EXHIBIT 10.25

 

VERISITY LTD.

2000 U.S. SHARE INCENTIVE PLAN, AMENDED AND RESTATED MAY 27, 2004

 

1. Adoption and Purpose of the Plan. This plan, to be known as the “Verisity
Ltd. 2000 U.S. Share Incentive Plan, Amended and Restated May 27, 2004” (the
“Plan”), has been adopted by the board of directors (the “Board”) of Verisity
Ltd., an Israeli corporation (the “Company”), and the shareholders of the
Company. The purpose of this Plan is to advance the interests of the Company and
its shareholders by enabling the Company to attract and retain qualified
Directors, Officers, Employees and Consultants by providing them with an
opportunity for investment in the Company. The options that may be granted
hereunder (“Options”) represent the right by the grantee thereof (“Optionee”) to
acquire Ordinary Shares of the Company (“Shares” which if acquired pursuant to
the exercise of an Option will be referred to as “Option Shares”) subject to the
terms and conditions of this Plan. Options granted hereunder may be either ISOs
or Nonstatutory Stock Options. In addition, Shares may be issued to Directors,
Officers, Employees and Consultants pursuant to Restricted Share Rights provided
for hereunder at the discretion of the Administrator. The terms of any Options
and Restricted Share Rights granted hereunder will be reflected in a written
Option Agreement or a Restricted Share Agreement, as applicable.

 

2. Certain Definitions. The defined terms set forth in Exhibit A attached hereto
and incorporated herein (together with other capitalized terms defined elsewhere
in this Plan) will govern the interpretation of this Plan.

 

3. Eligibility. The Company may grant Options and Restricted Share Rights under
this Plan only to persons who, at the time of such grant, are Directors,
Officers, Employees and/or Consultants of the Company and/or any of its
Subsidiaries (“Eligible Participants”). Subject to the provisions of section 4
of this Plan, there is no limitation on the number of Options or Restricted
Share Rights that may be granted to an Eligible Participant.

 

4. Shares Subject to the Plan. Subject to section 13 of this Plan, in no event
will the Company issue, in the aggregate, more than the sum of (i) Three
Million, Six Hundred and Five Thousand (3,605,000) Shares and (ii) Five Hundred
Thousand (500,000) Shares1 (collectively, the “OptionPool”) pursuant to the
exercise of all Options and Restricted Share Rights granted under this Plan,
less that number of Shares and Restricted

 

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1Such 500,000 Share pool was added to the Plan by resolution of the Board
effective April 15, 2003, subject to the limitation that such pool be reserved
solely for the issuance of Shares upon exercise of Nonstatutory Options, and not
ISOs. The aggregate number of Shares issued or reserved for issuance pursuant to
Options granted to persons other than Officers and Directors under this pool
must exceed fifty percent (50%) of the total number of shares issued or reserved
for issuance pursuant to Options granted under such pool as determined on April
15, 2006 and on each yearly anniversary thereafter.

 

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Share Rights that have been issued, or have been reserved for issuance, either
directly or pursuant to options granted, to Directors, Officers, Employees, or
Consultants of the Company and any of its Subsidiaries on or after August 30,
2000 under any other share option plan, share incentive plan, restricted share
or similar arrangement (except for the Employee Share Purchase Plan, the 2000
Israeli Share Option Plan and any equity plan, agreement or arrangement assumed
in connection with a merger or acquisition transaction), provided that the
Option Pool shall be deemed to include, and shall not be reduced by (and shall
be deemed to be increased by the Shares described in clause (ii) below): (i) any
Shares that may have been reserved for issuance and purchase pursuant to any
Option or Restricted Share Right granted under this Plan, but which Shares
remain unissued (and no longer reserved for issuance) upon the expiration or
cancellation for any reason of such Option or Right, or any portion thereof,
(ii) any Shares that may have been reserved for issuance and purchase pursuant
to any Option or Restricted Share Right granted under any such other plan or
similar arrangement (except for the Employee Share Purchase Plan, the 2000
Israeli Share Option Plan and any equity plan, agreement or arrangement assumed
in connection with a merger or acquisition transaction), but which Shares remain
unissued (and no longer reserved for issuance) upon the expiration or
cancellation for any reason, on or after August 30, 2000, of such Option or
Right, or any portion thereof, and (iii) any Shares that are retained by or
delivered to the Company upon exercise of an Option or Restricted Share Right as
consideration for the payment of all or a portion of the Option Price and/or Tax
Withholding Liability as contemplated by section 5(c) of this Plan.
Notwithstanding the foregoing, subject to section 13 of this Plan, in no event
will the Company issue, in the aggregate, more than Three Million, Six Hundred
and Five Thousand (3,605,000) Shares pursuant to the exercise of all ISOs that
are granted under this Plan. No Participant shall be issued, within any one-year
period, a number of Shares and/or Option Shares under the Plan that exceeds
500,000 shares (subject to section 13). At all times while Options granted under
this Plan are outstanding, the Company will reserve for issuance for the
purposes hereof a sufficient number of authorized and unissued Shares to fully
satisfy the Company’s obligations under all such outstanding Options.

