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                                                                   EXHIBIT 10.24

                              SOFTWARE PRODUCTION

                                      AND

                            DISTRIBUTION AGREEMENT

                                    BETWEEN

                                  KLA TENCOR

                                      AND

                      NUMERICAL TECHNOLOGIES, INC. (NTI)

                                JANUARY 9, 1998

                                       1

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

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

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                SOFTWARE PRODUCTION AND DISTRIBUTION AGREEMENT

     This Software Production and Distribution Agreement (this "AGREEMENT"),
effective as of January 9, 1998 (the "EFFECTIVE DATE"), is entered into by and
between Numerical Technologies, Inc., a California corporation with its primary
place of business at 333 West Maude Avenue, Suite 207, Sunnyvale, California
94086 ("NTI"), and KLA-Tencor Corporation, a Delaware corporation with its
primary place of business at 160 Rio Robles, San Jose, California 95134 ("KLA-
TENCOR").

                                   RECITALS

     A.   KLA-Tencor, among other things, develops and sells hardware used to
perform quality inspection and analysis of photomasks used in the manufacture of
integrated circuits.

     B.   NTI, among other things, develops, markets, and distributes software
tools for manipulating integrated circuit designs for application in the
production of semiconductors, including certain software designed for reticle
defect analysis.

     C.   KLA-Tencor desires to have NTI produce certain software tools
(based, in part, on certain of NTI's proprietary software tools and libraries)
for use in connection with KLA-Tencor's photomask quality inspection and
analysis hardware, and to have NTI grant KLA the right to market and distribute
such software tools for use in connection with KLA-Tencor's quality inspection
and analysis hardware.

     D.   KLA-Tencor also desires to distribute one or more of NTI's existing
software tools.

     E.   NTI desires to produce such tools and grant to KLA-Tencor such
distribution rights, all in accordance with the terms and conditions of this
Agreement.

                                   AGREEMENT

     NOW, THEREFORE, in consideration for the mutual covenants contained
herein, the parties agree as follows:

1.   DEFINITIONS

     1.1  "VIRTUAL STEPPER" means NTI's existing software tool marketed under
the name "Virtual Stepper" or "TINT" used for simulation of photolithography,
and accompanying documentation.

     1.2  "RAPID VIRTUAL STEPPER" means the version of the Virtual Stepper
adapted under this Agreement to execute in conjunction with KLA Tencor reticle
equipment.

     1.3  "VIRTUAL STEPPER LIBRARIES" mean the software and existing
intellectual property underlying NTI's Virtual Stepper software.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       2
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     1.4  "VIRTUAL STEPPER MODULES" or "MODULES" mean the software to be
produced under this Agreement based on the Virtual Stepper Libraries that
includes a printable coefficient module (the "PRINT MODULE"), a two dimensional
image module (the "2-D IMAGE MODULE"), and a process window module (the "WINDOW
MODULE"). Modules include all error corrections and Upgrades thereto provided by
NTI in accordance with the terms of this Agreement.

     1.5  "PRODUCT(S)" means the RAPID Virtual Stepper and the Modules,
individually or collectively.

     1.6  "DEVELOPMENT SCHEDULE" means the schedule according to which NTI
shall adapt the Virtual Stepper and the Modules, to be attached as EXHIBIT A
hereto. Such schedule may be amended from time to time upon written agreement of
the parties.

     1.7  "END USER" means a direct or indirect customer of KLA-Tencor that
is authorized to use the Products for the End User's internal business purposes
in accordance with the terms of Section 4.4(a).

     1.8  "FEASIBILITY STUDY" means a review and assessment of the technical
requirements for the production of the Products to be undertaken jointly by KLA
Tencor and NTI, set forth in writing and attached thereafter as EXHIBIT A
hereto.

     1.9  "INTELLECTUAL PROPERTY RIGHTS" means patent rights (including
patent applications and disclosures), rights of priority, mask work rights,
copyrights, trade secrets, know-how and any other intellectual property rights
recognized in any country or jurisdiction in the world.

     1.10 "KLA-TENCOR DATA" means the data that KLA-Tencor will make available
to NTI to enable NTI to produce and test the Products, in accordance with the
terms of this Agreement, and any other data as KLA-Tencor may provide from time
to time hereunder.

     1.11 "KLA-TENCOR MATERIALS" means, collectively, a market requirements
document, the KLA-Tencor Data and any other Intellectual Property Rights
developed by KLA-Tencor in the course of performing under this Agreement as
listed in EXHIBIT F.

     1.12 "NUMERICAL MATERIALS" means the software, libraries, data, and any
other Intellectual Property Rights developed by NTI in the course of performing
under this Agreement and other materials as listed in EXHIBIT G.

     1.13 "SPECIFICATIONS" means the functional specifications and performance
requirements for the Products, respectively, to be agreed upon by the parties
and attached thereafter as EXHIBIT C hereto. The parties may amend EXHIBIT C
from time to time upon written agreement in accordance with the terms and
conditions of Section 2.1(c).

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       3

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     1.14 "SUB-DISTRIBUTOR" means a company that is authorized to market,
distribute and sub-license the Products to End Users or other Sub-distributors
in accordance with the terms of Section 4.4(b).

     1.15 "UPGRADES" means separately-priced enhancements to the Products
produced by NTI under this Agreement. "Upgrades" includes without limitation any
enhancements produced by NTI under this Agreement pursuant to Section 1(c) of
EXHIBIT E to correct Severity Level 3, Severity Level 4, and Severity Level 5
errors in the Products.

2.   DEVELOPMENT AND ACCEPTANCE.

     2.1  FEASIBILITY STUDY AND SPECIFICATIONS.

          (a)  KLA Tencor will provide a Feasibility Study plan to NTI, and NTI
and KLA Tencor will diligently conduct the Feasibility Study in accordance with
the Development Schedule. Within ten (10) business days following the conclusion
of the Feasibility Study, the parties will discuss in good faith whether to
proceed with development of the Specifications or terminate the Agreement.
Either party may terminate this Agreement at the conclusion of the Feasibility
Study upon written notice to the other party. Termination of this Agreement by
the parties in accordance with the terms of this subsection (a) will, in no
event, be deemed a termination for cause or material breach. Upon termination of
this Agreement by either party at the end of the Feasibility Study, NTI will
refund all product fees prepaid by KLA Tencor, less 20% of such pre-paid fees
for each month (or part thereof) which has passed since February 28, 1998.

          (b)  If the parties decide to have NTI proceed with development of the
Specifications, NTI will use its diligent efforts to develop the Specifications
for the Products. NTI will deliver the Specifications to KLA-Tencor in
accordance with the Development Schedule. Within ten (10) business days
following such delivery, KLA-Tencor will provide NTI with a written notice of
approval of the Specifications or a written statement that specifically
identifies any material deficiencies in the Specifications (a "STATEMENT OF
DEFICIENCIES"). If KLA-Tencor provides NTI with a Statement of Deficiencies, NTI
will revise the Specifications thirty (30) days and re-deliver the
Specifications to KLA-Tencor for review. The foregoing procedure will repeat
until KLA-Tencor provides NTI with a written notice of approval of the
Specifications or the process has been repeated two (2) times. In that case,
either both parties can mutually agree to extend the number of iterations beyond
two (2), or KLA Tencor will be entitled to terminate this Agreement in
accordance with section 15.2. If KLA-Tencor fails to provide NTI with a written
notice of approval of the Specifications or a Statement of Deficiencies within
thirty (30) days of any delivery or re-delivery of the Specifications to KLA-
Tencor hereunder, then the Specifications will be deemed accepted by KLA-Tencor.

          (c)  If KLA-Tencor desires to materially modify the Specifications
(after approval thereof under Section 2.1(b) above, KLA-Tencor will present to
NTI a written request describing such modification in reasonable detail (a
"CHANGE ORDER"). KLA-Tencor expressly acknowledges and agrees that NTI's
performance of such Change Orders may result in increased costs and/or delays in
the

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       4

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Development Schedule. NTI will promptly determine, in NTI's reasonable
discretion, whether such Change Order can be accomplished, and within thirty
(30) days of receipt thereof, will provide KLA-Tencor with a written statement
that describes the impact of the Change Order on NTI's development efforts
hereunder, including without limitation any additional compensation and changes
to the Development Schedule. If, after receipt of such written statement from
NTI, KLA-Tencor desires NTI to perform such Change Order, then KLA-Tencor will
provide NTI with written confirmation thereof, and the Specifications,
Development Schedule and payment terms, as applicable, will be deemed amended by
the terms and conditions of such Change Order.

     2.2  PRODUCT DEVELOPMENT. Following acceptance of the Specifications by
KLA-Tencor in accordance with Section 2.1, NTI will produce the Products in
accordance with the Specifications, and will deliver both a prototype version
and the final, completed version of each of the Products (each a "DELIVERABLE")
to KLA-Tencor in accordance with the Development Schedule.

     2.3  TECHNICAL CONTACTS. KLA-Tencor and NTI will each designate primary
and alternate technical contacts (collectively, the "TECHNICAL CONTACTS") as the
primary individuals responsible for facilitating communication between
KLA-Tencor and NTI regarding all technical matters and for coordinating the
design, production, and testing of the Products. Each party may change its
respective Technical Contact at any time by providing the other party with no
less than five (5) days' advance notice.

     2.4  ASSISTANCE BY KLA-TENCOR. KLA-Tencor will provide the KLA-Tencor
Materials to NTI in accordance with the Development Schedule. In addition,
KLA-Tencor agrees to provide such technical cooperation and assistance as NTI
may reasonably require to produce the Products and to make the Products
compatible with other KLA-Tencor products.

     2.5  ACCEPTANCE PROCEDURE. NTI will promptly deliver each Deliverable to
KLA-Tencor as soon as it is completed and ready for acceptance testing in
accordance with this Section. Following each such delivery, KLA-Tencor will test
such Deliverable to ensure that the Deliverable conforms in all material
respects with the applicable portion of the Specifications.

Within twenty (20) days after delivery of each such Deliverable, KLA-Tencor will
provide NTI with a written notice of acceptance of the Deliverable or a written
statement that specifically identifies any material failure of the Deliverable
to comply with the relevant portion of the Specifications (a "STATEMENT OF
ERRORS"). If KLA-Tencor provides NTI with a Statement of Errors, NTI must
correct such deficiencies so that the Deliverable will conform to the relevant
portion of the Specifications within thirty (30) days and redeliver such
Deliverable to KLA-Tencor for re-testing.

The foregoing procedure may be repeated until KLA-Tencor provides NTI with a
written notice of acceptance of the Deliverables or the process has been
repeated two (2) times. In that case, either both parties can either mutually
agree to extend the number of iterations beyond two (2), or KLA Tencor will have
the right to terminate all or any portion of this Agreement pursuant to section
15.2.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       5
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     2.6  ADDITIONAL AND FUTURE DEVELOPMENT WORK. Any additional or future
development work proposed by KLA-Tencor or KLA-Tencor customers to be performed
by NTI, and not required by this Agreement, shall be separately negotiated and
subject to the mutual agreement of the parties on the terms under which such
work will be performed.

3.   INTERNAL USE LICENSE GRANT BY NTI FOR OTHER NUMERICAL TECHNOLOGIES TOOLS.

     Subject to the terms and conditions of this Agreement, NTI grants to
KLA-Tencor in accordance with the terms and conditions of NTI's standard
software license agreement, attached hereto as EXHIBIT I (the "NTI SOFTWARE
LICENSE AGREEMENT"), a single user license for the Virtual Stepper. KLA-Tencor
agrees to pay NTI a license fee of [***] within thirty (30) days of the
Effective Date in consideration for (i) the licenses granted under this
Section 3; (ii) training to be provided by NTI to KLA-Tencor personnel
pursuant Section 12.1(a); and (iii) one (1) year of NTI's standard maintenance
and support for the Virtual Stepper. Any standard maintenance and support for
the Virtual Stepper provided by NTI to KLA-Tencor after such one (1) year
period will be provided at NTI's then-current rates.

4.   LICENSE GRANTS AND COVENANTS BY NTI.

     4.1  RAPID VIRTUAL STEPPER DISTRIBUTION LICENSE. Subject to the terms
and conditions of this Agreement (including without limitation Section 4.4(a)),
NTI hereby grants to KLA-Tencor a perpetual, worldwide, nonexclusive,
nontransferable, irrevocable license to market, distribute and sublicense (both
directly and through Sub-distributors) the RAPID Virtual Stepper, in object code
form, solely to End Users who are customers of KLA-Tencor. In no event may
KLA-Tencor market or distribute the RAPID Virtual Stepper to any company or
other entity that is not a customer of KLA-Tencor products.

     4.2  INTERNAL USE AND DISTRIBUTION LICENSE FOR THE MODULES.

          (a)  Subject to the terms and conditions of this Agreement (including
without limitation Section 4.4(b)), NTI hereby grants to KLA-Tencor a
nontransferable, perpetual, worldwide, irrevocable license under all
Intellectual Property Rights in the Modules: (i) to market, distribute, and
sublicense (directly and through Sub-distributors) the Products, in object code
form, to End Users; provided, that KLA-Tencor may only market, distribute and
sublicense the Products bundled with or for use in connection with other KLA-
Tencor products; (ii) to perform and display the Products in connection with
marketing and demonstrating the Products to current and prospective End Users
and (iii) to provide installation support to End Users; and (iv) to copy the
Products as necessary to exercise the rights set forth in the foregoing clauses
(i), (ii), and (iii). KLA Tencor will have the right to prepare authorization
keys that allow the licensed End Users to use the Products.

     4.3  RESTRICTIONS ON LICENSES. KLA-Tencor has no right to transfer,
sub-license or otherwise distribute the Products to any third party except as
expressly set forth in this Agreement. KLA-Tencor shall not, and shall not allow
any third party to:

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       6

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

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          (a)  decompile, disassemble, reverse engineer or modify any portion of
the Products, except to the extent permitted by law;

          (b)  copy or otherwise reproduce the Products except for the purpose
of making an archival backup copy or as expressly authorized by this Agreement;
and

          (c)  use the Products to provide service bureau, time sharing, or
other computer services to third parties.

     4.4  AGREEMENT WITH END USERS.

          (a)  KLA-Tencor will not distribute the RAPID Virtual Stepper to any
End User unless and until each such End User has first executed a written end
user software license agreement with NTI that: (i) contains the terms and
conditions set forth in EXHIBIT J (the "RAPID VIRTUAL STEPPER TERMS"); (ii)
makes no representations or warranties on behalf of NTI; and (iii) does not
grant any rights to such End User beyond the scope of the RAPID Virtual Stepper
Terms. Any material changes to the RAPID Virtual Stepper Terms requires NTI's
prior written approval.

          (b)  KLA-Tencor will not distribute the Products to End Users unless
and until each such End User is subject to the terms and conditions of a
supplemental license agreement in addition to KLA Tencor's normal Terms and
Conditions. This agreement will contain terms which comply with those set forth
in EXHIBIT K (the "MODULE TERMS").

          (c)  KLA-Tencor may not distribute the Products to any Sub-distributor
unless each such Sub-distributor has executed a written sub-distributor license
agreement with KLA-Tencor that: (i) protects NTI and its proprietary rights in
the Products to at least the same degree as the terms and conditions of this
Agreement; (ii) makes no representations or warranties on behalf of NTI; and
(iii) does not permit distribution of the Products beyond the scope of this
Agreement (including without limitation an express prohibition on distribution
of the Products except bundled with or for use in connection with other KLA-
Tencor products.

     4.5  SOURCE CODE ESCROW. NTI agrees, at KLA-Tencor's expense, to enter into
an escrow agreement ("ESCROW AGREEMENT") with respect to the source code of the
Products with Data Securities International, Inc., in the form set forth in
EXHIBIT L hereto within sixty (60) days of signing this Agreement. NTI will
deposit into escrow copies of the source code for the Products, respectively,
within thirty (30) days of receipt of payment for each such Product. The parties
agree that the conditions for release of such source code shall be solely as set
forth in the Escrow Agreement. From time to time, NTI will also deposit into the
escrow account the source code for any error corrections and Upgrades thereto,
if any, provided by NTI to KLA-Tencor pursuant to this Agreement. At KLA-
Tencor's request and sole expense, NTI will also deposit into the escrow account
the information and materials specified in EXHIBIT L. (The parties may amend
EXHIBIT L from time to time by written agreement.) In any case, a breach of the
contract by KLA Tencor will not be a release condition under the Escrow
Agreement.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       7
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     4.6  NUMERICAL TECHNOLOGIES COVENANT. Numerical Technologies agrees that
it will not use or disclose the Feasibility Study and Products (exclusive of the
Numerical Materials) except for the benefit of KLA Tencor.

     4.7  RESERVATION BY NUMERICAL TECHNOLOGIES. KLA Tencor has no rights in
the Numerical Materials except as set forth herein. NTI and its suppliers
reserve all rights in the Numerical Materials not expressly granted to KLA
Tencor in this Agreement.

5.   TRADEMARK LICENSE GRANT BY NTI.

     Subject to the terms and conditions of this Agreement, NTI grants KLA-
Tencor a worldwide, non-exclusive, non-transferable royalty-free license for the
term of this Agreement to use NTI's applicable trademarks, service marks, and
logos identified in EXHIBIT H (the "MARKS") solely in connection with KLA-
Tencor's marketing of the Products. (The parties may amend EXHIBIT H from time
to time by written agreement.) Nothing in this Agreement grants KLA-Tencor any
ownership or any rights in or to use the Marks except in accordance with this
license, and all goodwill or value inuring to the Marks shall belong exclusively
to NTI. KLA-Tencor will comply with NTI's guidelines regarding use and placement
of such Marks. The rights granted to KLA-Tencor in this license will terminate
upon any termination of this Agreement. Upon such termination, KLA-Tencor will
no longer make any use of any Marks. NTI will have the exclusive right to own,
use, hold, apply for registration for, and register the Marks during the term
of, and after the termination of, this Agreement. KLA-Tencor will neither take
nor authorize any activity inconsistent with such exclusive rights.

