Document:

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                                                                     EXHIBIT 4.2

                                     CALLIDUS SOFTWARE INC.

                                      AMENDED AND RESTATED

                          REGISTRATION AND INFORMATION RIGHTS AGREEMENT

         This Amended and Restated Registration and Information Rights Agreement
(the "AGREEMENT") is made effective as of December 24, 2002 by and among
Callidus Software Inc., a Delaware corporation (the "COMPANY"), the purchasers
(the "PURCHASERS") of Series G Preferred Stock of the Company as set forth in
Exhibit A attached hereto pursuant to the Series G Preferred Stock Purchase
Agreement dated as of the date hereof (the "PURCHASE AGREEMENT"), the holder of
Series A Preferred Stock as set forth in Exhibit A attached hereto (the "SERIES
A HOLDER"), the holders of Series B Preferred Stock as set forth in Exhibit A
attached hereto (the "SERIES B HOLDERS"), the holders of Series C Preferred
Stock as set forth in Exhibit A attached hereto (the "SERIES C HOLDERS"), the
holders of Series D Preferred Stock as set forth in Exhibit A attached hereto
(the "SERIES D HOLDERS"), the holders of Series E Preferred Stock as set forth
in Exhibit A attached hereto (the "SERIES E HOLDERS"), the holders of the Series
F Preferred Stock and Warrants as set forth in Exhibit A attached hereto (the
"SERIES F HOLDERS"), Andrew L. Swett and Scott Kitayama (the "FOUNDERS"),
Transamerica Business Credit Corporation Funding Trust II ("TRANSAMERICA") and
the holders of Warrants to purchase Common Stock of the Company as set forth in
Exhibit A hereto (the "WARRANT HOLDERS").

                                    RECITALS

         A.       The Company, the Series A Holder, the Series B Holders, the
Series C Holders, the Series D Holders, the Series E Holders, the Series F
Holders, Transamerica and the Founders are parties to the Company's Registration
and Information Rights Agreement, as amended and restated effective as of March
13, 2001, as further amended by that certain Amendment No. 1 to Amended and
Restated Registration and Information Rights Agreement effective as of October
26, 2001 (the "RESTATED AGREEMENT").

         B.       The Company, the Series A Holder, the Series B Holders, the
Series C Holders, the Series D Holders, the Series E Holders, the Series F
Holders, Transamerica and the Founders wish to induce the Purchasers to purchase
the Series G Preferred Stock by amending and restating the Restated Agreement to
add the Purchasers as parties and make certain other changes.

         C.       Section 11 of the Restated Agreement allows for amendment and
the addition of parties with the consent of the Company, the holders of a
majority of the Registrable Securities and the holders of a majority of the
Registrable Securities of any class affected in a manner different from the
holders generally.

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         D.       The obligations of the Company and the Purchasers under the
Purchase Agreement are conditioned, among other things, upon the execution and
delivery of this Agreement by the Company and the Purchasers.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:

         1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:

                  "COMMISSION" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.

                  "CONVERSION STOCK" means the Common Stock issued or issuable
pursuant to (i) conversion of the Preferred Stock and (ii) the Series F Warrants
(or any underlying convertible security issued or issuable pursuant to such
warrants), to the extent not otherwise already included in clause (i).

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar Federal rule or statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.

                  "FOUNDERS' STOCK" means the Common Stock acquired by the
Founders pursuant to the Founder's Stock Purchase Agreements with the Company;
provided, however, that, for the purposes of Sections 5.1, 5.2 and 5.3,
Founders' Stock shall not include any Common Stock subject to a right of
repurchase in favor of the Company pursuant to a Founder's Stock Purchase
Agreement between the Company and a Founder unless, until, and to the extent
that such right of repurchase has lapsed.

                  "HOLDER" means any Series A Holder, Series B Holder, Series C
Holder, Series D Holder, Series E Holder, Series F Holder, Purchaser, Founder,
Transamerica or Warrant Holder holding Registrable Securities, or any person
holding Registrable Securities to whom the rights under this Agreement have been
transferred in accordance with Section 5.10 hereof.

                  "INITIATING HOLDERS" means any Holder or Holders who, in the
aggregate, hold not less than the required percentage of the Registrable
Securities then outstanding (the "REQUIRED PERCENTAGE"). The Required Percentage
shall be (i) 50% for the purposes of Section 5.1 or (ii) 25% for the purposes of
Section 5.3 hereof, in each case exclusive of Founder's Stock.

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                  "PREFERRED STOCK" shall mean the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock, and Series F Preferred Stock and Series G
Preferred Stock of the Company.

                  "REGISTRABLE SECURITIES" means (i) the Conversion Stock, (ii)
the Founders' Stock, (iii) the Warrant Stock, (iv) any Common Stock of the
Company issued or issuable in respect of any of the foregoing upon any
conversion, stock split, stock dividend, recapitalization, or similar event;
provided, however, that securities shall only be treated as Registrable
Securities if and so long as (i) they have not been registered or sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction and (ii) the registration rights with respect to such
securities have not terminated pursuant to Section 5.11.

                  The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

                  "REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 5.1,
5.2 and 5.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company). Registration Expenses shall also include
the fees and disbursements for one special counsel to the selling stockholders,
not to exceed $20,000 per registration, for one (1) registration pursuant to
Section 5.1, one (1) registration pursuant to Section 5.2 and three (3)
registrations pursuant to Section 5.3 hereof.

                  "RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear the legends set forth in Section 3 hereof.

                  "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar Federal rule or statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.

                  "SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth above, all fees and
disbursements of counsel for any Holder.

                  "WARRANTS" shall mean (i) the warrant for the purchase of
17,500 shares of Common Stock issued to Transamerica on March 26, 1999, (ii) the
warrant for the purchase of 4,375 shares of Common Stock issued to Transamerica
on May 31, 2000, (iii) the warrant for the purchase of 19,133 shares of Series F
Preferred Stock issued to Transamerica on September 28, 2001, (iv) any other
warrant issued in connection with the Loan and Security Agreement between the
Company and Transamerica Business Credit Corporation dated March 26, 1999, as
amended from time to time and

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(v) all warrants to purchase Common Stock issued in connection with the Closing
of the sale of the Series F Preferred Stock on March 13, 2001.

                  "WARRANT STOCK" shall mean the Common Stock issued or issuable
upon exercise of the Warrants.

         2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the Conversion
Stock, the Founders' Stock, the Warrants, the Warrant Stock and any other
securities issued in respect of such stock upon any stock split, stock dividend,
recapitalization, merger, or similar event, shall not be sold, assigned,
transferred or pledged except upon the conditions specified in this Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder or transferee will cause any proposed purchaser,
assignee, transferee, or pledgee of any such shares held by the Holder or
transferee to agree to take and hold such securities subject to the restrictions
and upon the conditions specified in this Agreement, including without
limitation the restrictions set forth in Sections 7 and 10.

         3. RESTRICTIVE LEGEND. Each certificate representing the Preferred
Stock, the Conversion Stock, the Founders' Stock, the Warrant Stock or any other
securities issued in respect of such stock upon any stock split, stock dividend,
recapitalization, merger, or similar event, shall (unless otherwise permitted by
the provisions of Section 4 below) be stamped or otherwise imprinted with
legends in substantially the following form (in addition to any legends required
by agreement or by applicable state securities laws):

                  THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
                  HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
                  IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH
                  SHARES GENERALLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
                  OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF
                  COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
                  TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
                  DELIVERY REQUIREMENTS OF SAID ACT.

                  THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
                  LOCKUP PERIOD OF UP TO 180-DAYS FOLLOWING THE EFFECTIVE DATE
                  OF CERTAIN REGISTRATION STATEMENTS OF THE COMPANY FILED UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN
                  AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
                  SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
                  OFFICE OF THE ISSUER. SUCH LOCKUP PERIOD IS BINDING ON
                  TRANSFEREES OF THESE SHARES.

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                  Each Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of its capital stock in
order to implement the restrictions on transfer established in this Agreement.

         4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Without in any way limiting the
immediately preceding sentence, no sale, assignment, transfer or pledge of
Restricted Securities shall be made by any holder thereof to any person unless
such person shall first agree in writing to be bound by the restrictions of this
Agreement including, without limitation, Section 7 and this Section 4. Prior to
any proposed sale, assignment, transfer or pledge of any Restricted Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer, sale, assignment
or pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and, if
requested by the Company, the holder shall also provide, at such holder's
expense, either (i) a written opinion of legal counsel who shall be, and whose
legal opinion shall be, reasonably satisfactory to the Company addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company; provided, however, that the Company shall not request
an opinion of counsel or a "no action" letter with respect to (i) a transfer not
involving a change in beneficial ownership, (ii) a transaction involving the
distribution without consideration of Restricted Securities by the holder to its
constituent partners or members in proportion to their ownership interests in
the holder, (iii) a transaction involving the transfer without consideration of
Restricted Securities by an individual holder during such holder's lifetime by
way of gift or on death by will or intestacy, or (iv) a transfer or assignment
by The Goldman Sachs Group, L.P. and/or its affiliates (collectively, "GOLDMAN")
to a successor entity in connection with a public offering by Goldman. Each
certificate evidencing the Restricted Securities transferred as above provided
shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in Section 3 above, except that such
certificate shall not bear such restrictive legend if in the opinion of counsel
for such holder and counsel for the Company such legend is not required in order
to establish compliance with any provision of the Securities Act.
Notwithstanding the foregoing, each holder of Restricted Securities agrees that
it will not request that a transfer of the Restricted Securities be made or that
the legend set forth in Section 3 be removed from the certificate representing
the Restricted Securities, solely in reliance on Rule 144(k) if, as a result
thereof, the Company would be rendered subject to the reporting requirements of
the Exchange Act.

         5. REGISTRATION.

                  5.1      REQUESTED REGISTRATION.

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                           (a)      Request for Registration. In case the
Company shall receive from Initiating Holders a written request that the Company
effect any registration with respect to shares of Registrable Securities, the
Company will:

                                    (i)      promptly give written notice of the
proposed registration to all other Holders; and

                                    (ii)     as soon as practicable, use its
best efforts to effect such registration as part of a firm commitment
underwritten public offering with underwriters reasonably acceptable to the
Initiating Holders and the Company (including, without limitation, appropriate
qualification under applicable state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request by delivering a written notice to such effect to the Company within
twenty (20) days after the date of such written notice from the Company.

         Notwithstanding the foregoing, the Company shall not be obligated to
take any action to effect or complete any such registration pursuant to this
Section 5.1:

                                             (A)      Prior to the earlier of
(i) 180 days after the effective date of the Company's first registered public
offering of its Common Stock or (ii) December 31, 2004;

                                             (B)      Unless the requested
registration would include at least 20% of the Registrable Securities or any
lesser percentage so long as the aggregate offering price of all Registrable
Securities sought to be registered by all Holders, net of underwriting discounts
and commissions, would exceed $30,000,000;

                                             (C)      During the period starting
with the date sixty (60) days prior to the Company's estimated date of filing
of, and ending on the date six (6) months immediately following the effective
date of any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;

                                             (D)      After the Company has
effected one registration pursuant to this subparagraph 5.1(a), and such
registration has been declared or ordered effective; or

                                             (E)      If the Company shall
furnish to the Initiating Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its stockholders for a
registration statement to be filed in the near future. In such case, the
Company's obligation to use its

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best efforts to register, qualify or comply under this Section 5.1(a) shall be
deferred for a period not to exceed 180 days from the date of receipt of the
written request from the Initiating Holders, provided that the Company may not
exercise this deferral right more than once per twelve month period.

         Subject to the foregoing clauses (A) through (E), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.

                           (b)      Underwriting. In the event of a registration
pursuant to Section 5.1, the Company shall advise the Holders as part of the
notice given pursuant to Section 5.1(a)(i) that the right of any Holder to
registration pursuant to Section 5.1 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 5.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.

         The Company shall, together with all Holders proposing to distribute
their securities through such underwriting, enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 5.1, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders requesting to be
included in the registration and underwriting, and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Holders requesting to be included in the
registration and underwriting in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by them at the time of filing
the registration statement, provided, however, that in the event of such
limitation on the number of shares to be underwritten, then no shares of
Founder's Stock shall be included unless all shares of Registrable Securities
held requested by the Holders other than the Founders, including any shares
issued in respect thereof upon conversion or otherwise, to be included in such
underwriting are so included. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares. If any
Holder of Registrable Securities disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company.

                  5.2      COMPANY REGISTRATION.

                           (a)      Notice of Registration. If at any time or
from time to time the Company shall determine to register any of its equity
securities, either for its own account or the account of a Holder or other
holders, other than (i) a registration relating solely to employee benefit
plans, (ii) a registration relating solely to a Rule 145 transaction, or (iii) a
registration in which the

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only equity security being registered is Common Stock issuable upon conversion
of convertible debt securities which are also being registered, the Company
will:

                                    (i)      promptly give to each Holder
written notice thereof; and

                                    (ii)     include in such registration (and
any related qualifications including compliance with Blue Sky laws), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after the date of such written
notice from the Company, by any Holder.

                           (b)      Underwriting. If the registration of which
the Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 5.2(a)(i). In such event, the right of any
Holder to registration pursuant to Section 5.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided herein.

                           All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 5.2, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration (i) in the case of the Company's initial public offering, to zero,
and (ii) in the case of any other offering, to an amount no less than 33-1/3% of
all shares to be included in such offering. The Company shall so advise all
Holders requesting to be included in the registration and underwriting and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all the Holders
requesting to be included in the registration and underwriting in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by them at the time of filing the registration statement, provided, however,
that in the event of such limitation on the number of shares to be underwritten,
then no shares of Founder's Stock shall be included unless all shares of
Registrable Securities held requested by the Holders other than the Founders to
be included in such underwriting are so included. To facilitate the allocation
of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares. If any Holder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by written notice to
the Company.

                           (c)      Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 5.2 prior to the effectiveness of such registration whether
or not any Holder has elected to include securities in such registration.

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                  5.3      REGISTRATION ON FORM S-3.