 

5. Administration.

 

(a) This Plan will be administered and interpreted by the Board, or if the Board
so decides, then to the extent permissible under Israeli law including but not
limited to the Israeli Companies Law and Section 112 thereof, by a Committee
appointed by the Board for such purpose (the Board, or such Committee, referred
to herein as the “Administrator”). Any Committee shall consist solely of two or
more such Non-Employee Directors in accordance with Rule 16b-3, one of whom will
be an External Director if and to the extent required under the Israeli
Companies Law. Notwithstanding the foregoing, the Committee may consist of one
or more members of the Board but only with respect to the grant of Options and
Restricted Share Rights to eligible persons who (i) are not then subject to
Section 16 of the Exchange Act and/or (ii) are either (A) not

 

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then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Option or Restricted Share Rights
or (B) not persons with respect to whom the Company wished to comply with
Section 162(m) of the Code. If administration of this plan is delegated to a
Committee, the Committee shall have the powers theretofore possessed by the
Board to the extent permissible under the Israeli Companies Law. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. A majority of the members of the Board, or a Committee if so
appointed, shall constitute a quorum and all actions of the Board or Committee
shall be taken by a majority of the members present at any meeting. Any action
of the Board, or a Committee, may be taken by an instrument or instruments in
writing signed by all the members of the Board, or such Committee, and any
actions so taken shall be as effective as if it had been passed by a majority of
the votes cast by the members of the Board, or a Committee, present at a meeting
of such members duly called and held.

 

(b) Subject to the express terms and conditions hereof and to the extent
permissible under the Israeli Companies Law and Section 112 thereof, the
Administrator is authorized to prescribe, amend and rescind rules and
regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. Specifically,
the Administrator will have full and final authority in its discretion, subject
to the specific limitations on that discretion as are set forth herein and in
the Articles, at any time:

 

        (i) to select and approve the Eligible Participants to whom Options and
Restricted Share Rights will be granted; provided that no Option or Restricted
Share Right may be granted to any person after he or she ceases, or to any
entity after it ceases, for any reason, to be an Eligible Participant (a “Loss
of Eligibility Status”);

 

        (ii) to determine the Eligible Participants to whom and the time or
times at which Shares may be issued under Restricted Share Rights; to grant
Restricted Share Rights to such Eligible Participants; to determine the number
of Shares to be sold or transferred and the price per share (which shall not be
less than par value) and the method of payment for any Shares to be sold or
transferred pursuant to a Restricted Share Right; to subject any Shares
purchased pursuant to a Restricted Share Right to the Company’s right to
repurchase such Shares upon any Loss of Eligibility Status (a “Repurchase
Option”); to determine limitations on the Repurchase Option and the rate at
which any such Repurchase Option shall lapse; and to determine all additional
terms of the Restricted Share Agreement that are not otherwise inconsistent with
the Plan;

 

        (iii) to determine the Fair Market Value of the Shares as of the Grant
Date for any Option or Restricted Share Right; and

 

        (iv) with respect to each Option, to determine the terms and conditions
of the Option, to be set forth in the Option Agreement evidencing the Option
(the form of

 

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which also being subject to approval by the Administrator), which may vary from
the “default” terms and conditions set forth in section 7 below, except to the
extent otherwise provided, as follows:

 

                (a) the total number of Option Shares that may be acquired by
the Optionee pursuant to the Option;

 

                (b) if the Option would otherwise satisfy the conditions under
Section 422(b) of the Code, whether the Option will be treated as an ISO;

 

                (c) the per share purchase price to be paid to the Company by
the Optionee to acquire the Option Shares issuable upon exercise of the Option
(the “Option Price”);

 

                (d) the maximum period or term during which the Option will be
exercisable (the “Option Term”), provided that in no event may the Option Term
be longer than 10 years from the Grant Date;

 

                (e) whether to accept a promissory note, delivery of Shares
and/or Options, etc. as forms of legal consideration in addition to cash as
payment of all or a portion of the Option Price and/or Tax Withholding Liability
to be paid by the Optionee upon the exercise of an Option granted hereunder;

 

                (f) the maximum period following any Loss of Eligibility Status
with respect to the Optionee, whether resulting from his or her death,
disability or any other reason, during which period (the “Grace Period”) the
Option will be exercisable, subject to vesting as provided for in section 7(d)
below and to the expiration of the Option Term; and

 

                (g) the conditions (e.g., the passage of time or the occurrence
of events), if any, that must be satisfied prior to the vesting of the right to
exercise all or specified portions of an Option (such portions being described
as a percentage of the total number of Option Shares that may be acquired by the
Optionee pursuant to the Option; the vested portion being referred to as a
“Vested Option” and the unvested portion being referred to as an “Unvested
Option”).

