Document:

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                                                                   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-
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    (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-
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    (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 twelve months (12)
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. VERISITY'S BUY-OUT OPTION

    Verisity may terminate this Agreement without cause immediately at any time
by delivery of written notice to Company. If Verisity terminates this Agreement
without cause under this Section 14, Verisity shall pay to Company an amount
determined in accordance with Section A of Exhibit C [*]
                                           ---------

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.<PAGE>

                                                                   EXHIBIT 10.17
                                                                   -------------

                      INTERNATIONAL DISTRIBUTOR AGREEMENT

          THIS INTERNATIONAL DISTRIBUTOR AGREEMENT ("Agreement") is made and
entered into as of the date of the last signature to this Agreement ("Effective
Date") by and between VERISITY Design, Inc., a California corporation with
principle offices at 2041 Landing Drive, Mountain View, CA 94043 ("VERISITY")
and DAVAN TECH CO., LTD., a South Korea corporation with principle offices at
    --------------------    -----------
7th Fl., Duam Bldg., #174-6, Seokchon-Dong, Songpa-Ku, Seoul, Korea, 138-190
----------------------------------------------------------------------------
("Distributor").

          WHEREAS, VERISITY has developed and continues to develop certain
technology and products related to the design and verifying of electronics
logics.

          WHEREAS, Distributor is engaged in the business of marketing such
products and desires to become a marketing representative for VERISITY's
Products (as defined below) in the Territory (as defined below); and

          WHEREAS, VERISITY desires to engage Distributor for the purpose of
soliciting and procuring orders for VERISITY's Products in the Territory.

          NOW, THEREFORE, the parties agree as follows:

1.   Appointment.  VERISITY hereby appoints Distributor for the term of this
     -----------
Agreement, and Distributor hereby agrees to act for VERISITY, as an exclusive
Distributor for the Products and services (as hereinafter defined) only within
the territory described in Schedule A (the "Territory"), subject to all of the
terms and conditions of this Agreement. Except as expressly allowed by VERISITY
in writing, Distributor agrees not to solicit orders, procure orders or
otherwise act as VERISITY's representative with respect to any Products or
establish or allow any office to do so unless such office is located within the
Territory and all such activity is conducted solely within the Territory.
Distributor may solicit and procure orders for Products only from customers
located and taking delivery within the Territory.

2.   Products; Prices.
     ----------------

     a.   The products and services covered by this Agreement ("Products") are
those listed on Schedule B hereto and updates, enhancements and new versions
which are substantially similar thereto and which are marketed under the same
model number and product nomenclature. Schedule B shall also include the prices
and terms of sale for the Products, which may be updated from time to time by
VERISITY.

                                      -1-
<PAGE>

     b.   For purposes of this Agreement, "Software Products" are (i) computer
programs or instructions (including those fixed in electrical circuits) which
are Products or included in Products and (ii) documentation provided by VERISITY
which is related to the Product. End-User Documentation is documentation
specifically identified in writing by VERISITY as provided for end-users.
Software Products are licensed not sold; any references herein to the sale or
price of any Software Products or any copy thereof refers to the license or
license fee thereof. Distributor will in no event be entitled to receive or have
any access to any source code of the Software Products.

     c.   The prices, charges, and terms of sale of the Product shall be those
established by VERISITY. In soliciting and procuring orders for the Products,
Distributor shall quote only the prices and terms on Schedule B. Quotation of
any other prices than those in the published Price List must be authorized in
writing by VERISITY. VERISITY reserves the right, at its sole discretion, to
establish or change the prices, Price List, terms and conditions of sale,
delivery and packing charges for the Products at any time during the term of
this Agreement.

3.  Commission.
    ----------

     a.   In consideration for the covenants of Distributor contained herein,
and as the entire compensation of Distributor for its services under this
Agreement, VERISITY will pay Distributor a commission equal to a percentage (as
specified in Schedule C) of the Net Revenues (as defined below) actually
collected by VERISITY (and not subject to refund or other contingency) on
account of shipments on bona fide firm orders, acceptable to VERISITY, in the
Territory, for the Products.

     b.   Commissions will not be paid for current or future sales of spare
parts, tools or services unless such spare parts, tools or services are Products
in Schedule B. Commissions on Net Revenues received in a calendar month will be
paid within thirty (30) days after the end of such calendar month by check or
wire transfer to the account stipulated by Distributor.

     c.   For purposes of this Agreement, "Net Revenues" shall mean the revenue
actually received from the sale, license or other disposition of Products in the
Territory during the applicable month, less all applicable Deductions and
Allowances (Deductions and Allowances are defined in Schedule D attached).
Deductions and Allowances do not include withholdings of local income taxes for
which VERISITY receives credits applicable against its U.S. income taxes).

     d.   All invoices in connection with orders solicited by Distributor shall
be rendered by VERISITY directly to the customer.

     e.   Nothing in this Agreement shall be construed as limiting in any manner
VERISITY's marketing or distribution activities of any kind in the Territory.

                                      -2-
<PAGE>

     f.   VERISITY shall have the right, without any liability to Distributor
for a commission, to:

          (1)  reject any order obtained by Distributor;

          (2)  approve or disapprove any credit to be extended to any customer;
and

          (3)  accept the return of Products or to make any Allowances or
Deductions as VERISITY shall deem appropriate.

     g.   All shipments are contingent upon VERISITY obtaining an appropriate
export license from the United States Department of Commerce. If requested by
VERISITY, Distributor shall provide reasonable assistance in securing such
export license.

4.   Warranty Disclaimer. TO THE MAXIMUM EXTENT PERMISSIBLE UNDER APPLICABLE
     -------------------
LAW, VERISITY MAKES NO WARRANTIES TO DISTRIBUTOR WITH RESPECT TO THE PRODUCTS OR
ANY SERVICES AND DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY, NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.