                           (a)      Request for Registration. In case the
Company shall receive from Initiating Holders a written request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for a public offering of shares of the Registrable Securities the aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $1,500,000, and the Company is a registrant entitled to use Form
S-3 to register the Registrable Securities for such an offering, the Company
shall use its best efforts to cause such Registrable Securities to be registered
for the offering on such form and to cause such Registrable Securities to be
qualified in such jurisdictions as such Holder or Holders may reasonably
request; provided, however, that the Company shall not be required to effect
more than one registration pursuant to this Section 5.3 in any twelve (12) month
period. If such offer is to be an underwritten offer, the underwriters must be
acceptable to both the Initiating Holders and the Company. The Company shall
inform the other Holders of the proposed registration and offer them upon at
least twenty (20) days written notice the opportunity to participate. In the
event the registration is proposed to be part of a firm commitment underwritten
public offering, the substantive provisions of Section 5.1(b) shall be
applicable to each such registration initiated under this Section 5.3.

                           (b)      Notwithstanding the foregoing, the Company
shall not be obligated to take any action pursuant to this Section 5.3:

                                    (i)      If the Company, within ten (10)
days of the receipt of the request of the Initiating Holders, gives notice of
its bona fide intention to effect the filing of a registration statement with
the Commission within ninety (90) days of receipt of such request (other than
with respect to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities);

                                    (ii)     During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date six (6) months immediately following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective; or

                                    (iii)    If the Company shall furnish to the
Initiating Holders a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors, it would be
seriously detrimental to the Company or its stockholders for a registration
statement to be filed in the near future, then the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a period
not to exceed 180 days from the receipt of the request to file such registration
by such Initiating Holder or Holders, provided that the Company may not exercise
this deferral right more than once per twelve month period.

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                  5.4      SUBSEQUENT REGISTRATION RIGHTS.

                           (a)      Without the consent of any holder of
Registrable Securities hereunder, the Company may grant to any holder of
securities of the Company registration rights inferior to those granted
hereunder.

                           (b)      Subject to Section 11, the Company may enter
into an agreement granting any holder or prospective holder of any securities of
the Company registration rights superior to or on a pari passu basis with the
rights granted the Holders hereunder only if the Company first obtains the
written consent of the holders of a majority of the Registrable Securities.

                  5.5      EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with (i) one registration pursuant to Section 5.1, (ii)
all registrations pursuant to Section 5.2, and (iii) all registrations pursuant
to Section 5.3 shall be borne by the Company. Notwithstanding the foregoing, in
the event that Initiating Holders cause the Company to begin a registration
pursuant to Section 5.1 or Section 5.3, and the request for such registration is
subsequently withdrawn by the Initiating Holders or such registration is not
completed due to failure to meet the net proceeds requirement set forth in such
section or is otherwise not successfully completed due to no fault of the
Company, all Holders shall be deemed to have forfeited their right to one
registration under Section 5.1, or a registration under Section 5.3 for a period
of 12 months, as applicable, unless the Initiating Holders pay for, or reimburse
the Company for, the Registration Expenses incurred in connection with such
withdrawn or incomplete registration. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders and all
other registration expenses shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered or proposed to be so
registered.

                  5.6      REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to this Agreement, the Company
will keep each Holder advised in writing as to the initiation of such
registration and as to the completion thereof. The Company will:

                           (a)      Prepare and file with the Commission a
registration statement and such amendments and supplements as may be necessary
and use its best efforts to cause such registration statement to become and
remain effective for at least 90 days or until the distribution described in the
registration statement has been completed, whichever first occurs; and

                           (b)      Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.

                  5.7      INDEMNIFICATION.

                           (a)      The Company will indemnify each Holder, each
of its officers and directors and partners, and each person controlling such
Holder within the meaning of Section 15 of

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the Securities Act, with respect to which registration has been effected
pursuant to this Agreement, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act, the Exchange Act, state
securities laws or any rule or regulation promulgated under such laws applicable
to the Company in connection with any such registration, and the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, for any legal and any other expenses reasonably
incurred, as such expenses are incurred, in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission, or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or controlling person, and
stated to be specifically for use therein; provided, however, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement, alleged untrue statement, omission or alleged
omission made in a preliminary prospectus on file with the Commission at the
time the registration statement becomes effective or the amended prospectus
filed with the Commission pursuant to Rule 424(b) (the "FINAL PROSPECTUS"), such
indemnity agreement shall not inure to the benefit of any Holder, if a copy of
the Final Prospectus was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act, and if the Final Prospectus would have cured the defect
giving rise to the loss, liability, claim or damage.

                           (b)      Each Holder will, if Registrable Securities
held by such Holder are included in the securities as to which such registration
is being effected, indemnify the Company, each of its directors and officers,
other holders of the Company's securities covered by such registration
statement, each person who controls the Company within the meaning of Section 15
of the Securities Act, and each other such Holder, each of its officers and
directors and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Holder of the Securities Act, the Exchange Act, state
securities laws or any rule or regulation promulgated under such laws applicable
to the Holder, and will reimburse the Company, such other Holders, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating or defending any such claim, loss, damage,
liability or action, but in the case of the Company or the other Holders or
their officers, directors or controlling

                                       11

<PAGE>

persons, only to the extent that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with information furnished to the Company by such Holder.
Notwithstanding the foregoing, the liability of each Holder under this
subsection 5.7(b) shall be limited to an amount equal to the net proceeds from
the offering received by such Holder.

                           (c)      Each party entitled to indemnification under
this Section 5.7 (the "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
there are separate and different defenses. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party (whose consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

                  5.8      INFORMATION BY HOLDER. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders, the Registrable Securities
held by them and the distribution proposed by such Holder or Holders as the
Company may request in writing and as shall be required in connection with any
registration referred to in this Agreement.

                  5.9      RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use all reasonable efforts to:

                           (a)      Make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;

                           (b)      File with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements); and

                                       12

<PAGE>

                           (c)      So long as a Holder owns any Restricted
Securities, to furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as the
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing the Holder to sell any such securities without
registration.

                  5.10     TRANSFER OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to Holders under Sections 5.1, 5.2
and 5.3 may be assigned to a transferee or assignee reasonably acceptable to the
Company in connection with any transfer or assignment of Registrable Securities
by the Holder provided that: (i) such transfer is otherwise effected in
accordance with applicable securities laws and the terms of this Agreement, (ii)
such assignee or transferee (together with its affiliates, as such term is
defined in Rule 405 of the Securities Act) acquires at least 500,000 shares (as
adjusted for stock splits, stock dividends, stock combinations and the like) of
Registrable Securities (including Preferred Stock convertible into Registrable
Securities), (iii) written notice is promptly given to the Company and (iv) such
transferee agrees to be bound by the provisions of this Agreement.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned without compliance with item (ii) above to (x) any
constituent partner or member of a Holder which is a partnership or limited
liability company, or an affiliate (as such term is defined in Rule 405 of the
Securities Act) of a Holder which is a corporation, partnership or limited
liability company, a successor entity to any of the foregoing, or an officer,
shareholder or other equity holder of a Holder and, in the case of this clause
(x), such person shall be deemed "reasonably acceptable" to the Company, or (y)
a family member or trust for the benefit of a Holder who is an individual, or a
trust for the benefit of a family member of such a Holder.

                  5.11     TERMINATION OF REGISTRATION RIGHTS. The rights
granted pursuant to Sections 5.1, 5.2 and 5.3 of this Agreement shall terminate
as to any Holder upon the earlier of (i) the date five years after the effective
date of the Company's initial public offering and (ii) provided that the
Company's shares are traded on a national stock exchange or the Nasdaq National
Market System, such time as the Registrable Securities held by the Holder
represent less than 1% of the outstanding capital stock of the Company or such
Holder may sell all of such Registrable Securities in any single three-month
period under Rule 144.

         6. FINANCIAL INFORMATION RIGHTS.

                           (a)      The Company will provide the following
reports to each Series A Holder, Series B Holder, Series C Holder, Series D
Holder, Series E Holder, Series F Holder and Purchaser who continues to hold
shares of Preferred Stock or Conversion Stock:

                                    (i)      As soon as practicable after the
end of each fiscal year, and in any event within 120 days after the end of each
such fiscal year, consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of

                                       13

<PAGE>

operations and consolidated statements of cash flows and stockholders' equity of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and audited by independent public accountants of national standing
selected by the Company, and a capitalization table in reasonable detail for
such fiscal year; and

                                    (ii)     As soon as practicable after the
end of the first, second and third quarterly accounting periods in each fiscal
year of the Company, and in any event within forty-five (45) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as of
the end of each such quarterly period, and consolidated statements of operations
and consolidated statements of cash flows of the Company and its subsidiaries,
if any, for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles (other than
accompanying notes), subject to changes resulting from year-end audit
adjustments, in reasonable detail and signed by the principal financial or
accounting officer of the Company, and a capitalization table in reasonable
detail for such quarterly period.

                           (b)      The Company will provide the following
information to each Series A Holder, Series B Holder, Series C Holder, Series D
Holder, Series E Holder, Series F Holder and Purchaser that continues to hold at
least 1,500,000 shares of Registrable Securities:

                                    (i)      At least 30 days prior to the
beginning of each fiscal year, a budget as adopted by the Company's Board of
Directors for the fiscal year; and

                                    (ii)     As soon as practicable after the
end of the first and second month of each quarterly accounting period, a
consolidated balance sheet of the Company and its subsidiaries (if any), as of
the end of each such monthly period, and consolidated statements of operations
and consolidated statements of cash flows of the Company and its subsidiaries
(if any), for such persons and for the current quarter to date, prepared in
accordance with generally accepted accounting principles (other than
accompanying notes), subject to changes resulting from quarter-end and year-end
adjustments, in reasonable detail and signed by the principal financial or
accounting officer of the Company.

                           (c)      For purposes of determining the minimum
holdings pursuant to this Section 6, any Series A Holder, Series B Holder,
Series C Holder, Series D Holder, Series E Holder, Series F Holder or Purchaser
that is a partnership or limited liability company shall be deemed to hold any
Preferred Stock originally purchased by such Series A Holder, Series B Holder,
Series C Holder, Series D Holder, Series E Holder, Series F Holder or Purchaser
and subsequently distributed to constituent partners or members of such Series A
Holder, Series B Holder, Series C Holder, Series D Holder, Series E Holder,
Series F Holder or Purchaser, but which have not been resold by such partners or
members. If the partnership or limited liability company is still in existence,
the Company may satisfy any obligation to distribute reports to individual
partners of the partnership or members of a limited liability company by
delivering a single copy of each report to the partnership or limited liability
company as agent for the constituent partners or members.

                                       14

<PAGE>

                           (d)      The rights granted pursuant to Section 6(b)
may be assigned to any transferee, other than a competitor or potential
competitor of the Company (as reasonably determined by the Company's Board of
Directors), that holds or acquires (together with its affiliates, as such term
is defined in Rule 405 of the Securities Act) at least 1,500,000 shares of
Registrable Securities (as adjusted for stock splits, stock dividends, stock
combinations and the like), so long as such transferee agrees in writing to be
bound by the provisions of Section 6(e), below.

                           (e)      Each Series A Holder, Series B Holder,
Series C Holder, Series D Holder, Series E Holder, Series F Holder, Purchaser or
transferee of rights under this Section 6 acknowledges and agrees that any
information obtained pursuant to this Section 6 which may be considered
nonpublic information will be maintained in confidence by such Series A Holder,
Series B Holder, Series C Holder, Series D Holder, Series E Holder, Series F
Holder, Purchaser or transferee and will not be utilized by such Series A
Holder, Series B Holder, Series C Holder, Series D Holder, Series E Holder,
Series F Holder, Purchaser or transferee in connection with purchases or sales
of the Company's securities except in compliance with applicable state and
Federal securities laws.

                           (f)      The covenants of the Company set forth in
this Section 6 shall terminate and be of no further force or effect upon the
closing of a firm commitment underwritten public offering or at such time as the
Company is required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act, whichever shall occur first.

         7. LOCKUP AGREEMENT. Each Series A Holder, Series B Holder, Series C
Holder, Series D Holder, Series E Holder, Series F Holder, Purchaser, Founder,
Transamerica, Warrant Holder and transferee who receives Conversion Stock,
Founders' Stock, Warrant Stock and any Common Stock of the Company issued or
issuable in respect of any of the foregoing upon any conversion, stock split,
stock dividend, recapitalization, or similar event, hereby agrees that, in
connection with the first registration of the offering of any securities of the
Company under the Securities Act for the account of the Company, if so requested
by the Company or any representative of the underwriters (the "MANAGING
UNDERWRITER"), such Series A Holder, Series B Holder, Series C Holder, Series D
Holder, Series E Holder, Series F Holder, Purchaser, Founder, Transamerica,
Warrant Holder or transferee shall not sell or otherwise transfer any securities
of the Company during the period specified by the Company's Board of Directors
at the request of the Managing Underwriter (the "MARKET STANDOFF PERIOD"), with
such period not to exceed 180 days following the effective date of the
registration statement of the Company filed under the Securities Act with
respect to such offering. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period. The Company shall use its reasonable best efforts
to place similar contractual lockup restrictions on all capital stock issued now
or hereafter to officers, directors, employees and consultants of the Company,
and holders of registration rights with respect to capital stock of the Company,
unless determined otherwise by the Company's Board of Directors (including the
affirmative vote of a majority of the directors designated by the holders of
Preferred Stock, for so long as the holders of Preferred Stock, voting as a
separate class, are entitled, under the Company's Certificate of Incorporation,
to elect directors). Notwithstanding the foregoing, the provisions of this
Section 7 shall not apply to a registration

                                       15

<PAGE>

relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a transaction within Rule 145 of the Securities Act on Form S-4 or similar
form which may be promulgated in the future. Notwithstanding the foregoing,
Goldman may engage in brokerage, investment advisory, investment company,
financial advisory, anti-raid advisory, financing, asset management, trading,
market making, arbitrage and other similar activities conducted in the ordinary
course of their business to the extent Goldman would have engaged in these
activities without regard to its ownership of shares of the Company's Series D
Preferred Stock, Series E Preferred or Stock Series F Preferred Stock.

         8. (INTENTIONALLY LEFT BLANK)

         9. (INTENTIONALLY LEFT BLANK)

         10. VOTING AGREEMENT. In connection with any election of the Company's
Board of Directors, the Holders and Founders hereby agree to vote all shares of
Common Stock then held by them in favor of electing the Company's chief
executive officer, currently Reed D. Taussig, and Andrew L. Swett to the Board
of Directors. For so long as the Company's Certificate of Incorporation provides
that the holders of Common Stock exclusively are entitled to fill one or more
Board seats, the seats so filled by the Company's chief executive officer and
Andrew L. Swett shall be deemed to constitute two (2) of such seats to be filled
exclusively by the holders of Common Stock. This Section 10 is intended by the
parties hereto to be a voting agreement within the meaning of Section 218(c), or
any successor provision, of the General Corporation Law of Delaware. Each
certificate representing the stock subject to this voting agreement shall be
stamped or otherwise imprinted with a legend in substantially the following form
(in addition to any legends required by agreement or by applicable state
securities laws):

         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING
         AGREEMENT SET FORTH IN AN AGREEMENT BETWEEN THE HOLDER, THE ISSUER, AND
         CERTAIN OTHER HOLDERS OF STOCK OF THE ISSUER, A COPY OF WHICH MAY BE
         OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.

