Document:

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                                                                   EXHIBIT 10.22
                                                                   -------------

                           INDEMNIFICATION AGREEMENT
                           -------------------------

THIS INDEMNIFICATION AGREEMENT is entered into as of this ___ day of ______ 2000
(the "Effective Date"), by and between Verisity Ltd., a company organized under
the laws of the State of Israel (the "Company") and _______________
("Indemnitee").

                                   RECITALS
                                   --------

A.  The Company is aware that because of the increased exposure to litigation
    costs, talented and experienced persons are increasingly reluctant to serve
    or continue serving as directors and officers of corporations unless they
    are protected by indemnification and are exempted from certain liabilities.

B.  The statutes and judicial decisions regarding the duties of directors and
    officers are often difficult to apply, ambiguous or conflicting, and
    therefore fail to provide such directors and officers with adequate guidance
    regarding the proper course of action.

C.  The Company believes that it is fair and proper to protect the Company's
    directors and certain of its officers from the risk and judgments,
    settlements and other expenses may occur as a result of their service to the
    Company.

D.  The Board of Directors of the Company after receiving the approval of the
    Audit Committee (the "Board") has concluded that, to retain and attract
    talented and experienced individuals to serve as officers and directors of
    the Company and to encourage such individuals to take the business risks
    necessary for the success of the Company, the Company should, to the fullest
    extent permitted by any applicable law, contractually indemnify its officers
    and directors with regard to certain events and up to specified amounts, in
    connection with claims against such officers and directors in connection
    with their services to the Company and exempt each of them from certain
    liabilities towards the Company, and have further concluded and approved
    that the failure to provide such contractual indemnification and exemption
    from liability could be detrimental to the Company and its shareholders.

NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as
follows:

1.  Definitions

    1.1  Agent. "Agent" means, subject to the provisions of any applicable law,
         -----
         any person who: is or was a director, officer or employee of the
         Company including, without limitation, each of the persons defined as
         "Nose Misra" in the Israeli Companies Law, 5759 -- 1999 (the "Companies
         Law"); is or was serving at the request of, for the convenience of, or
         to represent the interests of the Company as a director, officer,
         employee or a Nose Misra of another
<PAGE>

                                      -2-

         entity or enterprise; or was a director, officer, employee or a Nose
         Misra of a predecessor corporation of the Company, or was a director,
         officer, employee or a Nose Misra of another enterprise at the request
         of, for the convenience of, or to represent the interests of such
         predecessor corporation.

     1.2 Proceeding. "Proceeding" means any threatened pending, or completed
         ----------
         claim, suit or action, whether civil, criminal, administrative,
         investigative or otherwise.

2.   Indemnification
     ---------------

     2.1  To the fullest extent permitted by any applicable law, including but
          not limited to the provisions of the Companies Law, the Company shall
          defend, indemnify and hold harmless Indemnitee, if Indemnitee was or
          is a party or is threatened to be made a party to any Proceeding by
          reason of anything done or not done by Indemnitee in Indemnitee's
          capacity as an Agent of the Company and in connection with any of the
          Indemnifiable Events set forth in Exhibit "A" to this Agreement, and
          up to the relevant Limitation Amount specified opposite each such
          Indemnifiable Event in Exhibit "A."

          Any indemnification under this agreement shall apply only with respect
          to (i) a financial obligation imposed on Indemnitee in favor of
          another person by a court judgment, including a compromise judgment or
          an arbitrator's award approved by court, and (ii) reasonable
          litigation expenses, including attorneys' fees, incurred by Indemnitee
          or charged to Indemnitee by a court, in a proceeding instituted
          against Indemnitee by the Company or on its behalf or by another
          person, or within a criminal charge from which Indemnitee was
          acquitted, or in a criminal proceeding in which Indemnitee was
          convicted of an offense that does not require proof of criminal
          intent.

          Furthermore, it is hereby clarified that the Board has determined that
          the undertaking to indemnify Indemnitee as per the above is limited to
          categories of events which, in the opinion of the Board, can be
          foreseen in advance when this Agreement is executed by the parties,
          and to amounts set by the Board as reasonable under the circumstances,
          as specified within Exhibit A to this Agreement.

     2.2  For the removal of doubt, the indemnification contained herein shall
          not apply with respect to any liability arising out of (i)
          Indemnitee's breach of the duty of loyalty to the Company, unless
          Indemnitee has acted or omitted to act in good faith and had
          reasonable reason to believe such action will not harm the Company's
          interests, (ii) intentional or reckless breach by Indemnitee of his or
          her duty of care to the Company, (iii) an action taken with the intent
          to unlawfully gain personal profit therefrom and (iv) any fine or
          penalty payment.
<PAGE>

                                      -3-

          The above indemnification is also subject to Indemnitee's acting in
          good faith and in a manner Indemnitee reasonably believed to be in or
          not opposed to the best interests of the Company, and, with respect to
          any criminal action or Proceeding, either had no reasonable cause to
          believe Indemnitee's conduct was unlawful or was convicted of an
          offense that does not require proof of criminal intent.

     2.3  To the extent permissible by any applicable law, in the event
          Indemnitee was or is a party or is threatened to be made a party to
          any Proceeding as per Section 2.1 above, and prior to, during the
          pendency of or after completion of, such Proceeding Indemnitee dies,
          then the Company shall defend, indemnify and hold harmless the estate,
          heirs and legatees of Indemnitee this Agreement.

     2.4  The expenses and liabilities covered hereby shall be net of any
          payments to Indemnitee by directors' and officers' liability insurance
          ("D&O Insurance") carriers or others.

3.   Partial Indemnification
     -----------------------

     If Indemnitee is found under Section 2.2, 7 or 9 hereof not to be entitled
     to indemnification for all of the amounts relating to a Proceeding, the
     Company shall indemnify Indemnitee for any portion of such amounts not
     specifically precluded by the operation of such Section 2.2, 7 or 9.