5.   Relationship of Parties. The parties hereto expressly understand and agree
     -----------------------
that Distributor is an independent contractor in the performance of each and
every part of this Agreement and is solely responsible for all of its employees
and agents and its labor costs and expenses arising in connection therewith and
for any and all claims, liabilities or damages or debts of any type whatsoever
that may arise on account of Distributor's activities, or those of, its
employees or agents in the performance of this Agreement. Distributor has no
authority, right or ability to bind or commit VERISITY in any way (including,
without limitation, by accepting orders) or sell any Products and will not
attempt to do so or imply that it may do so. VERISITY is in no manner associated
with or otherwise connected with the actual performance of this Agreement on the
part of Distributor, nor with Distributor's employment of other persons or
incurring of other expenses. Except as expressly provided herein, VERISITY shall
have no right to exercise any control whatsoever over the activities or
operations of Distributor.

6.   Responsibilities of Distributor. Distributor's duties hereunder are as
     -------------------------------
follows:

     a.   Distributor shall use its best efforts to actively promote, solicit
orders for and procure orders for the Products within the Territory on a
continuing basis, shall comply with good business practices and all applicable
laws and regulations and shall diligently perform all other duties as mutually
agreed upon herein. Distributor shall be solely responsible for its own expenses
in carrying out its responsibilities under this Agreement. [Distributors efforts
shall generate Net Revenues to VERISITY of at least the minimum amounts set
forth in Schedule C (the "Minimum Amounts").] Distributor will maintain

                                      -3-
<PAGE>

appropriate demonstration equipment and an adequate facility capable of handling
technical support and customer demonstrations and provide technical assistance.

     b.   In its efforts, Distributor will use VERISITY's then current names for
the Products (but will not represent or imply that it is VERISITY or is a part
of VERISITY and will obtain VERISITY's prior approval of any such use) and will
not add to, delete from or modify any sales or marketing documentation or forms
provided by VERISITY except with the prior written consent of VERISITY.
Distributor will not otherwise use or register (or make any filing with respect
to) any trademark, name or other designation relevant to the subject matter of
this Agreement anywhere in the world. Distributor will not contest anywhere in
the world the use by VERISITY or use authorized by VERISITY of any trademark,
name or other designation relevant or similar to the subject matter of this
Agreement or application or registration therefor, whether during or after the
term of this Agreement. Distributor acknowledges and agrees that Distributor has
no interest in or right to VERISITY's names, designations or trademarks, or any
label or design or other marks used in connection with VERISITY or the Products.
Distributor further acknowledges and agrees that all of its use of such
trademarks, names or other designations shall inure to the benefit of VERISITY.

     c.   Distributor shall maintain an office in the Territory and employ
sufficient qualified employees and agents, including adequate engineering and
sales staff, to assist in diligently performing all of its duties as mutually
agreed upon herein. Distributor shall attend sales conferences and take
advantage of technical training programs, if offered, by VERISITY, for such
persons at Distributor's expense.

     d.   Distributor shall keep VERISITY informed as to any problems
encountered with the Products and as to any resolutions arrived at for those
problems, and shall communicate promptly to VERISITY any and all modifications,
design changes, improvements of the Products, or new customer requirements
suggested by any entity or person solicited by or making inquiries of
Distributor or by any employee or agent of Distributor. Distributor hereby
assigns to VERISITY any and all right, title and interest in and to any such
suggested modifications, design changes or improvements of the Products held by
Distributor, without the payment of any additional consideration.

     e.   At VERISITY's request, Distributor shall promptly submit to VERISITY
reports containing pertinent information about Distributor's customers and the
Products and Distributor's activity within the Territory. VERISITY may
reasonably request information concerning customers and business volumes,
financial information and operating plans. Distributor shall advise and assist
VERISITY with respect to sales aids and furnish available information concerning
competitive products sold in the Territory.

     f.   Distributor will provide good faith sales forecasts and business
status reports to VERISITY for the Products. The forecasts will be provided in
writing and in a format specified by VERISITY on a quarterly basis before the
beginning of the new quarter.

                                      -4-
<PAGE>

     g.   Distributor will coordinate with customers in establishing irrevocable
letters of credit to VERISITY through the bank specified by VERISITY for payment
of the Products. Distributor shall also assist VERISITY in the collection of
payment should the need arise.

     h.   Distributor will supply updates of VERISITY software to those
customers who are under warranty or annual maintenance at no charge, and which
updates will be supplied by VERISITY to the Distributor.

     i.   Distributor will obtain the appropriate signatures on the evaluation
agreement as shown in Schedule G by any customer before the installation of any
evaluation software at the customer site and return same to VERISITY within ten
(10) days of such installation. Furthermore, Distributor will obtain the
appropriate signatures on any technology license agreements as shown in Schedule
H by any customer on each sale of Products and return same to VERISITY within
ten (10) days of such installation.

     j.   Distributor will not engage in, cause or permit the reverse
engineering, disassembly or recompilation or similar manipulation of the
Products; provided, however, that the foregoing restriction is limited so that
it prohibits such activity only to the maximum extent such activity may be
prohibited without violating applicable law relating to computer software.

     k.   Distributor will not modify or otherwise alter the Products and shall
not remove any legal notices from any portions of the Products.

     l.   Distributor warrants and represents that it has no intention of
exporting or reexporting outside the Territory any Products, customer designs,
customer verification environment, whether for demonstration purposes or not, or
Proprietary Information (defined below), any part thereof or any direct product
thereof, whether directly or indirectly, and understands that it may not do so
under this Agreement. Distributor agrees not to, and not to allow, export or
reexport of any Product or Proprietary Information or any part thereof or any
direct product thereof directly or indirectly from the U.S. or elsewhere, (a) in
violation of any such restrictions, laws or regulations or (b) without all
required licenses and proper authorizations, to Cuba, Libya, North Korea, Iran,
Iraq or Rwanda or to any Group D:1 or E:2 country (or any national of such
country) specified in the then current Supplement No. 1 to part 740 of the U.S.
Export Administration Regulations (or any successor supplement or regulations).
Licensee shall promptly execute any documents required by Licensor to comply
with U.S. export requirements or demonstrate to Licensor its compliance with
such requirements. Without limitation of the foregoing, Distributor agrees to
commit no act which, directly or indirectly, would violate the U.S. Foreign
Corrupt Practices Act (regarding, among other things, payments to government
officials) or any United States law, regulation, or treaty