         The requirements of this Section 10 shall terminate and be of no
further force or effect upon the closing of the Company's initial public
offering of its Common Stock pursuant to a registration statement declared
effective by the Commission.

         11. AMENDMENT. Except as otherwise provided above, additional parties
may be added to this Agreement, any provision of this Agreement may be amended
or the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. Notwithstanding the foregoing, no amendment shall
be made to this Agreement which by its terms adversely affects, or which was
motivated primarily by an intent to adversely affect, a particular class of
Holders (i.e., Founders, Series A Holder, Series B Holders, Series C Holders,
Series D Holders, Series E Holders, Series F Holders, Purchasers, Transamerica
or Warrant Holder) in a manner differently from the other Holders without the
written consent of a majority of

                                       16

<PAGE>

the Registrable Securities held by the Holders in such adversely affected class.
In addition, the Founders hereby agree that any amendment pursuant to Section
5.4 in connection with any subsequent rounds of financing described therein
shall not require the consent of the Founders. Any amendment or waiver effected
in accordance with Section 5.4 or Section 11, as applicable, shall be binding
upon each Series A Holder, Series B Holder, Series C Holder, Series D Holder,
Series E Holder, Series F Holder, Purchaser, Founder, Transamerica, Warrant
Holder or Holder of Registrable Securities at the time outstanding, each future
holder of any of such securities, and the Company. The Company, the Holders and
the Founders hereby agree that, with the exception of Section 8 of the Restated
Agreement, which shall remain in full force and effect among the parties to the
Restated Agreement, this Agreement shall supersede the Restated Agreement in all
respects, and that the Restated Agreement shall have no further force or effect
from and after the date hereof.

         Notwithstanding the foregoing, the Holders and the Founders hereby
consent to the Amendment of this Agreement for the purpose of adding as
additional parties purchasers of additional shares of Series G Preferred Stock
in one or more closings after the date hereof pursuant to the terms of the
Purchase Agreement.

         12. GOVERNING LAW. Except for Section 10 ("VOTING AGREEMENT"), which by
its terms is intended to be governed by Delaware law, this Agreement shall be
governed in all respects by the internal laws of the State of California without
regard to conflict of laws provisions.

         13. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and Agreement among the parties regarding the matters set forth
herein. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon the successors, assigns,
heirs, executors and administrators of, the parties hereto.

         14. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed:

                  (a)      if to a Holder, at such Holder's address as set forth
in Exhibit A, or at such other address as such Holder shall have furnished to
the Company.

                  (b)      if to the Company, to:

                           Callidus Software Inc.
                           160 West Santa Clara Avenue
                           15th Floor
                           San Jose, California 95113
                           Attn: Reed D. Taussig
                           Fax: (408) 271-2662

                                       17

<PAGE>

         or at such other address as the Company shall have furnished to the
Holders, with a copy to:

                           Davis Polk & Wardwell
                           1600 El Camino Real
                           Menlo Park, CA 94025
                           Attn: Francis S. Currie, Esq.
                           Fax: (650) 752-2111

                  Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered personally, if sent by facsimile, the first business day after the
date of confirmation that the facsimile has been successfully transmitted to the
facsimile number for the party notified, or, if sent by mail, at the earlier of
its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.

         15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

                                       18

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.

                                                  "COMPANY"

                                                  Callidus Software Inc.,
                                                  a Delaware Corporation

                                                  By: /s/ Reed D. Taussig
                                                      --------------------------
                                                      Reed D. Taussig, President

                                        "PURCHASERS"

                                        ONSET ENTERPRISE ASSOCIATES II,
                                          L.P.

                                        By: OEA II Management, L.P., The
                                            General Partner of ONSET Enterprise
                                            Associates II, L.P.

                                        By: ____________________________________
                                            Name:
                                            Title:

                                        ONSET ENTERPRISE ASSOCIATES
                                          III, L.P.

                                        By: OEA III Management, L.P., The
                                            General Partner of ONSET Enterprise
                                            Associates III, L.P.

                                        By: /s/ Terry Opdendyk
                                            ------------------------------------
                                            Name:
                                            Title:

                                       19

<PAGE>

                                        CROSSPOINT VENTURE PARTNERS
                                          LS 2000

                                        By: /s/ John Mumford
                                            ------------------------------------
                                            Name:
                                            Title:

                                        EAGLE VENTURES WF, LLC

                                        By: /s/ Kevin Spreng
                                            ------------------------------------
                                            Name:
                                            Title:

                                        CRESCENDO WORLD FUND, LLC

                                        By: Crescendo Ventures WF, LLC,
                                            Managing Member

                                        By: /s/ Kevin Spreng
                                            ------------------------------------
                                            Name:
                                            Title:

                                        CROSSPOINT VENTURE PARTNERS
                                          1997 L.P.

                                        By: CROSSPOINT ASSOCIATES 1997,
                                            L.L.C., General Partner

                                        By: /s/ John Mumford
                                            ------------------------------------
                                            Name:
                                            Title:

                                       20

<PAGE>

                                        PRISMA GERMAN AMERICAN
                                          VENTURE PARTNERS GBR

                                        By: Crescendo Capital Management,
                                            LLC

                                        By: /s/ Kevin Spreng
                                            ------------------------------------
                                            Name:
                                            Title:

                                        ________________________________________

                                        By: ____________________________________
                                            Name:
                                            Title:

                                        CHANCELLOR V, L.P.

                                        By: IPC Direct Associates V, L.L.C.,
                                            its General Partner

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By:      /s/ Johnston Evans
                                            ------------------------------------
                                        Name:
                                        Title:

                                       21

<PAGE>

                                        CHANCELLOR V-A, L.P.

                                        By: IPC Direct Associates V, L.L.C.,
                                            its General Partner

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By:      /s/ Johnston Evans
                                            ------------------------------------
                                        Name:
                                        Title:

                                        EUROMEDIA VENTURE FUND (cotenancy
                                        of IPC Direct Associates V, L.L.C. and
                                        EuroMedia Venture Belgique SA)

                                        By: IPC EuroMedia Associates, L.L.C.,
                                            its Managing Member

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By:      /s/ Johnston Evans
                                            ------------------------------------
                                        Name:
                                        Title:

                                        CITIVENTURE 2000, L.P.

                                        By: IPC Direct Associates V, L.L.C.,
                                            its General Partner

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By:      /s/ Johnston Evans
                                            ------------------------------------
                                        Name:
                                        Title:

                                       22

<PAGE>

                                        "HOLDERS"

                                        THE GOLDMAN SACHS GROUP, INC.

                                        By:      /s/ John Bowman
                                            ------------------------------------
                                            Name: John E. Bowman
                                            Title: Attorney-in Fact

                                        STONE STREET FUND 1998, L.P.
                                        By: Stone Street 1998, L.L.C.

                                        By:      /s/ John Bowman
                                            ------------------------------------
                                            Name: John E. Bowman
                                            Title: Vice President

                                        STONE STREET FUND 1999, L.P.
                                        By: Stone Street 1999, L.L.C.

                                        By: ____________________________________
                                            Name:
                                            Title:

                                        BRIDGE STREET FUND 1998, L.P.
                                        By: Stone Street 1998, L.L.C.

                                        By:      /s/ John Bowman
                                            ------------------------------------
                                            Name: John E. Bowman
                                            Title: Vice President

                                       23

<PAGE>

                                        ONSET ENTERPRISE ASSOCIATES II,
                                            L.P.

                                        By: OEA II Management, L.P., The
                                            General Partner of ONSET Enterprise
                                            Associates II, L.P.

                                        By: /s/ Terry Opdendyk
                                            ------------------------------------
                                            Name:
                                            Title:

                                        ONSET ENTERPRISE ASSOCIATES
                                            III, L.P.

                                        By: OEA III Management, L.P., The
                                            General Partner of ONSET Enterprise
                                            Associates III, L.P.

                                        By: /s/ Terry Opdendyk
                                            ------------------------------------
                                            Name:
                                            Title:

                                        CROSSPOINT VENTURE PARTNERS
                                            LS 2000

                                        By: /s/ John Mumford
                                            ------------------------------------
                                            Name:
                                            Title:

                                        EAGLE VENTURES WF, LLC

                                        By: /s/ Kevin Spreng
                                            ------------------------------------
                                            Name:
                                            Title:

                                       24

<PAGE>

                                        CRESCENDO WORLD FUND, LLC

                                        By: Crescendo Ventures WF, LLC,
                                            Managing Member

                                        By: /s/ Kevin Spreng
                                            ------------------------------------
                                            Name:
                                            Title:

                                        CROSSPOINT VENTURE PARTNERS
                                          1997 L.P.

                                        By: CROSSPOINT ASSOCIATES 1997,
                                            L.L.C., General Partner

                                        By: /s/ John Mumford
                                            ------------------------------------
                                            Name:
                                            Title:

                                        PRISMA GERMAN AMERICAN
                                          VENTURE PARTNERS GBR

                                        By: Crescendo Capital Management,
                                            LLC

                                        By: /s/ Kevin Spreng
                                            ------------------------------------
                                            Name:
                                            Title:

                                       25

<PAGE>

                                        CHANCELLOR V, L.P.

                                        By: IPC Direct Associates V, L.L.C.,
                                            its General Partner

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By: ____________________________________
                                        Name:
                                        Title:

                                        CHANCELLOR V-A, L.P.

                                        By: IPC Direct Associates V, L.L.C.,
                                            its General Partner

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By: ____________________________________
                                        Name:
                                        Title:

                                        EUROMEDIA VENTURE FUND (cotenancy
                                        of IPC Direct Associates V, L.L.C. and
                                        EuroMedia Venture Belgique SA)

                                        By: IPC EuroMedia Associates, L.L.C.,
                                            its Managing Member

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By: ____________________________________
                                        Name:
                                        Title:

                                       26

<PAGE>

                                        CITIVENTURE 2000, L.P.

                                        By: IPC Direct Associates V, L.L.C.,
                                            its General Partner

                                        By: INVESCO Private Capital, Inc.,
                                            its Managing Member

                                        By:      /s/ Johnston Evans
                                            ------------------------------------
                                        Name:
                                        Title:

                                       27

<PAGE>

                                    EXHIBIT A

                          (to the Amended and Restated

                  Registration and Information Rights Agreement

                              dated March 13, 2001)

                               SCHEDULE OF HOLDERS

"THE FOUNDERS"

Andrew L. Swett                         492,224 shares of Common Stock
2004 Avy Avenue
Menlo Park, CA 94025
Scott Kitayama                          210,901 shares of Common Stock
209 Cypress Point Drive
Mountain View, CA 94043

"THE SERIES A HOLDER"

ONSET ENTERPRISE ASSOCIATES II, L.P.    1,000,000 shares of Series A Preferred
2490 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

"THE SERIES B HOLDERS"

ONSET ENTERPRISE ASSOCIATES II, L.P.    600,000 shares of Series B Preferred
2490 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

CROSSPOINT VENTURE PARTNERS 1997 L.P.   1,000,000 shares of Series B Preferred
2925 Woodside Road                      Stock
Woodside, CA 94062
Attn: John Mumford
Fax: (650) 851-7661

                                       28

<PAGE>

"THE SERIES C HOLDERS"

ONSET ENTERPRISE ASSOCIATES II, L.P.    761,422 shares of Series C Preferred
2490 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

CROSSPOINT VENTURE PARTNERS 1997 L.P.   634,518 shares of Series C Preferred
2925 Woodside Road                      Stock
Woodside, CA 94062
Attn: John Mumford
Fax: (650) 851-7661

CRESCENDO WORLD FUND, LLC (formerly     1,332,145 shares of Series C Preferred
IAI WORLD FUND, LLC)                    Stock
800 LaSalle Avenue, Suite 2250
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

EAGLE VENTURES WF, LLC                  63,794 shares of Series C Preferred
800 LaSalle Avenue, Suite 2250          Stock
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

PRISMA GERMAN AMERICAN VENTURE          126,904 shares of Series C Preferred
PARTNERS GBR                            Stock
800 LaSalle Avenue, Suite 2250
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

WS INVESTMENT COMPANY 98A               12,690 shares of Series C Preferred
c/o Wilson Sonsini Goodrich & Rosati    Stock
650 Page Mill Road
Palo Alto, CA  94304
Attn: Gail Husick
Fax: (650) 493-6811

                                       29

<PAGE>

HUSICK FAMILY TRUST U/D/T FEB. 7, 1996  12,690 shares of Series C Preferred
c/o Wilson Sonsini Goodrich & Rosati    Stock
650 Page Mill Road
Palo Alto, CA  94304
Attn: Gail Husick
Fax: (650) 493-6811

"THE SERIES D HOLDERS"

THE GOLDMAN SACHS GROUP, L.P.           1,941,748 shares of Series D Preferred
85 Broad Street                         Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

STONE STREET FUND 1999, L.P.            323,624 shares of Series D Preferred
85 Broad Street                         Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

STONE STREET FUND 1998, L.P.            248,597 shares of Series D Preferred
85 Broad Street                         Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

BRIDGE STREET FUND 1998, L.P.           75,027 shares of Series D Preferred
85 Broad Street                         Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

ONSET ENTERPRISE ASSOCIATES II, L.P.    323,624 shares of Series D Preferred
2490 Sand Hill Road                     Stock
Menlo Park, CA 94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

                                       30

<PAGE>

CROSSPOINT VENTURE PARTNERS 1997 L.P.   323,624 shares of Series D Preferred
2925 Woodside Road                      Stock
Woodside, CA 94062
Attn: John Mumford
Fax: (650) 851-7661

PRISMA GERMAN AMERICAN VENTURE          53,938 shares of Series D Preferred
PARTNERS GBR                            Stock
800 LaSalle Avenue, Suite 2250
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

EAGLE VENTURES WF, LLC                  27,114 shares of Series D Preferred
800 LaSalle Avenue, Suite 2250          Stock
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