4.   Additional Indemnification Rights
     ---------------------------------

     In the event of any subsequent change of any applicable law, statute or
     rule that broadens the right of an Israeli corporation to indemnify an
     Agent, the parties hereto hereby agree that Indemnitee shall enjoy by
     virtue of this Agreement the additional privileges afforded by such
     subsequent change. In the event of any such subsequent change in any
     applicable law, statute or rule that narrows the right of an Israeli
     corporation to indemnify an Agent, the parties hereto hereby agree that
     such change, to the extent permitted under such law, statute or rule, shall
     have no effect on this Agreement or the parties' rights and obligations
     hereunder, all subject to the terms of this Agreement and any applicable
     law.

5.   Exemption
     ---------

     To the fullest extent permitted by any applicable law and subject to any
     limitation contained in such law, the Company hereby exempts and releases
     Indemnitee from any and all liability towards the Company related to damage
     resulting from a breach by Indemnitee of his or her duty of care towards
     the Company.

     For the removal of doubt, the above release from liability shall not apply
     with respect to any liability arising out of (i) intentional or reckless
     breach by
<PAGE>

                                      -4-

     Indemnitee of his or her duty of care to the Company, (ii) an action taken
     with the intent to unduly gain personal profit therefrom and (iii) any fine
     or penalty payment.

6.   Indemnification Procedures; Advancement of Expenses
     ---------------------------------------------------

     6.1  Promptly after receipt by Indemnitee of notice of the commencement or
          threat of any Proceeding covered hereby, Indemnitee shall notify the
          Company of the commencement or threat thereof, provided that any
          failure to so notify shall not relieve the Company of any of its
          obligations hereunder, unless the Company has been prejudiced thereby.

     6.2  Indemnitee will further reasonably cooperate with the Company as may
          be required in order to handle the Proceeding (including by providing
          the Company with documents and any other materials in Indemnitee's
          possession or under Indemnitee's control, and that relates to the
          Proceeding).

     6.3  If, at the time of the receipt of a notice pursuant to Section 6.1
          above, the Company has D&O Insurance in effect that might cover such
          Proceeding or claim, the Company shall give prompt notice of the
          Proceeding or claim to its insurers in accordance with the procedures
          set forth in the applicable policies. The Company shall thereafter
          take action to cause such insurers to pay all amounts payable as a
          result of such Proceeding in accordance with the terms of such
          policies.

     6.4  The Company shall be entitled to assume the defense of such Proceeding
          with counsel approved by Indemnitee, such approval not to be
          unreasonably withheld, upon the delivery to Indemnitee of written
          notice of its election to do so. After delivery of such written
          confirmation and such notice, approval of such counsel by Indemnitee
          and the retention of such counsel by the Company, the Company will not
          be liable to Indemnitee under this Agreement for any fees of counsel
          subsequently incurred by Indemnitee with respect to such Proceeding.
          The Company shall have the right to conduct such defense as it deems
          fit in its sole discretion, including the right to settle any claim
          against Indemnitee without the consent of Indemnitee, provided however
          any such settlement includes (i) a complete release and discharge of
          Indemnitee, (ii) does not contain any admittance of wrong doing by
          Indemnitee and (iii) is monetary only.

     6.5  In the event that the Company does not assume the defense of a
          Proceeding as per the above, Indemnitee shall be entitled to select,
          in Indemnitee's sole discretion, and retain one or more counsel from
          time to time to act as Indemnitee's counsel in and for the
          investigation, defense, settlement or appeal of each Proceeding.

          To the extent permitted by any applicable law, the Company shall bear
          all
<PAGE>

                                      -5-

          reasonable fees and expenses (including invoices for advance
          retainers) of such counsel, and all reasonable fees and expenses
          invoiced by other persons or entities, in connection with the
          investigation, defense, settlement or appeal of each such Proceeding.
          Such fees and expenses are referred to herein as "Covered Expenses."
          Any such advance shall be subject to the determination of Right to
          Indemnification under Section 7 hereof. If required by any applicable
          law as a condition to such advances, Indemnitee shall, at the request
          of the Company, agree to repay such amounts advanced if it is
          ultimately determined that Indemnitee is not entitled to be
          indemnified by the Company by the terms hereof or under applicable
          law.

7.  Determination of Right to Indemnification
    -----------------------------------------

    7.1  Upon the conclusion of any Proceeding, the Company shall determine
         whether Indemnitee is entitled to Indemnification under this agreement
         and any applicable law.

    7.2  Any amount Indemnitee is entitled to receive hereunder shall be paid to
         Indemnitee within 10 days. In such event, Indemnitee shall not be
         required to repay to the Company any Covered Expenses. In any other
         event and in the event the Company has determined that Indemnitee is
         not entitled to indemnification, the Covered Expenses shall be
         immediately repaid by him to the Company.

8.  Company's Right to Recover
    --------------------------

    In the event of payment by the Company under this Agreement, the Company
    shall have the right of subrogation with respect to Indemnitee's rights of
    recovery to the extent such rights exists.  Indemnitee shall execute any and
    all documents required and shall do all acts that may be reasonably
    necessary to secure such rights and to enable the Company effectively to
    enforce such rights.

9.  Exceptions
    ----------

    Notwithstanding any other provision hereunder to the contrary, the Company
    shall not be obligated pursuant to the terms of this Agreement:

    9.1  To indemnify or advance Covered Expenses to Indemnitee with respect to
         Proceedings or claims initiated or brought voluntarily by Indemnitee
         and not by way of defense (other than Proceedings brought to establish
         or enforce a right to indemnification under this Agreement or the
         provisions of the Company's Articles of Association).

    9.2  To indemnify Indemnitee under this Agreement for any amounts paid in
         settlement of any Proceeding covered hereby without the prior written
         consent of the Company to such settlement.
<PAGE>

                                      -6-

10.  Non-exclusivity
     ---------------

     This Agreement is not the exclusive arrangement between the Company and
     Indemnitee regarding the subject matter hereof and shall not diminish or
     affect any other rights which Indemnitee may have under any provision of
     law, the Company's Articles of Association, other agreements or otherwise.