 

6. Restricted Shares.

 

(a) Restricted Shares may be issued either alone or in tandem with the grant of
Options under the Plan. After the Administrator determines that it will offer
Restricted Shares under the Plan, it shall advise the selected Eligible
Participant in writing, by means of a Notice of Grant, of the terms, conditions
and restrictions related to the offer, including the number of Shares that the
Participant shall be entitled to receive and the price to be paid (which may be
as low per share as par value). The offer shall be

 

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accepted by a purchaser (the “Purchaser”) by the execution of a Restricted Share
Agreement in the form determined by the Administrator.

 

(b) Unless the Administrator determines otherwise and to the extent permissible
under the Israeli Companies Law, the Restricted Share Agreement shall grant the
Company a Repurchase Option. The purchase price for Shares repurchased pursuant
to the Restricted Share Agreement shall be the original price paid by the
Purchaser and may be paid by cancellation of any indebtedness of the Purchaser
to the Company.

 

7. Terms and Conditions of Option Agreements if not otherwise Specified. Unless
otherwise expressly provided in an Option Agreement based on the Administrator’s
determination pursuant to section 5(b) above, the following terms and conditions
will be the default provisions that apply to each Option as if expressly set
forth in the Option Agreement, provided that, if the Administrator grants an ISO
to an Eligible Participant, then in no event shall that Participant’s Option
Agreement modify the provisions of section 7(a):

 

(a) ISO. If granted to an Eligible Participant who, as of the Grant Date, is an
Employee of the Company or any Subsidiary (as determined under Section 3401(c)
of the Code), the Option will be subject to the following additional terms and
conditions in order to qualify as an ISO:

 

        (i) To the extent that the Fair Market Value of Option Shares
(determined as of the Grant Date) with respect to which all ISOs are exercisable
for the first time by any individual during any calendar year exceeds $100,000,
the Option will not be treated as an ISO.

 

        (ii) The Option Price will not be less than 100% of the Fair Market
Value of the Shares as of the Grant Date, except that if the Optionee is a 10%
shareholder the Option Price will not be less than 110% of the Fair Market Value
of the Shares as of the Grant Date, and the Option Term may not be more than
five (5) years.

 

        (iii) Notwithstanding any Grace Period selected by the Administrator
pursuant to section 5(b) above, or the provisions set out in this section 7, the
tax treatment available pursuant to Section 422 of the Code upon the exercise of
the ISO will not be available to an Optionee who exercises the Option more than
(i) three months following the Optionee’s Loss of Eligibility Status other than
by reason of his or her death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code), or (ii) 12 months following such
Optionee’s Loss of Eligibility Status by reason or his or her permanent and
total disability, whichever case may be applicable.

 

(b) Option Term. The Option Term will be for a period of 10 years beginning on
the Grant Date (subject to section 7(a) above in the case of an ISO granted to a
10% shareholder).

 

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(c) Grace Periods. Following a Loss of Eligibility Status:

 

        (i) the Grace Period will be 30 days, unless the Loss of Eligibility
Status is a result of a Just Cause Termination or the death or disability of the
Optionee;

 

        (ii) the Grace Period will be six months if the Loss of Eligibility
Status is a result of the death or disability of the Optionee; and

 

        (iii) the Option will terminate, and there will be no Grace Period,
effective immediately as of the date and time of a Loss of Eligibility Status
which results from a Just Cause Termination of the Optionee, regardless of
whether the Option is Vested or Unvested.

 

(d) Vesting. The Option initially will be deemed an entirely Unvested Option,
but portions of the Option will become a Vested Option on the following
schedule:

 

        (i) twenty-five percent (25%) will become a Vested Option as of the
first anniversary of the “Vesting Start Date” specified in the Option Agreement
(which may be earlier than the Grant Date specified therein); and

 

        (ii) two and one-twelfth percent (2-1/12%) of the Option will become a
Vested Option as of the end of each month thereafter, provided that the Optionee
does not suffer a Loss of Eligibility Status prior to each such vesting date and
provided further that additional vesting will be suspended during any period
while the Optionee is on a leave of absence from the Company, as determined by
the Administrator.

 

(e) Exercise of the Option; Issuance of Share Certificate.

