<PAGE>
                                                                     EXHIBIT 4.1


                              PDF SOLUTIONS, INC.

                                2001 STOCK PLAN

                         EFFECTIVE AS OF JULY 26, 2001
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<S>                                                                            <C>
SECTION 1.  INTRODUCTION....................................................   1

SECTION 2.  DEFINITIONS.....................................................   1

            (a)   "Affiliate"...............................................   1

            (b)   "Award"...................................................   1

            (c)   "Board"...................................................   1

            (d)   "Change In Control".......................................   1

            (e)   "Code"....................................................   2

            (f)   "Committee"...............................................   2

            (g)   "Common Stock"............................................   2

            (h)   "Company".................................................   2

            (i)   "Consultant"..............................................   3

            (j)   "Director"................................................   3

            (k)   "Disability"..............................................   3

            (l)   "Employee"................................................   3

            (m)   "Exchange Act"............................................   3

            (n)   "Exercise Price"..........................................   3

            (o)   "Fair Market Value".......................................   3

            (p)   "Grant"...................................................   3

            (q)   "Incentive Stock Option" or "ISO".........................   3

            (r)   "Key Employee"............................................   4

            (s)   "Non-Employee Director"...................................   4

            (t)   "Nonstatutory Stock Option" or "NSO"......................   4

            (u)   "Option"..................................................   4

            (v)   "Optionee"................................................   4

            (w)   "Parent"..................................................   4

            (x)   "Participant".............................................   4

            (y)   "Plan"....................................................   4

            (z)   "Restricted Stock"........................................   4

            (aa)  "Restricted Stock Agreement"..............................   4

            (bb)  "Securities Act"..........................................   4

            (cc)  "Service".................................................   4

            (dd)  "Share"...................................................   4

            (ee)  "Stock Option Agreement"..................................   4
</TABLE>
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<TABLE>
<S>                                                                           <C>
            (ff)  "Stock Purchase Right"....................................   4

            (gg)  "Subsidiary"..............................................   4

            (hh)  "10-Percent Shareholder"..................................   5

SECTION 3.  ADMINISTRATION..................................................   5

            (a)   Committee Composition.....................................   5

            (b)   Authority of the Committee................................   5

            (c)   Indemnification...........................................   6

SECTION 4.  ELIGIBILITY.....................................................   6

            (a)   General Rules.............................................   6

            (b)   Incentive Stock Options...................................   6

            (c)   Non-Employee Director Options.............................   6

SECTION 5.  SHARES SUBJECT TO PLAN..........................................   7

            (a)   Basic Limitation..........................................   7

            (b)   Annual Addition...........................................   7

            (c)   Additional Shares.........................................   7

            (d)   Limits on Options.........................................   7

            (e)   Limits on Stock Purchase Rights...........................   7

SECTION 6.  TERMS AND CONDITIONS OF OPTIONS.................................   8

            (a)   Stock Option Agreement....................................   8

            (b)   Number of Shares..........................................   8

            (c)   Exercise Price............................................   8

            (d)   Exercisability and Term...................................   8

            (e)   Modifications or Assumption of Options....................   8

            (f)   Transferability of Options................................   9

            (g)   No Rights as Stockholder..................................   9

            (h)   Restrictions on Transfer..................................   9

SECTION 7.  PAYMENT FOR OPTION SHARES.......................................   9

            (a)   General Rule..............................................   9

            (b)   Surrender of Stock........................................   9

            (c)   Promissory Note...........................................   9

            (d)   Other Forms of Payment....................................  10

SECTION 8.  TERMS AND CONDITIONS FOR AWARDS OF STOCK PURCHASE RIGHTS........  10
</TABLE>
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<TABLE>
<S>                                                                           <C>
            (a)   Time, Amount and Form of Awards...........................  10

            (b)   Agreements................................................  10

            (c)   Payment for Restricted Stock..............................  10

            (d)   Vesting Conditions........................................  10

            (e)   Assignment or Transfer of Restricted Stock................  10

            (f)   Trusts....................................................  10

            (g)   Voting and Dividend Rights................................  11

SECTION 9.  PROTECTION AGAINST DILUTION.....................................  11

            (a)   Adjustments...............................................  11

            (b)   Participant Rights........................................  11

SECTION 10. EFFECT OF A CHANGE IN CONTROL...................................  11

            (a)   Merger or Reorganization..................................  11

            (b)   Acceleration..............................................  12

SECTION 11. LIMITATIONS ON RIGHTS...........................................  12

            (a)   Retention Rights..........................................  12

            (b)   Stockholders' Rights......................................  12

            (c)   Regulatory Requirements...................................  12

SECTION 12. WITHHOLDING TAXES...............................................  12

            (a)   General...................................................  12

            (b)   Share Withholding.........................................  12

SECTION 13. DURATION AND AMENDMENTS.........................................  13

            (a)   Term of the Plan..........................................  13

            (b)   Right to Amend or Terminate the Plan......................  13

SECTION 14. EXECUTION.......................................................  13
</TABLE>
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                               PDF SOLUTIONS, INC.

