers, refer potential customers to Verisity etc. For the
     removal of doubt, it was agreed that as long as ISS AB act in cooperation
     with us under this letter of understanding ISS AB shall not be engaged,
     directly or indirectly, with the sale, distribution or marketing, in any
     way whatsoever, of similar or competitive products to Verisity's products.

     1.1  ISS AB shall be entitled to a commission with respect to any final and
          binding purchase of a license from Verisity during the term of this
          letter of understanding as follows: With respect to the first license
          purchased from Verisity by a new customer with in the territory during
          the term of this letter of understanding as a direct result of ISS AB
          efforts and activities--[*] of the license fee. A new customer is
          defined as a company or a division of a company who was not using
          Verisity technology prior to the initial license sale. In any case of
          a dispute regarding this issue, it will be solely determined by the
          CEO of Verisity.

          Any additional license purchased from Verisity during the term of this
          letter of understanding by those new customers-[*]of the license fee.

[*] 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.

                                      -1-
<PAGE>

2.

     2.1  The commission shall be paid with respect to orders which have been
          accepted by Verisity, have had all contingencies removed and have been
          invoiced and actually paid to Verisity by the customer. Contingent
          orders are not eligible for payment of a commission until the customer
          actually pays Verisity.

          For the removal of doubt, any order which is canceled or revoked by
          the customer, or for which payment is not actually received, will not
          entitle ISS AB to a commission.

          ISS AB commission shall be paid by Verisity within 15 days from the
          actual receipt by us of the initial license fee from any relevant
          customer.

     2.2  ISS AB commission will be based on the actual amount of the license
          fee paid by each customer in U.S$ including the initial annual
          maintenance and support fee paid by such customer for the first year
          of maintenance and support, all as specified in the final purchase
          order of the customer approved by Verisity. For the removal of doubt,
          no commission will he paid with raspect to any extension of
          maintenance and support by a customer beyond the first year.

     2.3  Commissions on sales which are split between multiple sales areas or
          which will entitle another person or entity to receive a commission,
          will be paid based on the portion of the sale credited to ISS AB
          activities. The ratio of any such splits will be solely determined by
          the CEO of Verisity.

     2.4  Should our cooperation under this letter of understanding expire or be
          terminated for any reason, commissions will be paid for non-
          contingent, non-cancelable and non-refundable orders invoiced and
          actually paid to Verisity prior to such expiration or termination
          date.

     2.5  ISS AB have agreed not to assign or give any part of the above
          commission to any agent, customer, customer representative or other
          person as an inducement for obtaining an order.
<PAGE>

     3.   ISS AB shall act as an independent consultant acting on its own
          expense and risk and in no event shall ISS AB hold itself to be our
          agent. Furthermore, ISS AB shall not be entitled to obligate or bind
          us in any and all matters, and inter alia, ISS AB shall not be
          entitled to take or accept any orders from end-users for the products.

     4.   The arrangement under this letter of understanding shall be in force
          for a period of 6 months. Notwithstanding the above, each party may
          terminate the cooperation under this letter of understanding for any
          reason whatsoever upon a 30 days prior written notice to the other
          party. For the removal of doult, ISS AB shall not be entitled to any
          payment or compensation upon such expiration or termination. Upon
          expiration or termination of our cooperation, ISS AB shall cease any
          activity with respect to verisity and its products and ISS AB shall
          not use the Verisity name in any way whatsoever.

     5.   ISS AB will execute the Verisity Confidentiality, Proprietary
          Information and Inventions Agreement, attached for ISS AB reference.

     6.   ISS AB shall give Verisity monthly reports detailing ISS AB activities
          under this letter of understanding.

     7.   ISS AB rights and obligations hereunder may not be assigned,
          delegated, pledged or otherwise transferred, in whole or in part.

     8.   The understandings contained in this letter shall be governed and
          construed in accordance with the internal laws of the State of
          California, without giving effect to its rules of conflicts of laws.
          The understandings contained herein will not be governed by or
          construed in accordance with the United Nations Convention on
          Contracts for the International Sale of Goods.

We hope that this letter fully summarizes our understandings.  Please confirm
ISS AB agreement to the above by signing a copy of this letter and returning it
to us.

                                             Sincerely yours,

                                             Gideon Kedem,
                                             European Sales Director
                                             Verisity Design Inc.

I agree to all of the above and
undertake to act accordingly.  /s/ Gideon Kedem
                               1/12/98

/s/ Ronny Stromberg
Ronny Stromberg, ISS AB

1 Dec 1998<PAGE>

                                                                   EXHIBIT 10.16
                                                                   -------------
                             DISTRIBUTOR AGREEMENT

                                    BETWEEN

                             VERISITY DESIGN, INC.

