Document:

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                                                                   Exhibit 10.31

                               Verisity Limited
                       2000 Employee Share Purchase Plan

1.  Purpose.  The purpose of the Plan is to provide employees of the Company
    -------
with an opportunity to purchase Ordinary Shares of the Company through
accumulated payroll deductions. In light of the substantial anticipated
participation of United States employees, it is the intention of the Company to
have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of
the United States Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed in a manner consistent with the
requirements of that section of the Code.

2.  Definitions.
    -----------

    (a)  "Board" shall mean the board of directors of the Company or any
committee appointed pursuant to Section 14.

    (b)  "Code" shall mean the United States Internal Revenue Code of 1986, as
amended.

    (c)  "Company" shall mean Verisity Ltd., an Israeli corporation, and any
Designated Subsidiary of the Company.

    (d)  "Compensation" shall mean all base gross earnings, exclusive of
payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses and other compensation.

    (e)  "Designated Subsidiary" shall mean Verisity Design, Inc., a Delaware
corporation, and any other Subsidiary that has been designated by the Board from
time to time in its sole discretion as eligible to participate in the Plan.

    (f)  "Employee" shall mean any individual who is an employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by contract, the
employment relationship, for purposes of this Plan, shall be deemed to have
terminated on the 91st day of such leave.

    (g)  "Enrollment Date" shall mean the first day of each Offering Period.

    (h)  "Exercise Date" shall consist of four days in each Offering Period. For
Offering Periods beginning on the first Trading Day on or after January 1, the
four Exercise Dates are the last Trading Day in the period ending on (i) the
first following

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     June 30; (ii) the first following December 31; (iii) the second following
     June 30; and (iv) the second following December 31. For Offering Periods
     beginning on the first Trading Day on or after July 1, the four Exercise
     Dates are last Trading Day in the period ending on (i) first following
     December 31; (ii) the first following June 30; (iii) the second following
     December 31; and (iv) the second following June 30. For purpose of
     determining the Exercise Dates for the initial Offering Period under this
     Plan, the Exercise Dates shall be determined as if such initial Offering
     Period commences on January 1, 2001.

          (i)  "Fair Market Value" shall mean, as of any date, the value of
     Ordinary Shares determined as follows:

               (i)   If the Ordinary Shares are listed on any established stock
     exchange or a national market system, including without limitation the
     Nasdaq National Market or the Nasdaq SmallCap Market, their Fair Market
     Value shall be the closing sales price for such shares (or the closing bid,
     if no sales were reported) as quoted on such exchange or system on the date
     of such determination (or, if such date is not a Trading Day, then on the
     first Trading Day immediately prior to such date), as reported in The Wall
     Street Journal or such other source as the Board deems reliable; or

               (ii)  If the Ordinary Shares are regularly quoted by a recognized
     securities dealer but selling prices are not reported, their Fair Market
     Value shall be the mean of the closing bid and asked prices for the
     Ordinary Shares on the date of such determination, as reported in The Wall
     Street Journal or such other source as the Board deems reliable; or

               (iii) In the absence of an established market for the Ordinary
     Shares, the Fair Market Value thereof shall be determined in good faith by
     the Board.

               (iv)  For purposes of the Enrollment Date of the first Offering
     Period under the Plan, the Fair Market Value shall be the initial price to
     the public as set forth in the final prospectus included within the
     registration statement on Form S-1 filed with the Securities and Exchange
     Commission for the initial public offering of the Company's Ordinary Shares
     (the "Registration Statement").

          (j)  "New Exercise Date" shall have the meaning set out in Section
     19(b).

          (k)  "Ordinary Shares" shall mean the ordinary shares of Verisity Ltd.

          (l)  "Offering Period" shall mean overlapping periods of approximately
     twenty four (24) months commencing (i) on the first Trading Day on or after
     each January 1 during the term of this Plan and terminating on the last
     Trading Day in the period ending the second following December 31, and (ii)
     on the first Trading Day on or after each July 1 during the term of this
     Plan and terminating on the last Trading Day in the period ending the
     second following June 30; provided, however, that the initial Offering
     Period

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     under the Plan shall commence with the first Trading Day on or after the
     date on which the Securities and Exchange Commission declares the Company's
     Registration Statement effective and shall terminate on the last Trading
     Day on or before December 31, 2002.  The duration of Offering Periods may
     be changed pursuant to Section 4 of this Plan.  Notwithstanding anything in
     this Plan to the contrary, if on any Exercise Date in an Offering Period,
     the Fair Market Value of the Ordinary Shares is less than the Fair Market
     Value of the Ordinary Shares on the Enrollment Date of such Offering
     Period, the Offering Period shall terminate on the day after such Exercise
     Date.  All Participants in such terminated Offering Period shall be
     automatically enrolled in the Offering Period that is then immediately
     commencing.

          (m)  "Participant" shall mean an eligible Employee who has completed
     and filed an enrollment form at the time and in the manner required by the
     Company for participation in the Plan.

          (n)  "Plan" shall mean the Verisity Ltd. 2000 Employee Share Purchase
     Plan.

          (o)  "Purchase Price" shall mean an amount equal to 85 percent of the
     Fair Market Value of an Ordinary Share on the Enrollment Date or on each
     Exercise Date during an Offering Period, whichever is lower; provided,
     however, that the Purchase Price may be adjusted by the Board pursuant to
     Section 20.

          (p)  "Reserves" shall mean the number of Ordinary Shares covered by
     each option under the Plan which have not yet been exercised and the number
     of Ordinary Shares which have been authorized for issuance under the Plan
     but not yet placed under option.

          (q)  "Subsidiary" shall mean a corporation, domestic or foreign, of
     which not less than 50 percent of the voting shares are held by the Company
     or a Subsidiary of the Company, whether or not such corporation now exists
     or is hereafter organized or acquired by the Company or a Subsidiary of the
     Company.

          (r)  "Trading Day" shall mean a day on which national stock exchanges
     and the Nasdaq National Market are open for trading.

     3.   Eligibility.
          -----------

          (a)  Any Employee who shall be employed by the Company on a given
     Enrollment Date shall be eligible to participate in the Plan.

          (b)  Any provisions of the Plan to the contrary notwithstanding, no
     Employee shall be granted an option under the Plan (i) to the extent that,
     immediately after the grant, such Employee (or any other person whose
     shares would be attributed to such Employee pursuant to Section 424(d) of
     the Code) would own capital shares of the Company and/or hold outstanding
     options to purchase such shares possessing five percent (5%) or more of

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     the total combined voting power or value of all classes of the capital
     shares of the Company or of any Subsidiary, or (ii) to the extent that his
     or her rights to purchase shares under the Plan (and all other employee
     share purchase plans of the Company and its Subsidiaries) accrues at a rate
     which exceeds Twenty-Five Thousand United States Dollars (US$25,000) worth
     of shares (determined at the Fair Market Value of the shares at the time
     such option is granted) for each calendar year in which such option is
     outstanding at any time.