                                 2001 STOCK PLAN

                          EFFECTIVE AS OF JULY 26, 2001

SECTION 1. INTRODUCTION.

      The Company's Board of Directors adopted the PDF Solutions, Inc. 2001
      Stock Plan on June 12, 2001 (the "Adoption Date"), and the Company's
      stockholders approved the Plan on July 6, 2001. The Plan is effective on
      the date of our initial public offering.

      The purpose of the Plan is to promote the long-term success of the Company
      and the creation of shareholder value by offering Key Employees an
      opportunity to acquire a proprietary interest in the success of the
      Company, or to increase such interest, and to encourage such selected
      persons to continue to provide services to the Company and to attract new
      individuals with outstanding qualifications.

      The Plan seeks to achieve this purpose by providing for Awards in the form
      of Stock Purchase Rights granting Restricted Stock and Options which may
      be Incentive Stock Options or Nonstatutory Stock Options.

      The Plan shall be governed by, and construed in accordance with, the laws
      of the State of Delaware (except its choice-of-law provisions).
      Capitalized terms shall have the meaning provided in Section 2 unless
      otherwise provided in this Plan or the applicable Stock Option Agreement
      or Restricted Stock Agreement.

SECTION 2. DEFINITIONS.

      (a) "AFFILIATE" means any entity other than a Subsidiary, if the Company
      and/or one or more Subsidiaries own not less than 50% of such entity. For
      purposes of determining an individual's "Service," this definition shall
      include any entity other than a Subsidiary, if the Company, a Parent
      and/or one or more Subsidiaries own not less than 50% of such entity.

      (b) "AWARD" means any award of an Option or Stock Purchase Right under the
      Plan.

      (c) "BOARD" means the Board of Directors of the Company, as constituted
      from time to time.

      (d) "CHANGE IN CONTROL" except as may otherwise be provided in a Stock
      Option Agreement or Restricted Stock Agreement, means the occurrence of
      any of the following:

                  (i)   The consummation of a merger or consolidation of the
            Company with or into another entity or any other corporate
            reorganization, if more than
<PAGE>
            50% of the combined voting power of the continuing or surviving
            entity's securities outstanding immediately after such merger,
            consolidation or other reorganization is owned by persons who were
            not stockholders of the Company immediately prior to such merger,
            consolidation or other reorganization;

                  (ii)  The sale, transfer or other disposition of all or
            substantially all of the Company's assets;

                  (iii) A change in the composition of the Board, as a result of
            which fewer that one-half of the incumbent directors are directors
            who either (i) had been directors of the Company on the date 24
            months prior to the date of the event that may constitute a Change
            in Control (the "original directors") or (ii) were elected, or
            nominated for election, to the Board with the affirmative votes of
            at least a majority of the aggregate of the original directors who
            were still in office at the time of the election or nomination and
            the directors whose election or nomination was previously so
            approved;

                  (iv)  Any transaction as a result of which any person becomes
            the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
            Act), directly or indirectly, of securities of the Company
            representing at least 20% of the total voting power represented by
            the Company's then outstanding voting securities. For purposes of
            this Paragraph (iii), the term "person" shall have the same meaning
            as when used in sections 13(d) and 14(d) of the Exchange Act but
            shall exclude:

                        (A)   A trustee or other fiduciary holding securities
                  under an employee benefit plan of the Company or a subsidiary
                  of the Company;

                        (B)   A corporation owned directly or indirectly by the
                  stockholders of the Company in substantially the same
                  proportions as their ownership of the common stock of the
                  Company; and

                        (C)   The Company; or

                  (v)   A complete liquidation or dissolution of the Company.

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

      (f) "COMMITTEE" means a committee consisting of one or more members of the
      Board that is appointed by the Board (as described in Section 3) to
      administer the Plan.

      (g) "COMMON STOCK" means the Company's common stock.

