Document:

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                                                                   EXHIBIT 10.3
                                                                   ------------

                            UNCONDITIONAL GUARANTY

                                (VERISITY LTD.)

          For and in consideration of the loan by SILICON VALLEY BANK ("Bank")
to VERISITY DESIGN, INC. ("Borrower"), which loan is made pursuant to Amended
and Restated Loan and Security Agreement of even date herewith between Borrower
and Bank (the "Agreement"), the undersigned guarantor ("Guarantor") hereby
unconditionally and irrevocably guarantees the prompt and complete payment of
all amounts that Borrower owes to Bank and performance by Borrower of the Loan
Documents (as defined in the Agreement) between Borrower and Bank, as amended
from time to time (collectively referred to as the "Agreements"), in strict
accordance with their respective terms.

          1.   If Borrower does not perform its obligations in strict accordance
with the Agreements, Guarantor shall immediately pay all amounts due thereunder
(including, without limitation, all principal, interest and fees) and otherwise
to proceed to complete the same and satisfy all of Borrower's obligations under
the Agreements.

          2.   The obligations hereunder are independent of the obligations of
Borrower, and a separate action or actions may be brought and prosecuted against
Guarantor whether action is brought against Borrower or whether Borrower be
joined in any such action or actions. Guarantor waives the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof, to the extent permitted by law. Guarantor's liability under this
Guaranty is not conditioned or contingent upon the genuineness, validity,
regularity or enforceability of the Agreements.

          3.   Guarantor authorizes Bank, without notice or demand and without
affecting its liability hereunder, from time to time to renew, extend or
otherwise change the terms of the Agreements or any part thereof.

          4.   Guarantor waives any right to require Bank to (a) proceed against
Borrower or any other person; (b) proceed against or exhaust any security held
from Borrower; or (c) pursue any other remedy in Bank's power whatsoever. Bank
may, at its election, exercise or decline or fail to exercise any right or
remedy it may have against Borrower or any security held by Bank, including
without limitation the right to foreclose upon any such security by judicial or

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nonjudicial sale, without affecting or impairing in any way the liability of
Guarantor hereunder. Guarantor waives any defense arising by reason of any
disability or other defense of Borrower or by reason of the cessation from any
cause whatsoever of the liability of Borrower. Guarantor waives any setoff,
defense or counterclaim that Borrower may have against Bank. Guarantor waives
any defense arising out of the absence, impairment or loss of any right of
reimbursement or subrogation or any other rights against Borrower. Until all of
the amounts that Borrower owes to Bank have been paid in full, (i) Guarantor
shall have no right of subrogation or reimbursement for claims arising out of or
in connection with this Guaranty, (ii) contribution or other rights against
Borrower, (iii) Guarantor waives any right to enforce any remedy that Bank now
has or may hereafter have against Borrower and (iv) Guarantor waives all tights
to participate in any security now or hereafter held by Bank. Guarantor waives
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty and of the existence, creation or incurring of new or additional
indebtedness. Guarantor assumes the responsibility for being and keeping itself
informed of the financial condition of Borrower and of all other circumstances
bearing upon the risk of nonpayment of any indebtedness or nonperformance of any
obligation of Borrower, warrants to Bank that it will keep so informed and
agrees that absent a request for particular information by Guarantor, Bank shall
have no duty to advise Guarantor of information known to Bank regarding such
condition or any such circumstances. Guarantor waives the benefits of California
Civil Code sections 2810, 2845, 2850, 2899 and 3433.

          5.   If Borrower becomes insolvent or is adjudicated bankrupt or files
a petition for reorganization, arrangement, composition or similar relief under
any present or future provision of the United States Bankruptcy Code, or if such
a petition is filed against Borrower, and in any such proceeding some or all of
any indebtedness or obligations under the Agreements are terminated or rejected
or any obligation of Borrower is modified or abrogated, or if Borrower's
obligations are otherwise avoided for any reason, Guarantor agrees that
Guarantor's liability hereunder shall not thereby be affected or modified and
such liability shall continue in full force and effect as if no such action or
proceeding had occurred. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if any payment must be returned by Bank upon the
insolvency, bankruptcy or reorganization of Borrower, Guarantor, any other
guarantor or otherwise, as though such payment had not been made.

