Document:

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                                                                   EXHIBIT 10.18

                          NUMERICAL TECHNOLOGIES, INC.

                                 1997 STOCK PLAN

                    STOCK OPTION AGREEMENT -- EARLY EXERCISE

     Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT
   ----------------------------

John Traub

     You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

         Date of Grant:                       November 17, 1999

         Vesting Commencement Date:           September 13, 1999

         Exercise Price per Share:            $1.50

         Total Number of Shares Granted:      100,000

         Total Exercise Price:                $150,000.00

         Type of Option:                       X    Incentive Stock Option
                                              -----

                                              ____ Nonstatutory Stock Option

         Term/Expiration Date:                Ten Years/November 17, 2009

---------------
* Or earlier, pursuant to the termination period set forth below.

     Exercise and Vesting Schedule:
     -----------------------------

     This Option is exercisable immediately, in whole or in part, and shall vest
according to the following vesting schedule:

     One-fourth (1/4th) of the Shares subject to the Option shall vest twelve
months after the Vesting Commencement Date, and one-sixteenth (1/16th) of the
Shares subject to the Option shall vest on the last day of each three month
anniversary thereafter, subject to your continuing to be a Service Provider on
such dates.
<PAGE>

     Termination Period:
     ------------------

     You may exercise this Option for thirty days after you cease to be a
Service Provider. Upon your death or disability, this Option may be exercised
for one year after you cease to be a Service Provider. In no event may you
exercise this Option after the Term/Expiration Date as provided above.

II. AGREEMENT
    ---------

     1. Grant of Option. The Plan Administrator of the Company hereby grants to
        ---------------
the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.

     If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code. Nevertheless, to the extent that it exceeds the
$100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").

     2. Exercise of Option. This Option shall be exercisable during its term in
        ------------------
accordance with the provisions of Section 9 of the Plan as follows:

         (a) Right to Exercise.
             -----------------

             (i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this
Option shall be exercisable cumulatively according to the vesting schedule set
forth in the Notice of Grant. Alternatively, at the election of the Optionee,
this option may be exercised in whole or in part at any time as to Shares which
have not yet vested. For purposes of this Stock Option Agreement, Shares subject
to the Option shall vest based on continued employment of Optionee with the
Company. Vested Shares shall not be subject to the Company's repurchase right
(as set forth in the Restricted Stock Purchase Agreement, attached hereto as
Exhibit C-1).
-----------
             (ii) As a condition to exercising this Option for unvested Shares,
the Optionee shall execute the Restricted Stock Purchase Agreement.

             (iii) This Option may not be exercised for a fraction of a Share.

         (b) Method of Exercise. This Option shall be exercisable by delivery of
             ------------------
an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
                                           ---------
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice

                                       -2-
<PAGE>

shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.

     No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.

     3. Optionee's Representations. In the event the Shares have not been
        --------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
                                                                       -------
B.
-

     4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
        --------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.

     5. Method of Payment. Payment of the aggregate Exercise Price shall be by
        -----------------
any of the following, or a combination thereof, at the election of the Optionee:

        (a) cash;

        (b) check;

        (c) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or

        (d) surrender of other Shares which, (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

     6. Restrictions on Exercise. This Option may not be exercised until such
        ------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon

                                       -3-
<PAGE>

such exercise or the method of payment of consideration for such shares would
constitute a violation of any Applicable Law.

     7. Non-Transferability of Option. This Option may not be transferred in any
        -----------------------------
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of the
Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

     8. Term of Option. This Option may be exercised only within the term set
        --------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.

     9. Tax Consequences. Set forth below is a brief summary as of the date of
        ----------------
this Option of some of the federal tax consequences of exercise of this Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

        (a) Exercise of ISO. If this Option qualifies as an ISO, there will be
            ---------------
no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.

        (b) Exercise of ISO Following Disability. If the Optionee ceases to be
            ------------------------------------
an Employee as a result of a disability that is not a total and permanent
disability as defined in Section 22(e)(3) of the Code, to the extent permitted
on the date of termination, the Optionee must exercise an ISO within three
months of such termination for the ISO to be qualified as an ISO.

        (c) Exercise of Nonstatutory Stock Option. There may be a regular
            -------------------------------------
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.

        (d) Disposition of Shares. In the case of an NSO, if Shares are held for
            ---------------------
at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and at least two years after the Date of Grant, any gain
realized on disposition of the Shares will also be treated as long-term capital
gain for federal income

                                       -4-

<PAGE>

tax purposes. If Shares purchased under an ISO are disposed of within one year
after exercise or two years after the Date of Grant, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the difference between the Exercise Price and the lesser
of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the
sale price of the Shares. Any additional gain will be taxed as capital gain,
short-term depending on the period that the ISO Shares were held.

        (e) Notice of Disqualifying Disposition of ISO Shares. If the Option
            -------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (i) the date two years after the Date of Grant, or (ii) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

         (f) Section 83(b) Election for Unvested Shares Purchased Pursuant to
             ----------------------------------------------------------------
Options. With respect to the exercise of an Option for unvested Shares, an
-------
election may be filed by the Optionee with the Internal Revenue Service, within
30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code to be taxed currently on any difference between the purchase price of the
Shares and their Fair Market Value on the date of purchase. In the case of a
Nonstatutory Stock Option, this will result in a recognition of taxable income
to the Optionee on the date of exercise, measured by the excess, if any, of the
fair market value of the Shares, at the time the Option is exercised over the
purchase price for the Shares. Absent such an election, taxable income will be
measured and recognized by Optionee at the time or times on which the Company's
Repurchase Option lapses. In the case of an Incentive Stock Option, such an
election will result in a recognition of income to the Optionee for alternative
minimum tax purposes on the date of exercise, measured by the excess, if any, of
the fair market value of the Shares, at the time the option is exercised, over
the purchase price for the Shares. Absent such an election, alternative minimum
taxable income will be measured and recognized by Optionee at the time or times
on which the Company's Repurchase Option lapses. Optionee is strongly encouraged
to seek the advice of his or her own tax consultants in connection with the
purchase of the Shares and the advisability of filing of the Election under
Section 83(b) of the Code. A form of Election under Section 83(b) is attached
hereto as Exhibit C-5 for reference.
          -----------

     OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT THE
COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON OPTIONEE'S
BEHALF.

     10. Entire Agreement; Governing Law. The Plan is incorporated herein by
         -------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.

                                       -5-

<PAGE>

     11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
         ---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

     Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

OPTIONEE:                                   NUMERICAL TECHNOLOGIES, INC.

/s/ John P. Traub                           /s/
--------------------------------            ----------------------------------
Signature                                   By

John P. Traub                               Pres. & CEO
--------------------------------            ----------------------------------
Print Name                                  Title

5662 Country Club Parkway
--------------------------------
San Jose, CA 95138
--------------------------------
Residence Address

                                      -6-
<PAGE>

                                    EXHIBIT A

                                 1997 STOCK PLAN

                                 EXERCISE NOTICE

Numerical Technologies, Inc.
80 West Plumeria Drive
San Jose, CA  95134-2134

Attention:  Secretary

     1. Exercise of Option. Effective as of today, _____________, _____, the
        ------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Numerical Technologies,
Inc. (the "Company") under and pursuant to the 1997 Stock Plan (the "Plan") and
the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated ____________,
___ (the "Option Agreement").

     2. Delivery of Payment. Purchaser herewith delivers to the Company the full
        -------------------
purchase price of the Shares, as set forth in the Option Agreement.

     3. Representations of Optionee. Optionee acknowledges that Optionee has
        ---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

     4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by
        ---------------------
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.

     5. Company's Right of First Refusal. Before any Shares held by Optionee or
        --------------------------------
any transferee (either being sometimes referred to herein as the "Holder") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").

         (a) Notice of Proposed Transfer. The Holder of the Shares shall deliver
             ---------------------------
to the Company a written notice (the "Notice") stating: (i) the Holder's bona
fide intention to sell or otherwise transfer such Shares; (ii) the name of each
proposed purchaser or other transferee

<PAGE>

("Proposed Transferee"); (iii) the number of Shares to be transferred to each
Proposed Transferee; and (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Shares (the "Offered Price"), and
the Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).

         (b) Exercise of Right of First Refusal. At any time within thirty (30)
             ----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder,elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.

         (c) Purchase Price. The purchase price ("Purchase Price") for the
             --------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.

         (d) Payment. Payment of the Purchase Price shall be made, at the option
             -------
of the Company or its assignee(s), in cash (by check), by cancellation of all or
a portion of any outstanding indebtedness of the Holder to the Company (or, in
the case of repurchase by an assignee, to the assignee), or by any combination
thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.

         (e) Holder's Right to Transfer. If all of the Shares proposed in the
             --------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.

         (f) Exception for Certain Family Transfers. Anything to the contrary
             --------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.

                                      -2-

<PAGE>

         (g) Termination of Right of First Refusal. The Right of First Refusal
             -------------------------------------
shall terminate as to any Shares upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.

     6. Tax Consultation. Optionee understands that Optionee may suffer adverse
        ----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.

     7.  Restrictive Legends and Stop-Transfer Orders.
         --------------------------------------------

         (a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:

         THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
         OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
         REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
         SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
         TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
         RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE
         ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
         THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
         BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
         RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
         THESE SHARES.

         (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
             ---------------------
compliance with the restrictions referred  to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

                                      -3-

<PAGE>

         (c) Refusal to Transfer. The Company shall not be required (i) to
             -------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

     8. Successors and Assigns. The Company may assign any of its rights under
        ----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.

     9. Interpretation. Any dispute regarding the interpretation of this
        --------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

     10. Governing Law; Severability. This Agreement is governed by the internal
         ---------------------------
substantive laws, but not the choice of law rules, of California.