      (h) "COMPANY" means PDF Solutions, Inc.

      (i) "CONSULTANT" means an individual who performs bona fide services to
      the Company, a Parent, a Subsidiary or an Affiliate other than as an
      Employee or Director or Non-Employee Director.


                                       2
<PAGE>
      (j) "DIRECTOR" means a member of the Board who is also an Employee.

      (k) "DISABILITY" means that the Key Employee is unable to engage in any
      substantial gainful activity by reason of any medically determinable
      physical or mental impairment which can be expected to result in death or
      which has lasted or can be expected to last for a continuous period of not
      less than 12 months.

      (l) "EMPLOYEE" means any individual who is a common-law employee of the
      Company, a Parent, a Subsidiary or an Affiliate.

      (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      (n) "EXERCISE PRICE" means, in the case of an Option, the amount for which
      a Share may be purchased upon exercise of such Option, as specified in the
      applicable Stock Option Agreement.

      (o) "FAIR MARKET VALUE" means the market price of Shares, determined by
      the Committee as follows:

            (i)   If the Shares were traded on a stock exchange on the date in
      question, then the Fair Market Value shall be equal to the last trading
      price reported by the applicable composite transactions report for such
      date;

            (ii)  If the Shares were traded over-the-counter on the date in
      question and were classified as a national market issue, then the Fair
      Market Value shall be equal to the last trading price quoted by the NASDAQ
      system for such date;

            (iii) If the Shares were traded over-the-counter on the date in
      question but were not classified as a national market issue, then the Fair
      Market Value shall be equal to the mean between the last reported
      representative bid and asked prices quoted by the NASDAQ system for such
      date; and

            (iv)  If none of the foregoing provisions is applicable, then the
      Fair Market Value shall be determined by the Committee in good faith on
      such basis as it deems appropriate.

      Whenever possible, the determination of Fair Market Value by the Committee
      shall be based on the prices reported in the Wall Street Journal. Such
      determination shall be conclusive and binding on all persons.

      (p) "GRANT" means any grant of an Award under the Plan.

      (q) "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
      described in Code section 422(b).

      (r) "KEY EMPLOYEE" means an Employee, Director, Non-Employee Director or
      Consultant who has been selected by the Committee to receive an Award
      under the Plan.


                                       3
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      (s) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
      Employee.

      (t) "NONSTATUTORY STOCK OPTION" or "NSO" means a stock option that is not
      an ISO.

      (u) "OPTION" means an ISO or NSO granted under the Plan entitling the
      Optionee to purchase Shares.

      (v) "OPTIONEE" means an individual, estate or other entity that holds an
      Option.

      (w) "PARENT" means any corporation (other than the Company) in an unbroken
      chain of corporations ending with the Company, if each of the corporations
      other than the Company owns stock possessing fifty percent (50%) or more
      of the total combined voting power of all classes of stock in one of the
      other corporations in such chain. A corporation that attains the status of
      a Parent on a date after the adoption of the Plan shall be considered a
      Parent commencing as of such date.

      (x) "PARTICIPANT" means an individual or estate or other entity that holds
      an Award.

      (y) "PLAN" means this PDF Solutions, Inc. 2001 Stock Plan as it may be
      amended from time to time.

      (z) "RESTRICTED STOCK" means a Share awarded under the Plan pursuant to a
      Stock Purchase Right.

      (aa) "RESTRICTED STOCK AGREEMENT" means the agreement described in Section
      8 evidencing Restricted Stock that may be purchased following the Award of
      a Stock Purchase Right.

      (bb) "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (cc) "SERVICE" means service as an Employee, Director, Non-Employee
      Director or Consultant.

      (dd) "SHARE" means one share of Common Stock.

      (ee) "STOCK OPTION AGREEMENT" means the agreement described in Section 6
      evidencing each Grant of an Option.

      (ff) "STOCK PURCHASE RIGHT" means the right to acquire Restricted Stock
      pursuant to Section 8.

      (gg) "SUBSIDIARY" means any corporation (other than the Company) in an
      unbroken chain of corporations beginning with the Company, if each of the
      corporations other than the last corporation in the unbroken chain owns
      stock possessing fifty percent (50%) or more of the total combined voting
      power of all classes of stock in one of the other corporations in such
      chain. A corporation that attains the status of a Subsidiary on a date
      after the adoption of the Plan shall be considered a Subsidiary commencing
      as of such date.