6.   KLA-TENCOR MATERIALS LICENSE.

     6.1  LICENSE GRANT. Subject to the terms and conditions of this Agreement,
KLA-Tencor hereby grants to NTI a nonexclusive, nontransferable, limited license
under all of KLA-Tencor's Intellectual Property Rights in the KLA-Tencor
Materials to use, copy, modify and make derivative works based on the KLA-Tencor
Materials solely for the purpose of producing the Products and for developing
any other products, programs or technology hereunder, as mutually agreed in
writing by the parties, in the form of an amendment to this Agreement executed
by duly authorized representatives of each party. NTI will not use the KLA-
Tencor Materials for any purpose, except in accordance with the license rights
set forth in section 6.1.

     6.2  RESERVATION BY KLA-TENCOR. NTI has no rights in the KLA-Tencor
Materials except as set forth herein. KLA-Tencor and its suppliers reserve all
rights in the KLA-Tencor Materials not expressly granted to NTI herein.

7.   PRODUCT CONFIGURATION.

     7.1  BUNDLING OPTIONS. The parties acknowledge that the Modules which are
produced in the course of this Agreement may be deemed by KLA Tencor to have a
variety of packaging configurations, and KLA Tencor retains complete freedom to
configure the Modules in any product offering or

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       8
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configuration it sees fit. Notwithstanding the foregoing, KLA Tencor
acknowledges that in any configuration it selects to use the Modules, NTI's name
and marks will be made available and obvious to the End User if the Module is
used.

8.   PROPRIETARY MARKING AND OWNERSHIP.

     8.1  NTI OWNERSHIP. As between KLA-Tencor and NTI, subject to the rights
granted in this Agreement, NTI will own all worldwide right, title and interest
in and to the Numerical Materials, and all worldwide Intellectual Property
Rights therein.

     8.2  NTI PROPRIETARY RIGHTS LEGENDS. KLA-Tencor will not delete or alter in
any manner the Intellectual Property Rights legends of NTI and its suppliers
appearing in the Products and any accompanying documentation, and will reproduce
such legends in all copies of KLA-Tencor may make of the Products.

     8.3  KLA-TENCOR OWNERSHIP. As between NTI and KLA-Tencor, KLA-Tencor will
own all worldwide right, title and interest in and to the KLA-Tencor Materials,
and the Specifications (subject to NTI's underlying rights and ownership of the
Numerical Materials), and all worldwide Intellectual Property Rights therein.

     8.4  JOINT OWNERSHIP. As between NTI and KLA-Tencor, KLA-Tencor and
Numerical Technologies will jointly own all worldwide right, title and interest
in and to the Feasibility Study and the Products (subject to NTI's underlying
rights and ownership of the Numerical Materials and KLA Tencor's underlying
rights and ownership of the KLA Tencor Materials).

9.   ORDER AND DELIVERY OF PRODUCTS.

     9.1  ORDERS. KLA Tencor is not obligated to order any additional quantity
of the Products from NTI unless the final, complete version has been accepted,
pursuant to section 2.5. KLA-Tencor's acceptance of the RAPID Virtual Stepper
pursuant to Section 2.5 shall be deemed an order for [***] licenses for the
RAPID Virtual Stepper. NTI will ship to KLA-Tencor copies of RAPID Virtual
Stepper in accordance with delivery schedules specified in any purchase order
in compliance with this Agreement received by NTI. Any terms and conditions of
any such purchase order which are in addition to or inconsistent with the
terms and conditions of this Agreement will be deemed stricken from such
purchase order. KLA Tencor will order licenses for the Products from NTI by
purchase order and pay royalties as described in EXHIBIT D within thirty (30)
days of delivery of the license(s) in advance of sale to customers until
December 31, 1998. After that time, payments to NTI will be in arrears, as
described in section 10.4 below.

     9.2  SHIPMENT. For any copies of the Products that NTI ships to KLA-Tencor
hereunder, NTI will ship such copies F.O.B. NTI's site, and risk of loss or
damage will pass to KLA-Tencor on delivery of such copies to KLA Tencor. All
master copies of Deliverables shall be delivered to KLA Tencor electronically.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                       9

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

<PAGE>

10.  PAYMENTS.

     10.1 PRICING FREEDOM. KLA-Tencor is, and will remain, entirely free to set
its own End User and Sub-distributor prices.

     10.2 PRODUCT FEES. For delivery of master copy of the Virtual Stepper and
the Products, KLA-Tencor shall pay NTI [***] in fees as follows:

          (a) [***] for an internal use license of the Virtual Stepper,
pursuant to section 3;

          (b) [***] for a master copy of the prototype of the RAPID Virtual
Stepper, payable within thirty (30) days of KLA Tencor's acceptance pursuant
to section 2.5;

          (c) [***] for a master copy of the prototype of the three Modules,
with ten (10) licenses for each for internal use only, payable within thirty
(30) days of KLA-Tencor's acceptance of all the Modules pursuant to Section
2.5.

     10.3 REFUNDS. All of the payments described in section 10.3(b) and 10.3(c)
above are fully refundable and will be refunded by NTI if the agreement is
terminated at the end of the Feasibility Study, pursuant to section 2.1 (a).

     10.4 ROYALTIES. KLA Tencor will agree to pay to NTI the royalties specified
in Exhibit D for each copy of the Products distributed to an End User pursuant
to section 4.2 of this Agreement. Royalties will be payable, in arrears, within
thirty (30) days following the close of each calendar quarter for all such
distributions to End Users made within the immediately proceeding quarter. Each
royalty will be accompanied by a written report detailing the number of copies
distributed and the amount of royalties owed, both for the immediately
proceeding quarter and in the aggregate from the Effective Date.

     10.5 TAXES. KLA-Tencor shall be responsible for and shall pay all sales,
use, and other taxes and fees, duties and tariffs imposed on or in connection
with KLA-Tencor's use and distribution of the Products, other than taxes based
on NTI's net income.

     10.6 RIGHT TO AUDIT. NTI will have the right to have an independent
certified public accountant, acceptable to KLA Tencor, inspect the books and
records of KLA Tencor on which the reports furnished to NTI under section 10.3
have been based. All such audits will be conducted during normal business hours,
and no more frequently than once every six (6) months, and no more than one (1)
time for any given quarter. If as the result of such an audit it is determined
that KLA Tencor has underpaid NTI by more than eight (8) percent of the current
amount owed to NTI for the period audited, KLA Tencor will reimburse NTI for all
reasonable costs of the audit and will make all required payments within thirty
(30) days of notice of underpayment from NTI.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      10

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

<PAGE>

11.  REPRESENTATIONS AND WARRANTIES

     11.1 WARRANTY OF RIGHTS BY NTI. NTI represents and warrants that:

          (a)  NTI has sufficient rights to grant to KLA-Tencor the rights set
forth in this Agreement; and

          (b)  NTI has full power to enter into this Agreement, to carry out its
obligations hereunder, and to grant the rights herein granted to KLA-Tencor.

     11.2 LIMITED MEDIA WARRANTY BY NTI. As to any copy of Products that NTI
delivers to KLA-Tencor hereunder, NTI warrants that during the ninety (90) days
following delivery thereof to KLA-Tencor, the storage media containing Products,
as applicable, will be free of defects in materials and workmanship. As
KLA-Tencor's sole and exclusive remedy for any breach of this limited warranty,
NTI will, at its option and without charge to NTI, repair or replace the
defective storage media, provided that the nonconforming item is returned to NTI
within the 90-day warranty period.

     11.3 WARRANTY OF RIGHTS BY KLA-TENCOR. KLA-Tencor represents and warrants
that:

          (a)  KLA-Tencor has sufficient rights to grant to NTI the rights set
forth in this Agreement; and

          (b)  KLA-Tencor has full power to enter into this Agreement, to carry
out its obligations hereunder, and to grant the rights herein granted to NTI.

     11.4 NO OTHER WARRANTIES. EXCEPT FOR NTI'S OBLIGATIONS LISTED UNDER EXHIBIT
E, THE WARRANTIES SET FORTH IN THIS SECTION 11 ARE THE SOLE AND EXCLUSIVE
WARRANTIES MADE BY EACH PARTY HEREUNDER AND EACH PARTY HEREBY DISCLAIMS ALL
OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

12.  TRAINING, MAINTENANCE, AND TECHNICAL SUPPORT.

     12.1 TRAINING AND MARKETING SUPPORT.

          (a)  NTI will provide, at no additional charge, eighty (80) person-
hours of training on the Virtual Stepper to KLA-Tencor personnel at a NTI or
KLA-Tencor facility in or near the San Jose area. Any additional training with
respect to the Virtual Stepper for KLA-Tencor personnel will be provided at a
facility as may be agreed in writing by the parties, in accordance with NTI's
then current standard training terms and conditions and subject to payment by
KLA-Tencor of the prices specified in Section 5 of EXHIBIT E. (The parties may
amend EXHIBIT E from time to time by written agreement.)

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      11
<PAGE>

          (b)  During the term of this Agreement, NTI will provide, at no
additional charge, a one-half or full-day (as mutually agreed by the parties)
product marketing presentation per calendar quarter to KLA-Tencor personnel with
respect to the Products. NTI will also provide reasonable support to KLA-
Tencor's marketing efforts for the Products by making available, at no
additional charge, one (1) individual from NTI's research and development group
for a total of two (2) business weeks every six (6) months for KLA-Tencor's
promotional "roadshows" and/or on-site beta test support.

     12.2 TECHNICAL SUPPORT. All technical support and maintenance for the
Products will be provided according to the terms and conditions set forth in
EXHIBIT E attached hereto.

13.  INDEMNIFICATION

     13.1 INDEMNIFICATION BY NTI.

          (a)  Subject to the conditions set forth in Section 13.3 below, NTI
will defend KLA-Tencor from and against any suit or proceeding brought against
KLA-Tencor to the extent that it is based on a claim that the Products
(exclusive of any KLA-Tencor Materials incorporated therein) (the "NTI
INDEMNIFIED TECHNOLOGY") infringes any or copyright or misappropriates the trade
secrets or any other intellectual property right of any third party, and will
indemnify and hold harmless KLA-Tencor from any damages, costs and expenses
(including but not limited to reasonable attorneys' fees), awarded in any such
suit or proceeding or paid in settlement; provided, that NTI will not enter into
any settlement that involves a remedy other than the payment of money, without
KLA-Tencor's prior written consent, which consent shall not be unreasonably
withheld; provided, further, that NTI shall have no obligation under this
Section 13.1(a) with respect to any claim of infringement or misappropriation
based upon: (i) the combination of the NTI Indemnified Technology with products,
programs or data not furnished by NTI, if such claim would have been avoided by
use of the NTI Indemnified Technology alone; (ii) any modification of the
Products not performed by NTI, if such claim would have been avoided by use of
the unmodified NTI Indemnified Technology; (iii) compliance by NTI with KLA-
Tencor requirements or specifications; or (iv) failure of KLA-Tencor to use
replacement NTI Indemnified Technology provided by NTI to KLA-Tencor to avoid
such claim of infringement or misappropriation. (The foregoing clauses (i) to
(iv) are collectively referred to hereafter as the "KLA-TENCOR-GENERATED
CLAIMS.")

          (b)  If the exercise by KLA-Tencor of any of its rights in the NTI
Indemnified Technology is enjoined as a result of a claim of infringement or
misappropriation of the type specified in Section 13.1(a) or, in the opinion of
NTI, is likely to be so enjoined, NTI at its option and expense will: (i)
procure for KLA-Tencor the right to continue to exercise all rights granted
under this Agreement with respect to the NTI Indemnified Technology; (ii) modify
the affected portion of the NTI Indemnified Technology to avoid the claim of
infringement or misappropriation, without materially altering the conformance of
the NTI Indemnified Technology with the Specifications or (iii) if neither (i)
nor (ii) can be accomplished despite NTI's reasonable efforts, NTI may terminate
this Agreement and KLA-Tencor's rights and NTI's obligations hereunder with
respect to the affected portion of the NTI Indemnified Technology, and refund to
KLA-Tencor the applicable fees paid for the NTI Indemnified

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      12
<PAGE>

Technology, amortized over a seven (7) year period commencing as of the date of
acceptance by KLA-Tencor of the Products pursuant to Section 2.5.

          (c)  THE PROVISIONS OF THIS SECTION 13.1 SET FORTH NTI'S SOLE AND
EXCLUSIVE OBLIGATIONS AND KLA-TENCOR'S SOLE AND EXCLUSIVE REMEDIES WITH RESPECT
TO INFRINGEMENT OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY RIGHTS OF ANY KIND.

     13.2 INDEMNIFICATION BY KLA-TENCOR. Subject to the conditions set forth in
Section 13.3 below:

          (a)  KLA-Tencor will defend NTI from and against any suit or
proceeding brought against NTI: (i) to the extent that it is based on a claim
that the KLA-Tencor Materials infringe any patent or copyright or
misappropriates the trade secrets or any intellectual property right of any
third party; (ii) to the extent that it is based on a KLA-Tencor-Generated
Claim; or (iii) arising out of any actions or omissions of KLA-Tencor in
connection with the distribution of the Products under this Agreement; and

          (b)  KLA Tencor will indemnify and hold harmless NTI from any damages,
costs and expenses (including but not limited to reasonable attorneys' fees),
awarded in any suit or proceeding as specified in subsection (a) above or paid
in final settlement; provided, that KLA-Tencor will not enter into any
settlement that involves a remedy other than the payment of money, without NTI's
prior written consent, which consent shall not be unreasonably withheld.

          (c)  KLA-Tencor shall have no obligation under this Section 13.2: (i)
for any action for which NTI is required to indemnify KLA-Tencor under Section
13.1; (ii) for any modification of the KLA-Tencor Materials (exclusive of any
modifications made by NTI pursuant to Section 2.2) not made by or at the written
request of KLA-Tencor, if such claim would have been avoided by use of the
unmodified KLA-Tencor Materials or (iii) failure of NTI to use replacement KLA-
Tencor Materials provided by KLA-Tencor to NTI to avoid a claim of infringement
or misappropriation.

          (d)  THE PROVISIONS OF THIS SECTION 13.1 SET FORTH KLA TENCOR'S SOLE
AND EXCLUSIVE OBLIGATIONS AND NTI'S SOLE AND EXCLUSIVE REMEDIES WITH RESPECT TO
INFRINGEMENT OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY RIGHTS OF ANY KIND.

     13.3 INDEMNITY CONDITIONS. A party requested to indemnify the other under
this Section 13 ("INDEMNITOR") shall have no obligation to so indemnify the
party seeking indemnity ("INDEMNITEE") unless Indemnitee: (i) provides
Indemnitor with prompt written notification of the claim; (ii) provides
Indemnitor with all reasonable information and assistance, at Indemnitor's
expense, to defend or settle such a claim; and (iii) grants Indemnitor authority
and sole control of the defense or settlement of such claim. Indemnitee reserves
the right to retain counsel, at Indemnitee's expense, to participate in the
defense and settlement of any such claim.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      13
<PAGE>

14.  CONFIDENTIALITY

     14.1 CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means: (i) the
source code and the documentation for the Products, the Feasibility Study and
the Specifications; (ii) the KLA-Tencor Data and the KLA-Tencor Materials; (iii)
the Numerical Materials, (iv) any business or technical information of NTI or
KLA-Tencor that is designated by the disclosing party as "confidential" or
"proprietary" at the time of disclosure or, if orally disclosed, is identified
as "confidential" or "proprietary" at the time of disclosure and reduced to
writing by the disclosing party within thirty (30) days of such disclosure; (v)
notwithstanding clause (iv) above, any information of NTI or KLA-Tencor
regarding a party's respective business plans, financial information, personnel
data, or customer data; and (vi) the specific terms and conditions of this
Agreement.

     14.2 EXCLUSIONS. Confidential Information shall not include information
that: (i) is or becomes generally known or available by publication, commercial
use or otherwise through no fault of the receiving party; (ii) is known to the
receiving party at the time of disclosure without violation of any
confidentiality restriction and without any restriction on the receiving party's
further use or disclosure; (iii) is independently developed by the receiving
party; or (iv) is permitted for release or disclosure to any third party by the
written prior consent of disclosing party.

     14.3 USE AND DISCLOSURE RESTRICTIONS. Each party will refrain from using
the other party's Confidential Information except as permitted herein for a
period ending five (5) years from the date of expiration or termination of this
Agreement. Not withstanding the foregoing, either party may designate longer
periods of confidentiality pertaining to particular disclosures by stating so in
writing at the time of disclosure. Each party will use the same level of care to
prevent disclosure of the other party's Confidential Information that it uses
with its own information of similar sensitivity and importance, but in any event
will not use less than reasonable care to prevent disclosure of the other
party's Confidential Information.

     Without limiting the foregoing, each party will disclose Confidential
Information of the other party only to its employees and consultants with a
"need to know," and only subject to written use and nondisclosure restrictions
at least as protective as those set forth herein which have been executed by
such employees and consultants. In addition, each party will promptly report to
the other party any violation of the restrictions set forth herein of which a
party becomes aware. However, each party may disclose Confidential Information
of the other party: (i) pursuant to the order or requirement of a court,
administrative agency, or other governmental body, provided that the disclosing
party gives reasonable notice to the other party to contest such order or
requirement; and (ii) on a confidential basis to legal or financial advisors.

