Document:

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                                                                   Exhibit 10.22

                       FORM OF 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 its officers from the risk and judgments, settlements and
      other expenses which 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.

E.    The Board has further determined that the undertaking to indemnify
      Indemnitee 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.

                                      -1-
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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 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, including claim, suit or action initiated
          by the Company or anyone else in its name or on its behalf.

     1.3  Applicable Law. "Applicable Law" means any Israeli and/or foreign law,
          --------------
          regulation, statute, rule, enactment, order, decree, etc. which is
          applicable to and/or governing the implementation of this Agreement,
          including but not limited to the Companies Law.

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

     2.1  To the fullest extent permitted by any Applicable 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 any act or omission of 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". For the removal of
          doubt, the above shall apply to such acts and omissions, regardless of
          whether they were performed prior or after the Effective Date of this
          Agreement.

                                      -2-
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          Any indemnification under this Agreement shall apply only with respect
          to (i) a financial obligation imposed on Indemnitee in favor of any
          third party, including the Company or anyone acting in its name or on
          its behalf, by a court judgment, including a settlement or other
          compromise judgment or an arbitrator's award approved by a 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.

     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.

          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 pursuant to 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.

                                      -3-
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4.   Additional Indemnification Rights
     ---------------------------------

     In the event of any subsequent change of any Applicable Law which 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 which 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 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; Advance 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 which 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

                                      -4-
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          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, and (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 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, in
          accordance with the requirement of any Applicable Law, 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 from the date of the determination
          specified in Section 7.1 above. 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 of Covered Expenses 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.

                                      -5-
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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.

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 the approvals required under the
     Companies Law.

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 with respect to any
     Proceeding under Section 2.1 above 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 any Applicable Law.

                                      -6-
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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 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.

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.
                         2041 Landings Drive, Buliding N
                         Mountain View, California 94043
                         Attention: General Counsel

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.  Governing Law
     -------------

     It is hereby agreed that the internal laws of the State of Israel
     (irrespective of its choice of law principles) shall govern this Agreement
     including the validity thereof, the construction of its terms and the
     interpretation of the rights and duties of the parties hereunder.

                                      -7-
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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:

                                 ______________________________________

                                      -8-
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                           INDEMNIFICATION AGREEMENT
                           -------------------------

                                   Exhibit A
                                   ---------

                    Indemnifiable Event                       Limitation Amount
                                                               (In Million US$)

 .    Any claim, demand, suit or action (all of which shall            10
     be referred to hereafter as "Claim") in connection with
     the holding, offering, sale or disposition of
     securities of or by the Company and/or its subsidiaries
     and/or affiliates (all of which shall be referred to
     hereafter as "the Company") and/or by a shareholder of
     the Company to the public and/or to private investors
     pursuant to a prospectus, memorandum, agreement or
     otherwise.

 .    Any Claim made in connection with any applicable                 10
     securities law, including but not limited to Claim
     relating to the failure to timely and/or properly
     disclose any information required to be disclosed
     pursuant to any Applicable Law, or relating to
     inadequate or improper disclosure of information to the
     Company's shareholders, potential or prospective
     shareholders or any relevant authority.

 .    Any Claim arising out of investments of or by the                10
     Company in other entities, negotiation and/or entering
     into the transaction, the execution and observance
     thereof and actions in connection with the purchase,
     sale or merge of companies, legal entities or assets,
     and the division or consolidation thereof.

 .    Any Claim made by employees, officers, directors,                10
     consultants, agents, suppliers, contractors,
     distributors, representatives or any other third party
     providing services to the Company or employed by it, in
     connection with their employment and/or contractual
     relations with the Company, or the termination of such
     relations.

 .    Any Claim made by licensees, customers, end-users,               10
     suppliers, contractors, distributors, representatives
     or other third party in connection with any business
     transacted by or with the Company, whether or not in
     the ordinary course of its business, including but
     without limitation Claim relating to the negotiations
     towards such transactions or the implementation thereof
     or representations or warranties provided in connection
     thereto or otherwise.

                                      -9-
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                    Indemnifiable Event                       Limitation Amount
                                                               (In Million US$)

 .    Any Claim made by any third party, including licensees,          10
     customers, and end-users of the Company's products,
     relating to personal injury, damage to property or
     damage to business (including but without limitation
     loss of revenue, loss of savings and loss of
     clientele), resulting from or connected with any act or
     omission of the Company, its employees, officers,
     directors, agents, representatives, or other persons
     acting on its behalf, or in connection with the use of
     products sold or licensed by the Company and the
     distribution, sale or use of the Company's products.

 .    Any Claim made for actual, alleged or otherwise                  10
     infringement, misappropriation or misuse by the Company
     of any third party's rights with respect to any
     proprietary rights or intellectual property and any
     actions taken in connection with the registration of
     any form of protection with respect to any proprietary
     rights or intellectual property rights of the Company.

 .    Any Claim made by any lenders and/or creditors for               10
     moneys borrowed by, credits granted to, or other
     indebtedness of the Company.