                                       4
<PAGE>
      (hh) "10-PERCENT SHAREHOLDER" means an individual who owns more than ten
      percent (10%) of the total combined voting power of all classes of
      outstanding stock of the Company, its Parent or any of its subsidiaries.
      In determining stock ownership, the attribution rules of section 424(d) of
      the Code shall be applied.

SECTION 3. ADMINISTRATION.

      (a) COMMITTEE COMPOSITION. A Committee appointed by the Board shall
      administer the Plan. The Board shall designate one of the members of the
      Committee as chairperson. If no Committee has been approved, the entire
      Board shall constitute the Committee. Members of the Committee shall serve
      for such period of time as the Board may determine and shall be subject to
      removal by the Board at any time. The Board may also at any time terminate
      the functions of the Committee and reassume all powers and authority
      previously delegated to the Committee.

      With respect to officers or directors subject to Section 16 of the
      Exchange Act, the Committee shall consist of those individuals who shall
      satisfy the requirements of Rule 16b-3 (or its successor) under the
      Exchange Act with respect to Awards granted to persons who are officers or
      directors of the Company under Section 16 of the Exchange Act.
      Notwithstanding the previous sentence, failure of the Committee to satisfy
      the requirements of Rule 16b-3 shall not invalidate any Awards granted by
      such Committee.

      The Board may also appoint one or more separate committees of the Board,
      each composed of one or more directors of the Company who need not qualify
      under Rule 16b-3, who may administer the Plan with respect to Key
      Employees who are not considered officers or directors of the Company
      under Section 16 of the Exchange Act, may grant Awards under the Plan to
      such Key Employees and may determine all terms of such Awards.

      Notwithstanding the foregoing, the Board shall constitute the Committee
      and shall administer the Plan with respect to all Awards granted to
      Non-Employee Directors.

      (b) AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan, the
      Committee shall have full authority and discretion to take any actions it
      deems necessary or advisable for the administration of the Plan. Such
      actions shall include:

            (i)   selecting Key Employees who are to receive Awards under the
                  Plan;
            (ii)  determining the type, number, vesting requirements and other
                  features and conditions of such Awards;
            (iii) interpreting the Plan; and
            (iv)  making all other decisions relating to the operation of the
                  Plan.

      The Committee may adopt such rules or guidelines, as it deems appropriate
      to implement the Plan. The Committee's determinations under the Plan shall
      be final and binding on all persons.


                                       5
<PAGE>
      (c) INDEMNIFICATION. Each member of the Committee, or of the Board, shall
      be indemnified and held harmless by the Company against and from (i) any
      loss, cost, liability, or expense that may be imposed upon or reasonably
      incurred by him or her in connection with or resulting from any claim,
      action, suit, or proceeding to which he or she may be a party or in which
      he or she may be involved by reason of any action taken or failure to act
      under the Plan or any Stock Option Agreement or Restricted Stock
      Agreement, and (ii) from any and all amounts paid by him or her in
      settlement thereof, with the Company's approval, or paid by him or her in
      satisfaction of any judgment in any such claim, action, suit, or
      proceeding against him or her, provided he or she shall give the Company
      an opportunity, at its own expense, to handle and defend the same before
      he or she undertakes to handle and defend it on his or her own behalf. The
      foregoing right of indemnification shall not be exclusive of any other
      rights of indemnification to which such persons may be entitled under the
      Company's Certificate of Incorporation or Bylaws, by contract, as a matter
      of law, or otherwise, or under any power that the Company may have to
      indemnify them or hold them harmless.

SECTION 4. ELIGIBILITY.

      (a) GENERAL RULES. Only Employees, Directors, Non-Employee Directors and
      Consultants shall be eligible for designation as Key Employees by the
      Committee.

      (b) INCENTIVE STOCK OPTIONS. Only Key Employees who are common-law
      employees of the Company, a Parent or a Subsidiary shall be eligible for
      the grant of ISOs. In addition, a Key Employee who is a 10-Percent
      Shareholder shall not be eligible for the grant of an ISO unless the
      requirements set forth in section 422(c)(5) of the Code are satisfied.

      (c) NON-EMPLOYEE DIRECTOR OPTIONS. Non-Employee Directors shall also be
      eligible to receive Options as described in this Section 4(c) from and
      after the date the Board has determined to implement this provision.