     11. Entire Agreement. The Plan and Option Agreement are incorporated herein
         ----------------
by reference. This Agreement, the Plan, the Restricted Stock Purchase Agreement,
the Option Agreement and the Investment Representation Statement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee.

Submitted by:                                   Accepted by:

OPTIONEE:                                       NUMERICAL TECHNOLOGIES, INC.

/s/ John P. Traub                               /s/
---------------------------------               -------------------------------
Signature                                       By

John P. Traub
---------------------------------               -------------------------------
Print Name                                      Its

Address:                                        Address:
-------                                         -------

5662 Country Club Parkway
San Josse, CA 95138

                                                ------------------------------
                                                Date Received

                                      -4-

<PAGE>

                                    EXHIBIT B
                                    ---------

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE               :

COMPANY                :      NUMERICAL TECHNOLOGIES, INC.

SECURITY               :      COMMON STOCK

AMOUNT                 :

DATE                   :

     In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:

         (a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

         (b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, and any other legend
required under applicable state securities laws.

         (c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration

<PAGE>

under the Securities Act. In the event the Company becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

     In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than three years, the satisfaction of the conditions set forth
in sections (1), (2), (3) and (4) of the paragraph immediately above.

         (d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.

                                      Signature of Optionee:

                                      -------------------------------------

                                      Date:                                 ,
                                           --------------------------------

                                      -2-

<PAGE>

                                   EXHIBIT C-1
                                   -----------

                          NUMERICAL TECHNOLOGIES, INC.

                                 1997 STOCK PLAN

                       RESTRICTED STOCK PURCHASE AGREEMENT

     THIS AGREEMENT is made between ____________________________________ (the
"Purchaser") and Numerical Technologies, Inc. (the "Company") as of
__________________, 199_.

                                    RECITALS
                                    --------

     (1) Pursuant to the exercise of the stock option granted to Purchaser under
the Company's 1997 Stock Plan (the "Plan") and pursuant to the Stock Option
Agreement (the "Option Agreement") dated ____________, 19__ by and between the
Company and Purchaser with respect to such grant, which Plan and Option
Agreement are hereby incorporated by reference, Purchaser has elected to
purchase _________ of those shares which have not become vested under the
vesting schedule set forth in the Option Agreement ("Unvested Shares"). The
Unvested Shares and the shares subject to the Option Agreement which have become
vested are sometimes collectively referred to herein as the "Shares".

     (2) As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the parties
with respect to Shares acquired upon exercise of the Option.

     1.  Repurchase Option.
         -----------------

         (a) If Purchaser's status as a Service Provider is terminated for any
reason, including for cause, death, and disability, the Company shall have the
right and option to purchase from Purchaser, or Purchaser's personal
representative, as the case may be, all of the Purchaser's Unvested Shares as of
the date of such termination at the price paid by the Purchaser for such Shares
(the "Repurchase Option").

         (b) Upon the occurrence of a termination, the Company may exercise its
Repurchase Option by delivering personally or by registered mail, to Purchaser
(or his transferee or legal representative, as the case may be), within ninety
(90) days of the termination, a notice in writing indicating the Company's
intention to exercise the Repurchase Option and setting forth a date for closing
not later than thirty (30) days from the mailing of such notice. The closing
shall take place at the Company's office. At the closing, the holder of the
certificates for the Unvested Shares

<PAGE>

being transferred shall deliver the stock certificate or certificates evidencing
the Unvested Shares, and the Company shall deliver the purchase price therefor.

         (c) At its option, the Company may elect to make payment for the
Unvested Shares to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser stating the name and
address of the bank, date of closing, and waiving the closing at the Company's
office.

         (d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.

         (e) The Repurchase Option shall terminate in accordance with the
Vesting Schedule in Optionee's Option Agreement.

         2. Transferability of the Shares; Escrow.
            -------------------------------------

         (a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.

         (b) To insure the availability for delivery of Purchaser's Unvested
Shares upon repurchase by the Company pursuant to the Repurchase Option under
Section 1, Purchaser hereby appoints the secretary, or any other person
designated by the Company as escrow agent, as its attorney-in-fact to sell,
assign and transfer unto the Company, such Unvested Shares, if any, repurchased
by the Company pursuant to the Repurchase Option and shall, upon execution of
this Agreement, deliver and deposit with the secretary of the Company, or such
other person designated by the Company, the share certificates representing the
Unvested Shares, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit C-2. The Unvested Shares and stock assignment shall
                   -----------
be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of
the Company and Purchaser attached as Exhibit C-3 hereto, until the Company
                                      -----------
exercises its purchase right as provided in Section 1, until such Unvested
Shares are vested, or until such time as this Agreement no longer is in effect.
As a further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as Exhibit C-4. Upon vesting of the Unvested
                                     -----------
Shares, the escrow agent shall promptly deliver to the Purchaser the certificate
or certificates representing such Shares in the escrow agent's possession
belonging to the Purchaser, and the escrow agent shall be discharged of all
further obligations hereunder; provided, however, that the escrow agent shall
nevertheless retain such certificate or certificates as escrow agent if so
required pursuant to other restrictions imposed pursuant to this Agreement.

         (c) The Company, or its designee, shall not be liable for any act it
may do or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.

                                      -2-

<PAGE>

         (d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and the
Exercise Notice executed by the Purchaser with respect to any
Unvested Shares purchased by Purchaser and shall acknowledge the same by signing
a copy of this Agreement.

     3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any
        --------------------------------
way the ownership, voting rights or other rights or duties of Purchaser, except
as specifically provided herein.

     4. Legends. The share certificate evidencing the Shares issued hereunder
        -------
shall be endorsed with the following legend (in addition to any legend required
under applicable state securities laws):

     THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

     5. Adjustment for Stock Split. All references to the number of Shares and
        --------------------------
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.

     6. Notices. Notices required hereunder shall be given in person or by
        -------
registered mail to the address of Purchaser shown on the records of the Company,
and to the Company at their respective principal executive offices.

     7. Survival of Terms. This Agreement shall apply to and bind Purchaser and
        -----------------
the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.

     8. Section 83(b) Election. Purchaser hereby acknowledges that he or she has
        ----------------------
been informed that, with respect to the exercise of an Option for unvested
Shares, an election may be filed by the Purchaser with the Internal Revenue
Service, within 30 days of the purchase of the Shares, electing pursuant to
         --------------
Section 83(b) of the Code to be taxed currently on any difference between the
purchase price of the Shares and their Fair Market Value on the date of
purchase. In the case of a Nonstatutory Stock Option, this will result in a
recognition of taxable income to the Purchaser on the date of exercise, measured
by the excess, if any, of the fair market value of the Shares, at the time the
Option is exercised over the purchase price for the Shares. Absent such an
election, taxable income will be measured and recognized by Purchaser at the
time or times on which the Company's Repurchase Option lapses. In the case of an
Incentive Stock Option, such an election will result in a recognition of income
to the Purchaser for alternative minimum tax purposes on the date of exercise,
measured by the excess, if any, of the fair market value of the Shares, at the
time the option is exercised, over the purchase price for the Shares. Absent
such an election, alternative minimum taxable income will be measured and
recognized by Purchaser at the time or times on which the

                                      -3-

<PAGE>

Company's Repurchase Option lapses. Purchaser is strongly encouraged to seek the
advice of his or her own tax consultants in connection with the purchase of the
Shares and the advisability of filing of the Election under Section 83(b) of the
Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-5
                                                                   -----------
for reference.

     PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT
THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S
BEHALF.

     9. Representations. Purchaser has reviewed with his own tax advisors the
        ---------------
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

     10. Governing Law. This Agreement shall be governed by the internal
         -------------
substantive laws, but not the choice of law rules, of California.

     Purchaser represents that he has read this Agreement and is familiar with
its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.

                                      -4-

<PAGE>

     IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set
forth above.

                                    "COMPANY"

                                    NUMERICAL TECHNOLOGIES, INC

                                    ------------------------------------
                                    By

                                    ------------------------------------
                                    Title

                                    "PURCHASER"

                                    /s/ John P. Traub
                                    -----------------------------------
                                    Signature

                                    John P. Traub
                                    -----------------------------------
                                    Printed Name

                                    ###-##-####
                                    -----------------------------------
                                    Soc. Sec. No.

                                    Address:
                                    -------

                                    5662 Country Club Parkway
                                    -----------------------------------
                                    San Jose, CA 95138
                                    -----------------------------------

                                      -5-

<PAGE>

                                   EXHIBIT C-2
                                   -----------

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto Numerical Technologies, Inc. (__________) shares of the Common
Stock of Numerical Technologies, Inc. standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint ________________ to transfer the said stock
on the books of the within named corporation with full power of substitution in
the premises.

     This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Numerical Technologies, Inc. and the
undersigned dated ______________, _____.

Dated: _______________, ______

       Signature: /s/ John P. Traub
                 -----------------------------------

INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.

                                      -1-

<PAGE>

                                   EXHIBIT C-3
                                   -----------

                            JOINT ESCROW INSTRUCTIONS

                                                                    ______, 19__

Numerical Technologies, Inc.
2630 Walsh Avenue
Santa Clara, CA 95051

Attention:  Secretary

Dear _______________:

     As Escrow Agent for both Numerical Technologies, Inc. (the "Company"), and
the undersigned purchaser of stock of the Company (the "Purchaser"), you are
hereby authorized and directed to hold the documents delivered to you pursuant
to the terms of that certain Restricted Stock Purchase Agreement ("Agreement")
between the Company and the undersigned, in accordance with the following
instructions:

     1. In the event the Company and/or any assignee of the Company (referred to
collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.

     2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.

     3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the
stock is held by you.