CRESCENDO WORLD FUND, LLC               566,197 shares of Series D Preferred
800 LaSalle Avenue, Suite 2250          Stock
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

"THE SERIES E HOLDERS"

THE GOLDMAN SACHS GROUP, INC.           145,834 shares of Series E Preferred
85 Broad Street                         Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

STONE STREET FUND 1998, L.P.            16,000 shares of Series E Preferred
85 Broad Street                         Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

                                       31

<PAGE>

BRIDGE STREET FUND 1998, L.P.           4,833 shares of Series E Preferred Stock
85 Broad Street
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

ONSET ENTERPRISE ASSOCIATES II, L.P.    41,666 shares of Series E Preferred
2490 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

CROSSPOINT VENTURE PARTNERS LS 1999     833,334 shares of Series E Preferred
2925 Woodside Road                      Stock
Woodside, CA 94062
Attn: John Mumford
Fax: (650) 851-7661

PRISMA GERMAN AMERICAN VENTURE          52,500 shares of Series E Preferred
PARTNERS GBR                            Stock
800 LaSalle Avenue, Suite 2250
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

CRESCENDO WORLD FUND, LLC               477,150 shares of Series E Preferred
800 LaSalle Avenue, Suite 2250          Stock
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

EAGLE VENTURES WF, LLC                  23,333 shares of Series E Preferred
800 LaSalle Avenue, Suite 2250          Stock
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

                                       32

<PAGE>

The Alexander Group, Inc.               58,334 shares of Series E Preferred
90 New Montgomery St.                   Stock
Suite 250
San Francisco, CA 94105
Attn: Robert Conti
Fax: (415) 550-6411

Robert Conti                            8,334 shares of Series E Preferred Stock
834 Dolores St.
San Francisco, CA 94110
Fax: (415) 550-6411

David Cichelli                          8,334 shares of Series E Preferred Stock
11 Trivota
Irvine, CA 92720
(714) 838-9367

Gary Tubridy                            8,334 shares of Series E Preferred Stock
14 Glen Avon
Riverside, CT 06878
Fax: (203) 637-4923

Robert Hawk                             35,000 shares of Series E Preferred
2925 Woodside Road                      Stock
Woodside, CA 94062
Fax: (650) 851-7661

ONSET ENTERPRISE ASSOCIATES II, L.P.    41,668 shares of Series E Preferred
2400 Sand Hill Road, Suite 150          Stock
Menlo Park, CA  94025
Attn: Terry L. Opdendyk
Fax: (650) 529-0777

ONSET ENTERPRISE ASSOCIATES III, L.P.   500,000 shares of Series E Preferred
2400 Sand Hill Road, Suite 150          Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

"TRANSAMERICA"

                                       33

<PAGE>

TRANSAMERICA BUSINESS CREDIT            17,500 shares of Warrant Stock
CORPORATION FUNDING TRUST II
Riverway II, West Office Tower
9399 West Higgins Road
Rosemont, IL 60018
Attn: Legal Department

TRANSAMERICA BUSINESS CREDIT            4,375 shares of Warrant Stock
CORPORATION FUNDING TRUST II
Riverway II, West Office Tower
9399 West Higgins Road
Rosemont, IL 60018
Attn: Legal Department

TRANSAMERICA BUSINESS CREDIT            Warrant to purchase 19,133 shares of
CORPORATION FUNDING TRUST II            Series F Preferred Stock
Riverway II, West Office Tower
9399 West Higgins Road
Rosemont, IL 60018
Attn: Legal Department

"WARRANT HOLDERS"

CRESCENDO WORLD FUND, LLC (formerly     Warrant to purchase 29,946 shares of
IAI WORLD FUND, LLC)                    Common Stock
800 LaSalle Avenue, Suite 2250
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

CROSSPOINT VENTURE PARTNERS LS 2000     Warrant to purchase 147,546 shares of
2925 Woodside Road                      Common Stock
Woodside, CA 94062
Attn: John Mumford
Fax: (650) 851-7661

EAGLE VENTURES WF, LLC                  Warrant to purchase 1,434 shares of
800 LaSalle Avenue, Suite 2250          Common Stock
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

                                       34

<PAGE>

THE GOLDMAN SACHS GROUP, INC.           Warrant to purchase 103,053 shares of
85 Broad Street                         Common Stock
New York, NY 10004
Attn: Randall A. Blumenthal
Fax: (212) 357-5505

ONSET ENTERPRISE ASSOCIATES II, L.P.    Warrant to purchase 123,898 shares of
2400 Sand Hill Road, Suite 150          Common Stock
Menlo Park, CA  94025
Attn: Terry L. Opdendyk
Fax: (650) 529-0777

ONSET ENTERPRISE ASSOCIATES III, L.P.   Warrant to purchase 123,900 shares of
2400 Sand Hill Road, Suite 150          Common Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

PRISMA GERMAN AMERICAN VENTURE          Warrant to purchase 2,853 shares of
PARTNERS GBR                            Common Stock
800 LaSalle Avenue, Suite 2250
Minneapolis, MN  55402
Attn: James Behnke
Fax: (612) 607-2801

STONE STREET FUND 1999, L.P.            Warrant to purchase 17,176 shares of
85 Broad Street                         Common Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

STONE STREET FUND 1998, L.P.            Warrant to purchase 13,194 shares of
85 Broad Street                         Common Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

BRIDGE STREET FUND 1998, L.P.           Warrant to purchase 3,982 shares of
85 Broad Street                         Common Stock
New York, NY 10004
Attn: Martin Stapleton
Fax: (212) 357-5505

                                       35

<PAGE>

"THE SERIES F HOLDERS"

CROSSPOINT VENTURE PARTNERS LS 2000     5,102,041 shares of Series F Preferred
2925 Woodside Road                      Stock
Woodside, CA  94062
Attn: John Mumford
Fax: (650) 851-7661

ONSET ENTERPRISE ASSOCIATES II, LP      460,757 shares of Series F Preferred
2400 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

ONSET ENTERPRISE ASSOCIATES III, L.P.   460,756 shares of Series F Preferred
2400 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

CRESCENDO WORLD FUND, LLC               586,084 shares of Series F Preferred
480 Cowper Street                       Stock
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

EAGLE VENTURES WF, LLC                  28,067 shares of Series F Preferred
480 Cowper Street                       Stock
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

PRISMA GERMAN AMERICAN                  10,609 shares of Series F Preferred
VENTURE PARTNERS GBR                    Stock
480 Cowper Street
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

                                       36

<PAGE>

GOLDMAN SACHS GROUP, INC.               387,774 shares of Series F Preferred
480 Cowper Street                       Stock
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

STONE STREET FUND 1999, L.P.            64,629 shares of Series F Preferred
480 Cowper Street                       Stock
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

STONE STREET FUND 1998, L.P.            49,646 shares of Series F Preferred
480 Cowper Street                       Stock
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

BRIDGE STREET FUND 1998, L.P.           14,983 shares of Series F Preferred
480 Cowper Street                       Stock
Suite 300
Palo Alto, CA  94301
Attn: Richard Grogan-Crane
Fax: (650) 470-1201

Chancellor V, L.P.                      1,000,510 shares of Series F Preferred
INVESCO Private Capital, Inc.           Stock 200,102 Warrant Shares
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

                                       37

<PAGE>

Chancellor V-A, L.P.                    468,878 shares of Series F Preferred
INVESCO Private Capital, Inc.           Stock 93,775 Warrant Shares
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

EUROMEDIA VENTURE FUND.                 925,255 shares of Series F Preferred
INVESCO Private Capital, Inc.           Stock 185,051 Warrant Shares
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

CITIVENTURE 2000, L.P.                  156,378 shares of Series F Preferred
INVESCO Private Capital, Inc.           Stock 31,275 Warrant Shares
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

                                       38

<PAGE>

"THE SERIES G HOLDERS"

CROSSPOINT VENTURE PARTNERS 2000 Q,     3,532,118 shares of Series G Preferred
  L.P                                   Stock
2925 Woodside Road
Woodside, CA  94062
Attn: John Mumford
Fax: (650) 851-7661

CROSSPOINT VENTURE PARTNERS 2000, L.P   404,139 shares of Series G Preferred
2925 Woodside Road                      Stock
Woodside, CA  94062
Attn: John Mumford
Fax: (650) 851-7661

ONSET ENTERPRISE ASSOCIATES III, L.P.   1,200,000 shares of Series G Preferred
2400 Sand Hill Road                     Stock
Menlo Park, CA  94025
Attn: Terry Opdendyk
Fax: (650) 529-0777

CRESCENDO WORLD FUND, LLC               1,164,246 shares of Series G Preferred
800 LaSalle Avenue                      Stock
Suite 2250
Minneapolis, MN 55402
Attn: Kevin Spreng

EAGLE VENTURES WF, LLC                  55,754 shares of Series G Preferred
800 LaSalle Avenue                      Stock
Suite 2250
Minneapolis, MN 55402
Attn: Kevin Spreng

                                       39

<PAGE>

Chancellor V, L.P.                      644,676 shares of Series G Preferred
INVESCO Private Capital, Inc.           Stock
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

Chancellor V-A, L.P.                    302,120 shares of Series G Preferred
INVESCO Private Capital, Inc.           Stock
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

EUROMEDIA VENTURE FUND.                 596,185 shares of Series G Preferred
INVESCO Private Capital, Inc.           Stock
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

                                       40

<PAGE>

CITIVENTURE 2000, L.P.                  100,762 shares of Series G Preferred
INVESCO Private Capital, Inc.           Stock
525 University Avenue, Suite 600
Palo Alto, CA  94301

INVESCO Private Capital
c/o Ben Gruder
1166 Avenue of the Americas
New York, NY  10036
Fax: (212) 278-3723

WITH COPIES TO:
Andrew Dworkin at the same address

                                       41<PAGE>
                                                                  Exhibit - 10.3

SILICON VALLEY BANK

LOAN AND SECURITY AGREEMENT

Borrower:   Callidus Software, Inc.
Address:    160 W. Santa Clara Street, Suite 1500
            San Jose, California 95113
Date:       Dated as of September 26, 2002.

            THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into
on the above date between SILICON VALLEY BANK ("Silicon"), whose address is 3003
Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)

1.          LOANS.

      1.1.1 REVOLVING LOANS. Silicon will make loans to Borrower (the "Loans"),
in amounts determined by Silicon in its good faith business judgment, up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event
of Default has occurred and is continuing, and subject to deduction of Reserves
for accrued interest and such other Reserves as Silicon deems proper from time
to time in its good faith business judgment.

      1.1.2 TERM LOAN.

            Bank will make a Term Loan available to Borrower on the Effective
Date. The Term Loan shall be payable in thirty six (36) equal installments of
principal, plus accrued interest (each a "Term Loan Payment"). Each Term Loan
Payment is payable on the 1st day of each month beginning on October 1, 2002.
Borrower's final Term Loan Payment, due on September 1, 2005, includes all
outstanding Term Loan principal and accrued interest.

      1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.

      1.3 OVERADVANCES. Unless otherwise agreed to in writing by Silicon in its
sole discretion, if at any time OR for any reason the total of all outstanding
Loans and all other monetary Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.

      1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule, which
are in addition to all INTEREST and other sums payable to Silicon and are not
refundable.

      1.5 LOAN REQUESTS. To obtain a Loan, Borrower shall make a request to
Silicon by facsimile or telephone. Loan requests received after 12:00 Noon
(Pacific time) will not be considered by Silicon until the next Business Day.
Silicon may rely on any telephone request for a Loan given by a person whom
Silicon

                                       1
<PAGE>
believes is an authorized representative of Borrower, and Borrower will
indemnify Silicon for any loss Silicon suffers as a result of that reliance.

      1.6 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its
good faith business judgment, issue or arrange for the issuance of letters of
credit for the account of Borrower in each case in form and substance
satisfactory to Silicon in its sole discretion (collectively, "Letters of
Credit"). The aggregate face amount of all Letters of Credit from time to time
outstanding shall not exceed the amount shown on the Schedule (the "Letter of
Credit Sublimit"), and unless otherwise collateralized by cash or cash
equivalents, shall be reserved against Loans which would otherwise be available
hereunder, and in the event at any time there are insufficient Loans available
to Borrower for such reserve, Borrower shall deposit and maintain with Silicon
cash collateral in an amount at all times equal to such deficiency, which shall
be held as Collateral for all purposes of this Agreement. Borrower shall pay all
bank charges (including charges of Silicon) for the issuance of Letters of
Credit, together with such additional fee as Silicon's letter of credit
department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty (30) days prior to the
Line of Credit Maturity Date. Borrower hereby agrees to indemnify and hold
Silicon harmless from any loss, cost, expense, or liability, including payments
made by Silicon, expenses, and reasonable attorneys' fees incurred by Silicon
arising out of or in connection with any Letters of Credit. Borrower agrees to
be bound by the regulations and interpretations of the issuer of any Letters of
Credit guaranteed by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other Loan Documents relating to Letters of Credit are cumulative.

      1.7 CASH MANAGEMENT SERVICES. Borrower may use up to the Cash Management
Services Sublimit (as hereinafter defined) of the loans for Silicon's Cash
Management Services, which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services identified in various
cash management services agreements related to such services (the "Cash
Management Services"). The aggregate face amount of all Letters of Credit, Cash
Management Services and the Foreign Exchange Sublimit from time to time
outstanding shall not exceed the amount shown on the Schedule, and shall be
reserved against Loans which would otherwise be available hereunder, and in the
event at any time there are insufficient Loans available to Borrower for such
reserve, Borrower shall deposit and maintain with Silicon cash collateral in an
amount at all times equal to such deficiency, which shall be held as Collateral
for all purposes of this Agreement. Any amounts Silicon pays on behalf of
Borrower or any amounts that are not paid by Borrower for any Cash Management
Services will be treated as Loans and will accrue interest at the rate provided
for herein.

      1.8 FOREIGN EXCHANGE SUBLIMIT. At the request of Borrower, Silicon may, in
its good faith business judgment, permit the Borrower to enter into foreign
exchange forward contracts with Silicon under which Borrower commits to purchase
from or sell to Silicon a set amount of foreign currency more than one (1)
Business Day after the contract date (the "FX Forward Contract"). Silicon will
subtract ten percent (10%) of each outstanding FX Forward Contract (the "FX
Reserve") from the Foreign Exchange Sublimit (as hereinafter defined). The total
FX Forward Contracts at any one time may not exceed ten (10) times the amount of
the FX Reserve. Silicon may terminate the FX Forward Contracts if a Default or
an Event of Default occurs and is continuing. The aggregate face amount of all
FX Forward Contracts and the amount of all FX Reserves shall not exceed the
amount shown on the Schedule (the "Foreign Exchange Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder, and in the
event at any time there are insufficient Loans available to Borrower for such
reserve, Borrower shall deposit and maintain with Silicon cash collateral in an
amount at all times equal to such deficiency, which shall be held as Collateral
for all purposes of this Agreement.