 .    Any Claim arising out of administrative, regulatory or           10
     judicial actions (including but without limitation
     orders, decrees, directives, liens, investigations,
     proceedings and the like) or the violation, alleged or
     actual, of any such administrative, regulatory or
     judicial actions or any Applicable Law relating to the
     Company or to any of its businesses or operations.

 .    Any Claim made, directly or indirectly, in connection            10
     with any failure by the Company or its employees,
     officers or directors, to effect payments, cause
     reports to be filed or obtained, keep applicable
     records or otherwise, regarding any compulsory payments
     of any form, origin or nature whatsoever, and under any
     Applicable Law, including any interest, penalty or
     addition thereto.

                                      -10-<PAGE>

                                                                   Exhibit 10.25

                                 Verisity Ltd.
                        2000 U.S. Share Incentive Plan

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

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

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

4.  Shares Subject to the Plan.  Subject to section 13 of this Plan, in no event
    --------------------------
will the Company issue, in the aggregate, more than One Million Seven Hundred
and Eighty Thousand (1,780,000) Shares (the "Option Pool") pursuant to the
exercise of all Options and Restricted Share Rights granted under this Plan,
less that number of Shares and Restricted Share Rights that have been issued, or
have been reserved for issuance, either directly or pursuant to options granted,
to Directors, Officers, Employees, or Consultants of the Company and any of its
Subsidiaries on or after August 30, 2000 under any other share option plan,
share incentive plan, restricted share or similar arrangement (other than the
Employee

                                      -1-
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Share Purchase Plan and the 2000 Israeli Share Option Plan). No Participant
shall be issued, within any one-year period, a number of Shares and/or Option
Shares under the Plan which exceeds 500,000 shares (subject to section 13). At
all times while Options granted under this Plan are outstanding, the Company
will reserve for issuance for the purposes hereof a sufficient number of
authorized and unissued Shares to fully satisfy the Company's obligations under
all such outstanding Options.

5.  Administration.
    --------------

     (a)  This Plan will be administered and interpreted by the Board, or if the
Board so decides, then to the extent permissible under Israeli law including but
not limited to the Israeli Companies Law and Section 112 thereof, by a Committee
appointed by the Board for such purpose (the Board, or such Committee, referred
to herein as the "Administrator"). Any Committee shall consist solely of two or
more such Non-Employee Directors in accordance with Rule 16b-3, one of whom will
be an External Director if and to the extent required under the Israeli
Companies Law. Notwithstanding the foregoing, the Committee may consist of one
or more members of the Board but only with respect to the grant of Options and
Restricted Share Rights to eligible persons who (i) are not then subject to
Section 16 of the Exchange Act and/or (ii) are either (A) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option or Restricted Share Rights or
(B) not persons with respect to whom the Company wished to comply with Section
162(m) of the Code. If administration of this plan is delegated to a Committee,
the Committee shall have the powers theretofore possessed by the Board to the
extent permissible under the Israeli Companies Law. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan. A
majority of the members of the Board, or a Committee if so appointed, shall
constitute a quorum and all actions of the Board or Committee shall be taken by
a majority of the members present at any meeting. Any action of the Board, or a
Committee, may be taken by an instrument or instruments in writing signed by all
the members of the Board, or such Committee, and any actions so taken shall be
as effective as if it had been passed by a majority of the votes cast by the
members of the Board, or a Committee, present at a meeting of such members duly
called and held.

     (b)  Subject to the express terms and conditions hereof and to the extent
permissible under the Israeli Companies Law and Section 112 thereof, the
Administrator is authorized to prescribe, amend and rescind rules and
regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. Specifically,
the Administrator will have

                                      -2-
<PAGE>

full and final authority in its discretion, subject to the specific limitations
on that discretion as are set forth herein and in the Articles, at any time:

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

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

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

          (iv)   with respect to each Option, to determine the terms and
conditions of the Option, to be set forth in the Option Agreement evidencing the
Option (the form of which also being subject to approval by the Administrator),
which may vary from the "default" terms and conditions set forth in section 7
below, except to the extent otherwise provided, as follows:

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

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

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

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

                                      -3-
<PAGE>

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

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

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

6.  Restricted Shares.
    ------------------

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

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

7.  Terms and Conditions of Option Agreements if not otherwise Specified.
    --------------------------------------------------------------------
Unless otherwise expressly provided in an Option Agreement based on the
Administrator's determination pursuant to section 5(b) above, the following
terms and conditions will be the default provisions that apply to each Option as
if expressly set forth in the Option Agreement, provided that, if the
Administrator

                                      -4-
<PAGE>

grants an ISO to an Eligible Participant, then in no event shall
that Participant's Option Agreement modify the provisions of section 7(a):

