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                                                                  EXHIBIT 10.7.1

                             CALLIDUS SOFTWARE INC.
                            2003 STOCK INCENTIVE PLAN

                          (AS RESTATED AUGUST 31, 2004)

      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 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.

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            (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.

            (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.

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            (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.

                  (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:

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                  (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 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.

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      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.

            (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

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                      (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. 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.

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      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 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 current policy with
respect to Options granted to Outside Directors under this Section, effective as
of the date of this Plan and continuing until modified or revoked by the Board
from time to time, shall be as follows:

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            (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.

                  (iv) The Company's Chairman of the Board (so long as such
            position continues to be held by an Outside Director) shall be
            granted automatically a Nonstatutory Stock Option to purchase 20,000
            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.

            (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.

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                  (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 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.

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            (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.

            (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

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      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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                             CALLIDUS SOFTWARE, INC.

                            2003 STOCK INCENTIVE PLAN

                             STOCK OPTION AGREEMENT

      Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

1     NOTICE OF STOCK OPTION GRANT

      [Optionee's Name and Address]

      The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:

      Grant Number                                __________________________

      Date of Grant                               __________________________

      Vesting Commencement Date                   __________________________

      Exercise Price per Share                    $_________________________

      Total Number of Shares Granted              __________________________

      Total Exercise Price                        $_________________________

      Type of Option:                             [Nonstatutory Stock Option]

      Term Expiration Date:                       __________________________

      Vesting Schedule:

      This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:

      [25% of the Shares subject to the Option shall vest and become exercisable
12 months after the Vesting Commencement Date, and 1/48th of the Shares subject
to the Option shall vest and become exercisable each month thereafter, subject
to Optionee's continuing to be a Service Provider on such dates.]

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      Termination Period:

      This Option shall be exercisable for 90 days after Optionee ceases to be a
Service Provider. Upon Optionee's death or disability, this Option may be
exercised for such longer period as provided in the Plan. In no event may
Optionee exercise this Option after the Term/Expiration Date as provided above.

2     AGREEMENT

      2.1 Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 15(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.

      2.2   Exercise of Option.

            2.2.1 Right to Exercise. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.

            2.2.2 Method of Exercise. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price. The Administrator shall require payment of any amount the
Company may determine to be necessary to withhold for taxes as a result of the
exercise of an award. In the absence of any other arrangement, Optionee agrees
that the Company shall be entitled to withhold from any payments to be made by
the Company to Optionee an amount equal to such withholding obligations.

            No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise complies with Applicable laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

            2.3 Lock-Up Period. Optionee hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the
180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act. Such restriction

                                        2
<PAGE>

shall apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on behalf
of the Company to the public in an underwritten public offering under the
Securities Act. The Company may impose stop-transfer instructions with respect
to securities subject to the foregoing restrictions until the end of such Market
Standoff Period.

      2.4 Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:

            2.4.1 cash or check;

            2.4.2 consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or

            2.4.3 surrender of other Shares which, (i) 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 (ii) have a Fair Market Value on
the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

            2.5 Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the stockholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.

            2.6 Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.

            2.7 Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option.

            2.8 Entire Agreement Governing Law. The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of the State of California.

            2.9 No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE

                                       3
<PAGE>

TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

      Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.

OPTIONEE:                                             CALLIDUS SOFTWARE, INC.

---------------------------                           --------------------------
Signature                                             By

---------------------------                           --------------------------
Print Name                                            Title

---------------------------

---------------------------
Residence Address

                                       4
<PAGE>

                                    EXHIBIT A

                            2003 STOCK INCENTIVE PLAN

                                 EXERCISE NOTICE

Callidus Software, Inc.
160 West Santa Clara Street
Suite 1500
San Jose, CA  95113

Attention:        Secretary

      Section 1.01 Exercise of Option. Effective as of today, _________, 20__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase __________ shares of the Common Stock (the "Shares") of Callidus
Software Inc.(the "Company") under and pursuant to the 2003 Stock Incentive Plan
(the "Plan") and the Stock Option Agreement dated ________, 20__ (the "Option
Agreement").

      Section 1.02 Delivery of Payment. Purchaser herewith delivers to the
Company the full purchase price of the Shares, as set forth in the Option
Agreement.