2.          SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when

                                       2
<PAGE>
due, Borrower hereby grants to Silicon a security interest in all of the
following (collectively, the "Collateral"): all right, title and interest of
Borrower in and to all of the following, whether now owned or hereafter arising
or acquired and wherever located: all Accounts; all Inventory; all Equipment;
all Deposit Accounts; all General Intangibles (including without limitation all
intellectual property); all Investment Property; all other property; and any and
all claims, rights and interests in any of the above, and all guaranties and
security for any of the above, and all substitutions and replacements for,
additions, accessions, attachments, accessories, and improvements to, and
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties) of, any and all of the above, and all Borrower's
books relating to any and all of the above. NOTWITHSTANDING THE FOREGOING, THE
SECURITY INTEREST GRANTED HEREIN DOES NOT EXTEND TO AND THE TERM "COLLATERAL"
DOES NOT INCLUDE ANY LICENSES WHERE BORROWER IS THE LICENSEE TO THE EXTENT THAT
(I) THE GRANTING OF A SECURITY INTEREST THEREIN WOULD BE CONTRARY TO APPLICABLE
LAW, OR (II) THAT SUCH RIGHTS ARE NON-ASSIGNABLE BY THEIR TERMS (BUT ONLY TO THE
EXTENT SUCH PROHIBITION IS ENFORCEABLE UNDER APPLICABLE LAW, INCLUDING THE
CODE). EXCEPT AS DISCLOSED ON THE SCHEDULE ATTACHED HERETO, BORROWER REPRESENTS
AND WARRANTS TO SILICON THAT IT IS NOT A PARTY TO, NOR IS IT BOUND BY, ANY SUCH
LICENSE OR OTHER AGREEMENT. BORROWER SHALL AT ALL TIMES USE COMMERCIALLY
REASONABLE EFFORTS TO CAUSE LICENSE AND OTHER AGREEMENTS THAT ARE MATERIAL TO
ITS BUSINESS TO PERMIT THE GRANT BY BORROWER OF A SECURITY INTEREST THEREIN TO
SILICON

3.          REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

            In order to induce Silicon to enter into this Agreement and to make
Loans, Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants,
throughout the term of this Agreement and until all Obligations have been paid
and performed in full:

      3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), and (iii) do not
violate Borrower's articles or certificate of incorporation, or Borrower's
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.

      3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon thirty (30) days prior written notice before
changing its name or doing business under any other name. Borrower has complied,
and will in the future comply, in all material respects, with all laws relating
to the conduct of business under a fictitious business name, except where the
failure to so comply would not reasonably be expected to result in a Material
Adverse Change.

      3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth in the Representations. Borrower will give Silicon at least thirty
(30) days prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the ordinary
course of business at which not more than a total of $50,000 fair market value
of Equipment is located.

      3.4 TITLE TO COLLATERAL; PERFECTION; PERMITTED LIENS.

                                       3
<PAGE>
      (a) Borrower is now, and will at all times in the future be, the sole
owner of all the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend Silicon and
the Collateral against all claims of others.

      (b) Borrower has set forth in the Representations all of Borrower's
Deposit Accounts, and Borrower will give Silicon five (5) Business Days advance
written notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon's
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment. Nothing herein limits any requirements
which may be set forth in the Schedule as to where Deposit Accounts will be
maintained.

      (c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or intends
to assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower's attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.

      (d) None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest, Borrower
shall, whenever requested by Silicon, use its best efforts to cause such third
party to execute and deliver to Silicon, in form acceptable to Silicon, such
waivers and subordinations as Silicon shall specify in its good faith business
judgment. Borrower will keep in full force and effect, and will comply with all
material terms of, any lease of real property where any of the Collateral now or
in the future may be located.

      3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.

      3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.

      3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP, at
the times and for the periods therein stated. Between the last date covered by
any such statement provided to Silicon and the date hereof, there has been no
Material Adverse Change.

      3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all required tax returns and reports, and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower. Borrower may, however, defer payment of any contested taxes, provided
that Borrower (i) in good faith contests Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and

                                       4
<PAGE>
Borrower has not and will not withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any such plan which could reasonably be expected to result in any
liability of Borrower, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency.

      3.9 COMPLIANCE WITH LAW. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.

      3.10 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change. Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower involving
any single claim of $100,000 or more, or involving $250,000 or more in the
aggregate.

      3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."

      3.12 INVESTMENTS. Provided no Default or Event of Default has occurred and
is continuing, Borrower may (i) make investments in accordance with Section 5.5
(vii) and (ii) other investments pursuant to an investment policy duly adopted
by Borrower's Board of Directors and consented to by Silicon.

4.          ACCOUNTS.

      4.1 REPRESENTATIONS RELATING TO ACCOUNTS. Borrower represents and warrants
to Silicon as follows: Each Account with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services, or the non-exclusive licensing of Intellectual Property, in the
ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility
Requirements set forth in Section 8 below.

      4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations. To the best of Borrower's knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.

      4.3 SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall deliver
to Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon's standard forms; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit Silicon's
security interest and other rights in all of Borrower's Accounts, nor shall
Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the fore going.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on
its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all

                                       5
<PAGE>
necessary endorsements, and copies of all credit memos.

      4.4 COLLECTION OF ACCOUNTS. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such order as Silicon shall determine. All proceeds of Collateral
shall be immediately deposited by Borrower on a daily basis into a lockbox
account, or such other "blocked account" as Silicon may specify, pursuant to a
blocked account agreement in such form as Silicon may specify in its good faith
business judgment.

      4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to remit
to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed
of by Borrower in good faith in an arm's length transaction for an aggregate
purchase price of $50,000 or less (for all such transactions in any fiscal
year). Borrower agrees that it will not commingle proceeds of Collateral with
any of Borrower's other funds or property, but will hold such proceeds separate
and apart from such other funds and property and in an express trust for
Silicon. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.

      4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.

      4.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount. In the event any attempted return
occurs after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for Silicon, and immediately
notify Silicon of the return of the Inventory.

      4.8 VERIFICATION. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

      4.9 NO LIABILITY. Silicon shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Silicon
be deemed to be responsible for any of Borrower's obligations under any contract
or agreement giving rise to an Account. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.

5.          ADDITIONAL DUTIES OF BORROWER.

      5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.

      5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices

                                       6
<PAGE>
for Borrower's industry and locations, and Borrower shall provide evidence of
such insurance to Silicon. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its good faith business judgment, except that,
provided no Default or Event of Default has occurred and is continuing, Silicon
shall release to Borrower insurance proceeds with respect to Equipment totaling
less than $100,000, which shall be utilized by Borrower for the replacement of
the Equipment with respect to which the insurance proceeds were paid. Silicon
may require reasonable assurance that the insurance proceeds so released will be
so used. If Borrower fails to provide or pay for any insurance, Silicon may, but
is not obligated to, obtain the same at Borrower's expense. Borrower shall
promptly deliver to Silicon copies of all material reports made to insurance
companies.

      5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time specify in
its good faith business judgment.

      5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records; provided that Silicon anticipates that such inspections or audits after
the initial inspection and audit shall occur on a quarterly basis or as
conditions may warrant. Silicon shall take reasonable steps to keep confidential
all information obtained in any such inspection or audit, but Silicon shall have
the right to disclose any such information to its auditors, regulatory agencies,
and attorneys, and pursuant to any subpoena or other legal process. The
foregoing inspections and audits shall be at Borrower's expense and the charge
therefor shall be $750 per person per day (or such higher amount as shall
represent Silicon's then current standard charge for the same), plus reasonable
out of pocket expenses.

      5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i) merge
or consolidate with another corporation or entity; (ii) acquire any assets,
except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business subject to the limitations set forth in
Section 4.5; (v) store any Inventory or other Collateral with any warehouseman
or other third party; (vi) sell any Inventory on a sale-or-return, guaranteed
sale, consignment, or other contingent basis; (vii) make any loans of any money
or other assets other than loans or advances to any individual employee in an
amount not to exceed $150,000 in the aggregate, which are made in the ordinary
course of business prior to the occurrence and continuance of any Default or
Event of Default, provided that the aggregate of all such loans and advances
shall not exceed $250,000 outstanding at any time (viii) make "cashless" loans
to employees for the purposes of purchasing stock of Borrower, (ix) incur any
debts, outside the ordinary course of business, which would result in a Material
Adverse Change; (x) guarantee or otherwise become liable with respect to the
obligations of another party or entity, other than any liability which may arise
by virtue of Borrower certifying certain financial statements and reports of its
operating subsidiaries; (xi) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of Borrower); (xii) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock, except for repurchase of stock owned by employees, directors and
consultants of Borrower pursuant to the terms of any employment, consulting or
other stock restrictions agreement at such time as any such employee, director
or consultant terminates his or her affiliations with the Borrower, provided
that no Default or Event of Default shall exist either immediately prior to or
after giving effect to such repurchase an further provided that the total amount
paid in connection therewith by Borrower shall not exceed $250,000 in any twelve
(12) month period; (xiii) make any change in Borrower's capital structure which
would result in a Material Adverse Change; or (xiv) engage, directly or
indirectly, in any business other than the businesses currently engaged in by
Borrower or reasonably related thereto; or (xv) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.

      5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon,

                                       7
<PAGE>
make available Borrower and its officers, employees and agents and Borrower's
books and records, to the extent that Silicon may deem them reasonably necessary
in order to prosecute or defend any such suit or proceeding.

      5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon's perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.

6.          TERM.

      6.1 MATURITY DATE. This Agreement shall continue in effect until the later
of (a) the Line of Credit Maturity Date set forth on the Schedule, or (b) the
Term Loan Maturity Date set forth in the Schedule (the latter of (a) or (b)
being referred to herein as the "Maturity Date"), subject to Section 6.2 below.

      6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three (3) Business Days
after written notice of termination is given to Silicon; or (ii) by Silicon at
any time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a
termination fee in an amount equal to Fifty Five Thousand Dollars ($55,000) for
the first twelve (12) months of the Loan and thereafter pro-rated each month by
1/24th, provided that no termination fee shall be charged if the credit
facilities hereunder are replaced with new facilities from another division of
Silicon Valley Bank. The termination fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate equal
to the highest rate applicable to any of the Obligations.

      6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Line of Credit
Maturity Date, or on any earlier effective date of termination, there are any
outstanding Letters of Credit is sued by Silicon or issued by another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Silicon, then on such date Borrower shall provide to Silicon cash
collateral in an amount equal to 105% of the face amount of all such Letters of
Credit plus all interest, fees and cost due or to become due in connection
therewith (as estimated by Silicon in its good faith business judgment), to
secure all of the Obligations relating to said Letters of Credit, pursuant to
Silicon's then standard form cash pledge agreement. Notwithstanding any
termination of this Agreement, all of Silicon's security interests in all of the
Collateral and all of the terms and provisions of this Agreement shall continue
in full force and effect until all Obligations have been paid and performed in
full; provided that Silicon may, in its sole discretion, refuse to make any
further Loans after termination. No termination shall in any way affect or
impair any right or remedy of Silicon, nor shall any such termination relieve
Borrower of any Obligation to Silicon, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Silicon shall promptly terminate
its financing statements with respect to the Borrower and deliver to Borrower
such other documents as may be required to fully terminate Silicon's security
interests.

7.          EVENTS OF DEFAULT AND REMEDIES.

      7.1 EVENTS OF DEFAULT The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans outstanding at any .time shall
exceed the Credit Limit; or (d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule, or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured, or shall fail
to permit Silicon to conduct an inspection or audit as specified in Section 5.4
hereof; or (e) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within five (5)

                                       8
<PAGE>
Business Days after the date due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within ten (10) days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has resulted or may
reasonably be expected to result in a Material Adverse Change; or (i)
dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within thirty (30) days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) there shall be a change in
the record or beneficial ownership of an aggregate of more than 20% of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) a Material Adverse Change shall occur. Silicon may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an Event
of Default has occurred and is continuing.

      7.2 REMEDIES. Upon the occurrence and during the continuance of any Event
of Default, and at any time thereafter, Silicon, at its option, and without
notice or demand of any kind (all of which are hereby expressly waived by
Borrower), may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other Loan
Document; (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Silicon deems it
necessary, in its good faith business judgment, in order to complete the
enforcement of its rights under this Agreement or any other agreement;
-provided, however, that should Silicon seek to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court rule
or otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that Silicon retain possession of, and not dispose of,
any such Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's premises, vehicles, hoists,
lifts, cranes, and other Equipment and all other property without charge; (f)
Sell, lease or otherwise dispose of any of the Collateral (except as permitted
under Section 4.5), in its condition at the time Silicon obtains possession of
it or after further manufacturing, processing or repair, at one or more public
and/or private sales, in lots or in bulk, for cash, exchange or other property,
or on credit, and to adjourn any such sale from time to time without notice
other than oral announcement at the

                                       9
<PAGE>
time scheduled for sale. Silicon shall have the right to conduct such
disposition on Borrower's premises without charge, for such time or times as
Silicon deems reasonable, or on Silicon's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Silicon may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Accounts and General Intangibles comprising Collateral and,
in connection therewith, Borrower irrevocably authorizes Silicon to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's good faith business judgment, to grant extensions of
time to pay, compromise claims and settle Accounts and the like for less than-
face value; (h) Offset against any sums in any of Borrower's general, special or
other Deposit Accounts with Silicon against any or all of the Obligations; and
(i) Demand and receive possession of any of Borrower's federal and state income
tax returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence and during the continuance of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
four percent per annum (the "Default Rate").

      7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten (10) days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least five (5) days before the sale in
a newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.

      7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of
any Event of Default, without limiting Silicon's other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Silicon agrees
that if it exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner: (a) Execute on behalf of Borrower any documents
that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any
Account, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon's possession; (d) Endorse all checks and other forms
of remittances received by Silicon; (e) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (f) Grant extensions of time to pay, compromise claims and
settle Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (h) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (i) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to

                                       10
<PAGE>
give Silicon the same rights of access and other rights with respect thereto as
Silicon has under this Agreement; and (j) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other Loan Documents.
Any and all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall Silicon's
rights under the foregoing power of attorney or any of Silicon's other rights
under this Agreement be deemed to indicate that Silicon is in control of the
business, management or properties of Borrower.