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

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

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

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

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

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

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

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

                                      -5-
<PAGE>

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

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

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

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

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

          (i)    The portion of the Option that is a Vested Option may be
exercised by giving written notice thereof to the Company, on such form as may
be specified by the Administrator, but in any event stating the Optionee's
intention to exercise the Option; the date of exercise; the number of full
Option Shares to be purchased (which number will be no less than 100 Shares,
without regard to adjustments to the number of Shares subject to the Option
pursuant to section 13 below, or, if less, all of the remaining Shares subject
to the Option); the amount and form of payment of the Option Price. The notice
of exercise will be signed by the person or persons exercising the Option. In
the event that the Option is being exercised by the representative of the
Optionee, the notice will be accompanied by proof satisfactory to the Company of
the representative's right to exercise the Option. The notice of exercise will
be accompanied by full payment of the Option Price for the number of Option
Shares to be purchased. The Administrator will determine the form of the
consideration that the Company will accept in payment of the Option Price. Such
consideration, in the Administrator's sole discretion, may include (a) cash,
certified check, bank draft, money order or the equivalent in U.S. dollars
payable to the order of the Company; (b) delivery of other Shares which (i) in
the case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender and (ii) have a Fair
Market Value on the date of surrender equal to the aggregate Option Price of the
Shares as to which said Option shall be exercised; (c) consideration received by
the Company under a cashless exercise program implemented by the Administrator,
if it wishes in its sole discretion, in connection with the Plan; or

                                      -6-
<PAGE>

(d) such other consideration (such as a promissory note) as approved by the
Administrator.

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

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

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

                                      -7-
<PAGE>

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

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

                                      -8-
<PAGE>

employment or other matters as may be determined by the Board. The Company may,
upon advice of counsel to the Company, place legends on share certificates
issued under the Plan as counsel to the Company deems necessary or advisable in
order to comply with applicable securities laws, including, but not limited to,
legends restricting the transfer of the Shares.

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

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

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

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

      (a)  The number of Shares subject to the Plan, the number of Shares
available under Options and the Restricted Share Rights granted and the Option
Price and the price payable for Shares under the Restricted Share Right shall be

                                      -9-
<PAGE>

adjusted as determined by the Board in its discretion from time to time to
reflect adjustments in the number of Shares arising as a result of subdivisions,
share dividends, bonus shares, consolidations or reclassifications of the Shares
or other relevant changes in the authorized or issued capital of the Company. No
such adjustments will be required by reason of the issuance or sale by the
Company for cash or other consideration of additional Shares or securities
convertible into or exchangeable for Shares. No fractional Shares may be
purchased or issued hereunder. If a Participant is entitled to purchase a
fraction of a Share pursuant to an Option or Restricted Share Right such
entitlement shall be rounded down to the nearest whole number.

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

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

15.  Change of Control Transactions.  Except as otherwise provided in the Option
     ------------------------------
Agreement, Restricted Share Agreement or any contract of employment or
engagement between a Participant and the Company, in the event of a Change of
Control Transaction, the Company shall endeavor to cause the Successor Entity in
such transaction either to assume all of the Options which have been granted
hereunder and which are outstanding as of the consummation of such transaction
(the "Closing"), or to issue (or cause to be issued) in substitution thereof
comparable options of such Successor Entity (or of its parent or its
subsidiary).  If the Successor Entity is unwilling to either assume such Options
or grant comparable options in substitution for such Options on terms that are
acceptable to the Company as determined by the Board in the exercise of its
discretion, then with respect to each outstanding Option, that portion of the
Option which remains Unvested that either (x) would have become Vested over the
12-month period immediately following the Closing, or (y) represents 50% of the
Unvested portion of the Option as of the Closing, whichever portion is smaller,
will become Vested

                                      -10-
<PAGE>

immediately prior to such closing; and the Board may cancel all outstanding
Options, and terminate this Plan, effective as of the closing, provided that it
will notify all Optionees of the proposed Change of Control Transaction a
reasonable amount of time prior to the closing thereof so that each Optionee
will be given the opportunity to exercise the Vested portion of his or her
Option (after giving effect to the acceleration of such vesting discussed above)
prior to such closing. In the event of a Change of Control Transaction, the
Board will also have the discretion to cancel all or any part of a Repurchase
Option in effect with respect to any Purchaser's Shares. For purposes of this
section 15, the term "Change of Control Transaction" means (a) the sale of all
or substantially all of the assets of the Company to any person or entity that,
prior to such sale, did not control, was not under common control with, or was
not controlled by, the Company, or (b) a merger or consolidation or other
reorganization in which the Company is not the surviving entity or becomes owned
entirely by another entity, unless at least fifty percent (50%) of the
outstanding voting securities of the surviving or parent corporation, as the
case may be, immediately following such transaction are beneficially held by
such persons and entities in the same proportions as such persons and entities
beneficially held the outstanding voting securities of the Company immediately
prior to such transaction, or (c) the sale or other change of beneficial
ownership of the outstanding voting securities of the Company such that any
person or "group" as that term is defined under the Exchange Act becomes the
beneficial owner of more than 50% of the outstanding voting securities of the
Company.