     14.4 INDEPENDENT DEVELOPMENT. Except as expressly set forth in this
Agreement, nothing in this Agreement will limit either party's right to acquire,
license, develop for itself, or have others develop for it, and offer products
that have the same or similar functionality as the Products at any time;
provided, however, that this provision does not grant to either party any rights
under the other party's Intellectual Property Rights.

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                               NTI CONFIDENTIAL

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<PAGE>

15.  TERM AND TERMINATION

     15.1 TERM. This Agreement shall commence on the Effective Date and shall
continue in full force and effect for two (2) years after the date of acceptance
by KLA-Tencor of the Products pursuant to Section 2.5, and shall be
automatically renewed for one (1) year terms thereafter unless: (i) either party
gives at least sixty (60) days written notice of non-renewal prior to any such
automatic renewal, in which case this Agreement will automatically expire at the
end of the then-current term; or (ii) earlier terminated in accordance with the
terms of this Agreement.

     15.2 TERMINATION FOR CAUSE. Either party shall have the right to terminate
this Agreement if the other party breaches any material term or condition of
this Agreement and fails to cure such breach within thirty (30) days after
written notice. A notice of termination issued by KLA-Tencor to NTI hereunder
will not extend the time for delivery of any of the Deliverables as set forth in
the Development Schedule.

     15.3 TERMINATION FOR FINANCIAL CONDITIONS. Either party shall have the
right to terminate this Agreement if: (i) the other party becomes the subject of
a voluntary petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit of
creditors; or (ii) the other party becomes the subject of an involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing.

     15.4 EFFECT OF TERMINATION OR EXPIRATION. Except as may be otherwise
provided herein, upon any termination or expiration of this Agreement, each
party shall, within thirty (30) days after such expiration or termination,
return or destroy all copies of any Confidential Information of the other party
provided hereunder and, upon request, an officer of each party shall certify in
writing that such delivery or destruction has been fully effected; provided,
however, that each party shall have the right to retain Confidential Information
of the other party solely to the extent and for the period necessary to exercise
its surviving rights and fulfill its surviving obligations.

     15.5 NONEXCLUSIVE REMEDY. Termination of this Agreement by either party
will be a non-exclusive remedy for breach and will be without prejudice to any
other right or remedy of such party.

     15.6 NO DAMAGES FOR TERMINATION. Neither party will be liable to the other
for damages of any type solely as a result of terminating this Agreement in
accordance with its terms.

     15.7 SURVIVAL. The rights and obligations of the parties under Sections
1,4, 7.1, 8, 10, 11, 12.2, 13, 14, 15.4, 15.5, 15.6, 16 and 17 will survive any
termination or expiration of this Agreement.

16.  LIMITATIONS OF LIABILITY

     16.1 GENERAL LIMITATION OF DAMAGES. REGARDLESS OF WHETHER ANY REMEDY SET
FORTH HEREIN FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT SHALL EITHER PARTY

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                               NTI CONFIDENTIAL

                                      15
<PAGE>

BE LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION,
LOSS OF PROFIT, REVENUE, DATA OR USE, WHETHER IN AN ACTION IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), BREACH OF WARRANTY, PRODUCT LIABILITY OR OTHERWISE, EVEN
IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. The foregoing
limitations will not apply: (i) to the parties' respective obligations under
Section 13; or (ii) to any material breach by a party of its obligations under
Section 14, in which case such a party's liability will, in no event, exceed one
million dollars ($1,000,000).

     16.2 SPECIFIC LIMITATION OF DAMAGES. IN NO EVENT SHALL NTI'S AGGREGATE
LIABILITY FOR ANY CLAIMS ARISING OUT OF THIS AGREEMENT, FROM ALL CAUSES OF
ACTION OF ANY KIND, WHETHER IN AN ACTION IN CONTRACT, TORT (INCLUDING
NEGLIGENCE), BREACH OF WARRANTY, PRODUCT LIABILITY OR OTHERWISE, EXCEED THE
ACTUAL AMOUNTS PAID BY KLA-TENCOR TO NTI UNDER THIS AGREEMENT. The foregoing
limitations will not apply: (i) to the parties' respective obligations under
Section 13; or (ii) to any material breach by a party of its obligations under
Section 14, in which case such a party's liability will, in no event, exceed one
million dollars ($1,000,000).

17.  GENERAL

     17.1 COMPLIANCE WITH LAWS. Both parties will comply in all material
respects with all laws and regulations applicable to their activities under this
Agreement. Without limiting the foregoing, both parties will comply with all
United States Department of Commerce and other United States export control laws
and regulations (collectively, "Export Laws") to ensure that neither the
Products nor any direct product thereof is exported or re-exported, directly or
indirectly, in violation of Export Laws.

     17.2 GOVERNING LAW AND DISPUTES. This Agreement and all disputes arising
from or related to this Agreement will be governed by and construed in
accordance with the laws of the United States and the State of California,
without regard to or application of provisions relating to conflicts of law.

     17.3 WAIVER AND MODIFICATION. Failure by either party to enforce any
provision of this Agreement will not be deemed a waiver of future enforcement of
that or any other provision. Any waiver, amendment or other modification of any
provision of this Agreement will be effective only if in writing and executed by
duly authorized representatives of the parties.

     17.4 SEVERABILITY. If for any reason a court of competent jurisdiction
finds any provision of or obligation under this Agreement to be unenforceable,
that provision of the Agreement will be enforced to the maximum extent
permissible so as to effect the intent of the parties, and the remainder of this
Agreement shall remain valid and enforceable.

     17.5 NOTICES. All notices required or permitted under this Agreement will
be in writing and delivered by confirmed facsimile transmission, by courier or
overnight delivery service, or by certified

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      16

<PAGE>

mail, and in each instance will be deemed given upon receipt. All communications
will be sent to the addresses set forth below or to such other address as may be
specified by either party to the other in accordance with this Section.

               To KLA-Tencor:                  To NTI:

               KLA-Tencor Corporation          Numerical Technologies, Inc.
               160 Rio Robles                  333 West Maude Avenue, Suite 207
               San Jose, California 95134      Sunnyvale, California 94086

               Telephone: (408) 875-4200       Telephone: (408) 732-4391
               Facsimile: (408) 434-4262       Facsimile: (408) 736-8605
               Attention: Frank Schellenberg   Attention: Larry Gletzer

     17.6  ASSIGNMENT. Neither party may assign its rights or delegate its
obligations hereunder, either in whole or in part, without the prior written
consent of the other party, except that either party, may, without the consent
of the other party, assign this Agreement to a successor to such party by merger
or consolidation or by any operation of law, or to any entity that controls, is
controlled by, or us under common control with, such party. Any other attempted
assignment or delegation without such consent will be void. Subject to the
foregoing, the rights and liabilities of the parties under this Agreement will
bind and inure to the benefit of the parties' respective successors and
permitted assigns.

     17.7  FORCE MAJEURE. Except for the payment of money, neither party will
be responsible for any failure or delay in its performance under this Agreement
due to causes beyond its reasonable control, including, but not limited to, acts
of God, war, riot, embargoes, acts of civil or military authorities, fire,
floods, earthquakes, accidents, strikes, fuel crises, or governmental action.

     17.8  RELATIONSHIP OF PARTIES. The parties to this Agreement are
independent contractors and this Agreement will not establish any relationship
of partnership, joint venture, employment, franchise, or agency between the
parties. Neither party will have the power to bind the other or incur
obligations on the other's behalf without the other's prior written consent.

     17.9  COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be deemed an original, but both of which together will constitute
one and the same instrument.

     17.10 ENTIRE AGREEMENT. This Agreement, including all exhibits, and the
Letter Agreement Regarding Deliverables, dated January 9, 1998, constitute the
full and complete agreement and understanding between the parties with respect
to the subject matter hereof, and supersedes and replaces all prior and
contemporaneous representations or understandings, written or oral, regarding
such subject matter. Notwithstanding the foregoing, the Mutual Non Disclosure
Agreements between the parties,

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                               NTI CONFIDENTIAL

                                      17

<PAGE>

dated September 11, 1997 will be effective as to the subject matter of this
Agreement until the Effective Date.

     17.12 HEADINGS. The headings and titles used in this Agreement are for
informational purposes only, and in the event of conflict, the provisions of the
Agreement control.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above by their respective duly authorized
representatives.

NUMERICAL TECHNOLOGIES, INC.           KLA-TENCOR CORPORATION

By: /s/ Yagyensh C. Pati                      By: /s/ Edward C. Grady
    --------------------                          -------------------

Name: Yagyensh C. Pati                        Name: EDWARD C GRADY
      ----------------                              --------------

Title: President & CEO                        Title: V. P. GM RAPID
       ---------------                               --------------

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                               NTI CONFIDENTIAL

                                      18

<PAGE>

                              SOFTWARE PRODUCTION
                                      AND
                            DISTRIBUTION AGREEMENT

                                   EXHIBITS

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                               NTI CONFIDENTIAL

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<PAGE>

                               TABLE OF EXHIBITS

Exhibit A      Development Schedule
Exhibit B      Feasibility Study
Exhibit C      Specifications
Exhibit D      Royalties for the Products
Exhibit E      Product Maintenance, Support, and Training Terms
Exhibit F      KLA Tencor Materials
Exhibit G      Numerical Materials
Exhibit H      NTI Trademarks
Exhibit I      NTI Software License Agreement
Exhibit J      RAPID Virtual Stepper License Terms and Conditions
Exhibit K      Module License Terms and Conditions
Exhibit M      Escrow Deposit Information and DSI Escrow Agreement

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                               NTI CONFIDENTIAL

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<PAGE>

                                   EXHIBIT A

                             DEVELOPMENT SCHEDULE

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

          TASK                                     COMPLETION DATE
          ----                                     ---------------

                                [TO BE ATTACHED]

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<PAGE>

                                   EXHIBIT B

                               FEASIBILITY STUDY

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

The Feasibility Study will consist of:

     1)  The creation of a test reticle that has certain programmed defects;

     2)  Inspecting the test reticle in a KLA Tencor reticle inspection
         system;

     3)  Gathering images from the KLA Tencor inspection system that
         correspond to the programmed defect locations;

     4)  Processing the images using the Virtual Stepper to produce estimates of
         the results expected from a wafer exposure of this reticle;

     5)  Assigning a printibility "score" for each of these defects based on the
         metrics proposed for the Products in this Agreement; and also

     6)  Using this reticle to expose a silicon wafer in a well characterized
         lithography stepper and processing system;

     7)  Gathering microscope images of the wafer locations corresponding to
         the programmed defects;

     8)  Comparing the printability "score" predicted by the NTI simulation with
         the actual printed wafer results;

     9)  Generating a comparison list that allows the confidence level in the
         "score" to be assessed; and

    10)  Determining whether the work estimated in this Agreement to automate
         the simulation and "scoring" tasks as necessary to improve the
         confidence level is accurate.

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                               NTI CONFIDENTIAL

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<PAGE>

                                   EXHIBIT C

                                SPECIFICATIONS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

                                [TO BE ATTACHED]

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                               NTI CONFIDENTIAL

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<PAGE>

                                   EXHIBIT D

                          ROYALTIES FOR THE PRODUCTS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

1.   ROYALTIES FOR PRODUCT LICENSES.

     (a)  For licenses for the Products sold to End Users by KLA-Tencor pursuant
to Section 9.1 and until December 30, 1999, the royalty to be paid to NTI shall
be as set forth below:

     Product                            Royalty
     -------                            -------

     RAPID Virtual                        [***] per license
     Stepper:

     Print Module                         [***] per license

     2-D Module                           [***] per license

     Window Module:                       [***] per license

NTI states that royalty listed above for all Products are at [***].

KLA shall also receive a product fee recovery rebate for RAPID Virtual Stepper
licenses sales to End Users as follows:

square    Licenses 31 through 80 shall receive an immediate [***] rebate per
          license.
square    Licenses 81 through 100 shall receive an immediate [***] rebate per
          license.

KLA-Tencor states that it projects purchase from NTI and subsequent sales to
KLA-Tencor end-users of thirty-five (35) RAPID Virtual Stepper Systems in 1998.
Additionally, KLA-Tencor states that projects purchase from NTI and subsequent
sales to KLA-Tencor end-users of twenty (20) Print Coefficient Modules in 1998

     (b)  If this Agreement expires or terminates, and the parties cannot reach
mutual agreement on the royalties for the Products at that time, the royalties
for licenses of the expired or terminated items shall be equal to the GREATER
of:

          1. the per-license royalty most recently agreed-to by the parties in
accordance with Section 10.4 prior to the date of expiration; or

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                               NTI CONFIDENTIAL

                                      24

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

<PAGE>

          2. an amount equal to KLA-Tencor's list price for the Product(s) as of
the date of a sale by KLA-Tencor multiplied a by royalty rate calculated as the
ratio of the royalty due to NTI for a Product and KLA-Tencor's list price as of
the date of expiration for that Product.

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                               NTI CONFIDENTIAL

                                      25

<PAGE>

                                   EXHIBIT E

               PRODUCT MAINTENANCE, SUPPORT, AND TRAINING TERMS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

1.    TECHNICAL SUPPORT DURING TERM OF AGREEMENT.

      During the term of this Agreement, NTI will provide KLA-Tencor with
technical support for the Products in accordance with the terms and conditions
set forth in this Section E-1.

      (a) KLA-Tencor will be responsible for providing first-line technical
support for the Products to End Users and to Sub-distributors. Except as
otherwise agreed in writing by the parties, NTI will have no responsibility for
providing such first-line technical support.

      (b) NTI personnel will be available to work with KLA-Tencor field
engineers to resolve problems reported by KLA-Tencor to NTI regarding the
performance of the Products in accordance with the terms and conditions set
forth in this Exhibit E. All questions and problems regarding the Framework or
the Modules reported to KLA-Tencor from End Users shall be directed by
telephone, facsimile, or email to the Applications Group at NTI through one
central source at KLA-Tencor. KLA-Tencor shall assign a Severity Level (as
defined in Section E-3 below) to each such problem in its initial report to NTI.
KLA-Tencor and NTI may, by mutual agreement, assign a different Severity Level
to a problem than the Severity Level initially assigned by KLA-Tencor.

      (c) For Severity Level 1 or Severity Level 2 problems reported by
KLA-Tencor, NTI will, at no additional charge, use its diligent efforts to
provide a correction for any Severity Level 1 or Severity Level 2 problem that
NTI diagnoses as an error in the Products, within twenty-four (24) hours of
receipt by NTI of a report from KLA-Tencor of such a problem, but NTI makes no
warranty of any kind that it will be able to provide a correction in accordance
with such time frame. For Severity Level 3, Severity Level 4, or Severity Level
5 problems reported by KLA-Tencor, corrections for such problems will be
provided as Upgrades to the Framework or the Modules, subject to payment by
KLA-Tencor of the applicable fees in accordance with the terms of Section 10.3
of the Agreement. For any service provided by NTI at an End User's site, at
KLA-Tencor's request, regardless of the Severity Level, KLA-Tencor will pay NTI
the fees and expenses specified in Section 4 below.

2.   TECHNICAL SUPPORT FOLLOWING EXPIRATION OF AGREEMENT.

     Following the expiration of this Agreement with regard to a Product, NTI
will provide KLA-Tencor with technical support for that Product in accordance
with the terms and conditions set forth in this Section E-2.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      26

<PAGE>

     (a) KLA-Tencor will be responsible for providing first-line technical
support for the Products to End Users and to Sub-distributors. Except as
otherwise agreed in writing by the parties, NTI will have no responsibility for
providing such first-line technical support.

     (b) For Severity Level 1 or Severity Level 2 problems reported by
KLA-Tencor, NTI will make best efforts to provide a correction for any Severity
Level 1 or Severity Level 2 problem that NTI diagnoses as an error in the
Products, within twenty-four (24) hours of receipt by NTI of a report from
KLA-Tencor of such a problem, but NTI makes no warranty of any kind that it will
be able to provide a correction in accordance with such time frame.

3.   SEVERITY LEVELS.

     System problem reports are classified in multiple levels of severity.
Severity levels 1 through 5 are defined as follows:

     1.  A catastrophic defect causes total failure of the system or
         unrecoverable data loss. There is no work around. In general a severity
         1 defect would prevent the product from being released.

     2.  Defect results in severely impaired functionality. A work around may
         exist but its use is unsatisfactory. In general, you would not release
         the product with such a defect.

     3.  Defect causes failure of non-critical aspects of the system. There is a
         reasonably satisfactory work around. The product may be released if the
         defect is documented, but the existence of the defect may cause
         customer dissatisfaction.

     4.  Defect of minor significance. A work around exists or the impairment is
         slight. Generally, the product could be released and most customers
         would be unaware of the defect's existence or only slightly
         dissatisfied.

     5.  Minor Defect. A work around exists or the problem can be ignored. The
         product can be shipped with such a problem.

4.

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<PAGE>

                                   EXHIBIT F

                             KLA-TENCOR MATERIALS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

                                [TO BE ATTACHED]

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<PAGE>

                                   EXHIBIT G

                              NUMERICAL MATERIALS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

                               [TO BE ATTACHED]

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<PAGE>

                                   EXHIBIT H

                                NTI TRADEMARKS

   THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY WRITTEN NOTICE TO KLA TENCOR
                EXECUTED BY AUTHORIZED REPRESENTATIVES OF NTI.

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<PAGE>

                                   EXHIBIT I

                        NTI SOFTWARE LICENSE AGREEMENT

    THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY WRITTEN NOTICE TO KLA TENCOR
                EXECUTED BY AUTHORIZED REPRESENTATIVES OF NTI.