     4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.

     5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.

     6. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

     10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

     11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.

     12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.

                                      -2-

<PAGE>

     13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

     14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

     15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.

                  COMPANY:                  Numerical Technologies, Inc.
                                            2630 Walsh Avenue
                                            Santa Clara, CA 95051
                                            Attention:  Secretary

                  PURCHASER:

                  ESCROW AGENT:             Wilson Sonsini Goodrich & Rosati
                                            650 Page Mill Road
                                            Palo Alto, CA  94304

     16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.

     17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.

                                      -3-

<PAGE>

     18. These Joint Escrow Instructions shall be governed by the internal
substantive laws, but not the choice of law rules, of California.

                                       NUMERICAL TECHNOLOGIES, INC.

                                       ------------------------------------
                                       By

                                       ------------------------------------
                                       Title

                                       PURCHASER

                                       /s/ John P. Traub
                                       -----------------------------------
                                       Signature

                                       John P. Traub
                                       -----------------------------------
                                       Typed or Printed Name

                                       ESCROW AGENT

                                       WILSON SONSINI GOODRICH & ROSATI

                                       -----------------------------------
                                       By

                                       -----------------------------------
                                       Title

                                      -4-

<PAGE>

                                  EXHIBIT C-4
                                  -----------

                               CONSENT OF SPOUSE
                               -----------------

         I,                     ,  spouse of                   ,  have read and
            --------------------             ------------------
approve the foregoing Agreement. In consideration of granting of the right to my
spouse to purchase shares of  Numerical Technologies, Inc., as set forth in the
Agreement,  I hereby appoint my spouse as my  attorney-in-fact in respect to the
exercise  of any  rights  under  the  Agreement  and  agree  to be  bound by the
provisions of the Agreement  insofar as I may have any rights in said  Agreement
or any shares  issued  pursuant  thereto  under the  community  property laws or
similar  laws  relating  to  marital  property  in  effect  in the state of our
residence as of the date of the signing of the foregoing Agreement.

Dated:               ,
       --------------     --

                                            /s/ Carol G. Traub
                                            -------------------------

                                      -1-

<PAGE>

                                   EXHIBIT C-5
                                   -----------

                          ELECTION UNDER SECTION 83(b)
                          ----------------------------
                      OF THE INTERNAL REVENUE CODE OF 1986
                      ------------------------------------

The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
or alternative minimum taxable income, as the case may be, for the current
taxable year the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:

1.   The name, address, taxpayer identification number and taxable year of the
     undersigned are as follows:

     NAME:                               TAXPAYER:                SPOUSE:

     ADDRESS:

     IDENTIFICATION NO.:                 TAXPAYER: ###-##-####     SPOUSE:

     TAXABLE YEAR:

2.   The property with respect to which the election is made is described as
     follows:                shares (the "Shares") of the Common Stock of
               -------------
     (the "Company").

3.   The date on which the property was transferred is:

4.   The property is subject to the following restrictions:

     The Shares may not be transferred and are subject to forfeiture under the
     terms of an agreement between the taxpayer and the Company. These
     restrictions lapse upon the satisfaction of certain conditions contained in
     such agreement.

5.   The fair market value at the time of transfer, determined without regard to
     any restriction other than a restriction which by its terms will never
     lapse, of such property is: $          .
                                  -----------

6.   The amount (if any) paid for such property is: $          .
                                                     ----------

The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked
--------------------------------------------------------------------------------
except with the consent of the Commissioner.
-------------------------------------------

Dated:
       ----------    --                   -------------------------------------
                                             Taxpayer

The undersigned spouse of taxpayer joins in this election.

Dated:  ___________________, 19__         -------------------------------------<PAGE>

                                                                   EXHIBIT 10.21

                               LICENSE AGREEMENT                    CONFIDENTIAL
                               -----------------

     This License Agreement (the "Agreement") is entered into as of this 1st day
of October, 1999 (the "Effective Date"), by and between Cadence Design Systems,
Inc., a Delaware corporation with offices at 555 River Oaks Parkway, San Jose,
CA 95134 ("Cadence") and Numerical Technologies Inc., a California corporation
with offices at 70 West Plumeria Drive, San Jose, CA 95134-2134 ("NTI").

RECITAL
-------

     WHEREAS, Cadence develops and markets electronic design automation ("EDA")
software tools for integrated circuit design and NTI develops and markets
software design tools for subwavelength integrated circuit technologies. Cadence
desires to incorporate into its products certain of NTI's software design tool
modules for subwavelength integrated circuit technologies subject to the terms
and conditions of this Agreement.

     In consideration of the foregoing and the mutual promises contained herein,
Cadence and NTI agree as follows:

     1.    DEFINITIONS.

           1.1   "Agent" of Cadence or NTI means, an individual or
                  -----
entity who is authorized to act for or in place of and to bind Cadence or NTI,
as the case may be, with respect to dealings or contractual obligations with
third parties.

           1.2   "Affiliate" of Cadence or NTI means, respectively, any entity
                  ---------
that controls, is controlled by, or is under common control with such party,
where "control" means ownership of fifty percent (50%) or more of the
outstanding voting securities of the entity in question or the power to
otherwise control the voting or affairs of such entity.

           1.3   "Cadence Combined Products" shall mean the Cadence software
                  -------------------------
products that are comprised of one or more Cadence Products and one or more NTI
Product Components.

           1.4   "Cadence Products" shall mean the Cadence software products
                  ----------------
listed in Exhibit A attached hereto and any other commercially released place-
and-route, physical design, and physical verification family of products offered
by Cadence or any of its Affiliates [***] primarily for the same intended uses
as the products listed in Exhibit A.

           1.5   "Critical Error" shall mean (i) an Error that stops, prevents
                  --------------
or hinders in a material and substantial way design work or production work;
(ii) an Error that causes design data corruption; or (iii) any other substantial
Error for which there is no reasonably acceptable work around.

           1.6   "Derivative Work" shall mean a derivative work within the
                  ---------------
meaning of the U.S. copyright law.

Numerical Technologies - CADENCE

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

           1.7   "Documentation" shall mean the manuals and other documentation
                  -------------
that NTI generally makes available with the NTI Product Components to end users.

           1.8   "Error Corrections" shall mean any Error corrections, patches,
                  -----------------
and bug fixes prepared by or for NTI to any portion of the NTI Product
Components.

           1.9   "Error" means any failure of an NTI Product Component to
                  -----
conform to its specifications or the applicable Documentation or to provide
consistent and accurate results.

           1.10  "Initial Term" means the period beginning on the Effective Date
                  ------------
and ending on December 31, 2002.

           1.11  "Intellectual Property Rights" shall mean (by whatever name or
                  ----------------------------
term known or designated) copyrights, trade secrets, patents, and any other
intellectual and industrial property and proprietary rights (excluding
trademarks) including registrations, applications, renewals and extensions of
such rights.

           1.12  "NTI Product Components" shall mean the NTI product components
                  ----------------------
that are listed in Exhibit B attached hereto and all Updates thereto.

           1.13  "Renewal Term" means the period beginning on January 1, 2003
                  ------------
and ending on December 31, 2004.

           1.14  "Update" shall mean any new release or version of the NTI
                  ------
Product Components or Cadence Products, as the case may be, that is designated
by a different version number (e.g., 2.0 instead of 1.0, or 2.1 instead of 2.0)
and, with respect to the NTI Product Components, any new software product that
(i) uses the same methodology as the NTI Product Components and (ii) is designed
primarily for the same intended uses as the NTI Product Components. Moreover,
for the purpose of clarification and avoidance of doubt, to the extent that NTI
or Cadence integrates the source code for the NTI Product Components or Cadence
Products or portions thereof, with additional source to make new NTI or Cadence
products (other than the NTI Product Components or Cadence Products), such
additional source code shall not constitute Updates but any improvements to the
source code for the NTI Product Components or Cadence Products shall constitute
Updates. Also, any source code created by or for NTI in the course of creating
customized interfaces between the NTI Product Components and third party
products as permitted under this Agreement will not constitute Updates.

     2.    DELIVERY OF NTI LICENSED TECHNOLOGY.

           NTI shall deliver the NTI Product Components and the Documentation to
Cadence promptly after the Effective Date in a mutually acceptable format and
manner and at a mutually acceptable place and time.

                                      -2-
<PAGE>

                                                                    CONFIDENTIAL

     3.    LICENSE GRANTS.

           3.1   Software License to Cadence. NTI hereby grants to Cadence
                 ---------------------------
the following nonexclusive (subject to Section 4), worldwide licenses, under all
of NTI's Intellectual Property Rights in and to the NTI Product Components:

                 (a)   to use, reproduce, perform and display the NTI Product
Components (in object code form only) for Cadence's internal purposes including
integration work (with Cadence Products only), testing, support, and
demonstrations,

                 (b)   to use, reproduce, perform and display the NTI Product
Components with the Cadence Products (in object code form only) for the purpose
of providing Cadence design and methodology services to Cadence customers,
provided that Cadence may not provide optical proximity correction design
services using the NTI Product Components alone for Cadence customers not using
the Cadence Products for the product design at issue;

                 (c)   to reproduce and distribute, and to make, have made,
offer for sale, import and sell, the NTI Product Components, in object code form
only, solely as incorporated or bundled with the Cadence Products and not on a
standalone basis; and

                 (d)   to reproduce and distribute, and to make, have made,
offer for sale, import and sell, the NTI Product Components, in object code form
only, on a standalone basis only to those Cadence customers who, as of the
Effective Date, already have purchased a license for at least one (1) of the
Cadence Products ("Existing Customers"), solely for the purpose of allowing such
customers to use the NTI Product Components with Cadence Products.

