<PAGE>
Exhibit 10.39
Verisity Ltd.
(the "Company")
Directed Share Plan 2000
------------------------
1. Purpose
-------
The Purpose of this plan (the "Plan") is to reward the employees of the
Company for their contribution to the Company's success, by enabling them to
purchase directly from FleetBoston Robertson Stephens Inc. (the
"Underwriters") Ordinary Shares NIS 0.01 par value each of the Company (the
"Ordinary Shares") within the framework and as part of the contemplated
initial public offering of the Company's shares (the "IPO").
2. Administration of the Plan
--------------------------
The Chief Executive Officer (the "CEO") and the Chief Financial Officer (the
"CFO") of the Company be, and each of them further is, authorized and
directed, for and on behalf of the Company, to administer this Plan in all
respects. Without derogating from the generality of the above, the CEO and
the CFO shall be entitled to suspend, terminate or cancel this Plan or any
part hereof, replace and/or determine further provisions and sub-plans in
addition to this Plan, determine any other plan in lieu of this Plan and
determine any provision and do anything in connection with this Plan, and
their interpretation and construction of any provision of this Plan shall be
final and conclusive unless otherwise determined by the Board of Directors
of the Company.
3. Eligible Employees and Participants
-----------------------------------
Each employee employed with the Company on October 10, 2000 and whose
employment has not been terminated prior to the IPO, shall be offered the
opportunity to participate in this Plan and to purchase directly from the
Underwriters Ordinary Shares hereunder (each such employee shall be referred
to hereafter as "Eligible Employee". Each Eligible Employee who have elected
to participate in this Plan and to purchase Ordinary Shares hereunder shall
be referred to hereafter as "Participant").
4. Number of Shares and Purchase Price
-----------------------------------
Each Eligible Employee shall be entitled to purchase within the framework of
this Plan 250 Ordinary Shares on an `all-or-nothing' basis, meaning that he
or she may either elect to purchase 250 Ordinary Shares or not to purchase
all and any Ordinary Shares hereunder.
The price to be paid for each Ordinary Share (the "Purchase Price") shall be
the same price as the price for the public in the IPO, as shall be
determined on the pricing of the IPO. For the removal of doubt, the Purchase
Price shall not be reduced by any discount (including underwriters
discount), reduction or the like.
<PAGE>
5. Offering Procedure and Distribution of Shares
---------------------------------------------
The offering procedure and the distribution of the Ordinary Shares to the
Participants, including but without limitation the offering of the Ordinary
Shares to the Eligible Employees, the allocation of the Ordinary Shares
between the Eligible Employees and the collection of payment for the
Ordinary Shares shall be made by and shall be at the sole responsibility of
the Underwriters, provided however that the offering and allocation of the
Ordinary Shares between the Eligible Employees as per the above shall be
made in accordance with the details of such Eligible Employees, as shall be
provided to the Underwriters by the Company and, provided further, that the
offering of the Ordinary Shares to the Eligible Employees shall only be made
after the shares of the Company are listed for trading on Nasdaq.
6. Tax Consequences
----------------
Any tax consequences arising from the participation in this Plan, from the
payment for the Ordinary Shares covered thereby or from any other event or
act (of the Company, the Underwriters or the Participant) hereunder, to the
extent any such tax consequences arise, shall be borne solely by the
Participant. Each Participant shall indemnify the Company and the
Underwriters and hold them harmless against and from any and all liability
for any such tax or interest or penalty thereon, including without
limitation, liabilities relating to the necessity to withhold, or to have
withheld, any such tax from any payment.
7. No Social Benefits
------------------
Any income attributed to the Participants as a result of this Plan, to the
extent any such income attributed, shall not be taken into account when
computing the basis of the Participants' entitlement to any social benefits.
Without derogating from the generality of the above, that income shall not
be taken into account in computing mangers insurance, vocational studies
fund, provident funds, severance pay, holiday pay and the like. If the
Company is legally obliged to take any of the above into account, as income
which is to be attributed to the Participant, the Participant will indemnify
the Company in respect of any expense sustained by it in such respect.
8. Continuance of Employment
-------------------------
Nothing in this Plan shall be construed to impose any obligation on the
Company to continue any employee's employment with it, to confer upon an
employee any right to continue in the employment of the Company or to
restrict the right of the Company to terminate such employment at any time.
9. Rights Not Assignable
---------------------
The rights of the Eligible Employee hereunder or any of them shall not be
assignable, transferable or given as collateral and no right with respect to
them may be given to any third party whatsoever, and such rights shall be
exercisable only by the Eligible Employee.
The Ordinary Shares purchased hereunder shall not be subject to lockup,
unless and to the extent required by the Underwriters.
<PAGE>
10. Condition Precedent
-------------------
This Plan is subject to the closing of the IPO on or before February 28,
2001, and in the event that the IPO is not so closed by February 28, 2001
this Plan will be null and void for any and all purpose.
In addition, the actual offering of Ordinary Shares to Eligible Employees
hereunder is subject to the grant by the Israeli Securities Authority to the
Company of an exemption pursuant to the Israeli Securities Law, 5728 - 1968,
with respect to such offering.
11. Governing Law & Jurisdiction
----------------------------
This Plan shall be exclusively governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts made
and to be performed therein, without giving effect to the principles of
conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole
and exclusive jurisdiction in any matters pertaining to this Plan.