                         NUMERICAL TECHNOLOGIES, INC.
                         ----------------------------

                    SOFTWARE LICENSE AND SUPPORT AGREEMENT

     THIS SOFTWARE LICENSE AND SUPPORT AGREEMENT (THIS "AGREEMENT") IS ENTERED
INTO AS OF THE_____DAY OF __________,1997 ("EFFECTIVE DATE") BY AND
BETWEEN___________________,("CUSTOMER"), AND NUMERICAL TECHNOLOGIES, INC.
("NUMERICAL TECHNOLOGIES"), AND DESCRIBES THE TERMS AND CONDITIONS PURSUANT TO
WHICH NUMERICAL TECHNOLOGIES SHALL LICENSE TO CUSTOMER AND SUPPORT CERTAIN
SOFTWARE (AS DEFINED BELOW). IN CONSIDERATION OF THE MUTUAL PROMISES AND UPON
THE TERMS AND CONDITIONS SET FORTH BELOW, THE PARTIES AGREE AS FOLLOWS:

I.   DEFINITIONS
     -----------

1.1  "CONCURRENT USERS" MEANS ALL LOG-ONS INTO THE SOFTWARE AT ANY ONE TIME.

1.2  "CONFIDENTIAL INFORMATION" MEANS THIS AGREEMENT AND ALL ITS EXHIBITS, ANY
ADDENDA HERETO SIGNED BY BOTH PARTIES, ALL SOFTWARE LISTINGS, DOCUMENTATION,
INFORMATION, DATA, DRAWINGS, BENCHMARK TESTS, SPECIFICATIONS, TRADE SECRETS,
OBJECT CODE AND MACHINE-READABLE COPIES OF THE SOFTWARE, SOURCE CODE RELATING TO
THE SOFTWARE, AND ANY OTHER PROPRIETARY INFORMATION SUPPLIED TO CUSTOMER BY
NUMERICAL TECHNOLOGIES.

1.2  "DOCUMENTATION" MEANS ANY INSTRUCTIONS MANUALS OR OTHER MATERIALS, AND
ON-LINE HELP FILES, REGARDING THE USE OF THE SOFTWARE.

1.3  "MAINTENANCE AND SUPPORT" MEANS THE SERVICES DESCRIBED IN SECTION 6.2.

1.3  "SOFTWARE" MEANS THE COMPUTER SOFTWARE PROGRAMS SPECIFIED IN EXHIBIT A, IN
OBJECT CODE FORM ONLY.

1.4  "UPDATE" MEANS A RELEASE OR VERSION OF THE SOFTWARE CONTAINING FUNCTIONAL
ENHANCEMENTS, EXTENSIONS, ERROR CORRECTIONS OR FIXES THAT IS GENERALLY MADE
AVAILABLE FREE OF CHARGE. (OTHER THAN MEDIA AND HANDLING CHARGES) TO NUMERICAL
TECHNOLOGIES' CUSTOMERS WHO HAVE CONTRACTED FOR MAINTENANCE AND SUPPORT.

1.5  "USE" MEANS UTILIZATION OF THE SOFTWARE BY CUSTOMER BY NO MORE THAN THE
NUMBER OF CONCURRENT USERS SET FORTH ON EXHIBIT B, FOR ITS OWN INTERNAL
INFORMATION PROCESSING SERVICES AND COMPUTING NEEDS, BY COPYING OR TRANSFERRING
THE SAME INTO CUSTOMER'S COMPUTER EQUIPMENT.

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<PAGE>

2.   GRANT OF LICENSE
     ----------------

2.1  LICENSE GRANT. SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT,
     -------------
NUMERICAL TECHNOLOGIES HEREBY GRANTS TO CUSTOMER A NONEXCLUSIVE AND
NONTRANSFERABLE LICENSE TO (A) USE THE SOFTWARE, SUBJECT TO THE LIMITATIONS SET
FORTH BELOW AND IN SECTION 3, AND TO MAKE SUFFICIENT COPIES AS NECESSARY FOR
SUCH USE, AND (B) USE THE DOCUMENTATION IN CONNECTION WITH USE OF THE SOFTWARE.
THIS LICENSE TRANSFERS TO CUSTOMER NEITHER TITLE NOR ANY PROPRIETARY OR
INTELLECTUAL PROPERTY RIGHTS TO THE SOFTWARE, DOCUMENTATION, OR ANY COPYRIGHTS,
PATENTS, OR TRADEMARKS, EMBODIED OR USED IN CONNECTION THEREWITH, EXCEPT FOR THE
RIGHTS EXPRESSLY GRANTED HEREIN.

2.2  DELIVERY. NUMERICAL TECHNOLOGIES SHALL ISSUE TO CUSTOMER, AS SOON AS
     --------
PRACTICABLE, MACHINE-READABLE COPIES OF THE SOFTWARE AS SET FORTH IN EXHIBIT A,
ALONG WITH ONE (1) COPY OF THE APPROPRIATE DOCUMENTATION.

2.3  COPIES. CUSTOMER WILL BE ENTITLED TO MAKE A REASONABLE NUMBER OF MACHINE-
     ------
READABLE COPIES OF THE SOFTWARE FOR BACKUP OR ARCHIVAL PURPOSES. CUSTOMER MAY
NOT COPY THE SOFTWARE, EXCEPT AS PERMITTED BY THIS AGREEMENT. CUSTOMER SHALL
MAINTAIN ACCURATE AND UP-TO-DATE RECORDS OF THE NUMBER AND LOCATION OF ALL
COPIES OF THE SOFTWARE AND INFORM NUMERICAL TECHNOLOGIES IN WRITING OF SUCH
LOCATION(S). ALL COPIES OF THE SOFTWARE WILL BE SUBJECT TO ALL TERMS AND
CONDITIONS OF THIS AGREEMENT. WHENEVER CUSTOMER IS PERMITTED TO COPY OR
REPRODUCE ALL OR ANY PART OF THE SOFTWARE, ALL TITLES, TRADEMARK SYMBOLS,
COPYRIGHT SYMBOLS AND LEGENDS, AND OTHER PROPRIETARY MARKINGS MUST BE
REPRODUCED.

3.   LICENSE RESTRICTIONS
     --------------------

3.1  CURRENT USERS; DESIGNATED CPU. CUSTOMER SHALL NOT ALLOW ACCESS TO EACH
     -----------------------------
LICENSED COPY OF THE SOFTWARE BY MORE THAN THE NUMBER OF CONCURRENT USERS
INDICATED ON EXHIBIT A. CUSTOMER SHALL NOT ALLOW ACCESS TO THE SOFTWARE BY ANY
CONCURRENT USER OTHER THAN CUSTOMER'S EMPLOYEES. CUSTOMER SHALL NOT USE THE
SOFTWARE ON ANY CENTRAL PROCESSING UNIT OTHER THAN THE CPU DESIGNATED ON EXHIBIT
A.

3.2  OTHER RESTRICTIONS. CUSTOMER AGREES THAT IT WILL NOT ITSELF, OR THROUGH ANY
     -------------------
PARENT, SUBSIDIARY, AFFILIATE, AGENT OR OTHER THIRD PARTY:

(A)  SELL, LEASE, LICENSE OR SUBLICENSE THE SOFTWARE OR THE DOCUMENTATION;

(B)  DECOMPILE, DISASSEMBLE, OR REVERSE ENGINEER THE SOFTWARE, IN WHOLE OR IN
PART;

(C)  WRITE OR DEVELOP ANY DERIVATIVE SOFTWARE OR ANY OTHER SOFTWARE PROGRAM
BASED UPON THE SOFTWARE OR ANY CONFIDENTIAL INFORMATION;

(D)  USE THE SOFTWARE TO PROVIDE PROCESSING SERVICES TO THIRD PARTIES, OR
OTHERWISE USE THE SOFTWARE ON A 'SERVICE BUREAU' BASIS; OR

(E)  PROVIDE, DISCLOSE, DIVULGE OR MAKE AVAILABLE TO, OR PERMIT USE OF THE
SOFTWARE BY ANY THIRD PARTY WITHOUT NUMERICAL TECHNOLOGIES' PRIOR WRITTEN
CONSENT.

4.   LICENSE FEE AND TAXES
     ---------------------

4.1  IN CONSIDERATION OF THE LICENSE GRANTED PURSUANT TO SECTION 2.1, CUSTOMER
AGREES TO PAY NUMERICAL TECHNOLOGIES THE LICENSE FEE SPECIFIED IN EXHIBIT A. THE
LICENSE FEE IS DUE AND PAYABLE IN FULL UPON THE EFFECTIVE DATE, UNLESS OTHERWISE
INDICATED.

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<PAGE>

4.2  ALL CHARGES AND FEES PROVIDED FOR IN THIS AGREEMENT (INCLUDING THE
MAINTENANCE FEES) ARE EXCLUSIVE OF AND DO NOT INCLUDE ANY TAXES, DUTIES, OR
SIMILAR CHARGES IMPOSED BY ANY GOVERNMENT. CUSTOMER AGREES TO PAY OR REIMBURSE
NUMERICAL TECHNOLOGIES FOR ALL FEDERAL, STATE, DOMINION, PROVINCIAL, OR LOCAL
SALES, USE, PERSONAL PROPERTY, EXCISE OR OTHER TAXES, FEES, OR DUTIES ARISING
OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (OTHER
THAN TAXES ON THE NET INCOME OF NUMERICAL TECHNOLOGIES).

5.   TRAINING
     --------

NUMERICAL TECHNOLOGIES SHALL PROVIDE INITIAL TRAINING TO CUSTOMER AS SET FORTH
IN EXHIBIT A.

6.   MAINTENANCE AND SUPPORT
     -----------------------

FOR SO LONG AS CUSTOMER IS CURRENT IN THE PAYMENT OF ALL MAINTENANCE FEES
(DESCRIBED BELOW), CUSTOMER WILL BE ENTITLED TO MAINTENANCE AND SUPPORT AS
SPECIFIED IN THIS SECTION 6.

6.2  TERM AND TERMINATION. NUMERICAL TECHNOLOGIES' PROVISION OF MAINTENANCE AND
     --------------------
SUPPORT TO CUSTOMER WILL COMMENCE ON THE EFFECTIVE DATE AND WILL CONTINUE FOR AN
INITIAL TERM OF ONE (1) YEAR. MAINTENANCE AND SUPPORT WILL AUTOMATICALLY RENEW
AT THE END OF THE INITIAL TERM AND ANY SUBSEQUENT TERM FOR A RENEWAL TERM OF ONE
(1) YEAR UNLESS CUSTOMER HAS PROVIDED NUMERICAL TECHNOLOGIES WITH A WRITTEN
TERMINATION NOTICE OF ITS INTENTION NOT TO RENEW THE MAINTENANCE AND SUPPORT AT
LEAST NINETY (90) DAYS PRIOR TO THE TERMINATION OF THE THEN-CURRENT TERM.
TERMINATION OF MAINTENANCE AND SUPPORT UPON FAILURE TO RENEW WILL NOT AFFECT THE
LICENSE OF THE SOFTWARE.

6.3  MAINTENANCE AND SUPPORT SERVICES. MAINTENANCE AND SUPPORT MEANS THAT
     --------------------------------
NUMERICAL TECHNOLOGIES WILL PROVIDE AS SET FORTH IN EXHIBIT B: (A) UPDATES, IF
ANY, AND APPROPRIATE DOCUMENTATION, AND (B) TELEPHONE, FAX-BACK AND EMAIL
ASSISTANCE WITH RESPECT TO THE SOFTWARE, INCLUDING, AS APPROPRIATE (I)
CLARIFICATION OF FUNCTIONS AND FEATURES OF THE SOFTWARE; (II) CLARIFICATION OF
DOCUMENTATION PERTAINING TO THE SOFTWARE; (III) GUIDANCE IN THE OPERATION OF THE
SOFTWARE; AND (IV) ERROR VERIFICATION, ANALYSIS AND CORRECTION TO THE EXTENT
POSSIBLE BY TELEPHONE. MAINTENANCE AND SUPPORT WILL BE PROVIDED ONLY WITH
RESPECT TO VERSIONS OF THE SOFTWARE THAT, IN ACCORDANCE WITH NUMERICAL
TECHNOLOGIES' POLICY, ARE THEN BEING SUPPORTED BY NUMERICAL TECHNOLOGIES.

6.4  ELIGIBILITY OF SOFTWARE. MAINTENANCE AND SUPPORT WILL NOT INCLUDE SERVICES
     -----------------------
REQUESTED AS A RESULT OF, OR WITH RESPECT TO, THE FOLLOWING, AND ANY SERVICES
REQUESTED AS A RESULT THEREOF WILL BE BILLED TO CUSTOMER AT NUMERICAL
TECHNOLOGIES' THEN-CURRENT RATES:

(A)  ACCIDENT; UNUSUAL PHYSICAL ELECTRICAL OR ELECTROMAGNETIC STRESS; NEGLECT;
MISUSE; FAILURE OF ELECTRIC POWER; OPERATION OF THE SOFTWARE WITH OTHER MEDIA
NOT MEETING OR NOT MAINTAINED IN ACCORDANCE WITH THE MANUFACTURER'S
SPECIFICATIONS; OR CAUSES OTHER THAN ORDINARY USE;

(B)  IMPROPER INSTALLATION OR OPERATION BY CUSTOMER OR USE OF THE SOFTWARE THAT
DEVIATES FROM ANY HARDWARE, CONFIGURATION, ENVIRONMENTAL OR OPERATING PROCEDURES
ESTABLISHED BY NUMERICAL TECHNOLOGIES IN THE APPLICABLE DOCUMENTATION;

(C)  MODIFICATION, ALTERATION OR ADDITION OR ATTEMPTED MODIFICATION, ALTERATION
OR ADDITION OF THE SOFTWARE UNDERTAKEN BY PERSONS OTHER THAN NUMERICAL
TECHNOLOGIES OR NUMERICAL TECHNOLOGIES' AUTHORIZED REPRESENTATIVES; OR

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<PAGE>

(D)  PROGRAMS MADE BY CUSTOMER.

6.5  RESPONSIBILITIES OF CUSTOMER. NUMERICAL TECHNOLOGIES' PROVISION OF
     ----------------------------
MAINTENANCE AND SUPPORT TO CUSTOMER IS SUBJECT TO THE FOLLOWING:

(A)  CUSTOMER SHALL PROVIDE NUMERICAL TECHNOLOGIES WITH ACCESS TO CUSTOMER'S
PERSONNEL AND COMPUTER EQUIPMENT DURING NORMAL BUSINESS HOURS, AS NECESSARY OR
APPROPRIATE FOR NUMERICAL TECHNOLOGIES TO PERFORM MAINTENANCE AND SUPPORT
SERVICES.

(B)  CUSTOMER SHALL DOCUMENT AND PROMPTLY REPORT ALL ERRORS OR MALFUNCTIONS OF
THE SOFTWARE TO NUMERICAL TECHNOLOGIES. CUSTOMER SHALL TAKE ALL STEPS NECESSARY
TO CARRY OUT PROCEDURES FOR THE RECTIFICATION OF ERRORS OR MALFUNCTIONS WITHIN A
REASONABLE TIME AFTER SUCH PROCEDURES HAVE BEEN RECEIVED FROM NUMERICAL
TECHNOLOGIES.

6.6  MAINTENANCE FEE. THE MAINTENANCE FEE FOR STANDARD SERVICE HOURS FOR EACH
     ---------------
ONE (1) YEAR TWELVE (12) MONTH PERIOD OF MAINTENANCE AND SUPPORT WILL BE A
PERCENTAGE OF THE LICENSE FEE FOR THE SOFTWARE, AS SET FORTH IN NUMERICAL
TECHNOLOGIES' PRICE LIST IN EFFECT AS OF THE DATE OF INVOICE. THE MAINTENANCE
FEE IS DUE AND PAYABLE IN FULL WITHIN THIRTY (30) DAYS AFTER THE DATE OF
NUMERICAL TECHNOLOGIES' INVOICE. ANY AMOUNTS NOT PAID WITHIN THIRTY (30) DAYS
WILL BE SUBJECT TO INTEREST OF 1.5% PER MONTH, WHICH INTEREST WILL BE
IMMEDIATELY DUE AND PAYABLE. THE MAINTENANCE FEE MAY BE MODIFIED BY NUMERICAL
TECHNOLOGIES FOR EACH RENEWAL TERM BY WRITTEN NOTICE TO CUSTOMER AT LEAST THIRTY
(30) DAYS PRIOR TO THE END OF THE THEN-CURRENT TERM. IF CUSTOMER ELECTS NOT TO
RENEW MAINTENANCE AND SUPPORT, CUSTOMER MAY RE-ENROLL ONLY UPON PAYMENT OF THE
ANNUAL MAINTENANCE FEE FOR THE COMING YEAR AND ALL MAINTENANCE FEES THAT WOULD
HAVE BEEN PAID HAD CUSTOMER NOT TERMINATED MAINTENANCE AND SUPPORT.

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<PAGE>

7.   LIMITED WARRANTY AND LIMITATION OF LIABILITY
     --------------------------------------------

NUMERICAL TECHNOLOGIES WARRANTS THAT THE SOFTWARE WILL PERFORM IN SUBSTANTIAL
ACCORDANCE WITH THE DOCUMENTATION FOR THE PERIOD OF TIME SET FORTH IN EXHIBIT A
FROM THE EFFECTIVE DATE ("WARRANTY PERIOD"). IF DURING THIS TIME PERIOD THE
SOFTWARE DOES NOT PERFORM AS WARRANTED, NUMERICAL TECHNOLOGIES SHALL RESPOND TO
SUCH PROBLEMS AS SET FORTH IN SECTION 6. IN ADDITION, NUMERICAL TECHNOLOGIES
WARRANTS THAT THE MEDIA ON WHICH THE SOFTWARE IS DISTRIBUTED WILL BE FREE FROM
DEFECTS IN MATERIALS AND WORKMANSHIP UNDER NORMAL USE FOR A PERIOD OF NINETY
(90) DAYS FROM THE EFFECTIVE DATE. NUMERICAL TECHNOLOGIES WILL REPLACE ANY
DEFECTIVE MEDIA RETURNED TO NUMERICAL TECHNOLOGIES WITHIN THE 90-DAY PERIOD.

