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                                                                    EXHIBIT 10.7

                             CALLIDUS SOFTWARE INC.
                            2003 STOCK INCENTIVE PLAN

         1.       Purposes of the Plan. The purposes of this Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business.

         2.       Definitions. As used herein, the following definitions shall
apply:

                  (a)      "Administrator" means the Board or any of its
         Committees as shall be administering the Plan in accordance with
         Section 4 hereof.

                  (b)      "Applicable Laws" means the requirements relating to
         the administration of stock plans under U.S. state corporate laws, U.S.
         federal and state securities laws, the Code, any stock exchange or
         quotation system on which the Common Stock is listed or quoted and the
         applicable laws of any other country or jurisdiction where Awards are
         granted under the Plan.

                  (c)      "Award" means any Option or other stock-based award
         granted under this Plan.

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

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

                  (f)      "Committee" means a committee of Directors appointed
         by the Board in accordance with Section 4 hereof.

                  (g)      "Common Stock" means the common stock, par value
         $0.001 per share, of the Company.

                  (h)      "Company" means Callidus Software Inc., a Delaware
         corporation.

                  (i)      "Consultant" means any person who is engaged by the
         Company or any Parent or Subsidiary to render consulting or advisory
         services to such entity.

                  (j)      "Director" means a member of the Board of Directors
         of the Company.

                  (k)      "Employee" means any person employed by the Company
         or any Parent or Subsidiary of the Company. A Service Provider shall
         not cease to be an Employee in the case of (i) any leave of absence
         approved by the Company or protected as a matter of local law or (ii)
         transfers between locations of the

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         Company or between the Company, its Parent, any Subsidiary, or any
         successor. Neither service as a Director nor payment of a director's
         fee by the Company shall be sufficient to constitute "employment" by
         the Company.

                  (l)      "Exchange Act" means the U.S. Securities Exchange Act
         of 1934, as amended.

                  (m)      "Fair Market Value" means, as of any date, the value
         of Common Stock determined as follows:

                           (i)      If the Common Stock is listed on any
                  established stock exchange or traded on the Nasdaq National
                  Market or the Nasdaq SmallCap Market, its Fair Market Value
                  shall be the closing sales price for such stock (or the
                  closing bid, if no sales were reported) as quoted on such
                  exchange or system on the date of determination (or if such
                  date is not a trading date, on the previous trading date), as
                  reported in The Wall Street Journal or such other source as
                  the Administrator deems reliable;

                           (ii)     In the absence of an established market for
                  the Common Stock, the Fair Market Value thereof shall be
                  determined in good faith by the Administrator.

                  (n)      "Incentive Stock Option" means an Option intended to
         qualify as an incentive stock option within the meaning of Section 422
         of the Code.

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

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

                  (q)      "Option Agreement" means an agreement evidencing the
         terms and conditions of an individual Option grant. Any Option
         Agreement is subject to the terms and conditions of the Plan.

                  (r)      "Optionee" means the holder of an outstanding Option
         granted under the Plan.

                  (s)      "Outside Director" means a Director who is not an
         Employee.

                  (t)      "Participant" means the holder of an outstanding
         Award granted under the Plan.

                  (u)      "Parent" means a "parent corporation," whether now or
         hereafter existing, as defined in Section 424(e) of the Code.

                  (v)      "Plan" means this 2003 Stock Incentive Plan.

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                  (w)      "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
         any successor to Rule 16b-3.

                  (x)      "Service Provider" means an Employee, Director or
         Consultant.

                  (y)      "Share" means a share of the Common Stock, as
         adjusted in accordance with Section 13 below.

                  (z)      "Subsidiary" means a "subsidiary corporation,"
         whether now or hereafter existing, as defined in Section 424(f) of the
         Code.