     4.  Offering Periods. The Plan shall be implemented through Offering
         ----------------
     Periods. The Board shall have the power to change the duration of future
     Offering Periods (including the commencement dates thereof) without
     shareholder approval if such change is announced at least five (5) days
     prior to the beginning (or previously scheduled beginning, if earlier) of
     the first Offering Period to be affected.

     5.  Participation.
         -------------

         (a)  All eligible Employees are automatically enrolled in the Plan at
     the time of its adoption. To confirm his or her level of participation,
     each automatic enrollee shall file an enrollment form in the form of
     Exhibit A to this Plan by January 1, 2001 or 30 days after the first day of
     the initial Offering Period under this Plan, whichever is later. In
     addition to the automatic enrollees, all other eligible Employees may
     become Participants in the Plan by completing these enrollment forms and
     filing such forms with the Company's payroll office prior to the applicable
     Enrollment Date. A Participant's enrollment form shall remain in effect
     automatically for each successive Offering Period commencing at the end of
     the Participant's prior Offering Period unless such enrollment is
     terminated as provided in Section 10.

         (b)  Payroll deductions for a Participant shall commence on the first
     payroll following the Enrollment Date and shall end on the last payroll in
     the Offering Period to which such authorization is applicable, unless
     sooner terminated by the Participant as provided in Section 10.

     6.  Payroll Deductions.
         ------------------

         (a)  Employees who have been automatically enrolled at the time of the
     Plan's initial adoption will not be subject to payroll deductions (until
     the filing of the enrollment form described above). At the time a
     Participant files his or her enrollment form (including an Employee who was
     automatically enrolled), he or she shall elect to have payroll deductions
     made on each pay day during the Offering Period in an amount not exceeding
     fifteen percent (15%) of the Compensation which he or she receives on each
     pay day during the Offering Period. Payroll deductions shall be made after
     taxes, even though the amount of each Participant's deduction shall be
     based on pretax income.

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          (b)  All payroll deductions made for a Participant shall be credited
     to his or her account under the Plan and shall be withheld in whole
     percentages only. A Participant may not elect to have payroll deductions in
     a percentage amount other than a whole number and may not elect to make any
     additional payments into such account.

          (c)  A Participant (including an automatic enrollee under Section
     5(a)) may discontinue his or her participation in the Plan as provided in
     Section 10, or may increase or decrease the rate of his or her payroll
     deductions during the Offering Period, by completing and filing with the
     Company a revised enrollment form. The Board may, in its discretion, limit
     the number of Participant rate changes during any Offering Period. The
     change in rate shall be effective with the first full payroll period
     following five (5) business days after the Company's receipt of the new
     enrollment form unless the Board elects to process a given change in
     participation more quickly.

          (d)  Notwithstanding the foregoing, to the extent necessary to comply
     with Section 423(b)(8) of the Code and Section 3(b), a Participant's
     payroll deductions may be decreased to zero percent (0%) at any time during
     an Offering Period. Payroll deductions shall recommence at the rate
     provided in such Participant's enrollment form on the date following an
     Exercise Date provided that the subsequent Exercise Date is scheduled to
     end in the following calendar year, unless terminated by the Participant as
     provided in Section 10.

          (e)  At the time the option is exercised, in whole or in part, or at
     the time some or all of the Company's Ordinary Shares issued under the Plan
     are disposed of, the Participant must make adequate provision for the
     Company's federal, state, or other tax withholding obligations, if any,
     which arise upon the exercise of the option or the disposition of the
     Ordinary Shares. At any time, the Company may, but shall not be obligated
     to, withhold from the Participant's compensation the amount necessary for
     the Company to meet applicable withholding obligations, including any
     withholding required to make available to the Company any tax deductions or
     benefits attributable to sale or early disposition of Ordinary Shares by
     the Participant. Notwithstanding the foregoing, the Company's duty to
     perform its obligations under this Plan are conditional upon the
     Participant making provision to satisfy his or her applicable tax
     obligations and/or liability in a manner that is acceptable to the Company.

     7.  Grant of Option.  On the Enrollment Date of each Offering Period, each
         ---------------
     Participant shall be granted an option to purchase on each of the Exercise
     Dates of such Offering Period at the applicable Purchase Price up to a
     number of the Company's Ordinary Shares determined by dividing such
     Participant's payroll deductions which have been accumulated prior to such
     Exercise Date and retained in the Participant's account as of the Exercise
     Date by the applicable Purchase Price (or as described in Section 8 below
     with respect to automatic enrollees). Exercise of the option shall occur as
     provided in

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     Section 8, unless the Participant has withdrawn pursuant to Section 10. The
     option shall expire immediately after the final Exercise Date in the
     Offering Period.

     8.  Exercise of Option.  Unless a Participant withdraws from the Plan as
         ------------------
     provided in Section 10, his or her option for the purchase of shares shall
     be exercised automatically on each of the successive Exercise Dates in the
     Offering Period. On such Exercise Date, the maximum number of full shares
     subject to the option shall be purchased for such Participant at the
     applicable Purchase Price with the accumulated payroll deductions in his or
     her account. No fractional shares shall be purchased; any payroll
     deductions accumulated in a Participant's account which are not sufficient
     to purchase a full share shall be retained in the Participant's account for
     the subsequent Exercise Date or Offering Period. Any other cash left over
     in a Participant's account after the Offering Period shall be returned to
     the Participant. During a Participant's lifetime, a Participant's option to
     purchase shares hereunder is exercisable only by him or her.
     Notwithstanding the above, as no payroll deductions will be made for
     automatic enrollees (until they have duly filed enrollment forms) each
     automatic enrollee who has not filed an enrollment form shall purchase with
     a lump-sum cash payment that number of whole Ordinary Shares at the
     Purchase Price that can be acquired with 15% of such enrollee's
     Compensation calculated from the beginning of the initial Offering Period
     through the initial Exercise Date.

     9.  Delivery. As promptly as practicable after each Exercise Date on which
         --------
     a purchase of shares occurs, the Company shall arrange the delivery to each
     Participant, as appropriate, of a notification of the amount of shares
     purchased upon exercise of his or her option. The Company may elect to
     deliver share certificates to the Participant representing such purchase of
     shares or may record such purchase and ownership of shares by any other
     method that comports with applicable law.

