<PAGE>



                                                                    EXHIBIT 10.1



                               PEOPLESUPPORT, INC.

                           1998 STOCK INCENTIVE PLAN

                         (EFFECTIVE AS OF AUGUST 1, 1998)

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                   <C>
SECTION 1.  PURPOSE................................................     1

SECTION 2.  DEFINITIONS............................................     1
       (a)  "Board of Directors"...................................     1
       (b)  "Code".................................................     1
       (c)  "Committee"............................................     1
       (d)  "Company"..............................................     1
       (e)  "Consultant"...........................................     1
       (f)  "Disability"...........................................     1
       (g)  "Employee".............................................     1
       (h)  "Exercise Price".......................................     2
       (i)  "Fair Market Value"....................................     2
       (j)  "ISO"..................................................     2
       (k)  "Nonstatutory Option"..................................     2
       (l)  "Offeree"..............................................     2
       (m)  "Option"...............................................     2
       (n)  "Optionee".............................................     2
       (o)  "Parent"...............................................     2
       (P)  "Plan".................................................     2
       (q)  "Purchase Price".......................................     2
       (r)  "Service"..............................................     2
       (s)  "Share"................................................     2
       (t)  "Stock"................................................     2
       (u)  "Stock Option Agreement"...............................     3
       (v)  "Stock Purchase Agreement".............................     3
       (w)  "Subsidiary"...........................................     3

SECTION 3.  ADMINISTRATION.........................................     3
       (a)  Committee Membership...................................     3
       (b)  Committee Procedures...................................     3
       (c)  Committee Responsibilities.............................     4
       (d)  Financial Reports......................................     5

SECTION 4.  ELIGIBILITY............................................     5
       (a)  General Rule...........................................     5
       (b)  Ten-Percent Shareholders...............................     6
       (c)  Attribution Rules......................................     6
       (d)  Outstanding Stock......................................     6

SECTION 5.  STOCK SUBJECT TO PLAN..................................     6
       (a)  Basic Limitation.......................................     6
       (b)  Additional Shares......................................     7
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                   <C>
SECTION 6.   TERMS AND CONDITIONS OF AWARDS OR SALES...............     7
      (a)    Stock Purchase Agreement..............................     7
      (b)    Duration of Offers and Nontransferability of Rights...     7
      (c)    Purchase Price........................................     8
      (d)    Withholding Taxes ....................................     8
      (e)    Restrictions on Transfer of Shares....................     8

SECTION 7.   TERMS AND CONDITIONS OF OPTIONS.......................     8
      (a)    Stock Option Agreement................................     8
      (b)    Number of Shares......................................     9
      (c)    Exercise Price........................................     9
      (d)    Withholding Taxes ....................................     9
      (e)    Exercisability........................................     9
      (f)    Term..................................................     10
      (g)    Nontransferability....................................     10
      (h)    Exercise of Options on Termination of Service.........     10
      (i)    No Rights as a Shareholder............................     11
      (j)    Modification, Extension and Assumption of Options ....     11
      (k)    Restrictions on Transfer of Shares ...................     11

SECTION 8.   PAYMENT FOR SHARES....................................     11
      (a)    General Rule.   ......................................     11
      (b)    Surrender of Stock....................................     11
      (c)    Promissory Notes......................................     12
      (d)    Cashless Exercise.....................................     12
      (e)    Services Rendered.....................................     12

SECTION 9.   ADJUSTMENT OF SHARES..................................     12
      (a)    General...............................................     12
      (b)    Reorganizations.......................................     13
      (c)    Reservation of Rights ................................     13

SECTION 10.  LEGAL REQUIREMENTS....................................     13

SECTION 11.  NO EMPLOYMENT RIGHTS..................................     14

SECTION 12.  DURATION AND AMENDMENTS ..............................     14
      (a)    Term of the Plan......................................     14
      (b)    Right to Amend or Terminate the Plan..................     15
      (c)    Effect of Amendment or Termination....................     14

SECTION 13.  EXECUTION.............................................     15
</TABLE>

                                      -ii-

<PAGE>

                              PEOPLESUPPORT, INC.
                           1998 STOCK INCENTIVE PLAN
                      (EFFECTIVE AS OF AUGUST_______, 1998)

SECTION 1. PURPOSE.

         The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such selected persons to
remain in the employ of the Company and to attract new employees with
outstanding qualifications. The Plan provides for the direct award or sale of
Shares and for the grant of Options to purchase Shares. Options granted under
the Plan may include Nonstatutory Options as well as incentive stock options
intended to qualify under section 422 of the Internal Revenue Code.