     Furthermore, it is hereby specifically clarified that this Agreement shall
     not limit the Company from indemnifying Indemnitee post factum without
     giving effect to the occurrences and/or amounts specified in Exhibit "A" to
     this Agreement, if and to the extent that the Company resolves to do so in
     its sole and absolute discretion, subject always to the provisions of any
     applicable law, including but not limited to the Companies Law and the
     approvals required thereunder.

11.  Condition Precedent; Continuation After Term
     --------------------------------------------

     This Agreement is subject to the receipt of all required approvals under
     the Companies Law, and it shall only become effective upon such approvals
     being actually obtained. Indemnitee's rights hereunder shall continue after
     Indemnitee has ceased acting as an Agent of the Company and the benefits
     hereof shall inure to the benefit of the heirs, executors and
     administrators of Indemnitee.

12.  Interpretation of Agreement
     ---------------------------

     This Agreement shall be interpreted and enforced so as to provide
     indemnification to Indemnitee to the fullest extent now or hereafter
     permitted by law.

13.  Severability
     ------------

    If any provision or provisions of this Agreement shall be held by a court or
    tribunal of competent jurisdiction to be invalid, illegal or unenforceable,
    the other provisions of this Agreement shall not in any way be affected or
    impaired thereby, and, to the fullest extent possible under any applicable
    law, the invalid, illegal or unenforceable provisions shall be construed or
    altered by the court or tribunal so as to remain enforceable and to provide
    Indemnitee with as many of the benefits contemplated hereby as permitted
    under any applicable law.

14. Counterparts, Modifications and Waiver
    --------------------------------------

    This Agreement may be signed in facsimile counterparts. This Agreement
    constitutes a separate Agreement between the Company and Indemnitee and may
    be supplemented or amended as to Indemnitee only by a written instrument
    signed by the Company and Indemnitee, with such amendment binding only the
    Company and Indemnitee. All waivers must be in a written document signed by
    the party to be charged. No waiver of any of the provisions of this
    Agreement shall be imposed

    by the conduct of the parties. A waiver of any right hereunder shall not
    constitute a waiver of any other right hereunder.
<PAGE>

                                      -7-

15. Notices
    -------

    All notices, demands, consents, requests, approvals and other communications
    required or permitted hereunder shall be in writing and shall be deemed to
    have been properly given if hand delivered (effective upon receipt or when
    refused), or if sent by a courier freight prepaid (effective upon receipt or
    when refused), in the case of the Company, at the address listed below, and
    in the case of Indemnitee, at Indemnitee's address of record at the office
    of the Company, or to such other addresses as the parties may notify each
    other in writing.

    To the Company:  Verisity Ltd.

                           8-10 Ha'Melacha Street
                           Rosh Ha'ain, Israel 48091
                           Attention:  Moshe Gavrielov

                           With a copy to:

                           David Larwood
                           Verisity Ltd.
                           2041 Landings Drive, Building N
                           Mountain View, California 94043

16.  Evidence of Coverage
     --------------------

     Upon request by Indemnitee, the Company shall provide evidence of any
     liability insurance coverage maintained by the Company. The Company shall
     promptly notify Indemnitee of any change in the Company's D&O Insurance
     coverage, if any.

17.  Jurisdiction; Governing Law
     ---------------------------

     The parties hereby irrevocably consent to the jurisdiction of the courts of
     the State of Israel for all purposes in connection with this Agreement and
     agree that any action instituted under this Agreement shall be commenced,
     prosecuted or continued in the competent Courts of the Tel-Aviv District
     only, which shall be the exclusive and only proper forum for adjudicating
     such a claim. It is the intention of the parties that the internal laws of
     the State of Israel (irrespective of its choice of law principles) shall
     govern the validity of this Agreement, the construction of its terms and
     the interpretation of the rights and duties of the parties hereunder.
<PAGE>

                                      -8-

18.  No Construction as Employment Agreement
     ---------------------------------------

     This Agreement shall not be construed as giving Indemnitee any right to be
     retained in the employ or otherwise in the service of the Company.

IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification
Agreement effective as of the date first above written.

                                                 VERISITY LTD.

                                                 By:___________________

                                                 INDEMNITEE:

                                                 ______________________
<PAGE>

                                      -9-

                                   Exhibit A
                                   ---------

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------

No.                        Indemnifiable Event                            Limitation Amount
                                                                           (In US$ Million)
---------------------------------------------------------------------------------------------
<S>                                                                       <C>
 1  Any claim or demand made by customers, suppliers, contractors or
    other third parties transacting any business with the Company,
    its subsidiaries or affiliates, in the ordinary course of their
    respective businesses, relating to the negotiations or
    performance of such transactions, representations or warranties
    provided in connection thereto or otherwise.
---------------------------------------------------------------------------------------------
 2  Any claim or demand made in connection with any transaction
    which is not within the ordinary course of business of either
    the Company, its subsidiaries or affiliates, including the sale,
    lease or purchase of any assets or businesses.
---------------------------------------------------------------------------------------------
 3  Any claim or demand made by employees, consultants, agents or
    other individuals or entities employed by or providing services
    to the Company relating to their employment relations or their
    contractual relations with the Company.
---------------------------------------------------------------------------------------------
 4  Any claim or demand made under any securities laws or by
    reference thereto, or relating to the failure to disclose any
    information in the manner or time such information is required
    to be disclosed pursuant to any applicable law, or relating to
    inadequate or improper disclosure of information to
    shareholders, or prospective shareholders, or connected to the
    purchasing, holding or disposition of securities of the Company
    or any other investment activity involving or affected by such
    securities.
---------------------------------------------------------------------------------------------
 5  Any claim or demand made for actual or alleged infringement,
    misappropriation or misuse by the Company, its subsidiaries or
    affiliates of any third party's rights to any intellectual
    property and any actions taken in connection with the
    registration of patents (or other protection of intellectual
    property) with respect to any proprietary rights of the Company.
---------------------------------------------------------------------------------------------
 6  Any claim or demand made by any lenders or other creditors or
    for moneys borrowed by, or other indebtedness of, the Company,
    its subsidiaries or affiliates.
---------------------------------------------------------------------------------------------
 7  Any claim or demand made by any third party suffering any
    personal injury or damage to business or personal property
    through any act or omission of the Company, its subsidiaries or
    affiliates, or their respective employees, agents or other
    persons
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