     10. Withdrawal.
         ----------

         (a)  A Participant may withdraw all but not less than all the payroll
     deductions credited to his or her account and not yet used to exercise his
     or her option under the Plan at any time by giving written notice to the
     Company in the form of Exhibit B to this Plan. All of the Participant's
     payroll deductions credited to his or her account shall be paid to such
     Participant promptly after receipt of notice of withdrawal and such
     Participant's option for the Offering Period shall be automatically
     terminated, and no further payroll deductions for the purchase of shares
     shall be made for such Offering Period. If a Participant withdraws from an
     Offering Period, payroll deductions shall not resume at the beginning of
     any succeeding Offering Period unless the Participant delivers to the
     Company a new enrollment form within the time periods and in the form
     specified by the Company.

         (b)  A Participant's withdrawal from an Offering Period shall not have
     any effect upon his or her eligibility to participate in any similar plan
     which may hereafter be

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     adopted by the Company, or in succeeding Offering Periods which commence
     after the termination of the Offering Period from which the Participant
     withdraws provided such Participant delivers a new enrollment form.

     11.  Termination of Employment.  Upon a Participant's ceasing to be an
          -------------------------
     Employee for any reason, he or she shall be deemed to have elected to
     withdraw from the Plan and the payroll deductions credited to such
     Participant's account during the Offering Period but not yet used to
     exercise the option shall be returned to such Participant or, in the case
     of his or her death, to the person or persons entitled thereto under
     Section 15, and such Participant's option shall be automatically
     terminated. The preceding sentence notwithstanding, a Participant who
     receives payment in lieu of notice of termination of employment shall be
     treated as continuing to be an Employee for the Participant's customary
     number of hours per week of employment during the period in which the
     Participant is subject to such payment in lieu of notice.

     12.  Interest.  No interest shall accrue on the payroll deductions of a
          --------
     Participant in the Plan.

     13.  Shares.
          ------

          (a)  Subject to adjustment upon changes in capitalization of the
     Company as provided in Section 19, the maximum number of the Company's
     Ordinary Shares which shall be made available for sale under the Plan shall
     be one million (1,000,000) shares. If, on a given Exercise Date, the number
     of shares with respect to which options are to be exercised exceeds the
     number of shares then available under the Plan, the Board shall make a pro
     rata allocation of the shares remaining available for purchase in as
     uniform a manner as shall be practicable and as it shall determine to be
     equitable.

          (b)  The Participant shall have no interest or voting right in shares
     covered by his option until such option has been exercised.

          (c)  Shares to be delivered to a Participant under the Plan shall be
     registered only in either the name of the Participant or in the name of the
     Participant and his or her spouse (or in a revocable trust established for
     estate planning purposes for such Participant or for such Participant and
     his or her spouse).

     14.  Administration.  The Plan shall be administered by the Board or, to
          --------------
     the extent permissible by law, a committee of Board members appointed by
     the Board. The Board shall have full and exclusive discretionary authority
     to construe, interpret and apply the terms of the Plan, to determine
     eligibility and to adjudicate all disputed claims filed under the Plan,
     including the power to delegate this authority to any subcommittee of the
     board established to administer the Plan. Every finding, decision and
     determination made by the Board shall, to the full extent permitted by law,
     be final and binding upon all parties.

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     15.  Designation of Beneficiary.
          --------------------------

          (a)  A Participant may file a written designation of a beneficiary who
     is to receive any shares and cash, if any, from the Participant's account
     under the Plan in the event of such Participant's death. In addition, a
     Participant may file a written designation of a beneficiary who is to
     receive any cash from the Participant's account under the Plan in the event
     of such Participant's death prior to exercise of the option. If a
     Participant is married and the designated beneficiary is not the spouse, an
     executed spousal consent form shall be required for such designation to be
     effective.

          (b)  Such designation of beneficiary may be changed by the Participant
     at any time by written notice. In the event of the death of a Participant
     and in the absence of a beneficiary validly designated under the Plan who
     is living at the time of such Participant's death, the Company shall
     deliver such shares and cash to the executor or administrator of the estate
     of the Participant, or if no such executor or administrator has been
     appointed (to the knowledge of the Company), the Company, in its
     discretion, may deliver such shares and cash to the spouse or to any one or
     more dependents or relatives of the Participant, or if no spouse, dependent
     or relative is known to the Company, then to such other person as the
     Company may designate.

     16.  Transferability.  Neither payroll deductions credited to a
          ---------------
     Participant's account nor any rights with regard to the exercise of an
     option or to receive shares under the Plan may be assigned, transferred,
     pledged or otherwise disposed of in any way (other than by will, the laws
     of descent and distribution or as provided in Section 15) by the
     Participant. Any such attempt at assignment, transfer, pledge or other
     disposition shall be without effect, except that the Company may treat such
     act as an election to withdraw in accordance with Section 10.

     17.  Use of Funds.  All payroll deductions received or held by the Company
          ------------
     under the Plan may be used by the Company for any corporate purpose, and
     the Company shall not be obligated to segregate such payroll deductions.

     18.  Reports.  Individual accounts shall be maintained for each Participant
          -------
     in the Plan. Statements of account shall be given to participating
     Employees at least annually, which statements shall set forth the amounts
     of payroll deductions, the Purchase Price, the number of shares purchased
     and the remaining cash balance, if any.

     19.  Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
          ---------------------------------------------------------------------
     Merger or Asset Sale.
     --------------------

          (a)  Changes in Capitalization.  Subject to any required action by the
               -------------------------
     shareholders of the Company, the Reserves, the maximum number of shares
     each Participant may purchase per Exercise Date (pursuant to Section 7) and
     the price per share and number of Ordinary Shares covered by each option
     under the Plan which has not yet been exercised

                                      -8-
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     shall be proportionately adjusted for any increase or decrease in the
     number of issued shares of Ordinary Shares resulting from a share split,
     reverse share split, share dividend, bonus shares, recapitalization,
     combination or reclassification of the Ordinary Shares, or any other
     increase or decrease in the number of Ordinary Shares effected without
     receipt of consideration by the Company; provided, however, that conversion
     of any convertible securities of the Company shall not be deemed to have
     been "effected without receipt of consideration." Such adjustment shall be
     made by the Board, whose determination in that respect shall be final,
     binding and conclusive. Except as expressly provided herein, no issuance by
     the Company of shares of any class, or securities convertible into shares
     of any class, shall affect, and no adjustment by reason thereof shall be
     made with respect to, the number or price of Ordinary Shares subject to an
     option.