SECTION 2. DEFINITIONS.

         (a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.

         (b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (c) "Committee" shall mean a committee consisting of members of the
Board of Directors authorized to administer the Plan under Section 3.

         (d) "Company" shall mean PeopleSupport, Inc., a Delaware corporation.

         (e) "Consultant" shall mean an individual who performs bona fide
services to the Company, a Parent or a Subsidiary as a consultant or advisor.

         (f) "Disability" shall means that an Optionee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment.

         (g) "Employee" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, or (iii) a Consultant.

                                      -1-
<PAGE>

Service as a member of the Board of Directors or as a Consultant shall be
considered employment for all purposes under the Plan except the second sentence
of Section 4(a).

         (h) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

         (i) "Fair Market Value" shall mean the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.

         (j) "ISO" shall mean an employee incentive stock option described in
Code section 422(b).

         (k) "Nonstatutory Option" or "NSO" shall mean an employee stock option
that is not an ISO.

         (l) "Offeree" shall mean an individual to whom the Committee has
offered the right to acquire Shares (other than upon exercise of an Option).

         (m) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.

         (n) "Optionee" shall mean an individual who holds an Option.

         (o) "Parent" shall have the meaning set forth in section 424(e) of the
Code.

         (p) "Plan" shall mean this PeopleSupport, Inc. 1998 Stock Incentive
Plan.

         (q) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.

         (r) "Service" shall mean service as an Employee, Non-Employee Director
or Consultant.

         (s) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).

         (t) "Stock" shall mean the common stock of the Company.

                                      -2-
<PAGE>

         (u) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.

         (v) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.

         (w) "Subsidiary" shall mean any corporation, of which the Company
and/or one or more other Subsidiaries own not less than fifty percent (50%) of
the total combined voting power of all classes of outstanding stock of such
corporation. 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.

SECTION 3. ADMINISTRATION.

         (a) Committee Membership. The Plan shall be administered by the
Committee, which shall consist of members of the Board of Directors. The members
of the Committee shall be appointed by the Board of Directors. If no Committee
has been appointed, the entire Board of Directors shall constitute the
Committee. At such time as the directors of the Company become reporting persons
with respect to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Committee shall have a membership composition which enables the Plan
to qualify under Rule 16b-3 under the Exchange Act with regard to the grant of
options or other rights to acquire shares to persons who are subject to Section
16 of the Exchange Act.

         (b) Committee Procedures. The Board of Directors shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at

                                      -3-
<PAGE>

which a quorum exists, or acts reduced to or approved in writing by all
Committee members, shall be valid acts of the Committee.

         (c) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take the following
actions:

                  (i)      To interpret the Plan and to apply its provisions;

                  (ii)     To adopt, amend or rescind rules, procedures and
         forms relating to the Plan;

                  (iii)    To authorize any person to execute, on behalf of the
         Company, any instrument required to carry out the purposes of the Plan;

                  (iv)     To determine when Shares are to be awarded or offered
         for sale and when Options are to be granted under the Plan;

                  (v)      To select Offerees and Optionees;

                  (vi)     To determine the number of Shares to be awarded or
         offered for sale or to be made subject to each Option;

                  (vii)    To prescribe the terms and conditions of each award
         or sale of Shares, including (without limitation) the Purchase Price
         and vesting of the award, and to specify the provisions of the Stock
         Purchase Agreement relating to such award or sale;

                  (viii)   To prescribe the terms and conditions of each Option,
         including (without limitation) the Exercise Price and vesting of the
         Option, to determine whether such Option is to be classified as an ISO
         or as a Nonstatutory Option, and to specify the provisions of the Stock
         Option Agreement relating to such Option;

                  (ix)     To amend any outstanding Stock Purchase or Stock
         Option Agreement; provided, however, that the rights and obligations
         under any Stock Purchase or Stock Option Agreement shall not be
         materially altered or impaired adversely by any such amendment, except
         with the consent of the Optionee or Offeree;

                                      -4-
<PAGE>

                  (x)      To determine the disposition of an Option or other
         right to acquire Shares in the event of an Optionee's or Offeree's
         divorce or dissolution of marriage;

                  (xi)     To correct any defect, supply any omission, or
         reconcile any inconsistency in the Plan and any Stock Purchase
         Agreement or Stock Option Agreement; and

                  (xii)    To take any other actions deemed necessary or
         advisable for the administration of the Plan.

         All decisions, interpretations and other actions of the Committee shall
be final and binding on all Offerees, Optionees and all persons deriving their
rights from an Offeree or Optionee. No member of the Committee shall be liable
for any action that he or she has taken or has failed to take in good faith,
with respect to the Plan, any Option or any other right to acquire Shares under
the Plan.