                                      -10-

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
No.                        Indemnifiable Event                            Limitation Amount
                                                                           (In US$ Million)
---------------------------------------------------------------------------------------------
<S>                                                                       <C>

    acting on their behalf.
---------------------------------------------------------------------------------------------
 8  Any claim or demand made directly or indirectly in connection
    with complete or partial failure, by the Company or any
    subsidiary or affiliate thereof, or their respective directors,
    officers and employees, to pay, report, keep applicable records
    or otherwise, of any taxes or other compulsory payments of any
    nature whatsoever, and under any applicable law or regulations,
    including any interest, penalty or addition thereto, whether
    disputed or not.
---------------------------------------------------------------------------------------------
 9  Any claim or demand in connection with the use of products sold
    or licensed by the Company or any subsidiary or affiliate
    thereof and the distribution, sale and any claim or demand made
    by any users of products of the Company, for damages or losses
    related to such use.
---------------------------------------------------------------------------------------------
10  Events arising out of investments the Company and/or
    Subsidiaries make in other corporations whether before and/or
    after the investment is made, entering into the transaction, the
    execution, development and monitoring thereof, including actions
    taken by Indemnitee in the name of the Company and/or a
    Subsidiary as an Office Holder of the corporation the subject of
    the transaction and the like.  Without derogating from the
    generality of the above, actions in connection with the purchase
    or sale of companies, legal entities or assets, and the division
    or consolidation thereof.
---------------------------------------------------------------------------------------------
11  Any administrative, regulatory or judicial actions, orders,
    decrees, suits, demands, demand letters, directives, claims,
    liens, investigations, proceedings or notices of noncompliance
    or violation by any governmental entity or other person alleging
    the failure to comply with any statute, law, ordinance, rule,
    regulation, order or decree of any governmental entity
    applicable to the Company or any of its subsidiaries, or any of
    their respective businesses or operations.
---------------------------------------------------------------------------------------------
</TABLE><PAGE>

                                                                   EXHIBIT 10.23
                                                                   -------------

                          SHARE RESTRICTION AGREEMENT

        This SHARE RESTRICTION AGREEMENT dated effective as of March 23, 1998
(the "Effective Date"), is between Verisity Ltd., a company organized under the
laws of the State of Israel (the "Company"), and Moshe Gavrielov ("Employee"),
with reference to the following:

            A. Employee is an employee of Verisity Design, Inc., a California
    corporation and a wholly-owned subsidiary of the Company (the "U.S.
    Subsidiary").  Employee is also the chief executive officer of the Company,
    although not an employee of the Company.

            B. Pursuant to the terms of that certain Executive Employment
    Agreement among Employee, the Company and the U.S. Subsidiary, dated as of
    the date hereof (the "Employment Agreement"), the Company has agreed to
    grant Employee a stock option under its 1996 U.S. Stock Option Plan (the
    "Option Plan") to acquire up to 671,938 of the Company's ordinary shares
    ("Ordinary Shares"), but in lieu thereof, because of Employee's desire to
    acquire such Shares immediately, the Company and Employee have agreed to
    enter into this Agreement.

            Now, therefore, the Company and Employee agree as follows:

1.  Sale and Purchase of Shares.  Subject to the terms and conditions of this
    ---------------------------
Agreement, the Company hereby sells to Employee and Employee hereby purchases
from the Company 671,938 Ordinary Shares (the "Shares"), for the per share
purchase price of THIRTY CENTS ($0.30) (the "Purchase Price") and an aggregate
purchase price of TWO HUNDRED AND ONE THOUSAND FIVE HUNDRED EIGHTY-ONE and
40/100 DOLLARS ($201,581.40) (the "Aggregate Purchase Price"), in payment of
which the Company agrees to accept from Employee his executed secured promissory
note in the form attached hereto as Exhibit A, accompanied by his executed
                                    ---------
pledge agreement in the form attached hereto as Exhibit B.  The certificate or
                                                ---------
certificates representing the Shares shall be held in escrow pursuant to Section
7 below.

2.  Vesting of Shares.
    -----------------

    (a)   If Employee ceases to serve the Company or the U.S. Subsidiary as an
officer, director, employee or consultant for any reason whatsoever (whether due
to death, disability, voluntary resignation, involuntary termination, or any
other reason, a 'Cessation of Services"), then the U.S. Subsidiary will have an
assignable right, but not an obligation, to purchase that number of the Shares
which are then deemed "Unvested Shares" (as defined below), after giving effect
to any accelerated vesting provided below,

                                      -1-
<PAGE>

for a total purchase price equal to the product of the number of Unvested Shares
to be purchased and the Purchase Price (as appropriately adjusted for any stock
dividend, stock bonus, stock split, or similar changes in the outstanding
Ordinary Shares of the Company).

     (b)  "Vested Shares" shall mean Shares that are deemed to "Vest" under this
Agreement.  "Unvested Shares" shall mean all Shares that are not Vested Shares.
As of the Effective Date, none of the Shares are Vested Shares and all of the
Shares are Unvested Shares.  On March 23, 1999, which is the first anniversary
of Employee's employment with the U.S. Subsidiary (the "Anniversary Date"),
167,985 (approximately 25%) of the Shares will become Vested Shares.  The
remaining 503,953 of the Shares shall become Vested monthly (approximately
13,999 Shares/month) on a cumulative basis over the 36-month period commencing
on the Anniversary Date, so that all of the Shares will be Vested Shares as of
March 23, 2002, provided that no further vesting will take place after a
Cessation of Services.