          (b)  Dissolution or Liquidation. In the event of the proposed
               --------------------------
     dissolution or liquidation of the Company, the Offering Period then in
     progress shall be shortened by setting a new Exercise Date (the "New
     Exercise Date"), and shall terminate immediately prior to the consummation
     of such proposed dissolution or liquidation, unless provided otherwise by
     the Board. The New Exercise Date shall be before the date of the Company's
     proposed dissolution or liquidation. The Board shall notify each
     Participant in writing, at least ten (10) business days prior to the New
     Exercise Date, that the Exercise Date for the Participant's option has been
     changed to the New Exercise Date and that the Participant's option shall be
     exercised automatically on the New Exercise Date, unless prior to such date
     the Participant has withdrawn from the Offering Period as provided in
     Section 10.

          (c)  Merger or Asset Sale.  In the event of a proposed sale of all or
               --------------------
     substantially all of the assets of the Company, or the merger of the
     Company with or into another corporation, each outstanding option shall be
     assumed or an equivalent option substituted by the successor corporation or
     a Parent or Subsidiary of the successor corporation.  In the event that the
     successor corporation refuses to assume or substitute for the option, the
     Offering Period then in progress shall be shortened by setting a New
     Exercise Date and following the procedures set out in Section 19(b), above.

     20.  Amendment or Termination.
          ------------------------

          (a)  The Board may at any time and for any reason terminate or amend
     the Plan. Except as provided in Section 19, however, no such termination
     shall affect options previously granted, except that the Board may
     terminate an Offering Period on any date if it determines that such
     termination is in the best interests of the Company and its shareholders.
     Except as provided in Section 19 and Section 20, no amendment may make any
     change in any option theretofore granted which adversely affects the rights
     of any Participant.

                                      -9-
<PAGE>

          (b)  Without shareholder consent and without regard to whether any
     Participant rights may be considered to have been adversely affected, the
     Board shall be entitled to change the Offering Periods, revise the Exercise
     Dates, limit the permitted frequency and number of changes in the amount
     withheld during an Offering Period, establish the exchange ratio applicable
     to amounts withheld in a currency other than U.S. dollars, permit payroll
     withholding in excess of the amount designated by a Participant in order to
     adjust for delays or mistakes in the Company's processing of properly
     completed withholding elections, establish reasonable waiting and
     adjustment periods and accounting and crediting procedures to ensure that
     amounts applied toward the purchase of Ordinary Shares for each Participant
     properly correspond with amounts withheld from the Participant's
     Compensation, and establish such other limitations or procedures as the
     Board determines in its sole discretion advisable and which are consistent
     with the Plan.

          (c)  In the event the Board determines that the ongoing operation of
     the Plan may result in unfavorable financial accounting consequences, the
     Board may, in its discretion, modify or amend the Plan to reduce or
     eliminate such accounting consequences, including, but not limited to:

               (i)  altering the Purchase Price applicable during any Offering
     Period including an Offering Period underway at the time of the change in
     Purchase Price; and

               (ii) shortening any Offering Period so that Offering Period ends
     on a new Exercise Date, including an Offering Period underway at the time
     of the Board action.

     Any such modifications or amendments under this Section 20 shall not
     require shareholder approval or the consent of any Plan Participants unless
     otherwise required under Section 423 of the Code or any other applicable
     law, regulation or stock exchange rule.

     The Board may from time to time designate a Subsidiary as a Designated
     Subsidiary wherein Employees of the Designated Subsidiary will participate
     in this Plan. However, if application of the Plan to any Designated
     Subsidiary operates to compromise or violate the equal rights and
     privileges requirement under Section 423, due to operation or requirements
     of governing law in the jurisdiction of such Subsidiary or any other
     reason, then that Designated Subsidiary will automatically be removed from
     the Plan and any Employees of such Subsidiary will be terminated from the
     Plan.

     21.  Notices.  All notices or other communications by a Participant to
          -------
     the Company under or in connection with the Plan shall be deemed to have
     been duly given when received in the form specified by the Company at the
     location, or by the person, designated by the Company for the receipt
     thereof.

     22.  Conditions Upon Issuance of Shares.  Shares shall not be issued with
          ----------------------------------
     respect to an option unless the exercise of such option and the issuance
     and delivery of such shares
                                      -10-
<PAGE>

pursuant thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the Israeli Securities Law, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or national market system upon which the shares may then be listed.

As a condition to the exercise of an option, the Company may require the person
exercising such option to make such representations and warranties at the time
of any such exercise that the Company determines are required under any
applicable law including, but not limited to, that the shares are being
purchased only for investment and without any present intention to sell or
distribute such shares.

23.  Term of Plan.  The Plan shall become effective upon the earlier to occur
     ------------
of its adoption by the Board or its approval by the shareholders of the Company.
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 20.

24.  General Provisions.
     ------------------

     (a)  Nothing in the Plan shall confer upon any Participant any right to
continue in the employ of the Company or any affiliate of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any affiliate of the Company employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.

     (b)  With respect to any Participant who is an employee of Verisity Design,
Inc., the provisions of the Plan shall be governed by the laws of the State of
California without resort to that state's conflict-of-laws rules. With respect
to all other Participants, the provisions of the Plan shall be governed by the
laws of the State of Israel without resort to that state's conflict-of-law's
rules. NOTWITHSTANDING ANYTHING ABOVE TO THE CONTRARY, THE PARTIES ACKNOWLEDGE
AND AGREE THAT THE RELATIONSHIP OF ALL PARTICIPANTS AS SHAREHOLDERS OF THE
COMPANY, INCLUDING WITHOUT LIMITATION ALL OF THEIR RIGHTS AND DUTIES ARISING
UNDER THE COMPANY'S ARTICLES OF ASSOCIATION, SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF ISRAEL, AND EACH SUCH 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.

                                      -11-
<PAGE>

                                   Exhibit A

                                 Verisity Ltd.

                       2000 Employee Share Purchase Plan

                                Enrollment Form

_____ Original Application                   Enrollment Date:  _______

_____ Change in Payroll Deduction Rate       Dated:  ___________

_____ Change of Beneficiary(ies)

     1.   I, _____________________________________, hereby elect to participate
in the Verisity Ltd. 2000 Employee Share Purchase Plan (the "Employee Share
Purchase Plan") and subscribe to purchase shares of the Company's Ordinary
Shares in accordance with this Enrollment Form and the Employee Share Purchase
Plan.

     2.   I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 15%) during the Offering
Period in accordance with the Employee Share Purchase Plan. (Please note that no
fractional percentages are permitted.)