     Such licenses shall be subject to the restrictions set forth in Section
3.3. Cadence may sublicense the rights granted in this Section 3.1 only as
follows: (i) Cadence may sublicense the rights to use, reproduce and distribute
the NTI Product Components incorporated or bundled with the Cadence Products to
its distributors, resellers, OEM customers, VAR customer, and VAD customers; and
(ii) Cadence may sublicense the rights to use and reproduce the NTI Product
Components to its end-user customers, solely for the purpose of allowing such
end-user customers to use the NTI Product Components with Cadence Products.

           3.2   Documentation License to Cadence. NTI grants to Cadence a
                 --------------------------------
nonexclusive (subject to Section 4), worldwide license, under all of NTI's
Intellectual Property Rights in and to the Documentation, to use, reproduce,
perform, display, distribute, and to make, have made, offer for sale, import and
sell the Documentation solely to the extent that the Documentation is to be used
in connection with the Cadence Combined Products or the NTI Product Components
on a stand-alone basis as permitted under Section 3.1(d) above. Cadence may
sublicense the right to reproduce and distribute the Documentation solely to the
extent that it is to be used in connection with the Cadence Combined Products
(or the NTI Product Components on a stand-alone basis as permitted under Section
3.1(d) above) to its distributors, resellers, OEM customers, VAR customers and
VAD customers.

                                      -3-
<PAGE>

                                                                    CONFIDENTIAL

           3.3   Restrictions. Cadence shall not itself, or through any
                 ------------
Affiliate, Agent or third party: (a) sell, lease, license or sublicense the NTI
Product Components or the Documentation (except as expressly permitted in
Section 3.1 and 3.2), (b) decompile, disassemble, reverse engineer or otherwise
attempt to derive source code from the NTI Product Components, in whole or in
part, except to the extent such restriction is prohibited by applicable law; (c)
modify or create Derivative Works from the NTI Product Components; or (d) use
the NTI Product Components to provide processing services to third parties
(except as expressly permitted under Section 3.1) or otherwise use the NTI
Product Components on a service bureau basis.

           3.4   Copyright Notices. Cadence agrees that it will not remove any
                 -----------------
copyright notices, proprietary markings, trademarks or tradenames from the NTI
Product Components or Documentation.

           3.5   Software License Terms. Cadence shall use its then-current
                 ----------------------
standard form software license terms for marketing and licensing the NTI Product
Components under this Agreement. Cadence shall include in its standard form
software license terms warranty disclaimer and limitation of liability
provisions for the benefit of NTI. NTI agrees that Cadence may refer to NTI as a
"third party" in the standard form license terms.

           3.6   Trademark License to Cadence. Cadence shall display NTI's
                 ----------------------------
trademarks and logos with any marketing, promotional or advertising literature
pertaining to the Cadence Combined Products. NTI grants to Cadence a
nonexclusive, worldwide license to use the NTI trade names, trademarks and logos
set forth in Exhibit C ("NTI's Trademarks") attached hereto during the term of
this Agreement solely in connection with the NTI Product Components as part of
the Cadence Combined Products, with the Documentation and in conjunction with
any other marketing, promotional or advertising literature pertaining to the
Cadence Combined Products. Cadence shall comply with any and all reasonable and
customary guidelines provided by NTI in writing concerning the use of NTI's
Trademarks. To enable NTI to monitor the use of NTI's Trademarks, Cadence shall
provide, as requested by NTI from time to time, samples of all items and
materials to which a NTI Trademark has been applied. Cadence shall obtain no
rights with respect to any of NTI's Trademarks, other than the rights set forth
herein. At NTI's written request, Cadence shall assign to NTI any such right,
title and interest exceeding the rights granted herein that it may obtain in
NTI's Trademarks and the associated goodwill. All goodwill arising out of any
uses of NTI's Trademarks will inure solely to the benefit of NTI.

           3.7   ModelCal Distribution License. The license to the NTI Product
                 -----------------------------
Component referred to in Exhibit B as the ModelCal Software is subject to the
further license terms:

                 (a)   Cadence agrees to list the ModelCal Software in its price
book as the "NTI Model Calibrator."

                 (b)   Cadence agrees to put in place appropriate language and
controls to limit distribution of the ModelCal Software to single copy licenses
in conjunction with other licenses of the NTI Product Components under this
Agreement.

                                      -4-
<PAGE>

                                                                    CONFIDENTIAL

                 (c)   Cadence agrees to refer ModelCal Software customers
directly to NTI for purchases of additional ModelCal Software licenses.

                 (d)   As between Cadence and NTI, NTI will provide any
maintenance, support, and consulting to end users of the ModelCal Software at
commercially reasonable prices. The ModelCal Software will be licensed to end
users either under Cadence's then-current standard form software license terms
in accordance with Section 3.5 or under a form of end user license agreement
supplied by NTI in which NTI is the licensor.

     4.    EXCLUSIVITY.

           4.1   Limits on NTI's Activities. During the Initial Term of this
                 --------------------------
Agreement and any Renewal Term hereunder, subject to Section 4.2:

                 (a)   NTI shall not, directly or through any of its Affiliates
or Agents, license, distribute, or otherwise provide any of the NTI Product
Components to [***] without the express prior written consent of Cadence,
which Cadence may grant or withhold in its sole discretion;

                 (b)   NTI shall not, directly or through any of its Affiliates
or Agents, develop, or assist any third party in developing, or otherwise
participate in the development of, interfaces between, or an integrated
solution consisting of (in whole or in part), any of the NTI Product
Components and any [***] product;

                 (c)   NTI shall not, directly or through any of its Affiliates
or Agents, participate in, or assist any third party with, any marketing or
sales activities with [***] or the marketing or distribution of interfaces
between, or an integrated solution consisting of (in whole or in part), any of
the NTI Product Components and any [***] product; and

                 (d)   NTI shall include in all agreements with third parties in
which the third party is licensed to redistribute the NTI Product Components
(including OEM, reseller, and distribution agreements) a provision that the
third party's license to redistribute the NTI Product Components will
automatically terminate (subject to reasonable sell-off terms that allow the
licensee, for up to ninety (90) days after the date of termination, to fulfill
customer orders accepted before the date of termination) if (i) [***], (ii)
[***], or (iii) [***].

                                      -5-

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

     Permitted NTI Activities. Subject to Section 4.1, NTI shall have the right
     ------------------------
to license, distribute, OEM and sell the NTI Product Components to any third
party other than [***]. Consistent with the foregoing, NTI agrees that it
will prohibit any third party who has the right to distribute NTI Components
from licensing or transmitting the NTI Components, either on a stand-alone
basis or as incorporated into any products, to [***]. Notwithstanding Section
4.1, if Cadence fails to meet the Cadence Production Release Milestones set
forth in Exhibit D, NTI shall have the unrestricted right to enter into OEM or
distribution license agreements with [***] for any or all of the NTI Product
Components. NTI shall notify Cadence in writing (a) if NTI believes that
Cadence has failed to meet any of the Cadence Production Release Milestones
set forth in Exhibit D, and (b) within two (2) business days after entering
into such an agreement with [***] . If, in response to any notice from NTI
under clause (a) above, Cadence notifies NTI in writing (within ten (10) days
after receipt of NTI's notice) that Cadence believes it has met the Cadence
Production Release Milestones in question, the parties will attempt to resolve
the dispute in accordance with Section 13. NTI will not enter into any OEM or
distribution license agreement with [***] until (i) it has given notice to
Cadence as described in clause (a) above and (ii) either Cadence has
acknowledged in writing that it failed to meet one of Cadence Production
Release Milestones, or Cadence has failed to notify NTI within ten (10) days
as described above that Cadence believes it has met the Cadence Production
Release Milestones in question, or if Cadence does so notify NTI, the dispute
has been resolved in favor of NTI or the parties have been unable to resolve
the dispute in accordance with Section 13.

     Notwithstanding Section 4.1, NTI will have the right to assist a
particular end user in integrating the NTI Product Components with any [***]
product solely for such end user customer's internal use, provided that
neither NTI nor such end user customer markets such integration services or
markets or distributes any interfaces developed in connection with such
integration work. It is understood and agreed that it will not be considered a
breach of Section 4.1 by NTI if [***] gains access to the NTI Product
Components through doing integration work at a customer's facilities.

           4.2   Limits on Cadence's Activities. During the Initial Term and any
                 ------------------------------
Renewal Term, Cadence shall not, directly or through any of its Affiliates or
Agents, license, distribute, or otherwise provide any of the NTI Product
Components to [***] without the express prior written consent of NTI, which
NTI may grant or withhold in its sole discretion, and Cadence shall not
develop, or participate in the development of, interfaces between, or an
integrated solution consisting of (in whole or in part), any of the NTI
Product Components and any [***] product. Cadence shall not be restricted from
                                                        ---
developing, licensing, acquiring, marketing or distributing any technologies
which have substantially the same functionality as the NTI Product Components.
Cadence shall use commercially reasonable efforts to introduce and field the
Cadence Combined Products as the primary Cadence solution for design tools for
subwavelength integrated circuit technologies during the Initial Term. The
restrictions and obligations on Cadence in this Section 4.3 will apply only as
long as NTI has not materially breached its obligations under Sections 4.1 and
4.2.

                                      -6-

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

     5.    FEES.

           5.1   Payment Amounts During Term. Subject to Section 5.4, Cadence
                 ---------------------------
shall pay NTI a license fee for license of the NTI Product Components
("License Fee") in the amount of [***] and shall pay NTI a fee for training
and support regarding the NTI Product Components ("Service Fee") in the amount
of [***] during the Initial Term. The License Fee shall be paid in accordance
with the schedule set forth in Exhibit E attached hereto and Section 5.3
below. The specific Service Fees to be paid are set forth in Exhibit F and
shall be paid in accordance with the schedule set forth in Exhibit F and
Section 5.3 below. Other than the fees described in this Section 5.1 and
Exhibit B, no other royalties or payments shall be payable by Cadence to NTI
for the license of the NTI Product Components during the Initial Term or, to
the extent that Cadence's rights under this Agreement survive the expiration
or termination of this Agreement, after such expiration or termination.