         3.       Stock Subject to the Plan.

                  (a)      Subject to the provisions of Section 13 of the Plan,
         the maximum aggregate number of Shares which may be issued under the
         Plan is 2,000,000 shares, plus (x) any Shares remaining available for
         grant of awards under the Company's 1997 Stock Option Plan on the
         effective date of the Plan and (y) an annual increase on July 1 of each
         year during the term of the Plan beginning July 1, 2004, in each case
         in an amount equal to the lesser of (i) 2,800,000 shares, (ii) 5.0% of
         the outstanding shares on the immediately preceding date or (iii) an
         amount determined by the Board. The Shares may be authorized but
         unissued, or reacquired, shares or treasury shares.

                  (b)      No Participant may receive Options and stock
         appreciation rights under the Plan in any calendar year that relate to
         more than 1,500,000 Shares.

                  (c)      If any Shares covered by an Award, or to which such
         an Award relates, are forfeited, or if an Award otherwise terminates in
         whole or in part without the delivery of the full number of Shares
         related thereto, then the Shares covered by such Award, or to which
         such Award relates, to the extent of any such forfeiture or
         termination, shall again be, or shall become, available for issuance
         under the Plan. Shares that have been issued but are repurchased by, or
         surrendered or forfeited to, the Company shall become available for
         future grant under the Plan. For purposes of this paragraph, awards and
         options granted under the Company's 1997 Stock Option Plan shall be
         treated as Awards.

         4.       Administration of the Plan.

                  (a)      The Plan shall be administered by the Board or a
         Committee appointed by the Board, which Committee shall be constituted
         to comply with Applicable Laws.

                           (i)      To the extent that the Administrator
                  determines it to be desirable to qualify Awards granted
                  hereunder as "performance-based compensation" within the
                  meaning of Section 162(m) of the Code, the Plan shall be
                  administered by a Committee of two or more "non-employee
                  directors" within the meaning of Section 162(m) of the Code.

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                           (ii)     To the extent desirable to qualify
                  transactions hereunder as exempt under Rule 16b-3, the
                  transactions contemplated hereunder shall be structured to
                  satisfy the requirements for exemption under Rule 16b-3.

                  (b)      Subject to the provisions of the Plan and, in the
         case of a Committee, the specific duties delegated by the Board to such
         Committee, and subject to the approval of any relevant authorities, the
         Administrator shall have the authority in its discretion:

                           (i)      to determine the Fair Market Value;

                           (ii)     to select the Service Providers to whom
                  Awards may from time to time be granted hereunder;

                           (iii)    to determine the number of Shares to be
                  covered by each such award granted hereunder;

                           (iv)     to approve forms of agreement for use under
                  the Plan;

                           (v)      to determine the terms and conditions, of
                  any Award granted hereunder. Such terms and conditions
                  include, but are not limited to, the exercise price, the time
                  or times when Awards may be exercised (which may be based on
                  performance criteria), any vesting acceleration or waiver of
                  forfeiture restrictions, and any restriction or limitation
                  regarding any Award or the Common Stock relating thereto,
                  based in each case on such factors as the Administrator, in
                  its sole discretion, shall determine;

                           (vi)     to amend the terms of any Award; provided
                  that (A) no such amendment shall directly or indirectly reduce
                  the exercise price of any Award without the approval of the
                  Company's stockholders and (B) no such amendment shall impair
                  the rights of any Participant without the consent of the
                  Participant;

                           (vii)    to grant Awards with such terms as the
                  Administrator deems necessary or appropriate in order to
                  comply with or take advantage of the laws of any jurisdiction
                  in which a Participant resides or is employed or to establish
                  a sub-plan under this Plan for such purposes;

                           (viii)   to prescribe, amend and rescind rules and
                  regulations relating to the Plan, including rules and
                  regulations relating to sub-plans established by the
                  Administrator for the purpose of qualifying for preferred tax
                  treatment under foreign tax laws or complying with foreign
                  securities or other legal requirements;

                           (ix)     to allow Participants to satisfy withholding
                  tax obligations by electing to have the Company withhold from
                  the Shares to be issued

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                  upon exercise of an Award that number of Shares having a Fair
                  Market Value equal to the amount required to be withheld; and

                           (x)      to construe and interpret the terms of the
                  Plan and awards granted pursuant to the Plan.