     3.   I understand that said payroll deductions shall be accumulated for the
purchase of Ordinary Shares at the applicable Purchase Price determined in
accordance with the Employee Share Purchase Plan. I understand that if I do not
withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option on each Exercise Date during the
Offering Period.

     4.   I have received a copy of the complete Employee Share Purchase Plan. I
understand that my participation in the Employee Share Purchase Plan is in all
respects subject to the terms of the Plan. I understand that my ability to
exercise the option under this Subscription Agreement is subject to shareholder
approval of the Employee Share Purchase Plan.

     5.   Shares purchased for me under the Employee Share Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse
only):_____________________________________________________________.

     6.   I understand that if I dispose of any shares received by me pursuant
to the Plan within two years after the Enrollment Date or within one year of the

                                      -12-
<PAGE>

Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal to
the excess of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby agree to
notify the Company in writing within 30 days after the date of any disposition
of shares and I will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of the
Ordinary Shares. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Ordinary
Shares by me. If I dispose of such shares at any time after the expiration of
the holding periods, I understand that I will be treated for federal income tax
purposes as having received income only at the time of such disposition, and
that such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares, or (2) 15% of the fair market value of the shares on the first day
of the Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.

     7.   I hereby agree to be bound by the terms of the Employee Share Purchase
Plan. The effectiveness of this Enrollment Form is dependent upon my eligibility
to participate in the Employee Share Purchase Plan.

     8.   In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Share Purchase Plan.

Name (Please print):

______________________________________
(First)        (Middle)       (Last)

______________________________________
Relationship

______________________________________
(Address)

                                      -13-
<PAGE>

I UNDERSTAND THAT THIS ENROLLMENT FORM SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

____________________________________    ________________________________________
Signature of Employee                   Spouse's Signature (If beneficiary other
                                        than spouse)

Employee's Social Security
Number:_____________________________

Employee's Address:

____________________________________

____________________________________

                                      -14-
<PAGE>

                                   Exhibit B

                                 Verisity Ltd.
                       2000 Employee Share Purchase Plan

                             Notice Of Withdrawal

The undersigned Participant in the Offering Period of the Verisity Ltd. 2000
Employee Share Purchase Plan which began on ___________, ______ (the "Enrollment
Date") hereby notifies the Company that he or she hereby withdraws from the
Offering Period. He or she hereby directs the Company to pay to the undersigned
as promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period. The undersigned understands and
agrees that his or her option for such Offering Period will be automatically
terminated. The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Enrollment Form.

Name (Please print):

___________________________________
(First)        (Middle)      (Last)

___________________________________
(Address)

Signature:

___________________________________

Date: _____________________________

                                      -15-<PAGE>

                                                                   Exhibit 10.38

                                 VERISITY LTD.

                       THE 2000 ISRAELI SHARE OPTION PLAN

1.   NAME

     This Plan, as amended from time to time, shall be known as the Verisity
     Ltd. 2000 Israeli Share Option Plan (the "ISOP").

2.   PURPOSE OF THE ISOP

     The ISOP is intended to provide an incentive to retain, in the employ of
     Verisity Ltd. (the "Company") and its Subsidiaries, persons of training,
     experience, and ability, to attract new employees, directors, consultants
     and advisors whose services are considered valuable, to encourage the sense
     of proprietorship of such persons, and to stimulate the active interest of
     such persons in the development and financial success of the Company by
     providing them with opportunities to purchase shares in the Company,
     pursuant to the ISOP approved by the board of directors of the Company (the
     "Board"). Options granted under the ISOP may or may not contain such terms
     as will qualify such Options for the special tax treatment under Section
     102 of the Israeli Income Tax Ordinance (New Version) 1961 (the
     "Ordinance") and any regulations, rules, orders or procedures promulgated
     thereunder, including but not limited to the Income Tax Rules (Tax Benefits
     in Stock Issuance to Employees) 1989 (collectively "Section 102").

     Options containing such terms as will qualify them for the special tax
     treatment under Section 102 shall be referred to herein as "102 Options".

     Options that do not contain such terms as will qualify them for the special
     tax treatment under Section 102 shall be referred to herein as "3(i)
     Options".

     All Options granted hereunder, whether together or separately, shall be
     hereinafter referred to as "Options".

     The term "Subsidiary" shall mean for the purposes of the ISOP: any company
     (other than the Company) in an unbroken chain of companies beginning with
     the Company if, at the time of granting an option, each of the companies
     other than the last company in the unbroken chain owns shares possessing
     fifty percent (50%) or more of the total combined voting power of all
     classes of shares in one of the other companies in such chain.
<PAGE>

                                      -2-

3.   ADMINISTRATION OF THE ISOP

     The Board or a share option committee appointed and maintained by the Board
     for such purpose (the "Committee") shall have the power to administer the
     ISOP. Notwithstanding the above, the Board shall have residual authority if
     no Committee shall be constituted or if such Committee shall cease to
     operate for any reason whatsoever. The Board or such Committee shall be
     referred to herein as the "Administrator".

     The Committee shall consist of such number of members (not less than two
     (2) in number, of whom at least one will be an External Director if and to
     the extent required under the Israeli Companies Law, 5759 - 1999) as may be
     fixed by the Board. The Committee shall select one of its members as its
     chairman ("the Chairman") and shall hold its meetings at such times and
     places as the Chairman shall determine. The Committee shall keep records of
     its meetings and shall make such rules and regulations for the conduct of
     its business as it shall deem advisable.

     No member of the Administrator shall be prevented from receiving Options
     under the ISOP by virtue of his or her service as a member, unless
     otherwise specified herein.

     To the extent permitted under any applicable law, the Administrator shall
     have full power and authority (i) to designate participants (the
     "Optionees"); (ii) to determine the terms and provisions of any respective
     Option Agreement (which need not be identical) including, but not limited
     to, the number of Shares (as defined below) to be covered by each Option,
     the vesting periods in respect thereof including but without limitation
     provisions concerning the time or times when and the extent to which the
     Options may be exercised and the nature and duration of restrictions as to
     transferability; (iii) to accelerate the right of an Optionee to exercise,
     in whole or in part, any previously granted Option; (iv) to interpret the
     provisions and supervise the administration of the ISOP; (v) to determine
     the Fair Market Value (as defined below) of the Shares (as defined below);
     (vi) to designate Options as 102 Options or 3(i)Options; (vii) to determine
     any other matter which is necessary or desirable for, or incidental to
     administration of the ISOP; and (viii) to appoint in its absolute
     discretion the Trustee and replace it at any time in the future.

     The Committee shall not be entitled to grant Options to the Optionees
     however, it will be authorized to issue shares underlying Options which
     have been granted by the Board and duly exercised pursuant to the
     provisions hereof all in accordance with Section 112(a)(5) of the Israeli
     Companies Law - 1999.