         (d) Financial Reports. To the extent required by applicable law, and
not less often than annually, the Company shall furnish to Optionees, Offerees
and stockholders who have received Stock under the Plan, Company summary
financial information including a balance sheet regarding the Company's
financial condition and results of operations, unless such Optionees, Offerees
or stockholders have duties with the Company that assure them access to
equivalent information. Such financial statements need not be audited.

SECTION 4. ELIGIBILITY.

         (a) General Rule. Only Employees, as defined in Section 2(g), shall be
eligible for designation as Optionees or Offerees by the Committee. In addition,
only individuals who are employed as common-law employees by the Company or a
Subsidiary shall be eligible for the grant of ISOs.

                                      -5-
<PAGE>

         (b) Ten-Percent Shareholders. An Employee who owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for designation as an
Optionee or Offeree unless (i) the Exercise Price for an ISO (and an NSO to the
extent required by applicable law) is at least 110 percent of Fair Market Value
on the date of grant, (ii) the Purchase Price for a sale of Shares is at least
100% of Fair Market Value at the date of purchase, and (iii) in the case of an
ISO, such ISO by its terms is not exercisable after the expiration of five years
from the date of grant.

         (c) Attribution Rules. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.

         (d) Outstanding Stock. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person.

SECTION 5. STOCK SUBJECT TO PLAN.

         (a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares, or issued Shares that have been reacquired by the Company.
The aggregate number of Shares which may be issued under the Plan (upon exercise
of Options or other rights to acquire Shares) shall not exceed six million two
hundred fifteen thousand (6,215,000) Shares, subject to adjustment

                                      -6-
<PAGE>

pursuant to Section 9. The number of Shares which are subject to Options or
other rights to acquire Shares outstanding at any time under the Plan shall not
exceed the number of Shares which then remain available for issuance under the
Plan. During the term of the Plan, the Company shall at all times reserve and
keep available sufficient Shares to satisfy the requirements of the Plan.

         (b) Additional Shares. In the event that any outstanding Option or
other right to acquire Shares for any reason expires or is canceled or otherwise
terminated, the Shares allocable to the unexercised portion of such Option or
other right shall again be available for the purposes of the Plan.

SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.

         (a) Stock Purchase Agreement. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.

         (b) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within the number of days specified by the
Committee after the grant of such right was communicated to the Offeree by the
Committee. Such right shall not be transferable and shall be exercisable only by
the Offeree to whom such right was granted.

         (c) Purchase Price. To the extent required by applicable law, the
Purchase Price of Shares to be offered under the Plan shall not be less than
eighty-five percent (85%) of the Fair

                                      -7-
<PAGE>

Market Value of such Shares, except as otherwise provided in Section 4(b).
Subject to the preceding sentence, the Purchase Price shall be determined by the
Committee at its sole discretion. The Purchase Price shall be payable in a form
described in Section 8 or in the form of services previously rendered to the
Company.

         (d) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.

         (e) Restrictions on Transfer of Shares. No Shares awarded or sold under
the Plan may be sold or otherwise transferred or disposed of by the Offeree
during the one hundred eighty (180) day period following the effective date of a
registration statement covering securities of the Company filed under the
Securities Act of 1933, as amended. Subject to the preceding sentence, any
Shares awarded or sold under the Plan shall be subject to such special
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such restrictions shall be set
forth in the applicable Stock Purchase Agreement and shall apply in addition to
any general restrictions that may apply to all holders of Shares. To the extent
required by applicable law, any service-based vesting conditions shall not be
less rapid than the schedule set forth in Section 7(e).

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

         (a) Stock Option Agreement. Each grant of an Option 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 which are not
inconsistent with the Plan and which the Committee deems

                                      -8-
<PAGE>

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.

         (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. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.

         (c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(b). The Exercise Price of a Nonstatutory
Option shall not be less than eighty-five percent (85%) of the Fair Market Value
of a Share on the date of grant, except as otherwise provided in Section 4(b).
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee in its sole discretion. The Exercise Price
shall be payable in a form described in Section 8.

         (d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

         (e) Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of twenty percent (20%) per year

                                      -9-
<PAGE>

for each of the first five years from the date of grant. Subject to the
preceding sentence, the vesting of any Option shall be determined by the
Committee in its sole discretion.

         (f) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of grant, except
as otherwise provided in Section 4(b). Subject to the preceding sentence, the
Committee at its sole discretion shall determine when an Option is to expire.

