Document:

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                                                                   EXHIBIT 10.36
                                                                   -------------

                             VERISITY DESIGN, INC.

                           Software License Agreement

     This Software License Agreement ("Agreement") is entered into effective
as of January 18, 1999 (the "Effective Date"), by and between VERISITY DESIGN,
Inc., a California corporation ("Licensor"), and Intel Corporation, a California
corporation ("Licensee") with reference to the following:

                                   Background

     A. Licensor is the creator of the certain software programs generally known
as Specman, as more fully described in Exhibit A attached hereto (the "Licensed
Program").

     B. Licensee desires to obtain (i) a license to the Licensed Program and
such separate printed documentation ('Documentation") as Licensor generally
makes available to its licensees in connection with the Licensed Program, and
(ii) access to certain maintenance and technical support services in connection
with the Licensed Program, and Licensor desires to grant such a license and
provide such services on the terms and conditions set forth in this Agreement.

     C. This Agreement is limited to the [*] Specman licenses acquired by Intel
from the purchase of the Siemens hardware design team known as Pyramid. Future
Intel purchases of Verisity software will be subjected to a separate
negotiated agreement.

     NOW THEREFORE, the parties agree as follows:

     1.  License.  Subject to Licensee's compliance with the terms and
         -------
conditions of this Agreement.  Licensor grants to Licensee, and Licensee accepts
from Licensor, for each Licensed Copy (as defined below), a nonexclusive,
nontransferable license to load the executable form of the Licensed Program into
computer memory, and execute the same within a single central processing unit
("CPU") associated with such memory, provided that (i) no more than that number
of copies of the Licensed Program as Licensee has paid the applicable License
Fee as specified in Exhibit A (each, a "Licensed Copy") may be simultaneously
                    ---------
loaded into computer memory and executed on an associated CPU; (ii) such memory
and associated CPU must be owned or leased by Licensee, and must be physically
located at the Delivery Site specified in Exhibit A; and (iii) Licensee will
                        ----              ---------
make no use of the Licensed Program for other than its intended uses that are
directly related to the internal business operations of Licensee, and will not
make any use

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -1-
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thereof to offer the benefits or services of the Licensed Program to third
parties, whether such arrangement is in the nature of a service bureau, out-
sourcing service, joint development relationship or any other similar service or
business. In addition to the foregoing, Licensee acknowledges and agrees that in
order to enforce the limitation on the number of Licensed Copies which may be
simultaneously loaded and executed, the Licensed Program includes license
management software which is only effective if all CPUs on which the Licensed
Program operates are at all times capable of communicating via a local area
network or a wide area network if applicable WAN upgrade has been purchased (but
not a dial-up network) with the license management software; therefore, the
Licensed Program may not be executed on any CPU which is not in direct
communication at all times with the license management software on such a
network. Licensee may make and hold two copies of the Licensed Program for
temporary backup use and/or archival purposes. All of Licensee's rights to use
the Licensed Program are expressly stated herein; there are no implied rights.

     2.  Additional Restrictions.  Licensee may not use, copy, modify,
         -----------------------
display, sublicense or print the Licensed Program or the Documentation, in whole
or in part, except as expressly provided in this Agreement.  Without limiting
the generality of the foregoing, Licensee will abide by the following additional
restrictions on the use and copying of the Licensed Program and Documentation:

         (a) No Modification.  Licensee will not make any modification to, or
             ---------------
adaptation of, the Licensed Program or the Documentation nor merge either of
them into any other programs or other materials.  Licensee will have no access
to, or rights or license to modify, the source code for the Licensed Program,
except as expressly set forth in Exhibit B attached hereto.  Licensee will not
                                 ---------
attempt, or allow others under its control to attempt, to obtain or derive
information from or about the Licensed Program through disassembly, decompiling,
reverse engineering or other means.

         (b) Markings.  All titles, trademarks, copyright notices and other
             --------
proprietary markings must be reproduced on all permitted copies of the Licensed
Program.  Licensee will not remove such titles, trademarks, copyright notices or
other proprietary markings.

     3.  Proprietary Matters.
         -------------------

         (a) Ownership.  Licensee acknowledges that the Licensed Program and the
             ---------
Documentation, including all associated copyrights, patents, trademarks, trade
secrets and other intellectual property and proprietary rights with respect
thereto, are, and at all times will be, the sole property of Licensor and its

                                      -2-
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licensors, even if suggestions made by Licensee are incorporated into subsequent
versions of the Licensed Program or the Documentation.

         (b) Confidential Information.  Licensee acknowledges that the Licensed
             ------------------------
Program and the Documentation, including without limitation all aspects of the
Licensed Program (e.g., the source code, methods of processing, specific design
and structure of individual programs and their interaction and unique
programming techniques employed therein as well as screen formats) constitute
valuable trade secrets of Licensor and its licensors.  Licensor and Licensee
acknowledge that, in the course of dealings between the parties, each parry will
acquire information, identified as confidential, about the other party, its
business activities and operations, its technical information and trade secrets,
of a highly confidential and proprietary nature.  Each party will hold such
information, which is identified as being confidential, and Licensee will hold
the Licensed Program and the Documentation, as well as the terms of this
Agreement, in strict confidence and will not disclose or reveal the same to
third parties except for any information generally available to or known to the
public, independently developed outside the scope of this Agreement, lawfully
disclosed by a third party, or required to be disclosed to a tribunal, provided
that in the case of required disclosures to tribunals, the receiving party will
notify the disclosing party prior to such disclosure to allow the disclosing
party to obtain protective orders maintaining the confidentiality of such
information.  Notwithstanding the foregoing, Licensee is not prohibited from
using the Licensed Program in the intended operational environment where the
operation of same may be observed by persons other than Licensee.

     4.  Maintenance And Technical Support Services.  For such periods as
         ------------------------------------------
Licensee fully pays the Annual Maintenance Fee as described in Section 5(b)
below, Licensor will provide the services to Licensee as are described in
Exhibit B attached hereto (the "Services").
---------

     5.  License Fee; Maintenance Fee.
         ----------------------------

         (a) License Fee.  In consideration for the licenses granted to Licensee
             -----------
in this Agreement, Licensee will pay to Licensor the License Fee set forth in
Exhibit A with respect to each Licensed Copy of the Licensed Program.  Upon
---------
delivery of the Licensed Program to Licensee's Delivery Site, Licensor will
                                                        ----
deliver an invoice to Licensee setting forth the applicable Licensee Fee and the
Initial Maintenance Term's Annual Maintenance Fee as set forth in Exhibit A, and
                                                                  ---------
Licensee will pay the same in full within [*] business days after receipt of
such invoice.

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -3-
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         (b) Annual Maintenance Fee.  In consideration for the Services to be
             ----------------------
performed by Licensor as described in Exhibit B, Licensee will annually pay to
                                      ---------
Licensor a fee (the "Annual Maintenance Fee"), to be determined and paid as
follows:

             (i)   The Annual Maintenance Fee payable with respect to the
Initial Maintenance Term (as defined in Section 6(b) below) will be paid with
the License Fee invoiced to Licensee and payable pursuant to Section 5(a) above.

             (ii)  The Annual Maintenance Fee payable with respect to each
Renewal Maintenance Term (as defined in Section 6(b) below) will be invoiced by
Licenser to Licensee at least [*] days before the expiration of the prior
Maintenance Term, and must be paid in full within [*] days after the invoice
dare.

             (iii) Because the cost of providing Services depends on a number
of unpredictable facts, such as the magnitude of improvements in New Releases,
Licenser may adjust the Annual Maintenance Fee for any Renewal Maintenance Term
by written notice to Licensee prior to the expiration of the immediately prior
Maintenance Term.

             (iv)  Licensee will not have the option of paying the Annual
Maintenance Fee with respect to less than the total number of Licensed Copies of
the Licensed Program, except to the extent that (A) Licensee wishes to terminate
the Services entirely as provided in Section 6(c) below, or (B) Licensee
notifies Licensor that the scope of the license granted in Section 1 is to be
reduced to include only that number of Licensed Copies as to which Licensee has
paid the Annual Maintenance Fee, as provided in Section 6(c) below.

         (c) Form of Payment; Taxes; Late Payments.  All payments are due in
             -------------------------------------
United States dollars.  The amount of the stated License Fee and Annual
Maintenance Fee do not include any taxes, duties or other governmental charges
levied or which may be levied in respect of such fees or the services performed
hereunder.  Licensee agrees to pay all such taxes, duties and governmental
charges, regardless of when they may come due, or to reimburse Licensor for same
if Licensor is required by applicable law to collect and pay over same to the
relevant taxing authority.  Licensor reserves the right to apply a service
charge to the unpaid balance at the rate of [*] per month (but in no event more
than the maximum rate allowed by law) for any fee or other amount not paid
within [*] days after the due date.  In addition, if Licensee fails to pay any
invoice when due, Licenser will have the right to institute collection
procedures to recover same and all costs incurred by Licensor will be paid by
Licensee.

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -4-
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     6.  Term and Termination.
         --------------------

         (a) License Term.  The term of this Agreement and the licenses granted
             ------------
hereunder will be perpetual upon payment of the License Fee with respect to each
Licensed Copy, unless terminated by Licensee as provided in this Agreement, and
may only be revoked by Licensor if Licensee materially breaches any of its
material obligations this Agreement.

         (b) Maintenance Term; Renewal.  The Services obligations of Licensor
             -------------------------
under Section 4 above will commence upon the delivery of the Licensed Program to
Licensee ("Commencement") (provided that Licensee has paid the Initial
Maintenance Term's Annual Maintenance Fee) and will expire at the end of
business on the date [*] from Commencement (the "Initial Maintenance Term").
Such Services obligations will automatically renew on the [*] of Commencement
each [*] during the term of this Agreement for additional [*] periods (each, a
"Renewal Maintenance Term"), provided that Licensee pays the applicable Annual
Maintenance Fee prior to the due date therefor, provided that any Renewal
Maintenance Term commencing after [*] from Commencement of the Initial
Maintenance Term must be by mutual written agreement of the parties.
Reinstatement of lapsed Services will be subject to the payment of applicable
reinstatement fees equal to the prorated sum of Maintenance Fees which would
have been payable during the lapsed period plus [*]%.

         (c) Termination. Licensee may terminate its right to obtain the
             -----------
Services under this Agreement at any time upon written notice to Licenser,
subject to compliance with the provisions of this Section 6. Licensee may also
terminate the license granted in Section 1 above as to any Licensed Copy of the
Licensed Program upon notice to Licenser, provided that Licensor will have no
obligation to refund any portion of the License Fee or current Annual
Maintenance Fee in connection therewith in addition to any other right to
terminate this Agreement expressly provided herein, Licensor may terminate this
Agreement, including the licenses granted under this Agreement, if Licensee
fails to perform any of its material obligations hereunder or otherwise
materially breaches this Agreement and fails to effect the cure of such failure
or breach within [*] days after written notice thereof, provided that Licensor
may terminate only its Services, but not the licenses granted hereunder, in the
event Licensee fails to pay the Annual Maintenance Fee when due.