      Section 1.03 Representations of Optionee. (a) Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions.

                  (b) Optionee acknowledges that Optionee has received and had
            access to such information as Optionee considers necessary or
            appropriate for deciding whether to invest in the Shares.
            Specifically, Optionee has received and read a copy of the
            prospectus describing the Plan.

      Section 1.04 Rights as Stockholder. Until the issuance of the Shares (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 Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued to
the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 13 of the Plan.

      Section 1.05 Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with
any tax consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

<PAGE>

Submitted by:                                 Accepted by:

OPTIONEE:                                     CALLIDUS SOFTWARE, INC.

-------------------------------               ----------------------------------
Signature                                     By

-------------------------------               ----------------------------------
Print Name                                    Its

Address                                       Address:

-------------------------------               160 West Santa Clara Street, Suite
1500

                                              San Jose, CA  95113

-------------------------------

                                              ----------------------------------
                                              Date Received

                                       6<PAGE>
                                                                  EXHIBIT 10.8.1

                             CALLIDUS SOFTWARE INC.

                              AMENDED AND RESTATED

                          EMPLOYEE STOCK PURCHASE PLAN

                                 AUGUST 10, 2004

     Section 1. PURPOSE OF THE PLAN.

     The purpose of this Employee Stock Purchase Plan (the "PLAN") is to give
eligible employees of Callidus Software Inc. (the "COMPANY") and its
subsidiaries the ability to share in the Company's future success. The Company
expects that it and its stockholders will benefit from the added interest which
such eligible employees will have in the welfare of the Company as a result of
their increased equity interest in the Company's success. The Plan is intended
to qualify under Section 423 of the Code (as defined below).

     Section 2. DEFINITIONS.

     The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:

     (a)  "BOARD" means the board of directors of the Company.

     (b)  "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.

     (c)  "COMMITTEE" means a committee of the Board designated by the Board to
administer the Plan. If no committee is so designated by the Board, the full
Board shall be the Committee hereunder.

     (d)  "COMMON STOCK" means the common stock, par value $0.001, of the

Company.

     (e)  "COMPENSATION" means base salary and commissions prior to any
reductions for pre-tax contributions made to a plan or salary reduction
contributions to a plan excludable from income under Sections 125, 132 or 402(g)
of the Code. Notwithstanding the foregoing, "Compensation" shall exclude
severance pay, bonuses, retirement income, change in control payments,
contingent payments, income derived from stock options, stock appreciation
rights and other equity-based compensation and other forms of special
remuneration.
<PAGE>

     (f)  "CORPORATE TRANSACTION" means (i) a merger of the Company with or into
another corporation (other than a merger whose sole purpose is to change the
state of the Company's incorporation or a merger as a result of which the direct
or indirect stockholders of the Company immediately prior to such merger or
consolidation hold, directly or indirectly, less than 50% of the voting power of
the surviving entity); (ii) the sale of substantially all of the assets or stock
of the Company, or (iii) the complete liquidation or dissolution of the Company.

     (g)  "ENROLLMENT DATE" means the first date of an Offering Period.

     (h)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor thereto.

     (i)  "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, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or 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 Committee deems reliable;

          (ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Committee.

     (j)  "IPO" means the initial public offering of the Common Stock pursuant
to an effective registration statement filed by the Company with the Securities
and Exchange Commission.

     (k)  "MAXIMUM SHARE AMOUNT" means 20,000 shares, or such other lesser
amount as the Committee, subject to applicable law, determines to be the maximum
number of Shares that a Participant may purchase on any given Purchase Date.

     (l)  "NEW PURCHASE DATE" means the purchase date established pursuant to
Section 12 of the Plan.

     (m)  "OFFERING PERIOD" means a period of approximately 12 months consisting
of two consecutive Purchase Periods, as set forth in Section 7, or such other
period as the Committee may determine in its sole discretion.

     (n)  "OPTION" means an option granted pursuant to Section 7 of the Plan.

     (o)  "PARTICIPANT" means an eligible employee of the Company or a
Participating Subsidiary who participates in the Plan.

                                       2
<PAGE>

     (p)  "PARTICIPATING SUBSIDIARY" means a Subsidiary that is selected to
participate in the Plan by the Committee in its sole discretion.