 

        (i) The portion of the Option that is a Vested Option may be exercised
by giving written notice thereof to the Company, on such form as may be
specified by the Administrator, but in any event stating the Optionee’s
intention to exercise the Option; the date of exercise; the number of full
Option Shares to be purchased (which number will be no less than 100 Shares,
without regard to adjustments to the number of Shares subject to the Option
pursuant to section 13 below, or, if less, all of the remaining Shares subject
to the Option); the amount and form of payment of the Option Price. The notice
of exercise will be signed by the person or persons exercising the Option. In
the event that the Option is being exercised by the representative of the
Optionee, the notice will be accompanied by proof satisfactory to the Company of
the representative’s right to exercise the Option. The notice of exercise will
be accompanied by full payment of the Option Price for the number of Option
Shares to be purchased. The Administrator will determine the form of the
consideration that the Company will accept in payment of the Option Price. Such
consideration, in the Administrator’s sole discretion, may include (a) cash,
certified check, bank draft, money order or the equivalent in U.S. dollars
payable to the order of the Company; (b) delivery of other Shares which (i) in
the case of

 

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Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Option Price of the Shares as to
which said Option shall be exercised; (c) consideration received by the Company
under a cashless exercise program implemented by the Administrator, if it wishes
in its sole discretion, in connection with the Plan; or (d) such other
consideration (such as a promissory note) as approved by the Administrator.

 

        (ii) To the extent required by applicable federal, state, local or
foreign law, and as a condition to the Company’s obligation to issue any Shares
upon the exercise of the Option in full or in part, the Optionee will make
arrangements satisfactory to the Company for the payment of any applicable Tax
Withholding Liability that may arise by reason of or in connection with such
exercise. Such arrangements may include, in the Company’s sole discretion, that
the Optionee tender to the Company the amount of such Tax Withholding Liability,
in cash, by check made payable to the Company, or in the form of such other
payment as may be approved by the Administrator, in its discretion pursuant to
section 5(b) above. Similar arrangements shall be made by a Purchaser of Shares
pursuant to a Restricted Share Agreement at the time (or times) that the
Repurchase Option lapses, if so required by the Administrator.

 

        (iii) After receiving a proper notice of exercise, payment of the
applicable Option Price and Tax Withholding Liability and satisfaction of any
requirements under section 9, below, the Company will cause to be issued a
certificate or certificates for the Option Shares as to which the Option has
been exercised, registered in the name of the person rightfully exercising the
Option and the Company will cause such certificate or certificates to be
delivered to such person (also referred to as the Purchaser) or to the escrow
holder described in section 8, below

 

8. Escrow. For purposes of facilitating the enforcement of the Repurchase Option
set forth in this Plan or in any Restricted Share Agreement, the Administrator
may, at its discretion, require the Purchaser of Shares to deliver the
certificate(s) for such Shares with a stock power executed by him or her and by
his or her spouse, in blank, to the Secretary of the Company (or his or her
designee) to hold said certificate(s) and stock power(s) in escrow and to take
all such actions and to effectuate all such releases as are in accordance with
the terms of this Plan. The certificates may be held in escrow so long as the
Shares whose ownership they evidence are subject to any Repurchase Option under
this Plan or under a Restricted Share Agreement, and shall be released by the
escrow holder to a Purchaser when they are no longer subject to a Repurchase
Option under this Plan or under a Restricted Share Agreement. Each Purchaser
thereby acknowledges that the Secretary of the Company (or his or her designee)
is so appointed as the escrow holder with the foregoing authorities as a
material inducement to the grant of a Restricted Share Right under this Plan,
that the appointment is coupled with an interest, and that it accordingly will
be irrevocable. The escrow holder will not be liable to any party to a

 

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Restricted Share Agreement (or to any other party) for any actions or omissions
unless the escrow holder is grossly negligent relative thereto. The escrow
holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine.

 