     (c)  Notwithstanding anything to the contrary set forth in Section 2(b)
above:

          (1) in the event that either (A) the U.S. Subsidiary (or any Successor
Entity, as that term is defined in the Option Plan) terminates the employment of
Employee other than for "Cause" (as that term is defined in Section 6.3 of the
Employment Agreement), or (B) Employee voluntarily terminates his employment
with the U.S. Subsidiary (or any Successor Entity) following any Constructive
Termination Event (as defined in Section 6.4(b) of the Employment Agreement),
with any such termination occurring during the 12-month period following the
Closing of a Change of Control Transaction (as that term is defined in the
Option Plan), then those Shares which remain Unvested which would have become
Vested over the 24-month period beginning on the effective date of such
termination will become immediately Vested, and thereafter, the remaining
Unvested Shares, if any, shall continue to Vest on the schedule set forth in
Section 2(b) above; and

          (2)  in the event that either (A) the U.S. Subsidiary terminates the
employment of Employee other than for "Cause" (as that term is defined in
Section 6.3 of the Employment Agreement), or (B) Employee voluntarily terminates
his employment with the U.S. Subsidiary following any Constructive Termination
Event (as defined in Section 6.4(b) of the Employment Agreement), in each case
other than under the circumstances described in Section 2(c)(1) above, then the
Shares which remain Unvested which would have become Vested over the 12-month
period beginning on the effective date of such termination will become
immediately Vested, and thereafter, the remaining Unvested Shares, if any, shall
continue to Vest on the schedule set forth in Section 2(b) above.

                                      -2-
<PAGE>

3.   Restrictions on Transfers; Permitted Transferees.
     ------------------------------------------------

     (a)  For purposes of this Agreement, "Transfer" means any sale or any
transaction or event which has resulted in or will result in a change in record
or beneficial ownership of the Shares, including without limitation a voluntary
or involuntary sale, assignment, transfer, conveyance, pledge, hypothecation,
encumbrance, disposal, loan, gift, attachment, or levy, or any "Involuntary
Transfer," which for purposes of this Agreement includes, without limitation,
any of the following:  (i) an assignment of any Shares for the benefit of
creditors of the transferor; (ii) a Transfer by operation of law; (iii) an
execution of judgment against the Shares or the acquisition of record or
beneficial ownership of Shares by a lender or creditor; (iv) a Transfer by will
or under the laws of descent and distribution; (v) a Transfer pursuant to any
decree of divorce, dissolution or separate maintenance, any property settlement,
any separation agreement or any other agreement with a spouse (except for bona
fide estate planning purposes) under which any Shares are Transferred or awarded
to the spouse of the transferor or are required to be sold; or (vi) a Transfer
resulting from the filing by the transferor of a petition for relief, or the
filing of an involuntary petition against the transferor, under the bankruptcy
laws of the United States or of any other nation.

     (b)  In addition to any other limitation on Transfer provided by applicable
securities laws or under the Articles of Association of the Company (the
"Articles"), a copy of which has been provided to Employee, prior to the initial
public offering of the Company's securities, Employee may not Transfer any
Shares, or any interest therein, except as expressly provided in this Agreement,
and in any event only after compliance with the specific limitations and
conditions set forth therein and with all applicable securities laws.  All
Transfers of Shares not complying with the specific limitations and conditions
set forth in this Agreement, and in the Articles (the limitations and conditions
of which are deemed to be incorporated herein), are expressly prohibited.  Any
prohibited Transfer is void and of no effect, and no purported transferee in
connection therewith will be recognized as a shareholder of the Company or
holder of the Shares for any purpose whatsoever.  Should such a Transfer purport
to occur, the Company may refuse to carry out the Transfer on its books, attempt
to set aside the Transfer, enforce any undertakings or rights under this
Agreement, or exercise any other legal or equitable remedy.

     (c)  It will be a condition to any Transfer of any Shares that:

               (i)  the transferee of the Shares will execute such documents as
     the Company may reasonably require to ensure that the Company's rights
     under this Agreement and the Articles are adequately protected with respect
     to such Shares, including, without limitation, the transferee's agreement
     to be bound by all of the terms and conditions of this Agreement, as if he
     or she were the original holder of such Shares; and

               (ii) the Company is satisfied that such Transfer complies in all
     respects with the requirements imposed by applicable Israeli laws and
     regulations as well as
                                      -3-
<PAGE>

     applicable state and federal securities laws and regulations and the
     Articles of the Company.

     (d)  The restrictions on Transfer of Shares set forth in this Agreement
shall not apply to any Transfer by Employee: (i) to his or her spouse, parents,
siblings, lineal descendants, spouses of lineal descendants, or spouse's
parents, except in the case of an Involuntary Transfer; (ii) to any trust,
partnership, limited liability company, custodianship or fiduciary account for
the benefit of Employee and/or any of the foregoing, including any distribution
of the Shares to the equity holders or beneficiaries of any such entity; or
(iii) to the estate of any of the foregoing by gift, will or intestate
succession; provided that any transferee of any Transfer permitted under this
Section shall agree to be bound by the terms and provisions of this Agreement as
to the transferred Shares; and provided further that the repurchase provisions
of Section 2 above shall continue to be determined by reference to the Cessation
of Services of Employee.

4.   Stock Dividends, Stock Splits. etc.; Rights Offering.
     ----------------------------------------------------

     (a)  Upon any stock dividend, stock bonus, stock split, reorganization,
consolidation merger or change in the outstanding Ordinary Shares of the
Company, any and all new, additional, substituted, replacement or other
securities to which Employee is entitled by reason of his or her ownership of
the Shares shall be deemed "Shares' subject to this Agreement to the same extent
as the Shares with respect to which those securities are issued.