      7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of
Collateral, Silicon shall have the option, exercisable at any time, in its good
faith business judgment, of either reducing the Obligations by the principal
amount of purchase price or deferring the reduction of the Obligations until the
actual receipt by Silicon of the cash therefor.

      7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.

8.          DEFINITIONS. As used in this agreement, the following terms have the
            following meanings:

      "Account Debtor" means the obligor on an Account.

      "Accounts" means all present and future "accounts" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all accounts receivable and other sums
owing to Borrower.

      "Adjustment Date" means the earlier of the date on which Borrower (i)
closes on a round of equity after the date of this Agreement which raises not
less than $4,000,000, or (ii) provides Silicon with financial statements in
accordance with this Agreement, which demonstrate to Silicon's satisfaction that
Borrower has met or exceeded the revenue covenant for the quarter ending
December 31, 2002.

      "Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

      "Business Day" means a day on which Silicon is open for business.

      "Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.

      "Collateral" has the meaning set forth in Section 2 above.

      "continuing" and "during the continuance of" when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.

                                       11
<PAGE>
      "Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.

      "Default Rate" has the meaning set forth in Section 7.2 above.

      "Deposit Accounts" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit.

      "EBITDA" means for any period of determination thereof, the sum of
Borrower's net income, plus income taxes, plus interest expense, plus
depreciation, amortization and other non-cash charges.

      "EBITDA Qualification Date" is the date upon which Borrower establishes to
Silicon's sole discretion that it has maintained a ratio of EBITDA to the
outstanding principal balance of the Term Loan of not less than 2.0 to 1.0 for
two (2) consecutive fiscal quarters.

      "Effective Date" is the date this Agreement is executed by Silicon.

      "Eligible Accounts" means Accounts and General Intangibles arising in the
ordinary course of Borrower's business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for borrowing.
Without limiting the fact that the determination of which Accounts are eligible
for borrowing is a matter of Silicon's good faith business judgment, the
following (the "Minimum Eligibility Requirements") are the minimum requirements
for a Account to be an Eligible Account: (i) the Account must not be outstanding
for more than ninety (90) days from its invoice date (the "Eligibility Period"),
(ii) the Account must not represent progress billings, or be due under a
fulfillment or requirements contract with the Account Debtor, unless in
Silicon's good faith business judgment, such progress billings are for
non-refundable product payments, software installation fees or maintenance
services, (iii) the Account must not be subject to any contingencies (including
Accounts arising from sales on consignment, guaranteed sale or other terms
pursuant to which payment by the Account Debtor may be conditional), (iv) the
Account must not be owing from an Account Debtor with whom Borrower has any
dispute (whether or not relating to the particular Account), (v) the Account
must not be owing from an Affiliate of Borrower, (vi) the Account must not be
owing from an Account Debtor which is subject to any insolvency or bankruptcy
proceeding, or whose financial condition is not acceptable to Silicon, or which,
fails or goes out of a material portion of its business, (vii) the Account must
not be owing from the United States or any department, agency or instrumentality
thereof (unless there has been compliance, to Silicon's satisfaction, with the
United States Assignment of Claims Act), (viii) the Account must not be owing
from an Account Debtor located outside the United States or Canada (unless
pre-approved by Silicon in its discretion in writing, or backed by a letter of
credit satisfactory to Silicon, or FCIA insured satisfactory to Silicon) to the
extent such Account (a) is not billed from the United States and subject to a
first lien perfected security interest in favor of Silicon or (b) causes the
total aggregate amount of all such Accounts to exceed 15% of Borrower's total
aggregate Eligible Accounts, (ix) the Account must not be owing from an Account
Debtor to whom Borrower is or may be liable for goods purchased from such
Account Debtor or otherwise (but, in such case, the Account will be deemed not
eligible only to the extent of any amounts owed by Borrower to such Account
Debtor). Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 35% of the total Accounts outstanding. In
addition, if more than 50% of the Accounts owing from an Account Debtor are
outstanding for a period longer than their Eligibility Period (without regard to
unapplied credits) or are otherwise not Eligible Accounts, then all Accounts
owing from that Account Debtor will be deemed ineligible for borrowing. Silicon
may, from time to time, in its good faith business judgment, revise the Minimum
Eligibility Requirements, upon written notice to Borrower.

      "Equipment" means all present and future "equipment" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest in any
of the foregoing.

                                       12
<PAGE>
      "Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.

      "GAAP" means generally accepted accounting principles consistently
applied.

      "General Intangibles" means all present and future "general intangibles"
as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all Intellectual
Property, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, options
to purchase or sell real or personal property, rights in all litigation
presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of
any kind.

      "good faith business judgment" means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon's business
judgment.

      "including" means including (but not limited to).

      "Intellectual Property" means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h)technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above; (j)
all licenses or other rights to use any-property or rights of a type described
above.

      "Inventory" means all present and future "inventory" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products, including without limitation such inventory as is temporarily
out of Borrower's custody or possession or in transit and including any returned
goods and any documents of title representing any of the above.

      "Investment Property" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.

      "Loan Documents" means, collectively, this Agreement, the Representations,
and all other present and future documents, instruments and agreements between
Silicon and Borrower, including, but not limited to those relating to this
Agreement, and all amendments and modifications thereto and replacements
therefor.

      "Material Adverse Change" means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.

      "Obligations" means all present and future Loans, the Term Loan, all
advances, debts, liabilities, obligations, guaranties, covenants, duties and
indebtedness at any time owing by Borrower to Silicon, whether evidenced by this
Agreement or any note or other instrument or document, or otherwise, whether
arising from an extension of credit, opening of a letter of credit, banker's
acceptance, loan, guaranty, indemnification or otherwise, whether direct or
indirect (including, without limitation, those acquired by assignment and any
participation by Silicon in Borrower's debts owing to others), absolute or
contingent, due

                                       13
<PAGE>
or to become due, including, without limitation, all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other Loan Documents.

      "Other Property" means the following as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
all rights relating thereto: all present and future "commercial tort claims"
(including without limitation any commercial tort claims identified in the
Representations), "documents", "instruments", "promissory notes", "chattel
paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm
products" and "money"; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the California Uniform
Commercial Code.

      "Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent may be
withheld in its good faith business judgment; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, ware housemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent or are being contested in good faith and for which Borrower maintains
adequate reserves on its books, provided such liens have no priority over any of
Silicon's security interests; (vii) liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by liens of the
type described above in clauses (i) or (ii) above, provided that any extension,
renewal or replacement lien is limited to the property encumbered by the
existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which-secure payment of customs duties in connection with
the importation of goods, (ix) leases or subleases and nonexclusive -licenses or
sublicenses granted to others not interfering in any material respect with the
business of the Borrower, and (x) liens in the nature of a lessor's interest
under any lease entered into by Borrower which is otherwise permitted under the
terms of this Agreement. Silicon will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on Silicon's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate security interest shall also constitute an Event of
Default under this Agreement.

      "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.

      "Representations" means the written Representations and Warranties
provided by Borrower to Silicon referred to in the Schedule.

      "Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business
or prospects of Borrower or any guarantor of the Obligations, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.

      "Streamline Period" is defined in the Schedule.

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<PAGE>
      "Term Loan" a loan of One Million Five Hundred Thousand Dollars
($1,500,000).

      Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

9.          GENERAL PROVISIONS.

      9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks and other items of payment received by Silicon (including proceeds of
Accounts and payment of the Obligations in full) shall be deemed applied by
Silicon on account of the Obligations three (3) Business Days after receipt by
Silicon of immediately available funds, and, for purposes of the foregoing, any
such funds received after 12:00 Noon (Pacific Time) on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its good faith business judgment, and Silicon may
charge Borrower's loan account for the amount of any item of payment which is
returned to Silicon unpaid.

      9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in Silicon's good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its good faith business judgment.

      9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.

      9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within sixty (60) days after such
account is rendered, describing the nature of any alleged errors or omissions.

      9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at each of the addresses shown in
the heading to this Agreement, or at any other address designated in writing by
one party to the other party. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two (2)
Business Days following the deposit thereof in the United States mail, with
postage prepaid.

      9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.

      9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.

      9.8 WAIVERS; INDEMNITY. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this Agreement
or any other Loan Document shall not waive or diminish any right of Silicon
later to demand and receive strict compliance therewith. Any waiver of any

                                       15
<PAGE>
default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this Agreement
or any other Loan Document shall be deemed to have been waived by any act or
knowledge of Silicon or its agents or employees, but only by a specific written
waiver signed by an authorized officer of Silicon and delivered to Borrower.
Borrower waives the benefit of all statutes of limitations relating to any of
the Obligations or this Agreement or any other Loan Document, and Borrower
waives demand, protest, notice of protest and notice of default or dishonor,
notice of payment and nonpayment, release, compromise, settlement, extension or
renewal of any commercial paper, instrument, account, General Intangible,
document or guaranty at any time held by Silicon on which Borrower is or may in
any way be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys' fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between Silicon and Borrower, or any other matter,
relating to Borrower or the Obligations; provided that this indemnity shall not
extend to damages proximately caused by the indemnitee's own gross negligence or
willful misconduct. Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.

      9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.

      9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.

      9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.

      9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend actions
by, Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce Silicon's security interest in, the Collateral; and
otherwise represent Silicon in any litigation relating to Borrower. In
satisfying Borrower's obligation hereunder to reimburse Silicon for attorneys
fees, Borrower may, for convenience, issue checks directly to Silicon's
attorneys, Troutman Sanders LLP, but Borrower acknowledges and agrees that
Troutman Sanders LLP is representing only Silicon and not Borrower in connection
with this Agreement. If either Silicon or Borrower files any lawsuit against the
other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.

      9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement

                                       16
<PAGE>
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall me lease Borrower
from its liability for the Obligations.

      9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the me lease of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

      9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or on any other person authorized to accept service on
behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action. The one-year period provided
herein shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other Loan Document.

      9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.
Notwithstanding anything set forth in this Agreement or any Loan Document to the
contrary, this Agreement and all of the Loan Documents shall not be effective
until the date on which Silicon executes this Agreement as indicated on the
signature page to this Agreement.

      9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.

      9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

Borrower:                         Silicon:

   CALLIDUS SOFTWARE INC.         SILICON VALLEY BANK

   By: /s/ RON J. FIOR            By:  /s/ Illegible
       ---------------                 -------------
       Name:  Ron J. Fior              Name:

                                       17
<PAGE>
       Title:  VP. Finance/CFO         Title:

                                  Signed by Silicon Valley Bank as of the 26th
                                  day of September, 2002 (the "Effective Date").

                                       18
<PAGE>
SILICON VALLEY BANK

                                  SCHEDULE TO

                          LOAN AND SECURITY AGREEMENT

BORROWER:   CALLIDUS SOFTWARE, INC.
ADDRESS:    160 W. SANTA CLARA STREET, SUITE 1500
            SAN JOSE, CALIFORNIA 95113

DATE:       DATED AS OF SEPTEMBER 26, 2002

This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.

1. CREDIT LIMIT
  (Section 1.1):              Silicon has agreed to provide two (2) credit
                              facilities to the Borrower consisting of a term
                              loan and a revolving loan in a combined amount not
                              to exceed Five Million Five Hundred Thousand
                              Dollars ($5,500,000).

The Term Loan                 In an amount not to exceed One Million Five
                              Hundred Thousand Dollars ($1,500,000).

The Revolving Loan            In an amount not to exceed the lesser of: (i) Four
                              Million Dollars ($4,000,000) at any one time
                              outstanding (the "Maximum Credit Limit"); or (ii)
                              Eighty Percent (80%) (the "Advance Rate") of the
                              amount of Borrower's Eligible Accounts (as defined
                              in Section 8 above), and at all times prior to the
                              EBITDA Qualification Date, less the then
                              outstanding principal balance of the Term Loan.

                              Silicon may, from time to time, modify the Advance
                              Rate, in its good faith business judgment, upon
                              notice to the Borrower, based on changes in
                              collection experience with respect to Accounts or
                              other issues or factors relating to the Accounts
                              or other Collateral.
<PAGE>
LETTER OF CREDIT SUBLIMIT
   (Section 1.6):             Two Million Dollars ($2,000,000), minus all
                              amounts utilized by Borrower under the Cash
                              Management Services Sublimit, minus all amounts
                              utilized by Borrower under the Foreign Exchange
                              Sublimit.

CASH MANAGEMENT
SERVICES SUBLIMIT
   (Section 1.7):             Two Million Dollars ($2,000,000), minus the
                              aggregate face amounts of all outstanding Letters
                              of Credit, minus all amounts utilized by Borrower
                              under the Foreign Exchange Sublimit.

FOREIGN EXCHANGE SUBLIMIT
   (Section 1.8):             Two Million Dollars ($2,000,000), minus the
                              aggregate face amounts of all outstanding Letters
                              of Credit, minus all amounts utilized by Borrower
                              under the Cash Management Services Sublimit.

2. INTEREST.

Interest Rate (Section 1.2):  (a) Loans: From the date of this Agreement until
                              the Adjustment Date, a rate equal to the "Prime
                              Rate" in effect from time to time, plus two and
                              one quarter of one percent (2.25%) per annum. From
                              and after the Adjustment Date, a rate equal to the
                              "Prime Rate" in effect from time to time, plus two
                              percent (2.0%) per annum.

                              (b) Term Loan: From the date of this Agreement
                              until the Adjustment Date, a rate equal to the
                              "Prime Rate" ii effect from time to time, plus two
                              and one half of one percent (2.50%) per annum.
                              From and after the Adjustment Date, a -rate equal
                              to the "Prime Rate" in effect from time to time,
                              plus two and one quarter of one percent (2.25%)
                              per annum.

                              (c) Interest shall be calculated on the basis of a
                              360-day year for the actual number of days
                              elapsed. "Prime Rate" means the rate announced
                              from time to time by Silicon as its "prime rate;"
                              it is a base rate upon which other rates charged
                              by Silicon are based, and it is not necessarily
                              the best rate available at Silicon. The interest
                              rate
<PAGE>
                              applicable to the Obligations shall change on each
                              date there is a change in the Prime Rate.

3. FEES (Section 1.4):
      Loan Fee:               Twenty Seven Thousand Five Hundred Dollars
                              ($27,500), payable concurrently herewith.