            (i)   Each eligible Non-Employee Director elected or appointed after
      the effective date of the Company's initial public offering shall
      automatically be granted an NSO to purchase 30,000 Shares (after giving
      effect to the June 2001 stock split) (subject to adjustment under Section
      9) as a result of his or her initial election or appointment as a
      Non-Employee Director. Upon the conclusion of each regular annual meeting
      of the Company's stockholders following his or her initial appointment,
      each eligible Non-Employee Director who will continue serving as a member
      of the Board and who received an initial grant thereafter shall receive an
      NSO to purchase 7,500 Shares (after giving effect to the June 2001 stock
      split) (subject to adjustment under Section 9). All NSOs granted pursuant
      to this Section 4 shall vest and become exercisable provided the
      individual is serving as a director of the Company as of the vesting date
      as follows: 25% one year from the date of grant, then in 36 equal monthly
      installments commencing on the date one month and one year after the date
      of grant.


                                       6
<PAGE>
            (ii)  All NSOs granted to Non-Employee Directors under this Section
      4(c) shall become exercisable in full in the event of Change in Control
      with respect to the Company.

            (iii) The Exercise Price under all NSOs granted to a Non-Employee
      Director under this Section 4(c) shall be equal to one hundred percent
      (100%) of the Fair Market Value of a Share of Common Stock on the date of
      grant, payable in one of the forms described in Section 7.

            (iv)  All NSOs granted to a Non-Employee Director under this Section
      4(c) shall terminate on the earlier of:

                  (1) The 10th anniversary of the date of grant; or

                  (2) The date ninety (90) days after the termination of such
      Non-Employee Director's Service for any reason.

SECTION 5. SHARES SUBJECT TO PLAN.

      (a) BASIC LIMITATION. The stock issuable under the Plan shall be
      authorized but unissued Shares or treasury Shares. The aggregate number of
      Shares reserved for Awards under the Plan shall not exceed 3,000,000
      Shares (after giving effect to the June 2001 stock split).

      (b) ANNUAL ADDITION. Beginning with the first fiscal year of the Company
      beginning after the Effective Date, on the first day of each fiscal year,
      Shares will be added to the Plan equal to the lesser of (i) 3,000,000
      Shares (after giving effect to the June 2001 stock split), (ii) five
      percent (5%) of the outstanding shares on the last day of the prior fiscal
      year, or (iii) such lesser number of Shares as may be determined by the
      Board in its sole discretion.

      (c) ADDITIONAL SHARES. If Awards are forfeited or terminate for any other
      reason before being exercised, then the Shares underlying such Awards
      shall again become available for Awards under the Plan.

      (d) LIMITS ON OPTIONS. No Key Employee shall receive Options to purchase
      Shares during any fiscal year covering in excess of 1,000,000 Shares(after
      giving effect to the June 2001 stock split), or 2,000,000 Shares (after
      giving effect to the June 2001 stock split)in the first fiscal year of a
      Key Employee's employment with Company.

      (e) LIMITS ON STOCK PURCHASE RIGHTS. No Key Employee shall receive an
      Award of Stock Purchase Rights during any fiscal year covering in excess
      of 500,000 Shares (after giving effect to the June 2001 stock split), or
      1,000,000 Shares (after giving effect to the June 2001 stock split) in the
      first fiscal year of a Key Employee's employment with Company.


                                       7
<PAGE>
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

      (a) STOCK OPTION AGREEMENT. Each Grant under the Plan shall be evidenced
      by a Stock Option Agreement between the Optionee and the Company. Such
      Option shall be subject to all applicable terms and conditions of the Plan
      and may be subject to any other terms and conditions that are not
      inconsistent with the Plan and that the Committee deems appropriate for
      inclusion in a Stock Option Agreement. The provisions of the various Stock
      Option Agreements entered into under the Plan need not be identical. A
      Stock Option Agreement may provide that new Options will be granted
      automatically to the Optionee when he or she exercises the prior Options.
      The Stock Option Agreement shall also specify whether the Option is an ISO
      or an NSO.

      (b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the number
      of Shares that are subject to the Option and shall provide for the
      adjustment of such number in accordance with Section 9.

      (c) EXERCISE PRICE. An Option's Exercise Price shall be established by the
      Committee and set forth in a Stock Option Agreement. The Exercise Price of
      an ISO shall not be less than 100% of the Fair Market Value (110% for
      10-Percent Shareholders) of a Share on the date of Grant. In the case of
      an NSO, a Stock Option Agreement may specify an Exercise Price that varies
      in accordance with a predetermined formula while the NSO is outstanding.