           5.2   Payments Amounts During Renewal Period. If Cadence exercises
                 --------------------------------------
its option to renew the term of this Agreement under Section 13.2 hereunder,
Cadence shall pay NTI an additional License Fee in the amount of [***] and an
additional Service Fee in the amount of [***] during the Renewal Term. The
License Fee shall be paid in accordance with the schedule set forth in Exhibit
E and the Service Fee shall be paid in accordance with a schedule to be
mutually agreed upon by the parties. Other than the fees described in this
Section 5.2 and Exhibit B, no other royalties or payments shall be payable by
Cadence to NTI for the license of the NTI Product Components during the
renewal term or, to the extent that Cadence's rights under this Agreement
survive the expiration or termination of this Agreement, after such expiration
or termination.

           5.3   Payment Terms. Payments will be made as indicated on the Fee
                 -------------
Payment Schedule on Exhibits E and F.

           5.4   Reduced Fees. If during the Initial Term or any Renewal Term
                 ------------
NTI executes a distributor or OEM agreement with [***] as permitted under
Section 4.2, beginning on the effective date of such agreement, the amount of
the License Fees payable thereafter by Cadence under this Section 5 during the
Initial Term and any Renewal Term shall be reduced by [***]. For the purpose of
clarification, in no event shall Cadence be entitled to any refund of License
Fees or Service Fees hereunder .

           5.5   No Withholding. Cadence understands and agrees that, in the
                 --------------
event of NTI's material breach of its training and support obligations, Cadence
shall not be entitled to withhold payment of License Fees hereunder.

     6.    PROPRIETARY RIGHTS.

           6.1   Cadence Products. The parties agree that, as between the
                 ----------------
parties, Cadence retains all right, title and interest in and to the Cadence
Products and in all Intellectual Property Rights therein.

                                      -7-

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

           6.2   NTI Products. The parties agree that, as between the parties,
                 ------------
NTI retains all right, title and interest in and to the NTI Product Components
and in all Intellectual Property Rights therein.

     7.    TRAINING AND SALES SUPPORT.

           7.1   Training of Cadence Employees. NTI will provide the following
                 -----------------------------
training regarding the NTI Product Components to Cadence employees:

                 (a)   Model Calibration Training: one (1), two (2) day class
employing two (2) NTI trainers, each quarter during the Initial Term and any
Renewal Term; and

                 (b)   Product Training for NOPC, SiDRC and ImagIC: one (1), two
(2) day class employing two (2) NTI trainers, each quarter during the Initial
Term and any Renewal Term.

     All training classes shall be provided at locations to be mutually agreed
upon by the parties. Any additional training shall be provided to Cadence by NTI
at an additional charge to be mutually agreed upon by the parties. For purposes
of this Section 7, "days" do not include travel time to or from locations where
NTI provides training or support pursuant to this Section 7.

           7.2   Joint Sales Calls. Two (2) NTI employees shall participate with
                 -----------------
Cadence in sales calls for up to three (3) weeks per quarter, made to
prospective customers for the Cadence Combined Products during the Initial Term
and any Renewal Term.

           7.3   Model Calibration Service. NTI shall make available two (2)
                 -------------------------
specialists for a total of two (2) calendar days per quarter to support the
customer and/or Cadence to accomplish model calibration of processes and OPC
rule generation during the Initial Term and any Renewal Term.

           7.4   Joint Marketing Efforts. NTI and Cadence agree to take
                 -----------------------
reasonable commercial steps to coordinate their respective efforts to market the
NTI Product Components and to create joint marketing collateral regarding the
NTI Product Components and Cadence Combined Products.

           7.5   Training of Cadence End Users. Cadence shall have the sole
                 -----------------------------
responsibility for conducting end-user training for the Cadence Combined
Products.

           7.6   Cadence End User Support. Cadence shall be solely responsible
                 ------------------------
for providing product technical support to all end-users of the Cadence Combined
Products.

     8.    UPDATES AND SUPPORT OF CADENCE.

           8.1 Updates. During the term of this Agreement, NTI shall deliver to
               -------
Cadence any Updates to the NTI Product Components that NTI has prepared upon
commercial release thereof. NTI agrees that it will not rename the NTI Product
Components in order to avoid providing Cadence with Updates that Cadence is
entitled to under this Section 8.1.

                                      -8-
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                                                                    CONFIDENTIAL

           8.2   Back-Up Support and Error Corrections. During the term of this
                 -------------------------------------
Agreement, NTI shall provide to Cadence back-up support for the NTI Product
Components as follows:

                 (a)   Error Correction. NTI will use reasonable commercial
                       ----------------
efforts to provide an Update to correct any Errors in the NTI Product Components
reported by Cadence. Such efforts will include, as appropriate, (i) reviewing
the Error with Cadence, (ii) gathering additional information about the Error,
(iii) analyzing the Error to determine its cause, (iv) providing an Error
solution (which may be an Update or a workaround, if already known), and (v)
when required providing an Update that corrects the Error. When available,
Updates will be delivered promptly to Cadence at no additional cost. NTI will
provide Cadence with an estimate of how long it will take to correct the Errors
reported by Cadence (in accordance with Section 8.2(b)) and will keep Cadence
informed of the progress of the problem resolution.

                 (b)   Error Classification and Response. Cadence and NTI will
                       ---------------------------------
jointly classify Errors reported by Cadence as follows: "Fatal" means an Error
that prevents the product from performing any useful work; "Severe Impact" means
an Error that disables a major or essential function or functions (other than
Fatal Errors); "Degraded Operations" means an Error that disables one or more
non-essential functions; and "Minor" means all other Errors. NTI will use
reasonable commercial efforts to confirm receiving a report of an Error, provide
a workaround or temporary fix including Documentation changes, and provide an
Update correcting the Error as follows:

Severity            Confirm Report   Temporary Fix           Update

                                     Continued effort until
Fatal               1 business day   corrected               6 days

Severe Impact       1 business day   5 business days         20 days

Degraded Operations 2 business day   15 business days        60 days

Minor               5 business day   To be determined on a   To be determined
                                     case-by-case basis      on a case-by-case
                                                             basis

     NTI will provide to Cadence sufficient advance notice of any planned
Updates as soon as such plans are made by NTI so as to enable Cadence to adapt
its interfaces to the NTI Product Components in a timely manner.

     9.    [***]

           9.1  [***]

                                      -9-

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

           9.2 [***]

           9.3   Assignability. The right [***] under this Section 9 is not
                 -------------
assignable by Cadence without the prior written consent of NTI, except to
Affiliates of Cadence in connection with an assignment of this entire Agreement
as part of an internal restructuring or reorganization of Cadence not involving
any combination with any third party (other than third parties that either are
Affiliates of Cadence as of the Effective Date or are formed in connection with
such internal restructuring or reorganization).

           9.4   Fiduciary Duties. Notwithstanding anything to the contrary
                 ----------------
above, the Board shall review all Acquisition Offers in compliance with its
fiduciary duties under law and any other applicable laws.

           9.5   Remedies. NTI acknowledges that any breach of this Section 9 by
                 --------
NTI would cause irreparable harm to Cadence for which monetary damages would be
inadequate and, therefore, Cadence will be entitled to immediate injunctive
relief, without the requirement of posting bond, to prevent any continuing or
threatened breach of this Section 9 by NTI.

           9.6   Termination. The rights and obligations under this Section 9
                 -----------
shall terminate upon the earliest to occur of the events described in clauses
(i) or (ii) below (provided, in the case of clause (ii), that NTI shall have
complied with the provisions of this Section 9 prior to consummating the
transactions described in such clause (ii)). The events referred to above are:
(i) the closing of the initial public offering of NTI, and (ii) a sale of
substantially all of the assets of NTI or a merger or consolidation of NTI with
or into another corporation or entity pursuant to which the shareholders
immediately prior to such merger or consolidation hold less than fifty percent
(50%) of the voting equity securities of the surviving or acquiring entity
immediately following such merger or consolidation.

     10.   LIMITED WARRANTIES AND DISCLAIMER.

           10.1  Limited Warranty for NTI Product Components. NTI warrants that,
                 -------------------------------------------
at the time of delivery to Cadence, the unmodified NTI Product Components will
be complete and functioning and that, for a period of eighteen (18) months from
the Effective Date or ninety (90) days

                                     -10-
<PAGE>

                                                                    CONFIDENTIAL

from the date of the first commercial shipment of the NTI Product Components by
Cadence (whichever is shorter) (the "Warranty Period"), the NTI Product
Components under normal use will have no Critical Errors. NTI's entire liability
and Cadences exclusive remedy under this warranty will be, at NTI's option, to
use reasonable commercial efforts to attempt to correct any Critical Errors or
to replace the NTI Product Components with functionally equivalent software. If
NTI is unable to correct any Critical Error in the initial version of the NTI
Product Components delivered to Cadence under Section 2 of this Agreement within
sixty (60) days after such Critical Error is reported to NTI by Cadence, Cadence
will have the right to terminate this Agreement by written notice to NTI,
provided that Cadence reports such Critical Error within the Warranty Period.

           10.2  Exclusions. The warranties under Section 10.1 will not extend
                 ----------
to problems that result from: (i) Cadence's failure to implement all Updates to
the NTI Product Components issued to Cadence by NTI; (ii) any alterations of or
additions to the NTI Product Components performed by or at the direction of
parties other than NTI; (iii) misuse of the NTI Product Components; or (iv) use
of the NTI Product Components in conjunction with products not supplied or
approved by NTI.