     (b)  If at any time prior to an initial public offering of the Company's
securities, the Company proposes to issue or sell any securities to all of its
then existing shareholders, it shall offer Employee the right to participate in
such offering on the same terms and conditions as are offered to such other
shareholders, and Employee shall be deemed for purposes of such issuance or
offer to sell to be a shareholder of both the Vested Shares and the Unvested
Shares that are then beneficially owned by Employee.

5.   Securities Laws.
     ---------------

     (a)  Employee represents and warrants to the Company as follows:

               (i)  Employee acknowledges that the Shares (which for purposes of
     this Section 6 shall include any other securities issuable upon exercise of
     any rights associated with the Shares) have not been registered under the
     Securities Act of 1933, as amended (the "1933 Act"), and are being offered
     and issued under the exemption provided for in Rule 701 promulgated under
     the 1933 Act, applicable to compensatory benefit arrangements such as this
     Agreement. Employee further acknowledges that the Shares have not been
     qualified under the California Corporate Securities Law of 1968 in reliance
     on an exemption from qualification, and have not been qualified under any
     other state securities laws. Employee further

                                      -4-
<PAGE>

     acknowledges that the Company is relying on the truth and accuracy of the
     representations, warranties and acknowledgements made in this Agreement in
     offering the securities for issuance without registering the securities
     under the 1933 Act or qualifying the securities under applicable state
     securities laws.

               (ii)   Employee is a citizen of the United States, and at least
     21 years of age, and a bona fide resident and domiciliary (not a temporary
     or transient resident) of the state set forth under his or her signature
     below, and has no present intention of becoming a resident of any other
     state or jurisdiction.

               (iii)  Employee understands that an investment in the Shares is
     (A) suitable only for an investor who is able to bear the economic
     consequences of losing his or her entire investment, and (B) speculative
     and involves a high degree of risk of loss, and that (C) there are
     substantial restrictions on the transferability of, and there will be no
     public market for, the Shares, and accordingly it may not be possible to
     liquidate Employee's investment in the Shares in the case of an emergency.

               (iv)   Employee has the financial ability (A) to bear the
     economic risk of an investment in the Shares, (B) to hold the Shares for an
     indefinite period of time, and (C) currently to afford a complete loss of
     the investment in the Shares without experiencing any undue financial
     difficulties, and Employee's commitments to speculative investments
     (including this investment in the Shares) are reasonable in relation to his
     or her net worth and annual income.

               (v)    Employee acknowledges that (A) the Company is an Israeli
     start-up company with no financial and operating history; (B) a start-up
     venture is inherently risky and speculative; and (C) to succeed, the
     Company will need to attract additional capital and additional personnel,
     and there can be no assurances that the Company will be able to attract the
     needed capital and personnel.

               (vi)   Employee acknowledges that this transaction has not been
     reviewed or scrutinized by the Securities and Exchange Commission or by any
     administrative agency charged with the administration of the securities
     laws of any state, and that no such agency has passed on or made any
     recommendation or endorsement of the Shares.

               (vii)  In making the decision to acquire the Shares, Employee has
     relied solely on independent investigation made by Employee or his or her
     Representatives; Employee and his or her Representatives have been given
     all financial, business or other information they have requested relating
     to the Company and have been given the opportunity to ask questions of, and
     to receive answers from, persons acting on behalf of the Company concerning
     the terms and conditions of the offering of the Shares, and to obtain any
     additional information, to

                                      -5-
<PAGE>

     the extent such persons possess such information or can obtain it without
     unreasonable effort or expense, which Employee deems necessary to evaluate
     the investment in the Shares.

               (viii) Employee is acquiring the Shares in good faith solely for
     his or her own account, for investment purposes only, and not with a view
     to any sale, distribution, subdivision or fractionalization of the Shares,
     in whole or in part.

               (ix)   Employee acknowledges that the Shares are "restricted
     securities" within the meaning of Rule 144 promulgated under the 1933 Act;
     that the Shares are not registered under the 1933 Act and must be held
     indefinitely unless they are subsequently registered under the 1933 Act and
     qualified under any applicable state and foreign securities laws, or unless
     an exemption from registration or qualification is available; and that
     although resales may be permitted under certain limited circumstances, the
     Company is under no obligation to take any action to establish those
     circumstances or to make an exemption available. Employee understands the
     resale limitations imposed by the 1933 Act and is familiar with Rule 144,
     as presently in effect, and the conditions which must be met in order for
     that Rule to be available for the resale of "restricted securities,"
     including the condition that there be available to the public current
     information about the Company under certain circumstances and the
     requirement that the Shares must be held for at least one year (two years
     in the absence of publicly available information about the Company) after
     their receipt from the Company prior to resale.

               (x)    Employee acknowledges that no representations, warranties
     or guaranties have been made by the Company, its employees or its agents,
     or by any other person, expressly or by implication, with respect to (A)
     the approximate length of time that Employee will be required to remain the
     owner of the Shares, or (B) the percentage of profit and/or amount or type
     of consideration, profit or loss to be realized, if any, as a result of the
     investment in the Shares.

               (xi)   Employee acknowledges that the Company may rely on the
     foregoing representations and warranties in determining whether to enter
     into this Agreement. If for any reason the representations and warranties
     are no longer true and accurate prior to acceptance of this Agreement by
     the Company, Employee will give the Company prompt written notice of the
     inaccuracy.

     (b)  Employee further agrees not to sell or otherwise Transfer any of the
Shares unless (1) the Shares to be Transferred have been registered under the
1933 Act and qualified under any applicable state and foreign securities laws,
or (ii) Employee first notifies the Company of the proposed Transfer and
presents the Company with an opinion of counsel or a "no-action" or interpretive
letter from the Securities and Exchange Commission stating that registration is
not required under the circumstances of the proposed Transfer, and counsel to
the Company concurs with the opinion of counsel

                                      -6-
<PAGE>

to Employee or the applicability of the no-action or interpretive letter;
provided that no sale or other Transfer of any of the Shares shall be permitted
except in compliance with the other terms and conditions of this Agreement.