      (d) EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the
      date when all or any installment of the Option is to become exercisable.
      The Stock Option Agreement shall also specify the term of the Option;
      provided that the term of an ISO shall in no event exceed ten (10) years
      from the date of Grant. An ISO that is granted to a 10-Percent Shareholder
      shall have a maximum term of five (5) years. No Option can be exercised
      after the expiration date provided in the applicable Stock Option
      Agreement. A Stock Option Agreement may provide for accelerated
      exercisability in the event of the Optionee's death, disability or
      retirement or other events and may provide for expiration prior to the end
      of its term in the event of the termination of the Optionee's service. A
      Stock Option Agreement may permit an Optionee to exercise an Option before
      it is vested, subject to the Company's right of repurchase over any Shares
      acquired under the unvested portion of the Option (an "early exercise"),
      which right of repurchase shall lapse at the same rate the Option would
      have vested had there been no early exercise. In no event shall the
      Company be required to issue fractional Shares upon the exercise of an
      Option.

      (e) MODIFICATIONS OR ASSUMPTION OF OPTIONS. Within the limitations of the
      Plan, the Committee may modify, extend or assume outstanding options or
      may accept the cancellation of outstanding options (whether granted by the
      Company or by another issuer) in return for the grant of new Options for
      the same or a different number of Shares and at the same or a different
      Exercise Price. The foregoing notwithstanding, no modification of an
      Option shall, without the consent of the Optionee, alter or impair his or
      her rights or obligations under such Option.


                                       8
<PAGE>
      (f) TRANSFERABILITY OF OPTIONS. Except as otherwise provided in the
      applicable Stock Option Agreement and then only to the extent permitted by
      applicable law, no Option shall be transferable by the Optionee other than
      by will or by the laws of descent and distribution. Except as otherwise
      provided in the applicable Stock Option Agreement, an Option may be
      exercised during the lifetime of the Optionee only or by the guardian or
      legal representative of the Optionee. No Option or interest therein may be
      assigned, pledged or hypothecated by the Optionee during his lifetime,
      whether by operation of law or otherwise, or be made subject to execution,
      attachment or similar process.

      (g) NO RIGHTS AS STOCKHOLDER. An Optionee, or a transferee of an Optionee,
      shall have no rights as a stockholder with respect to any Common Stock
      covered by an Option until such person becomes entitled to receive such
      Common Stock by filing a notice of exercise and paying the Exercise Price
      pursuant to the terms of such Option.

      (h) RESTRICTIONS ON TRANSFER. Any Shares issued upon exercise of an Option
      shall be subject to such rights of repurchase, rights of first refusal and
      other transfer restrictions as the Committee may determine. Such
      restrictions shall apply in addition to any restrictions that may apply to
      holders of Shares generally and shall also comply to the extent necessary
      with applicable law.

SECTION 7. PAYMENT FOR OPTION SHARES.

      (a) GENERAL RULE. The entire Exercise Price of Shares issued upon exercise
      of Options shall be payable in cash at the time when such Shares are
      purchased, except as follows:

            (i)   In the case of an ISO granted under the Plan, payment shall be
      made only pursuant to the express provisions of the applicable Stock
      Option Agreement. The Stock Option Agreement may specify that payment may
      be made in any form(s) described in this Section 7.

            (ii)  In the case of an NSO granted under the Plan, the Committee
      may in its discretion, at any time accept payment in any form(s) described
      in this Section 7.

      (b) SURRENDER OF STOCK. To the extent that this Section 7(b) is
      applicable, payment for all or any part of the Exercise Price may be made
      with Shares which have already been owned by the Optionee for such
      duration as shall be specified by the Committee. Such Shares shall be
      valued at their Fair Market Value on the date when the new Shares are
      purchased under the Plan.

      (c) PROMISSORY NOTE. To the extent that this Section 7(c) is applicable,
      payment for all or any part of the Exercise Price may be made with a
      full-recourse promissory note.

      (d) OTHER FORMS OF PAYMENT. To the extent that this Section 7(d) is
      applicable, payment may be made in any other form that is consistent with
      applicable laws, regulations and rules.


                                       9
<PAGE>
SECTION 8. TERMS AND CONDITIONS FOR AWARDS OF STOCK PURCHASE RIGHTS.

      (a) TIME, AMOUNT AND FORM OF AWARDS. Awards under this Section 8 may be
      granted in the form of Stock Purchase Rights pursuant to which Restricted
      Stock will be awarded to a Key Employee. Such Rights may also be awarded
      in combination with NSOs, and such an Award may provide that the
      Restricted Stock will be forfeited in the event that the related NSOs is
      exercised.