          6.   Upon an Event of Default (as defined in the Agreement) of
Borrower, any indebtedness of Borrower now or hereafter held by Guarantor is
hereby subordinated to any indebtedness of Borrower to Bank, and such

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indebtedness of Borrower to Guarantor shall be collected, enforced and received
by Guarantor as trustee for Bank and be paid over to Bank on account of the
indebtedness of Borrower to Bank but without reducing or affecting in any manner
the liability of Guarantor under the other provisions of this Guaranty;
provided, however, that if there is no Event of Default that is uncured beyond
the applicable cure period, if any, under the Agreement, any amounts received by
Guarantor on account of any indebtedness of Borrower held by Guarantor shall be
Borrower's sole and separate property and shall not be subject to recovery by
Bank if properly received pursuant to this Section 6.

          7.   Guarantor agrees to pay a reasonable attorneys' fee and all other
costs and expenses that may be incurred by Bank in the enforcement of this
Guaranty. No terms or provisions of this Guaranty may be changed, waived,
revoked or amended without Lender's prior written consent. Should any provision
of this Guaranty be determined by a court of competent jurisdiction to be
unenforceable, all of the other provisions shall remain effective. This
Guaranty, together with any agreements (including without limitation any
security agreements or any pledge agreements) executed in connection with this
Guaranty, embodies the entire agreement among the parties hereto with respect to
the matters set forth herein, and supersedes all prior agreements among the
parties with respect to the matters set forth herein. No course of prior dealing
among the parties, no usage of trade and no parol or extrinsic evidence of any
nature shall be used to supplement, modify or vary any of the terms hereof.
There are no conditions to the full effectiveness of this Guaranty. Bank may
assign this Guaranty without in any way affecting Guarantor's liability under
it. This Guaranty shall inure to the benefit of Bank and its successors and
assigns. This Guaranty is in addition to the guaranties of any other guarantors
and any and all other guaranties of Borrower's indebtedness or liabilities to
Bank.

          8.   Guarantor represents and warrants to Bank that (i) Guarantor has
taken all necessary and appropriate action to authorize the execution, delivery
and performance of this Guaranty, (ii) execution, delivery and performance of
this Guaranty do not conflict with or result in a breach of or constitute a
default under Guarantor's Articles of Association and Memorandum of Association
or other organizational documents or agreements to which it is party or by which
it is bound and (iii) this Guaranty constitutes a valid and binding obligation,
enforceable against Guarantor in accordance with its terms.

          9.   Guarantor covenants and agrees that Guarantor shall do all of the
following:

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               9.1  Guarantor shall maintain its corporate existence, remain in
good standing in Israel, and continue to qualify in each jurisdiction in which
the failure to so qualify could reasonably be expected to have a material
adverse effect on the financial condition, operations or business of Guarantor.
Guarantor shall maintain in force all licenses, approvals and agreements, the
loss of which could reasonably be expected to have a material adverse effect on
its financial condition, operations or business.

               9.2  Guarantor shall comply with all statutes, laws, ordinances,
directives, orders and government rules and regulations to which it is subject
if noncompliance with such laws could reasonably be expected to adversely affect
the financial condition, operations or business of Guarantor.

               9.3  At any time and from time to time Guarantor shall execute
and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.

          10.  This Guaranty shall be governed by the laws of the State of
California, without regard to conflicts of laws principles. GUARANTOR WAIVES ANY
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. Guarantor submits to the exclusive jurisdiction of the State
and federal courts located in Santa Clara County, California.

          IN WITNESS WHEREOF, the undersigned Guarantor has executed this
Guaranty as of this 31st day of December, 1998.

                                     VERISITY LTD.