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

17.  Governing Law.  The internal laws of the State of California (irrespective
     -------------
of its choice of law principles) shall govern this Agreement.  HOWEVER, THE
RELATIONSHIP OF THE PARTICIPANTS AS SHAREHOLDERS OF THE COMPANY, INCLUDING
WITHOUT LIMITATION ALL OF THEIR RIGHTS AND DUTIES ARISING UNDER THE COMPANY'S
ARTICLES, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF iSRAEL, AND THE COMPANY
AND EACH PARTICIPANT HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF

                                      -11-
<PAGE>

ISRAEL LOCATED IN TEL AVIV, IN RESPECT OF ANY DISPUTE OR MATTER
ARISING OUT OF OR CONNECTED WITH SUCH RELATIONSHIP AND THE ARTICLES.

18.  Amendment and Discontinuance.  The Board may amend, suspend or discontinue
     ----------------------------
this Plan at any time or from time to time; provided that no action of the Board
will cause ISOs granted under this Plan not to comply with Section 422 of the
Code unless the Board specifically declares such action to be made for that
purpose and provided further that no such action may, without the approval of
the shareholders of the Company, materially increase (other than by reason of an
adjustment pursuant to section 13) the benefits accruing to Eligible
Participants, or materially modify the category of, or eligibility requirements
for persons who are Eligible Participants.  However, no such action may
materially and adversely impair any Option or Restricted Share Right previously
granted under this Plan without the consent of the Participant, nor may the
number of Shares subject to the Plan be reduced to a number that is less than
the aggregate number of Option Shares and Shares (i) that may be issued pursuant
to the exercise of all outstanding and unexpired Options or Restricted Share
Rights granted hereunder, and (ii) that have been issued and are outstanding
pursuant to the exercise of Options granted hereunder.  The Board may create
subplans under this Plan or make changes to this Plan which are appropriate or
necessary by law to permit Directors, Officers, Employees or Consultants of the
Company or its Subsidiaries outside of the United States to participate in this
Plan.  The Board in its sole discretion may also submit any other amendment to
the Plan for shareholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of performance-
based compensation from the limit on corporate deductibility of compensation
paid to certain executive officers.  Nothing contained in the Plan or in the
Option Agreement or Restricted Share Agreement shall be construed so as to
prevent the Company or any Subsidiary from taking corporate action which is
deemed by the Company or the Subsidiary to be appropriate or in the Company's
best interest, whether or not such action would have an adverse effect on the
Plan.

19.  No Shareholder or Employment Rights.  No rights or privileges of a
     -----------------------------------
shareholder in the Company are conferred by reason of the granting of an Option
or Share Purchase Right.  No Optionee will become a shareholder in the Company
with respect to any Option Shares unless and until the Option has been properly
exercised and the Option Price has been fully paid as to the portion of the
Option exercised, and the name of the person rightfully exercising the Option
has been entered in the register of shareholders of the Company.  The granting
of an Option or the grant of rights to a Participant pursuant to a Restricted
Share Right do not confer upon the Participant any right to continue in the
employment of the

                                      -12-
<PAGE>

Company or any Subsidiary of the Company or on the Board, as the case may be,
nor does it interfere in any way with the right of the Participant or the
Company to terminate the Participant's employment at any time or shareholders'
right to elect Directors.

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

          Date Plan Adopted by Board of Directors:  ___________, 2000

          Date Plan Approved by the Shareholders:  ____________, 2000

                                      -13-
<PAGE>

                                 Verisity Ltd.
                        2000 U.S. Share Incentive Plan

                                   Exhibit A

                                  Definitions
                                  -----------

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

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

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

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

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

6.   "Articles" means the Company's Articles of Association, as amended.

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

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

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

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

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

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

13.  "Covered Employee" means the chief executive officer and the four other
highest compensated officers of the Company for whom total compensation is

                                      -14-
<PAGE>

required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

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

15.  "Director" means a member of the Board.

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

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

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

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

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

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

                                      -15-
<PAGE>

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

23.  "Just Cause Termination" means a termination by the Company and/or any of
its Subsidiaries of the Optionee's employment or services (or if the Optionee is
a Director, removal of him or her from the Board by action of the shareholders
or, if permitted by applicable law and the bylaws of the Company, the other
Directors), in connection with the good faith determination of the Board (or of
the Company's shareholders if the Optionee is a Director and the removal of him
or her from the Board is by action of the shareholders, but in either case
excluding the vote of the subject individual if he or she is a Director or a
shareholder) that the Optionee has engaged in any acts involving dishonesty or
moral turpitude or in any acts that materially and adversely affect the
business, affairs or reputation of the Company or any of its Subsidiaries.

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

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

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

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

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

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

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

                                      -16-
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      -17-
<PAGE>

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

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

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

                                      -18-
<PAGE>

                            Share Option Agreement
                            Under the Verisity Ltd.
                        2000 U.S. Share Incentive Plan

        This Agreement is made effective as of ____________________ (the "Grant
Date"; also the date the option referred to herein was authorized for granting
by the Administrator of the 2000 U.S. Share Incentive Plan), between Verisity
Ltd., a Company organized under the laws of the State of Israel (the "Company"),
and the undersigned Optionee. Capitalized terms not otherwise defined in this
Agreement will have the meanings set forth in the Company's 2000 U.S. Share
Incentive Plan, a copy of which is attached hereto and incorporated by reference
(the "Plan").