                                      -5-
<PAGE>

or any other international treaty agreement, relating to national security or to
the export or reexport of any of the Products or associated technical data or
products thereof to which the United States adheres. Distributor agrees to
indemnify VERISITY against any claim, demand action, proceeding, investigation,
loss, liability, cost and expense (including attorneys' fees) suffered or
incurred by VERISITY and arising out or related to any violation (whether
intentional or unintentional) by Distributor of any of the warranties or
covenants in this section.

     m.   Distributor understands that VERISITY is not bound to any price
(whether or not on Schedule B) with respect to an order until VERISITY has
accepted such order and Distributor will not imply or represent anything to the
contrary to any person or entity; in any event VERISITY will not be liable to
Distributor for and Distributor will have no rights with respect to any price
change (whether before or after acceptance of an order) or any other matter with
respect to the dealings between VERISITY and customers.

     n.   Distributor shall maintain at each office in the Territory sufficient
Products for demonstration purposes. VERISITY will consign or make available to
Distributor certain demonstration products on an as-needed basis. In no event
shall Distributor be supplied with more than the amount of demonstration
products which VERISITY deems necessary hereunder in its sole discretion.

     o.   During the term of this Agreement, and for a period of ninety (90)
days after termination of this Agreement, Distributor shall not:

          (1)  represent, assist, or provide either directly or indirectly
marketing services of any sort, to any individual, firm, corporation,
partnership, or other entity which manufactures or distributes products which
are competitive with the Products;

          (2)  market directly or indirectly in the Territory products which are
competitive with the Products;

          (3)  solicit orders for, or deal in, used goods or equipment
previously manufactured by VERISITY without written authorization from VERISITY;
or

          (4)  have any financial or managerial interest in another company
which represents products directly competitive to those offered by VERISITY.

          Distributor may, however, represent within the Territory, an
individual, firm, corporation, partnership, or other entity which manufactures
or distributes products which are complimentary or related to the Products. [A
copy of the list of products currently sold by Distributor, either for itself or
for the account of a third party is attached as Schedule F hereto and is true,
accurate and complete. Distributor shall provide VERISITY with thirty (30) days
prior written notice of any additions it wishes to make to Schedule F.]

                                      -6-
<PAGE>

     p.   During the term of this Agreement and for a period of one (1) year
after the termination or expiration of this Agreement, as the case may be,
Distributor shall not, directly or indirectly, solicit the employment or
services of any employee, representative or agent of VERISITY, or encourage such
employees, representatives or agents to leave VERISITY.

     q.   Distributor warrants and represents to VERISITY that neither this
Agreement (or any term hereof) nor the performance of or exercise of rights
under this Agreement, is contrary to, in conflict with, ineffective under, or
requires registration or approval or tax withholding under, or affects
VERISITY's proprietary rights under, any law or regulation of any organization,
country, group of countries or political or governmental entity located within
or including all or a portion of the Territory. Distributor will take no action
inconsistent with the foregoing warranty and will indemnify VERISITY from any
losses, damages, claims, settlements, attorneys fees and other expenses incurred
by VERISITY which arise due to any allegation or action of any person or entity
inconsistent with the foregoing warranty. Furthermore, Distributor agrees to
give VERISITY adequate notice of any change in legislation in the Territory
which may materially affect the contractual relationship of the Parties.

     r.   Distributor agrees to hold harmless, defend and indemnify VERISITY and
its officers, directors, employees, agents and servants from and against any and
all claims, damages and expenses, including reasonable legal fees and expenses,
of whatever kind and nature directly or indirectly arising out of or on account
of or resulting from Distributor's activities, including but without limitation,
any unauthorized representations of Distributor, or out of Distributor's failure
to comply with its obligations under this Agreement.

     s.   The failure by Distributor to comply with any of its obligations as
set forth in this Section 6 shall constitute a breach of this Agreement and
shall entitle VERISITY to give notice to Distributor requiring it to cure such
breach. If any such breach is not cured within thirty (30) days after such
notice is given, this Agreement shall, at VERISITY's option, terminate
immediately in accordance with Section 8.a.(3).

7.   Duties of VERISITY.  VERISITY shall have the following responsibilities
     ------------------
during the term of this Agreement:

     a.   VERISITY shall provide Distributor, at VERISITY's expense, with
current marketing advice, sales aids, and a reasonable supply of any applicable
printed marketing materials for the Products. Any printed materials, equipment,
or spare parts furnished by VERISITY to Distributor shall be and remain at all
times the property of VERISITY.

     b.   VERISITY reserves the right, at any time, to change or modify the
design of or discontinue any of the Products, or parts thereof, or add Products
and to change its service policies, or its financial requirements. VERISITY
shall inform Distributor within

                                      -7-
<PAGE>

a reasonable time of any changes in the Products, the prices, and marketing and
sale documentation.

     c.   VERISITY may conduct advertising campaigns for the Products the scope
and nature of which will be determined at VERISITY's sole discretion. Upon
request of Distributor, VERISITY will send Distributor duplicate copies of all
invoices and any customer acknowledgements.

     d.   With respect to each payment of commissions hereunder, VERISITY shall
provide Distributor with an accounting of the orders for which payment is made
(which shall be limited to the invoice number, customer name, calculation of Net
Revenues and rate of commissions for each order).