                                     By: /s/ Charles Alvarez
                                         --------------------------------------
                                     Title: VP Finance/CFO
                                           ------------------------------------

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                      CORPORATE RESOLUTIONS TO GUARANTEE

--------------------------------------------------------------------------------
Guarantor: VERISITY LTD.
           ------------------
--------------------------------------------------------------------------------

          I, the undersigned Secretary or Assistant Secretary of Verisity Ltd.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the country of Israel.

          I FURTHER CERTIFY that the Articles of Association and Memorandum of
Association of the Corporation attached hereto are in full force and effect on
the date hereof and have not been modified or amended as of the date hereof.

          I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.

          BE IT RESOLVED, that any one (1) of the following named officers,
employees or agents of this Corporation, whose actual signatures are shown
below:

NAMES                        POSITIONS                       ACTUAL SIGNATURES
-----------------------     ---------------------------     --------------------
Moshe Gavrielov              Chief Executive Officer         /s/ Moshe Gavrielov
-----------------------     ---------------------------     --------------------
Avishai Silvershatz          President                       /s/ Avishai Silvers
-----------------------     ---------------------------     --------------------
Charles Alvarez              Chief Financial Officer         /s/ Charles Alvarez
-------------------------------------------------------     -------------------

acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:

          Guarantee Indebtedness.  To guarantee amounts borrowed from time to
          ----------------------
time from Silicon Valley Bank ("Bank") by VERISITY DESIGN, INC. ("Borrower")
pursuant to that certain Amended and Restated Loan and Security

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Agreement between Bank and Borrower dated as of December 31, 1998, as amended
from time to time (the "Loan Agreement").

          Execute Guaranty.  To execute and deliver to Bank that certain
          ----------------
Unconditional Guaranty (Verisity Ltd.) dated December 31, 1998 (the "Guaranty"),
on Bank's forms, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, consolidations or substitutions therefor.

          Further Acts.  To do and perform such other acts and things, to pay
          ------------
any and all fees and costs and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or proper
in order to carry into effect the provisions of these Resolutions.

          BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

          I FURTHER CERTIFY that the officers, employees and agents named above
are duly elected, appointed or employed by or for the Corporation, as the case
may be, and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.

          IN WITNESS WHEREOF, I have hereunto set my hand on December 31, 1998,
and attest that the signatures set opposite the names listed above are their
genuine signatures.

                                                 CERTIFIED TO AND ATTESTED BY:

                                                 X /s/ Charles Alvarez
                                                 -----------------------------

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                                                                    EXHIBIT 10.4
                                                                    ------------
                                 AN AGREEMENT
                                 ------------

     made and signed in Tel Aviv on the 29th day of the month of July 1997

                                    BETWEEN

Mifalei Locky l' Bniya Ltd. Public Company 52 - 0041278
of Tchernikovsky Street, 15, Haifa

Hereafter: the "Landlord"

                                  AND BETWEEN

Verisity Ltd. Private Company 51 - 2203357
of 16, Ha'atzmaut Street, Yehud

Hereafter: the "Tenant"

WHEREAS       The Landlord owns the right from the Israel Lands Authority in
              regard to the parcels of land known as the Industrial Mall in Rosh
              Ha'Ayin, Parcels 3, 11, 12, 13 (part) and 16 in Bloc 8863, Lots
              516, 519 (hereafter: the "Mall") and which is designated as an
              industrial building.

AND WHEREAS   The Landlord owns the rights to a unit in the Mall over an area of
              approximately 686 square meters gross including public areas, as
              well as terraces having an area of approximately 180 square meters
              that is located on the third floor according to the attached
              drawing, marked with the letter 'A' (unit) signed by the Parties
              and which constitutes an inseparable part of the Agreement
              (hereafter: the "Rented Premises").

AND WHEREAS   It is the wish of the Tenant to rent from the Landlord and the
              wish of the Landlord to rent to the Tenant the Rented Premises on
              an unprotected tenancy in pursuance of the Tenants Protection Law
              (Integrated Version) 5732 - 1972 for a period,

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              for consideration of and in accordance with that specified below
              in this Agreement.