        The Parties Agree as Follows:

1.  Option Grant.  Subject to all of the terms and conditions set forth herein
    ------------
and in the Plan, the Company hereby grants to Optionee an option (the "Option")
to purchase the number of the Company's ordinary shares (the "Shares"), for an
exercise price per share (the "Option Price") and based upon the Grant Date set
forth above and an Expiration Date of the tenth anniversary of the Grant Date
(subject to earlier termination as provided in the Plan) as set forth below:

        Number of Shares
         subject to the Option:  ___________

        Option Price per Share:  $__________

        Vesting Start Date:      ___________

[The Option is intended to be an Incentive Stock Option ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.]

2.  Vesting and Exercise.
    --------------------

     (a)  Vesting.  Initially, the entire Option will be an "Unvested Option"
          -------
within the meaning of the Plan; portions of the Option will become a "Vested
Option" within the meaning of the Plan on the following schedule:

          (1)  twenty-five percent (25%) of the Shares subject to the Option
     shall become a Vested Option as of the first anniversary of the Vesting
     Start Date; and

          (2)  the remaining seventy-five percent (75%) of the Shares subject to
     the Option shall become a Vested Option monthly ratably (approximately
     _______ shares/month) on a cumulative basis over the 36-month period
     commencing on the first anniversary of the Vesting Start Date, subject to
     the condition that Optionee does not suffer a Loss of Eligibility Status
     prior to each such vesting date.

                                      -1-
<PAGE>

    (b)  Minimum Number of Shares.  Any exercise of the Option must be for at
         ------------------------
least one hundred (100) Shares (without regard to adjustments to the number of
Shares subject to the Option pursuant to section 8 of the Plan) or, if less, all
of the remaining Shares subject to the Option.

    (c)  Notice of Exercise.  Optionee or Optionee's representative may exercise
         ------------------
the Option by giving written notice to the Company pursuant to section 6.5(a) of
the Plan using the specified form of notice of exercise attached to this
Agreement as Exhibit A.  The notice will be signed by the person or persons
             ---------
exercising the Option.  In the event that the Option is being exercised by the
representative of Optionee, the notice will be accompanied by proof reasonably
satisfactory to the Company of the representative's right to exercise the
Option.  Payment of the Option Price will accompany the notice and will be made
by cash or a check made payable to the Company.

    (d)  Withholding Taxes.  To the extent required by applicable federal,
         -----------------
state, local or foreign law, and as a condition to the Company's obligation to
issue any Shares upon the exercise of the Option in full or in part, Optionee
will make arrangements reasonably satisfactory to the Company for the payment of
any withholding tax obligations that arise by reason of such exercise.

    (e)  Issuance of Option Shares.  Subject to the provisions of the Plan,
         -------------------------
after receiving a proper notice of exercise and payment of the applicable Option
Price and withholding taxes, the Company will cause to be issued a certificate
or certificates for the Option Shares as to which the Option has been exercised,
registered in the name of the person rightfully exercising the Option.  The
Company will cause such certificate or certificates to be delivered to such
person.

3.  Representations and Warranties of Optionee.  Optionee hereby represents and
    ------------------------------------------
warrants that:

    (a)  Optionee is acquiring the Option granted hereby, and will acquire any
Shares obtained upon exercise of the Option, for investment purposes only, for
Optionee's own account, and with no view to the distribution thereof.

    (b)  Optionee understands that the Option and the Shares that may be
acquired by exercising the Option ("Option Shares") have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), and that the
Option and the Option Shares are not freely tradeable and must be held
indefinitely unless they are either registered under the 1933 Act or an
exemption from such registration is available.  Optionee understands that the
Company is under no obligation to register the Option or the Option Shares.
Optionee also understands that the Option and the Option Shares have not been
qualified under the securities laws of any state and are to be offered and sold
pursuant to an exception from qualification under applicable state securities
laws.

4.  No Shareholder Rights.  No rights or privileges of a shareholder in the
    ---------------------
Company are conferred by reason of the granting of the Option.  Optionee will
not become a shareholder in the

                                      -2-
<PAGE>

Company with respect to any Option Shares unless and until the Option has been
properly exercised and the Option Price fully paid as to the portion of the
Option exercised.

5.  No Employment Rights.  Nothing in this Agreement will be construed as giving
    --------------------
Optionee the right to be retained as an employee of the Company and/or its
Subsidiaries.

6.  Terms of the Plan.  Optionee understands that the Plan includes important
    -----------------
terms and conditions that apply to the Option.  Those terms include (without
limitation):  important conditions to the right of Optionee to exercise the
Option; important restrictions on the ability of Optionee to transfer the Option
or to Transfer any of the Option Shares received upon exercise of the Option;
and early termination of the Option following the occurrence of certain events,
including Optionee no longer being an employee, director, consultant or
independent contractor to or of the Company or its Subsidiaries.  Optionee
acknowledges that he or she has read the Plan, agrees to be bound by its terms,
and makes each of the representations required to be made by Optionee under it.
Optionee further acknowledges that the Company has given no tax advice
concerning the Option and has advised Optionee to consult with his or her own
tax or financial advisor about the tax treatment of the Option and its exercise.