9. Compliance with Law. Notwithstanding any other provision of this Plan,
Options and Restricted Share Rights may be granted pursuant to this Plan, and
Option Shares and Shares may be issued pursuant to the exercise thereof by a
Participant, only after and on the condition that there has been compliance with
all applicable United States federal and state securities laws, applicable
Israeli laws and, to the extent applicable, all applicable rules and regulations
of all share exchanges or quotation systems on which the Shares are listed or
posted for trading (together “Applicable Laws”). Except in any period (a
“Listing Period”) during which the Company’s Shares are listed or approved for
listing upon notice of issuance on a national securities exchange, or are
designated or approved for designation upon notice of issuance as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., in which the exchange or system has
been certified by rule or order of the California Commissioner of Corporations
pursuant to section 25100(o) of the Corporate Securities Law of 1968, as amended
(the “1968 Law”), each Option and Restricted Share Right granted under this Plan
shall comply with the provisions of section 25102(o) of the 1968 Law and the
regulations cited therein (specifically Regulations 260.140.41, 260.140.42,
260.140.45 and 260.140.46 of Title 10 of the California Code of Regulations),
and the Administrator shall take no action nor exercise its authority or
discretion hereunder except in strict compliance with such provisions, which
shall be deemed incorporated into this Plan by this reference, provided that
during any Listing Period such provisions shall not be deemed incorporated into
this Plan, in which case the Administrator shall be free to take action and to
exercise its authority and discretion hereunder without compliance with such
provisions. In addition to any other requirements hereunder, the Company’s
obligation to issue and deliver Shares under any Option or Restricted Share
Right is subject to the satisfaction of all requirements under Applicable Laws
in respect thereof and obtaining all regulatory approvals as the Company shall
determine to be necessary or advisable in connection with the authorization,
issuance and sale thereof. In this connection, the Company shall take all
reasonable steps to obtain such approvals and registrations as may be necessary
for the issuance of such Shares in compliance with Applicable Laws and for the
registration of such Shares. As a condition to the exercise of an Option or the
issuance of any Shares, the Company may impose various conditions, including a
requirement that the person exercising such Option or acquiring such Shares
represents and warrants, at the time of any such exercise or acquisition, that
the Shares are being acquired only for investment and without any present
intention to sell or distribute such Shares and other restrictions on such
Shares relating to employment or other matters as may be determined by the
Board. The Company may, upon advice of counsel to the Company, place legends on
share certificates issued under the Plan as counsel to the Company deems
necessary or advisable in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Shares.

 

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10. Restrictions on Transfer. No Option or Share (that is still subject to
restrictions under a Restricted Share Agreement) will be transferable by an
Optionee otherwise than by will or the laws of descent and distribution. During
the lifetime of a natural person who is granted an Option under this Plan, the
Option will be exercisable only by him or her. Notwithstanding anything else in
the Plan to the contrary, no Option Agreement will contain any provision which
is contrary to, or which modifies, the provisions of this Section 10.

 

11. Notices. Any notice to be given to the Company under the terms of an Option
Agreement or Restricted Share Right will be addressed to the Company (or the
Subsidiary for which the Participant renders services) at its principal
corporate office, Attention: Chief Financial Officer, or at such other address
as the Company (or such Subsidiary) may designate in writing. Any notice to be
given to a Participant will be addressed to him or her at the address provided
to the Company by such Participant. Any such notice will be deemed to have been
duly given if and when enclosed in a properly sealed envelope, addressed as
aforesaid, deposited, either postage prepaid in a post office or branch post
office regularly maintained by the local postal authority or prepaid with a
globally-recognized air courier.

 

12. Term of the Plan. The Plan will become effective on the date of its adoption
by the shareholders of the Company. The Plan will expire on the tenth (10th)
anniversary of the date of its adoption by the shareholders of the Company
unless it is terminated earlier pursuant to Section 18 of the Plan, after which
no more Options or Restricted Share Rights may be granted under the Plan,
although all outstanding Options and Restricted Share Rights granted prior to
such expiration or termination will remain subject to the provisions of the
Plan, and no such expiration or termination of the Plan will result in the
expiration or termination of any such Option or Restricted Share Right prior to
the expiration or early termination of the applicable Option Term or the term
set forth in the Restricted Share Right, as applicable.

 

13. Adjustments Upon Changes in Share Capital; Rights Offering.

 

(a) The number of Shares subject to the Plan, the number of Shares available
under Options and the Restricted Share Rights granted and the Option Price and
the price payable for Shares under the Restricted Share Right shall be adjusted
as determined by the Board in its discretion from time to time to reflect
adjustments in the number of Shares arising as a result of subdivisions, share
dividends, bonus shares, consolidations or reclassifications of the Shares or
other relevant changes in the authorized or issued capital of the Company. No
such adjustments will be required by reason of the issuance or sale by the
Company for cash or other consideration of additional Shares or securities
convertible into or exchangeable for Shares. No fractional Shares may be
purchased or issued hereunder. If a Participant is entitled to purchase a
fraction of a Share pursuant to

 

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an Option or Restricted Share Right such entitlement shall be rounded down to
the nearest whole number.

 

(b) If the Company proposes to issue or sell any securities to all of its then
current shareholders, each Optionee shall be deemed for purposes of such
issuance or offer to sell to be a shareholder of that number of Option Shares
that may be acquired by the Optionee pursuant to Vested Options held by such
Optionee (in addition to any Option Shares or other Shares actually held of
record by such Optionee).

 

14. Market Standoff. If in connection with any public offering of securities of
the Company, the Company, the Board and/or the underwriter or underwriters
managing such offering so request, then each Participant and each holder of
Option Shares and/or Shares will agree to not sell or otherwise transfer any
such Shares (other than Shares included in such underwriting) without the prior
written consent of such underwriter, for such period of time as may be requested
by the underwriter commencing on the effective date of the registration
statement filed with the Securities and Exchange Commission in connection with
such offering.