      (b) AGREEMENTS. Each Award of a Stock Purchase Right under the Plan shall
      be evidenced by a Restricted Stock Agreement between the Participant and
      the Company. Such Awards shall be subject to all applicable terms and
      conditions of the Plan and may be subject to any other terms and
      conditions that are not inconsistent with the Plan and that the Committee
      deems appropriate for inclusion in the applicable Agreement. The
      provisions of the various Agreements entered into under the Plan need not
      be identical.

      (c) PAYMENT FOR RESTRICTED STOCK. Restricted Stock may be issued pursuant
      to the Award of a Stock Purchase Right with or without cash consideration
      under the Plan.

      (d) VESTING CONDITIONS. Each Award of Restricted Stock shall become
      vested, in full or in installments, upon satisfaction of the conditions
      specified in the applicable Agreement. An Agreement may provide for
      accelerated vesting in the event of the Participant's death, Disability or
      retirement or other events.

      (e) ASSIGNMENT OR TRANSFER OF RESTRICTED STOCK. Except as provided in
      Section 13, or in a Restricted Stock Agreement, or as required by
      applicable law, an Award granted under this Section 8 shall not be
      anticipated, assigned, attached, garnished, optioned, transferred or made
      subject to any creditor's process, whether voluntarily, involuntarily or
      by operation of law. Any act in violation of this Section 8(e) shall be
      void. However, this Section 8(e) shall not preclude a Participant from
      designating a beneficiary who will receive any outstanding Restricted
      Stock in the event of the Participant's death, nor shall it preclude a
      transfer of Restricted Stock by will or by the laws of descent and
      distribution.

      (f) TRUSTS. Neither this Section 8 nor any other provision of the Plan
      shall preclude a Participant from transferring or assigning Restricted
      Stock to (a) the trustee of a trust that is revocable by such Participant
      alone, both at the time of the transfer or assignment and at all times
      thereafter prior to such Participant's death, or (b) the trustee of any
      other trust to the extent approved in advance by the Committee in writing.
      A transfer or assignment of Restricted Stock from such trustee to any
      person other than such Participant shall be permitted only to the extent
      approved in advance by the Committee in writing, and Restricted Stock held
      by such trustee shall be subject to all of the conditions and restrictions
      set forth in the Plan and in the applicable Restricted Stock Agreement, as
      if such trustee were a party to such Agreement.

      (g) VOTING AND DIVIDEND RIGHTS. The holders of Restricted Stock acquired
      pursuant to a Stock Purchase Right awarded under the Plan shall have the
      same voting, dividend and


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<PAGE>
      other rights as the Company's other stockholders. A Restricted Stock
      Agreement, however, may require that the holders of Restricted Stock
      invest any cash dividends received in additional Restricted Stock. Such
      additional Restricted Stock shall be subject to the same conditions and
      restrictions as the Award with respect to which the dividends were paid.
      Such additional Restricted Stock shall not reduce the number of Shares
      available under Section 5.

SECTION 9. PROTECTION AGAINST DILUTION.

      (a) ADJUSTMENTS. In the event of a subdivision of the outstanding Shares,
      a declaration of a dividend payable in Shares, a declaration of a dividend
      payable in a form other than Shares in an amount that has a material
      effect on the price of Shares, a combination or consolidation of the
      outstanding Shares (by reclassification or otherwise) into a lesser number
      of Shares, a recapitalization, reorganization, merger, liquidation,
      spin-off or a similar occurrence, the Committee shall make such
      adjustments as it, in its reasonable discretion, deems appropriate in
      order to prevent the dilution or enlargement of rights hereunder in one or
      more of:

            (i)   the number of Shares available for future Awards and the per
      person Share limits under Section 5;

            (ii)  the number of Shares covered by each outstanding Award; or

            (iii) the Exercise Price under each outstanding Option.

      (b) PARTICIPANT RIGHTS. Except as provided in this Section 9, a
      Participant shall have no rights by reason of any issue by the Company of
      stock of any class or securities convertible into stock of any class, any
      subdivision or consolidation of shares of stock of any class, the payment
      of any stock dividend or any other increase or decrease in the number of
      shares of stock of any class.

SECTION 10. EFFECT OF A CHANGE IN CONTROL.