         (d) Effect Of Termination. Termination of this Agreement or the
             ---------------------
licenses granted hereunder will not limit either party from pursuing any other
remedies available to it, including injunctive relief, nor will termination
relieve Licensee of its obligation to pay all fees and other amounts that
accrued prior to

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -5-
<PAGE>

the effective date of termination. The rights and obligations of the parties as
provided in this and the following provisions of this Agreement will survive any
termination of this Agreement: Sections 3, 5(c), 6(e), 7 and 8.

         (e) Return of Licensed Program.  Upon termination of this Agreement or
             --------------------------
the licenses granted hereunder, Licensee will make no further use of the
Licensed Program or the Documentation; and, within [*] days after such
termination, Licensee will either destroy or return to Licensor the originals
and all copies of the Licensed Program and the Documentation in the possession
or under the control of Licensee, and certify in writing to Licensor that
Licensee no longer possesses or controls any copies of the Licensed Program or
the Documentation and is otherwise in compliance with the terms of this
Agreement which survive the termination.  The foregoing obligations apply to
copies of the Licensed Program and the Documentation in all forms, partial and
complete, in all types of media and computer memory, and whether or not modified
or combined with other materials.

     7.  Warranty; Liability.
         -------------------

         (a) Non-Infringement Warranty and Indemnity.  Licenser represents and
             ---------------------------------------
warrants that it has the right to license the Licensed Program and Documentation
on the terms and conditions set forth in this Agreement, and that use of the
Licensed Program within the scope of such license does not infringe any United
States copyright or misappropriate any trade secret of a third party.  Licensor
will indemnify and hold Licensee harmless Licensee from and against all damages,
liabilities, costs and expenses (including reasonable fees of counsel and other
professionals) incurred by Licensee arising out of a breach of the warranty in
this Section 7, provided that Licensee promptly notifies Licensor of any third
party claim or action which alleges such infringement or misappropriation, and
grants Licensor the sole control of the defense of any such action, including
all negotiations for its settlement or compromise.  If Licensee is a defendant
in such action, it may participate at its expense.  Licensor will use
commercially reasonable efforts to mitigate any damages arising out of a
judicial determination that use of the Licensed Program infringes third party
copyrights or trade secrets by either (A) delivering a non-infringing version of
the Licensed Program, or (B) obtaining a license from the third party such that
the use of the Licensed Program as contemplated hereunder is no longer
infringing, or (C) if neither of the foregoing actions are commercially
practicable, Licensor may terminate this Agreement and the license granted
hereunder, in which case Licensor will refund to Licensee a portion of the
License Fee actually paid to Licensor for the Licensed Program on an equitable
basis taking into consideration such factors as the useful life of the Licensed
Program and the period of time during which Licensee enjoyed its use.

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -6-
<PAGE>

         (b) No Other Warranty. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 7,
             -----------------
LICENSOR EXPRESSLY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR
STATUTORY, AS TO ANY ASPECT OF THE LICENSED PROGRAM, THEIR OPERATION OR THE
SERVICES TO BE PERFORMED BY LICENSOR HEREUNDER, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN,
CONDITION, CAPACITY, PERFORMANCE, TITLE, AND NON-INFRINGEMENT OF THIRD PARTY
RIGHTS.

         (c) Limitation on Liability. Licensee acknowledges that Licensor has
             -----------------------
not priced the Licensed Program to contemplate the risks of reliance by Licensee
on the Licensed Program or to have or assume substantial liability or
responsibility for Licensee's decisions. Accordingly, IN NO EVENT WILL LICENSOR
BE LIABLE TO LICENSEE FOR LOSS OF PROFITS, LOSS OF REVENUES, LOSS OF SAVINGS,
LOSS OF USE, LOSS OR CORRUPTION OF DATA OR ANY INDIRECT, INCIDENTAL, SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, WHETHER UNDER TORT, CONTRACT OR
OTHER THEORIES OF RECOVERY, EVEN IF LICENSOR HAD BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. LICENSEE EXCLUSIVELY BEARS FULL AND COMPLETE LIABILITY AND
RESPONSIBILITY FOR ITS USE AND RELIANCE ON THE LICENSED PROGRAM, EVEN IF SUCH
USE WERE TO PRODUCE INCORRECT INFORMATION OR ERRONEOUS RESULTS. IN NO EVENT WILL
LICENSOR'S TOTAL LIABILITY UNDER THIS AGREEMENT OR AS A RESULT OF THE LICENSE
AND USE OF THE LICENSED PROGRAM EXCEED THE AGGREGATE AMOUNT OF THE LICENSE FEE
ACTUALLY PAID UNDER THIS AGREEMENT BY LICENSEE TO LICENSOR. Licensee agrees that
the foregoing represents a fair allocation of risk hereunder and is a material
inducement to Licensor's entering into this Agreement.

     8.  Miscellaneous.
         -------------

         (a) Notices.  All notices will be given in writing and will be sent by
             -------
certified mail, postage prepaid and return receipt requested, or transmitted by
facsimile if confirmed by such mailing, to the address indicated for the
receiving party on the signature page below.  Either party may change its
address or facsimile telephone number by written notice to the other party.

         (b) Entire Agreement; Amendments. This Agreement and the attachments
             ----------------------------
and exhibits hereto constitute the entire agreement of the parties concerning
the subject matter hereof, superseding all prior and contemporaneous

                                      -7-
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proposals, negotiations, communications and agreements, written or oral, with
respect to the subject matter of this Agreement. No representation or promise
relating to and no amendment or modification of this Agreement will be binding
unless it is in writing and signed by an authorized representative of each
party.

       (c) Assignment.  Except as specifically provided for herein, neither this
           ----------
Agreement, nor any right or license under this Agreement, nor any Licensed
Program or Documentation, may be assigned, sublicensed, distributed, sold,
rented, leased or otherwise transferred by Licensee to a third party, other than
a wholly-owned subsidiary of that party which uses the Licensed Program at the
same Designated Site, without Licensor's prior written consent, which will not
                ----
be unreasonably withheld or delayed.  Subject to the foregoing, this Agreement
will bind and inure to the benefit of the successors and permitted assigns of
Licensee and Licensor.

       (d) Lawful Use; Export.  Licensee will comply with all applicable laws
           ------------------
and regulations in its use of the Licensed Program and the Documentation.
Licensee may not export, re-export or otherwise transfer the Licensed Program or
the Documentation to any territory outside of the United States of America
except with the prior written consent of Licensor, and then only in full
compliance with the provisions of the United States Export Administration Act
and the rules and regulations thereunder, and both the Licensed Program and the
Documentation will be deemed 'technical data" for purposes thereof.

       (e) Governing Law; Captions; Waiver; Etc.  This Agreement will be
           ------------------------------------
governed by and construed in accordance with the substantive laws of the State
of California.  The captions appearing in this Agreement are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or interpretation of this Agreement.  Except for Licensee's obligation to
pay Licensor, neither party will be liable for any failure to perform due to
causes beyond the party's reasonable control.  No waiver by a party of any
breach of any provision of this Agreement will constitute a waiver of any other
breach of that or any other provision of this Agreement.  In the event that any
of the provisions contained in this Agreement are held to be unenforceable, such
provisions will be narrowed (or deleted if necessary) to the minimum extent
necessary to make them enforceable.

       (f) Arbitration.  If there is any disagreement that cannot be resolved
           -----------
between the parties arising out of or relating to this Agreement (other than a
dispute concerning the ownership of any copyright or other intellectual property
right), any such dispute will be settled by binding arbitration in Santa Clara
County, California, in accordance with the rules of the American Arbitration

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Association.  Any party receiving an award in arbitration may have judgment
entered on the award in any court having jurisdiction.  The prevailing party in
any dispute will be entitled to receive from the other party its reasonable
attorneys' fees and costs.

       (g) Injunctive Relief.  Licensee hereby acknowledges that unauthorized
           -----------------
disclosure or use of the Licensed Program or the Documentation or any other
breach of this Agreement could cause irreparable harm and significant injury to
Licensor that may be difficult to ascertain.  Accordingly, Licensee agrees that
Licensor will have the right to obtain immediate injunctive relief to enforce
obligations under this Agreement in addition to any other rights and remedies it
may have.

       (h) Independent Contractors.  Each party will perform its obligations as
           -----------------------
an independent contractor and will be solely responsible for its own financial
obligations.  This Agreement will not create a joint venture, partnership, or
principal and agent relationship between the parties.  Neither party will have
the authority or will represent that it has the authority to assume or create
any obligation, express or implied on behalf of the other party, except as
expressly provided herein.

       (i) Counterparts.  This Agreement may be executed in counterparts, each
           ------------
of which will be deemed an original, but all of such counterparts together will
constitute one and the same agreement.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the last day and yeas specified below.

LICENSOR:                                 LICENSEE:

VERISITY DESIGN, INC.

By: /s/ Charles Alvarez                   By: s/b
   ---------------------------------         ------------------------------

Title: V.P. Finance & Admin/CFO           Title:
      ------------------------------            ___________________________

Date: 3/31/99                             Date: March 22, '99
     -------------------------------           ----------------------------

Address for notices to Licensor:          Address for notices to Licensee:

Verisity Design, Inc.                     Intel Corporation

2041 Landings Drive
Mountain View, CA 94043                   3600 Juliette Lane
Phone (650) 934-6700                      Santa Clara, CA 95052-8119
Fax (650) 934-6701
Attn: Kathryn Kranen

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                                   EXHIBIT A

                      LICENSED PROGRAM AND Specific TERMS

Licensed Program

        Specman is a software system designed to assist in the design of
hardware devices to verify the correctness of their designs.  Specman's main
features are:

!  A language (called 'e'). Files written in the 'e' language can be either
   loaded and interpreted, or translated by Specman into the C language.

!  A tool that helps users generate test scenarios with which to verify their
   designs, based (among other things) on user-defined constraints.

!  A tool that helps users quantify certain aspects of the coverage of the tests
   they run, depending (among other things) on those aspects being explicitly
   declared by the user.

!  Features that help users debug the verification environment they develop with
   Specman.

Specific Terms
Licensee:                       Intel Corporation

License Fee & Number            [*]
of Licensed Copies:

Initial Maintenance             [*]
Term's Annual
Maintenance Fee:

Delivery Site:    Intel Corporation
                  3600 Juliette Lane
                  Santa Clara, CA 95052-8119

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                  Exhibit A-1
<PAGE>

                                   EXHIBIT B

                   MAINTENANCE AND Technical Support SERVICES

     For such periods as Licensee fully pays the Annual Maintenance Fee,
Licensor will provide the following services to Licensee (the "Services"):

     1.  Delivery of "Bug Updates" and New Releases.  Whenever Licensor makes
         ------------------------------------------
a "Bug Update" or "New Release" generally available to its customers who have
purchased maintenance and technical support services, Licensor will provide a
copy of same to Licensee, and Licensee will install the same on any computer on
which it intends to operate the Licensed Program.  A "Bug Update" is an interim
release version of the Licensed Program in which certain previously identified
Errors have been corrected.  A "New Release" is an updated version of the
Licensed Program with certain new functions and/or features, other than computer
programs that include substantially new or different functions and/or features
relative to the Licensed Program.  Both Bug Updates and New Releases will
include revised Documentation or release notes which, when read in conjunction
with previously delivered Documentation, identifies with reasonably clarity the
new or differing functions and/or features of the Licensed Program.  Upon
delivery to Licensee, any New Release will be considered a "Licensed Program"
for purposes of this Agreement.