 

15. Change of Control Transactions. Except as otherwise provided in the Option
Agreement, Restricted Share Agreement or any contract of employment or
engagement between a Participant and the Company, in the event of a Change of
Control Transaction, the Company shall endeavor to cause the Successor Entity in
such transaction either to assume all of the Options which have been granted
hereunder and which are outstanding as of the consummation of such transaction
(the “Closing”), or to issue (or cause to be issued) in substitution thereof
comparable options of such Successor Entity (or of its parent or its
subsidiary). If the Successor Entity is unwilling to either assume such Options
or grant comparable options in substitution for such Options on terms that are
acceptable to the Company as determined by the Board in the exercise of its
discretion, then with respect to each outstanding Option, that portion of the
Option which remains Unvested that either (x) would have become Vested over the
12-month period immediately following the Closing, or (y) represents 50% of the
Unvested portion of the Option as of the Closing, whichever portion is smaller,
will become Vested immediately prior to such closing; and the Board may cancel
all outstanding Options, and terminate this Plan, effective as of the closing,
provided that it will notify all Optionees of the proposed Change of Control
Transaction a reasonable amount of time prior to the closing thereof so that
each Optionee will be given the opportunity to exercise the Vested portion of
his or her Option (after giving effect to the acceleration of such vesting
discussed above) prior to such closing. In the event of a Change of Control
Transaction, the Board will also have the discretion to cancel all or any part
of a Repurchase Option in effect with respect to any Purchaser’s Shares. For
purposes of this section 15, the term “Change of Control Transaction” means (a)
the sale of all or substantially all of the assets of the Company to any person
or entity that, prior to such sale, did not control, was not under common
control with, or was not controlled by, the Company, or (b) a merger

 

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or consolidation or other reorganization in which the Company is not the
surviving entity or becomes owned entirely by another entity, unless at least
fifty percent (50%) of the outstanding voting securities of the surviving or
parent corporation, as the case may be, immediately following such transaction
are beneficially held by such persons and entities in the same proportions as
such persons and entities beneficially held the outstanding voting securities of
the Company immediately prior to such transaction, or (c) the sale or other
change of beneficial ownership of the outstanding voting securities of the
Company such that any person or “group” as that term is defined under the
Exchange Act becomes the beneficial owner of more than 50% of the outstanding
voting securities of the Company.

 

16. Modification, Extension and Renewal of Options and Restricted Share Rights.
Subject to the terms and conditions and within the limitations of this Plan, the
Administrator may modify, extend or renew outstanding Options and Restricted
Share Rights granted under this Plan, or accept the surrender of outstanding
Options or Restricted Share Rights (to the extent not theretofore exercised) and
authorize the granting of new Options or Restricted Share Rights in substitution
therefor (to the extent not theretofore exercised). Notwithstanding the
foregoing, however, no modification of any Option or Restricted Share Right will
without the consent of the Participant, materially and adversely impair any
rights or obligations under any outstanding Option or Restricted Share Right.

 

17. Governing Law. The internal laws of the State of California (irrespective of
its choice of law principles) shall govern this Agreement. HOWEVER, THE
RELATIONSHIP OF THE PARTICIPANTS AS SHAREHOLDERS OF THE COMPANY, INCLUDING
WITHOUT LIMITATION ALL OF THEIR RIGHTS AND DUTIES ARISING UNDER THE COMPANY’S
ARTICLES, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ISRAEL, AND THE COMPANY
AND EACH PARTICIPANT HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF ISRAEL LOCATED IN TEL AVIV, IN RESPECT OF ANY DISPUTE OR MATTER
ARISING OUT OF OR CONNECTED WITH SUCH RELATIONSHIP AND THE ARTICLES.

 

18. Amendment and Discontinuance. The Board may amend, suspend or discontinue
this Plan at any time or from time to time; provided that no action of the Board
will cause ISOs granted under this Plan not to comply with Section 422 of the
Code unless the Board specifically declares such action to be made for that
purpose and provided further that no such action may, without the approval of
the shareholders of the Company, materially increase (other than by reason of an
adjustment pursuant to section 13) the benefits accruing to Eligible
Participants, or materially modify the category of, or eligibility requirements
for persons who are Eligible Participants. However, no such action may
materially and adversely impair any Option or Restricted Share Right previously
granted under this Plan without the consent of the Participant, nor may the
number of Shares subject to the Plan be reduced to a number that is less than
the

 

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aggregate number of Option Shares and Shares (i) that may be issued pursuant to
the exercise of all outstanding and unexpired Options or Restricted Share Rights
granted hereunder, and (ii) that have been issued and are outstanding pursuant
to the exercise of Options granted hereunder. The Board may create subplans
under this Plan or make changes to this Plan which are appropriate or necessary
by law to permit Directors, Officers, Employees or Consultants of the Company or
its Subsidiaries outside of the United States to participate in this Plan. The
Board in its sole discretion may also submit any other amendment to the Plan for
shareholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers. Nothing contained in the Plan or in the Option
Agreement or Restricted Share Agreement shall be construed so as to prevent the
Company or any Subsidiary from taking corporate action which is deemed by the
Company or the Subsidiary to be appropriate or in the Company’s best interest,
whether or not such action would have an adverse effect on the Plan.