8.   Term and Termination. Subject to the provisions for termination as provided
     --------------------
herein, this Agreement shall commence on the Effective Date and shall be for a
term of two (2) years, and shall be automatically renewed for successive one (1)
year terms thereafter unless either of the parties hereto gives to the other
party written notice of its election to terminate this Agreement at least ninety
(90) days prior to the expiration of the then current term. Nothing contained
herein shall preclude VERISITY's right of termination pursuant to this Section
8. Distributor understands that after termination of this Agreement, it shall
have no right whatsoever to continue as VERISITY's representative of Products
regardless of any undocumented continuation of the relationship with VERISITY.

     a.   This Agreement may be terminated by VERISITY for cause immediately
upon the occurrence of any of the following events:

          (1)  If Distributor ceases to do business, or otherwise terminates its
business operations or if there is a material change in control of Distributor;
or

          (2)  If Distributor fails to secure or renew any license, permit
authorization or approval for the conduct of its business in any significant
country or area of the Territory, or if any such license, permit, authorization
or approval is revoked or suspended; or

          (3)  If Distributor breaches any provision of this Agreement and
(except in the case of a compromise of Proprietary Information where termination
shall be effective immediately upon notice) fails to fully cure such breach
within thirty (30) days or such longer time as is provided herein of written
notice from VERISITY describing the breach; or

          (4)  If Distributor seeks protection under any bankruptcy,
receivership, trust deed, creditors arrangement, composition or comparable
proceeding, or if any such proceeding is instituted against Distributor; or

                                     -8-

<PAGE>

          (5)  If the Net Revenues during any period (with the exception of the
first year following the initial signing of the contract, where the review will
be at the end of the first year of the contract) are less than the Minimum
Amount for that period or if the rate of Net Revenues received is such that
VERISITY reasonably believes such Minimum Amount will not be timely achieved;
provided VERISITY gives Distributor at least thirty (30) days written notice of
termination; or

          (6)  If this willful misconduct, wrongful act, willful neglect or bad
faith on the part of the Distributor, its officer agents or employees which
VERISITY considers to be detrimental to the best interest of VERISITY.
Violations of the U.S. law on export of technical data and commodities is
considered a wrongful act for the purposes of this clause.

     b.   VERISITY shall incur no liability whatsoever for any damage, loss or
expenses of any kind suffered or incurred by Distributor arising from or
incident to any termination of this Agreement by VERISITY which complies with
the terms of the Agreement whether or not VERISITY is aware of any such damage,
loss or expenses.

     c.   Upon termination of this Agreement by either party or naturally at the
end of the term:

          (1)  All rights and licenses of Distributor and all obligations of
VERISITY hereunder shall terminate, except rights to payments accrued prior to
termination (including during any applicable notice period).

          (2)  Distributor shall immediately:

          (a)  discontinue any use of the name, logotype, trademarks or slogans
of VERISITY and the trade names or other designations of any of the Products;

          (b)  discontinue all representations or statements from which it might
be inferred that any relationship exists between VERISITY and Distributor;

          (c)  cease to promote, solicit orders for or procure orders for
Products (but not act in any way to damage the reputation of VERISITY or any
Product);

          (d)  return to VERISITY at Distributor's expense all Products,
demonstration units, samples, instruments, equipment, spare parts, catalogues
and literature of VERISITY then in possession of Distributor; and

          (e)  return to VERISITY all Proprietary Information (as defined below)
in Distributor's possession, custody or control in whatever form held (including
copies or embodiments of Proprietary Information or relating to Proprietary
Information) upon termination of this Agreement, or at any time or from time to
time, upon written request by VERISITY.

                                      -9-
<PAGE>

     (3)  The following provisions of this Agreement shall remain in effect
after termination (including, without limitation, the natural expiration
hereof): 4, 6.o, 6.p, 9, 11 and 12.

          (a)  After termination (by expiration or otherwise) of this Agreement
for any reason whatsoever, promptly after receipt of the applicable Net Revenues
and all Deductions and Allowances have been determined and applied, VERISITY
shall pay Distributor all commissions earned (as provided in Section 3 above)
but not previously paid to Distributor prior to the termination date.

          (b)  Distributor's acceptance of its final commission check from
VERISITY shall be in full satisfaction of all amounts due to Distributor
hereunder and a full and complete discharge by Distributor of any and all
liabilities of VERISITY.

9.   Proprietary Information; Proprietary Rights
     -------------------------------------------

     a.   Distributor acknowledges that, in the course of performing its duties
under this Agreement, it may obtain information relating to Products and to
VERISITY which is of a confidential and proprietary nature ("Proprietary
Information"). Such Proprietary Information may include, without limitation,
chip design and chip test objects and technologies, computer codes, software,
computer hardware, circuits, trade secrets, know-how, inventions, techniques,
processes, programs, algorithms, schematics, data, customer lists, financial
information and sales and marketing plans. Distributor and its employees and
agents shall, at all times, both during the term of this Agreement and after its
termination, keep in trust and confidence all such Proprietary Information, and
shall not use such Proprietary Information other than in the course of its
duties as expressly provided in this Agreement, nor shall Distributor or its
employees or agents disclose any such Proprietary Information to any person
without VERISITY's prior written consent. Distributor acknowledges that any such
Proprietary Information received by Distributor shall be received as a fiduciary
of VERISITY.

     b.   Distributor shall not be bound by this Section 9 with respect to
information Distributor can document (i) at the date hereof has entered or later
enters the public domain as a result of no act or omission of Distributor or its
employees, or agents or (ii) is lawfully received by Distributor from third
parties without restriction and without breach of any duty of nondisclosure by
any such third party.

     c.   VERISITY and its licensors retain all right, title and interest in and
to (i) all copyrights, patent rights, trade secret rights and other proprietary
rights in the Products, all copies and derivative works thereof (by whomever
produced) and all related documentation and materials, (ii) all of VERISITY's
service marks, trademarks, tradenames or any other designations and (iii) all
other proprietary rights in the Products.