                  (c)      All decisions, determinations and interpretations of
         the Administrator shall be final and binding on all Participants.

         5.       Eligibility.

                  (a)      Awards may be granted to Service Providers as
         determined by the Administrator in its sole discretion, except that
         Incentive Stock Options may be granted only to Employees.

                  (b)      Neither the Plan nor any Award shall confer upon any
         Participant any right with respect to continuing the Participant's
         relationship as a Service Provider with the Company or its Subsidiary,
         nor shall it interfere in any way with his or her right or the right of
         the Company or its Subsidiary, as appropriate, to terminate such
         relationship at any time, with or without cause.

         6.       Term of Plan. The Plan shall become effective as determined by
the Board. It shall continue in effect for a term of ten years unless sooner
terminated under Section 14 of the Plan.

         7.       Terms of Options.

                  (a)      The term of each Option shall be stated in the Option
         Agreement; provided that the term shall be no more than ten (10) years
         from the date of grant thereof. In the case of an Incentive Stock
         Option granted to an Optionee who, at the time the Option is granted,
         owns stock representing more than ten percent (10%) of the voting power
         of all classes of stock of the Company or any Parent or Subsidiary, the
         term of the Option shall be five (5) years from the date of grant or
         such shorter term as may be provided in the Option Agreement.

                  (b)      Each Option shall be designated in the Option
         Agreement as either an Incentive Stock Option or a Nonstatutory Stock
         Option. However, notwithstanding such designation, to the extent that
         the aggregate Fair Market Value of the Shares with respect to which
         Incentive Stock Options are exercisable for the first time by the
         Optionee during any calendar year (under all plans of the Company and
         any Parent or Subsidiary) exceeds $100,000, such Options shall be
         treated as Nonstatutory Stock Options. For purposes of this Section
         7(b), Incentive Stock Options shall be taken into account in the order
         in which they were granted. The Fair Market Value of the Shares shall
         be determined as of the time the Option with respect to such Shares is
         granted.

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                  (c)      The per share exercise price for the Shares to be
         issued upon exercise of an Option shall be such price as is determined
         by the Administrator, but in the case of any Incentive Stock Option
         shall be subject to the following:

                                    (A)   the exercise price of any Incentive
                           Stock Option granted to an Employee who, at the time
                           of grant of such Option, owns stock representing more
                           than ten percent (10%) of the voting power of all
                           classes of stock of the Company or any Parent or
                           Subsidiary shall be no less than 110% of the Fair
                           Market Value per Share on the date of grant; and

                                    (B)   the exercise price of any Incentive
                           Stock Option granted to any other Employee shall be
                           no less than 100% of the Fair Market Value per Share
                           on the date of grant.

                  (d)      The consideration to be paid for the Shares to be
         issued upon exercise of an Option, including the method of payment,
         shall be determined by the Administrator (and, in the case of an
         Incentive Stock Option, shall be determined at the time of grant). Such
         consideration may consist of (1) cash, (2) check, (3) promissory note,
         (4) other Shares which (x) 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 (y) have a Fair Market Value on the date
         of surrender equal to the aggregate exercise price of the Shares as to
         which such Option shall be exercised, (5) consideration received by the
         Company under a cashless exercise program implemented by the Company in
         connection with the Plan, or (6) any combination of the foregoing
         methods of payment. In making its determination as to the type of
         consideration to accept, the Administrator shall consider if acceptance
         of such consideration may be reasonably expected to benefit the
         Company.