     (c)  Employee acknowledges and agrees that the certificates evidencing the
Shares will bear the legends specified in Section 8 below, that the restrictions
will be noted in the stock records of the Company, and that the Company shall
not be required to effect any Transfer of the Shares except in compliance with
the requirements of this Agreement and applicable law.

     (d)  The representations, warranties, acknowledgements and agreements set
forth in this Agreement shall survive both (i) issuance and delivery of the
Shares, and (ii) Employee's death or disability, and shall be binding upon
Employee's heirs, executors, administrators, successors and assigns.

6.   Tax Matters.
     -----------

     (a)  Employee acknowledges that there is no established market for the
Shares. Employee further acknowledges that the Company makes no representation
or warranty and gives no assurance as to the fair market value of the Shares.
Employee acknowledges that because Employee was granted the Shares, the fair
market value of the Shares constitutes taxable ordinary income to Employee in
the year the Shares are issued assuming either that the Shares are Vested when
issued or that an election under Section 83(b) is made as described in Section
6(b) of this Agreement. Employee assumes full responsibility for any taxes on
any such income and the Company has no obligation to Employee to reimburse
Employee for any such liability.

     (b)  Under Section 83 of the Internal Revenue Code of 1986 (the "Code"), as
a general rule the excess, if any, of the fair market value of the Shares on the
date restrictions on transfer and risks of forfeiture lapse, over the amount
paid for the Shares, is taxed as ordinary income to the purchaser of those
Shares. Under this Agreement the Unvested Shares are subject to a risk of
forfeiture and when the Shares Vest, such risk lapses. Employee acknowledges
that to the extent the Shares are Unvested, Employee may elect to be taxed at
the time the Shares are acquired rather than when the Shares Vest by filing with
the Internal Revenue Service an election under Section 83(b) of the Code within
30 days of the date of issuance of the Shares. Employee acknowledges that his or
her failure to make this filing in a timely manner may result in recognition of
ordinary income by Employee as Shares become Vested, in an amount equal to the
fair market value of the Shares on the date of vesting. EMPLOYEE ACKNOWLEDGES
THAT IT IS HIS OR HER SOLE AND EXCLUSIVE RESPONSIBILITY TO FILE IN A TIMELY
MANNER ANY ELECTION UNDER Section 83(B), AND THAT THE COMPANY SHALL BEAR NO
RESPONSIBILITY WHATSOEVER FOR THAT FILING. Employee shall promptly deliver to
the Company a copy of any tax election relating to the treatment of the Shares
under the Code.

                                      -7-
<PAGE>

7.   Escrow.  For purposes of facilitating the enforcement of restrictions on
     ------
Transfer set forth in this Agreement, any certificate(s) for Unvested Shares
will be delivered, together with a stock power executed by Employee and by his
or her spouse (if required for Transfer) in blank, to the President 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 Transfers
and/or releases as are in accordance with the terms of this Agreement.  The
certificate(s) may be held in escrow so long as the Shares are subject to any
right of repurchase or first refusal under this Agreement, and shall be released
by the escrow holder to Employee (or to any permitted transferee of Employee)
when they are no longer subject to any right of repurchase or first refusal
under this Agreement.  Employee acknowledges that the President 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 sale and issuance of the Shares to
Employee, that the appointment is coupled with an interest, and that it
accordingly will be irrevocable.  The escrow holder will not be liable to
Employee or the Company (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.

8.   Legends.
     -------

     (a)  Each certificate evidencing the Shares shall bear the following
legend:

          THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN TAKEN BY
          THE ISSUEE FOR INVESTMENT PURPOSES. THESE SHARES MAY NOT BE SOLD OR
          TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SUCH ACT, OR
          (B) THE COMPANY (OR ITS TRANSFER AGENT) IS PRESENTED WITH EITHER A
          WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, A "NO-ACTION"
          OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION, OR
          OTHER EVIDENCE SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
          REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF THE SALE OR
          TRANSFER.

     (b)  For so long as any Shares are Unvested or are subject to the
provisions of the Right of First Refusal, the certificates evidencing those
Shares shall bear the following legend:

          THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A
          SHARE RESTRICTION

                                      -8-
<PAGE>

          AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF OR HIS OR HER
          PREDECESSOR IN INTEREST, PROVIDING FOR AMONG OTHER THINGS A RIGHT OF
          FIRST REFUSAL FOR THE BENEFIT OF THE ISSUER OR ITS AFFILIATES. A COPY
          OF THE AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

     (c)  The certificates evidencing the Shares shall also bear any legend
required by the Commissioner of Corporations of the State of California or by
any state, local or foreign law governing securities.

9.   Market Stand-off.  To the extent requested by the Company and any
     ----------------
underwriter of securities of the Company in connection with an underwriting of
the Company's securities (including the Company's initial public offering),
Employee will not Transfer any Shares which were not included in the
registration statement filed in connection with that offering or previously
registered, for the period following the effective date of that registration
statement which the Company shall specify; provided that in no event shall such
period be longer that the period of time that the officers and directors of the
Company or the U.S.  Subsidiary are generally prohibited from Transferring their
Shares in connection with an underwriting of the Company's securities.  The
Company may impose stop-transfer restrictions in the stock records of the
Company in order to enforce the provisions of this Section 9.

10.  No Employment Agreement.  The parties acknowledge that unless otherwise
     -----------------------
agreed in writing, any employment or other relationship between Employee and the
U.S.  Subsidiary is entirely at the will of each party.  This Agreement shall in
no way affect that status, nor does it limit in any way the right of either the
U.S. Subsidiary or Employee to terminate their relationship at any time for any
reason or for no reason.  This Agreement does not constitute an express or an
implied promise or agreement for, and shall create no expectation of, employment
for any period whatsoever.