7.  Miscellaneous.
    -------------

     (a)  Assignment.  Neither this Agreement nor the Option is assignable by
          ----------
either party, except as expressly provided herein.  All of the covenants and
provisions of this Agreement by or for the benefit of the Company or Optionee
shall bind and inure to the benefit of their respective successors.

     (b)  Entire Agreement; Amendments. This Agreement constitutes the final and
          ----------------------------
complete expression of all of the terms of the understanding and agreement
between the parties hereto concerning the subject matter hereof. This Agreement
may not be modified, amended, altered or supplemented except by means of the
execution and delivery of a written instrument mutually executed by the Company
and Optionee.

     (c)  Governing Law.  The internal laws of the State of California
          -------------
(irrespective of its choice of law principles) shall govern this Agreement.
however, the relationship of the participants as shareholders of the Company,
including without limitation all of their rights and duties arising under the
Company's Articles, shall be governed by the laws of the State of Israel, and
the company and each participant hereby irrevocably submits to the exclusive
jurisdiction of the Courts of Israel located in Tel Aviv, in respect of any
dispute or matter arising out of or connected with such relationship and the
Articles.

     (d)  Counterparts.  This Agreement may be executed in any number of
          ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.

                                      -3-
<PAGE>

The parties hereby have entered into this Agreement as of the Grant Date.

                              Verisity Ltd.

                              By:_____________________________________

                              Title:__________________________________

                              "Optionee"

                              ________________________________________

                              Address:

                              ________________________________________

                              ________________________________________

                              Social Security No.:_______________________

   Attachments:  (1)  Consent of Spouse
                 (2)  2000 U.S. Share Incentive Plan

   Exhibit A:    Form of Notice of Exercise of Share option

                                      -4-
<PAGE>

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

        I am the spouse of ___________, who together with Verisity Ltd., have
entered into the Share option Agreement, to which this Consent is attached.
Capitalized terms not defined herein will have the meaning set forth in such
Agreement, or in the Verisity Ltd. 2000 U.S. Share Incentive Plan, which forms a
part of such Agreement (the "Plan").

        I have read and understand the Share option Agreement and the Plan. I
acknowledge that, by execution hereof, I am bound by the Share option Agreement
and the Plan as to any and all interests I may have in the Option and the Option
Shares issuable under the Agreement and the Plan. In particular, I understand
and agree that the Option Shares (including any interest that I may have
therein) is subject to certain restrictions on transfer.

        I also agree with my spouse and the Company that if my spouse and I ever
get divorced or enter into any marital property settlement agreement, or if my
spouse or I ever seek a decree of separate maintenance, to the extent my spouse
has or can obtain assets other than the Option Shares in amounts and of value
sufficient to settle or satisfy any marital property claims I may have in the
value of the Option Shares, I will accept such other assets in settlement of
those claims.

        I agree that I will not do anything to try to prevent the operation of
any part of the Share option Agreement or the Plan.  I acknowledge that I have
had an opportunity to obtain independent counsel to advise me concerning the
matters contained herein.

Dated:_____________     Signature:_______________________

                        Print Name:______________________
<PAGE>

                                                                       Exhibit A
                                                                       ---------
                      NOTICE OF EXERCISE OF SHARE OPTION
                                 Verisity Ltd.

To The General Manager of Verisity Ltd.

    The undersigned, the holder of an Option to purchase ordinary shares of
Verisity Ltd. (the "Company"), hereby irrevocably elects to exercise the
purchase rights represented by such Option, and to purchase thereunder _________
ordinary shares of the Company, herewith makes payment of $_____________
therefor in the form of a check made payable to the Company, and requests that
the certificates for such shares be issued in the name of and delivered to the
undersigned at the address set forth below.

    The undersigned acknowledges that the shares being purchased by him or her
(the "Option Shares") are subject to substantial restrictions on sale or
transfer set forth in the Company's Articles of Association and in the Company's
2000 U.S. Share Incentive Plan (the "Plan") and agrees to be bound by the terms
and conditions of said Plan and the Share option Agreement entered into by and
between the Company and the undersigned on ___________, 200_.  The undersigned
further represents, warrants and acknowledges that, unless a registration
statement is in effect with respect to the sale of Option Shares:  (i) those
Option Shares are not freely tradeable and must be held indefinitely unless such
Option Shares are either registered under the Securities Act of 1933, as
amended, (the "Act"), or an exemption from such registration is available; (ii)
the Company is under no obligation to register those Option Shares; (iii) the
undersigned is purchasing the Option Shares for his or her own account and not
with a view to or for sale in connection with any distribution within the
meaning of the Act, other than as may be effected in compliance with the Act and
the rules and regulations promulgated thereunder; (iv) no one else will have any
beneficial interest in the Option Shares; and (v) he or she has no present
intention of disposing of the Option Shares or any interest therein at any
particular time.