         8.       Exercise of Option.

                  (a)      Any Option granted hereunder shall be exercisable
         according to the terms hereof at such times and under such conditions
         as determined by the Administrator and set forth in the Option
         Agreement. Unless the Administrator provides otherwise or unless
         required by local law, vesting of Options granted hereunder shall be
         tolled during any unpaid leave of absence. An Option may not be
         exercised for a fraction of a Share.

                  (b)      An Option shall be deemed exercised when the Company
         receives: (i) written or electronic notice of exercise (in accordance
         with the Option Agreement) from the person entitled to exercise the
         Option, and (ii) full payment for the Shares with respect to which the
         Option is exercised. Full payment may consist of any consideration and
         method of payment authorized by the Administrator and permitted by the
         Option Agreement and the Plan. Shares issued upon exercise of an Option
         shall be issued in the name of the Optionee or, if requested by the
         Optionee, in the name of the Optionee and his or her spouse.

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         Until the Shares are issued (as evidenced by the appropriate entry on
         the books of the Company or of a duly authorized transfer agent of the
         Company), no right to vote or receive dividends or any other rights as
         a stockholder shall exist with respect to the Shares, notwithstanding
         the exercise of the Option. The Company shall issue (or cause to be
         issued) such Shares promptly after the Option is exercised. No
         adjustment will be made for a dividend or other right for which the
         record date is prior to the date the Shares are issued, except as
         provided in Section 13 of the Plan.

                  (c)      Exercise of an Option in any manner shall result in a
         decrease in the number of Shares thereafter available, both for
         purposes of the Plan and for sale under the Option, by the number of
         Shares as to which the Option is exercised.

         9.       Termination of Relationship as a Service Provider.

                  (a)      Termination. If an Optionee ceases to be a Service
         Provider, such Optionee may exercise his or her Option within such
         period of time as is specified in the Option Agreement (of at least 30
         days) to the extent that the Option is vested on the date of
         termination (but in no event later than the expiration of the term of
         the Option as set forth in the Option Agreement). In the absence of a
         specified time in the Option Agreement, the vested portion of the
         Option shall remain exercisable for 90 days following the Optionee's
         termination. If, after termination, the Optionee does not exercise his
         or her Option within the time specified herein or in the Option
         Agreement, the Option shall terminate, and the Shares covered by such
         Option shall revert to the Plan.

                  (b)      Disability of Optionee. If an Optionee ceases to be a
         Service Provider as a result of the Optionee's disability, the Optionee
         may exercise an Option to the extent the Option is vested as of the
         date of termination, but only within 12 months from the date of such
         termination (and in no event later than the expiration date of the term
         of such Option as set forth in the Option Agreement). If such
         disability is not a "disability" as such term is defined in Section
         22(e)(3) of the Code, in the case of an Incentive Stock Option such
         Incentive Stock Option shall automatically cease to be treated as an
         Incentive Stock Option and shall be treated for tax purposes as a
         Nonstatutory Stock Option on the day three months and one day following
         such termination. 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 the
         Plan.

                  (c)      Death of Optionee. If an Optionee dies while a
         Service Provider, the Option may be exercised at any time within 12
         months following the date of death (but in no event later than the
         expiration of the term of such Option as set forth in the Option
         Agreement) to the extent vested as of the date of death. The Option may
         be exercised by the executor or administrator of the Optionee's estate
         or, if none, by the person(s) entitled to exercise the Option under the
         Optionee's will or the laws of descent or distribution. If the Option
         is not so exercised within

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         the time specified herein, the Option shall terminate, and the Shares
         covered by such Option shall revert to the Plan.

                  (d)      Buyout Provisions. The Administrator may at any time
         offer to buy out, for a payment in cash or Shares, an Award previously
         granted, based on such terms and conditions as the Administrator shall
         establish and communicate to the Participant at the time that such
         offer is made.