11.  Further Assurances.  Each party to this Agreement agrees to perform any and
     ------------------
all further acts and to execute and deliver any documents that may reasonably be
necessary to carry out the provisions of this Agreement.

12.  Attorneys' Fees.  If either party shall commence any action or proceeding
     ---------------
against the other party by reason of any breach or claimed breach in the
performance of any of the terms or conditions of this Agreement, or to seek a
judicial declaration of rights under this Agreement, the prevailing party in
that action shall be entitled to recover reasonable attorneys' fees and costs.

13.  Governing Law.  This Agreement shall be governed by and construed in
     -------------
accordance with the laws of the State of Israel applicable to contracts wholly
made and performed in the State of Israel, except that for purposes of Section
2(c) above, any determination as to

                                      -9-
<PAGE>

whether a Constructive Termination Event has occurred (as defined in Section
6.4(b) of the Employment Agreement) will be governed by the substantive laws of
the State of California. Notwithstanding the foregoing, any party may seek to
enforce its rights under this Agreement in any court of competent jurisdiction
located within the judicial district in which the Company or the U.S. Subsidiary
has a regular place of business.

14.  Notices.  Any notice or other communication under this Agreement must be in
     -------
writing and shall be effective upon delivery by hand; upon facsimile
transmission to either party at the number provided below for that party, but
only upon receipt by the transmitting party of a written confirmation of
receipt; or five business days after deposit in the United States mail, postage
prepaid, certified or registered, and addressed to the Company, the U.S.
Subsidiary or to Employee at the corresponding address below or on the signature
page of this Agreement. Each party shall be obligated to notify the other in
writing of any change in that party's address. Notice of change of address shall
be effective only when done in accordance with this Section 14.

          If to the Company or the U.S. Subsidiary, to:

               Attention:  Avishai Silvershatz
               Verisity Ltd.
               16 Ha'atzmaut St.
               Yehud, Israel 56304
               Facsimile:  972-3536-8519

15.  Entire Agreement.  This Agreement embodies the entire agreement between
     ----------------
Employee and the Company with regard to the subject matter of this Agreement and
supersedes all prior agreements with respect to that subject matter, including
without limitation the stock option agreement referred to in the Employment
Agreement.  This Agreement may not be contradicted by evidence of any prior or
contemporaneous agreement, oral or written, and this Agreement may not be
explained or supplemented by evidence of consistent additional terms.  This
Agreement supersedes all prior representations, statements, negotiations,
understandings, proposed agreements and agreements, written or oral, relating to
its subject matter.

16.  Amendment; Waiver.  This Agreement may not be amended, or any provision of
     -----------------
it waived, except in a writing signed by the party against whom such amendment
or waiver is sought. No waiver of any provision of this Agreement shall be
deemed to, or shall, operate as a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.

17.  Successors and Assigns.  This Agreement shall be binding on and inure to
     ----------------------
the benefit of the successors and assigns of the Company and the U.S. Subsidiary
and, subject to the limitations set forth in this Agreement, any successors and
permitted

                                      -10-
<PAGE>

assigns of Employee, including any executors, administrators or other legal
representatives of Employee.

18.  Captions; Sections.  Captions in this Agreement are inserted for
     ------------------
convenience of reference only and shall be ignored in the construction or
interpretation of this Agreement. Unless the context requires otherwise, all
references in this Agreement to "Sections" are to the sections of this
Agreement.

19.  Severability.  If any provision of this Agreement, or its application to
     ------------
any person, place, or circumstance, is held by an arbitrator or a court of
competent jurisdiction to be invalid, unenforceable or void, that provision
shall be enforced to the greatest extent permitted by law, and the remainder of
this Agreement and of that provision shall remain in full force and effect as
applied to other persons, places, and circumstances.

20.  Interpretation.  This Agreement shall be construed as a whole, according to
     --------------
its fair meaning, and not in favor of or against any party.  By way of example
and not in limitation, this Agreement shall not be construed in favor of the
party receiving a benefit nor against the party responsible for any particular
language in this Agreement.

21.  Counterparts.  This Agreement may be executed in one or more counterparts
     ------------
all of which together shall constitute one and the same instrument.

The parties have duly executed this Agreement as of the date first written
above.

Verisity Ltd.

By:  s/b Pierre Lamond
     -------------------------------
     Pierre Lamond, Director

Employee

Signature:  s/b Moshe Gavrielov
            ------------------------
Name:       Moshe Gavrielov

Address:    1900 Webster Street, Palo Alto, CA 94301

State of Residence:  California

Attachments:  Consent of Spouse

Exhibit A:  Form of Secured Promissory Note
Exhibit B:  Form of Pledge Agreement

                                      -11-
<PAGE>

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

        The undersigned is the spouse of Moshe Gavrielov, referred to in the
attached SHARE RESTRICTION AGREEMENT (the "Agreement") with Verisity Ltd. and
acknowledges that she:

          1.   has received, reviewed, understands and approves of the Agreement
(including its attachments);

          2.   consents to the Agreement, and agrees to be irrevocably bound by
its terms to the extent that she now has or may obtain any interest (including
any joint or community property interest) in the Shares covered by the
Agreement;

          3.   hereby appoints her spouse as her attorney-in-fact with respect
to any amendment, exercise of any rights or taking of any action with respect to
the Agreement and the Shares that are subject to it; and

          4.   understands that Verisity Ltd. is relying upon this consent in
entering into the Agreement, in issuing the Shares that are subject to it, and
in not taking further steps to protect its interests.

Date:  March 23, 1998

Signed:

s/b Ewa Gavrielov
----------------------------
Spouse of Moshe Gavrielov

Ewa Gavrielov
----------------------------
Print name

                                      -12-

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