         (g) Nontransferability. No Option shall be transferable by the Optionee
other than by will or by the laws of descent and distribution. An Option may be
exercised during the lifetime of the Optionee only by him or by his guardian or
legal representative. No Option or interest therein may be transferred,
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.

         (h) Exercise of Options on Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment. Notwithstanding the foregoing, to the extent required
by applicable law, each Option shall provide that the Optionee shall have the
right to exercise the vested portion of any Option held at termination for at
least 30 days following termination of service with the Company for any reason
other than cause, and that the Optionee shall have the right to exercise the
Option for at least six months if the Optionee's service terminates due to death
or Disability.

                                      -10-
<PAGE>

         (i) No Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by an Option until the date of the issuance of a stock certificate for
such Shares.

         (j) Modification, Extension and 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 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 or for other consideration.

         (k) Restrictions on Transfer of Shares. No Shares issued upon exercise
of an Option may be sold or otherwise transferred or disposed of by the Optionee
during the one hundred eighty (180) day period following the effective date of a
registration statement covering securities of the Company filed under the
Securities Act of 1933. Subject to the preceding sentence, 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 be set forth in the applicable Stock Option Agreement
and shall apply in addition to any restrictions that may apply to holders of
Shares generally.

SECTION 8. PAYMENT FOR SHARES.

         (a) General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b), (c),
(d) and (e) below.

         (b) Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with Shares which have already been
owned by the Optionee or the Optionee's representative for any time period
specified by the Committee and

                                      -11-
<PAGE>

which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.

         (c) Promissory Notes. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with a full recourse promissory
note executed by the Optionee or Offeree. The interest rate and other terms and
conditions of such note shall be determined by the Committee. The Committee may
require that the Optionee pledge his or her Shares to the Company for the
purpose of securing the payment of such note. In no event shall the stock
certificate(s) representing such Shares be released to the Optionee until such
note is paid in full.

         (d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides and a public market for the Shares exists, payment may be made all or
in part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker to sell Shares and to deliver all or part of
the sale proceeds to the Company in payment of the aggregate Exercise Price.

         (e) Services Rendered. At the discretion of the Committee, Shares may
be awarded under the Plan in consideration of services rendered to the Company
or a Subsidiary prior to the award.

SECTION 9. ADJUSTMENT OF SHARES.

         (a) General. In the event of a subdivision of the outstanding Stock, 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 value
of Shares, a combination or consolidation of the outstanding Stock into a lesser
number of Shares, a recapitalization, a reclassification or a similar
occurrence, the Committee shall make appropriate adjustments in one or more of
(i) the

                                      -12-
<PAGE>

number of Shares available for future grants of Options or other rights to
acquire Shares under Section 5, (ii) the number of Shares covered by each
outstanding Option or other right to acquire Shares or (iii) the Exercise Price
of each outstanding Option or the Purchase Price of each other right to acquire
Shares.

         (b) Reorganizations. In the event that the Company is a party to a
merger or reorganization, outstanding Options or other rights to acquire Shares
shall be subject to the agreement of merger or reorganization.

         (c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend,
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option, or the number or Purchase Price
of shares subject to any other right to acquire Shares. The grant of an Option
or other right to acquire Shares pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

SECTION 10. LEGAL REQUIREMENTS.

         Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on

                                      -13-
<PAGE>

which the Company's securities may then be listed, and the Company has obtained
the approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.

SECTION 11. NO EMPLOYMENT RIGHTS.

         No provision of the Plan, nor any Option granted or other right to
acquire Shares awarded under the Plan, shall be construed to give any person any
right to become, to be treated as, or to remain an Employee. The Company and its
Subsidiaries reserve the right to terminate any person's Service at any time and
for any reason.

SECTION 12. 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 of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any Option grants or other right to acquire Shares already made shall
be null and void, and no additional Option grants or other right to acquire
Shares shall be made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.

         (b) Right to Amend or Terminate the Plan. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any Option granted or other right to acquire Shares awarded before amendment of
the Plan shall not be materially altered, or impaired adversely, by such
amendment, except with consent of the Optionee or

                                      -14-
<PAGE>

Offeree. An amendment of the Plan shall be subject to the approval of the
Company's shareholders only to the extent required by applicable laws,
regulations or rules.

         (c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or Option
previously granted under the Plan.

SECTION 13. EXECUTION.

         To record the adoption of the Plan by the Board of Directors as of
August _______, 1998, the Company has caused its authorized officer to execute
the same.

                                          PEOPLESUPPORT, INC.

                                          By ___________________________________

                                          Title ________________________________

                                      -15-