         10.      Formula Grants to Outside Directors. Options may be granted to
Outside Directors in accordance with the policies established from time to time
by the Board specifying the number of shares (if any) to be subject to each such
award and the time(s) at which such awards shall be granted. The initial policy
with respect to Options granted to Outside Directors under this Section
effective as of the effective date of this Plan and continuing until modified or
revoked by the Board from time to time, shall be as follows:

                  (a)      Initial Grants. As of the date on which any Outside
         Director first becomes a member of the Board, whether by election by
         the stockholders or appointment by the Board, such individual shall be
         granted automatically a Nonstatutory Stock Option to purchase 30,000
         Shares (an "Initial Option").

                  (b)      Annual Grants. Immediately after the Company's
         regularly scheduled annual meeting of stockholders each year, the
         following grants shall be made (each, an "Annual Option"):

                           (i)      Each Outside Director shall be granted
                  automatically a Nonstatutory Stock Option to purchase 10,000
                  Shares; provided that if such Outside Director has served on
                  the Board for less than one year, the number of Shares subject
                  to such Annual Option shall be reduced pro rata based on the
                  portion of the year that such Outside Director has served on
                  the Board.

                           (ii)     The chair of the Audit Committee shall be
                  granted automatically a Nonstatutory Stock Option to purchase
                  10,000 Shares; provided that if such Director has served in
                  such capacity for less than one year, the number of Shares
                  subject to such Annual Option shall be reduced pro rata based
                  on the portion of the year that such Director has served in
                  such capacity.

                           (iii)    The chair of the Compensation Committee and
                  the Nominating and Corporate Governance Committee each shall
                  be granted automatically a Nonstatutory Stock Option to
                  purchase 5,000 Shares; provided that if such Director has
                  served in such capacity for less than one year, the number of
                  Shares subject to such Annual Option shall be reduced pro rata
                  based on the portion of the year that such Director has served
                  in such capacity.

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                  (c)      Terms of Options. Options granted to Outside
         Directors pursuant to this Section 10 shall be on the following terms,
         unless otherwise determined by the Board:

                           (i)      The exercise price per Share shall be 100%
                  of the Fair Market Value per Share on the date of grant of the
                  Option.

                           (ii)     Each Initial Option shall vest and become
                  exercisable over four years, with the first 25% vesting on the
                  first anniversary of the grant date and the remainder vesting
                  monthly thereafter.

                           (iii)    Each Annual Option shall be fully vested and
                  exercisable immediately.

                           (iv)     The term of each such Option shall be ten
                  years.

         11.      Non-Transferability of Awards. Except as otherwise determined
by the Administrator, Awards may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant.

         12.      Other Stock Awards. The Administrator is hereby authorized to
grant to Participants such other Awards (including, without limitation, grants
of restricted stock, restricted stock units, stock bonus awards, and stock
appreciation rights) that are denominated or payable in, valued in whole or in
part by reference to, or otherwise based on or related to, Shares (including,
without limitation, securities convertible into Shares) as are deemed by the
Administrator to be consistent with the purposes of the Plan. Subject to the
terms of the Plan, the Administrator shall determine the terms and conditions of
such Awards, which shall be set forth in an Award Agreement.

         13.      Adjustments Upon Changes in Capitalization, Merger or Asset
Sale.

                  (a)      Changes in Capitalization. Subject to any required
         action by the stockholders of the Company, the number of shares of
         Common Stock covered by each outstanding Award, and the number of
         shares of Common Stock which have been authorized for issuance under
         the Plan but as to which no Awards have yet been granted or which have
         been returned to the Plan upon cancellation or expiration of an Award,
         as well as the price per share of Common Stock covered by each such
         outstanding Award, shall be proportionately adjusted for any increase
         or decrease in the number of issued shares of Common Stock resulting
         from a stock split, reverse stock split, stock dividend, combination or
         reclassification of the Common Stock, or any other increase or decrease
         in the number of issued shares of Common Stock effected without receipt
         of consideration by the Company. The conversion of any convertible
         securities of the Company shall not be deemed to have been "effected
         without receipt of consideration." Such adjustment shall be made by the
         Board, whose determination in that respect shall be final, binding and
         conclusive. Except as expressly provided herein, no issuance by the
         Company of shares of stock of any

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         class, or securities convertible into shares of stock of any class,
         shall affect, and no adjustment by reason thereof shall be made with
         respect to, the number or price of shares of Common Stock subject to an
         Award.