     From time to time Licensor and Licensee will meet to discuss Licensor's
product marketing and update plans with respect to the Licensed Program and to
solicit suggestions from Licensee with respect to improvements to the
functionality of the Licensed Program.  The information disclosed to Licensee in
such meetings will be considered confidential information subject to Section
3(b) of the Agreement.

     Licensor will provide Licensee with periodic "bug" reports generated by
Licensor's technical support staff, including possible work-around and status of
planned corrections to the Licensed Program.  The information disclosed to
Licensee in such reports will be considered confidential information subject to
Section 3(b) of the Agreement.

     2.  Error Correction.  Licensor will provide the following services for
         ----------------
Errors (as defined below) of which Licensor is notified by Licensee:

         (a) For Critical Errors:  Licensor will initiate work to verify and
           -------------------
correct the Error within [*] of the time when Licensor received the report of
such Error. Licensor will diligently pursue the correction of the Error until
the same is corrected. A "Critical Error" is an Error that materially impairs
substantial

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                  Exhibit B-1
<PAGE>

functions of the Licensed Program or poses imminent danger to Licensee's
equipment or data.

          (b) For Non-Critical Errors:  Licensor will use reasonable commercial
              -----------------------
efforts to correct the Error in future Bug Updates and/or New Releases.  A "Non-
Critical Error' is any Error other than a Critical Error.

        An "Error" means a material failure of the Licensed Program to conform
to its functional specifications as described in the applicable documentation.
Errors do not include, and Licensor will have no responsibility for, any of the
following circumstances:  (A) the Licensed Program has been modified by any
person or entity other than Licensor; (B) the Licensed Program has been operated
other than in accordance with Licensor's installation and operations
instructions, including without limitation on computing devices or with computer
operating systems and/or third party software other than that recommended by
Licensor; (C) the Licensed Program has been damaged in any manner due to the
fault of any person or entity other than Licensor; (D) Licensee fails to
reasonably assist Licensor in verifying, reproducing and correcting error
conditions (for example, by providing telecommunications connections to
Licensee's computer equipment and providing sample output and other diagnostic
information), or Licensor is unable after using reasonable commercial efforts to
verify and reproduce the error condition reported by Licensee; (E) Licensee has
failed to install the most recent Bug Update or New Release of the Licensed
Program made available to Licensee pursuant to paragraph 1 above; or (F) any
failure of the computer operating systems and/or third party software utilized
by Licensee.

        Error correction may include a temporary work-around, patch or bypass
supplied by Licensor, or temporary implementation by Licensee of a computer or
operational procedure, in order to diminish or avoid the effect of the Error.
Licensee acknowledges that software, by its nature, will contain "bugs' (some of
which may cause interruptions in use), and that operation of software on
hardware configurations other than those on which the software has been
developed and tested can create problems in the operation of the software.
Accordingly, Licensor does not warrant that all Errors can be corrected, and
Licensee agrees to implement appropriate procedures to backup its data and
programming work in order to avoid loss or cost in the event of data loss in
using the Licensed Program.

     3.  "Hotline" Support.  Licensor will make a qualified member of its
         -----------------
technical support staff available by telephone and e-mail during Licensor's
normal business hours, to assist Licensee's System Administrator in the use and
operation of the Licensed Program, and to report Error conditions.  Licensee
will designate a

                                  Exhibit B-2-
<PAGE>

System Administrator who will be Licensee's sole liaison with Licensor for
technical support, and will be responsible for providing first line support of
the Licensed Program for Licensee's employees. If Licensee's System
Administrator reports multiple error conditions, he or she may request that
Licensor resolve such Errors in a designated order of priority. Licensor's
technical support staff will communicate to Licensee's Systems Administrator (by
telephone, e-mail or fax) the status of Licensor's efforts to correct Critical
Errors (i) if Licensor receives the Error report prior to 12 Noon Pacific Time,
by responding on the same business day, or (ii) if the Error report is received
later than that, by responding prior to 12 Noon Pacific Time on the next
business day.

       4.  On-Site Support.  During the Maintenance Term, Licensor will provide
           ---------------
on-site technical support at Licensee's facilities for any problem which cannot
otherwise be diagnosed, and resolved after reasonable attempts by Licensee's
technical staff to reproduce, diagnose, and resolve the problem with the help of
Licensor's technical staff through telephone discussions and/or electronic file
exchanges (a) if Licensee's facility is within [*] miles of Licensor's nearest
support facility, at no charge to Licensee; or (b) if Licensee's facilities are
located more than [*] miles from Licensor's facility, then for separate charges
for the travel time incurred by Licensor's technical support staff at Licensor's
standard hourly rate, together with reimbursement of reasonable applicable
travel and related expenditures consistent with Licensee's standard expense
reimbursement policy.

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                 Exhibit B-3

<PAGE>

Intel.

Tom Denebeim
Verisity

Subject:  Assignment of Software Licenses

Dear Tom Denebeim,

        As you may know, Intel Corporation (Intel) recently acquired the
hardware design team of Siemens known as Pyramid that was located in Beaverton,
Oregon and San Jose, California. The acquisition became effective on [*], 1999.
The design group will become part of the [*] unit within [*]. The tools will
continue to be used by engineers from the design team. They will continue to
operate these Verisity tools to perform their design activities.

        This letter is a formal request for Intel to assume the obligations and
rights under Verisity licenses with the Siemens design team known as Pyramid.
Detailed information on the licenses is provided in the table below. The
contract and/or agreements Siemens has with Verisity relate to the business of
the former Pyramid group and now the [*] group at Intel. The intent of this
letter is to assure you that Intel, on behalf of the [*], desires that the
contractual relationship remain in full force and effect and continue
uninterrupted. In this regard and for the avoidance of any doubt, we wish to
secure your acknowledgement and/or consent to Intel's assumption of all
contracts and or agreements (the "Agreements") currently outstanding between
Siemens Pyramid and Verisity. For the purposes of this letter, the agreements
are deemed to include the maintenance agreements if any, associated with the
Agreements, purchase orders, purchase agreements, and non-disclosure agreements.
Please be assured that Intel agrees to accept and be bound by and faithfully
carry out all of the obligations under these Agreements as if it were the
original party.

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                      -4-
<PAGE>

        Upon receipt of this letter, please sign where indicated and return one
fully executed copy of this letter in the enclosed envelope.  We thank you in
advance for your cooperation in this matter and look forward to the
relationship.

Sincerely,                              Sincerely,

INTEL CORPORATION                       Siemens Pyramid

/s/ Jared Justus                        s/b
--------------------------------        ---------------------------------
Jared C. Justus                         Dir. Finance
IT Buyer

Consented to by Verisity

Signature: /s/ Charles Alvarez
          ----------------------
Name: Charles G. Alvarez
     ---------------------------
Title: V.P. Finance & Admin/CFO
      --------------------------
Date: 3/31/99
      --------------------------

        The contact person for the licenses was formerly Bob Young, at Siemens
Pyramid. The contact at Intel will remain Bob Young. The servers, which host the
applications, are unchanged due to the acquisition, and still reside on the two
machines below.

Contact:           Bob Young

                   (408) 765-5351

Santa Clara host:
Hostname:          [*]
Hostid:            [*]
OS:                [*]
System:            [*]
Network ID:        [*]
Street Address:    3600 Juliette Ln., Santa Clara, CA 95052

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                     -5-
<PAGE>

Oregon host:
------------
Hostname:          [*]
Hostid:            [*]
OS:                [*]
System:            [*]
Network ID:        [*]
Street Address:    15201 NW Greenbrier Parkway Beaverton, OR 97005

Licenses:

<TABLE>
<CAPTION>
------------------------------------------------------------------------
   Manufacturer                Description              Version Number
------------------------------------------------------------------------
   <S>                         <C>                      <C>
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
     Verisity                    Specman                    [*]
------------------------------------------------------------------------
</TABLE>

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

                                  -6-<PAGE>

                                                                   Exhibit 10.37
                                                                   -------------

                              AMENDMENT NO. 1 TO
                    Software and Related Services Agreement
                                    between
                               INTEL CORPORATION
                                      and
                              VERISITY DESIGN INC

                         INTEL AGREEMENT NUMBER C-9012

          Amendment Effective Date:  May 05, 2000
                                     ------------

          WHEREAS, Intel Corporation and Verisity Design have entered into a
Software and Related Services Agreement, Agreement No. C-9012 (hereinafter
called "Agreement") dated June 21, 1999; and

          WHEREAS, both parties wish to amend the Agreement to include a term
extension for the Agreement, and a modification or addition of two separate
addenda named Addendum A-1 for Software Description, Specification, Price and
Addendum H-1 for Supplemental Provisions as described in this Amendment No. 1.

          THEREFORE, for valuable consideration, the adequacy and receipt of
which are hereby acknowledged, the parties agree as follows:

1.   PRE-ESTABLISHED TERMS

          All terms and conditions of the Agreement remain in full force and
effect and apply to this Addendum, unless specifically modified below.

2.   AGREEMENT MODIFICATIONS

     (a)  Term Extension

          Intel Corporation and Verisity Design agree to extend the Agreement's
term with a new Expiration Date of June 30, 2003.

     (b)  Modification and New Addenda

          These additional addenda shall form a part of the Agreement, and the
following provisions will complement, govern and supersede any conflicting
provisions in the Agreement or Addenda.  Any capitalized term used herein and
not defined herein will have the meaning set forth in the original Agreement or
Addenda.

                                      -39-
<PAGE>

                                ADDENDUM "A-1"

                  SOFTWARE DESCRIPTION, SPECIFICATION, PRICE

I.     [*]

II.    [*]

III.   [*]

IV.    [*]

V.     [*]

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -40-
<PAGE>

       [*]

VI.    Additional consulting is billed at [*] US per day for US based
       consulting. Only International consulting needs may be negotiated by the
       local Intel Purchasing organizations at local rates, but only with regard
       to the price, quantity, location, travel and lodging expenses, and timing
       of consulting services from Verisity or its affiliates.

VII.   Training (US only) is [*] per student at Verisity. On-site training (US
       only) is offered for [*] per class, limited to 12 students maximum per
       class. Only International training needs may be negotiated by the local
       Intel Purchasing organizations at local rates, but only with regard to
       the price, quantity, location, travel and lodging expenses, and timing of
       training services from Verisity or its affiliates.

VIII.  Specman Elite Licensed copies. May be re-hosted within an Intel
       Organization [*]. Intel will destroy the previously re-hosted licensed
       copies as soon as the re-hosted copy is running on the new host.

IX.    [*]

X.     Verisity has audit rights on Intel's license manager log files.

XI.    [*]

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -41-
<PAGE>

                                 ADDENDUM H-1

                            SUPPLEMENTAL PROVISIONS

I.     Pricing:  Numeral Two (2), Bullet One (1) in Addendum H of the Agreement
       -------
       shall be replaced with the following language:

          [*]

II.    Termination for Convenience:  Numeral Four (4), Bullet One (1) in
       ---------------------------
       Addendum H of the Agreement shall be deleted in its entirety from
       Addendum H and replaced with a New Section called "Termination for Cause"
       under the herein Addendum H-1. Notwithstanding the above, the language in
       Section Six (6) of the Agreement remains in full force.

