Exhibit 10.28

[FORM OF PERFORMANCE-BASED STOCK OPTION AGREEMENT]

CALLIDUS SOFTWARE, INC.

2003 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

      Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

I.     NOTICE OF STOCK OPTION GRANT

      [Name]

      [Address]

      The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:

Grant Number

Date of Grant

Vesting Commencement Date

Exercise Price per Share

Total Number of Shares Granted

Total Exercise Price

Type of Option

Term Expiration Date

Vesting Schedule:

      This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:

      Grants will vest 100% three years from the date of grant. Vesting will
accelerate in accordance with the table below at the end of any 22 consecutive
trading periods (i.e. on the 23rd day) in which:

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      (i) The average closing price during that 22 consecutive day period is
equal to or exceeds the Target Stock Price listed below: and

      (ii) The closing stock price for at least 15 trading days within the
22-day consecutive period is equal to or exceeds the Target Stock Price.

> > Target Stock Price $5/share - 20% cumulatively vested
> > 
> > Target Stock Price $8/share - 40% cumulatively vested
> > 
> > Target Stock Price $11/share - 60% cumulatively vested
> > 
> > Target Stock Price $13/share - 80% cumulatively vested
> > 
> > Target Stock price $16/share – 100% cumulatively vested

      Termination Period:

      This Option shall be exercisable for 90 days after Optionee ceases to be a
Service Provider. Upon Optionee’s death or disability, this Option may be
exercised for such longer period as provided in the Plan. In no event may
Optionee exercise this Option after the Term/Expiration Date as provided above.

II.    AGREEMENT

      1.  Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the “Optionee”), an option (the
“Option”) to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the “Exercise
Price”), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 15(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.

      2.  Exercise of Option.

           (a) Right to Exercise. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.

           (b) Method of Exercise. This Option shall be exercisable by delivery
of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”)
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price. The Administrator shall require payment of any amount the Company may
determine to be necessary to withhold for taxes as a result of the exercise of
an award. In the absence of any other

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arrangement, Optionee agrees that the Company shall be entitled to withhold from
any payments to be made by the Company to Optionee an amount equal to such
withholding obligations.

      No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.

      3. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the “Managing Underwriter”)
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the “Market Standoff Period”) following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.

      4. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:

           (a) cash or check;

           (b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or

           (c) surrender 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 Exercise Price of the Exercised
Shares.

      5.  Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.

      6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

      7.  Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.

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      8.  Entire Agreement Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of the State of California.

      9.  No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO
TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

      Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

OPTIONEE: CALLIDUS SOFTWARE, INC.        

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Signature By    

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  Title

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  Residence Address  

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