           10.3  Necessary Rights. NTI represents and warrants to Cadence that
                 ----------------
NTI has all rights necessary to grant to Cadence the licenses granted to Cadence
in this Agreement.

           10.4  No Viruses. NTI represents and warrants to Cadence that the NTI
                 ----------
Product Components, as delivered by NTI to Cadence under this Agreement, will
not contain any computer software code, routines, or devices (other than as set
forth in the documentation accompanying such software or code) designed to
alter, disable, damage, erase, or impair the use of software or data without the
user's knowledge and consent, and that NTI will use commercially reasonable
efforts, including the use of commercially available virus detection software,
to ensure that the media on which the NTI Product Components are delivered to
Cadence do not contain any such code.

           10.5  Year 2000 Compliance. During the Warranty Period, NTI warrants
                 --------------------
that the NTI Product Components will accurately process and handle (including
calculating, comparing and sequencing) date and time data from, into, and
between the twentieth and twenty-first centuries, and the years 1999 and 2000,
including leap year calculations, to the extent that other information
technology used in combination with the NTI Product Components properly exchange
date and time data with it. NTI's entire liability and Cadence's exclusive
remedy under this warranty will be, at NTI's option, to use reasonable
commercial efforts to attempt to correct any failure of the NTI Product
Components to be Year 2000 compliant as described above, unless such failure
also constitutes a Critical Error, in which case Cadence will also have the
remedies available under Section 10.1.

           10.6  Exclusive Warranties. Except for the express warranties stated
                 --------------------
in Section 10 above, NEITHER PARTY MAKES ANY OTHER WARRANTY OF ANY KIND, WHETHER
EXPRESS, IMPLIED OR, STATUTORY AND BOTH PARTIES DISCLAIM ANY AND ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. NTI
disclaims any warranty that the NTI Product Components delivered to Cadence
under this Agreement will be capable of productive use if not used with the
Cadence Products.

                                     -11-
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                                                                    CONFIDENTIAL

     11.   INDEMNIFICATION AND LIMITATION OF LIABILITY.

     Indemnification. NTI agrees, at its own expense, to defend or at its
     ---------------
option settle, any third party claim, suit or proceeding (collectively,
"Action") brought against Cadence to the extent such Action results from actual
or alleged infringement (whether direct, contributory, by inducement, or
otherwise) by the NTI Product Components of any U.S. patent, any patent issued
in Japan or any European Union country, or any copyright, trade secret,
trademark, or other Intellectual Property Right worldwide; provided, that NTI
shall have sole control of any such Action or settlement negotiations, and NTI
agrees to indemnify and hold Cadence harmless from, subject to the limitations
hereinafter set forth, any settlement amounts or final judgment entered against
Cadence on such issue in any such Action (regardless of characterization of
types of damage). Cadence will (i) notify NTI promptly in writing of such an
Action, (ii) give NTI sole control and authority to proceed as contemplated
herein, and (iii) give NTI proper and full information and assistance to settle
and/or defend any such Action. Failure by Cadence to notify NTI promptly in
writing of such an Action will relieve NTI of its obligations under this Section
11.1 only to the extent that NTI's ability to defend the Action is prejudiced by
such lack of notice. NTI further agrees to indemnify and hold Cadence harmless
for Cadence's reasonable costs and expenses (including reasonable attorneys'
fees) incurred in analyzing and tendering to NTI any such Action, provided that
Cadence fulfills its obligations under clauses (i), (ii) and (iii) of this
Section 11.1. In addition, in the event that NTI fails to assume the defense of
any such Action, and provided that Cadence has fulfilled its obligations under
clauses (i), (ii) and (iii) above, then Cadence may give NTI written notice of
such failure and an opportunity to cure such failure within thirty (30) business
days. In the event that NTI does not assume the defense of such Action within
such cure period, then NTI shall further be obligated to indemnify and hold
Cadence harmless for Cadence's reasonable costs and expenses (including
reasonable attorneys' fees) incurred in the defense or settlement of such
action.

If it is adjudicatively determined, or if NTI reasonably believes that the NTI
Product Components or any part thereof infringe any patent, copyright, trade
secret, trademark or other Intellectual Property Right of a third party, then
NTI may, and if the sale, distribution, or use of the NTI Product Components by
Cadence is, as a result, enjoined, then NTI shall, at its option and expense:
(a) procure for Cadence the rights under such patent, copyright, trade secret,
trademark or other Intellectual Property Right needed for Cadence to exercise
all of its rights under this Agreement with respect to the NTI Product
Components, or such part thereof; or (b) replace the NTI Product Components, or
parts thereof, with non-infringing suitable NTI products or parts with the same
functionality (or better) as the infringing NTI Product Components or parts; or
(c) suitably modify the NTI Product Components, or part thereof, to become non-
infringing and have the same functionality or better; or (d) if none of the
foregoing is feasible and Cadence's continued use and distribution of the
infringing NTI Product Component (or part thereof) has been finally enjoined,
accept return of such NTI Product Component, or part thereof, terminate
distribution or sale thereof, and pay to Cadence an amount equal to a portion of
the License Fees previously paid (and reduce the License Fees still to be paid
by an amount) commensurate with the value of such NTI Product Component (or part
thereof) compared to the value of all the NTI Product Components. NTI will not
be liable for any costs or expenses incurred without its prior written
authorization, or for any installation costs of replaced NTI products. Any
settlement that restricts Cadence's ability to continue using or distributing
any NTI Product Components in accordance with this Agreement will not be binding
on Cadence unless approved in writing by an authorized officer of Cadence (which

                                     -12-
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                                                                    CONFIDENTIAL

approval will not be unreasonably withheld). If any settlement restricts
Cadence's ability to continue using or distributing any NTI Product Components
in accordance with this Agreement, the parties will negotiate in good faith a
commensurate reduction in the License Fees.

           11.1  Limitation of Liability. EXCEPT WITH RESPECT TO BREACH OF
                 -----------------------
SECTIONS 12 (CONFIDENTIALITY), 3 (LICENSE GRANTS), 4 (EXCLUSIVITY) AND 9 (RIGHT
TO MATCH ACQUISITION OFFER) AND EXCEPT WITH RESPECT TO LIABILITY UNDER SECTION
11.1 (INDEMNIFICATION), NEITHER PARTY SHALL HAVE ANY LIABILITY TO THE OTHER
PARTY FOR LOST PROFITS OR BUSINESS OPPORTUNITIES, LOST DATA, OR ANY OTHER
INDIRECT, INCIDENTIAL, CONSEQUENTIAL, SPECIAL, OR RELIANCE DAMAGES, HOWEVER
CAUSED AND UNDER ANY THEORY OF LIABILITY, WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), PRODUCT LIABILITY OR OTHERWISE. THESE LIMITATIONS SHALL
APPLY REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY. NTI'S TOTAL, CUMULATIVE LIABILITY UNDER SECTION 11.1 FOR ANY AND ALL
CLAIMS OF INFRINGEMENT OF PATENTS ISSUED IN JAPAN OR ANY EUROPEAN UNION COUNTRY
WILL BE LIMITED TO THE AGGREGATE AMOUNT PAID BY CADENCE TO NTI UNDER THIS
AGREEMENT.

     12.   CONFIDENTIALITY.

           12.1  Definition. The term "Confidential Information" shall mean any
                 ----------
information disclosed by one party to the other party in connection with this
Agreement which is disclosed in writing, electronically, orally or by inspection
and which a party has a reasonable basis to believe is treated as confidential
by the other party.

           12.2  Obligation. Each party shall treat as confidential all
                 ----------
Confidential Information received from the other party, shall not use such
Confidential Information except as expressly permitted under this Agreement, and
shall not disclose such Confidential Information to any third party without the
other party's prior written consent. Each party shall take reasonable measure to
prevent the disclosure and unauthorized use of Confidential Information of the
other party for a period from the time of disclosure until the later to occur of
(i) the date five (5) years after such disclosure, or (ii) the expiration or
termination of this Agreement.

           12.3  Exceptions. Notwithstanding the above, the restrictions of this
                 ----------
Section 12 shall not apply to information that:

                 (a)   was independently developed by the receiving party
without any use of the Confidential Information of the other party and by
employees or other agents of (or independent contractors hired by) the receiving
party who have not been exposed to the Confidential Information as demonstrated
by written documentation;

                 (b)   becomes known to the receiving party, without
restriction, from a third party without breach of this Agreement and who had a
right to disclose it;

                                     -13-
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                                                                    CONFIDENTIAL

                 (c)   was in the public domain at the time it was disclosed or
becomes in the public domain through no act or omission of the receiving party;
or

                 (d)   was rightfully known to the receiving party, without
restriction, at the time of disclosure.

           12.4  Government Order. If a receiving party is required under an
                 ----------------
order or requirement of a court, administrative agency, or other governmental
body to disclose any Confidential Information, then such receiving party shall
provide prompt notice thereof to the other party and shall use its reasonable
commercial efforts to obtain a protective order or otherwise prevent public
disclosure of such information.

           12.5  Residuals. This Section 12 is not intended to prevent the
                 ---------
receiving party from using Residual Knowledge, subject to any valid patents and
copyrights of the disclosing party. "Residual Knowledge" means ideas, concepts,
know-how, or techniques related to the disclosing party's technology or general
skill, knowledge, talent and expertise that are retained in the unaided memories
of the receiving party's employees who have had access to the Confidential
Information of the disclosing party, but in no event including Confidential
Information relating to the source code of the NTI Product Components to the
extent that Cadence employees gain access to such source code under Section 15
of this Agreement. An employee's memory is considered unaided if the employee
has not intentionally memorized the Confidential Information for the purpose of
retaining and subsequently using or disclosing it.