DATED: _______________

                              ________________________________________
                              (signature)

                              ________________________________________
                              Print name exactly as to be shown on certificate

                              Address:
                              ________________________________________________

                              ________________________________________________
<PAGE>

                            Share Option Agreement
                            Under the Verisity Ltd.
                        2000 U.S. Share Incentive Plan
                            [for outside directors]

          This Agreement, between Verisity Ltd., a Company organized under the
laws of the State of Israel (the "Company") and the undersigned Optionee, is
made effective as of _____________________ (the "Grant Date"; also the date the
option referred to herein was authorized for granting by the Administrator of
the Company's Plan). Capitalized terms not otherwise defined in this Agreement
will have the meanings set forth in the Company's 2000 U.S. Share Incentive
Plan, a copy of which is attached hereto and incorporated by reference (the
"Plan").

           The Parties Agree as Follows:

1.  Option Grant.  Subject to all of the terms and conditions set forth herein
    ------------
and in the Plan, the Company hereby grants to Optionee an option (the "Option")
to purchase the number of the Company's ordinary shares (the "Shares"), for an
exercise price per share (the "Option Price") and based upon the Grant Date set
forth above and an Expiration Date of the tenth anniversary of the Grant Date
(subject to earlier termination as provided in the Plan) as set forth below:

        Number of Shares
         subject to the Option:  ________________________

        Option Price per Share:  $
                                 ------------------------
        Vesting Start Date:      ________________________

2.  Vesting and Exercise.
    --------------------

      (a)  Vesting.  Initially, the entire Option will be an "Unvested Option"
           -------
within the meaning of the Plan; portions of the Option will become a "Vested
Option" within the meaning of the Plan on the following schedule: the Shares
subject to the Option shall become a Vested Option monthly ratably
(approximately ________ shares/month) on a cumulative basis over the 36-month
period commencing on the Vesting Start Date, subject to the condition that
Optionee does not suffer a Loss of Eligibility Status prior to each such vesting
date.

      (b)  Minimum Number of Shares.  Any exercise of the Option must be for at
           ------------------------
least one hundred (100) Shares (without regard to adjustments to the number of
Shares subject to the Option pursuant to section 8 of the Plan) or, if less, all
of the remaining Shares subject to the Option.
<PAGE>

    (c)  Notice of Exercise.  Optionee or Optionee's representative may exercise
         ------------------
the Option by giving written notice to the Company pursuant to section 6.3(a) of
the Plan using the specified form of notice of exercise attached to this
Agreement as Exhibit A.  The notice will be signed by the person or persons
             ---------
exercising the Option.  In the event that the Option is being exercised by the
representative of Optionee, the notice will be accompanied by proof reasonably
satisfactory to the Company of the representative's right to exercise the
Option.  Payment of the Option Price will accompany the notice and will be in
any of the following forms acceptable to the Company:  (i) cash or a check made
payable to the Company; or (ii) [by the delivery of one or more certificate(s)
representing shares of the Company with a Fair Market Value on the date of
exercise equal to the Option Price, together with a share transfer deed executed
in blank].

    (d)  Withholding Taxes.  To the extent required by applicable federal,
         -----------------
state, local or foreign law, and as a condition to the Company's obligation to
issue any Shares upon the exercise of the Option in full or in part, Optionee
will make arrangements reasonably satisfactory to the Company for the payment of
any withholding tax obligations that arise by reason of such exercise.

    (e)  Issuance of Option Shares.  Subject to the provisions of the Plan,
         -------------------------
after receiving a proper notice of exercise and payment of the applicable Option
Price and withholding taxes, the Company will cause to be issued a certificate
or certificates for the Option Shares as to which the Option has been exercised,
registered in the name of the person rightfully exercising the Option.  The
Company will cause such certificate or certificates to be delivered to such
person.

3.  Representations and Warranties of Optionee.  Optionee hereby represents and
    ------------------------------------------
warrants that:

    (a)  Optionee is acquiring the Option granted hereby, and will acquire any
Shares obtained upon exercise of the Option, for investment purposes only, for
Optionee's own account, and with no view to the distribution thereof.

    (b)  Optionee understands that the Option and the Shares that may be
acquired by exercising the Option ("Option Shares") have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), and that the
Option and the Option Shares are not freely tradeable and must be held
indefinitely unless they are either registered under the 1933 Act or an
exemption from such registration is available.  Optionee understands that the
Company is under no obligation to register the Option or the Option Shares.
Optionee also understands that the Option and the Option Shares have not been
qualified under the securities laws of any state and are to be offered and sold
pursuant to an exception from qualification under applicable state securities
laws.

4.  No Shareholder Rights.  No rights or privileges of a shareholder in the
    ---------------------
Company are conferred by reason of the granting of the Option.  Optionee will
not become a shareholder in the Company with respect to any Option Shares unless
and until the Option has been properly exercised and the Option Price fully paid
as to the portion of the Option exercised.