AND WHEREAS   The Landlord has expressed his agreement to rent the Rented
              Premises to the Tenant on an unprotected tenancy in pursuance of
              the Tenants Protection Law (Integrated Version) 5732 -1972on the
              conditions and for the purpose and the period specified below in
              this Agreement.

IT IS THEREFORE DECLARED, STIPULATED AND AGREED BETWEEN THE PARTIES AS FOLLOWS:
-------------------------------------------------------------------------------

          1.   The Preamble to this Agreement constitutes an inseparable Part
thereof.

          2.   The Tenant declares that he has seen and examined the Rented
Premises, their nature and condition, has examined well the possibilities of
exploiting and using them , is aware that he is bound, on his responsibility and
at his expense, to connect the Rented Premises to the electricity network, has
found them and all the conditions suitable to him and for his purposes and
subject to the execution of the work which the Landlord is bound to execute on
the Rented Premises in accordance with that agreed between the Parties, he
waives any claim whatsoever in relation to the Rented Premises, to the
possibilities of using it and, in addition, including any claim of unsuitability
but excepting claims in respect of concealed defects.

This section is fundamental.

          3.   It is hereby explicitly agreed between the Parties:

            a. On the date on which the Tenants Protection Law (Sundry
     Provisions) 5728 - 1968 came into effect, that is on August 20, 1968, there
     was no tenant entitled to possession of the Rented Premises.

            b. The Rented Premises are free of any tenant entitled to
     possession thereof.

            c. The Tenant did not pay nor shall he pay whether directly or
     indirectly to the Landlord any consideration whatsoever of any sort
     whatsoever for his agreement to rent him the Rented Premises.

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            d.  The protection of the Tenants Protection Law (Integrated
     Version) 5722 - 1972 and any other law that shall replace it or amend it
     and that grants protection or privilege of any sort whatsoever to a tenant
     shall not apply to this Rental nor to the relationship between the Parties
     as specified below in this Contract.

            This section is fundamental.

          4.    The Landlord hereby rents to the Tenant and the Tenant hereby
rents from the Landlord the Rented Premises for a tenancy that is unprotected
for a period of 36 months from its inception on December 1, 1997 and which
terminates on November 30, 2000 (hereafter: the "Period of the Tenancy")

This section is fundamental.

          5.    a.  The aim of the tenancy: the management of the Tenant's
business and his offices exclusively in the hi-tech field and not for any other
purpose whatsoever.

                b.  The Tenant hereby declares that he has examined the
conditions for the use and operation of the Rented Premises in accordance with
the law, and in particular the Business Licensing Law and that they are known to
him and perfectly clear to him and that he undertakes to act solely in
accordance with those conditions. It is hereby expressly stipulated that the
Tenant only is responsible for obtaining a license from the competent
authorities for the conduct of his business on the rented premises. The Tenant
shall have no claim whatsoever against the Landlord in connection with the
receipt or non-receipt of permits or licenses to conduct his business on the
Rented Premises and he hereby waives in advance any claim whatsoever against the
Landlord. Without derogating from the aforementioned, it is made clear that
failure to obtain a permit or license as stated, for any reason whatsoever,
shall not constitute grounds for the cancellation of the Agreement by the Tenant
or exempt him from the fulfillment of his undertakings in pursuance thereof,
including his obligation to pay the rent specified therein.

                c.  The Tenant undertakes not to cause any nuisance or
inconvenience whatsoever, including and without derogating from the general
nature of that stated, smells, fire, smoke or noise.

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     This section is fundamental.

          6.  a.  The rent, the manner of its payment and its linkage shall be
in accordance with that stated in the attached Payments Appendix (hereafter: the
"Appendix'), signed by the Parties and which constitutes an inseparable part of
this Agreement.

              b.  In addition to the payment of the rent in pursuance of this
Agreement and together therewith, the Tenant shall pay the Landlord, VAT in
return for a tax invoice.