                                      -10-
<PAGE>

     d.   VERISITY hereby grants Distributor a nontransferable license only to
demonstrate in the Territory the Products solely to bona fide clients
considering ordering such Products in strict accordance with all the terms of
this Agreement and solely to the extent necessary to fulfill the purposes of
this Agreement.

     e.   Distributor shall bind in writing its employees who have access to
Proprietary Information to hold such information in confidence and not to
disclose any thereof except as expressly allowed herein.

10.  Intellectual Property Indemnification. VERISITY shall hold Distributor and
     -------------------------------------
its officers, directors, agents and employees harmless from liability resulting
from infringement by the Product of any patent issued as of the Effective Date
of this Agreement or any trademark or copyright, provided VERISITY is promptly
notified of any and all threats, claims and proceedings related thereto and
given reasonable assistance and has sole control over the defense and all
negotiations for a settlement or compromise; VERISITY will not be responsible
for any settlement it does not approve in writing.  THE FOREGOING IS IN LIEU OF
ANY WARRANTIES OF NONINFRINGEMENT, WHICH ARE HEREBY DISCLAIMED.

11.  Liability Limitation.  TO THE MAXIMUM EXTENT PERMISSIBLE UNDER APPLICABLE
     --------------------
LAW, VERISITY WILL NOT BE LIABLE UNDER ANY SECTION OR SUBJECT MATTER OF THIS
AGREEMENT OR UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY FOR ANY (I) INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (II) COST OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES.

12.  Miscellaneous.
     -------------

     a.   Assignment Binding Effect.  Neither this Agreement nor any right or
          -------------------------
obligation hereunder is capable of being assigned by Distributor without the
prior written consent of VERISITY and any purported transfer or assignment will
be void.  VERISITY may assign its rights and duties hereunder.  Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns (whether by operation of law, merger,
change of control or otherwise) of the parties.

     b.   Counterparts.  This Agreement may be executed in two or more
          ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same instrument.

     c.   Severability. If any provision of this Agreement is held to be illegal
          ------------
or unenforceable, that provision shall be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full force and
effect and enforceable.

                                      -11-
<PAGE>

     d.   Modification.  Except as otherwise expressly provided herein, any
          ------------
provision of this Agreement may be amended and the observance of any provision
of this Agreement may be waived (either generally or any particular instance and
either retroactively or prospectively) only with the written consent of VERISITY
and Distributor.

     e.   Governing Law. This Agreement shall be governed by and construed under
          -------------
the laws of the State of California and the United States without regard to the
conflict of laws provisions thereof and without regard to the United Nations
Convention on the International Sales of Goods.  Unless waived by VERISITY in
writing for the particular instance (which VERISITY may do at its option), the
sole jurisdiction and venue for actions related to the subject matter hereof
shall be the Superior Court of the State of California for Santa Clara County or
the United States District Court for the Northern District of California.  Both
parties consent to the jurisdiction of such courts and agree that process may be
served in the manner provided herein for giving of notices or otherwise as
allowed by California law.  In any action or proceeding to enforce rights under
this Agreement, the prevailing party shall be entitled to recover costs and
attorneys' fees.

     f.   Arbitration. Any dispute or claim arising out of or in connection with
          -----------
this Agreement shall be finally settled by binding arbitration.  Any arbitration
shall be initiated and conducted in San Jose, California, under the commercial
rules and auspices of the American Arbitration Association.  Any arbitration
shall be conducted by three (3) arbitrators, at least one of whom shall have
recognized expertise in the field of semiconductor testing.  The arbitrators
shall apply California law to the merits of any dispute or claim, without
reference to state rules of conflicts of law or arbitration.  Judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.  Notwithstanding the foregoing, the Parties may apply to
any court of competent jurisdiction for injunctive relief without breach of this
arbitration provision.

     g.   Applicable Language.  The official test 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 the Agreement, the executed
English language test shall govern.  Each Party declares that its representative
who signs this Agreement on its behalf understands the contents thereof.

     h.   Notice. Any notice required or permitted under this Agreement shall be
          ------
given in writing and shall be deemed effectively given:  (i) immediately upon
personal delivery or facsimile transmission to the parties to be notified, (ii)
one (1) day after deposit with a commercial overnight courier with tracking
capabilities or (iii) three (3) days after deposit with the United States Postal
Service, by registered or certified mail, postage prepaid and addressed to the
party to be notified (Attn:  President) at the address

                                      -12-
<PAGE>

indicated for such party on the signature page hereof, or at such other address
as the party may designate by ten (10) days advanced written notice to the other
party.

     i.   Entire Agreement.  This Agreement is the sole agreement between the
          ----------------
parties with respect to the subject matter hereof.  This Agreement supersedes
all prior agreements or discussions between the parties with respect to
distribution, marketing and/or service of any products of or distributed by
VERISITY.

     j.   Remedy for Breach.  Termination of this Agreement shall not be an
          -----------------
exclusive remedy for breach of this Agreement and, whether or not termination is
effected, all other remedies will remain available.

          IN WITNESS WHEREOF, the parties have entered into this Agreement
effective as of the date first above written.

                                        VERISITY Design, INC.

                                        Signature: /s/ Moshe Gavrielov
                                                   ---------------------------

                                        Name:      Moshe Gavrielov

                                        Title:     President and CEO

                                        Address:   2041 Landings Drive
                                                   Mountain View, CA 94043

                                        Date:      11/10/99
                                                   ---------------------------

                                             Distributor:  Davan Tech Co., Ltd.