     (q)  "PAYROLL DEDUCTION ACCOUNT" means an account to which payroll
deductions of a Participant are credited under Section 8(c) of the Plan.

     (r)  "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government,
but excluding any of the Company, any Subsidiary or any employee benefit plan
sponsored or maintained by the Company or any Subsidiary.

     (s)  "PURCHASE DATE" means the last trading day of a Purchase Period.

     (t)  "PURCHASE PERIOD" means the approximately six-month period, or such
other period as the Committee may determine in its sole discretion, commencing
on February 16 and August 16 of each year and ending with the next Purchase
Date. The first Purchase Period shall be lengthened by commencing on the first
trading day on or after the date of the IPO and ending on the last trading day
before August 16, 2004, unless otherwise determined by the Committee.

     (u)  "PURCHASE PRICE" means, with respect to each Share, 85% of the lesser
of (i) the Fair Market Value of a Share on the Enrollment Date and (ii) the Fair
Market Value of a Share on the Purchase Date.

     (v)  "SHARE" means a share of Common Stock.

     (w)  "SUBSIDIARY" means any corporation, partnership, joint venture or
other legal entity of which the Company owns directly or indirectly, more than
50% of the total combined voting power of all classes of stock or other equity
interests of such entity.

     Section 3. SHARES SUBJECT TO THE PLAN.

     The total number of shares of Common Stock subject to the Plan is
1,200,000, plus an annual increase to be added on July 1 of each year during the
term of the Plan beginning July 1, 2004, in an amount equal to the lesser of (i)
1,200,000 shares, (ii) 2.0% of the outstanding shares of Common Stock on the
last day immediately preceding such date or (iii) a lesser amount determined by
the Board. The Shares will consist in whole or in part of authorized but
unissued Shares or treasury Shares, including Shares purchased on the open
market or otherwise.

     Section 4. ADMINISTRATION.

     (a)  The Plan shall be administered by the Committee. Subject to the terms
of the Plan and applicable law, the Committee shall have full power and
authority to: (i) designate Participants; (ii) interpret and administer the
Plan; (iii) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem

                                       3
<PAGE>

appropriate for the proper administration of the Plan; (iv) correct any defect
or supply any omission or reconcile any inconsistency in the Plan in the manner
and to the extent the Committee deems necessary or desirable; and (v) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan.

     (b)  All decisions of the Committee shall be final, conclusive and binding
upon all persons.

     Section 5. ELIGIBILITY.

     Any individual who is employed by the Company or a Participating Subsidiary
on a given Enrollment Date is eligible to participate in the Plan, subject to
limitations imposed by Section 423 of the Code. Notwithstanding the foregoing,
no Employee shall be granted an option under the Plan if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company or its Subsidiaries.

     Section 6. ELECTION TO PARTICIPATE.

     Pursuant to procedures set forth by the Committee, Participants may elect
to participate in a given Offering Period under the Plan prior to the Enrollment
Date for such Offering Period. Enrollments shall remain in effect for subsequent
Offering Periods, except as provided herein. A Participant shall not be enrolled
in more than one Offering Period at any time.

     Section 7. OFFERING PERIODS; GRANT OF OPTION ON ENROLLMENT; PURCHASE OF
SHARES.

     (a)  The Plan shall be implemented by consecutive, overlapping Offering
Periods with a new Offering Period commencing on each February 16 and August 16,
or as otherwise determined by the Committee, except that the first Offering
Period shall be lengthened by commencing on the first trading day on or after
the IPO and ending on the last trading day before February 16, 2005, unless
otherwise determined by the Committee.

     (b)  With respect to an Offering Period, each Participant enrolled in such
Offering Period shall be granted as of the Enrollment Date an Option to purchase
on each Purchase Date during the Offering Period a number of Shares equal to the
lesser of (i) the Maximum Share Amount or (ii) the number determined by dividing
(A) the amount accumulated in such Participant's Payroll Deduction Account as of
a Purchase Date, pursuant to the election made under Section 8, by (B) the
Purchase Price.

     (c)  In the event that the Committee determines that the number of Shares
that may be purchased on a Purchase Date may exceed the number of Shares
available under Section 3, the Committee may in its discretion provide for a pro
rata purchase on the Purchase Date, and may continue or terminate any Offering
Periods then in effect.