          7.  a.  The Tenant shall be obligated to pay the Landlord the rent in
full and on the due dates even if he does not use the Rented Premises or if he
does not operate them for any part whatsoever of the Period of the Tenancy, for
whatever reason whatsoever, except in the case of damage caused to the Rented
Premises that significantly and fundamentally disrupts the possibility of using
the Rented Premises for the purpose of the Tenancy, other than through the fault
of the Tenant.

              b.  To facilitate the collection of the rent only, the Tenant will
deposit with the Landlord, subject to the accounts for the linkage differentials
as stated in Section 6 above, checks that correspond to the amounts of the
payments and their dates however, only actual payment of the checks shall be
deemed as payment of the rent.

          This section is fundamental.

          8.  The Tenant undertakes to allow the Landlord or his representatives
to enter the Rented Premises at any reasonable time and hour, if coordinated in
advance.

          9.  The Tenant undertakes to use the Rented Premises with care, not to
cause any nuisance or disturbance to other lessees or tenants in the Mall and in
particular not to disturb the public means of access and the access to the other
assets in the Mall, to maintain them in good and proper condition, to repair
immediately at his expense any defect, impairment or breakage that is revealed
in the Rented Premises apart from basic defects that do not result from
unreasonable use of the Rented Premises by the Tenant and apart from reasonable
wear and tear, the repair of which is the

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responsibility of the Landlord, to return the Rented Premises to the Landlord at
the end of the Period of the Tenancy in the condition in which they were when he
received them, apart from reasonable wear and tear.

The Tenant hereby confirms that the Rented Premises shall be transferred to him
in new condition, subject to the defects that are revealed in the Rented
Premises on the date of their transfer.  On the transfer of possession of the
Rented Premises, protocol shall be recorded which reflects the condition of the
Rented Premises on that occasion, and the Landlord shall repair, if necessary,
defects and impairments that are revealed in the Rented Premises on transferring
them to the Tenant.

          This section is fundamental.

          10.   During the Period of the Tenancy, the Tenant alone shall be
fully liable to the Landlord, whether criminally, contractually or civilly for
any matter that concerns the possession of the Rented Premises, use thereof, the
operation thereof and all that arises therefrom. That stated in this section
does not in any way derogate from the Landlord's liability in law or of those
who act on his behalf in respect of the building of the Rented Premises.

The Tenant undertakes, irrevocably and unconditionally to compensate and/or
indemnify the Landlord immediately and without delay in respect of and for any
demand submitted to him or in respect of any claim filed against him and which
refers to the Tenant's use during the Period of the Tenancy, or any person
acting on his behalf, of the Rented Premises or that arises as a result thereof
including the payment of expenses and lawyer's fees.

The Landlord undertakes to inform the Tenant at the that time, of any demand or
claim filed against him as stated, in order to enable the Tenant to defend it
should he wish to do so.

Should the Tenant decide to defend the demand or claim, the Landlord shall not
pay it nor shall be make any settlement in respect thereof.

          11.   a.     Without derogating from the provision of the management
agreement as specified below, the Tenant shall be responsible for the payment of
all water and electricity charges and other expenses that are involved in the
use he makes of the Rented Premises.

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            b.  The general municipal rates or any other tax that applies to the
     possessor of real estate shall apply to the Tenant and be paid by him
     during the Period of the Tenancy or the Period of the Agreement.  Property
     Tax and any other tax that applies to owners of real estate, should they
     apply, shall apply to the Landlord and be paid by him.

            c.  The Tenant shall be responsible for all the payments that apply
     to him in pursuance of the management agreement as specified below.

            This section is fundamental.

           12.   a.       The Tenant may not let and/or transfer and/or allow
use of the Rented premises or any part thereof to any other person and/or body
but, however, the Tenant may employ workers of his own for the purpose of
conducting his business.

            b.  Should the Tenant be a company or an association of any sort,
     then during the period in which this Agreement is valid, there shall be a
     prohibition on the transfer of shares or of rights in the Tenant, apart
     from a transfer as stated which is not a transfer of control of the Company
     or association.

            c.  The Tenant may not and undertakes not to make and not to execute
     without permission alterations or additions of any sort whatsoever in the
     Rented Premises or any part thereof without first obtaining the consent in
     writing of the Landlord.

            This section is fundamental.