                                      AND

                             CYBERTEC YUGEN KAISHA

                      INTERNATIONAL DISTRIBUTOR AGREEMENT

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

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

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

1.  DEFINITIONS

    The capitalized terms below will have the respective meanings indicated:

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

                                      -1-
<PAGE>

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

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

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

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

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

2.  APPOINTMENT; AUTHORITY

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

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

                                      -2-
<PAGE>

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

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

3.  DURATION OF THE AGREEMENT

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

4.  DUTIES OF VERISITY

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

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

5.  DUTIES OF COMPANY

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

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

                                      -3-

[*]- 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>

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

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

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

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

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

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

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

6.  LSI SYSTEMS, INC.

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

                                      -4-
<PAGE>

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

7.  COMPENSATION; PAYMENT

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

8.  WARRANTY; LIMITATION OF LIABILITY; INSURANCE

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

9.  OWNERSHIP AND USE OF INTELLECTUAL PROPERTY; CONSIGNMENT

    (a)  Company acknowledges that (i) it is obtaining only the right to market,
demonstrate and perform the Products and Services and sell, license and
distribute Products and Services as provided hereunder; (ii) all ownership,
right, title or interest in or to any trademarks, trade names, insignias, logos,
proprietary marks and the like related to the Products (together, the
"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) will remain at all times with Verisity and its
licensors; (iii) none of such rights are transferred from Verisity to Company
hereunder; and (iv) any permitted use of such rights hereunder will inure to the
benefit of Verisity and/or its licensors, and

                                      -5-
<PAGE>

that Company will not itself claim any exclusive rights in such rights or the
goodwill and rights related thereto.

    (b)  Subject to Verisity's right to review all marketing materials,
packaging and documentation prior to use by Company, Verisity hereby grants
Company a nonexclusive 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 and expense. 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, except as may be approved by
Verisity in writing. 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.

    (c)  Company shall promptly notify Verisity of any infringement within the
Territory of which it may become aware of any Proprietary Mark, patent,
copyright or 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 and risk of loss to any and all such items.

10. 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 a U.S.
or Japanese copyright of a third party, provided that:  (i) Company notifies
Verisity in writing within thirty (30) days of any such suit, (ii) Verisity has
sole control of the defense and all related settlement negotiations and (iii)
Company provides

                                      -6-
<PAGE>

Verisity with the assistance, information and authority necessary to perform the
above. Reasonable out-of-pocket expenses incurred by Company in providing such
assistance will be reimbursed by Verisity.

    (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 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 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, at its expense, to modify the Products
to be non-infringing. This Section 10 states Company's exclusive and entire
remedy and Verisity's entire liability for any infringement.

11. GENERAL INDEMNITY BY COMPANY

    Company will defend and indemnify Verisity and Verisity Ltd. against any and
all claims, actions, suits losses, costs, liabilities or expenses (including
attorneys' fees) arising out of or related to (i) any breach by Company of its
representations, warranties or covenants made hereunder and (ii) any claim by
LSI against Company relating to LSI's performance of services for Company as
subcontractor or otherwise or any termination by Company of LSI's services.

12. CONFIDENTIALITY

    Company acknowledges that it may be furnished or may otherwise receive or
have access to information relating to Verisity's or Verisity Ltd.'s past,
present or future 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). Company 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 agrees that it will cause all of its employees, 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.

                                      -7-
<PAGE>

13. TERMINATION

    (a)  If either party defaults in the performance of any provision of this
Agreement, the non-defaulting party may immediately give written notice 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 making an assignment for the benefit of creditors, or
(iii) dissolution of Company.

14. [*]

15. CHANGE OF CONTROL

    If a Change of Control occurs at any time prior to December 31, 1999, and no
event of default by Company has occurred and is continuing upon such Change of
Control, Company will be entitled to receive from the Purchaser an amount
determined in accordance with Section A of Exhibit C with respect to Revenues
                                           ---------
for the [*] beginning on such date of termination, but in no event less than [*]
Verisity will require any Purchaser to assume the obligation to pay the amount
set forth in the preceding sentence. Such amount will be payable within thirty
(30) days after the end of such [*] period. Company shall make a reasonable
effort, if so requested, to ensure a smooth sales team transition. Change of
                                                                   ---------
Control means any assignment or transfer of all of Verisity's rights to sell or
-------
license Products and Services that does not include an assignment or transfer of
Verisity's rights and obligations under this Agreement. Purchaser means the
                                                        ---------
person or entity that acquires all of Verisity's rights to sell or license
Products and Services pursuant to a Change of Control.