      Collateral Monitoring
      Fee:                    One Thousand Two Hundred Fifty Dollars ($1,250),
                              per month, payable in arrears (prorated for any
                              partial month at the beginning and at termination
                              of this Agreement) (the "Collateral Monitoring
                              Fee"); provided such Collateral Monitoring Fee
                              shall not be due in any month in which the
                              Streamline Period is in effect.

4. MATURITY DATES
   (Section 6.1):

a. Line of Credit Maturity Date  September 25, 2003.

b. Term Loan Maturity Date  September 1, 2005.

5. FINANCIAL COVENANTS
     (Section 5.1):           Borrower shall comply with each of the following
                              covenants. Compliance shall be determined as of
                              the end of each month, except as otherwise
                              specifically provided below:

MONTHLY CASH COLLECTIONS      Borrower shall maintain minimum cash collections
                              of not less than the following amounts for the
                              three (3) month period ending as of the following
                              dates:

                              1.  September 30, 2002             $4,500,000;

                              2.  October 31, 2002               $4,600,000;

                              3.  November 30, 2002              $4,700,000;

                              4.  December 31, 2002              $4,800,000;

                              5.  January 31, 2003               $4,900,000; and
<PAGE>
                              6.  February 28, 2003 and          $5,000,000.
                                    as of the end of each
                                    month thereafter

QUARTERLY REVENUES:           Borrower will maintain (the "Revenue Covenant")
                              total aggregate quarterly revenues of not less
                              than the following amounts as of the following
                              quarterly periods:

                              1. Quarter ending September 30, 2002  $6,000,000;
                              2. Quarter ending December 31, 2002   $8,500,000;
                              3. Quarter ending March 31, 2003 and
                                      each quarter thereafter       $10,000,000.

6. REPORTING.
      (Section 5.3):

                              Borrower shall provide Silicon with the following:

                              1.   At least weekly and at any time Borrower
                                   requests a Loan transaction reports and
                                   schedules of collections, on Silicon's
                                   standard form.

                              2.   Monthly accounts receivable agings, aged by
                                   invoice date, within fifteen (15) days after
                                   the end of each month.

                              3.   Monthly accounts payable agings, aged by
                                   invoice date, and outstanding or held check
                                   registers, if any, within fifteen (15) days
                                   after the end of each month.

                              4.   Monthly reconciliations of accounts
                                   receivable agings (aged by invoice date),
                                   transaction reports, and general ledger,
                                   within fifteen (15) days after the end of
                                   each month.

                              5.   Monthly unaudited financial statements, as
                                   soon as available, and in any event within
                                   thirty (30) days after the end of each month.
<PAGE>
                              6.   Monthly Compliance Certificates, within
                                   thirty (30) days after the end of each
                                   month, in such form as Silicon shall
                                   reasonably specify, signed by the Chief
                                   Financial Officer of Borrower, certifying
                                   that as of the end of such month Borrower was
                                   in full compliance with all of the terms and
                                   conditions of this Agreement, and setting
                                   forth calculations showing compliance with
                                   the financial covenants set forth in this
                                   Agreement and such other information as
                                   Silicon shall reasonably request, including,
                                   without limitation, a statement that at the
                                   end of such month there were no held checks.

                              7.   Monthly deferred revenue schedules and
                                   backlog reports within fifteen (15) days
                                   after the end of each month.

                              8.   Annual operating budgets (including income
                                   statements, balance sheets and cash flow
                                   statements, by month) for the upcoming fiscal
                                   year of Borrower within thirty (30) days
                                   prior to the end of each fiscal year of
                                   Borrower.

                              9.   Annual financial statements, as soon as
                                   available, and in any event within one
                                   hundred twenty (120) days following the end
                                   of Borrower's fiscal year, certified by, and
                                   with an unqualified opinion of, independent
                                   certified public accountants acceptable to
                                   Silicon.

STREAMLINE PERIOD.

                              Notwithstanding anything to the contrary set forth
                              in this Agreement, so long as: (A) no Default or
                              Event of Default has occurred and is continuing;
                              (B) Borrower is not in breach of its obligations
                              under this Agreement; and (C) no Loans are
                              outstanding at such time:

                              1. Daily Delivery of Proceeds of Accounts and
                              Collateral Not Required. Borrower shall not be
                              required to deposit the proceeds of the Accounts
                              and Collateral into a lock box account at Silicon
<PAGE>
                              upon receipt, as provided in Section 4.4 of this
                              Agreement.

                              2. Reporting Requirements. Borrower shall provide
                              Silicon with monthly agings of accounts
                              receivables and accounts payables, transaction
                              reports on Silicon's standard form, including,
                              sales, credit memos and collections journals
                              within fifteen (15) days after the end of each
                              month.

                              3. Notice Prior to Future Loans. Borrower shall
                              provide Silicon with at least thirty (30) days'
                              prior written notice of Borrower's desire to have
                              Silicon make any future Loans to Borrower (the "30
                              Day Notice"). Such Loans, if any, shall be made in
                              accordance with the terms and conditions of this
                              Agreement. Prior to Silicon making such Loans, if
                              any, Silicon shall have received the results,
                              satisfactory to Silicon in its good faith business
                              judgment, of an audit as provided for in Section
                              5.4 of this Agreement.

                              4. Collateral Monitoring Fee. During any
                              Streamline Period, the monthly Collateral
                              Monitoring Fee shall be $0.

                              Upon the earliest to occur of (a) the request by
                              Borrower for a Loan after the date hereof, (b) the
                              occurrence of a Default or Event of Default, or
                              (c) a breach of Borrower's obligations under this
                              Agreement, the Streamline Period will
                              automatically and without notice terminate and the
                              standard terms and conditions as provided for in
                              this Agreement will immediately take effect
                              without any further action on the part of Silicon
                              or Borrower.

                              The application of the foregoing provisions shall
                              be referred to in this Agreement as the
                              "Streamline Period". The Streamline Period shall
                              automatically terminate upon Borrower giving Bank
                              the 30 Day Notice.

7. BORROWER INFORMATION:

                              Borrower represents and warrants that the
                              information set forth in the Representations and
<PAGE>
                              Warranties of the Borrower dated August 21, 2002
                              previously submitted to Silicon (the
                              "Representations") is true and correct as of the
                              date hereof.

8. ADDITIONAL PROVISIONS

                              1.   BANKING RELATIONSHIP. Borrower shall at all
                                   times maintain its primary banking
                                   relationship with Silicon. Without limiting
                                   the generality of the foregoing, Borrower
                                   shall, at all times, maintain not less than
                                   90% of its total cash and investments on
                                   deposit with Silicon. As to any Deposit
                                   Accounts and investment accounts maintained
                                   with another institution, Borrower shall
                                   cause such institution, within thirty (30)
                                   days after the date of this Agreement, to
                                   enter into a control agreement in form
                                   acceptable to Silicon in its good faith
                                   business judgment in order to perfect
                                   Silicon's first-priority security interest in
                                   said Deposit Accounts and investment
                                   accounts.

                              2.   SUBORDINATION OF INSIDE DEBT. All present and
                                   future indebtedness of Borrower to its
                                   officers, directors and shareholders ("Inside
                                   Debt") shall, at all times, be subordinated
                                   to the Obligations pursuant to a
                                   subordination agreement on Silicon's standard
                                   form. Borrower represents and warrants that
                                   there is no Inside Debt presently
                                   outstanding, except for the following: (N/A).
                                   Prior to incurring any Inside Debt in the
                                   future, Borrower shall cause the person to
                                   whom such Inside Debt will be owed to execute
                                   and deliver to Silicon a subordination
                                   agreement on Silicon's standard form.

                              3.   INTELLECTUAL PROPERTY SECURITY AGREEMENT. As
                                   a condition precedent to the effectiveness of
                                   this Agreement, the Borrower shall have
                                   executed and delivered an Intellectual
                                   Property Security Agreement (the "IP Security
                                   Agreement"), substantially in the form
                                   attached hereto as Exhibit B.
<PAGE>
Borrower:                          Silicon:

CALLIDUS SOFTWARE, INC.            SILICON VALLEY BANK

By: /s/ RON J. FIOR                By:  /s/ Illegible
    ---------------                     -------------
    Name:  Ron J. Fior                    Name:
    Title: VP. Finance/CFO                Title:
<PAGE>
                             COMPLIANCE CERTIFICATE

      To:      Silicon Valley Bank
               3003 Tasman Drive
               Santa Clara, California 95054

      From:    Callidus Software, Inc.
               160 W. Santa Clara Street, Suite 1500
               San Jose, California 95113

      The undersigned authorized Officer of Callidus Software, Inc.
("Borrower"), hereby certifies that in accordance with the terms and conditions
of the Loan and Security Agreement, as modified from time to time, the Borrower
is in complete compliance for the period ending _____________ of all required
conditions and terms except as noted below. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistent from one period to the next except as explained in an
accompanying letter or footnotes.

            Please indicate compliance status by circling Yes/No under
            "Complies" column.

<TABLE>
<CAPTION>
REPORTING COVENANT                   REQUIRED                     COMPLIES
<S>                                  <C>                          <C>
Financials & Comp. Cert.             Monthly w/in 30 days         YES/NO
Receivable agings  (invoice          Monthly w/in 15 days         YES/NO
date)
Reconciliations of A/R agings,       Monthly w/in 15 days         YES/NO
Transactions reports, G/L            Weekly                       YES/NO
Payables agings                      Monthly w/in 15 days         YES/NO
Held Checks                                                       YES/NO
If YES, Held Checks Register         Monthly w/in 15 days         YES/NO
Audited Annual Financials            FYE w/in 120 days            YES/NO
Annual Operating Budget              W/in 30 days prior           YES/NO
                                     to FYE

During any Streamline Period, Borrower will provide:

Receivable agings (invoice date)     Monthly w/in 15 days         YES/NO
Transactions reports, G/L            Monthly w/in 15 days         YES/NO
Payables agings                      Monthly w/in 15 days         YES/NO
</TABLE>
<PAGE>
FINANCIAL COVENANTS

1.    Monthly Cash Collections

<TABLE>
<CAPTION>
PERIOD                              REQUIRED              ACTUAL
------                              --------              ------
<S>                                 <C>                   <C>
September 30, 2002                  $4,500,000;

October 31, 2002                    $4,600,000;

November 30, 2002                   $4,700,000;

December 31, 2002                   $4,800,000;

January 31, 2003                    $4,900,000;

March 31, 2003 and as of the        $5,000,000
end of each month thereafter
</TABLE>

                                        COMPLIES?  YES/NO

2.    Quarterly Revenues

<TABLE>
<CAPTION>
PERIOD                              REQUIRED              ACTUAL
------                              --------              ------
<S>                                 <C>                   <C>
September 30, 2002                  $6,000,000;

December 31, 2002                   $8,500,000;

March 31, 2003 and as of the        $10,000,000
end of each quarter thereafter
</TABLE>

                                        COMPLIES?  YES/NO

Terms are defined in the Schedule to the Loan Agreement, Section 5.1.

Comments regarding financial covenants:
<PAGE>
                                           Callidus Software, Inc.

                                           By: ________________________________

                                           Name: ______________________________

                                           Title: _____________________________

                                           Received:

                                           By: ________________________________

                                           Name: ______________________________

                                           Title: _____________________________

<PAGE>

                           WARRANT TO PURCHASE STOCK

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),OR THE SECURITIES LAWS OF ANY
STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION
OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM
REGISTRATION.

                            WARRANT TO PURCHASE STOCK

Company:                CALLIDUS SOFTWARE, INC., a Delaware corporation
Number of Shares:       The amount of shares equal to $180,000 divided by the
                        Warrant Price.
Class of Stock:         Series G Preferred Stock; provided, however, that in the
                        event that the Company does not close on its Series G
                        round of equity financing on or before the Expiration
                        Date, this Warrant shall be for the Company's Series F
                        Preferred Stock.
Warrant Price:          The lesser of (i) $3.92 or (ii) the price per share paid
                        by the lead investor (as determined by the Holder) in
                        the Company's Series G round of equity financing for the
                        Company's Series G Preferred Stock.
Issue Date:             September 26, 2002
Expiration Date:        September 26, 2012

      THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the company (the "Company") at the Warrant
Price, all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth
in this Warrant.

ARTICLE 1.  EXERCISE.

            1.1   Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix I to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Article 1.2, Holder shall also
deliver to the Company a check, wire transfer (to an account designated by the
Company), or other form of payment acceptable to the Company for the aggregate
Warrant Price for the Shares being purchased.

            1.2   Conversion Right. In lieu of exercising this Warrant as
specified in Article 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Article 1.3.
<PAGE>
            1.3   Fair Market Value. If the Company's common stock is traded in
a public market and the shares are common stock, the fair market value of each
Share shall be the closing price of a Share reported for the business day
immediately before Holder delivers its Notice of Exercise to the Company (or in
the instance where the Warrant is exercised immediately prior to the
effectiveness of the Company's initial public offering, the "price to public"
per share price specified in the final prospectus relating to such offering). If
the Company's common stock is traded in a public market and the Shares are
preferred stock, the fair market value of a Share shall be the closing price of
a share of the Company's common stock reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company (or, in the
instance where the Warrant is exercised immediately prior to the effectiveness
of the Company's initial public offering, the initial "price to public" per
share price specified in the final prospectus relating to such offering), in
both cases, multiplied by the number of shares of the Company's common stock
into which a Share is convertible. If the Company's common stock is not traded
in a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment.

            1.4   Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, but in any event within ten (10) days of
such exercise or conversion, and, if applicable, the Company receives payment of
the aggregate Warrant Price, the Company shall deliver to Holder certificates
for the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so
acquired.

            1.5   Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company shall, at its expense, execute and deliver, in lieu of this Warrant,
a new warrant of like tenor.

            1.6   Treatment of Warrant Upon Acquisition of Company.

                  1.6.1 "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.

                  1.6.2 Treatment of Warrant at Acquisition.

                  (a)   Upon the written request of the Company, Holder agrees
that, in the event of an Acquisition in which the sole consideration is cash,
either (a) Holder shall exercise its conversion or purchase right under this
Warrant and such exercise will be deemed effective immediately prior to the
consummation of such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will expire upon the consummation of such Acquisition. The
Company shall provide the Holder with written notice of its request relating to
the foregoing (together with such reasonable information as the Holder may
request in connection with such contemplated Acquisition giving rise to such
notice), which is to be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.