          13.   Subject to that stated in Section 12c. above, and without
derogating from it, it is hereby agreed that any additions or alterations that
are made by the Tenant to the Rented Premises and which are permanently fixed to
the Rented Premises shall be deemed the property of the Landlord, unless the
Landlord demands that the Tenant remove them and/or restore the Rented Premises
to their former condition.  In such a case, the Tenant shall be bound to do so,
on his responsibility and at his expense, immediately and without any delay.
Should the Tenant not do so, the Landlord may do so at the expense of the
Tenant.  The accounts of the Landlord shall serve as prima facie evidence of the
amounts of the expenses incurred or paid by him in order to execute the
aforesaid.

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<PAGE>

          14.   It is hereby made clear and explicitly emphasized that the
Tenant hereby exempts the Landlord from any responsibility, direct or indirect,
for any damage caused to goods or equipment or any property whatsoever in the
Rented Premises or their surroundings, whatever the reason for the damage
caused, providing that the damage was not caused maliciously.

This section is fundamental.

          15.   On the occasion on which the Tenant signs this Agreement, he
undertakes to sign, as an inseparable part thereof, the management agreement
with the Kanion Hata'siya Nihool V'Ahzakot Ltd. (hereafter: the "Management
Company") in the attached text, to be signed by the Parties (hereafter: the
"Management Agreement").

The Tenant undertakes to rigorously fulfill all his undertakings as specified in
the Management Agreement and it is hereby made clear and explicitly emphasized
that a breach of the Tenant's undertakings as specified in the Management
Agreement shall constitute, to all intents and purposes, a breach of this
Agreement.

A legal cancellation of the Management Agreement by the Management Company
because of a breach on the part of the Tenant shall, as well, constitute a
breach of this Agreement, to all intents and purposes, and as a result thereof
this Agreement shall be completely cancelled.

          16.   On November 30, 2000, no later than 24:00 hrs., the Tenant
undertakes to vacate the Rented Premises and to deliver possession thereof to
the Landlord, the Rented Premises being empty and free of any person or object
that does not belong to the Landlord and in accordance with the provisions of
this Agreement.

This section is fundamental.

          17.   a.      Should the Tenant not vacate the Rented Premises and not
return them and the possession thereof to the Landlord at the end of the Period
of the Tenancy or on the legal cancellation of the Agreement, he shall be deemed
a trespasser from that day with all the legal and judicial consequences that
result therefrom.

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<PAGE>

            b.  Without derogating from that stated above in sub-section (a),
     the Tenant shall be obliged to pay the Tenant double the daily rent
     recorded in the Agreement for each day's delay in vacating the Rented
     Premises and returning the possession thereof to the Landlord.  This sum
     represents user fees fixed and agreed in advance by the Parties which seem
     to them to be reasonable for the damage that is likely to be caused to the
     Landlord in the event of failure to vacate the Rented Premises on the due
     date.

           18.   Without derogating from the Management Agreement, at the end of
the Period of the Tenancy or on the termination of this Agreement as is the
case, the Tenant shall be obligated to present to the Landlord copies of the
confirmations and receipts that testify to the fact that he has made all the
payments and paid all the taxes and expenses that apply to him in pursuance of
this Agreement.

           19    a.   Without derogating from that stated above, it is hereby
agreed that any delay in the payment of the rent in excess of 5 days shall
constitute a fundamental breach of this Agreement.

                 b.   Without derogating from that stated above, it is hereby
agreed that in respect of a delay in the payment of the rent or any part
thereof, the Tenant shall pay the Landlord effective interest and linkage at the
rate of 0.15% for each day's delay in payment from the second day's delay until
payment is made in full. Should the delay exceed 2 days, the payment of interest
shall start from the first day of the delay.