     The Administrator shall have the authority to grant, in its discretion, to
     the holder of an outstanding Option, in exchange for the surrender and
     cancellation of such Option, a new Option having a purchase price equal to,
     lower than or higher than the Purchase Price provided in the Option so
     surrendered and canceled, and containing such other terms and conditions as
     the Administrator may prescribe in accordance with the provisions of the
     ISOP.
<PAGE>

                                      -3-

     All decisions and selections made by the Administrator pursuant to the
     provisions of the ISOP shall be made by a majority of its members except
     that no member of the Administrator shall vote on, or be counted for quorum
     purposes, with respect to any proposed action of the Administrator relating
     to any Option to be granted to that member. Notwithstanding the above, any
     decision signed or agreed to in writing or by telex or facsimile by all of
     the members of the Administrator, who are authorized to make such decision
     shall be valid for every purpose as a resolution adopted at the
     Administrator's meeting that was duly convened and held.

     The interpretation and construction by the Administrator of any provision
     of the ISOP or of any Option Agreement thereunder shall be final and
     conclusive unless otherwise determined by the Board.

     Subject to the Company's Articles of Association and the Company's
     decision, and to all approvals legally required, including but not limited
     to the provisions of the Israeli Companies Law - 1999, each member of the
     Administrator shall be indemnified and held harmless by the Company against
     any cost or expense (including counsel fees) reasonably incurred by him, or
     any liability (including any sum paid in settlement of a claim with the
     approval of the Company) arising out of any act or omission to act in
     connection with the ISOP, unless arising out of such member's own fraud or
     bad faith, to the extent permitted by applicable law. Such indemnification
     shall be in addition to any rights of indemnification the member may have
     as a director or otherwise under the Company's Articles of Association, any
     agreement, any vote of shareholders or disinterested directors, insurance
     policy or otherwise.

     "Fair Market Value" means, with respect to the Shares and as of the date
     that is relevant to such determination, the market price per share of such
     Shares determined by the Administrator as follows:

     (One) 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;

     (Two) 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;

     (Three) 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

     (Four) 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.
<PAGE>

                                      -4-

4.   DESIGNATION OF PARTICIPANTS

     4.1  The persons eligible for participation in the ISOP as recipients of
          Options shall include any employees, directors, consultants and
          advisors of the Company or of any Subsidiary that now exists or
          hereinafter is organized or acquired by the Company. The grant of an
          Option hereunder shall neither entitle the Optionee to participate nor
          disqualify him from participating in any other grant of Options
          pursuant to the ISOP or any other option or stock plan of the Company
          or any of its affiliates.

     4.2  Anything in the ISOP to the contrary notwithstanding, all grants of
          Options to directors and office holders shall be authorized and
          implemented in accordance with the provisions of any applicable law,
          including but not limited to the provisions of Israeli Companies Law -
          1999 or any successor act or regulation, as in effect from time to
          time.

5.   TRUSTEE

     The 102 Options which shall be granted under the ISOP and/or any Shares
     issued upon exercise of such Options and/or other shares received
     subsequently following any realization of rights, shall be allocated or
     issued to a Trustee nominated by the Administrator, and approved in
     accordance with the provisions of Section 102 (the "Trustee") and held for
     the benefit of the Optionees. The 102 Options and any Shares received
     subsequently following exercise of 102 Options, shall be held by the
     Trustee for such period of time as required by Section 102 or any
     regulations, rules or orders or procedures promulgated thereunder.

     Anything to the contrary notwithstanding, the Trustee shall not release any
     Options which were not already exercised into Shares by the Optionee or
     release any Shares issued upon exercise of Options prior to the full
     payment of the Optionee's tax liabilities arising from Options which were
     granted to the Optionee and/or any Shares issued upon exercise of such
     Options.

     Upon receipt of the Option, the Optionee will sign an undertaking to
     release the Trustee from any liability in respect of any action or decision
     duly taken and bona fide executed in relation with the ISOP, or any Option
     or Share granted to the Optionee thereunder.

6.   SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

     6.1  The Company has reserved Seven Hundred Thousand (700,000) authorized
                                   ----------------------  -------
          but unissued Ordinary Shares of NIS 0.01 par value each of the Company
          (the "Shares") for the purposes of the ISOP, subject to adjustment as
          set forth in Section 8 below. Any of such Shares which may remain
          unissued and which are not subject to outstanding Options at the
          termination of the ISOP shall cease to be reserved for the purpose of
          the ISOP. Until termination of the ISOP the Company shall at all times
          reserve sufficient number of Shares to meet the requirements of
<PAGE>

                                      -5-

          the ISOP. Should any Option for any reason expire or be canceled prior
          to its exercise or relinquishment in full, the Shares therefore
          subject to such Option may again be subject to an Option under the
          ISOP.

     6.2  Each Option granted pursuant to the ISOP, shall be evidenced by a
          written agreement between the Company and the Optionee (the "Option
          Agreement"), in such form as the Administrator shall from time to time
          approve. Each Option Agreement shall state, inter alia, the number of
          Shares to which the Option relates, the Purchase Price thereof and the
          type of Option granted thereunder (whether 102 or 3(i)).

     6.3  All Shares issued upon exercise of the Options in compliance with the
          terms and conditions of the ISOP as well as the terms and conditions
          of the Option Agreement pursuant to which the Options were granted
          shall entitle the holder thereof to receive dividends and other
          distributions thereon.

     6.4  If in connection with any public offering of securities of the
          Company, the stock exchange regulations and/or any applicable law so
          provide and/or the Administrator so resolve and/or the underwriter or
          underwriters managing such offering so requests, then each Optionee
          who purchased Shares hereunder upon exercise of Options 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 in connection with such offering.

7.   PURCHASE PRICE

     7.1  The purchase price of each Share subject to an Option or any portion
          thereof shall be determined by the Administrator in its sole and
          absolute discretion in accordance with applicable law, subject to any
          guidelines as may be determined by the Board from time to time (the
          "Purchase Price").

     7.2  The Purchase Price shall be payable upon the exercise of the Option in
          a form satisfactory to the Administrator, including without
          limitation, by cash or cheque or any other form of payment approved by
          the Administrator in its sole and absolute discretion, to the extent
          permissible under any applicable law. The Administrator shall have the
          authority to postpone the date of payment on such terms as it may
          determine.