III.   Intellectual Property Indemnification:  Numeral Seven (7), Bullet One (1)
       -------------------------------------
       in Addendum H of the Agreement shall be replaced with the following
       language:

       . . . If a third party's claim endangers or disrupts Intel's use of the
       Software, Supplier shall, at Intel's option within reason and at no
       charge to Intel, (a) obtain a license so Intel may continue use of the
       Software; (b) modify the Software to avoid the infringement; (c) replace
       the Software with a compatible, functionally equivalent and non-
       infringing product; or if these options are commercially unreasonable (d)
       refund to Intel [*] the amount paid for [*], whereupon Buyer shall
       immediately cease all further use of the Software and provide written
       confirmation to Supplier that Software is not being used.

IV.    Support and Maintenance Service:  Numeral Fourteen (14), Bullet One (1)
       -------------------------------
       in Addendum H of the Agreement shall be replaced with the following
       language:

[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMMITTED PORTION.

                                      -42-
<PAGE>

          [*]

V.   Termination for Cause:  (Section 28 shall be created as a new section of
     ---------------------
     the Agreement) Intel Corporation agrees to add this section to the contract
     as follows:

          [*]

[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMMITTED PORTION.

                                      -43-
<PAGE>

          The parties have executed this Amendment No. 1 as of the 5 day of May
2000.

AGREED:

INTEL CORPORATION                           VERISITY DESIGN INC.

By: /s/ Victor Hugo                         By: /s/ Charles Alvarez
   -------------------------------             ---------------------------------

       Victor Hugo Narvaez                           Charlie Alvarez
----------------------------------          ------------------------------------
(Printed Name)                              (Printed Name)

            Senior IT Buyer                         Chief Financial Officer
----------------------------------          ------------------------------------
(Title)                                     (Title)

              May 05, 2000                                May 05, 2000
----------------------------------          ------------------------------------
(Date)                                      (Date)

                                      -44-
<PAGE>

                     INTEL CORPORATION PURCHASE AGREEMENT
                       --SOFTWARE AND RELATED SERVICES--

                                        Agreement No.           9012
                                                           --------------
                                        Effective Date     June 21, 1999
                                                           --------------
                                        Expiration Date    June 21, 2001
                                                           --------------
                                        CNDA No.               67063
                                                           --------------

INTEL:         Intel Corporation (and all Intel Divisions and
               Subsidiaries, hereinafter "Buyer" or "Intel")

Located at:    5000 West Chandler Blvd
               -----------------------------------------------------------------
               Chandler, AZ 85226-3699
               -----------------------------------------------------------------

SUPPLIER:      Verisity Design Inc.                     (hereinafter "Supplier")
               -----------------------------------------
Located at:    1943 Landings Dr.
               -----------------------------------------------------------------
               Mountain View, CA 94043
               -----------------------------------------------------------------

Addenda:  attached to this Agreement     X     General Terms and Conditions--
                                       -----
(Mark "X" where applicable)                    Software & Related Services
                                         X     A.  Software & Services
                                       -----
                                               Description/Specifications/Price
                                         X     B. Software Maintenance and
                                       -----
                                               Support
                                         X     C. Alcohol and Drug Free
                                       -----
                                               Workplace
                                         X     D. Protection of Buyer's
                                       -----
                                               Information Assets
                                         X     E.  Certificate of Originality
                                       -----
                                       _____   F. Assignment of Intellectual
                                               Property
                                         X     G.  Source Code Escrow
                                       -----
                                         X     H.  Supplemental Provisions
                                       -----

Buyer may license Software or purchase Services and Supplier shall provide the
Software and/or Services as described in Addendum A, at prices specified, and in
accordance with the Terms and Conditions of this Agreement.  All Purchase Orders
issued to Supplier by Buyer during the term of this Agreement shall be governed
only by the Terms and Conditions of this Agreement notwithstanding any
preprinted terms and conditions on Supplier's acknowledgment or Buyer's Purchase
Order.  Any additional or different terms in Supplier's documents are

                                      -1-
<PAGE>

hereby deemed to be material alterations and notice of objection to and
rejection of them is hereby given.

INTEL CORPORATION                          SUPPLIER:   VERISITY DESIGN INC.
                                                       --------------------

Signature /s/ Victor Narvaez               Signature  /s/ Charles Alvarez
         ------------------------------              ---------------------------

Printed Name:  Victor Hugo Narvaez         Printed Name:  Charlie Alvarez
             --------------------------                 ------------------------

Title:  Senior IT Buyer                    Title:  Chief Financial Officer
      ---------------------------------          -------------------------------

Date:  June 21, 1999                       Date:  June 21, 1999
     ----------------------------------         --------------------------------

                                      -2-
<PAGE>

                         GENERAL TERMS AND CONDITIONS

1.   DEFINITIONS

     A.   "Acceptance Date" means the date on which Intel accepts Software under
Section 9 herein.

     B.   "Purchase Order" means Intel's written release placed with Supplier to
order and schedule delivery of the Software and/or Services specified in this
Agreement.  Intel's Purchase Order may be transmitted to Supplier by mail,
facsimile,or electronic data interchange.

     C.   "Release" means a substantial improvement in user functionality that
is marketed by Supplier as a new and improved Software product, or a version of
the Software which replaces previous Releases.  Substantial improvement must
include more than just new hardware support (i.e., devices, drivers, ports to
the Software) and fixes to program errors in a previous Release.

     D.   "Services" means the designated Software related work provided by
Supplier, which may include development, training, consulting, support, and/or
maintenance.

     E.   "Software" means Supplier's software and/or firmware products
(including documentation customarily provided with the Software) described in
Addendum A and any Releases, Updates, and Upgrades, licensed to Intel under the
terms of this Agreement.  All such items shall be included in the License Fee
and/or pricing set forth in Addendum A.

     F.   "Source Code" means the source code version of the Software, along
with all available information, proprietary information, technical
documentation, specifications, and schematics which will enable Intel to
develop, maintain, support, and/or enhance the Software without assistance of
any other third person or reference to any other materials, including
maintenance tools (test programs and program specifications), proprietary or
third party system utilities (compiler and assembler descriptions), and a
description of the system/program generation.

     G.   "Update" means functional and/or feature improvements made, at
Supplier's discretion or at Intel's request and which are deemed to be paid for
hereunder, to the Software to keep the current shipping version of the Software
Release competitive with related technology in the Software's respective market,
including but not limited to bug fixes, performance enhancements, improvements,
or error corrections. Such Updates are typically identified by a change in the
digit(s) to the right of the tenths digit [x.x.(x)] (i.e.-1.01, 1.02, 1.03)

                                      -3-
<PAGE>

     H.   "Upgrade" means the unique functional and/or feature improvements made
at Supplier's discretion or at Intel's request, to the Software to keep the
current version of the Software Release competitive in terms of new
capabilities, features or pricing in the Software's respective market.  Such
Upgrades are typically identified by a change in the tenths digit [x.(x).x]
(i.e.-1.10, 1.20, 1.30).

2.   TERM OF AGREEMENT

     The term of this Agreement shall begin on the Effective Date and continue
to the Expiration Date.

3.   LICENSE GRANT

     A.   Supplier grants to Intel a non-exclusive, perpetual, royalty-free,
worldwide, irrevocable license, under all intellectual property rights owned or
licensed by Supplier and embodied in the Software, to use, copy, distribute
internally, and make derivatives of the Software and associated documentation
and technical materials listed on Addendum A for Intel's internal purposes only,
including the right to (i) use in web-based E-Commerce and E-Business
applications; (ii) use copies of the Software for internal training, (iii)
permit Intel's subcontractors to exercise Intel's rights under this Agreement
solely in performance of work for Intel; and (iv) make archival copies pursuant
to Intel's standard backup and archival policies and procedures.  Supplier shall
provide Intel with the latest Releases, Updates, and Upgrades made to each
Software program licensed herein as soon as they are made available to
Supplier's other customers, provided Intel is receiving support and maintenance
from Supplier.  Title to and ownership of the Software shall at all times remain
with Supplier.  Intel will include on any authorized copies the copyright
notices or proprietary legends contained within the Software or upon the
associated documentation.

     B.   Supplier also grants to Intel the right to modify, have modified,
prepare derivative works, or enhance the Software for its own internal purposes
and use, either through the Services provided by Supplier or by means of its own
employees or contractors. Intel shall own all right, title, and interest in such
modifications, enhancements, or derivatives made to the Software by Intel or by
Supplier at Intel's request, subject to Supplier's underlying intellectual
property rights and the licenses granted hereunder. Supplier shall not use or
incorporate Intel's modifications, enhancements, or derivatives into Supplier's
Software without the express written permission of Intel.

                                      -4-
<PAGE>

4.   PRICING

     A.   License Fees and Service Rates (hereinafter "Prices") are set forth in
Addendum A and shall remain fixed for the duration of this Agreement except as
provided herein.

     B.   [*]

     C.   All applicable taxes and other charges such as duties, customs,
tariffs, imposts, and government imposed surcharges shall be stated separately
on Supplier's invoice and borne by Supplier.  In the event that Intel is
prohibited by law from remitting payments to the Supplier unless Intel deducts
or withholds taxes therefrom on behalf of the local taxing jurisdiction, then
Intel shall duly withhold such taxes and shall remit the remaining net invoice
amount to the Supplier.  Intel shall not reimburse Supplier for the amount of
such taxes withheld.

     D.   Additional costs, except those described on Addendum A, will not be
reimbursed without Buyer's prior written approval.

     E.   Buyer reserves the right to have Supplier's records inspected and
audited to ensure compliance with this Agreement. At Buyer's option or upon
Supplier's written demand, such audit will be performed by an independent third
party at Buyer's expense. However, if Supplier is found to not be complying with
this Agreement in any way, Supplier shall reimburse Buyer for all costs
associated with the audit, along with any discrepancies discovered, within
thirty (30) days after completion of the audit. The results of such audit shall
be kept confidential

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

                                      -5-
<PAGE>

by the auditor and, if conducted by a third party, only Supplier's failures to
abide by the obligations of this Agreement shall be reported to Buyer

5.   INVOICING AND PAYMENT

     A.   Prompt payment discounts will be computed from the latest of:  (i) the
scheduled delivery or Service date; (ii) the date of actual delivery or Service;
or (iii) the date a properly filled out original invoice or packing list is
received. Payment is made when Buyer's check is mailed or EDI funds transfer
initiated. Buyer shall at its option make payment within [*] days and receive a
[*] percent [*] discount from the total invoice, or within [*] days after
receipt of the proper original invoice or Intel's receipt of Software or
performance of Services, whichever is later.

     B.   Original invoices shall be submitted and shall include: Purchase
Agreement number from the Purchase Order, Purchase Order number, line item
number, listing of and dates of Service provided, complete bill to address,
description of incidental Items, quantities, unit price, extended totals, and
any applicable taxes or other charges. Intel's payment shall not constitute
acceptance.