                                        Signature: /s/ Sancho Park
                                                   ---------------------------

                                        Name:      Sancho Park

                                        Title:     Executive Director

                                        Address:   7th Floor, Duam Building,
                                                   #174-6, Seokchon-Dong,
                                                   Songpa-Gu, Seoul, Korea

                                        Date:      10/5/99
                                                    ---------------------------

                                      -13-
<PAGE>

                                  SCHEDULE A

The Territory consists of the following areas only: South Korea

                                      -14-
<PAGE>

                                  SCHEDULE B

The attached price list is [*] As an example;

US Price = [*]

South Korea Price = [*]

The Representative Company can provide its customer [*]

The Representative Company shall update the attached US price 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.

                                      -15-
<PAGE>

           VERISITY Korean Specman Price List - Revised Final Version

<TABLE>
<CAPTION>
Product Number          Product Name          List Price         Remarks
<S>                     <C>                    <C>               <C>
SM1000                  Specman Elite         [*]                Product Floating

SM1000T                 Node Transfer         [*]                Node Transfer

SM1000M                 Maintenance           [*]                1 Year Maintenance
</TABLE>

Specman Simulator Interfaces

<TABLE>
<S>                 <C>                              <C>
SM1021              Verilog XL interface             [*]

SM1022              Leapfrog interface               [*]

SM1023              QuickHDL interface               [*]

SM1024              Modelsim interface               [*]

SM1025              VSS interface                    [*]

SM1026              VCS interface                    [*]

SM1027              Speedsim interface               [*]

SM1028              NC Verilog interface             [*]
</TABLE>

[*]

<TABLE>
<S>               <C>                                                      <C>
SM1301            License upgrade to World wide--Wide Area Network         [*]

SML1012           [*]                                                      [*]

TR1000            Specman Basic Training Held at Verisity's headquarters   [*]
                  in Mt. View, CA
</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.

                                      -16-
<PAGE>

                                  SCHEDULE C

I.  COMMISSION PERCENTAGES

    The commission percentages will be as follows:

          Business Year      Commission Rate                  Remarks
          -------------      ---------------                  -------
                         Products*   Maintenance*
                         ------------------------
          FY1999            [*]         [*]         Based on the final PO amount
          FY2000            [*]         [*]         Based on the final PO amount
          FY2001            [*]         [*]         Based on the final PO amount

          *Products above include the first year maintenance, and Maintenance is
     only for renewal.

          [*]

    Over Achievement Incentive Plan Quarterly

          [*]

    Compensation after termination notice

          Order for 3 months          [*]Based on the final PO amount
          Order for 3 to 6 months     [*]Based on the final PO amount

          *Davan Tech will provide Verisity, at the time of termination, with a
    list of all ongoing sales activities which are anticipated to lead to orders
    within the next 6 months.

II. Sales Quarter
    (Required minimum order amounts stated in Net Revenues)

                      Fiscal Year                      Sales Quarter
                      -----------                      -------------
          1999:       July 1, 1999 Dec. 31, 1999            [*]
          2000:       Jan. 1, 2000-Dec. 31, 2000            [*]
          2001:       Jan. 1, 2001-Dec. 31, 2001            [*]

[*] 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.

                                      -17-
<PAGE>

                                  SCHEDULE D

                  DEDUCTIONS AND ALLOWANCES FROM NET REVENUES

  (1) Deductions.  Shall include the following:
      ----------

      [*]

  (2) Allowances: Set-Offs and Charge-Backs.  Net Revenues shall not include any
      -------------------------------------
      revenues from the sale of any Product for which any of the following occur
      ("Allowances"):

      [*]

[*] 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.
                                      -18-
<PAGE>

                                  SCHEDULE E

             DEMONSTRATION PRODUCTS, CONFIGURATIONS AND DISCOUNTS

                                Not Applicable

                                      -19-
<PAGE>

                                  SCHEDULE F

                LIST OF APPROVED THIRD PARTY PRODUCTS OR LINES

                                Not Applicable

                                      -20-
<PAGE>

                                  SCHEDULE G

                         SOFTWARE EVALUATION AGREEMENT

This Software Evaluation Agreement (this "Agreement") is entered into as of
_____________ (the "Effective Date") by and between VERISITY Design, Inc.
("VERISITY") and Davan Tech ("Licensee").  The parties agree as follows, with
                 ----------
the capitalized terms not otherwise defined having the meaning given them in
Appendix A:

1.  License Rights
    --------------

    1.1    Licensed Programs. VERISITY hereby grants to Licensee a non-
exclusive, non-assignable, non-transferable right and license, without the right
to sublicense, (i) to use one copy of VERISITY LTD.'s proprietary software
product _________________ (the "Licensed Program") in object code form in
accordance with the documentation on a single computer located at Licensee's
facility in __________________________, solely for the purpose of evaluating the
VERISITY LTD. Technology, and (ii) to use one set of the Documentation at the
Processing Site in connection with the use of the Licensed Program.

    1.2    VERISITY Design Objects.  VERISITY hereby grants Licensee a non-
exclusive, non-assignable, non-transferable right and license, without right to
sublicense, (i) to use and incorporate VERISITY LTD.  Design Objects into
Licensee's integrated circuit designs solely for the purpose of evaluating the
VERISITY LTD. Technology, (ii) to use the VERISITY Technical Data in connection
with integration and verification of the VERISITY LTD.Design Objects and (iii)
to make, have made and test a reasonable number of Test Chips.  Nothing in this
Agreement shall be interpreted as giving Licensee any right to sell, license, or
otherwise distribute any integrated circuit design incorporating any of the
VERISITY LTD. Technology.

2.  Installation, Fees, and Support
    -------------------------------

    2.1    Initial Installation.  Within a reasonable time after VERISITY has
received from Licensee an executed copy of this Agreement, VERISITY will deliver
to Licensee the Licensed Program and the Documentation.  Licensee will install
the Licensed Program on the designated computer in accordance with the standard
installation procedures set forth in the Documentation.