8.   ADJUSTMENTS

     Except as otherwise provided in the Option Agreement, upon the occurrence
     of any of the following events, Optionee's rights to purchase Shares under
     the ISOP shall be adjusted as hereafter provided:
<PAGE>

                                      -6-

     8.1  In the event of: (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 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 becomes the beneficial owner of more than 50% of the
          outstanding voting securities of the Company ( "Change of Control
          Transaction") while unexercised Options remain outstanding under the
          ISOP, then the Company shall endeavor to cause the successor entity in
          such transaction either to assume all the outstanding Options 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 subsidiary). If the successor
          entity is unwilling to either assume such Options or grant comparable
          options in substitution of such Options, on terms that are acceptable
          to the Company as determined by the Board in the exercise of its
          discretion, then:

          (i)  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

          (ii) the Board may cancel all outstanding Options, and terminate this
               Plan, effective as of the Closing, provided that it shall notify
               all Optionees of the proposed Change of Control Transaction a
               reasonable amount of time prior to the Closing so that the
               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 under clause (i) above) prior to the
               Closing.
<PAGE>

                                      -7-

     8.2  The number of Shares subject to the ISOP, the number of Shares
          available under Options and the Purchase Price shall be adjusted as
          determined by the Board in its sole 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 share 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 an Optionee is entitled to
          purchase a fraction of a Share pursuant to an outstanding Option, such
          entitlement shall be rounded down to the nearest whole number.

          Notwithstanding the above, no adjustment shall be made 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).

9.   TERM AND EXERCISE OF OPTIONS

     9.1  Options shall be exercised by the Optionee by giving written notice to
          the Company, in such form and method as may be determined by the
          Administrator, which exercise shall be effective upon receipt of such
          notice by the Company at its principal office. The notice shall
          specify the number of Shares with respect to which the Option is being
          exercised and it shall be accompanied by any further assurances and/or
          undertaking as the Administrator  may require to ensure that the
          transaction complies in all respects with the requirements of any
          applicable law. The above notice will be signed by the person
          exercising the Option and, subject to Section 7.2 above, it will be
          accompanied by full payment of the corresponding Purchase Price.

     9.2  Each Option shall be exercisable following the vesting dates, subject
          to the provisions of the ISOP and for the number of Shares as shall be
          provided in the Option Agreement. However no Option shall be
          exercisable after the expiration date, as defined for each Optionee in
          the Optionee's Option Agreement (the "Expiration Date"), subject
          always to Section 9.6 below.

     9.3  An Option shall not be transferable by an Optionee other than by will
          or laws of descent and distribution, and during an Optionee's lifetime
          shall be exercisable only by that Optionee.
<PAGE>

                                      -8-

     9.4  The Options may be exercised by the Optionee in whole at any time or
          in part from time to time, to the extent that the Options become
          vested and exercisable, prior to the Expiration Date, and provided
          that the number of Shares purchased under the exercised Option will be
          no less than 100 Shares, without regard to adjustments to the number
          of shares subject to the Option pursuant to Section 8, or, if less,
          all of the remaining Shares subject to the Option, and provided
          further that subject to the provisions of Section 9.6 below and unless
          the Administrator resolves otherwise, the Optionee is an employee or
          director, consultant or advisor of the Company or any of its
          Subsidiaries, at all times during the period beginning with the
          granting of the Option and ending upon the date of exercise.

     9.5  Subject to the provisions of Section 9.6 below, in the event of
          termination of Optionee's employment with or performance of services
          for or on behalf of the Company or any of its Subsidiaries, all
          Options granted to the Optionee will immediately expire. A notice of
          termination of employment or services shall be deemed to constitute
          termination of employment or services.

     9.6  Notwithstanding anything to the contrary hereinabove, an Option may be
          exercised after the date of termination of Optionee's employment with
          or performance of services for or on behalf of the Company or any of
          its Subsidiaries during an additional period of time beyond the date
          of such termination, but only with respect to the number of Options
          already vested at the time of such termination according to the
          vesting periods of the Options set forth in the Optionee's Option
          agreement, if:

          (i)   Termination is without Cause (as defined below), in which event
                any Options still in force and unexpired may be exercised within
                a period of 30 (thirty) days from the date of such termination;

          (ii)  Termination is the result of death or disability of the
                Optionee, in which event any Options still in force and
                unexpired may be exercised within a period of 6 (six) months
                from the date of termination; or

          (iii) Prior to the date of such termination, the Administrator shall
                authorize an extension of the terms of all or part of the
                Options beyond the date of such termination for a period not to
                exceed the period during which the Options by their terms would
                otherwise have been exercisable.

          The term "Cause" shall mean 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
          Articles of Association 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 shareholders, but in
          either case excluding the vote of the
<PAGE>

                                      -9-

          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.

     9.7  To avoid doubt, the holders of Options shall not have any of the
          rights or privileges of shareholders of the Company in respect of any
          Shares purchasable upon the exercise of any Options, nor shall they be
          deemed to be a class of shareholders or creditors of the Company for
          the purpose of the operation of Sections 350 and 351 of the Israeli
          Companies Law - 1999 or any successor to such Sections, until
          registration of the Optionee as holder of such Shares in the Company's
          register of members upon exercise of the Options in accordance with
          the provisions of the ISOP.

     9.8  Any form of Option Agreement authorized by the ISOP may contain such
          other provisions as the Administrator may, from time to time, deem
          advisable. Without limiting the foregoing, the Administrator may, with
          the consent of the Optionee, from time to time, cancel all or any
          portion of any Option then subject to exercise, and the Company's
          obligation in respect of such Option may be discharged by (i) payment
          to the Optionee of an amount in cash equal to the excess, if any, of
          the Fair Market Value of the Shares at the date of such cancellation
          subject to the portion of the Option so canceled over the aggregate
          Purchase Price of such Shares, or (ii) the issuance or transfer to the
          Optionee of Shares of the Company with a Fair Market Value at the date
          of such transfer equal to any such excess, or (iii) a combination of
          cash and shares with a combined value equal to any such excess, all as
          determined by the Administrator in its sole discretion.

10.  VESTING OF OPTIONS

     Except as otherwise provided in the Option Agreement, the Option initially
     will be deemed an entirely unvested Option, but portions of the Option will
     become a vested Option on the following schedule:

     10.1  twenty-five percent (25%) will become a vested Option as of the first
           anniversary of the Date of Grant set forth in the Optionee's Option
           Agreement; and

     10.2  two and one-twelfth percent (2-1/12%) of the Option will become
           vested as of the end of each month thereafter, subject to section 9.5
           above and provided 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.