                                       4
<PAGE>

     Section 8. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS;
ISSUANCE OF SHARES.

     (a)  Payroll deductions shall be made on each day that a Participant is
paid during an Offering Period in respect of a payroll period commencing after
the Enrollment Date. The deductions shall be made as a percentage of the
Participant's Compensation in 1% increments, from 1% to 15% of such
Participant's Compensation, as elected by the Participant; PROVIDED that, in
accordance with Section 423(b)(8) of the Code and the regulations thereunder, no
Participant shall be permitted to accrue rights to purchase Shares under this
Plan (and any other employee stock purchase plan of the Company or any of its
Subsidiaries) with an aggregate Fair Market Value (as determined as of the date
the applicable option is granted) in excess of $25,000 for each calendar year in
which such option is outstanding at any time.

     (b)  A Participant may discontinue his or her participation in the Plan as
provided in Section 9, or may change the rate of his or her payroll deductions
during an Offering Period by completing and filing with the Company a new
authorization for payroll deduction, subject to clause (a) above. The Committee
may, in its discretion, limit the number of participation rate changes in any
Offering Period. The change in rate shall be effective as soon as
administratively feasible following the Company's receipt of the new
authorization.

     (c)  All payroll deductions made with respect to a Participant shall be
credited to the Participant's Payroll Deduction Account under the Plan and shall
be deposited with the general funds of the Company, and no interest shall accrue
on the amounts credited to such Payroll Deduction Account. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions. Except to the extent provided by the Committee, a
Participant may not make any separate cash payments into such Participant's
Payroll Deduction Account, and payment for Shares purchased under the Plan may
not be made in any form other than by payroll deduction.

     (d)  On each Purchase Date, all funds then in the Participant's Payroll
Deduction Account shall be applied to purchase Shares (or fractions thereof)
pursuant to the automatic exercise of the Option granted on the Enrollment Date.
The Committee may determine with respect to all Participants that any fractional
shares shall be rounded down to the next lower whole share, in which event the
resulting unused amount in any Participant's Payroll Deduction Account may be
carried over into the next Purchase Period.

     (e)  Certificates representing the Shares purchased by a Participant under
the Plan shall be issued to the Participant as soon as practicable following the
end of each Purchase Period, except that the Committee may determine that such
Shares shall be held for each Participant's benefit by a broker designated by
the Committee.

                                       5
<PAGE>

     (f)  The Participant shall have no interest or voting right in the Shares
covered by the Participant's Option until such Option is exercised and the
covered Shares are registered in the name of the Participant.

     Section 9. WITHDRAWAL.

     Each Participant may withdraw from participation prior to the end of an
Offering Period or from the Plan in accordance with procedures set forth by the
Committee. Upon a Participant's withdrawal from participation in respect of any
Offering Period or from the Plan, all accumulated payroll deductions in the
Payroll Deduction Account shall be returned, without interest, to such
Participant, and such Participant shall not be entitled to any Shares on the
Purchase Date or thereafter with respect to the Offering Period in effect at the
time of such withdrawal. If a Participant withdraws from an Offering Period,
payroll deductions will not resume at the beginning of the succeeding Offering
Period unless the Participant re-enrolls in the Plan prior to the applicable
Enrollment Date in accordance with the procedures set forth by the Committee.

     Section 10. TERMINATION OF EMPLOYMENT.

     A Participant shall cease to participate in the Plan upon the Participant's
termination of employment for any reason (including death) and all accumulated
payroll deductions in the Participant's Payroll Deduction Account shall be
returned, without interest to such Participant (or Participant's estate, as
applicable). For purposes of the Plan, transfers from the Company or a
Participating Subsidiary to another Participating Subsidiary or to the Company,
as the case may be, shall not be a termination of employment. Employment shall
not be deemed to terminate when the Participant goes on a leave of absence
approved by the Company in writing, unless otherwise required by the Code and
the applicable regulations.

     Section 11. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD.