     C.   Supplier shall be solely responsible for and hold Intel harmless for
any and all payments to its vendors or subcontractors utilized in the
performance of the Services.

     D.   Supplier agrees to invoice Intel no later than [*] days after
completion of Services or shipment of Items. Intel will not be obligated to make
payment against any invoices submitted after such period.

6.   TERMINATION FOR CONVENIENCE

     A.   Intel may terminate this Agreement or any Purchase Order issued, or
any part thereof, at any time for its sole convenience by giving written notice
of termination to Supplier. Upon Supplier's receipt of such notice, Supplier
shall, unless otherwise specified in such notice, immediately stop all work
previously authorized and give prompt written notice to, and cause all of, its
suppliers or subcontractors to cease all related work.

     B.   Supplier shall continue to provide Software and Services for any
portion of this Agreement not canceled or terminated. Nothing herein shall
affect Intel's right to exercise the licenses granted hereunder for Software not
terminated.

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

                                      -6-
<PAGE>

     C.   There shall be no termination charges for Services or Software not yet
provided.  Intel will be responsible for payment of authorized Services and
Software already provided by Supplier but not yet invoiced.

     D.   Before assuming any payment obligation under this section, Intel may
inspect Supplier's work in process and audit all relevant documents prior to
paying Suppliers invoice.

7.   CONTINGENCIES

     Neither party shall be responsible for its failure to perform due to causes
beyond its reasonable control such as acts of God, fire, theft, war, riot,
embargoes or acts of civil or military authorities.  If delivery of Software or
performance of Services are to be delayed by such contingencies, Supplier shall
immediately notify Intel in writing and Intel may either:  (i) extend time of
performance; or (ii) terminate all or part of the uncompleted portion of the
Purchase Order at no cost to Intel.

8.   DELIVERY, PURCHASE ORDERS, AND SCHEDULING

     A.   Supplier shall notify Buyer in writing within two (2) business days of
receipt of Buyer's Purchase Order if Supplier is unable to make any scheduled
delivery and state the reasons therefor.  The absence of such notice constitutes
acceptance of the Purchase Order and commitment to the release terms.

     B.   Supplier shall deliver Software per the release schedule and Buyer may
return non-conforming shipments at Supplier's risk and expense.  At Intel's
request, Supplier shall deliver the Software in electronic form.

     C.   Supplier shall promptly perform Services as scheduled or shall
promptly notify Buyer if unable to perform any scheduled Services and shall
state the reasons.

     D.   Buyer may reschedule or cancel any release in whole or in part prior
to the release date at no additional charge.

     E.   Buyer may place any portion of a release on hold by notice which shall
take effect immediately upon receipt. eeleases placed on hold will be
rescheduled or canceled within a reasonable time.

     F.   Buyer shall have no obligation with respect to the purchase of
Software or Services under this Agreement until such Software or Services are
specified in an issued Purchase Order which contains specific release dates for
specific Software or Services.

                                      -7-
<PAGE>

9.   INSPECTION, ACCEPTANCE AND WARRANTY

     A.   Software and Services shall be received subject to Buyer's inspection,
testing, approval, and acceptance at Buyer's premises notwithstanding any
inspection or testing at Supplier's premises, any prior evaluation of the
Software, or any prior payment for such Software or Services.

     B.   Supplier makes the following warranties regarding Software and
Services furnished hereunder, which shall survive any delivery, inspection,
acceptance, payment, or resale of the Items:

          (i)    Supplier or Supplier's vendors have legal title and rights of
ownership of the Software and supplemental documentation, and that Supplier has
all necessary rights, title, and interest to grant the rights set forth herein
to Buyer, free of any claims, liens, or conflicting rights in favor of any third
party;

          (ii)   The Software licensed in this Agreement is free from
significant programming errors and defects in workmanship and materials, and
substantially complies with functionality and performance set forth in
Supplier's published specifications or as otherwise expressly agreed in writing.

          (iii)  The Software does not infringe any intellectual property right
of any third party;

          (iv)   The Software contains no disabling code and is free from any
viruses at the time of delivery to Intel;

          (v)    The Software (i) will function without error or interruption
related to Date Data from more than one century; (ii) the Software requires all
Date Data (whether received from users, systems, applications or other sources)
include an indication of century in each instance; and (iii) all date output and
results, in any form, shall include an indication of century in each instance.
As used herein, "Date Data" means any data or input which includes an indication
of or reference to date.

          (vi)   Services shall be provided in a workmanlike and competent
manner in accordance with the highest professional standards in Supplier's trade
or industry, and shall meet the descriptions, specifications, and the
performance standards stated in Addendum A. Supplier shall guarantee workmanship
for [*] months after Services are provided.

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

                                      -8-
<PAGE>

          (vii)  There will be no disruption in the delivery of Software or
Services under this Agreement as a result of or due to the date change from and
between December, 1999, and January, 2000, nor due to the year 2000 being a leap
year.

     C.   During the warranty period, Supplier shall promptly provide all
Releases, Updates, and Upgrades at no additional cost to Intel;

     D.   During the warranty period and without additional charge, Supplier
shall provide Intel with at least the same level of Software support as
described in Addendum "B" of this Agreement. If no Addendum "B" is included,
Supplier shall provide at least Supplier's standard level of Software support
provided to Supplier's other customers, including twenty-four (24) hours a day
by seven (7) days per week telephone support and written consultation upon
Intel's request.

     E.   If Supplier breaches any of the foregoing warranties, or Software or
Services are otherwise defective or nonconforming, for a period of [*] from the
Acceptance Date of the Software (or longer if Supplier offers a longer warranty
period with the Software), or a period of [*] after the Acceptance Date of the
Services, Supplier shall promptly correct any non-conforming Software, Service,
or defective workmanship and shall pay to Buyer all incidental and consequential
damages (as those terms are defined in the Uniform Commercial Code, Article 1,
1995 Official Text) arising from the breach of the foregoing warranties.
Supplier shall pay the cost of shipping and risk of loss for all non-conforming
Software.

     F.   Software rejected by Buyer as not conforming to this Agreement may be
returned to Supplier at Supplier's risk and expense. Intel shall notify Supplier
in writing, specifying how the Software failed. Supplier shall make such
necessary corrections and modifications in the Software so that it can be
resettled no later than [*] working days from the date of Supplier's receipt of
Intel's first notice. If the Software still fails to pass Intel's acceptance
tests once Supplier has provided Intel with corrected Software, Intel may
either: (a) notify Supplier in writing, specifying how the Software failed and
request another corrected version of the Software within [*] working days; or
(b) terminate this Agreement or any portion thereof for default and exercise any
of its rights hereunder.

10.  CONFIDENTIALITY AND PUBLICITY

     A.   During the course of this Agreement, either party may have or may be
provided access to the other's confidential information and materials.
Additionally, Supplier may be engaged to develop new information for Intel, or
may develop such information during the performance of Services, which
information will become, upon creation, Intel's confidential information unless

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

                                      -9-
<PAGE>

otherwise agreed in writing.  Provided information and materials are marked in a
manner reasonably intended to make the recipient aware, or the recipient is sent
written notice within forty-eight (48) hours of disclosure, that the information
or materials are "Confidential", each party agrees to maintain such information
in accordance with the terms of this Agreement and the CNDA referenced on the
signature page of this Agreement and any other applicable separate nondisclosure
agreement between Intel and Supplier.  At a minimum each party agrees to
maintain such information in confidence and limit disclosure on a need to know
basis, to take all reasonable precautions to prevent unauthorized disclosure,
and to treat such information as it treats it's own information of a similar
nature, until the information becomes publicly available through no fault of the
non-disclosing party.  Supplier's employees who access Intel's facilities may be
required to sign a separate access agreement prior to admittance to Intel's
facilities.  Furthermore, Supplier will furnish a copy of Addendum D to each of
its employees and subcontractors assigned to or contracted for Intel work and
will take reasonable steps to assure Intel that all such have read and
understood Addendum D.  Supplier shall not use any of the confidential
information created for Intel other than for Intel.

     B.   The parties agree that neither will disclose the existence of this
Agreement, nor any of its details or the existence of the relationship created
by this Agreement, to any third party without the specific, written consent of
the other.  If disclosure of this Agreement or any of the terms hereof is
required by applicable law, rule, or regulation, or is compelled by a court or
governmental agency, authority, or body:  (i) the parties shall use all
legitimate and legal means available to minimize the disclosure to third parties
of the content of the Agreement, including without limitation seeking a
confidential treatment request or protective order; (ii) the disclosing party
shall inform the other party at least ten (10) business days in advance of the
disclosure; and (iii) the disclosing party shall give the other party a
reasonable opportunity to review and comment upon the disclosure, and, any
request for confidential treatment or a protective order pertaining thereto,
prior to making such disclosure.  The parties may disclose this Agreement in
confidence to their respective legal counsel, accountants, bankers, and
financing sources as necessary in connection with obtaining services from such
third parties.  The obligations stated in this section shall survive the
expiration or termination of this Agreement.  Neither party may use the other
party's name or trademarks in advertisements, brochures, banners, letterhead,
business cards, reference lists, or similar advertisements without the other's
written consent.

                                      -10-
<PAGE>

11.  INTELLECTUAL PROPERTY INDEMNIFICATION

Supplier shall defend, indemnify and hold Intel harmless from any costs,
expenses (including reasonable attorneys' fees), losses, damages or
liability incurred because of actual or alleged infringement of any [*]
proprietary right arising out of Intel's use of the licensed Software or
Services provided by Supplier.  Intel shall notify Supplier of such claim or
demand.  [*].
If a third party's claim endangers or disrupts Intel's use of the Software,
Supplier shall, at Intel's option and at no charge to Intel, (a) obtain a
license so Intel may continue use of the Software; (b) modify the Software
to avoid the infringement; (c) replace the Software with a compatible,
functionally equivalent and non-infringing product; or if these options are
commercially unreasonable (d) refund to Intel the amount paid for the
Software.

12.  COMPLIANCE WITH LAWS AND RULES

     A.   Supplier shall comply with all national, state, and local laws and
regulations governing the manufacture, transportation, and/or sale of Items
and/or the performance of Services in the course of this Agreement.  In the
United States, these may include, but are not limited to, Department of
Commerce, Environmental Protection Agency, and Department of Transportation
regulations applicable to Hazardous Materials.

     B.   Supplier shall abide by all Buyer's rules, and regulations while on
Buyer's premises or performing Services including, but not limited to, safety,
health and Hazardous Material management rules, and rules prohibiting misconduct
on Buyer's premises including, but not limited to, use of physical aggression
against persons or property, harassment, and theft. Supplier shall perform only
those Services identified on Addendum A and will work only in areas designated
for such Services.

     C.   Supplier represents and agrees that it is in compliance with Executive
Order 11246 and Implementing Equal Employment Opportunity regulations and the
Immigration Act of 1987, unless exempted or inapplicable.