    2.2    License Fee.  In consideration of the license rights granted herein,
Licensee agrees to pay to VERISITY a license fee of $____________ (the "License
Fee").  Payment of the License Fee will be due 30 days after date of invoice.

    2.3    Technical Support.  VERISITY will provide Licensee with technical
assistance in the installation and use of the VERISITY LTD. Technology and will
work

                                      -21-
<PAGE>

with Licensee to resolve with VERISITY any problems Licensee encounters in using
the VERISITY LTD. Technology.

3.  Restrictions
    ------------

    3.1    No Duplication, Modification or Reverse Engineering.  Except as
expressly authorized herein, Licensee may not (i) duplicate all or any portion
of the VERISITY LTD. Technology, (ii) modify the VERISITY LTD. Technology, or
(iii) incorporate any portion of the VERISITY LTD. Technology into any other
program or product.  Licensee acknowledges that VERISITY considers the source
code of the Licensed Program and its underlying algorithms to constitute
valuable trade secrets of VERISITY and, therefore, Licensee will not at any time
attempt to reverse engineer, disassemble, decompile or otherwise reduce the
Licensed Program or any component thereof to human-readable form, nor will
Licensee attempt to examine or copy, in whole or in part, any of the underlying
algorithms of the Licensed Program.

    3.2    Ownership.  Nothing in this Agreement shall affect the exclusive
ownership by VERISITY, or its licensors, of the VERISITY LTD. Technology or any
patents, trademarks, copyrights or other intellectual property rights pertaining
to the VERISITY LTD. Technology.  Licensee will not exceed the scope of the
licenses granted herein.

    3.3    U.S. Government Restricted Rights.  The VERISITY LTD. Technology is
provided with Restricted Rights.  Use, duplication, or disclosure by the U.S.
Government is subject to restrictions as set forth in subparagraph (c)(1)(ii) of
the Rights in Technical Data and Computer Software clause at DFARS 252.227-7013
or subparagraphs (c)(l) and (c)(2) of the Commercial Computer Software-
Restricted Rights at 48 CFR 52.227-19, as applicable.  Manufacturer is VERISITY
Design, Inc., whose address is 2041 Landing Drive, Mountain View, CA  94043.

4.  Limited Warranty
    ----------------

    4.1    Limited Warranty.  VERISITY warrants that the media on which the
VERISITY LTD. Technology is delivered will be free from defects in materials and
workmanship under normal use and service for a period of 30 days from the date
of delivery to Licensee.  Licensee's exclusive remedy and VERISITY's sole
obligation under this warranty shall be for VERISITY to redeliver on defect-free
media that portion of the VERISITY LTD. Technology that does not meet this
warranty.

    4.2    Warranty Exclusions.  Any unauthorized modification or attempted
modification of the VERISITY LTD. Technology by Licensee shall terminate the
warranty obligations of VERISITY under this Section 4.  VERISITY does not
warrant that the VERISITY LTD. Technology will meet Licensee's design
requirements, that it will operate in the combinations that may be selected for
use by Licensee, that the

                                      -22-
<PAGE>

operation of the VERISITY LTD. Technology will be uninterrupted or error-free,
or that any Test Chips will operate error-free or will be commercially
manufacturable.

    4.3    Warranty Disclaimer.  VERISITY'S ENTIRE LIABILITY AND LICENSEE'S
EXCLUSIVE REMEDY AS TO DEFECTS, PERFORMANCE, OR NONPERFORMANCE OF THE VERISITY
LTD. TECHNOLOGY AND THE DELIVERED MEDIA SHALL BE THE WARRANTIES AND REMEDIES SET
FORTH IN THIS SECTION 4, REGARDLESS OF THE THEORY OF CLAIM OR FORM OF ACTION.
THE WARRANTIES SET FORTH IN THIS SECTION 4 ARE THE ONLY WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, THAT ARE MADE BY VERISITY, AND VERISITY DISCLAIMS ALL
OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY, TITLE, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY VERISITY, ITS AGENTS, OR ITS
EMPLOYEES SHALL CREATE A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF THE
WARRANTIES IN THIS AGREEMENT.

5.  Limitation of Liability
    -----------------------

    5.1    VERISITY Liability.  NEITHER VERISITY NOR ANYONE ELSE WHO HAS BEEN
INVOVERSITYED IN THE CREATION, PRODUCTION OR DELIVERY OF THE VERISITY LTD.
TECHNOLOGY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES (INCLUDING DAMAGES FOR LOST PROFITS, BUSINESS INTERRUPTION,
LOSS OF BUSINESS INFORMATION, COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES,
OR TECHNOLOGY, AND THE LIKE) ARISING OUT OF THIS AGREEMENT OR THE USE OF OR
INABILITY TO USE THE VERISITY LTD. TECHNOLOGY, EVEN IF VERISITY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.  IN NO CASE SHALL VERISITY'S AGGREGATE
LIABILITY FOR ALL MATTERS ARISING OUT OF THE SUBJECT MATTER OF THIS AGREEMENT,
WHETHER IN CONTRACT, TORT OR OTHERWISE, EXCEED THE LICENSE FEES PAID TO VERISITY
FOR THE VERISITY LTD. TECHNOLOGY.  LICENSEE ACKNOWLEDGES THAT THE FOREGOING
LIMITATION REFLECTS A BARGAINED-FOR ALLOCATION OF RISK AND THAT LICENSEE'S
AGREEMENT TO THE PROVISIONS OF THIS ARTICLE 5 IS A PRE-CONDITION TO AND A
MATERIAL INDUCEMENT FOR VERISITY TO ENTER INTO THIS AGREEMENT AND LICENSE THE
USE OF THE VERISITY LTD. TECHNOLOGY TO LICENSEE.

6.  Term and Termination
    --------------------

    6.1    Term of the Agreement. This Agreement will begin on the Effective
Date and expire at the end of ______ days unless it is terminated earlier in
accordance with Section 6.2 or renewed in accordance with Section 6.4.

