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Exhibit 10.3

DITECH COMMUNICATIONS CORPORATION

1998 STOCK OPTION PLAN

ADOPTED BY THE BOARD OF DIRECTORS OCTOBER 15, 1998
APPROVED BY THE STOCKHOLDERS NOVEMBER 6, 1998
AMENDED AND RESTATED APRIL 21, 1999
AMENDED BY THE BOARD OF DIRECTORS JULY 6, 2000
AMENDMENT APPROVED BY STOCKHOLDERS SEPTEMBER 22, 2000
AMENDED BY THE BOARD OF DIRECTORS NOVEMBER 22, 2000
(STOCKHOLDER APPROVAL NOT REQUIRED FOR AMENDMENT)
AMENDED BY THE BOARD OF DIRECTORS JUNE 6, 2002
AMENDMENT APPROVED BY STOCKHOLDERS SEPTEMBER 20, 2002
AMENDED BY THE BOARD OF DIRECTORS NOVEMBER 15, 2002
(STOCKHOLDER APPROVAL NOT REQUIRED FOR AMENDMENT)

1. Purposes.

        (a)  The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.

        (b)  The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

        (c)  The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

2. Definitions.

        (a)  "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

        (b)  "Board" means the Board of Directors of the Company.

        (c)  "Code" means the Internal Revenue Code of 1986, as amended.

        (d)  "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

        (e)  "Company" means Ditech Communications Corporation, a Delaware
corporation.

        (f)    "Consultant" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.

        (g)  "Continuous Status as an Employee, Director or Consultant" means
that the service of an individual to the Company, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Board or the chief
executive officer of the Company may determine, in that party's

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sole discretion, whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board or the chief executive officer of the Company,
including sick leave, military leave, or any other personal leave; or
(ii) transfers between the Company, Affiliates or their successors.

        (h)  "Covered Employee" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

        (i)    "Director" means a member of the Board.

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

        (k)  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

        (l)    "Fair Market Value" means, as of any date, the value of the
common stock of the Company determined as follows:

        (1)  If the common stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of common stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's common stock) on the day of determination, as reported
in The Wall Street Journal or such other source as the Board deems reliable.

        (2)  In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.

        (3)  Prior to the Listing Date, the value of the common stock shall be
determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.

        (m)  "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

        (n)  "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

        (o)  "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 Securities Act
("Regulation S-K")), 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 purposes of Rule 16b-3.

        (p)  "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.

        (q)  "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.

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        (r)  "Option" means a stock option granted pursuant to the Plan.

        (s)  "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

        (t)    "Optionee" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

        (u)  "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

        (v)  "Plan" means this 1998 Stock Option Plan.

        (w)  "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.

        (x)  "Securities Act" means the Securities Act of 1933, as amended.

3. Administration.

        (a)  The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

        (b)  The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

        (1)  To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted;
whether an Option will be an Incentive Stock Option or a Nonstatutory Stock
Option; the provisions of each Option granted (which need not be identical),
including the time or times such Option may be exercised in whole or in part;
and the number of shares for which an Option shall be granted to each such
person.

        (2)  To effect, at any time and from time to time, with the consent of
any adversely affected Optionee, (i) the reduction of the exercise price of any
outstanding Option under the Plan, (ii) the cancellation of any outstanding
Option under the Plan and the grant in substitution therefor of (A) a new Option
under the Plan covering the same or a different number of shares of common
stock, (B) a stock bonus, (C) the right to acquire restricted stock, and/or
(D) cash, or (iii) any other action that is treated as a repricing under
generally accepted accounting principles.

        (3)  To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.

        (4)  To amend the Plan or an Option as provided in Section 11.

        (5)  Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company.

        (c)  The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be,

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in the discretion of the Board, Non-Employee Directors and/or Outside Directors.
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee of two (2) or
more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the Listing Date, and notwithstanding anything to the contrary
contained herein, the Board may delegate administration of the Plan to any
person or persons and the term "Committee" shall apply to any person or persons
to whom such authority has been delegated. Notwithstanding anything in this
Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Options to
eligible persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Option, or (ii) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code.

4. Shares Subject To The Plan.

        (a)  Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate three million eight hundred fifty-six thousand
eighty-two (3,856,082) shares of the Company's common stock. If any Option shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the stock not purchased under such Option shall
revert to and again become available for issuance under the Plan.

        (b)  The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

5. Eligibility.

        (a)  Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.

        (b)  No person shall be eligible for the grant of an Option if, at the
time of grant, such person owns (or is deemed to own pursuant to Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.

        (c)  Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than four hundred thousand (400,000) shares of the Company's
common stock in any calendar year. This subsection 5(c) shall not apply prior to
the Listing Date and, following the Listing Date, shall not apply until (i) the
earliest of: (A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of common
stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of shareholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.

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6. Option Provisions.

        Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

        (a)    Term.    No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.

        (b)    Price.    The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted; the exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

        (c)    Consideration.    The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.

        In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at not less than the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement.

        (d)    Transferability.    An Option shall not be transferable except by
will or by the laws of descent and distribution, and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person. A
Nonstatutory Stock Option granted after the Listing Date shall only be
transferable by the Optionee upon such terms and conditions as are set forth in
the Option Agreement for such Nonstatutory Stock Option, as the Board or the
Committee shall determine in its discretion. The person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.