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

                                      -11-
<PAGE>

13.  INSURANCE

     A.   Without limiting or qualifying Supplier's liabilities, obligations, or
indemnities otherwise assumed by Supplier pursuant to this Agreement, Supplier
shall maintain, at its sole cost and expense, with companies acceptable to
Buyer, Commercial General Liability and Automobile Liability Insurance with
limits of liability not less than $1,000,000.00 per occurrence and including
liability coverage for bodily injury or property damage (1) assumed in a
contract or agreement pertaining to Supplier's business and (2) arising out of
Supplier's product, Services, or work.  Supplier's insurance shall be primary,
and any applicable insurance maintained by Buyer shall be excess and non-
contributing.  The above coverages shall name Buyer as additional insured.

     B.   Supplier shall also maintain statutory Workers' Compensation coverage,
including a Broad Form All States Endorsement in the amount required by law, and
Employers' Liability Insurance in the amount of $1,000,000.00 per occurrence.
Such insurance shall include an insurer's waiver of subrogation in favor of
Buyer.

     C.   If Supplier is providing any professional service to Buyer, Supplier
shall maintain Professional Liability insurance (including errors and omissions
coverage) with liability limits not less than $1,000,000.

     D.   Supplier shall provide Buyer with properly executed Certificate(s) of
Insurance prior to commencement of any operation hereunder and shall notify
Buyer, no less than 30 days in advance, of any reduction or cancellation of the
above coverages.

14.  INDEMNIFICATION

     A.   Supplier shall, to the fullest extent permitted by law, protect,
defend, indemnify, and hold Buyer harmless from and against any and all claims,
liabilities, demands, penalties, forfeitures, suits, judgments, and the
associated costs and expenses (including attorney's fees), which Buyer may
hereafter incur, become responsible for, or pay out as a result of: death or
personal injury (including bodily injury) to any person, destruction or damage
to any property, contamination of or adverse effects on the environment, and any
cleanup costs in connection therewith, or any violation of law, governmental
regulation or orders, to the extent caused by (i) Supplier's breach of any term
or provision of this Agreement; (ii) any negligent or willful acts, errors, or
omissions by Supplier, its employees, officers, agents, representatives, or
subcontractors in the performance of this Agreement; or (iii) dangerous defects
in Software or Services.

                                      -12-
<PAGE>

     B.   Notwithstanding Supplier's immunities under applicable state worker's
compensation and industrial insurance acts, and as mutually negotiated between
the parties, Supplier specifically undertakes to defend, indemnify, and hold
Buyer harmless from claims or liabilities asserted against Buyer by Supplier's
employees.

15.  RETENTION AND AUDITS

     Supplier will maintain complete and accurate records of the Services
performed under this Agreement for a period of five (5) years after the
completion of these Services.  Records relating to the performance of this
Agreement shall be made available to Buyer upon reasonable notice to Supplier.

16.  INDEPENDENT CONTRACTOR

     In performing Services under this Agreement, Supplier is an independent
contractor and its personnel and other representatives shall not act as nor be
agents or employees of Buyer.  As an independent contractor, Supplier will be
solely responsible for determining the means and methods for performing the
required Services.  Supplier shall have complete charge and responsibility for
personnel employed by Supplier; however, Buyer reserves the right to instruct
Supplier to remove from Buyer's premises immediately any of Supplier's personnel
who is in breach of Section 12 or 17 of this Agreement.  Such removal shall not
affect Supplier's obligation to provide Services under this Agreement.

17.  SECURITY

     Supplier confirms that employees of Supplier performing work at Buyer's
facilities have no record of criminal convictions involving drugs, assaultive or
combative behavior, or theft within the last five years.  Supplier understands
that such employees may be subject to criminal history investigations by Buyer
at Buyer's expense and will be denied access to Buyer's facilities if any such
criminal convictions are discovered.  Supplier also agrees to comply with
Buyer's Alcohol and Drug-free Workplace Directive set forth in Addendum C.

18.  MERGER, MODIFICATION, WAIVER, AND REMEDIES

     A.   This Agreement contains the entire understanding between Intel and
Supplier with respect to the subject matter hereof and merges and supersedes all
prior and contemporaneous agreements, dealings and negotiations. No
modification, alteration, or amendment shall be effective unless made in
writing, dated and signed by duly authorized representatives of both parties.

                                      -13-
<PAGE>

     B.   No waiver of any breach hereof shall be held to be a waiver of any
other or subsequent breach.

     C.   Intel's rights and remedies herein are in addition to any other rights
and remedies provided by law or in equity.

     D.   If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal, or unenforceable, such
determination shall not affect the validity of the remaining provisions unless
Intel determines in its discretion that the court's determination causes this
Agreement to fail in any of its essential purposes.

19.  ASSIGNMENT

     Neither party may assign or factor any rights in nor delegate any
obligations under this Agreement or any portion thereof without the written
consent of the other.  Buyer may cancel this Agreement for cause should Supplier
attempt to make an unauthorized assignment of any right or obligation arising
hereunder.

20.  APPLICABLE LAW

     This Agreement shall be governed by the laws of the State of Delaware,
excluding its conflict of laws provision.  The provisions of the United Nations
Convention on Contracts for the International Sale of Goods shall not apply to
this Agreement.  The parties agree that licensing of Software under this
Agreement shall constitute the sale of goods and that the Delaware version of
the Uniform Commercial Code Article 2 Sales shall be applicable to this
Agreement by analogy.

21.  HEADINGS

     The headings provided in this Agreement are for convenience only and shall
not be used in interpreting or construing this Agreement.

22.  SPECIFIC PERFORMANCE

     Notwithstanding anything else contained in this Agreement, Intel and
Supplier specifically agree that failure to perform certain obligations
undertaken in connection with this Agreement would cause irreparable damage, and
that monetary damages would not provide an adequate remedy in such event.  The
parties further agree that Supplier's failure to complete performance of the
Services called for in this Agreement or on any project released under this
Agreement or to deliver or effect delivery of Services and/or materials as
contracted are such certain obligations.  Accordingly, it is agreed that, in
addition

                                      -14-
<PAGE>

to any other remedy to which the nonbreaching party may be entitled, at law or
in equity, the nonbreaching party shall be entitled to an order of specific
performance to compel performance of such obligations in any action instituted
in any court of the United States or any state thereof having subject matter
jurisdiction.

23.  RIGHT TO DEVELOP

     Intel reserves the right to develop, market, distribute, and otherwise
commercially exploit software and/or firmware products of any type whatsoever,
including without limitation software and/or firmware that are similar to or
compete with the Software.

24.  NEW DEVELOPMENTS

     A.   Supplier represents and warrants that Supplier has no outstanding
agreement or obligation that is in conflict with any of the provisions of this
Agreement, or that would adversely affect Supplier's performance hereunder or
Buyer's exclusive right to Developments (defined below), and Supplier agrees
that Supplier shall not enter into any such conflicting agreement during the
term of this Agreement.

     B.   Supplier agrees that all works of authorship, inventions,
improvements, developments, and discoveries conceived, made, or discovered by
Supplier, solely or in collaboration with others, in the course of its
performance of Services or the development of deliverables for Buyer hereunder
as well as all patents, copyrights, trade secrets, trademarks, and other
intellectual property rights therein and thereto (collectively, "Developments"),
are the sole property of Buyer. Supplier agrees to assign (or cause to be
assigned) and does hereby assign fully to Buyer all such Developments.

     C.   Supplier agrees to assist Buyer, or its designee, at Buyer's expense,
in every proper way, to secure Buyer's rights in the Developments, including the
disclosure to Buyer of all pertinent information and data with respect thereto
and the execution of all applications, specifications, oaths, assignments, and
all other instruments which Buyer may deem necessary in order to apply for and
obtain such rights and in order to assign and convey to Buyer, its successors,
assigns, and nominees the sole and exclusive rights, title, and interest in and
to such Developments, including (without limitation) the Certificate of
Originality set forth on Addendum E and the Assignment of Intellectual Property
set forth on Addendum F. Supplier further agrees that Supplier's obligation to
execute or cause to be executed, when it is in Supplier's power to do so, any
such application, specification, oath assignment, or other instrument shall
continue after the termination of this Agreement. Supplier further agrees to
assist Buyer in

                                      -15-
<PAGE>

enforcing all patents, trademarks, copyrights, trade secrets, or other ownership
rights to protect Buyer's exclusive interest in Developments.

     D.   [*]

     E.   Supplier represents, warrants, and agrees that it will not incorporate
any third party intellectual property into any Development or deliverable
provided hereunder without notifying and obtaining the prior written approval of
Buyer.

     F.   Supplier hereby waives any and all moral rights, including the right
to identification of authorship or limitation on subsequent modification, that
Supplier (or its employees) has or may have in any invention, materials, or
other deliverables assigned to Buyer hereunder.

     G.   Supplier warrants that:  (1) all of its employees or contractors who
perform work for it hereunder will have entered into written agreements with
Supplier which ensure that the work they do is subject to the terms and
conditions of this Section 24; and (2) it will not incorporate any Developments
into deliverables to be provided to Buyer which contain intellectual property
not assignable or licensable to Buyer as provided in this Section

25.  CUSTOMS AND EXPORT CONTROL

     Intel and Supplier shall take appropriate steps to ensure that the
distribution and export/ re-export of the Software will be in compliance with
the laws, regulations, orders, or other restrictions of the U.S. Export
Administration Regulations.  Supplier will provide, upon Intel's Customs
Department request, all necessary import and export related information
regarding the Software to meet any applicable export or import regulation,
including, without limitation, a statement of origin for all Software and
applicable customs documentation for Software which is wholly or partially
developed and/or packaged outside of the country of import.

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

                                      -16-
<PAGE>

26.  SURVIVABILITY

     The following sections shall survive termination or expiration of this
Agreement:  Sections 1, 3, 4, 6, 7, 9, 10, 11, 14, 15, 16, 18, 19, 20, 21, 22,
23, 24, 25, 26 and Paragraphs 4C, the provision of Addendum A, Addendum B and
the provision of any and all Certificates of Originality and Assignments of
Intellectual Property which are executed by Supplier, will survive any
termination or expiration of this Agreement.

                                      -17-
<PAGE>

                                 ADDENDUM "A"

                  SOFTWARE DESCRIPTION, SPECIFICATION, PRICE

          Verisity Design's Specman(TM)--includes architectural modeling,
automatic generation of functional tests, HDL simulation control, data and
temporal checking, and functional coverage analysis.  Includes MTI simulator
interface.

          SM1000--Perpetual License list price is [*]

          SML1000--1 year time based license list price is [*]

          [*]

          [*]

          [*]

Additional Items [*]

Perpetual License maintenance is renewable each year for [*]

Training is offered for [*] per engineer and is held in Mountain View,
California.

On-site training is offered at Intel for [*]

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -18-
<PAGE>

[*]

[*]- CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -19-
<PAGE>

                                 ADDENDUM "B"

                        SUPPORT AND MAINTENANCE SERVICE

SERVICE SHALL BEGIN June 21, 1999.  SERVICES SHALL END June 21, 2001.

1.   COMPENSATION:  So long as Intel pays the fees for Services as listed in
Addendum A, Supplier shall provide such Services to Intel.  Intel and Supplier
agree that the compensation which Supplier will receive for Services provided to
Intel is listed on Addendum A.  Intel shall not be responsible for any amount
greater than the amount listed in Addendum A.  Supplier shall be responsible for
any and all payments to Supplier's subcontractors utilized in the performance of
these Services.  No additional billable activities will occur until and unless
Intel issues a purchase order requesting such activities.