7.1  THE FOREGOING ARE CUSTOMER'S SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF
WARRANTY. THE WARRANTY SET FORTH ABOVE IS MADE TO AND FOR THE BENEFIT OF
CUSTOMER ONLY. THE WARRANTY WILL APPLY ONLY IF:

(A)  THE SOFTWARE HAS BEEN PROPERLY INSTALLED AND USED AT ALL TIMES AND IN
ACCORDANCE WITH THE INSTRUCTIONS FOR USE; AND

(B)  NO MODIFICATION, ALTERATION OR ADDITION HAS BEEN MADE TO THE SOFTWARE BY
PERSONS OTHER THAN NUMERICAL TECHNOLOGIES.

EXCEPT AS SET FORTH ABOVE, NUMERICAL TECHNOLOGIES MAKES NO WARRANTIES, WHETHER
EXPRESS, IMPLIED, OR STATUTORY REGARDING OR RELATING TO THE SOFTWARE OR THE
DOCUMENTATION, OR ANY MATERIALS OR SERVICES FURNISHED OR PROVIDED TO CUSTOMER
UNDER THIS AGREEMENT, INCLUDING MAINTENANCE AND SUPPORT. NUMERICAL TECHNOLOGIES
SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO THE SOFTWARE AND
DOCUMENTATION.

IN NO EVENT WILL NUMERICAL TECHNOLOGIES BE LIABLE FOR ANY LOSS OF PROFITS, LOSS
OF USE, BUSINESS INTERRUPTION, LOSS OF DATA, COST OF COVER OR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH OR ARISING
OUT OF THE FURNISHING, PERFORMANCE OR USE OF THE SOFTWARE OR SERVICES PERFORMED
HEREUNDER, WHETHER ALLEGED AS A BREACH OF CONTRACT OR TORTUOUS CONDUCT,
INCLUDING NEGLIGENCE, EVEN IF NUMERICAL TECHNOLOGIES HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. NUMERICAL TECHNOLOGIES' LIABILITY UNDER THIS
AGREEMENT FOR DAMAGES WILL NOT, IN ANY EVENT, EXCEED THE LICENSE FEE PAID BY
CUSTOMER TO NUMERICAL TECHNOLOGIES UNDER THIS AGREEMENT.

8.   INDEMNIFICATION FOR INFRINGEMENT
     --------------------------------

NUMERICAL TECHNOLOGIES SHALL, AT ITS EXPENSE, DEFEND OR SETTLE ANY CLAIM, ACTION
OR ALLEGATION BROUGHT AGAINST CUSTOMER THAT THE SOFTWARE INFRINGES ANY
COPYRIGHT, TRADE SECRET OR TRADEMARK RIGHT OF ANY THIRD PARTY AND SHALL PAY ANY
FINAL JUDGMENTS AWARDED OR SETTLEMENTS ENTERED INTO; PROVIDED THAT CUSTOMER
GIVES PROMPT WRITTEN NOTICE TO NUMERICAL TECHNOLOGIES OF ANY SUCH CLAIM, ACTION
OR ALLEGATION OF INFRINGEMENT AND GIVES NUMERICAL TECHNOLOGIES THE AUTHORITY TO
PROCEED AS CONTEMPLATED HEREIN. NUMERICAL TECHNOLOGIES WILL HAVE THE EXCLUSIVE
RIGHT TO DEFEND ANY SUCH CLAIM, ACTION OR ALLEGATION AND MAKE SETTLEMENTS
THEREOF AT ITS OWN DISCRETION, AND CUSTOMER MAY NOT SETTLE OR COMPROMISE SUCH
CLAIM, ACTION OR ALLEGATION, EXCEPT WITH PRIOR WRITTEN CONSENT OF NUMERICAL
TECHNOLOGIES. CUSTOMER SHALL GIVE SUCH ASSISTANCE AND INFORMATION AS NUMERICAL
TECHNOLOGIES MAY REASONABLY REQUIRE TO

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<PAGE>

SETTLE OR OPPOSE SUCH CLAIMS. IN THE EVENT ANY SUCH INFRINGEMENT, CLAIM, ACTION
OR ALLEGATION IS BROUGHT OR THREATENED, NUMERICAL TECHNOLOGIES MAY, AT ITS SOLE
OPTION AND EXPENSE:

(A)  PROCURE FOR CUSTOMER THE RIGHT TO CONTINUE USE OF THE SOFTWARE OR
INFRINGING PART THEREOF; OR

(B)  MODIFY OR AMEND THE SOFTWARE OR INFRINGING PART THEREOF, OR REPLACE THE
SOFTWARE OR INFRINGING PART THEREOF WITH OTHER SOFTWARE HAVING SUBSTANTIALLY THE
SAME OR BETTER CAPABILITIES; OR, IF NEITHER OF THE FOREGOING IS COMMERCIALLY
PRACTICABLE,

(C)  TERMINATE THIS AGREEMENT AND REPAY TO CUSTOMER A PORTION, IF ANY, OF THE
LICENSE FEE EQUAL TO THE AMOUNT PAID BY CUSTOMER LESS ONE-THIRTY-SIXTH (1/36)
THEREOF FOR EACH MONTH OR PORTION THEREOF THAT THIS AGREEMENT HAS BEEN IN
EFFECT. NUMERICAL TECHNOLOGIES AND CUSTOMER WILL THEN BE RELEASED FROM ANY
FURTHER OBLIGATION TO THE OTHER UNDER THIS AGREEMENT, EXCEPT FOR THE OBLIGATIONS
OF INDEMNIFICATION PROVIDED FOR ABOVE AND SUCH OTHER OBLIGATIONS THAT SURVIVE
TERMINATION.

THE FOREGOING OBLIGATIONS SHALL NOT APPLY TO THE EXTENT THE INFRINGEMENT ARISES
AS A RESULT OF MODIFICATIONS TO THE SOFTWARE MADE BY ANY PARTY OTHER THAN
NUMERICAL TECHNOLOGIES.

THE FOREGOING STATES THE ENTIRE LIABILITY OF NUMERICAL TECHNOLOGIES WITH RESPECT
TO INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER PROPRIETARY
RIGHT.

9.   CONFIDENTIAL INFORMATION
     ------------------------

9.1  CUSTOMER ACKNOWLEDGES THAT THE CONFIDENTIAL INFORMATION CONSTITUTES
VALUABLE TRADE SECRETS AND CUSTOMER AGREES THAT IT SHALL USE CONFIDENTIAL
INFORMATION SOLELY IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT AND WILL
NOT DISCLOSE, OR PERMIT TO BE DISCLOSED, THE SAME, DIRECTLY OR INDIRECTLY, TO
ANY THIRD PARTY WITHOUT NUMERICAL TECHNOLOGIES' PRIOR WRITTEN CONSENT. CUSTOMER
AGREES TO EXERCISE DUE CARE IN PROTECTING THE CONFIDENTIAL INFORMATION FROM
UNAUTHORIZED USE AND DISCLOSURE. HOWEVER, CUSTOMER BEARS NO RESPONSIBILITY FOR
SAFEGUARDING INFORMATION THAT IS PUBLICLY AVAILABLE, ALREADY IN CUSTOMER'S
POSSESSION AND NOT SUBJECT TO A CONFIDENTIALITY OBLIGATION, OBTAINED BY CUSTOMER
FROM THIRD PARTIES WITHOUT RESTRICTIONS ON DISCLOSURE, INDEPENDENTLY DEVELOPED
BY CUSTOMER WITHOUT REFERENCE TO CONFIDENTIAL INFORMATION, OR REQUIRED TO BE
DISCLOSED BY ORDER OF A COURT OR OTHER GOVERNMENTAL ENTITY.

9.2  IN THE EVENT OF ACTUAL OR THREATENED BREACH OF THE PROVISIONS OF SECTION
9.1, NUMERICAL TECHNOLOGIES WILL HAVE NO ADEQUATE REMEDY AT LAW AND WILL BE
ENTITLED TO IMMEDIATE AND INJUNCTIVE AND OTHER EQUITABLE RELIEF, WITHOUT BOND
AND WITHOUT THE NECESSITY OF SHOWING ACTUAL MONEY DAMAGES.

10.  TERM AND TERMINATION
     --------------------

10.1 TERM. THIS AGREEMENT WILL TAKE EFFECT ON THE EFFECTIVE DATE AND WILL REMAIN
     ----
IN FORCE UNTIL TERMINATED IN ACCORDANCE WITH THIS AGREEMENT.

10.2 TERMINATION BY CUSTOMER. THIS AGREEMENT MAY BE TERMINATED BY CUSTOMER UPON
     -----------------------
THIRTY (30) DAYS' PRIOR WRITTEN NOTICE TO NUMERICAL TECHNOLOGIES, WITH OR
WITHOUT CAUSE, PROVIDED THAT NO SUCH TERMINATION WILL ENTITLE CUSTOMER TO A
REFUND OF ANY PORTION OF THE LICENSE FEE OR MAINTENANCE FEE.

10.3 TERMINATION BY NUMERICAL TECHNOLOGIES. NUMERICAL TECHNOLOGIES MAY, BY
     -------------------------------------
WRITTEN NOTICE TO CUSTOMER, TERMINATE THIS AGREEMENT IF ANY OF THE

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<PAGE>

FOLLOWING EVENTS ("TERMINATION EVENTS") OCCUR:

(A)  CUSTOMER FAILS TO PAY ANY AMOUNT DUE NUMERICAL TECHNOLOGIES WITHIN THIRTY
(30) DAYS AFTER NUMERICAL TECHNOLOGIES GIVES CUSTOMER WRITTEN NOTICE OF SUCH
NONPAYMENT; OR

(B)  CUSTOMER IS IN MATERIAL BREACH OF ANY NONMONETARY TERM, CONDITION OR
PROVISION OF THIS AGREEMENT, WHICH BREACH, IF CAPABLE OF BEING CURED, IS NOT
CURED WITHIN THIRTY (30) DAYS AFTER NUMERICAL TECHNOLOGIES GIVES CUSTOMER
WRITTEN NOTICE OF SUCH BREACH; OR

(C)  CUSTOMER (I) TERMINATES OR SUSPENDS ITS BUSINESS, (II) BECOMES INSOLVENT,
ADMITS IN WRITING ITS INABILITY TO PAY ITS DEBTS AS THEY MATURE, MAKES AN
ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR BECOMES SUBJECT TO DIRECT CONTROL OF
A TRUSTEE, RECEIVER OR SIMILAR AUTHORITY, OR (III) BECOMES SUBJECT TO ANY
BANKRUPTCY OR INSOLVENCY PROCEEDING UNDER FEDERAL OR STATE STATUTES.

IF ANY TERMINATION EVENT OCCURS, TERMINATION WILL BECOME EFFECTIVE IMMEDIATELY
OR ON THE DATE SET FORTH IN THE WRITTEN NOTICE OF TERMINATION. ANY TERMINATION
OF THIS AGREEMENT WILL NOT AFFECT SECTIONS 1, 7, 8, 9, 11, 12 AND 13, WHICH
SHALL SURVIVE THE TERMINATION OR EXPIRATION OF THIS AGREEMENT.

10.4 RETURN OF MATERIALS. WITHIN THIRTY (30) DAYS AFTER THE DATE OF TERMINATION
     -------------------
OR DISCONTINUANCE OF THIS AGREEMENT FOR ANY REASON WHATSOEVER, CUSTOMER SHALL
RETURN THE SOFTWARE AND ALL COPIES, IN WHOLE OR IN PART, ALL DOCUMENTATION
RELATING THERETO, AND ANY OTHER CONFIDENTIAL INFORMATION IN ITS POSSESSION THAT
IS IN TANGIBLE FORM.

11.  NONASSIGNMENT/BINDING AGREEMENT
     -------------------------------

NEITHER THIS AGREEMENT NOR ANY RIGHTS UNDER THIS AGREEMENT MAY BE ASSIGNED OR
OTHERWISE TRANSFERRED BY CUSTOMER, IN WHOLE OR IN PART, WHETHER VOLUNTARY OR BY
OPERATION OF LAW, INCLUDING BY WAY OF SALE OF ASSETS, MERGER OR CONSOLIDATION,
WITHOUT THE PRIOR WRITTEN CONSENT OF NUMERICAL TECHNOLOGIES, WHICH CONSENT WILL
NOT BE UNREASONABLY WITHHELD. SUBJECT TO THE FOREGOING, THIS AGREEMENT WILL BE
BINDING UPON AND WILL INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.

12.  NOTICES
     -------

ANY NOTICE REQUIRED OR PERMITTED UNDER THE TERMS OF THIS AGREEMENT OR REQUIRED
BY LAW MUST BE IN WRITING AND MUST BE (A) DELIVERED IN PERSON, (B) SENT BY FIRST
CLASS REGISTERED MAIL, OR AIR MAIL, AS APPROPRIATE, OR (C) SENT BY OVERNIGHT AIR
COURIER, IN EACH CASE PROPERLY POSTED AND FULLY PREPAID TO THE APPROPRIATE
ADDRESS SET FORTH BELOW. NOTICES WILL BE CONSIDERED TO HAVE BEEN GIVEN AT THE
TIME OF ACTUAL DELIVERY IN PERSON, THREE (3) BUSINESS DAYS AFTER DEPOSIT IN THE
MAIL AS SET FORTH ABOVE, OR ONE (1) DAY AFTER DELIVERY TO AN OVERNIGHT AIR
COURIER SERVICE.

13.  MISCELLANEOUS
     -------------

13.1 FORCE MAJEURE. NEITHER PARTY WILL INCUR ANY LIABILITY TO THE OTHER PARTY ON
     -------------
ACCOUNT OF ANY LOSS OR DAMAGE RESULTING FROM ANY DELAY OR FAILURE TO PERFORM ALL
OR ANY PART OF THIS AGREEMENT IF SUCH DELAY OR FAILURE IS CAUSED, IN WHOLE OR IN
PART, BY EVENTS, BEYOND THE CONTROL OF THE PARTIES, INCLUDING WITHOUT LIMITATION
ACTS OF GOD, STRIKES, LOCKOUTS, RIOTS, ACTS OF WAR, EARTHQUAKE, FIRE AND
EXPLOSIONS, BUT THE INABILITY TO MEET FINANCIAL OBLIGATIONS IS EXPRESSLY
EXCLUDED.

13.2 WAIVER. ANY WAIVER OF A PARTY'S RIGHTS OR REMEDIES UNDER THIS AGREEMENT
     ------
MUST BE IN WRITING TO BE EFFECTIVE. FAILURE, NEGLECT, OR DELAY BY A PARTY TO
ENFORCE THE PROVISIONS OF THIS AGREEMENT

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<PAGE>

OR ITS RIGHTS OR REMEDIES AT ANY TIME, WILL NOT BE CONSTRUED AND WILL NOT BE
DEEMED TO BE A WAIVER OF SUCH PARTY'S RIGHTS UNDER THIS AGREEMENT.

13.3 SEVERABILITY. IF ANY TERM, CONDITION, OR PROVISION IN THIS AGREEMENT IS
     ------------
FOUND TO BE INVALID, UNLAWFUL OR UNENFORCEABLE TO ANY EXTENT, SUCH INVALID TERM,
CONDITION OR PROVISION WILL BE SEVERED FROM THE REMAINING TERMS, CONDITIONS AND
PROVISIONS, WHICH WILL CONTINUE TO BE VALID AND ENFORCEABLE TO THE FULLEST
EXTENT PERMITTED BY LAW.

13.4 INTEGRATION. THIS AGREEMENT (INCLUDING THE EXHIBITS) CONTAINS THE ENTIRE
     -----------
AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT
AND SUPERSEDES ALL PREVIOUS AGREEMENTS, EITHER ORAL OR WRITTEN, BETWEEN THE
PARTIES WITH RESPECT TO SAID SUBJECT MATTER. THIS AGREEMENT MAY NOT BE AMENDED,
EXCEPT BY A WRITING SIGNED BY BOTH PARTIES.

13.5 EXPORT. CUSTOMER MAY NOT EXPORT OR RE-EXPORT THE SOFTWARE WITHOUT THE PRIOR
     ------
WRITTEN CONSENT OF NUMERICAL TECHNOLOGIES OR WITHOUT THE APPROPRIATE UNITED
STATES AND FOREIGN GOVERNMENT LICENSES.

13.6 PUBLICITY. CUSTOMER ACKNOWLEDGES THAT NUMERICAL TECHNOLOGIES MAY DESIRE TO
     ---------
USE ITS NAME IN PRESS RELEASES, PRODUCT BROCHURES AND FINANCIAL REPORTS
INDICATING THAT CUSTOMER IS A CUSTOMER OF NUMERICAL TECHNOLOGIES, AND CUSTOMER
AGREES THAT NUMERICAL TECHNOLOGIES MAY USE ITS NAME IN SUCH A MANNER, SUBJECT TO
CUSTOMER'S CONSENT, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.

13.7 COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, EACH OF WHICH
     ------------
SO EXECUTED WILL BE DEEMED TO BE AN ORIGINAL AND SUCH COUNTERPARTS TOGETHER WILL
CONSTITUTE ONE AND THE SAME AGREEMENT.

13.8 GOVERNING LAW. THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN
     -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES.

13.9 JURISDICTION. ANY DISPUTE ARISING OUT OF THIS AGREEMENT SHALL BE RESOLVED
     ------------
IN THE STATE AND FEDERAL COURTS OF SANTA CLARA COUNTY, CALIFORNIA, AND EACH
PARTY HEREBY AGREES TO THE EXCLUSIVE JURISDICTION

IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT.