      (a) MERGER OR REORGANIZATION. In the event that the Company is a party to
      a merger or other reorganization, outstanding Awards shall be subject to
      the agreement of merger or reorganization. Such agreement may provide,
      without limitation, for the assumption of outstanding Awards by the
      surviving corporation or its parent, for their continuation by the Company
      (if the Company is a surviving corporation), for accelerated vesting or
      for their cancellation with or without consideration.

      (b) ACCELERATION. Except as otherwise provided in the applicable Stock
      Option Agreement or Restricted Stock Agreement, in the event that a Change
      in Control occurs with respect to the Company and the applicable agreement
      of merger or reorganization provides for assumption or continuation of
      Awards pursuant to Section 10(a), no acceleration of vesting shall occur.
      In the event that a Change in Control occurs with


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<PAGE>
      respect to the Company and there is no assumption or continuation of
      Awards pursuant to Section 10(a), all Awards shall vest and become
      immediately exercisable.

SECTION 11. LIMITATIONS ON RIGHTS.

      (a) RETENTION RIGHTS. Neither the Plan nor any Award granted under the
      Plan shall be deemed to give any individual a right to remain an employee,
      consultant or director of the Company, a Parent, a Subsidiary or an
      Affiliate. The Company and its Parents and Subsidiaries and Affiliates
      reserve the right to terminate the Service of any person at any time, and
      for any reason, subject to applicable laws, the Company's Certificate of
      Incorporation and Bylaws and a written employment agreement (if any).

      (b) STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights,
      voting rights or other rights as a stockholder with respect to any Shares
      covered by his or her Award prior to the issuance of a stock certificate
      for such Shares. No adjustment shall be made for cash dividends or other
      rights for which the record date is prior to the date when such
      certificate is issued, except as expressly provided in Section 9.

      (c) REGULATORY REQUIREMENTS. Any other provision of the Plan
      notwithstanding, the obligation of the Company to issue Shares under the
      Plan shall be subject to all applicable laws, rules and regulations and
      such approval by any regulatory body as may be required. The Company
      reserves the right to restrict, in whole or in part, the delivery of
      Shares pursuant to any Award prior to the satisfaction of all legal
      requirements relating to the issuance of such Shares, to their
      registration, qualification or listing or to an exemption from
      registration, qualification or listing.

SECTION 12. WITHHOLDING TAXES.

      (a) GENERAL. A Participant shall make arrangements satisfactory to the
      Company for the satisfaction of any withholding tax obligations that arise
      in connection with his or her Award. The Company shall not be required to
      issue any Shares or make any cash payment under the Plan until such
      obligations are satisfied.

      (b) SHARE WITHHOLDING. If a public market for the Company's Shares exists,
      the Committee may permit a Participant to satisfy all or part of his or
      her withholding or income tax obligations by having the Company withhold
      all or a portion of any Shares that otherwise would be issued to him or
      her or by surrendering all or a portion of any Shares that he or she
      previously acquired. Such Shares shall be valued at their Fair Market
      Value on the date when taxes otherwise would be withheld in cash. In no
      event may the Company allow Shares to be withheld in an amount that
      exceeds the minimum statutory withholding rates for federal and state tax
      purposes, including payroll taxes. Any payment of taxes by assigning
      Shares to the Company may be subject to restrictions, including, but not
      limited to, any restrictions required by rules of the Securities and
      Exchange Commission.


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<PAGE>
SECTION 13. DURATION AND AMENDMENTS.

      (a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
      effective on the date of its adoption by the Board, subject to the
      approval of the Company's stockholders. No Options shall be exercisable
      until such stockholder approval is obtained. In the event that the
      stockholders fail to approve the Plan within twelve (12) months after its
      adoption by the Board, any Awards made shall be null and void and no
      additional Awards shall be made. The Plan shall terminate on the date that
      is ten (10) years after its adoption by the Board and may be terminated on
      any earlier date pursuant to Section 13(b).

      (b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board may amend or terminate
      the Plan at any time and for any reason. The termination of the Plan, or
      any amendment thereof, shall not affect any Award previously granted under
      the Plan. No Awards shall be granted under the Plan after the Plan's
      termination. An amendment of the Plan shall be subject to the approval of
      the Company's stockholders only to the extent required by applicable laws,
      regulations or rules.

SECTION 14. EXECUTION.

      To record the adoption of the Plan by the Board, the Company has caused
      its duly authorized officer to execute this Plan on behalf of the Company.

                                       PDF SOLUTIONS, INC.

                                           /s/ P. Steven Melman
                                       By ______________________________________

                                              Chief Financial Officer
                                       Title ___________________________________


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