          20.   Despite that stated in section 4 above, it is hereby agreed that
the Tenant reserves the right to extend the Period of the Tenancy for three
further Periods of the Tenancy each period being of only 24 months, the first
starting on December 1, 2000 and ending on November 30, 2002 (hereafter: the
"First Period") and the second starting on December 1, 2002 and ending on
November 30, 2004 (hereafter: the "Second Period") and the third starting on
December 1, 2004 and ending on November 30, 2006 (hereafter: the "Third Period")
subject to the cumulative conditions as follows:

                 a.   The Tenant shall give notice of his intention to extend
the Period of the Tenancy for the First Period and/or the Second Period and/or
the Third Period, as is the case, at least 60 days before the end of the actual
period of the Tenancy, such notice to be sent in writing by registered mail.

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<PAGE>

            b.  The Tenant has fulfilled all his fundamental undertakings during
     the period of the Tenancy prior to the extended period.

            c.  The Tenant shall extend the validity of the bank guarantee
     recorded in Section 22 below.

If not all the conditions specified above are fulfilled together, this right of
the Tenant shall be cancelled.

          21.   a.      The rent during the period of the extended tenancy shall
bear linkage differentials as stated in Section 6 above and in its Appendix.

            b.  In addition to the rent and together with it, the Tenant shall
     pay VAT as due.

            This section is fundamental.

          22.   To guarantee payment of the rent, taxes and all the other
payments and sums that apply to the Tenant in accordance with this Agreement,
the Tenant undertakes to deposit with the Landlord an autonomous bank guarantee
in an amount that is the equivalent of 50,000 dollars that shall remain valid
until 90 days after the end of the Period of the Tenancy.

The Landlord may use the bank guarantee if the Tenant breaches any of the
provisions of the Agreement, only for the purpose of payment of a debt or damage
or compensation or a payment that applies to the Tenant and which he has not
paid, in accordance with the provisions of the Agreement or in accordance with
the provisions of any law.

A condition for the right of the Landlord to use the bank guarantee is that the
Landlord shall inform the Tenant in writing at least 10 days in advance of his
intention and he shall give details of the grounds for using all or part of the
bank guarantee.

Should the Tenant fulfill all his undertakings in pursuance of the Contract, the
Landlord shall return the security bill to him  no later than at the end of 90
days from the end of the Period of the Agreement or before that, if the Tenant
provides the Landlord with copies of the confirmations that testify

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<PAGE>

that he has made all the payments and paid all the taxes that apply to him in
pursuance of this Agreement.

          23.   In addition, and without derogating from that stated above, or
any right conferred on the Landlord in law, if the Tenant does not approach the
Landlord on the due date and does not deliver sole possession of the Rented
Premises to him in accordance with the provisions of this Agreement, then the
Landlord or any person authorized by him for that purpose shall be entitled to
enter the Rented Premises, to seize sole possession thereof, to forcibly evict
the Tenant and to remove all the chattels of the Tenant or those chattels that
do not belong to the Landlord, by force, to use for that purpose all reasonable
force including breaking open the doors of the Rented Premises.  The Tenant
declares that in the case of any loss or damage that is caused to him or to the
property of a third party as a result of the Landlord's acts as stated in this
Section, he has no nor shall he have an claim or suit against the Landlord and
he hereby waives and waives finally and absolutely any claim or suit whatsoever
in this matter should he have any such claim or suit.  The Tenant undertakes to
refrain from taking any step whatsoever in order to prevent the Landlord from
acting in accordance with that stated above.  The signature of the Tenant on
this Agreement is as the grant of an irrevocable power of attorney to the
Landlord or those that represent him that enables them to act in accordance with
that stated above.

The Landlord may use the powers conferred above in this section only after he
has notified the Tenant at least 10 days in advance in writing.

          24.   In addition to any provision in law or in pursuance of this
Agreement, the Landlord may cancel the Agreement if an application is made for
the bankruptcy of the Tenant or an order is granted for the receipt of his
assets or if he is declared bankrupt, or, if the Tenant is a company, if an
application is made against him for receivership or liquidation or if a
liquidation order is granted or if a Liquidator is appointed, whether
temporarily or permanently, or any of the directors of the association are
declared bankrupt or an order for the receipt of his assets is issued and the
relevant order or request is not cancelled within 45 days of the date on which
it was made.