(CUSTOMER)                                  NUMERICAL TECHNOLOGIES, INC.

BY:______________________________
                                        BY:_____________________________________

      _________________________________
(PRINT NAME AND TITLE)                              (PRINT NAME AND TITLE)

DATE: _______________                       DATE:

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      38
<PAGE>

ADDRESS:                              ADDRESS:

                                      ____________________________________

                                      ____________________________________

                             KLA TENCOR CONFIDENTIAL
                                NTI CONFIDENTIAL

                                      39
<PAGE>

                                   EXHIBIT A
                                   ---------

                                   SOFTWARE

     SOFTWARE          FEES          DESIGNATED         WARRANTY       TRAINING
                                        CPU              PERIOD

NUMERITECH IC
WORKBENCH V.
1.0

EXHIBIT B
---------

                                    SUPPORT

*    TELEPHONE SUPPORT: TELEPHONE SUPPORT PROVIDED 9 A.M. TO 5:30 P.M. (PST)
     MONDAY-FRIDAY.

*    FAX-BACK SERVICE: WRITTEN RESPONSES PROVIDED TO SPECIFIC QUESTIONS,
     PROBLEMS AND RECOMMENDATIONS FROM LICENSEES.

*    EMAIL: EMAILED RESPONSES PROVIDED TO SPECIFIC QUESTIONS, PROBLEMS AND
     RECOMMENDATIONS FROM LICENSEES.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      40
<PAGE>

                                   EXHIBIT J

              RAPID VIRTUAL STEPPER LICENSE TERMS AND CONDITIONS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

All license agreements for the Products granted by KLA Tencor will:

1.   State that third-parties have intellectual property rights in the Products;

2.   Prohibit the use of the Products except with hardware and software supplied
     by KLA Tencor;

3.   Prohibit copying of the Products except for backup purposes;

4.   Prohibit reverse engineering, decompilation, or other derivation of the
     source code of the Products (except as permitted by law);

5.   Specify that no title to the Products passes to the End User;

6.   Disclaim all third-party liability for performance of the Products;

7.   Specify that the End User must return or destroy all copies of the
     Products upon termination of the End User license;

8.   Specify that the End User has no right to transfer its license to the
     software except in connection with the sale of all or substantially all
     its assets.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      41
<PAGE>

                                   EXHIBIT K

                      MODULE LICENSE TERMS AND CONDITIONS

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

All license agreements for the Products granted by KLA Tencor will:

1.   State that third-parties have intellectual property rights in the Products;

2.   Prohibit the use of the Products except with hardware and software supplied
     by KLA Tencor;

3.   Prohibit copying of the Products except for backup purposes;

4.   Prohibit reverse engineering, decompilation, or other derivation of the
     source code of the Products (except as permitted by law);

5.   Specify that no title to the Products passes to the End User;

6.   Disclaim all third-party liability for performance of the Products;

7.   Specify that the End User must return or destroy all copies of the
     Products upon termination of the End User license;

8.   Specify that the End User has no right to transfer its license to the
     software except in connection with the sale of all or substantially all
     its assets.

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      42
<PAGE>

                                   EXHIBIT L

              ESCROW DEPOSIT INFORMATION AND DSI ESCROW AGREEMENT

 THIS EXHIBIT MAY BE AMENDED AT ANY TIME BY MUTUAL WRITTEN AGREEMENT EXECUTED
                BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.

1.   ESCROW DEPOSIT INFORMATION. This section describes the information that NTI
will deposit into the escrow account (in addition to the source code for the
Products) pursuant to the terms and conditions of Section 4.5.

     A.  Detailed class diagrams showing the relationships of all classes
implemented in the source code generated as part of the deliverable product.
These class diagrams should show the following information:

         The names of all classes used in the libraries.

         The inheritance relationships among all classes.

         The invocation relationships among all classes.

     B.  An operational description of the sequence of class/method
invocations that occur in response to execution of a framework filled with the
integrated modules. An invocation sequence should provide the following
information.

         Begin with execution of an integrated module.

         List the sequence of primary class/method calls performed in the
         immediate body of the framework to access the integrated module.

         Trace each of the primary class/method calls in the framework to a
         sufficient depth within the integrated module to provide useful
         guidance information for programmer's debugging problems or making
         changes to the source code of the framework or the integrated module.

         Define the purpose of each of the calls in the above calling sequence
         so that a programmer's debugging code changes and enhancements can
         understand what is happening during execution.

2.   DSI ESCROW AGREEMENT

                               [TO BE ATTACHED].

                            KLA TENCOR CONFIDENTIAL
                               NTI CONFIDENTIAL

                                      43
<PAGE>

LETTER AGREEMENT REGARDING DELIVERABLES
January 9, 1998

Re:  Software Production and Distribution Agreement between KLA Tencor and
     Numerical Technologies, dated 1/9/98

In the Software Production and Distribution Agreement, dated 1/9/98, it is
stated in section 2.2 that Numerical Technologies will deliver Deliverables
which represent the "prototype" of the RAPID Virtual Stepper and the Modules.
This letter confirms that both parties understand a "prototype" to mean a
version of the software which meets basic conditions outlined in the
Specifications but does not meet all the Specifications. For the RAPID Virtual
Stepper, this is understood to mean a version of the existing Virtual Stepper
which functions in a UNIX environment like that of the KLA 90 product series.
For the Modules, these are understood to be software programs which execute the
functions described in the Specifications and whose features are limited in
scope to only those functions.

In the Software Production and Distribution Agreement, dated 1/9/98, it is
stated in section 2.2 that Numerical Technologies will deliver Deliverables
which represent the "final, completed version" of the RAPID Virtual Stepper and
the Modules. This letter confirms that both parties understand this to mean a
version of the software which meets all the conditions outlined in the
Specifications but has not been refined or improved to a version suitable for
final End User acceptance. This corresponds to what KLA Tencor would typically
refer to as the delivery of an "Engineering Alpha" version to KLA Tencor. This
corresponds to what NTI would typically call a "Customer Ready Beta Version",
which means that the version is ready for delivery to a beta customer for
evaluation, and that some further refinement and improvement is still expected
to be implemented after this evaluation.

/s/ Edward C. Grady            1-9-98      /s/ Yagyensh C. Pati         1-9-98
---------------------------    ------      ---------------------------  ------
Ed Grady                       Date        Yagyensh Pati                Date
General Manager, RAPID Division            Numerical Technologies CEO
KLA Tencor Vice President

/s/ Frank Schellenberg         1/9/98      /s/ L. Gletzer               1/9/98
---------------------------    ------      ---------------------------  ------
Frank Schellenberg             Date        Larry Gletzer                Date
Analysis Product Manager,                  Numerical Technologies V.P. Sales
RAPID Division, KLA Tencor

Cc:  Mark Merrill                  KLA Tencor
     Lisa Berry                    KLA Tencor
     Janice Fall                   Wilson Sonsini Goodrich and Rosati
<PAGE>

                                                                       EXHIBIT B

                       DESCRIPTION OF DEPOSIT MATERIALS

Depositor Company Name: NUMERICAL TECHNOLOGIES, INC.
                        ----------------------------

Account Number 1421007-00001
               -------------

Product Name: VIRTUAL STEPPTER SYSTEM                           Version: 1.0B3
              -----------------------                                    -----
(Product Name will appear on Account History report)

DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size           Label Description of Each Separate Item
                           (Please use other side if additional space is needed)

_____             Disk 3.5" or _____

1                 DAT tape 4mm             VIRTUAL STEPPER SYSTEM
-                          -
_____             CD-ROM                   FILENAME: DRWBSRC.TAR 10,181KB 3-4-99

_____             Data cartridge tape _____          VSSLIBKLA.ZIP  284KB 3-4-99

_____             TK 70 or _____ tape      Date: 3-4-99 For KLA-Tencor

_____             Magnetic tape _____      NUMERICAL TECHNOLOGIES, INC.

_____             Documentation

_____             Other ________________________

PRODUCT DESCRIPTION:
Operating System: SUN SOLARIS V2.51
                  -----------------
Hardware Platform: ULTRA SPARC
                   -----------

DEPOSIT COPYING INFORMATION:
Is the media encrypted? Yes/No If yes, please include any passwords and the
decryption tools.
Encryption tool name _____________________________ Version ____________________

Hardware required __________________________________________________
Software required __________________________________________________

I certify for DEPOSITOR that the above described DSI has inspected and accepted
the above. deposit materials have been transmitted to DSI: materials (any
exceptions are noted above):

Signature _______________________          Signature /s/ Christie Woodward
Print Name ______________________          Print Name Christie Woodward
                                                      -----------------
Date ____________________________          Date Accepted 3-25-99
                                                         -------
                                           Exhibit B# 1
                                                      -

Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123 (619) 694-
1900

Page 10
<PAGE>

                                                                       EXHIBIT B

                       DESCRIPTION OF DEPOSIT MATERIALS

Depositor Company Name _________________________________________________________

Account Number _________________________________________________________________

Product Name _____________________________________ Version _____________________
(Product Name will appear on Account History report)

DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size        Label Description of Each Separate Item
                           (Please use other side if additional space is needed)

______            Disk 3.5" or ________

______            DAT tape _____ mm

______            CD-ROM

______            Data cartridge tape _____

______            TK 70 or _____ tape

______            Magnetic tape _____

______            Documentation

______            Other _________________

PRODUCT DESCRIPTION:
Operating System ______________________________________________________________
Hardware Platform _____________________________________________________________

DEPOSIT COPYING INFORMATION:
Is the media encrypted? Yes/No If yes, please include any passwords and the
decryption tools.

Encryption tool name_______________________________ Version ___________________

Hardware required______________________________________________________________
Software required _____________________________________________________________

I certify for DEPOSITOR that the above described DSI has inspected and accepted
the above Deposit Materials have been transmitted to DSI: materials (any
exceptions are noted above):

Signature __________________________     Signature_____________________________
Print Name _________________________     Print Name ___________________________
Date _______________________________     Date Accepted ________________________
                                         Exhibit B#____________________________

Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123 (619) 694-
1900

(c) 1983, 1999 DSI

                        DSI TECHNOLOGY ESCROW SERVICES
                           An Iron Mountain Company
<PAGE>

DSI TECHNOLOGY ESCROW SERVICES
9555 CHESAPEAKE DRIVE, SUITE 200
SAN DIEGO, CA 92123
TELEPHONE: 619 694-1900
FAX: 619 694-1919
www.dsiescrow.com

DSI TECHNOLOGY ESCROW SERVICES(R)
An Iron Mountain Company

March 25, 1999

Yagyensh C. Pati
Numerical Technologies, Inc.
2630 Walsh Avenue
San Jose, CA 95051-0905

Re:  Escrow Documents and Initial Deposit
     Account Number: 1421007-00001

Dear Yagyensh C. Pati:

DSI has received Numerical Technologies' Escrow Agreement with KLA-Tencor
Corporation as well as the initial deposit, thank you. A copy of the executed
Agreement and Exhibit B are enclosed. Also enclosed for your future use are
blank Exhibit B's. Please reference the above account number on any Exhibit B
you submit.

An Account History report will be sent to you periodically to help you stay in
compliance with your contractual commitments.

Thank you for trusting DSI to protect your software assets. If you need further
assistance, please contact Jennifer J. Buckloh, Account Representative, who may
be reached at (415) 398-7900.

Yours very truly,

/s/Christie Woodward
Christie Woodward
Senior Contract Administrator

Enclosures

cc:  Lisa C. Polli-Benbow, DSI<PAGE>

                                                                   EXHIBIT 10.25

                                                                    CONFIDENTIAL

                                LICENSE AGREEMENT
                                -----------------

         This License Agreement (the "Agreement") is entered into this 23 day of
                                                                       --
December, 1999 (the "Effective Date"), by and between Seiko Instruments, Inc., a
--------
corporation duly authorized and existing under the laws of Japan with principal
offices at 8, Nakase 1-chome, Mihama-ku Chiba-shi Chiba 261-8507, Japan ("SII")
and Numerical Technologies Inc., a California corporation with offices at 70
West Plumeria Drive, San Jose, CA 95134-2134 ("NTI").

                                    RECITAL
                                    -------

         WHEREAS, SII develops and markets custom design tools for VLSI layout
and design and NTI develops and markets software design tools for subwavelength
integrated circuit technologies. SII desires to distribute certain of its
products in conjunction with certain of NTI's software design tool modules for
subwavelength integrated circuit technologies subject to the terms and
conditions of this Agreement.

         In consideration of the foregoing and the mutual promises contained
herein. SII and NTI agree as follows:

         1.    DEFINITIONS.

               1.1  "Bundled Product" shall mean the SII Combined Products
                     ---------------
bundled with and licensed under the same SKU as ModelCalibrator.

               1.2  "Check-It" shall mean that software (in the form of binary
                     --------
application) marketed under the name "Check-It Version 3.1" which acts as the
layout verification software that uses NTI's lithography simulation to locate
and flag areas of an integrated circuit layout design that product projected
wafer patterns outside of specified tolerance, and any Updates thereto.

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

               1.4  "Documentation" shall mean the manuals and other
                     -------------
documentation that NTI generally makes available with the NTI Products, Check-It
and ModelCalibrator to End Users licensed users of such products.

               1.5  "End User" shall mean an end user who obtains a copy of
                     --------
the SII Combined Products and/or Bundled Product and associated Keys from SII
solely in order to fulfill such end users own internal operations and not for
further distribution subject to the terms of an End User Agreement.

               1.6  "End User Agreement" shall mean an agreement or agreements
which is/are mutually acceptable to the parties in accordance with Section 2.4.

Numerical Technologies, Inc. - Seiko Instruments, Inc.

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

          1.7  "Error" shall mean a substantial nonconformity of the NTI
                -----
Products, Check-It or ModelCalibrator with the Documentation.

          1.8  "Floating License" shall mean an End User Agreement which
authorizes an End User to use the licensed product, on different computers, so
long as the licensed product is not used simultaneously on two computers.

          1.9  "Fiscal Year" shall mean a year which commences on April 1 and
ends on March 31 of the following calendar year.

          1.10 "Integration Software" shall mean software that integrates NTI
                --------------------
Products with the SII Product

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

          1.12 "Keys" shall mean the software files supplied to SII by
                ----
NTI which enable the NTI Products, Check-It and ModelCalibrator to be accessed
by an End User. A Key is required for use of the NTI Products, Check-It and
ModelCalibrator in order to operate such products in a non-demonstration mode.

          1.13 "ModelCalibrator" shall mean that software (in the form of a
                ---------------
binary application) marketed under the name "ModelCalibrator Version 2.1"
which functionality includes the input of results of test-chip measurements and
creation of the optical/lithography process models used by NTI tools and
components, and any Updates thereto.

          1.14 "NTI Products" shall mean the NTI software products (in the form
                ------------
of binary application) listed in Exhibit A attached hereto in machine
executable object code format, and any Updates thereto. "NTI Products" does not
include Check-It or ModelCalibrator.

          1.15 "Price List" shall mean the price set forth on the official list
                ----------
of prices which a party publishes for disclosure to customers and prospective
customers. SII List Price means the price for a designated product on a Price
List published by SII. NTI U.S. List Price means the price for a designated
product on a Price List published by NTI for customers located in the United
States only and not in any other location worldwide

          1.16 "SII Combined Products" shall mean the SII software products that
                ---------------------
are comprised of the SII Product and the NTI Products.

          1.17 "SII Product" shall mean software product listed in Exhibit B
                -----------
attached hereto in machine executable object code format, and all Updates
thereto.

Numerical Technologies, Inc. - Seiko Instruments, Inc.  2
<PAGE>

          1.18 "SKU" shall mean the stock keeping unit number or other unique
                ---
product number that is used to identify a particular product.

          1.19 "Updates" shall mean bug fixes and reasonable enhancements to the
                -------
NTI Products, Check-It and ModelCalibrator that NTI generally makes available to
its End Users free of charge, but excluding new versions of the NTI Products,
Check-It and ModelCalibrator that contain significant new features or
functionality, as determined by NTI in its sole discretion.

     2.   LICENSE GRANTS

          2.1  Software License to SII. Subject to the limitations set forth in
               -----------------------
Section 2.2 below and the other terms and conditions of this Agreement, NTI
hereby grants to SII:

               (i)   non-exclusive, nontransferable, worldwide, limited license
under NTI's Intellectual Property Rights in the NTI Products, Check-It and
ModelCalibrator to use, reproduce, perform and display the NTI Products, Check-
It and ModelCalibrator (in object code form only) for SII's internal purposes
only including integration work, testing, support, and demonstrations;

               (ii)  a non-exclusive, nontransferable, worldwide, limited
license under NTI's Intellectual Property Rights in the NTI Products: (1) to
copy the NTI Products and to distribute as NTI Products as incorporated into the
SII Combined Product (and not on a standalone basis) and associated Keys to End
Users, and (2) to use the NTI Products solely for the support thereof pursuant
to the provisions of Section 5;

               (iii) a non-exclusive, nontransferable, worldwide, limited
license under NTI's Intellectual Property Rights in Check-It and
ModelCalibrator: (1) to copy Check-It and ModelCalibrator, and to distribute
Check-It and ModelCalibrator as incorporated with the Bundled Product (and not
on a standalone basis) and associated Keys to End Users, and (2) to use Check-It
and ModelCalibrator solely for the support thereof pursuant to the provisions of
Section 5;

               (iv)  a non-exclusive, nontransferable, worldwide, limited
license under NTI's Intellectual Property Rights in Check-It: (1) to copy Check-
It and to Distribute Check-It (on a standalone basis) and associated Keys to End
Users, and (2) to use Check-It solely for the support thereof pursuant to the
provisions of Section 5; and

               (v)   a non-exclusive, nontransferable, worldwide limited license
under NTI's Intellectual Property Rights in the Documentation to copy and
distribute the Documentation to End Users in conjunction with the authorized
distribution of the SII Combined Products and Bundled Product.