[*]- 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.

                                      -8-
<PAGE>

16. EFFECT OF TERMINATION

    (a)  Upon termination of this Agreement, Company's appointment as Verisity's
exclusive distributor in Section 2 above will automatically terminate, all
amounts and debts of Company to Verisity shall immediately 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 9(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 deliver
promptly same to Verisity, and Company will promptly return Products shipped to
Company at no charge or on consignment or pay for such Products at the prices
specified on Exhibit A attached hereto.
             ----------

    (b)  A party terminating this Agreement pursuant to the terms hereof shall
not be liable to the other party for any claims, damages or liabilities to the
other party arising by reason of the exercise of such right to terminate.

    (c)  In the event of termination hereunder, Company shall be entitled to
amounts determined in accordance with Section A of Exhibit C with respect to
                                                   ---------
orders solicited by Company prior to the date of termination.

    (d)  The provisions of the following Sections will survive any termination
of this Agreement: 1, 2(b), 8(a), 9(a), 11, 12, 13, 16, 18 and 21.

17. 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.

    (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
United States laws pertaining to export of Products or technical data. Company
agrees, and will cause each of its customers and End-Users to agree, not to
export or re-export any

                                      -9-
<PAGE>

Product or part thereof, directly or indirectly, to any prohibited country.
Company agrees, and will cause its customers and End-Users to agree, not to
distribute or supply any Product to any entity or person if there is reason to
believe that such entity or person intends to export or use any Product or part
thereof in any prohibited country.

18. NOTICES

    Any notice required or permitted to be given under this Agreement shall be
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).

19. 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 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.

20. FORCE MAJEURE

    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.

21. 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

                                      -10-
<PAGE>

conflicts of law. 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)  The parties agree that this Agreement does not constitute Verisity and
Company as a partnership or joint venture, or Company or Mr. Naoya Tsuruta as an
employee of Verisity 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)  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 text shall
govern.

    (e)  In the event that any of the provisions of this Agreement are
determined to be invalid under applicable rules, statutes and 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.

    (f)  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 orally, except by a statement in writing signed
by the party against whom enforcement of the change, waiver, discharge or
termination is

                                      -11-
<PAGE>

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.
                 ---------                                           ---------

    (g)  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.

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

    (i)  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.

    (j)  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, Inc.               CyberTec Yugen Kaisha

By:    /s/ Moshe Gavrielov          By:    /s/ Naoya Tsuruta
       ------------------------            ----------------------
Name:  Moshe Gavrielov              Name:  Naoya Tsuruta
       ------------------------            ----------------------
Title:  CEO                         Title: CEO
       ------------------------            ----------------------
Date:                               Date:
       ________________________            ______________________

                                      -12-
<PAGE>

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

A.  Products

Specman perpetual and time-based licenses
Specman simulator interfaces

B.  Prices

<TABLE>
<CAPTION>
Product #                    Name                                Unit Price                        Maintenance
--------------------------------------------------------------------------------------------------------------
<S>                          <C>                                 <C>                               <C>
SM1000                       Specman Perpetual License              [*]                               [*]

One (1) Specman Simulator Interface is included

Specman Simulator Interfaces                                        [*]                               [*]

SM1021                       Verilog XL
SM1022                       Leapfrog
SM1023                       QuickHDL
SM1024                       Modelsim
SM1025                       VSS
SM1026                       VCS
SM1027                       SpeedSim

SM1301                       License Upgrade to World Wide WAN

                                                                    [*]                             [*]

SML1001                      [*]                                    [*]                             [*]

SML1012                      Specman 1 Year License                 [*]                             [*]
</TABLE>

[*] 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>

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

A.  Services

    Specman Training
    Onsite applications consulting

B.  Prices

TR1000   Specman Training           [*]

AE1000   Applications consulting    [*]
         onsite

Service fees are paid to the organization (CyberTec or Verisity) providing the
service.

[*]- 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>

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

A. [*]

B. [*]

[*]- 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>

[*]
     C.   Annual Revenue Quota. The revenue quota for fiscal year 1999 shall be
[*]
     D.   If at any time LSI Systems no longer acts as a subcontractor for
Company, Verisity may at its discretion revise the Commission to CyberTec.

[*]- 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>

                        Exhibit D--Target Account List
                        ------------------------------

[*]

[*]- 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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