        (e)    Vesting.    The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The Option may be subject to such other terms and conditions on
the time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this subsection 6(e) are subject
to any Option provisions governing the minimum number of shares as to which an
Option may be exercised.

        Notwithstanding the foregoing, Options granted prior to the Listing Date
shall provide for vesting of at least twenty percent (20%) per year of the total
number of shares subject to the Option; provided,

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however, that an Option granted to an officer, director or consultant (within
the meaning of Section 260.140.41 of Title 10 of the California Code of
Regulations) prior to the Listing Date may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during any
period established by the Company or of any of its Affiliates.

        (f)    Securities Law Compliance.    The Company may require any
Optionee, or any person to whom an Option is transferred under subsection 6(d),
as a condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act, or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to provide
such other representations, written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.

        (g)    Termination of Employment or Relationship as a Director or
Consultant.    In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three
(3) months following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant, or such longer or shorter period specified in
the Option Agreement, which for Options granted prior to the Listing Date shall
not be less than thirty (30) days, or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

        (h)    Disability of Optionee.    In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement, which for Options granted
prior to the Listing Date shall not be less than six (6) months), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

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        (i)    Death of Optionee.    In the event of the death of an Optionee
during, or within a period specified in the Option Agreement after the
termination of, the Optionee's Continuous Status as an Employee, Director or
Consultant, the Option may be exercised (to the extent the Optionee was entitled
to exercise the Option as of the date of death) by the Optionee's estate, by a
person who acquired the right to exercise the Option by bequest or inheritance
or by a person designated to exercise the option upon the Optionee's death
pursuant to subsection 6(d), but only within the period ending on the earlier of
(i) the date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement, which for Options granted
prior to the Listing Date shall not be less than six (6) months), or (ii) the
expiration of the term of such Option as set forth in the Option Agreement. If,
at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.

        (j)    Early Exercise.    The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that for Options granted prior to the Listing Date (i) the right to
repurchase at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date the Option was
granted, and (ii) such right shall be exercisable only within (A) the ninety
(90) day period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares. Notwithstanding the
foregoing, shares received on exercise of an Option by an officer, director or
consultant (within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations) may be subject to additional or greater
restrictions.

        (k)    Right of First Refusal.    The Option may, but need not, include
a provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the Optionee
of the intent to transfer all or any part of the shares exercised pursuant to
the Option. Except as expressly provided in this subsection 6(k), such right of
first refusal shall otherwise comply with the provisions of the Bylaws of the
Company.

        (l)    Withholding.    To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.

7. Covenants Of The Company.

        (a)  During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.

        (b)  The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to

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register under the Securities Act either the Plan, any Option or any stock
issued or issuable pursuant to any such Option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.

8. Use Of Proceeds From Stock.

        Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

9. Miscellaneous.

        (a)  The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.

        (b)  Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.

        (c)  Prior to the Listing Date, to the extent required by
Section 260.140.46 of Title 10 of the California Code of Regulations, the
Company shall deliver financial statements to Optionees at least annually. This
subsection 9(c) shall not apply to key employees whose duties in connection with
the Company assure them access to equivalent information.

        (d)  Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's Bylaws and
the provisions of the corporate law of the state in which the Company or the
Affiliate, as the case may be, is incorporated, or to terminate the relationship
of any Consultant subject to the terms of that Consultant's agreement with the
Company or Affiliate to which such Consultant is providing services.

        (e)  To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

10. Adjustments Upon Changes In Stock.

        (a)  If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person during any calendar
year pursuant to subsection 5(c), and the outstanding Options will be
appropriately adjusted in the type(s) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board or Committee, the determination of

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which shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company.")

        (b)  In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then: (i) any surviving or acquiring corporation shall assume
Options outstanding under the Plan or shall substitute similar options
(including an option to acquire the same consideration paid to shareholders in
the transaction described in this subsection 10(b)) for those outstanding under
the Plan, or (ii) in the event any surviving or acquiring corporation refuses to
assume such Options or to substitute similar options for those outstanding under
the Plan, (A) with respect to Options held by persons then performing services
as Employees, Directors or Consultants, the vesting of such Options and the time
during which such Options may be exercised shall be accelerated prior to such
event and the Options terminated if not exercised after such acceleration and at
or prior to such event, and (B) with respect to any other Options outstanding
under the Plan, such Options shall be terminated if not exercised prior to such
event.

11. Amendment Of The Plan and Options.

        (a)  The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

        (1)  Increase the number of shares reserved for Options under the Plan;

        (2)  Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code); or

        (3)  Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with applicable stock exchange listing
requirements.

        (b)  The Board may in its sole discretion submit any other amendment to
the Plan for stockholder 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.

        (c)  It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.

        (d)  Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.

        (e)  The Board at any time, and from time to time, may amend the terms
of any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by

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any such amendment unless (i) the Company requests the consent of the person to
whom the Option was granted and (ii) such person consents in writing.

12. Termination Or Suspension Of The Plan.

        (a)  The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on October 14, 2008, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the shareholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.

        (b)  Rights and obligations under any Option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.

13. Effective Date Of Plan.

        The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.

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DITECH COMMUNICATIONS CORPORATION 1998 STOCK OPTION PLAN