     13.   DISPUTE RESOLUTION.

     If NTI and Cadence are unable to resolve any dispute, controversy or claim
arising out of this Agreement between them, then, prior to exercising its right
to terminate under any provision of this Agreement or (in the case of a dispute
over whether Cadence has met the Production Release Milestones set forth in
Exhibit D) prior to NTI entering into an OEM or distribution agreement with
Synopsys as permitted under Section 4.2, either NTI or Cadence shall, by written
notice to the other, first have such dispute referred to a Senior Vice President
(or equivalent) of NTI and Cadence, for attempted resolution by good faith
negotiations within ten (10) business days after such notice is received. If not
resolved within such ten (10) business day period, the parties shall escalate
the dispute to their respective Chief Operating Officers (or equivalent) for
resolution within thirty (30) business days after expiration of the initial ten
(10) day period. Unless otherwise mutually agreed, the negotiations between the
designated officers shall be conducted by face-to-face meetings within ten (10)
business days and at mutually convenient times within the period stated above.

     14.   TERM AND TERMINATION.

           14.1  Term. The term of this Agreement shall commence on the
                 ----
Effective Date and, unless terminated earlier as provided under Section 14.3 or
renewed as provided under Section 14.2, shall expire at the end of the Initial
Term.

           14.2  Option to Renew. Cadence shall have the option of renewing this
                 ---------------
Agreement for the "Renewal Term" by giving NTI written notice of its intent to
exercise such option on or

                                     -14-
<PAGE>

                                                                    CONFIDENTIAL

before March 31, 2002. In the event Cadence opts to extend this Agreement for
the Renewal Term, the Agreement shall continue in full force and effect for a
term of two (2) years from January 1, 2003 through December 31, 2004.

           14.3  Termination for Breach. If either party (the "Breaching Party")
                 ----------------------
materially breaches any term or condition of this Agreement, the other party
(the "Non-Breaching Party") may give written notice of such breach to the
Breaching Party. The Breaching Party will then have ten (10) days to notify the
Non-Breaching Party if the Breaching Party believes it has not materially
breached this Agreement, in which case the parties will attempt to resolve the
dispute in accordance with Section 13. If the Breaching Party acknowledges in
writing that it has materially breached this Agreement or fails to provide such
notice to the Non-Breaching Party within this ten (10) day period, or if the
parties are unable to resolve the dispute in accordance with Section 13, then
the Breaching Party will have thirty (30) days to cure the breach. If the
Breaching Party is unable to cure the breach within this thirty (30) day period,
the Non-Breaching Party may terminate this Agreement by written notice to the
Breaching Party at any time within thirty (30) days following the end of such
thirty (30) day period.

           14.4  Effect of Termination. Except as otherwise specifically set
                 ---------------------
forth in this Agreement, the following sections shall survive the expiration or
termination, for any reason, of this Agreement: 1 (Definitions), 10 (Limited
Warranties and Disclaimer), 11 (Indemnification and Limitation of Liability), 12
(Confidentiality), 16 (Assignment), and 17 (Miscellaneous). All other Sections
and all licenses hereunder shall terminate upon the expiration or termination,
for any reason, of this Agreement except as provided in Sections 14.5, 14.6,
14.7 and 15.3 below.

           14.5  Rights Upon Cadence Breach. In the event of termination of the
                 --------------------------
Agreement by NTI for a material breach by Cadence, the following shall apply
regarding Cadence's right to continue to ship the NTI Product Components and
Upgrades thereto after such termination:

                 (a)   Non-Intellectual Property or Payment Related Breach. If
                       ---------------------------------------------------
the material breach by Cadence is not related to NTI's Intellectual Property
rights or NTI's right to receive fees under the Agreement, then after
termination Cadence shall only have the right to ship the then-current version
of the NTI Product Components available at the time of the breach as part of
Updates to the Cadence Combined Products to Cadence customers who, prior to
breach, already purchased the Cadence Combined Product.

                 (b)   Intellectual Property or Payment Related Breach. If the
                       -----------------------------------------------
Cadence breach is a material breach relating to NTI's Intellectual Property
rights or NTI's right to receive fees under the Agreement, then Cadence shall
have no right to continue shipping any NTI Product Components under any
circumstances.

           14.6  Rights Upon NTI Breach. In the event of a material breach by
                 ----------------------
NTI, Cadence shall have the right to either:

                 (a)   terminate this Agreement in accordance with Section 14.3
and have the same rights as provided under Section 3 for the remainder of the
Initial Term and the Renewal Term (if (i) the termination took place before the
time for Cadence to make its election regarding the

                                     -15-
<PAGE>

                                                                    CONFIDENTIAL

Renewal Term, or (ii) if termination took place after Cadence has elected to
renew the Agreement), or just for the remainder of the Initial Term if the time
for election had passed prior to termination and Cadence had not elected to
extend the Agreement into the Renewal Term; provided, however that except as
provided in Section 14.6(b), Cadence shall pay NTI a reduced License Fee in the
amount of [***] of the original License Fee (including the License Fee owed
for the Renewal Term, if Cadence elects to preserve its rights for the Renewal
Term) owed under this Agreement (any such additional payments will be due in
accordance with the schedule in Exhibit E); or

                 (b)   if the NTI breach was a material breach of Section 4,
terminate this Agreement in accordance with Section 14.3 and have the same
rights as provided under Section 3 with no further payments of the License Fee
whatsoever for the remainder of the Initial Term and the Renewal Term (if (i)
the termination took place before the time for Cadence to make its election
regarding the Renewal Term, or (ii) if termination took place after Cadence has
elected to renew the Agreement), or just for the remainder of the Initial Term
if the time for election had passed prior to termination and Cadence had not
elected to extend the Agreement into the Renewal Term.

In any case of termination under this Agreement, after such termination NTI will
have no obligation under this Agreement to provide Updates to Cadence.

           14.7  Rights upon Expiration. Upon the expiration of the Renewal Term
                 ----------------------
(or, if none, the Initial Term), Cadence shall only have the right to ship the
then-current version of the NTI Product Components available at the time of such
expiration to the Cadence Combined Products to Cadence customers who, prior to
such expiration, already purchased the Cadence Combined Product; provided that,
Cadence shall only be permitted to continue such shipments until the end of life
of the release of the Cadence Combined Products which were being shipped at the
time of the expiration.

           14.8  Return of Materials. Upon the expiration or termination of this
                 -------------------
Agreement for any reason, and except for copies of such items as may be
reasonably required by NTI to exercise any surviving rights or fulfill any
surviving obligations, NTI shall promptly (i) return to Cadence the originals
and all copies (in tangible form or stored in storage or memory devices) of all
Cadence Materials, all Confidential Information of Cadence and all other
material provided hereunder by Cadence in NTI's possession or control; and (ii)
provide Cadence with a written statement certifying that it has complied with
the foregoing obligations. Upon the termination of this Agreement for any
reason, and except for such items as may be reasonably required by Cadence to
exercise any surviving rights or fulfill any surviving obligations, Cadence
shall promptly (a) return to NTI the originals and all copies (in tangible form
or stored in storage or memory devices) of all Confidential Information of NTI
and all other material provided hereunder by NTI in Cadence's possession or
control; and (b) provide NTI with a written statement certifying that it has
complied with the foregoing obligations.

           14.9  Remedies Cumulative. If Cadence elects to terminate this
                 -------------------
Agreement due to a material breach by NTI, such termination will be Cadence's
sole and exclusive remedy for such breach. Except as specifically set forth in
this Agreement, termination shall be in addition to all other legal or equitable
remedies available to either party.

                                     -16-

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

     15.   ESCROW.

           15.1  Escrow Account. Within ninety (90) days of the Effective Date
                 --------------
of this Agreement, NTI agrees to place and maintain current in an escrow account
with an escrow agent in California selected by Cadence and reasonably acceptable
to NTI a complete copy of the source code for the NTI Product Components
hereunder and any Updates and related documentation thereto that Cadence is
licensed to use hereunder (collectively "Source Code"). Cadence shall have the
right at any time to contact the escrow agent for the purpose of confirming that
the Source Code is in the escrow account and verifying the instructions to the
escrow agent to release the Source Code under the circumstances specified in
Section 14.2 below. Cadence shall bear all fees, expenses and other charges of
the escrow agent to open and maintain such escrow account.

           15.2  Release. The escrow agreement between Cadence, NTI and the
                 -------
escrow agent will provide that, if NTI (or its successors or assigns)
liquidates, makes general assignment for the benefit of creditors, or ceases
doing business as a going concern, or if NTI ceases to support the NTI Product
Components or commits a material and ongoing breach of its support obligations
under Section 8.2 above that is not cured within thirty (30) days of written
notice from Cadence, then, upon notice thereof by Cadence to NTI and the escrow
agent, the escrow agent shall deliver the Source Code to Cadence. If NTI
disputes Cadence's right to the Source Code, the matter shall be referred to
arbitration or a court of jurisdiction.