                  (b)      Dissolution or Liquidation. In the event of the
         proposed dissolution or liquidation of the Company, the Administrator
         shall notify each Participant as soon as practicable prior to the
         effective date of such proposed transaction. The Administrator in its
         discretion may provide for a Participant to have the right to exercise
         his or her Award prior to such transaction, including Shares as to
         which the Award would not otherwise be exercisable. In addition, the
         Administrator may provide that any Company repurchase option applicable
         to any Shares purchased upon exercise of an Award shall lapse as to all
         such Shares, provided the proposed dissolution or liquidation takes
         place at the time and in the manner contemplated. To the extent it has
         not been previously exercised, an Award will terminate immediately
         prior to the consummation of such proposed action.

                  (c)      Merger or Asset Sale. In the event of a merger of the
         Company with or into another corporation, or the sale of all or
         substantially all of the assets of the Company, each outstanding Award
         shall be continued or assumed or an equivalent award substituted by the
         Company or the successor corporation or a Parent or Subsidiary of the
         successor corporation. In the event that any Award is not so continued,
         assumed or substituted, such Award shall become fully vested and
         exercisable. If an Award becomes fully vested and exercisable in lieu
         of continuation, assumption or substitution, the Administrator shall
         notify the Participant in writing or electronically that the Award
         shall be fully exercisable for a period of no less than 15 days from
         the date of such notice, and the Award shall terminate upon the
         expiration of such period. For the purposes of this paragraph, the
         Award shall be considered assumed if, following the merger or sale of
         assets, the option or right confers the right to purchase or receive,
         for each Share subject to the Award immediately prior to the merger or
         sale of assets, the consideration (whether stock, cash, or other
         securities or property) received in the merger or sale of assets by
         holders of Common Stock for each Share held on the effective date of
         the transaction (and if holders were offered a choice of consideration,
         the type of consideration chosen by the holders of a majority of the
         outstanding Shares); provided that if such consideration received is
         not solely common stock of the successor corporation or its Parent, the
         Administrator may provide for the consideration to be received upon the
         exercise of the Award, for each Share subject to the Award, to be
         solely common stock of the successor corporation or its Parent equal in
         fair market value to the per share consideration received by holders of
         Common Stock.

         14.      Amendment and Termination of the Plan.

                  (a)      Amendment and Termination. The Board may at any time
         amend, alter, suspend or terminate the Plan.

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                  (b)      Stockholder Approval. The Board shall obtain
         stockholder approval of any Plan amendment to the extent necessary and
         desirable to comply with Applicable Laws.

                  (c)      Effect of Amendment or Termination. No amendment,
         alteration, suspension or termination of the Plan by the Board shall
         impair the rights of any Participant with the consent of the
         Participant. Termination of the Plan shall not affect the
         Administrator's ability to exercise the powers granted to it hereunder
         with respect to Awards granted under the Plan prior to the date of such
         termination.

         15.      Conditions Upon Issuance of Shares.

                  (a)      Legal Compliance. Shares shall not be issued pursuant
         to any Award granted hereunder unless the issuance and delivery of such
         Shares shall comply with Applicable Laws.

                  (b)      Tax Withholding. The Administrator shall require
         payment of any amount the Company may determine to be necessary to
         withhold for any income, employment or social insurance taxes or
         contributions, as applicable, as a result of the exercise of an award.

         16.      Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

         17.      Stockholder Approval. The Plan shall be subject to approval by
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the degree and
manner required under Applicable Laws.

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