     To the extent permitted by any applicable laws and regulations, if the Fair
Market Value of the Shares on any Purchase Date in an Offering Period is lower
than the Fair Market Value of the Shares on the Enrollment Date of such Offering
Period, then all Participants in such Offering Period shall be automatically
withdrawn from such Offering Period immediately after the purchase of their
Shares on such Purchase Date and automatically re-enrolled in a new Offering
Period as of the first business day after such Purchase Date.

     Section 12. ADJUSTMENTS UPON CERTAIN EVENTS.

     Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Options granted under the Plan:

     (a)  In the event of any 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 Committee shall, in such manner as it may
deem

                                       6
<PAGE>

equitable, adjust any or all of (i) the number or type of Shares or other
securities issued or reserved for issuance pursuant to the Plan, (ii) the
Purchase Price and/or (iii) any other affected terms hereunder.

     (b)  In the event of a Corporate Transaction, unless each outstanding
Option shall be continued or assumed or an equivalent option substituted by the
Company or the successor corporation or a parent or Subsidiary of the successor
corporation, the Committee shall shorten any Offering Period then in progress by
setting a New Purchase Date, which shall be before the date of the consummation
of the Corporate Transaction. The Committee shall notify each Participant not
less than 10 days prior to the New Purchase Date that (i) a New Purchase Date
has been set and (ii) the Participant's Option will be exercised automatically
on the New Purchase Date unless prior to such date the Participant has withdrawn
from the Offering Period as provided in Section 9. Each Offering Period then in
effect shall terminate on such New Purchase Date.

     Section 13. NONTRANSFERABILITY.

     Unless otherwise determined by the Committee, Options granted under the
Plan shall not be transferable or assignable by the Participant other than by
will or by the laws of descent and distribution.

     Section 14. LEGAL COMPLIANCE.

     Shares shall not be issued hereunder unless the issuance and delivery of
such Shares shall comply with all applicable laws and regulations, including the
federal and state securities laws and the regulations of any stock exchange or
other securities market on which the Company's securities are traded.

     Section 15. NO RIGHT TO EMPLOYMENT.

     The granting of an Option under the Plan shall impose no obligation on the
Company or any Subsidiary to continue the employment of a Participant and shall
not lessen or affect the Company's or Subsidiary's right to terminate the
employment of such Participant.

     Section 16. AMENDMENT OR TERMINATION OF THE PLAN.

     (a)  The Plan shall continue until the earliest to occur of the following:
(i) termination of the Plan by the Board, (ii) issuance of all of the Shares
reserved for issuance under the Plan or (iii) the tenth anniversary of the
Effective Date.

     (b)  The Committee may amend, alter or discontinue the Plan or any portion
thereof at any time, PROVIDED that no amendment, alteration or discontinuation
shall be made (x) without the approval of the stockholders of the Company if
such amendment, alteration or discontinuation would (except as is provided in
Section 12) increase the total number of Shares reserved for purposes of the
Plan or as otherwise required by applicable laws or regulations, or (y) without
the consent of a Participant, such amendment,

                                       7
<PAGE>

alteration or discontinuation would materially diminish any of the rights or
obligations under any Option theretofore granted to such Participant under the
Plan.

     (c)  Notwithstanding clause (y) of Section 16(b), the Committee may amend
or terminate the Plan, including with respect to any Offering Periods then in
effect, without consent of the Participants in such manner as it deems necessary
to permit the granting of Options meeting the requirements of the Code or other
applicable laws or in the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting consequences for the
Company.

     (d)  Notwithstanding clause (y) of Section 16(b), the Committee shall have
the power to change the duration and timing of Offering Periods (both before and
after any Offering Period has commenced) and Purchase Periods. In no event,
however, will any such Offering Period be longer than 27 months.

     Section 17. TAXES.

     At the time the Shares are purchased, or at the time some or all of the
Shares issued under the Plan are disposed of, the Participant must make adequate
provision for the Company's federal, state or other tax withholding obligations,
if any, which arise. At any time, the Company, may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary for the
Company to meet applicable withholding obligations, including any withholding
required to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Shares by the Participant.

     Section 18. GOVERNING LAW.

     The Plan shall be governed by and construed in accordance with the laws of
the State of California, without regard to conflicts of laws.

     Section 19. EFFECTIVENESS OF THE PLAN.

     The Plan shall become effective as determined by the Board, subject to
stockholder approval.

                                       8

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