 

19. No Shareholder or Employment Rights. No rights or privileges of a
shareholder in the Company are conferred by reason of the granting of an Option
or Share Purchase Right. No Optionee will become a shareholder in the Company
with respect to any Option Shares unless and until the Option has been properly
exercised and the Option Price has been fully paid as to the portion of the
Option exercised, and the name of the person rightfully exercising the Option
has been entered in the register of shareholders of the Company. The granting of
an Option or the grant of rights to a Participant pursuant to a Restricted Share
Right do not confer upon the Participant any right to continue in the employment
of the Company or any Subsidiary of the Company or on the Board, as the case may
be, nor does it interfere in any way with the right of the Participant or the
Company to terminate the Participant’s employment at any time or shareholders’
right to elect Directors.

 

20. Copies of Plan; Electronic Delivery. A copy of the Plan will be delivered to
each Participant at or before the time he, she or it executes an Option
Agreement or Restricted Share Agreement, as applicable. Notwithstanding any
other provision of the Plan, to the extent permitted by Applicable Law, the
Company may provide copies of the Plan and any other documentation or writing to
be delivered to any Participant or Eligible Participant (including Option
Agreements and Restricted Share Agreements) electronically, and, as determined
by the Administrator and permitted by Applicable Law, all notices and other
documentation or writing required to be provided by a Participant or Eligible
Participant to the Company may be transmitted electronically.

 

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VERISITY LTD.

2000 U.S. SHARE INCENTIVE PLAN, AMENDED AND RESTATED MAY 27, 2004

 

EXHIBIT A

 

DEFINITIONS

 

1. “10% shareholder” means a person who owns, either directly or indirectly by
virtue of the ownership attribution provisions set forth in Section 424(d) of
the Code at the time he or she is granted an Option, shares possessing more than
10% of the total combined voting power or value of all classes of equity of the
Company and/or of its Subsidiaries.

 

2. “1968 Law” has the meaning set forth in section 9 of the Plan.

 

3. “1933 Act” means the United States Securities Act of 1933, as amended.

 

4. “Administrator” has the meaning set forth in section 5(a) of the Plan.

 

5. “Applicable Laws” has the meaning set forth in section 9 of the Plan.

 

6. “Articles” means the Company’s Articles of Association, as amended.

 

7. “Board” has the meaning set forth in section 1 of the Plan.

 

8. “Change of Control Transaction” has the meaning set forth in section 15 of
the Plan.

 

9. “Code” means the United States Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to refer to Sections of
the Code as enacted at the time of the Plan’s adoption by the Board and as
subsequently amended, or to any substantially similar successor provisions of
the Code resulting from recodification, renumbering or otherwise).

 

10. “Company” has the meaning set forth in section 1 of the Plan.

 

11. “Committee” means a committee appointed by the Board in accordance with
section 5(a) of the Plan.

 

12. “Consultant” is as an individual who provides bona fide services (other than
relating to capital raising activities) to the Company or a Subsidiary but who
is not an Employee, Officer or Director.

 

13. “Covered Employee” means the chief executive officer and the four other
highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

 

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14. “Disability” means any physical or mental disability which results in a Loss
of Eligibility Status under applicable law, except that for purposes of section
9.3(c) of the Plan, the term “disability” means permanent and total disability
within the meaning of Section 22(e)(3) of the Code.

 

15. “Director” means a member of the Board.

 

16. “Eligible Participants” has the meaning set forth in section 3 of the Plan.

 

17. “Employee” means any person, including Officers and Directors, employed by
the Company or any Affiliate. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient to constitute “employment” by
the Company.

 

18. “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

 

19. “Fair Market Value” means, with respect to the Shares and as of the date
that is relevant to such a determination (e.g., on the Grant Date), the market
price per share of such Shares determined by the Administrator, consistent with
the requirements of Section 422 of the Code and to the extent consistent
therewith, as follows: (a) if the Shares are traded on a share exchange on the
date in question, then the Fair Market Value will be equal to the closing price
reported by the applicable composite-transactions report for such date; (b) if
the Shares are traded over-the-counter on the date in question and are
classified as a national market issue, then the Fair Market Value will be equal
to the last-transaction price on the Nasdaq National Market; (c) if the Shares
are traded over-the-counter on the date in question but are not classified as a
national market issue, then the Fair Market Value will be equal to the mean
between the last reported representative bid and asked prices quoted by Nasdaq
for such date; and (e) if none of the foregoing provisions is applicable, then
the Fair Market Value will be determined by the Administrator in good faith on
such basis as it deems appropriate.