          25.   All that stated above in this Contract does not prevent and is
in addition to the right of the Party that fulfills the Contract to seek any
legal relief conferred on him in pursuance of the law including mandatory
injunctions and/or prohibitory injunctions and/or any claim to remove the Tenant
from the Rented Premises.

                                      -10-
<PAGE>

          26.   Any alteration or addition to this Agreement must be made in
writing and signed by the Tenant and the Landlord and no alteration or addition
shall be valid which is not made in writing as aforesaid.

          27.   The addresses of the Parties for the purpose of sending notices
in pursuance of this Agreement and for the purpose of service of process of
court, are as stated in the Preamble to this Agreement and any letter or notice
that is sent to either one at the above address by registered mail shall be
deemed to be delivered to him within 5 days of the date of its dispatch.

          28.   The Tenant hereby declares that he is aware that the Law Office
of E. Dedikman, Adv. has prepared this Agreement for the Landlord alone and not
for him that he does not represent him in this Agreement or in its performance
and that he may be represented by another lawyer.  The Tenant undertakes to
repay to the Landlord, on signing the Agreement, his legal costs in respect of
preparation of the Agreement in a sum that is equal to the full monthly payment
that the Tenant shall pay the Landlord, with the addition of Vat.

          29.   The Courts of Law in Tel Aviv - Jaffa shall have the sole local
jurisdiction to hear any claim or dispute that concerns this Agreement or that
results therefrom.

   IN WITNESS WHEREOF THE SIGNATURES OF THE PARTIES

/s/ indecipherable                                /s/ indecipherable
-------------------------                         -------------------------
The Tenant                                        The Landlord
(-) Stamped Verisity Ltd                          (-) Stamped Mifalei Locky
            ------------                                      -------
16 Ha'atzmaut Street, 16,                         l'Bniya Ltd
-------------------------                         -----------
POB 8429
--------
Yehud 56304
-----------

                                      -11-
<PAGE>

                                    APPENDIX
                                    --------

          1.  The Rent for the Period of the Tenancy shall be in the sum of NIS
26,512 a month.

The Tenant shall pay the rent to the Landlord every four months with each
payment being in advance for a four monthly period.  30 days before the due date
for payment of the rent, the Tenant shall deliver to the Landlord a prepared
check payable on the due date for payment of the rent as stated in the
Agreement.

          2.  The following terms in the Agreement shall mean:

              a.  "The Index" - the Consumer Price Index published each month by
     the Central Bureau of Statistics.

              b.  "The Base Index" - the Index known on the date recorded in the
     heading to the Agreement on the date on which it is signed.

              c.  "The Determining Index" - the Index published for the month in
     which the rent is to be paid.

          3.  a.      Despite that stated above in section 1, if on the actual
date of payment of the rent, it becomes clear that the Determining Index has
risen compared to the Base Index, then the rent recorded in Section 1 above
shall be increased proportionately to the increase of the Determining Index
compared to the Base Index. In order to remove any doubt, it is hereby made
clear that should the Index decrease, it shall not be considered for the
purposes of calculating linkage differentials.

              b.  Should the Tenant exercise his right as stated in Section 20
     of the Agreement and extend the period of the Agreement for the First
     Period and/or the Second Period, then in such a case, the basic rent that
     he is bound to pay the Landlord shall be the rent that he is bound to pay
     him in respect of the last month of the Period of the Tenancy or the last
     month of the First Period as is the case, with the addition of 10%. This
     rent shall carry linkage differentials in accordance with that stated in
     Section 6 of the Agreement and Section 2 above in this Appendix.

            c.  The linkage differentials above shall be paid within 5 days of
     the date of publication of the Determining Index.

                                      -12-
<PAGE>

/s/ indecipherable                           /s/ indecipherable
------------------------                     -------------------------
The Tenant                                   The Landlord
(-) Stamped Verisity Ltd                     (-) Stamped Mifalei Locky
            ------------                                 --------
16 Ha'atzmaut Street                         l' Bniya Ltd
--------------------                         ------------
POB 8429
--------
Yehud 56304
-----------

                                      -13-

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