           15.3  License. NTI hereby grants to Cadence a nonexclusive right to
                 -------
use, reproduce, and modify such Source Code solely to correct Errors in the NTI
Product Components, to maintain the compatibility of the NTI Product Components
with the Cadence Products and third party software used in conjunction with the
NTI Product Components, and to provide minor functionality enhancements to the
NTI Product Components consistent with the enhancements being made to the
Cadence Products. The object code derived from the Source Code so modified shall
be deemed to be NTI Product Components hereunder and subject to the same rights
and restrictions on use, reproduction, and disclosure that are contained in this
Agreement with respect to the NTI Product Components. Cadence shall not
distribute, sell or sublicense the Source Code. The Source Code shall be subject
to the confidentiality provisions set forth in this Agreement in Section 12. In
addition, Cadence shall restrict disclosure of the Source Code to those within
its organization who need to use it for the purposes set forth above, and shall
keep it in a secure, locked location when not in use. NTI shall retain all
right, title and interest in and to the Source Code. The license granted in this
Section shall survive termination of the Agreement in accordance with Section 14
if the escrow provisions were triggered prior to termination or expiration of
the Agreement, but Cadence may not trigger the escrow provisions post-
termination or expiration.

     16.   ASSIGNMENT.

     Neither party may, by operation of law or otherwise, assign any of its
rights or delegate any of its obligations under this Agreement without the prior
express written consent of the other party. Notwithstanding the foregoing,
either party may assign all (but not part) of its rights and delegate all (but
not part) of its obligations under this Agreement to a third party as part of
any acquisition of such assigning party by such third party, provided that
notice of and details concerning such proposed assignment and delegation is
given to the non-assigning party, and Cadence may assign this

                                     -17-
<PAGE>

                                                                    CONFIDENTIAL

Agreement to any of its Affiliates; provided that, in no event, may Cadence
assign its rights or delegate duties under this Agreement to any third party
which Cadence has engaged or is working with to develop, license, acquire,
market or distribute any technologies which have substantially the same
functionality as the NTI Product Components as is permitted under Section 4.2 of
this Agreement. Subject to the foregoing, this Agreement will bind and inure to
the benefit of the parties, their respective successors and permitted assigns.
Any permitted assignment under this Section 16 shall be subject to the assignee
agreeing in writing to be bound by all the terms and conditions of this
Agreement.

     17.   MISCELLANEOUS.

           17.1  Waivers. No waiver of any provision of this Agreement shall be
                 -------
effective unless in writing and signed by the party to be charged. No failure or
delay by either party in exercising any right, power, or remedy under this
Agreement, except as specifically provided herein, shall operate as a waiver of
any such right, power or remedy.

           17.2  No Limitation. Use of the word "including" is meant to be
                 -------------
illustrative only and not limiting.

           17.3  Descriptive Headings. The descriptive headings herein are
                 --------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

           17.4  Governing Law. This Agreement shall be governed by and
                 -------------
construed in accordance with the laws of the State of California without
application of any choice of law principles. All disputes under this Agreement
shall be brought in the courts located in Santa Clara County, California.

           17.5  Independent Contractors. The parties are independent
                 -----------------------
contractors. Neither party shall be deemed to be an employee, agent, partner or
legal representative of the other for any purpose and neither shall have any
right, power or authority to create any obligation or responsibility on behalf
of the other.

           17.6  Notices. All notices and other communications hereunder shall
                 -------
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy with answer back, by express or overnight mail delivered by
a nationally recognized air courier (delivery charges prepaid), or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at their addresses set forth on the first page of this Agreement or to
such other address as the party to whom notice is given may have previously
furnished to the others in writing in the manner set forth above. Any notice or
communication so delivered shall be deemed effective on delivery or when
delivery is refused. Any notice or communication to Cadence shall be addressed
to the attention of the General Counsel.

           17.7  Severability. If any provision of this Agreement is held by a
                 ------------
court of competent jurisdiction to be contrary to law, such provision shall be
changed and interpreted so as to

                                     -18-
<PAGE>

                                                                    CONFIDENTIAL

best accomplish the objectives of the original provision to the fullest extent
allowed by law and the remaining provisions of this Agreement shall remain in
full force and effect.

           17.8  Entire Agreement. This Agreement, including all Exhibits
                 ----------------
attached hereto, constitutes the final, complete and exclusive agreement between
the parties with respect to the subject matter hereof, and supersedes any prior
or contemporaneous agreement.

           17.9  Amendment. No change or amendment will be made to this
                 ---------
Agreement except by an instrument in writing signed on behalf of each of the
parties hereto.

           17.10 Exhibits. Each Exhibit attached to this Agreement is deemed a
                 --------
part of this Agreement and incorporated herein wherever reference to it is made.

           17.11 No Implied Licenses. No licenses are to be implied from any
                 -------------------
term of this Agreement other than the licenses expressly granted herein.

           17.12 Counterparts. This Agreement may be executed in counterparts,
                 ------------
each of which will be deemed an original.

     IN WITNESS WHEREOF, the parties have caused this License Agreement to be
signed by their duly authorized representatives.

NUMERICAL TECHNOLOGIES, INC.           CADENCE DESIGN SYSTEMS, INC.

By: /s/ Yagyensh C. Pati               By: /s/ William Porter
    --------------------                   ------------------

Name: Yagyensh C. Pati                 Name: William Porter
      ----------------                       --------------

Title: President & CEO                 Title: Chief Financial Officer
       ---------------                        -----------------------

                                     -19-
<PAGE>

                                                                    CONFIDENTIAL

                          EXHIBIT A: CADENCE PRODUCTS

Assura(TM) physical verification products: Consisting of DRC, LVS, RCX, and SI
(signal integrity) tools for both batch and interactive physical verification,
extraction and analysis.

Virtuoso(TM) physical design products: Consisting of products for custom
physical design, layout editing, and layout compaction.

Envisia cell-based design products: Consisting of products providing placement,
routing, interconnect parasitic extraction, timing and delay analysis
capabilities for digital, cell-based design.
<PAGE>

                                                                    CONFIDENTIAL
                       EXHIBIT B: NTI PRODUCT COMPONENTS

Silicon Design Rule Check (SiDRC), Version 1.0: Silicon vs. Layout verification
software engine, in the form of binary shared libraries, that uses lithography
simulation to locate and flag areas of an integrated circuit layout design that
produce projected wafer patters outside the specified tolerance. This engine is
accompanied with a C header-file that allows the user to call the engine's API.
This will also include ModelGen (as described below), a complete mathematical
description of the semi-empirical component model, and description of the model
data file format.

ImagIC, Version 1.1: Software engine, in the form of binary code and the scripts
needed to link Virtuoso Layout Editor with NTI's simulation engines, that
generates real-time wafer image from layout data using lithography simulation.
This will also include ModelGen.

NumeriTech Optical Proximity Correction Tool (NOPC), Version 1.0: Rules-based
and simulation-based Optical Proximity Correction software engine, in the form
of binary shared libraries, that applies corrections based on the OPC rules (or
model information for the Simulation-based engine) to compensate for the
subwavelength lithographic effects. This engine is accompanied with a C
header-file that allows the user to call the engine's API.

NumeriTech Optical Proximity Correction GUI (NOPC-GUI), Version 3.1: Graphical
User Interface software, in the form of a binary application, that allows for
viewing and modifying OPC rules, as well as adding constraints and usage
options. This software will save the input from the user and will create a
command file, in TCL format, that will drive the operations of NOPC engine.

RuleGen, Version 1.3: Software, in the form of a binary application, that
automatically creates OPC rules from the calibrated optical/lithography process
models.

ModelGen, Version __: Software, in the form of a binary application, that
automatically creates a Model file from optical/lithography process models. The
Model file is read by several applications (e.g., Imagic and SiDRC).

         ModelCalibrator, Version 2.1: Software, in the form of a binary
application, that inputs of results of test-chip measurements based on which it
then calibrates the optical/lithography process models used by NTI tools and
components.
<PAGE>

                                                                    CONFIDENTIAL

                             EXHIBIT C: TRADEMARKS

NTI Trademarks:   Registered Trademark: Virtual Stepper (R)

Corporate Trademarks: Numerical Technologies (TM), Inc.

NumeriTech (TM)

The Numerical Technologies logo.

Product Trademarks:

iN-Phase

TROPiC

N-Abled

SiVL

ImagIC

SiDRC

SiImage

Rule-Gen

Model-Gen

NOPC

IC Workbench
<PAGE>

                                                                    CONFIDENTIAL

               EXHIBIT D: CADENCE PRODUCTION RELEASE MILESTONES

Production Release Milestone #1
-------------------------------
[***]

Production Released deadline by: [***]
Production Release Number: [***]

Production Release Milestone #2
-------------------------------
[***]

Production Released deadline by: [***]

Production Release Number: [***]

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                    CONFIDENTIAL

                   EXHIBIT E: LICENSE FEES PAYMENT SCHEDULE

Fees During Initial Term
------------------------

1999
----
upon execution
of the Agreement          [***]

2000
----
January 3                 [***]
April 3                   [***]
July 3                    [***]
October 2                 [***]

2001
----
January 2                 [***]
April 2                   [***]
July 2                    [***]
October 1                 [***]

2002
----
January 2                 [***]
April 1                   [***]
July 1                    [***]
October 1                 [***]

Total Fees
During Initial Term:      [***]

Fees During Renewal Term

2003
----
January 2                 [***]
April 1                   [***]
July 1                    [***]
October 1                 [***]

2004
----
January 2                 [***]
April 1                   [***]
July 1                    [***]
October 1                 [***]

Total Fees
During Renewal Term:      [***]

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>

                                                                  DRAFT 12/15/99

                            EXHIBIT F: SERVICE FEES

Service Fee Payment Schedule
----------------------------

1999
----
Upon
execution of
the Agreement           [***]

2000
----
January 3               [***]
April 3                 [***]
July 3                  [***]
October 2               [***]

2001
----
January 2               [***]
April 2                 [***]
July 2                  [***]
October 1               [***]

2002
----
January 2               [***]
April 1                 [***]
July 1                  [***]
October 1               [***]

Total Fees During Initial Term:

Fees During Renewal Term

2003                    [***]
----
2004                    [***]
----

Total Fees During Renewal Term: [***]

[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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