    6.2    Early Termination.  VERISITY may terminate this Agreement if Licensee
commits any breach or default and fails to provide an acceptable remedy of such
breach within 10 days after receipt of written notice of such breach from
VERISITY.  Licensee

                                      -23-
<PAGE>

may terminate this Agreement at any time by returning the VERISITY LTD.
Technology to VERISITY.

    6.3    Upon Termination.  Upon termination of this Agreement, all licenses
granted to Licensee will be terminated.  Within ten days following the
termination, Licensee must return the original of the Licensed Program to
VERISITY and destroy and account for all copies thereof.

    6.4    Renewal.  Upon request of Licensee and a showing that additional time
is needed to fully evaluate the VERISITY LTD. Technology, VERISITY may, at its
option, extend this Agreement for up to 30 days.

    6.5    Survival. The rights and obligations of the parties under Sections 3,
4.3, 5.1, 6.3, 6.5, 7, 8, and 9 shall survive the expiration or termination of
this Agreement.

7.  Proprietary Information
    -----------------------

    7.1    Definition.  Proprietary Information of a party means information and
data in written, graphic or machine-readable form and marked "confidential" or
with a similar proprietary legend.  "Proprietary Information" of VERISITY
includes, regardless of form and without the necessity of any proprietary
legend, the VERISITY LTD. Technology.

    7.2    Obligation.  Each party shall use the same degree of care and
safeguards that it takes with its own Proprietary Information of a similar
nature, but in no event less than a reasonable degree of care (i) to prevent the
publication, communication, or dissemination of the Proprietary Information of
the other party to any third party and (ii) to prevent any use of such
Proprietary Information not authorized herein.  The obligations of this Section
7.2 will survive the termination or expiration of this Agreement and will expire
five (5) years from such termination or expiration.

    7.3    Exclusions.  The provisions of Section 7.2 will not apply to any
Proprietary Information of the disclosing party that:  (i) is known by the
receiving party without restriction prior to the time of disclosure; (ii) is
generally known and available in the public domain through no fault of the
receiving party; (iii) is developed independently by the receiving party using
no Proprietary Information of the disclosing party; or (iv) is rightfully
received by the receiving party without restriction from a third party that is
under no obligation of confidentiality; In addition, the receiving party may
disclose Proprietary Information of the disclosing party with the prior written
approval of the disclosing party or to a court or other government body of
competent jurisdiction when required to do so by such body provided it uses
reasonable efforts to give prompt prior notice to the disclosing party and to
limit disclosure to that which is legally required.

    7.4    Injunctive Relief. Each receiving party expressly agrees that
monetary damages would be inadequate to compensate the disclosing party for any
breach of any

                                      -24-
<PAGE>

provision of this Article 7, that any such breach or threatened breach will
cause irreparable injury to the other party, and that, in addition to any other
remedies that may be available to it in law or in equity, the disclosing party
shall be entitled to obtain injunctive relief against the threatened or
continuing breach of any provision of this Article 7 without the necessity of
proving actual damages.

8.  General
    -------

    8.1    Scope of Agreement; Amendment.  This Agreement is the complete and
exclusive statement of the agreement between the parties with respect to the
subject matter hereof and supersedes all other written or oral communications
between the parties with respect to the license and use of the VERISITY LTD.
Technology.  This Agreement may be amended only by a written document signed by
both parties.  The terms and conditions of this Agreement will not be modified
by any purchase order issued by Licensee in connection with its license of the
VERISITY LTD. Technology, even if such purchase order states that its terms
shall prevail.

    8.2    No Waiver.  Neither party will, by mere lapse of time, without giving
notice or taking other action, be deemed to have waived any breach by the other
party of any of the provisions of this Agreement.  Further, the waiver by either
party of a particular breach of this Agreement by the other will neither be
construed as nor constitute a continuing waiver of such breach or of other
breaches of the same or any other provision of this Agreement.

    8.3    Assignment.  Licensee represents that it is acting on its own behalf
and is not acting as an agent for or on behalf of any third party, and further
agrees that it may not assign its rights or obligations under this Agreement, by
operation of law or otherwise, without VERISITY's prior written consent, which
shall not be unreasonably withheld.

    8.4    Governing Law; Unenforceability.  All questions concerning the
validity, operation, interpretation, and construction of this Agreement will be
governed by and determined in accordance with the laws of the State of
California, without regard to its conflict of laws provisions.  The parties
agree that the United Nations Convention on Contracts for the International Sale
of Goods is specifically excluded from application to this Agreement.  If a
court of competent jurisdiction determines that any provision of this Agreement
is invalid, illegal, or otherwise unenforceable, such provision shall be
enforced as nearly as possible in accordance with the stated intention of the
parties, while the remainder of this Agreement shall remain in full force and
effect.  To the extent any provision cannot be enforced in accordance with the
stated intentions of the parties, such provision shall be deemed not to be a
part of this Agreement.

                                      -25-
<PAGE>

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above:

VERISITY Design, Inc.                        [Licensee]:

By: s/b Moshe Gavrielov                      By: /s/ indecipherable
   -----------------------------                ------------------------
Name:                                        Name:
Title:                                       Title:

                                      -26-
<PAGE>

                                  Appendix A

                                  Definitions

VERISITY Technical Data means all of the following, in whatever form, provided
by VERISITY to Licensee or generated by Licensee's use of the Licensed Program:
[*]

Documentation means VERISITY's standard user documentation for the Licensed
Program.

VERISITY LTD. Technology means the Licensed Program, the VERISITY Design
Objects, the VERISITY Technical Data and the Documentation.

Test Chip means [*]

[*] 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.

                                      -27-
<PAGE>

                                  SCHEDULE H

                         TECHNOLOGY LICENSE AGREEMENT

                                      N/A

                                      -28-

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