     SII may not, and may not authorize any third party to, distribute the NTI
Products, Check-It or ModelCalibrator or the Documentation on a stand-alone
basis

Numerical Technologies, Inc. - Seiko Instruments, Inc.  3
<PAGE>

(except as permitted in Section 2.1(iv) above), without the express written
consent of NTI. SII may not authorize a third party to distribute the NTI
Products, Check-It or ModelCalibrator without the prior written permission of
NTI. SII may not sublicense its rights hereunder except to the extent expressly
permitted under Section 2.4 below.

          2.2  Restrictions on License. SII shall not itself, or through any
               -----------------------
subsidiary, affiliate, agent or third party: (a) sell, lease, license or
sublicense the NTI Products, Check-It or ModelCalibrator or the Documentation
(except as expressly permitted in Section 2.1), (b) decompile, disassemble,
reverse engineer or otherwise attempt to derive source code from the NTI
Products, Check-It or ModelCalibrator, in whole or in part, except to the extent
such restriction is prohibited by applicable law; (c) write or develop any
Derivative Works of the NTI Products, Check-It or ModelCalibrator or any other
software program based upon the NTI Products Check-It or ModelCalibrator; or (d)
use the NTI Products, Check-It or ModelCalibrator to provide processing services
to third parties, or otherwise use the NTI Products, Check-It or ModelCalibrator
on a service bureau basis.

          2.3  Master Copies. Promptly after the Effective Date, NTI will
               -------------
provide SII with one (1) copy of the NTI Products, Check-It and ModelCalibrator
and the Documentation as they exist on such date, in a mutually agreed upon
electronic form. SII will have thirty (30) days from the respective dates of
receipt by SII of such copies to notify NTI in writing of its acceptance
thereof, or to provide a written statement of any Errors to be corrected.
Failure of SII to notify NTI of any such Errors within such ten (10) day period
shall be deemed acceptance by SII. If SII provides a written statement of
Errors, NTI shall correct all Errors and deliver the correct NTI Products,
Check-It, ModelCalibrator or Documentation to SII within a reasonable timeframe.

          2.4  End User License Terms. SII shall distribute the NTI Products.
               ----------------------
Check-It and ModelCalibrator to End Users under standard SII form license which
incorporates certain terms to be mutually agreed upon by the parties. Such terms
shall include, but are not limited to, a prohibition on the assignment of the
End User License, a warranty disclaimer and limitation of liability provisions
for the benefit of NTI and restrictions similar to those in Section 2.2 above.
It is understood that the NTI Products, Check-It and ModelCalibrator are
licensed on a per CPU basis, and use of the NTI Products, Check-It and
ModelCalibrator by the End User requires installation and use of a Key with
respect to each CPU from which the NTI Products, Check-It and ModelCalibrator
are accessed. Keys shall be supplied by NTI to SII as provided under Section
3.7.

          2.5  Trademark License to SII. SII shall display NTI's trademarks
               ------------------------
and logos with the SII Combined Products, Bundled Product and the Documentation
and any other marketing, promotional or advertising literature pertaining to the
SII Combined Products and Bundled Product. NTI grants to SII a nonexclusive,
worldwide license to use the NTI trade names, trademarks and logos set forth in
Exhibit C ("NTI's Trademarks") attached hereto during the term of this Agreement
solely in connection with the authorized distribution of SII Combined Products
and SII Bundled Products, and with

Numerical Technologies, Inc. - Seiko Instruments, Inc.  4
<PAGE>

the authorized distribution of the Documentation. SII shall fully comply with
any and all guidelines provided by NTI concerning the use of NTI's Trademarks.
NTI's Trademarks shall be at least the same size as all other trademarks, trade
names and logos displayed on the SII Combined Products and Bundled Products and
no less prominent. All representations of NTI's Trademarks that SII intends to
use shall be submitted to NTI by SII for approval of design, color and other
details or shall be exact copies of those used by NTI. To enable NTI to monitor
the use of NTI's Trademarks, SII shall provide, as requested by NTI from time to
time, samples of all items and materials to which a NTI Trademark has been
applied. SII shall obtain no rights with respect to any of NTI's Trademarks,
other than the rights set forth herein. At NTI's written request, SII shall
assign to NTI any such right, title and interest exceeding the rights granted
herein that it may obtain in NTI's Trademarks and the associated goodwill. All
goodwill arising out of any uses of NTI's Trademarks will inure solely to the
benefit of NTI. NTI reserves the right to modify or replace the NTI Trademarks
("Updated NTI Trademarks") in its sole discretion. Upon ten (10) days prior
written notice to SII of Updated NTI Trademarks, SII shall replace the NTI
trademarks with the Updated NTI Trademark, and the Updated NTI Trademark shall
be subject to this Section 2.5.

          2.6  No Other Rights. Except as expressly provided in this Section
               ---------------
2, NTI does not grant to SII any right, title or interest in the NTI Products,
Check-It, ModelCalibrator or the Documentation, whether by implication, estoppel
or otherwise. All rights not specifically granted herein are reserved to NTI
including without limitation the right to modify or otherwise create Derivative
Works of the NTI Products, Check-It. ModelCalibrator and the Documentation.
Without limiting the foregoing, NTI retains the right to distribute NTI
Products, Check-It, ModelCalibrator and the Documentation, directly or
indirectly, for any and all uses.

          2.7  Copyright Notices. SII shall not (and shall require that End
               -----------------
Users do not) remove, alter, cover or obfuscate any copyright notices or other
proprietary rights notices placed on or embedded in the NTI Products, Check-It,
ModelCalibrator or Documentation by NTI. All titles, trademark symbols,
copyright symbols and legends and other proprietary markings must be reproduced.
Upon NTI's request, SII shall furnish evidence of its compliance with the
provisions of this Section 2.

     3.   DISTRIBUTION AND FEES

          3.1  Development Fees. In consideration of NTI's development of the
               ----------------
NTI Products, SII shall pay NTI development fees equal to the amounts set forth
in Exhibit D (the "Development Fees") according to the schedule set forth on
Exhibit D.

          3.2  License Fees. In consideration of the rights granted hereunder,
               ------------
for distribution of the NTI Products, Check-It, ModelCalibrator and for each Key
shipped by NTI to SII hereunder, SII shall pay to NTI the license fees set forth
in Exhibit E (the "License Fee"). The difference between the License Fee and the
fees charged by SII for the NTI Products shall be SII's sole remuneration for
the distribution of the NTI Products. SII is responsible for establishing the
fees charged to End Users.

Numerical Technologies, Inc. - Seiko Instruments, Inc.  5
<PAGE>

          3.3  Minimum License Fees. During the term of this Agreement, the
               --------------------
parties agree that NTI shall receive a minimum license fee set forth in Exhibit
E for SII's distribution the NTI Products, Check-It and Model Calibrator
hereunder. In addition, during the term of this Agreement, SII shall be
obligated to make an annual commitment of License Fees that it shall pay to NTI
under this Agreement ("Annual Minimum License Fees"). Prior to the beginning of
a Fiscal Year, SII and NTI shall agree in writing upon the Annual Minimum
License Fee SII pay to NTI in such upcoming Fiscal Year.

          3.4  Maintenance Fees. In consideration of the rights granted
               ----------------
hereunder, in consideration for support of the NTI Products, Check-It and Model
Calibrator provided under Section 6 hereunder, SII shall pay to NTI the
maintenance fees set forth in Exhibit F (the "Maintenance Fees") on an annual
basis.

          3.5  Invoicing. NTI shall submit an invoice for License Fees and
               ---------
Maintenance Fees to SII upon shipment of Keys ordered by SII. All invoices shall
be sent to SII's address for notices hereunder, without regard to the actual
shipping address. Each such invoice shall state SII's aggregate and unit License
Fees payable with respect to a given shipment of Keys, plus any freight, taxes
or other costs incident to the purchase, license or shipment initially paid by
NTI but to be borne by SII hereunder.

          3.6  Reports and Payment Terms. Unless otherwise expressly provided
               -------------------------
herein. SII shall make all License Fee payments due to NTI under Section 3
hereunder monthly, within forty-five (45) days of the end of each calendar
month. All payments shall be made in U.S. dollars. Within forty-five (45) days
of the end of each calendar month, SII shall also submit through an electronic
transfer of funds to an account designated by NTI and shall be accompanied by a
"Report". "Report" means a report showing, at a minimum, date licensed, quantity
of each type of NTI Product, Check-It and ModelCalibrator licensed, the End
Users' names and addresses and a statement of the amounts due NTI under Section
3. Each Report shall be deemed NTI's Confidential Information pursuant to
Section 10 herein. Any exchange rate calculations made under this Agreement
shall be made at the Yen to Dollar rate published by Fuji bank on the last day
of the calendar month preceding payment.

          3.7  Assignment of Keys. Each Key shall be issued by NTI to SII for
               ------------------
further distribution to End Users. Keys shall only be provided to End Users.

          3.8  Audit Rights. SII agrees to maintain, until three (3) years after
               ------------
expiration of this Agreement, complete books, records and accounts relevant to
computation and accounting for License Fees and Maintenance fees under this
Agreement. SII agrees to allow an independent certified public accountant the
right to audit and examine such books, records and accounts during SII's normal
business hours no more than twice per year upon reasonable notice. In the event
such examination leads to a determination that SII underpaid NTI, SII agrees to
pay, in addition to any damages to which NTI might be entitled, the amount of
such shortfall. In addition, if any such

Numerical Technologies, Inc. - Seiko Instruments, Inc.  6
<PAGE>

examination reveals an underpayment of five percent (5%) or more, SII shall
reimburse to NTI its costs of such examination.

          3.9  Taxes. The License Fees do not include and are net of any
               -----
foreign or domestic governmental taxes or charges of any kind that may be
applicable to the licensing, marketing or distribution of the Products. SII
shall be responsible for and shall pay all such taxes and charges levied against
NTI in a timely manner. When NTI has the legal obligation to pay or collect such
taxes, excluding taxes on the income of NTI, the appropriate amount shall be
invoiced to SII and paid by SII within thirty (30) days of the date of invoice
unless SII provides NTI with a valid tax exemption certificate authorized by the
appropriate taxing authority.

          3.10 Withholding Taxes. All payments by SII shall be made free and
               -----------------
clear of, and without reduction for, any withholding taxes. Any such taxes which
are otherwise imposed on payments to NTI shall be the sole responsibility of
SII. SII shall provide NTI with official receipts issued by the appropriate
taxing authority or such other evidence as is reasonably requested by NTI to
establish that such taxes have been paid.

     4.   SII DILIGENCE

     SII shall use commercially reasonable efforts to promote and market the
SII Combined Products and Bundled Products to maximize sales of the SII Combined
Products and Bundled Products worldwide. Except as expressly set forth herein,
SII shall be solely responsible for all costs and expenses related to the
advertising, marketing, promotion, and distribution of the SII Combined Products
and Bundled Products and for performing its obligations hereunder.

     5.   SII SUPPORT.

          5.1  SII End User Support. Except as provided in Section 6.1 below,
               --------------------
SII shall be solely responsible for supporting all End Users of the SII Combined
Products, Bundled Products and Check-It distributed hereunder. SII shall ensure
that SII's technical and engineering support personnel attend any training
provided by NTI with respect to the NTI Products, Check-It and ModelCalibrator.
SII shall ensure that all End User questions regarding the use or operation of
SII Combined Products, Bundled Products and Check-It are initially addressed to
and answered by SII. NTI will provide support services directly to SII in
accordance with the provisions of Section 6.

          5.2  Training of SII End Users. SII shall have the sole
               -------------------------
responsibility for conducting end-user training for the SII Combined Products
and Bundled Products.

     6.   NTI SUPPORT AND TRAINING.

          6.1  Information and Support. NTI shall provide SII (and not
               -----------------------
End Users) with reasonable back-up telephone and electronic mail support
regarding the NTI Products, Check-It and ModelCalibrator. Such support shall be
provided with respect to

Numerical Technologies, Inc. - Seiko Instruments, Inc.  7
<PAGE>

issues related directly to the NTI Products, Check-It and ModelCalibrator as
provided by NTI to SII hereunder, and not with respect to issues related to
interfacing, or the components of SII Combined Products or Bundled Product other
than the NTI Products, Check-It and ModelCalibrator.

          6.2  Training. NTI shall provide reasonable training class to SII
               --------
engineers and support engineers regarding the NTI Products, Check-It and
ModelCalibrator at a mutually agreed upon location. The goal of the class shall
be to enable SII engineers and support engineers to provide telephone support to
End Users for the NTI Products, Check-It and ModelCalibrator; to engage in sales
activities and respond to technical questions; and to conduct End-User training
for the NTI Products, Check-It and ModelCalibrator. NTI will quote prices for
any special training upon request.

          6.3  Marketing Materials. NTI, at its expense, may periodically
               -------------------
provide SII with samples of NTI's advertising and promotional materials, pricing
information and technical data related to the NTI Products. Check-It and Model
Calibrator in English, in each case to the extent NTI in its discretion makes
such materials generally available to its value-added resellers other than SII;
provided that SII shall pay the freight costs and other taxes and duties
applicable to any such items provided or the delivery thereof. SII shall not
modify the materials described in this Section 6.3 without NTI's prior written
approval.

          6.4  Updates. During the term of this Agreement, NTI shall promptly
               -------
deliver to SII any Updates to the NTI Products, Check-It and ModelCalibrator
that NTI has prepared upon commercial release thereof.

          6.5  Back-Up Support and Error Corrections. During the term of this
               -------------------------------------
Agreement, NTI shall provide to SII reasonable back-up support for the NTI
Products, Check-It and ModelCalibrator which shall consist of reasonable
commercial efforts to correct Errors in NTI Products, Check-It and Model
Calibrator based upon NTI's standard priority bug fix and support policies.
Without limiting the foregoing, SII shall (w) provide sufficient information to
NTI for NTI to duplicate any reported Error in the NTI Products, Check-It or
ModelCalibrator; (x) incorporate Updates into the SII Combined Products and
Bundled Products promptly upon receipt thereof and distribute Updates to then-
existing End Users; (y) report Errors promptly in English and in writing in
accordance with NTI's standard support procedures; and (z) provide reasonable
cooperation and full information to NTI in the furnishing of support for the NTI
Products, Check-It and ModelCalibrator.

     7.   PROPRIETARY RIGHTS.

          7.1  SII Product. The parties agree that, as between the parties, SII
               -----------
retains all right, title and interest in and to the SII Product and in all
Intellectual Property Rights therein. Nothing herein shall grant to NTI any
rights that SII may own in the software developed by SII to interface with the
NTI Products, Check-It and ModelCalibrator.

Numerical Technologies, Inc. - Seiko Instruments, Inc.  8
<PAGE>

          7.2  NTI Products. The parties agree that, as between the parties,
               ------------
NTI retains all right, title and interest in and to the NTI Products, Check-It
and ModelCalibrator and in all Intellectual Property Rights therein.

     8.   LIMITED WARRANTIES AND DISCLAIMER.

          8.1  Limited Warranty. NTI warrants that, at the time of delivery of
               ----------------
the Key to SII, the unmodified NTI Products, Check-It and ModelCalibrator will
be complete and functioning and that, for a period of ninety (90) days from the
date of receipt by an End User as evidenced in the End User License, and that
the NTI Products, Check-It and ModelCalibrator, under normal use, will perform
substantially in accordance with the Documentation.

          8.2  Limitations. The warranties under Section 8.1 will not extend
               -----------
to problems that result from: (i) SII's failure to implement all Updates to the
NTI Products, Check-It or ModelCalibrator issued to SII by NTI; (ii) any
alterations of or additions to the NTI Products, Check-It or ModelCalibrator
performed by parties other than NTI; (iii) use of the NTI Products, Check-It or
ModelCalibrator in a manner for which it was not designed; or (iv) use of the
NTI Products, Check-It or ModelCalibrator in conjunction with products not
supplied or approved by NTI.

          8.3  Exclusive Remedy. NTI's entire liability and SII's exclusive
               ----------------
remedy under this warranty will be, at NTI's option, to use reasonable
commercial efforts to attempt to correct or work around Errors or to replace the
NTI Products, Check-It and ModelCalibrator with functionally equivalent NTI
Products Check-It and ModelCalibrator.

          8.4  Disclaimer of Warranties. Except as expressly stated in Section
               ------------------------
8.1 above, NTI MAKES NO OTHER WARRANTIES OR CONDITIONS OF ANY KIND, WHETHER
EXPRESS, IMPLIED OR, STATUTORY OR OTHERWISE AND NTI SPECIFICALLY DISCLAIMS ANY
AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR
A PARTICULAR PURPOSE. NOTWITHSTANDING THE FOREGOING, NTI DOES NOT EXCLUDE
LIABILITY TO THE EXTENT THAT SUCH LIABILITY MAY NOT BE EXCLUDED OR LIMITED BY
APPLICABLE LAW.

          8.5  SII Restrictions. Except to the extent required by applicable
               ----------------
law, SII shall not pass on to its End Users a warranty of greater scope or
protection than the warranty (including the limited remedy, exclusions, and
limitation of liability) set forth in this Section 8 and Section 9.3 below. SII
shall indemnify, defend and hold harmless NTI from any claim or liability
arising out of or relative to breach of this Section 8.5 or representations or
warranties which exceed NTI's express warranties set forth in this Section 8 or
the limitations of liability set forth in Section 11.3.

