<PAGE>

                                                            Exhibit 4.8


                              SEGUE SOFTWARE, INC.

           Third Amendment to 1996 Amended and Restated Incentive and
                        Non-Qualified Stock Option Plan


A.   The following Third Amendment to the 1996 Amended and Restated Incentive
and Non-Qualified Stock Option Plan (the "Plan") of Segue Software, Inc. (the
"Company"), as first amended by vote of the Board of Directors on February 7,
1997 and the shareholders of the Company at the Annual Meeting of Stockholders
of the Company on May 2, 1997, was adopted by the Board of Directors of the
Company, with respect to paragraphs 1, 3 and 4, on March 22, 2000, and with
respect to paragraphs 2 and 5 on June 23, 2000 and was submitted to and approved
by the stockholders of the Company at the 2000 Annual Meeting of Stockholders
held on June 23, 2000.  Capitalized terms used herein and not otherwise defined
shall have the meaning provided in the Plan.

     1.   Paragraph 3 of the Plan is hereby amended by deleting said Paragraph
in its entirety and substituting therefor the following:

     "3.  SHARES SUBJECT TO THE PLAN.
          --------------------------

          The number of Shares reserved and available for issuance under the
     Plan shall be increased from 3,250,000 to 3,700,000.  Further, as of each
     of January 1, 2001 and January 1, 2002, an additional positive number equal
     to five percent (5%) of the number of shares of Common Stock of the Company
     outstanding as of each such dates, respectively, shall be added to the
     reserved Shares under the Plan.  The foregoing number of Shares shall be
     subject to adjustment by the Administrator in accordance with Paragraph 16
     of the Plan.

          For purposes of this Paragraph 3, the Shares underlying any Options
     which are forfeited, canceled, reacquired by the Company, satisfied without
     the issuance of Common Stock or otherwise terminated (other than by
     exercise) shall be added back to the Shares available for issuance under
     the Plan."

     2.   Paragraph 6(A) of the Plan is hereby amended by deleting subparagraph
(a) thereof and substituting therefor the following:

               "(a)  Option Price:  The option price (per share) of the Shares
     covered by each Option shall be determined by the Administrator but shall
     not be less than the Fair Market Value per share of Common Stock."

     3.   Paragraph 6(B) of the Plan is hereby amended by deleting subparagraph
(d) in its entirety and substituting therefor the following:

               "(d) Limitation on Grant of ISOs: No ISOs shall be granted (i)
     from the 2,450,000 Shares authorized on February 12, 1996 after February
     12, 2006, (ii) from the 550,000 Shares authorized by the amendment to the
     Plan adopted by the Board of Directors on February 7, 1997 and approved by
     the shareholders of the Company on May 2, 1997 after February 7, 2007,
     (iii) from the 250,000 Shares authorized by the amendment to the Plan
     adopted by the Board of Directors on February 25, 1998 and approved by the
     shareholders of the Company on June 5, 1998 after February 25, 2008, and
     (iv) from the Shares added to the Plan by this Second Amendment, on March
     22, 2010."

     4.   Paragraph 22 of the Plan is hereby amended by deleting said Paragraph
in its entirety and substituting therefor the following:

     "22.  TERMINATION OF THE PLAN.
           -----------------------
<PAGE>

          The Plan will terminate on March 22, 2010.  The Plan may be terminated
     at an earlier date by vote of the shareholders of the Company; provided,
     however, that any such earlier termination will not affect any Options
     granted or Option Agreements executed prior to the effective date of such
     termination."

     5.   Paragraph 23 of the Plan is hereby amended by deleting said Paragraph
in its entirety and substituting therefor the following:

     "23.  AMENDMENT OF THE PLAN AND AGREEMENTS.
           ------------------------------------

          The Plan may be amended by the shareholders of the Company.  The Plan
     may also be amended by the Administrator, including, without limitation, to
     the extent necessary to qualify any or all outstanding Options granted
     under the Plan or Options to be granted under the Plan for favorable
     federal income tax treatment (including deferral of taxation upon exercise)
     as may be afforded incentive stock options under Section 422 of the Code,
     to the extent necessary to ensure the qualification of the Plan under Rule
     16b-3, at such time, if any, as the Company has a class of stock registered
     pursuant to Section 12 of the 1934 Act, and to the extent necessary to
     qualify the shares issuable upon exercise of any outstanding Options
     granted, or Options to be granted, under the Plan for listing on any
     national securities exchange or quotation in any national automated
     quotation system of securities dealers.  Notwithstanding the preceding
     sentence, any amendment approved by the Administrator which (i) is
     material, or (ii) is of a scope that requires shareholder approval in order
     to ensure favorable federal income tax treatment for any incentive stock
     options or requires shareholder approval in order to ensure the compliance
     of the Plan with Rule 16b-3 at such time, if any, as the Company has a
     class of stock registered pursuant to Section 12 of the 1934 Act, shall be
     subject to obtaining such shareholder approval.  Any modification or
     amendment of the Plan shall not, without the consent of a Participant,
     adversely affect his or her rights under an Option previously granted to
     him or her.  With the consent of the Participant affected, the
     Administrator may amend outstanding Option Agreements in a manner which may
     be adverse to the Participant but which is not inconsistent with the Plan.
     In the discretion of the Administrator, outstanding Option Agreements may
     be amended by the Administrator in a manner which is not adverse to the
     Participant."

B.   Except as expressly amended hereby, the Plan remains in full force and
effect in accordance with its terms.