2.   SOFTWARE SUPPORT AND ERROR LISTINGS:  Supplier agree to provide Intel with:

     A.   All Releases, Updates and Upgrades for each Software program described
in Addendum A. Software Releases, Updates and Upgrades shall be provided on
magnetic tape, tape cartridge or other formats as requested by and acceptable to
Intel.

     B.   All necessary system reconfiguration Releases for hardware
compatibility and support to ensure that the Software remains compatible with
manufacturer's operating system software.

     C.   Qualified telephone support available twenty-four (24) hours a day by
seven (7) days a week for the Software.

     D.   Supplier's hotline telephone number is:_______________________________

     If the Software fails to conform to the specifications set forth in
Addendum A, Supplier agrees to use best efforts to modify the Software to
conform to the Specifications, and to respond to general questions from Buyer
regarding the use and functionality of the Software, according to the procedure
and priority levels set forth below, as determined by Buyer.

                                      -20-
<PAGE>

<TABLE>
<CAPTION>
  Priority Level            Critical                  Urgent                   Routine
----------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                      <C>
Priority Level          A problem                A problem impairing      A problem impacting
Definition              preventing the           the operation of a       a minor, yet
                        operation of a           major function of        desired, specified
                        major function of        the Software.            function or feature
                        the Software.                                     of the Software.
----------------------------------------------------------------------------------------------
Required Responses      Supplier shall           Supplier shall           Supplier shall
                        respond within           respond within           respond within
                        [*] and provide a        [*] and provide a        [*] and provide a
                        correction to the        correction to the        correction to the
                        error within             error within             error within
                        [*] from notice.         [*] from notice.         [*] business days
                                                                          from notice.
---------------------------------------------------------------------------------------------
</TABLE>

     E.   Downtime for Software shall not exceed [*] for any one Software
installation. If the Software downtime period exceeds [*] in a [*] period,
Supplier agrees that an extra [*] maintenance will be provided at no cost to
Intel for each such downtime period. Such extension shall not relieve Supplier
of it's duties or obligations under this Agreement.

     F.   Supplier will promptly supply Intel's designated contact person
(listed in Section 13) with all revisions or upgrades of Software application
manuals and guides issued on a priority basis, together with a list of known
Software errors and their respective solutions. This list will be distributed by
Intel to its employees with a need to know.

3.   APPLICATION SUPPORT:  Supplier agrees to provide Intel with:

     A.   Qualified telephone support available for Software and applications
inquiries, with responses provided within [*].

          Supplier's hotline telephone number is:
                                                  -----------------------------

     B.   Supplier's best efforts to verify any Software error within [*] after
receiving notification of the error by Intel. If Supplier requires a test case
to verify a Software error, Supplier shall verify the error within [*] after
receipt of a test case from Intel.

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

                                      -21-
<PAGE>

     C.   On-site visits for applications support within [*] business days
when an on-site visit is required to remedy any Software error(s) due to non-
compliance with Supplier's performance specifications described in Addendum "B."

     D.   Supplier's Software application models, Updates and Upgrades as they
become available.

     E.   If Supplier decides to cease production and/or support for any
Software, Supplier shall promptly notify Intel and provide a Software conversion
methodology to any new or replacement product(s) Supplier will offer. Upon
Supplier's discontinuance of the Software offering, Supplier will either
continue to fully support the current Software for as long as Intel uses the
Software, or convert Intel over to use of the replacement product(s) at no
additional charge.

4.   DEFAULT:  If Supplier defaults on the support obligations set forth above,
Supplier agrees to deliver to Intel the most current version of the Source Code
and notes for the Software within [*] of Intel's written notice to Supplier.
Such Source Code shall thereafter be included in the Software. Intel's receipt
of Source Code shall not vitiate Supplier's duty to perform under this
Agreement.

5.   CONTACTS

     The following initial contact persons will facilitate Service scheduling,
communications and notifications between Intel and Supplier.  Either party may
change its contact person by written notice to the other party.

INTEL:____________________________     SUPPLIER:  Verisity Design Inc
        Name  Telephone No.                       ------------------------------
                                                       Name  Telephone No.

                                       1943 Landings Dr. CA 94043 (650-934-6801)
__________________________________     -----------------------------------------
        Location  Facsimile No.              Location  Facsimile No.

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

                                      -22-
<PAGE>

                                  ADDENDUM C

                     ALCOHOL/DRUG-FREE WORKPLACE DIRECTIVE

          Intel is committed to fulfilling its legal and ethical responsibility
to maintain a safe and efficient working environment on Intel premises.
Supplier's drug and alcohol program shall be at least as stringent as Intel's.
This means that at a minimum: (i) all Contractors assigned to Intel premises
shall pass a screen test (urine analysis) for drugs per the schedule outlined
below and within seventy-two (72) hours of accepting employment with Supplier.
In addition, Supplier shall perform immediate drug and alcohol testing of any
Contractor so assigned if Supplier has a reasonable suspicion of drug or alcohol
impairment. "Reasonable suspicion" is present when an observation of a change in
a Contractor's behavior or such conduct indicates a noticeable performance
impairment to the observer.

          In the event that the initial date on which the Contractor is employed
by Supplier and the initial assignment date at Intel are the same date, the
Contractor must successfully pass the screen test within seventytwo (72) hours
prior to commencing an assignment at Intel.  Any Contractor who does not
successfully pass the screen test within such seventytwo (72) hour period will
be barred access to all Intel facilities.

          When Intel has a reasonable suspicion that a Contractor is under the
influence of alcohol or drugs in violation of Intel's standards, Intel may
require Supplier to perform drug and/or alcohol testing of the Contractor or
remove the Contractor from Intel premises.

          However, if a Contractor fails to advise Supplier of a drug or alcohol
dependency and fails to seek Supplier's approval of a professional counseling
and rehabilitation program, and if requested testing shows that the tested
Contractor is under the influence of alcohol or illegal drugs, that Contractor
will be denied access to Intel premises and Intel will require return of that
Contractor's security badge immediately.  In addition, a corporate-wide "no-
access" notation will be placed in the Intel corporate security database and no
Application for Waiver will be considered by Intel.

          Supplier will be responsible for all testing and for maintaining of
records for its Contractors.  Supplier will also be responsible for prompt
notification and removal of any Contractor found to be in violation of Buyer's
Alcohol and Drug-Free Workplace Directive.  This includes retrieving the
Contractor's badge (including duplicate picture badges, Fab, AT, or other
specialty access or permit badges and other property movement badges) and other
Intel property, and depositing same at the nearest Intel security post.

                                      -23-
<PAGE>

          Also, Intel may, at its option, exercise its right to audit Supplier's
personnel records related to compliance with Intel's Drug and Alcohol standard
to ensure that federally certified laboratories are being used and appropriate
procedures are adhered to.

<TABLE>
<CAPTION>
Drugs                   Screening Method Cutoff       Confirmation Method Cutoff
                        (Immunoassay)                 (GC/MS)
<S>                     <C>                           <C>
Amphetamines            1000 ng/ml                    500 ng/ml

Cannabinoids            50 ng/ml                      15 ng/ml

Cocaine                 300 ng/ml                     150 ng/ml

Opiates                 300 ng/ml                     300 ng/ml

Phencyclidine           25 ng/ml                      25 ng/ml
</TABLE>

                                      -24-
<PAGE>

                                  ADDENDUM D

                         PROTECTION OF INTEL'S ASSETS

          Supplier agrees to safeguard Intel's classified (i.e., Intel
Confidential, Intel Secret, Intel Restricted Secret and Intel Top Secret) and
proprietary information set out in the body of the parties' Agreement and
relevant Unescorted Access Application forms for badges.  Supplier also agrees
to use and apply Intel's information protection methods stated below in this
Addendum in the performance of Supplier's work.  Supplier agrees that this
performance standard applies to all Intel classified and proprietary
information, regardless of the medium (Intel's or Supplier's) in or on which it
is retained or communicated and to software that is licensed by Intel for its
internal use.

          Supplier is not automatically granted access to Intel classified and
proprietary information, networks or software.  However, authorization to use or
access Intel information, software, or telecommunications may be granted by the
Intel information owner if access is necessary and directly related to
Supplier's scope of work or duties.  Unless specifically authorized, Supplier
may not use or access Intel classified or proprietary information that may be
happened upon or inadvertently discovered while performing work under this
Agreement.  Neither may a Supplier or Supplier's employee control an Intranet
web site at Intel.

          Supplier shall not modify Intel classified or proprietary information,
software, hardware, or telecommunications without the explicit permission of the
Intel employee responsible for the resource, with the exception of contract-
related requirements or resources that allow for individual customization (e.g.,
Microsoft Windows user features).  The Supplier's employees, agents, or
subcontractors may not disclose Intel classified or proprietary information to
their co-workers, except for disclosure to those similarly bound to protect
Intel's intellectual property with a need to know to fulfill this Agreement.

                     INTEL INFORMATION PROTECTION METHODS

          This section outlines the Intel's minimum requirements for protection
methods for all Intel classified or proprietary information and software that
the Supplier's personnel may come in contact with.  Intel recognizes that the
correct and proper protection of its information rests with its employees and
Suppliers who have been authorized access.  Failure to comply with these
requirements will provide grounds for immediate termination of this Agreement by
Intel.  Periodic updates to these protection methods can be found on Intel's
internal web at:

                                      -25-
<PAGE>

                 URL http://www-infosec.fm.intel.com/policies/

          Upon reaching the above web site, refer to Policies for Employees and
Procedures for Employees.  These protection methods may also be obtained through
your purchasing representative.

          For further information or questions, contact your Intel management
sponsor.

                                      -26-
<PAGE>

                                  ADDENDUM E

                          CERTIFICATE OF ORIGINALITY

          This Certificate of Originality must be completed by Supplier when
furnishing software material (program product or offering and related
documentation or other software material) for Intel.

          One Certificate of Originality can cover one complete product, even if
that product includes multiple modules.  However, a separate Certificate of
Originality must be completed for the code and another for its related
documentation (if any).

          Please leave no questions blank.  Write "not applicable" or "N/A" if a
question is not relevant to the furnished software material.

1.   Name of the software material (provide complete identification, including
     version, release and modification numbers for programs and documentation):

          [Specman 3.1]

2.   Was the software material or any portion thereof written by any party other
     than you, or your employees working within their job assignment?

     Yes  X        No _____
         ---

     If Yes, provide the following information:

     (a)  Indicate if the whole software material or only a portion thereof was
          written by such party, and identify such portion:
          [The whole software material
          ----------------------------------------------------------------------

     (b)  Specify for each involved party:

          (i)    Name:

          (ii)   Company: [Verisity Ltd.]

          (iii)  Address: [8 Hamelacha St., Rosh-Ha'ain, Israel 48091]

          (iv)   If the party is a company, how did it acquire title to the
                 software material (e.g., software material was written by
                 company's employees as part of their job assignment)? [Software
                 material

                                      -27-
<PAGE>

                 was written by company's employees as part of their job
                 assignment.]