Numerical Technologies, Inc. - Seiko Instruments, Inc.  9
<PAGE>

     9.   INDEMNIFICATION AND LIMITATION OF LIABILITY.

          9.1  Indemnification by NTI. NTI agrees, at its own expense, to
               ----------------------
defend or at its option settle, any third party claim, suit or proceeding
(collectively, "Action") brought against SII to the extent such Action results
from infringement by the NTI Products ModelCalibrator and Check-It of any U.S.
patent or U.S. copyright or trademark worldwide and NTI agrees to pay, subject
to the limitations hereinafter set forth, any settlement amounts or final
judgment entered against SII on such issue in any such Action defended and/or
settled by NTI. SII agrees that NTI will be relieved of the foregoing
obligations unless SII (i) notifies NTI promptly in writing of such an Action,
(ii) gives NTI sole control and authority over any such Action or settlement
negotiations, and (iii) gives NTI proper and full information and assistance to
settle and/or defend any such Action. If it is adjudicatively determined, or if
NTI believes that the NTI Products, Check-It or ModelCalibrator or any part
thereof, infringe any U.S. patent, copyright or trademark, or if the sale or use
of the NTI Products, Check-It or ModelCalibrator is, as a result, enjoined, then
NTI may, at its election, option, and expense: (a) procure for SII the right
under such patent, copyright or trademark to sell or use, as appropriate, the
NTI Products, Check-It or ModelCalibrator, or such part thereof; or (b) replace
the NTI Products, Check-It or ModelCalibrator, or parts thereof, with
noninfringing suitable NTI products or parts; or (c) suitably modify the NTI
Products, Check-It or ModelCalibrator, or part thereof, to become noninfringing;
or (d) remove the NTI Products. Check-It or ModelCalibrator, or part thereof,
terminate distribution or sale thereof and refund the last four months payments
of License Fees made by SII for such NTI Products. Check-It or ModelCalibrator.

               (a)  The remedy set forth in this Section 9.1 shall not apply to
the extent that such infringement arises from (a) use of a NTI Products. Check-
It or ModelCalibrator in a manner which is not provided for in the Documentation
or training; (b) use of a NTI Products, Check-It or ModelCalibrator in a
combination or process where the use of a NTI Products, Check-It or
ModelCalibrator used alone or not in that process would not have infringed such
rights; (c) use of other than a current unaltered release of NTI Products,
Check-It or ModelCalibrator to the extent that the infringement would have been
avoided by such current unaltered release; (d) modification of, or in the use of
NTI Products, Check-It or ModelCalibrator by, or requested by, SII or an End
User; or (e) continued infringement by SII if NTI is providing a remedy under
9.1(b) below; or (f) a breach of this Agreement by SII.

               (b)  NTI will not be liable for any costs or expenses incurred
without its prior written authorization, or for any installation costs of
replaced NTI products. This Section 9.1 states the sole liability of NTI and the
exclusive remedy of SII and End Users with respect to any claim of infringement.

          9.2  Indemnification by SII. SII agrees, at its own expense, to
               ----------------------
defend or at its option settle, any third party claim, suit or proceeding
(collectively, "Action") brought against NTI to the extent such Action results
from infringement of intellectual property rights as a result of or
misrepresentations regarding the SII Combined Products

Numerical Technologies, Inc. - Seiko Instruments, Inc.  10
<PAGE>

or the Bundled Products not covered under Section 9.1. subject to the
limitations hereinafter set forth, any settlement amounts or final judgment
entered against NTI on such issue in any such Action defended and/or settled by
SII. NTI agrees that SII will be relieved of the foregoing obligations unless
NTI (i) notifies SII promptly in writing of such an Action, (ii) gives SII sole
control and authority over any such Action or settlement negotiations, and (iii)
gives SII proper and full information and assistance to settle and/or defend any
such Action. SII will not be liable for any costs or expenses incurred without
its prior written authorization.

          9.3  Limitation of Liability. EXCEPT WITH RESPECT TO BREACH OF
               -----------------------
SECTION 10 (CONFIDENTIALITY), LIABILITY UNDER SECTION 8.5 (INDEMNIFICATION) AND
LIABILITY TO THIRD PARTIES UNDER SECTION 9 (INDEMNIFICATION), NEITHER PARTY
SHALL HAVE ANY LIABILITY TO THE OTHER PARTY FOR LOST PROFITS OR BUSINESS
OPPORTUNITIES, LOST DATA, OR ANY OTHER INDIRECT, INCIDENTAL, CONSEQUENTIAL,
SPECIAL, OR RELIANCE DAMAGES, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY.
WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY OR
OTHERWISE. THESE LIMITATIONS SHALL APPLY REGARDLESS OF WHETHER SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE
OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

     10.  CONFIDENTIALITY.

          10.1 Definition. The term "Confidential Information" shall mean any
               ----------
information disclosed by one party to the other party in connection with this
Agreement which if disclosed in writing or electronically is designated
"Confidential", or if disclosed orally or by inspection is designated
confidential at the time of such disclosure or which a party knows or should
have reason to know is treated as confidential by the other party.

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

          10.3 Exceptions. Notwithstanding the above, the restrictions of this
               ----------
Section 10 shall not apply to information that:

               (a)  a receiving party can demonstrate was independently
developed by the receiving party without any use of the Confidential Information
of the other party and by employees or other agents of (or independent
contractors hired by) the

Numerical Technologies, Inc. - Seiko Instruments, Inc.  11
<PAGE>

receiving party who have not been exposed to the Confidential Information as
demonstrated by written documentation;

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

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

               (d)  a receiving party can demonstrate was rightfully and
previously known to the receiving party, without restriction, at the time of
disclosure.

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

     11.  TERM AND TERMINATION.

          11.1 Term. The term of this Agreement shall commence on the
               ----
Effective Date and shall continue in full force and effect for a term of three
(3) years from the Effective Date unless terminated earlier as provided under
Section 11.2 or 11.3. Thereafter, this Agreement shall be automatically renewed
for additional one (1) year terms upon mutual agreement on pricing, unless
either party notifies the other party in writing of its intention not to renew
the Agreement for an additional term at least sixty (60) days prior to the
expiration of the then-current term.

          11.2 Right to Terminate for Breach. If either party materially
               -----------------------------
breaches any term or condition of this Agreement and fails to cure that breach
within sixty (60) days after receiving written notice of the breach, the non-
breaching party may terminate this Agreement at any time within thirty (30) days
following the end of such sixty (60) day period; provided that the parties have
exhausted the following escalation procedure.

          11.3 Additional Restrictions. This Agreement shall terminate on ninety
(90) days notice in the event that (i) [***] enters into an agreement with SII
to merge with, acquire thirty percent (30%) or more of the outstanding capital
stock or material assets of, or purchase all or substantially all of the assets
of a specific business unit of the SII that is distributing or using the NTI
Products, Check-It or Model Calibrator, or (ii) SII enters into an agreement to
merge with or acquire thirty percent (30%) or more of the outstanding capital
stock or material assets of [***] and the resulting combined entity distributes
a product that incorporates any of the NTI Products, Check-It or Model
Calibrator (iii) SII distributes or licenses the NTI Product Components, CheckIt
or Model Calibrator, or any product incorporating these NTI products, to [***].
Upon receipt of notice under this Section 11.3, SII may continue to exercise its
license rights pursuant to the

Numerical Technologies, Inc. - Seiko Instruments, Inc. 12

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

terms and conditions of this Agreement in order to fulfill End User orders
accepted up until fifteen (15) days prior to the effective date of such
termination.

          11.4 Effect of Termination. Except as otherwise specifically set
               ---------------------
forth in this Agreement, the following sections shall survive the expiration or
termination, for any reason, of this Agreement: 1 (Definitions), 7 (Proprietary
Rights), 8 (Limited Warranty), 9 (Indemnification and Limitation of Liability),
10 (Confidentiality), 11.4 (Effect of Termination) and 12 (Miscellaneous). All
other Sections and all licenses hereunder shall terminate upon the expiration or
termination, for any reason, of this Agreement.

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

          11.6 Remedies Cumulative. Termination shall be in addition to all
               -------------------
other legal or equitable remedies available to either party.

     12.  MISCELLANEOUS.

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

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

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

          12.4 Governing Law. This Agreement shall be governed by and
               -------------
construed in accordance with the laws of the State of California without
application of any choice of law principles. All disputes under this Agreement
shall be brought in the

Numerical Technologies, Inc. - Seiko Instruments, Inc.  13
<PAGE>

courts located in Santa Clara County, California. The rights and obligations of
the parties under this Agreement shall not be governed by the 1980 U.N.
Convention on Contracts for the International Sale of Goods.

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

          12.6 Assignment. Neither party may, by operation of law or otherwise,
               ----------
assign any of its rights or delegate any of its obligations under this Agreement
without the prior express written consent of the other party. Notwithstanding
the foregoing, either party may assign all (but not part) of its rights and
delegate all (but not part) of its obligations under this Agreement to a third
party as part of any acquisition of such assigning party by such third party,
provided that notice of and details concerning such proposed assignment and
delegation is given to the non-assigning party. Subject to the foregoing, this
Agreement will bind and inure to the benefit of the parties, their respective
successors and permitted assigns. Any permitted assignment under this Section
12.6 shall be subject to the assignee agreeing in writing to be bound by all the
terms and conditions of this Agreement.

          12.7 Notices. All notices and other communications hereunder shall
               -------
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy with answer back, by express or overnight mail delivered by
a nationally recognized air courier (delivery charges prepaid), or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first Business Day at the place at which such notice
or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the third Business Day at the place
from which such notice or communication was mailed following the day on which
such notice or communication was mailed. As used in this Section 12.7, "Business
Day" means (i) when such term is being used to calculate the notice to NTI, any
day other than a Saturday, a Sunday or a day on which banking institutions
located in the State of California are authorized or obligated by law or
executive order to close, or (ii) when such term is being used to calculate the
notice to SII, any day other than a Saturday, a Sunday or a day on which banking
institutions located in Japan are authorized or obligated by law or executive
order to close.

          12.8 Severability. If any provision of this Agreement is held by a
               ------------
court of competent jurisdiction to be contrary to law, such provision shall be
changed and interpreted so as to best accomplish the objectives of the original
provision to the fullest

Numerical Technologies, Inc. - Seiko Instruments, Inc.  14
<PAGE>

extent allowed by law and the remaining provisions of this Agreement shall
remain in full force and effect.

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

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

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

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

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

          12.14 Language. This Agreement is in the English language only, which
                --------
language will be controlling in all respects, and all versions hereof in any
other language will not be binding on the parties hereto. All communications and
notices to be made given pursuant to this Agreement shall be in the English
language. The parties hereto confirm that it is their desire that this
Agreement, as well as all other documents relating hereto, including notices,
have been and will be made in the English language only.

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

NUMERICAL TECHNOLOGIES, INC.                  SEIKO INSTRUMENTS INC.

By: /s/ Yagyensh C. Pati                      By: /s/ Takahiro Ozasa
    --------------------                          ------------------

Name: Yagyensh C. Pati                        Name: Takahiro Ozasa
      ---------------                               --------------

Title: President & CEO                        Title: Deputy Division Manager
       ---------------                               -----------------------

Date: December 23, 1999                       Date: January 6, 2000
      -----------------                             ---------------

Numerical Technologies, Inc. - Seiko Instruments, Inc.  15
<PAGE>

                            EXHIBIT A: NTI PRODUCTS

     SII Silicon Design Rule Check (SII-SiDRC), Version 1.0: Silicon vs. Layout
verification software engine, in the form of binary shared libraries, that uses
lithography simulation to locate and flag areas of an integrated circuit layout
design that produce projected wafer patters outside the specified tolerance.
This engine is accompanied with a C header-file that allows the user to call the
engine's API.

     SII-ImagIC, Version 1.1: Software engine, in the form of binary shared
libraries, that generates real-time wafer image from layout data using
lithography simulation. This engine is accompanied with a C header-file that
allows the user to call the engine's API.

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

     SII-Batch-NOPC, Version 3.1: Rules-based Optical Proximity Correction
software, in the form of binary application, that applies corrections based on
the OPC rules to compensate for the subwavelength lithography effects.

     RuleGen Version 1.3 which provides for the automatic creation of the OPC
rules from the calibrated optical/lithography process models.

     SII-Batch-SiDRC, Version 3.1: Silicon vs. Layout verification software, in
the form of binary application, that uses lithography simulation to locate and
flag areas of an integrated circuit layout design that produce projected wafer
patters outside the specified tolerance

Numerical Technologies, Inc. - Seiko Instruments, Inc.  16
<PAGE>

                            EXHIBIT B: SII PRODUCT

"SII Product" means technology identified as "SX-9000" or "SX-GIGA" in marketing
materials and Price Lists and comprising the VLSI design layout system developed
by combining Seiko Instrument's CAD technology and VLSI technology.

Numerical Technologies, Inc. - Seiko Instruments, Inc.  17
<PAGE>

                            EXHIBIT C : TRADEMARKS

NTI Trademarks:

NTI Trademarks:   Registered Trademark: Virtual Stepper (R)

Corporate Trademarks: Numerical Technologies (TM), Inc.

NumeriTech (TM)

The Numerical Technologies logo.

Product Trademarks:

IN-Phase

TROPiC

N-Abled

SiVL

ImagIC

SiDRC

SiImage

Rule-Gen

Model-Gen

NOPC

IC Workbench

Numerical Technologies, Inc. - Seiko Instruments. Inc.  18
<PAGE>

                                                                    CONFIDENTIAL

                          EXHIBIT D: DEVELOPMENT FEES

1.   Development Fees.
     ----------------

File level integration                                 [***]

Engine level/API level integration                     [***]

Total                                                  [***]
--------------------------------------------------------------------------------

2.   Schedule for Payment of Development Fees. SII shall pay to NTI the
     ----------------------------------------
Development Fees on or before the following dates:

April 30, 2000                     [***]

July 31, 2000                      [***]

October 31, 2000                   [***]

January 31, 2000                   [***]

Numerical Technologies, Inc. - Seiko Instruments, Inc.

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

                    Exhibit E: License and Maintenance Fees

License Fees

     In consideration of the rights and licenses granted hereunder and for each
Key shipped by NTI SII shall pay NTI the following License Fees:

1.   NTI Products. SII shall pay NTI [***] of the then-current SII List Price
     ------------
     for the each NTI Product distributed as part of the SII Combined Products
     ("NTI Products License Fee"), but in no event less than [***] copy.

2.   Check-It. SII shall pay NTI [***] of the then-current NTI US List Price for
     --------
     each copy of Check-It distributed under the license in Section 2.1 (iii)
     ("Bundled Check-It License Fee"). In addition, SII shall pay NTI [***] of
     the then-current NTI U.S. List Price for each copy of Check-It distributed
     under the license in Section 2.1 (iv) ("Standalone Check-It License Fee"),
     and NTI discuss with SII on a case-by-case basis the possibility of
     adjusting this Standalone Check-It License Fee where necessary to obtain a
     deal with a potential End User.

3.   ModelCalibrator. SII shall pay NTI [***] of the then-current SII List Price
     ---------------
     for the Bundled Product for copy of the ModelCalibrator distributed
     hereunder ("ModelCalibrator License Fee"), but in no event less than [***]
     per copy.

4.   Floating License. SII shall pay [***] of the fees in Sections 1 through 3
     above, in any instance in which SII grants a Floating License to an End
     User.

License Fee-Free Licenses

     On the conditions that SII has made timely payments to NTI of the
Development Fees indicated in Exhibit D, NTI shall provide a total of three Keys
at no additional cost to SII at the time that SII makes it's first sale of SII
Combined Product to it's end-user customer.

Maintenance Fees

     In consideration of the support provided to SII by NTI under Section 7 of
this Agreement SII shall pay NTI the following Maintenance Fees:

1.   NTI Products. SII shall pay NTI annual Maintenance Fee equal to [***] of
     ------------
     the NTI Products License Fee. Thus, the NTI Products Maintenance Fees
     payable to NTI by SII shall be calculated as follows: SII then-current List
     Price for the SII Combined Products x [***], but in no event less than
     [***] per year per copy.

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

2.   Check-It. SII shall pay NTI annual Maintenance Fee equal to [***] of the
     --------
     Bundled Check-It License Fee ("BUNDLED CHECK-IT MAINTENANCE FEES"). Thus,
     the Check-It Maintenance Fees payable by SII to NTI shall be calculated as
     follows: NTI then-current US List-Price for Check-It x [***]. In addition,
     SII shall pay NTI annual Maintenance Fee equal to [***] of the Standalone
     Check-It License Fee ("STANDALONE CHECK-IT MAINTENANCE FEES"). Thus, the
     Standalone Check-It Maintenance Fees payable by SII to NTI shall be
     calculated as follows: NTI then-current U.S. List-Price for Check-It x
     [***].

     For distribution of Check-It to End Users pursuant to Section 2.1(iv) only,
     NTI agrees to waive the Standalone Check-It Maintenance Fees for the first
     year following the license of Check-It to End Users pursuant to Section
     2.1(iv).

3.   Model Calibrator. SII shall pay NTI annual Maintenance Fee equal to
     ----------------
     [***] of the ModelCalibrator License Fee. Thus, the ModelCalibrator
     Maintenance Fees payable to NTI by SII shall be calculated as follows: SII
     then-current List Price for the SII Combined Products x [***], but in no
     event less than [***] per year per copy.

PRICE LISTS.

     Within ten (10) days following the Effective Date of this Agreement, each
party agrees to provide its Price List to the other party. Each party is free to
set prices in their sole discretion. Within ten (10) days of making any changes
to the Price List ("Updated Price List"), each party shall make available to the
other party such Updated Price List.

Numerical Technologies, Inc. - Seiko Instruments, Inc.  21

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

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