 

20. “Grace Period” has the meaning set forth in section 5(b)(iv) of the Plan.

 

21. “Grant Date” means, with respect to an Option, the date set forth in that
Option Agreement as the “Grant Date” and, with respect to a Share, the date set
forth in that Restricted Share Agreement as the “Grant Date.”

 

22. “ISO” means an “incentive share option” as defined in Section 422 of the
Code.

 

23. “Just Cause Termination” means a termination by the Company and/or any of
its Subsidiaries of the Optionee’s employment or services (or if the Optionee is
a Director, removal of him or her from the Board by action of the shareholders
or, if permitted by applicable law and the bylaws of the Company, the other
Directors), in connection with the good faith determination of the Board (or of
the Company’s shareholders if the Optionee is a Director and the removal of him
or her from the Board is by action of the

 

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shareholders, but in either case excluding the vote of the subject individual if
he or she is a Director or a shareholder) that the Optionee has engaged in any
acts involving dishonesty or moral turpitude or in any acts that materially and
adversely affect the business, affairs or reputation of the Company or any of
its Subsidiaries.

 

24. “Listing Period” has the meaning set forth in section 9 of the Plan.

 

25. “Loss of Eligibility Status” has the meaning set forth in section 5(b)(i) of
the Plan.

 

26. “Non-Employee Director” means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or Subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
Subsidiary for services rendered as a Consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the 1933 Act), does
not possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K or (ii) is otherwise considered a “non-employee director” for
purposed of Rule 16b-3.

 

27. “Nonstatutory Stock Option” means an Option not intended to qualify as an
ISO.

 

28. “Notice of Grant” means a written notice evidencing certain terms and
conditions of an individual Share Purchase Right grant.

 

29. “Officer” means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

 

30. “Option Agreement” means an agreement pursuant to which an Optionee is
granted Options to purchase Option Shares pursuant to the Plan.

 

31. “Option Price” has the meaning set forth in section 5(b)(iv) of the Plan.

 

32. “Option Shares” has the meaning set forth in section 1 of the Plan.

 

33. “Option Term” has the meaning set forth in section 5(b)(iv) of the Plan.

 

34. “Optionee” has the meaning set forth in section 1 of the Plan.

 

35. “Options” has the meaning set forth in section 1 of the Plan.

 

36. “Participant” means Eligible Participants to whom Options are granted
pursuant to the Plan or to whom a Share Purchase Right has been granted.

 

37. “Plan” has the meaning set forth in section 1 of the Plan.

 

38. “Purchaser” has the meaning set forth in section 6(a) of the Plan.

 

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39. “Repurchase Option” has the meaning set forth in section 5(b)(ii) of the
Plan.

 

40. “Restricted Share Agreement” means a written agreement between the Company
and the grantee of a Share Purchase Right evidencing the terms and restrictions
applying to Shares to be purchased under a Share Purchase Right. The Restricted
Share Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

 

41. “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the Plan.

 

42. “Shares” means the Ordinary Shares of the Company or, in the event of an
adjustment contemplated in section 13 hereof, such other securities to which an
Eligible Participant may be entitled upon the exercise of an Option or a Share
Purchase Right as a result of such adjustment.

 

43. “Share Purchase Right” means the right to purchase Shares pursuant to
section 6 of the Plan, as evidenced in the Notice of Grant.

 

44. “Subsidiary” has the same meaning as “subsidiary corporation” as defined in
Section 424(f) of the Code.

 

45. “Successor Entity” means a corporation or other entity that acquires all or
substantially all of the assets of the Company, or which is the surviving or
parent entity resulting from Change of Control Transaction, as that term is
defined in section 15 of the Plan.

 

46. “Tax Withholding Liability” in connection with the exercise, sale or
repurchase of any Option or Option Shares means United States federal or state
income taxes, social security taxes, employment taxes and any other taxes
(together with any interest or penalties applicable thereon) related to any
compensation income arising from the transaction required by applicable law to
be withheld by the Company.

 

47. “Unvested Option” has the meaning set forth in section 5(b)(iv) of the Plan.

 

48. “Vested Option” has the meaning set forth in section 5(b)(iv) of the Plan.

 

Date Plan Adopted by Board of Directors: 11 October , 2000

 

Date Plan Approved by the Shareholders: 18 October , 2000

 

Date Plan Amended by Board of Directors: 17 April , 2002

 

Date Amended Plan Approved by the Shareholders: 04 June , 2002

 

Date Amended Plan Amended by Board of Directors: 30 March , 2004

 

Date Amended Plan Approved by the Shareholders: 27 May , 2004

 

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