          (v)    If the party is an individual, did s/he create the software
                 material while employed by or under contractual relationship
                 with another party? [N/A]

                 Yes _____        No _____

                 If Yes, provide name and address of the other party and explain
                 the nature of the obligations:

                 _______________________________________________________________

                 _______________________________________________________________

                 _______________________________________________________________

     (c)  How did you acquire tittle to the software material written by the
          other party?
          By license. Supplier is a wholly owned subsidiary of Verisity Ltd.
          ------------------------------------------------------------------

3.   Was the software material or any portion thereof derived from any third
     party's pre-existing material(s)?

     Yes _____          No  X
                           ---

     If Yes, provide the following information for each of the pre-existing
     materials:

     ___________________________________________________________________________

     (a)  Name of the materials:

          ______________________________________________________________________

     (b)  Owner:

          ______________________________________________________________________

     (c)  How did you get the right to use the pre-existing material(s)?

          ______________________________________________________________________

4.   Identify below, or in an attachment, any other circumstances which might
     affect Intel's ability to reproduce and market this software product,
     including: n/a

     (a)  Confidentiality or trade secrecy of pre-existing materials:

          ______________________________________________________________________

                                      -28-
<PAGE>

     (b)  Known or possible royalty obligations to others:

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

     (c)  Pre-existing material developed for another party or customer
          (including government) where you may not have retained full rights to
          the material:

          ______________________________________________________________________

     (d)  Materials acquired from a person or company possibly not having title
          to them:

          ______________________________________________________________________

     (e)  Other circumstances:

          [Software is for internal use by Intel under fully paid up license.]

SUPPLIER:   Verisity Design Inc
         ---------------------------

Signature:/s/ Charles Alvarez
          --------------------------

Printed Name:  Charlie Alvarez
             -----------------------

Title:  Chief Financial Officer
      ------------------------------

Date:  June 21, 1999
     -------------------------------

                                      -29-
<PAGE>

                                  ADDENDUM F

                      ASSIGNMENT OF INTELLECTUAL PROPERTY

          In consideration of the disclosure of Intellectual Property and
Confidential Information of Intel and the compensation paid by Intel to
("Assignor") under the Intel Corporation Purchase Agreement--Software & Related
Services No. ____, effective _______________ ("Agreement") the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

          Assignor has created or obtained exclusive title to the following
work(s) (hereinafter "Work") entitled:

          1.

          2.

          In this Agreement, "Work" means all works, including literary works,
pictorial, graphic and sculptural works, architectural works, works of visual
art, mask works, and any other work that may be the subject matter of copyright
protection; advertising and marketing concepts; information; data; formulas;
designs; models; drawings; computer programs; including all documentation,
related listings, design specifications, and flowcharts, trade secrets, and any
inventions including all processes, machines, manufactures and compositions of
matter, and any other invention that may be the subject of patent protection;
and all statutory protection obtained or obtainable thereon including those in
foreign countries.

          The undersigned hereby assigns to Intel all right, title, and interest
to all Work created by Assignor arising out of or utilized by the Assignor in
the performance of the Agreement, and the ownership of the same shall be vested
solely in Intel.  In respect to copyrights, this assignment shall be effective
for the entire duration of the copyrights and shall include, but not be limited
to all rights to derivative works.  Assignor waives all rights of attribution,
and integrity for specific works created by Assignor under the Agreement in
respect of all marketing, advertising, and commercial uses thereof.

          Assignor represents and warrants that the Work is original; that
neither the Assignor's interest in the Work nor the copyright therein is
encumbered or subject to any undisclosed lien or charge; and that Assignor is
free to make the

                                      -30-
<PAGE>

present assignment and has no legal obligation or prior commitment which is
inconsistent with this Agreement.

ASSIGNOR

Signature:  Not Applicable
          ------------------------

Printed Name:_____________________

Date:_____________________________

                                      -31-
<PAGE>

                                  ADDENDUM G

                              SOURCE CODE ESCROW

                                  PLEASE SEE
                           SOURCE CODE ESCROW UNDER
                            SUPPLEMENTAL PROVISIONS
                                 IN ADDENDUM H

                                      -32-
<PAGE>

                                  ADDENDUM H

                            SUPPLEMENTAL PROVISIONS

                 ADDENDUM TO PURCHASE AGREEMENT--SOFTWARE AND
               RELATED SERVICES--BETWEEN INTEL CORPORATION AND
                             VERISITY DESIGN, INC.

          This Addendum serves to modify and amend that certain Purchase
Agreement--Software and Related Services (including the General Terms and
Conditions that form a part thereof, the "Agreement") entered into on and as of
the 21st day of June, 1999, by and between Intel Corporation ("Intel" or
"Buyer") and Verisity Design, Inc. ("Verisity" or "Supplier").  This Addendum
shall form a part of the Agreement, and the following provisions will govern and
supersede any conflicting provisions in the Agreement.  Any capitalized term
used herein and not defined herein will have the meaning set forth in the
Agreement.

1)   License Grant:  (Section 3 of the Agreement) Intel Corporation agrees to
     -------------
     modify this section with the following language:

     .    Section 3(B) of this Agreement is replaced to read as follows:
Notwithstanding anything to the contrary in the Agreement, except as provided
Under the caption "Source Code Escrow", Intel will not make any modifications
to, or derivative works or adaptations of, the Software, nor merge the
software into any other program or material and Intel will have no access to,
or rights or license to modify, the Source Code for the Software.  Intel will
not attempt, or allow others under its control to attempt, to obtain or derive
information from or about the Software through disassembly, decompiling,
reverse engineering, or other means.

     .    [*]

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

                                      -33-
<PAGE>

[*]

2)   Pricing:  (Section 4 of the Agreement) Intel Corporation agrees to modify
     -------
     this section with the following language respectively:

     .    For purposes of Section 4(B), [*]

     .    Section 4(C) of the Agreement [*]

3)   Invoicing and Payment:  (Section 5 of the Agreement) Intel Corporation
     ---------------------
     agrees to modify this section with the following language:

     .    [*]

4)   Termination for Convenience:  (Section 6 of the Agreement) Intel
     ---------------------------
     Corporation agrees to modify this section with the following language:

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

                                      -34-
<PAGE>

     .   [*]

5)   Delivery, Purchase Orders, and Scheduling:  (Section 8 of the Agreement)
     -----------------------------------------
     Intel Corporation agrees to modify this section with the following
     language:

     .    Section 8(A) [*]

6)   Inspection, Acceptance And Warranty:  (Section 9 of the Agreement) Intel
     -----------------------------------
     Corporation agrees to modify this section with the following language
     respectively:

     .    Section 9(B) subparagraph (vi) of the Agreement is modified to read as
     follows: ...Supplier shall guarantee workmanship for [*] after services are
     provided.

     .    Section 9 of the Agreement is modified and complemented as follows:
     ...The warranty periods applicable to Sections 9(B)(ii), 9(C), 9(D) shall
     be [*] and 9(E) shall be [*] from the delivery date of the Software, and
     Intel's remedies for a breach of such warranties shall be as set forth in
     Addendum B, and (2) as a condition to the availability of such remedies,
     and as a condition to Buyer's rights under Section 9(C), Intel shall be
     current in its payments to Supplier for Support and Maintenance as set
     forth in Addendum A. In addition, the first sentence of Section 9(E) shall
     end after the words "or defective workmanship" (with the clause "and shall
     pay ...of the foregoing warranties" being deleted).

7)   Intellectual Property Indemnification:  (Section 11 of the Agreement) Intel
     -------------------------------------
     Corporation agrees to modify this section with the following language:

     .    ...If a third party's claim endangers or disrupts Intel's use of the
     Software, Supplier shall, at Intel's option within reason and at no charge
     to Intel, (a) obtain a license so Intel may continue use of the Software;
     (b) modify the Software to avoid the infringement; (c) replace the Software
     with a compatible, functionally equivalent and non-infringing product; or
     if these options are commercially unreasonable (d) refund to Intel [*] the
     amount paid for [*], whereupon Buyer shall immediately cease all further
     use of the Software and provide written confirmation to Supplier that
     Software is not being used.

[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
                                      -35-
<PAGE>

8)   Indemnification:  (Section 14 of the Agreement) Intel Corporation agrees to
     ---------------
     modify this section with the following language:

     .    [*]
9)   Assignment:  (Section 19 of the Agreement) Intel Corporation agrees to
     ----------
     modify this section with the following language:

     .    Section 19 will be modified to indicate that the written consent of
          Buyer to Supplier shall not be unreasonably withheld.

10)  Applicable Law:  (Section 20 of the Agreement) Intel Corporation agrees to
     --------------
     modify this section with the following language:

     .    Notwithstanding Section 20 of the Agreement, California law (including
          the California commercial code, as applicable) shall govern the rights
          and duties of the parties to this Agreement.

11)  Right to Develop:  (Section 23 of the Agreement) Intel Corporation agrees
     ----------------
     to modify this section with the following language:

     .    For purposes of this Agreement, the term "Developments" does not
          include the Software (including its underlying source code) or any
          derivatives or improvements thereof, [*]. Section 23 shall be modified
          to read: "Intel reserves the right to develop, market, distribute, and
          otherwise commercially exploit software and/or firmware products of
          any type whatsoever, except with respect to Supplier's patents,
          copyrights, trade secrets or other intellectual property, including
          without limitation...."

[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
                                     -36-
<PAGE>

12)  Survivability:  (Section 26 of the Agreement) Intel Corporation agrees to
     -------------
     modify this section with the following language:

     .    Notwithstanding anything in Section 26 to the contrary, Section 3(a),
          9 (other than Sections 9(B)(I) and (iii)) and 19 will not survive the
          termination or expiration of this Agreement.

13)  Limitation on Liability:  (Section 27 shall be created as a new section of
     -----------------------
     the Agreement) Intel Corporation agrees to add this section to the contract
     as follows:

     .  In no event will Supplier be liable to Intel for consequential damages
        (including loss of revenues and profits), [*]

14)  Support and Maintenance Service:  (Addendum B of the Agreement) Intel
     -------------------------------
     Corporation agrees to modify this addendum with the following language
     respectively:

     .  Qualified telephone support pursuant to Section 2(C) of Addendum B shall
        [*] be available [*] (except recognized holidays). The "Required
        Response" for "Critical" Priority Level pursuant to Section 2(D) of
        Addendum B shall be modified to read: "Supplier shall respond within
        [*] during its normal business hours and use its [*], within [*], to
        provide a correction to the error within [*] from receipt of notice";
        and for "Urgent Priority Level shall be modified to read: "Supplier
        shall respond within [*] during its normal business hours and use its
        [*], within [*], to provide a correction to the error within [*] from
        receipt of notice." [*]

[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMMITTED PORTION.

                                      -37-
<PAGE>

          Source Code Escrow: [*]

          The parties have executed this Addendum as of the 21 day of June 1999.

INTEL CORPORATION                           VERISITY DESIGN, INC.

/s/ Victor Narvaez                          /s/ Charles Alvarez
-----------------------------               ------------------------------------
By:  Victor Hugo Narvaez                    By:  Charlie Alvarez
Its: Senior IT Buyer--Intel                 Its: Chief Financial Officer--
     Corporation                                 Verisity Design Inc.

[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMMITTED PORTION.

                                      -38-

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