11.  DIVIDENDS; NO SOCIAL BENEFITS

     11.1  With respect to all Shares (in contrary to unexercised Options)
           issued upon the exercise of Options purchased by the Optionee and
           held by the Trustee, the Optionee shall be entitled to receive
           dividends in accordance with the quantity of
<PAGE>

                                     -10-

           such Shares, and subject to any applicable taxation on distribution
           of dividends. During the period in which Shares issued to the Trustee
           on behalf of an Optionee are held by the Trustee, the cash dividends
           paid with respect thereto shall be paid directly to the Optionee.

     11.2  The income attributed to the Optionee as a result of the grant of the
           Options hereunder and/or the exercise of the Shares, their transfer
           in his or her name or their sale and in all respects relating
           thereto, shall not be taken into account when computing the basis of
           the Optionee's entitlement to any social benefits. Without derogating
           from the generality of the above, that income shall not be taken into
           account in computing mangers insurance, vocational studies fund,
           provident funds, severance pay, holiday pay and the like. If the
           Company is legally obliged to take any of the above into account, as
           income which is to be attributed to the Optionee, the Optionee will
           indemnify the Company in respect of any expense sustained by it in
           such respect.

12.  ASSIGNABILITY AND SALE OF OPTIONS

     No Option shall be assignable, transferable or given as collateral or any
     right with respect to it shall be given to any third party whatsoever, and
     any such action made directly or indirectly, for an immediate validation or
     for a future one, shall be void. During the lifetime of the Optionee each
     and all of such Optionee's rights to purchase Shares hereunder shall be
     exercisable only by the Optionee.

     As long as the Shares are held by the Trustee in favor of the Optionee,
     than all rights the last possesses over the Shares are personal, can not be
     transferred, assigned, pledged or mortgaged, other than by will or laws of
     descent and distribution.

13.  EFFECTIVE DATE OF ISOP AND TERM OF THE ISOP

     The ISOP shall be effective as of the day it was adopted by the Board and
     shall terminate at the end of ten years from such day of adoption, if not
     terminated under Section 14 below prior to such date, after which no more
     Options may be granted under the ISOP, although all outstanding Options
     granted prior to such termination will remain subject to the provisions of
     the ISOP, and no such termination of the ISOP will result in the expiration
     or termination of any such Option prior to the expiration or early
     termination of the applicable Option term.

14.  AMENDMENTS OR TERMINATION

     14.1  The Administrator may at any time, amend, alter, suspend, cancel or
           terminate the ISOP or any part thereof, replace and/or determine
           further provisions and sub-plans in addition to the ISOP, determine
           any other plan in lieu of the ISOP and determine any provision and do
           anything in connection with the ISOP.
<PAGE>

                                     -11-

     14.2  No amendment, alteration, suspension or termination of the ISOP shall
           impair the rights of any Optionee with respect to an outstanding
           Option, unless mutually agreed otherwise between the Optionee and the
           Administrator, which agreement must be in writing and signed by the
           Optionee and the Company. Termination of the ISOP shall not affect
           the Administrator's ability to exercise the powers granted to it
           hereunder with respect to Options granted under the ISOP prior to the
           date of such termination.

     14.3  No Options may be granted under the ISOP while the ISOP is suspended
           or after it is terminated.
<PAGE>

                                     -12-

15.  GOVERNMENT REGULATIONS

     The ISOP, and the granting and exercise of Options hereunder, and the
     obligation of the Company to sell and deliver Shares under such Options,
     shall be subject to all applicable laws, rules, and regulations of the
     State of Israel and to such approvals by any governmental agencies or
     national securities exchanges as may be required. Nothing herein shall be
     deemed to require the Company to register the Shares under the securities
     law of any jurisdiction.

16.  CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

     Neither the ISOP nor the Option Agreement with the Optionee shall impose
     any obligation on the Company or a Subsidiary thereof, to continue any
     Optionee in its employ, or the hiring by the Company of the Optionee's
     services and nothing in the ISOP or in any Option granted pursuant thereto
     shall confer upon any Optionee any right to continue in the employ or
     service of the Company or a Subsidiary thereof or restrict the right of the
     Company or a Subsidiary thereof to terminate such employment or service
     hiring at any time.

17.  GOVERNING LAW & JURISDICTION

     The ISOP shall be governed by and construed and enforced in accordance with
     the laws of the State of Israel applicable to contracts made and to be
     performed therein, without giving effect to the principles of conflict of
     laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction
     in any matters pertaining to the ISOP.

18.  TAX CONSEQUENCES

     Any tax consequences arising from the grant or exercise of any Option, from
     the payment for Shares covered thereby or from any other event or act (of
     the Company and/or its Subsidiaries, or the Optionee) hereunder shall be
     borne solely by the Optionee. The Company and/or its Subsidiaries and/or
     the Trustee shall withhold taxes according to the requirements under the
     applicable laws, rules, and regulations, including withholding taxes at
     source. Furthermore, to the extent permitted by applicable law, the
     Optionee shall agree to indemnify the Company and/or its Subsidiaries
     and/or the Trustee and hold them harmless against and from any and all
     liability for any such tax or interest or penalty thereon, including
     without limitation, liabilities relating to the necessity to withhold, or
     to have withheld, any such tax from any payment made to the Optionee.

     The Administrator and/or the Trustee shall not be required to transfer any
     Shares and/or to release any Share certificate to an Optionee until all
     required payments have been fully made.
<PAGE>

                                     -13-

19.  NON-EXCLUSIVITY OF THE ISOP

     The adoption of the ISOP by the Board shall not be construed as amending,
     modifying or rescinding any previously approved incentive arrangements or
     as creating any limitations on the power of the Board to adopt such other
     incentive arrangements as it may deem desirable, including, without
     limitation, the granting of stock Options otherwise then under the ISOP,
     and such arrangements may be either applicable generally or only in
     specific cases.

     For the avoidance of doubt, prior grant of options to Optionees of the
     Company under their employment or services agreements, and not in the
     framework of any previous option plan, shall not be deemed an approved
     incentive arrangement for the purpose of this Section.

     In addition, for the avoidance of doubt, the grant of Options to the
     Optionees shall not prejudice any previous grant (within the framework of
     previously approved incentive arrangements) of Options to the Optionee.

20.  MULTIPLE AGREEMENTS

     The terms of each Option may differ from other Options granted under the
     ISOP at the same time, or at any other time. The Administrator may also
     grant more than one Option to a given Optionee during the term of the ISOP,
     either in addition to, or in substitution for, one or more Options
     previously granted to that Optionee.

21.  THE STATUS OF THE AGREEMENT

     Any interpretation of the Option Agreements will be made in accordance with
     the ISOP but in the event there is any contradiction between the provisions
     of an Option Agreement and the ISOP, the provisions of the Option Agreement
     will prevail.

?\6\17\120-4

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