5.  No Rights to Board Membership.  Nothing in this Agreement will be construed
    -----------------------------
as giving Optionee the right to be a director of the Company and/or its
Subsidiaries.
<PAGE>

6.  Terms of the Plan.  Optionee understands that the Plan includes important
    -----------------
terms and conditions that apply to the Option.  Those terms include (without
limitation):  important conditions to the right of Optionee to exercise the
Option; important restrictions on the ability of Optionee to transfer the Option
or to Transfer any of the Option Shares received upon exercise of the Option;
and early termination of the Option following the occurrence of certain events,
including Optionee no longer being a director of the Company.  Optionee
acknowledges that he or she has read the Plan, agrees to be bound by its terms,
and makes each of the representations required to be made by Optionee under it.
Optionee further acknowledges that the Company has given no tax advice
concerning the Option and has advised Optionee to consult with his or her own
tax or financial advisor about the tax treatment of the Option and its exercise.

7.  Miscellaneous.
    -------------

      (a)  Assignment.  Neither this Agreement nor the Option is assignable by
           ----------
either party, except as expressly provided herein.  All of the covenants and
provisions of this Agreement by or for the benefit of the Company or Optionee
shall bind and inure to the benefit of their respective successors.

      (b)  Entire Agreement; Amendments. This Agreement constitutes the final
           ----------------------------
and complete expression of all of the terms of the understanding and agreement
between the parties hereto concerning the subject matter hereof. This Agreement
may not be modified, amended, altered or supplemented except by means of the
execution and delivery of a written instrument mutually executed by the Company
and Optionee.

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

    (d)  Counterparts.  This Agreement may be executed in any number of
         ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.

The parties hereby have entered into this Agreement as of the Grant Date.

                              Verisity Ltd.

                              By: _______________________________________

                              Title: ____________________________________

                              Optionee

                              By: _______________________________________

                              Title: ____________________________________

                              Address:

                              ____________________________
                              ____________________________

                              Tax ID No.:_________________

   Attachments:  (1)  Consent of Spouse
                 (2)  2000 U.S. Share Incentive Plan

   Exhibit A:    Form of Notice of Exercise of Share Option
<PAGE>

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

        I am the spouse of ___________, who together with Verisity Ltd., have
entered into the Share Option Agreement, to which this Consent is attached.
Capitalized terms not defined herein will have the meaning set forth in such
Agreement, or in the Verisity Ltd. 2000 U.S. Share Incentive Plan, which forms a
part of such Agreement (the "Plan").

        I have read and understand the Share Option Agreement and the Plan.  I
acknowledge that, by execution hereof, I am bound by the Share Option Agreement
and the Plan as to any and all interests I may have in the Option and the Option
Shares issuable under the Agreement and the Plan.  In particular, I understand
and agree that the Option Shares (including any interest that I may have
therein) is subject to certain restrictions on transfer.

        I also agree with my spouse and the Company that if my spouse and I ever
get divorced or enter into any marital property settlement agreement, or if my
spouse or I ever seek a decree of separate maintenance, to the extent my spouse
has or can obtain assets other than the Option Shares in amounts and of value
sufficient to settle or satisfy any marital property claims I may have in the
value of the Option Shares, I will accept such other assets in settlement of
those claims.

        I agree that I will not do anything to try to prevent the operation of
any part of the Share Option Agreement or the Plan.  I acknowledge that I have
had an opportunity to obtain independent counsel to advise me concerning the
matters contained herein.

Dated:_____________     Signature:___________________________________

                        Print Name:__________________________________
<PAGE>

                                                                       Exhibit A
                                                                       ---------
                      NOTICE OF EXERCISE OF SHARE OPTION
                                 Verisity Ltd.

To The General Manager of Verisity Ltd.

    The undersigned, the holder of an Option to purchase ordinary shares of
Verisity Ltd. (the "Company"), hereby irrevocably elects to exercise the
purchase rights represented by such Option, and to purchase thereunder _________
ordinary shares of the Company, herewith makes payment of $_____________
therefor in the form of a check made payable to the Company, and requests that
the certificates for such shares be issued in the name of and delivered to the
undersigned at the address set forth below.

    The undersigned acknowledges that the shares being purchased by him or her
(the "Option Shares") are subject to substantial restrictions on sale or
transfer set forth in the Company's Articles of Association and in the Company's
2000 U.S. Share Incentive Plan (the "Plan") and agrees to be bound by the terms
and conditions of said Plan and the Share Option Agreement entered into by and
between the Company and the undersigned dated effective as of ______, 200_.  The
undersigned further represents, warrants and acknowledges that, unless a
registration statement is in effect with respect to the sale of Option Shares:
(i) those Option Shares are not freely tradeable and must be held indefinitely
unless such Option Shares are either registered under the Securities Act of
1933, as amended, (the "Act"), or an exemption from such registration is
available; (ii) the Company is under no obligation to register those Option
Shares; (iii) the undersigned is purchasing the Option Shares for his or her own
account and not with a view to or for sale in connection with any distribution
within the meaning of the Act, other than as may be effected in compliance with
the Act and the rules and regulations promulgated thereunder; (iv) no one else
will have any beneficial interest in the Option Shares; and (v) he or she has no
present intention of disposing of the Option Shares or any interest therein at
any particular time.

DATED: _______________

                      __________________________________________________________
                        (signature)

                      __________________________________________________________
                      Print name exactly as to be shown on certificate

                      Address:
                      __________________________________________________________

                      __________________________________________________________

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