                  (b)   Upon the written request of the Company, Holder agrees
that, in the event of an Acquisition that is an "arms length" sale of all or
substantially all of the Company's assets (and only its assets) to a third party
that is not an Affiliate (as defined

                                       2
<PAGE>
below) of the Company (a "True Asset Sale"), either (a) Holder shall exercise
its conversion or purchase right under this Warrant and such exercise will be
deemed effective immediately prior to the consummation of such Acquisition or
(b) if Holder elects not to exercise the Warrant, this Warrant will continue
until the Expiration Date if the Company continues as a going concern following
the closing of any such True Asset Sale. The Company shall provide the Holder
with written notice of its request relating to the foregoing (together with such
reasonable information as the Holder may request in connection with such
contemplated Acquisition giving rise to such notice), which is to be delivered
to Holder not less than ten (10) days prior to the closing of the proposed
Acquisition.

                  (c)   Upon the closing of any Acquisition other than those
particularly described in subsections (A) and (B) above, the successor entity
shall assume the obligations of this Warrant, and this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price and/or number of Shares shall be adjusted
accordingly.

As used herein "Affiliate" shall mean any person or entity that owns or controls
directly or indirectly ten (10) percent or more of the stock of Company, any
person or entity that controls or is controlled by or is under common control
with such persons or entities, and each of such person's or entity's officers,
directors, joint venturers or partners, as applicable.

ARTICLE 2.  ADJUSTMENTS TO THE SHARES.

            2.1   Stock Dividends, Splits, Etc. If the Company declares or pays
a dividend on the Shares payable in common stock, or other securities, then upon
exercise of this Warrant, for each Share acquired, Holder shall receive, without
cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the
dividend occurred. If the Company subdivides the Shares by reclassification or
otherwise into a greater number of shares or takes any other action which
increase the amount of stock into which the Shares are convertible, the number
of shares purchasable hereunder shall be proportionately increased and the
Warrant Price shall be proportionately decreased. If the outstanding shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares shall be proportionately decreased.

            2.2   Reclassification, Exchange, Combinations or Substitution. Upon
any reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles or
Certificate (as applicable) of Incorporation upon the closing of a registered
public offering of the Company's common stock. The Company or its successor
shall promptly issue to Holder an amendment to this Warrant setting forth the
number and kind of such new securities or other property issuable upon exercise
or conversion of this Warrant as a result of such reclassification, exchange,
substitution or other event that results in a change of the number and/or class
of securities issuable upon exercise or conversion of this Warrant. The
amendment to this Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
2 including, without

                                       3

<PAGE>
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Article 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.

            2.3   Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth in the Company's Articles or Certificate of Incorporation as if the
Shares were issued and outstanding on and as of the date of any such required
adjustment. The provisions set forth for the Shares in the Company's Articles or
Certificate (as applicable) of Incorporation relating to the above in effect as
of the Issue Date may not be amended, modified or waived, without the prior
written consent of Holder unless such amendment, modification or waiver affects
the rights associated with the Shares in the same manner as such amendment,
modification or waiver affects the rights associated with all other shares of
the same series and class as the Shares granted to the Holder.

            2.4   No Impairment. The Company shall not, by amendment of its
Articles or Certificate (as applicable) of Incorporation or through a
reorganization, transfer of assets, consolidation, merger, dissolution, issue,
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed under
this Warrant by the Company, but shall at all times in good faith assist in
carrying out of all the provisions of this Article 2 and in taking all such
action as may be necessary or appropriate to protect Holder's rights under this
Article against impairment.

            2.5   Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder the amount computed by
multiplying the fractional interest by the fair market value of a full Share.

            2.6   Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company shall promptly notify Holder in writing, and, at the
Company's expense, promptly compute such adjustment, and furnish Holder with a
certificate of its Chief Financial Officer setting forth such adjustment and the
facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

            3.1   Representations and Warranties. The Company represents and
warrants to the Holder as follows:

                  (a)   The initial Warrant Price referenced on the first page
of this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.

                  (b)   All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.

                                       4
<PAGE>
                  (c)   The Company further covenants and agrees that, during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved for the purpose of
issue or transfer upon exercise of the subscription rights evidenced by this
Warrant, a sufficient number of Shares of authorized but unissued stock, or
other securities and property, when and as required to provide for the exercise
of the rights represented by this Warrant.

                  (d)   The Capitalization Table previously provided to Holder
remains true and complete as of the Issue Date.

            3.2   Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon any of its stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for sale additional shares of any class or series of the
Company's stock; (c) to effect any reclassification or recapitalization of any
of its stock; (d) to merge or consolidate with or into any other corporation, or
sell, lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder: (1) at least 10 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 10 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.

            3.3   Registration Under Securities Act of 1933, as amended. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall have certain incidental, or
"Piggyback," registration rights pursuant to and as set forth in the Company's
Investor Rights Agreement or similar agreement. The provisions set forth in the
Company's Investors' Right Agreement or similar agreement relating to the above
in effect as of the Issue Date may not be amended, modified or waived without
the prior written consent of Holder unless such amendment, modification or
waiver affects the rights associated with the Shares in the same manner as such
amendment, modification, or waiver affects the rights associated with all other
shares of the same series and class as the Shares granted to the Holder.

            3.4   No Shareholder Rights. Except as provided in this Warrant, the
Holder will not have any rights as a shareholder of the Company until the
exercise of this Warrant.

            3.5   REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder
represents and warrants to the Company as follows:

            3.6   Purchase for Own Account. This Warrant and the securities to
be acquired upon exercise of this Warrant by the Holder will be acquired for
investment for the Holder's account, not as a nominee or agent, and not with a
view to the public resale or distribution within the meaning of the Act. Holder
also represents that the Holder has not been formed for the specific purpose of
acquiring this Warrant or the Shares.

            3.7   Disclosure of Information. The Holder has received or has had
full

                                       5
<PAGE>
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the acquisition of this Warrant and
its underlying securities. The Holder further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Holder or to which the
Holder has access.

            3.8   Investment Experience. The Holder understands that the
purchase of this Warrant and its underlying securities involves substantial
risk. The Holder has experience as an investor in securities of companies in the
development stage and acknowledges that the Holder can bear the economic risk of
such Holder's investment in this Warrant and its underlying securities and has
such knowledge and experience in financial or business matters that the Holder
is capable of evaluating the merits and risks of its investment in this Warrant
and its underlying securities and/or has a preexisting personal or business
relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables the Holder to be aware
of the character, business acumen and financial circumstances of such persons.

            3.9   Accredited Investor Status. The Holder is an "accredited
investor" within the meaning of Regulation D promulgated under the Act.

            3.10  The Act The Holder understands that this Warrant and the
Shares issuable upon exercise or conversion hereof have not been registered un
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment intent
as expressed herein.

The Holder understands that this Warrant and the Shares issued upon any exercise
or conversion hereof must be held indefinitely unless subsequently registered
under the 1933 Act and qualified under applicable state securities laws, or
unless exemption from such registration and qualification are otherwise
available.

ARTICLE 4. MISCELLANEOUS.

            4.1   Term: This Warrant is exercisable in whole or in part at any
time and from time to time on or before the Expiration Date.

            4.2   Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

      THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
      UNDER THE ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND
      PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR
      OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
      UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF
      LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
      SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
      EXEMPT FROM REGISTRATION.

                                       6
<PAGE>
            4.3   Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to Silicon Valley Bancshares (Holder's
parent company) or any other affiliate of Holder. Additionally, the Company
shall also not require an opinion of counsel if there is no material question as
to the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale. At the
written request of the Holder, who proposes to sell Stock issuable upon the
exercise of the Warrant in compliance with Rule 144, within ten (10) days after
receipt of such request, a written statement confirming the Company's compliance
with the filing requirements of the Securities and Exchange Commission as set
forth in such Rule, as such Rule may be amended from time to time. In addition,
the Company agrees to provide the Holder within ten (10) days of written request
such additional documents as the Holder may require in order to exercise its
rights under this Warrant and transfer the Shares issued hereunder and carry out
the intent of this Warrant, including, without limitation, an opinion of counsel
for the benefit of the Holder or any underwriter or broker.

            4.4   Transfer Procedure. Upon receipt by Holder of the executed
Warrant, Holder will transfer all of this Warrant to Silicon Valley Bancshares,
Holder's parent company, by execution of an Assignment substantially in the form
of Appendix 2. Subject to the provisions of Article 5.3 and upon providing
Company with written notice, Silicon Valley Bancshares and any subsequent Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the Shares issuable directly or indirectly, upon conversion of
the Shares, if any) to any transferee, provided, however, in connection with any
such transfer, Silicon Valley Bancshares or any subsequent Holder will give the
Company notice of the portion of the Warrant being transferred with the name,
address and taxpayer identification number of the transferee and Holder will
surrender this Warrant to the Company for reissuance to the transferee(s) (and
Holder if applicable). The Company may refuse to transfer this Warrant or the
Shares to any person who directly competes with the Company, unless, in either
case, the stock of the Company is publicly traded.

            4.5   Notices. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may (or on the first business day after transmission by
facsimile) be, in writing by the Company or such holder from time to time.
Effective upon receipt of the fully executed Warrant and the initial transfer
described in Article 5.4 above, all notices to the Holder shall be addressed as
follows until the Company receives notice of a change of address in connection
with a transfer or otherwise:

                  Silicon Valley Bancshares
                  Attn: Treasury Department
                  3003 Tasman Drive, HA 200
                  Santa Clara, CA 95054
                  Telephone:  408-654-7400
                  Facsimile:  408-496-2405

                                       7
<PAGE>
      Notice to the Company shall be addressed as follows until the Holder
receives notice of a change in address:

                  Callidus Software, Inc.
                  Attn: Chief Financial Officer
                  160 W. Santa Clara St., Suite 1500
                  San Jose, California 95113
                  Telephone:  408-808-6400
                  Facsimile:   408-271-2662

            4.6   Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.

            4.7   Attorney's Fees. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorney's fees.

            4.8   Automatic Conversion upon Expiration. In the event that, upon
the Expiration Date, the fair market value of one Share (or other security
issuable upon the exercise hereof) as determined in accordance with Section 1.3
above is greater than the Warrant Price in effect on such date, then this
Warrant shall automatically be deemed on and as of such date to be converted
pursuant to Section 1.2 above as to all Shares (or such other securities) for
which it shall not previously have been exercised or converted, and the Company
shall promptly deliver a certificate representing the Shares (or such other
securities) issued upon such conversion to the Holder.

            4.9   Counterparts. This Warrant may be executed in counterparts,
all of which together shall constitute one and the same agreement.

                    [SIGNATURES APPEAR ON THE FOLLOWING PAGE]

                                       8
<PAGE>
            4.10  Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

"COMPANY"

CALLIDUS SOFTWARE, INC.

By: /s/ RON J. FIOR                     By:
    ---------------                          ------------------------------
      Name:  Ron J. Fior                        Name:
      Title: VP Finance/CFO                     Title:

"HOLDER"

SILICON VALLEY BANK

By: /s/ Illegible
    -------------
    Name:
    Title: Vice President

                                       9
<PAGE>
                                   APPENDIX 1

                               NOTICE OF EXERCISE

      1.    Holder elects to purchase ________ shares of the Series _____
Preferred Stock of Callidus Software, Inc. pursuant to the terms of the attached
Warrant, and tenders payment of the purchase price of the shares in full.

            [or]

      1.    Holder elects to convert the attached Warrant into Shares/cash
[strike one] in the manner specified in the Warrant. This conversion is
exercised for _________ of the Shares covered by the Warrant.

      [Strike paragraph that does not apply.]

      2.    Please issue a certificate or certificates representing the shares
in the name specified below:

                        _______________________________________
                        Holders Name

                        _______________________________________

                        _______________________________________
                        (Address)

      3.    By its execution below and for the benefit of the Company, Holder
hereby restates each of the representations and warranties in Article 4 of the
Warrant as the date hereof.

                                         HOLDER:

                                         _______________________________________

                                         By: ___________________________________
                                             Name:
                                             Title:

                                         (Date): _______________________________

                                       10
<PAGE>
                                   APPENDIX 2

                                   ASSIGNMENT

FOR VALUE RECEIVED, SILICON VALLEY BANK HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO

                  NAME:       SILICON VALLEY BANCSHARES
                  ADDRESS:    3003 TASMAN DRIVE (HA-200)
                              SANTA CLARA, CA 95054

                  TAX ID:     91-1962278

that certain Warrant to Purchase Stock issued by Callidus Software, Inc. (the
"Company"), on August ___, 2002 (the "Warrant") together with all rights, title
and interest therein.

                                                   SILICON VALLEY BANK

                                                   By: _________________________
                                                       Name:
                                                       Title:

Date: [insert Issue Date]_____________

By its execution below, and for the benefit of the Company, Silicon Valley
Bancshares makes each of the representations and warranties set forth in Article
4 of the Warrant as of the date hereof.

                                                   SILICON VALLEY BANCSHARES

                                                   By: _________________________
                                                       Name:
                                                       Title:

                                       11
<PAGE>

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT

     This Intellectual Property Security Agreement is entered into as of
September   , 2000 (sic) by and between SILICON VALLEY BANK ("Bank") and
CALLIDUS SOFTWARE, INC. ("Grantor").

                                    RECITALS

      A.    Bank has agreed to make certain advances of money and to extend
certain financial accommodation to Grantor (the "Loans") in the amounts and
manner set forth in that certain Loan and Security Agreement by and between Bank
and Grantor dated of even date herewith (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks and Patents
to secure the obligations of Grantor under the Loan Agreement.

      B.    Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired in, to and under all of the Collateral.

      NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, grantor hereby represents, warrants, covenants and agrees as follows:

                                    AGREEMENT

      To secure its obligations under the Loan Agreement, grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents and Trademarks listed on Schedules
A, B and C hereto), and including without limitation all proceeds thereof (such
as, by way of example but not by way of limitation, license royalties and
proceeds of infringement suits), the right to sue for past, present and future
infringements, all rights corresponding thereto throughout the world and all
re-issues, divisions continuations, renewals, extensions and
continuations-in-part thereof.

      This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity. Each
right, power
<PAGE>
and remedy of Bank provided for herein or in the Loan Agreement or any of the
Loan Documents, or now or hereafter existing at law or in equity shall be
cumulative and concurrent and shall be in addition to every right, power or
remedy provided for herein and the exercise by Bank of any one or more of the
rights, powers or remedies provided for in this Intellectual Property Security
Agreement, the Loan Agreement or any of the other Loan Documents, or now or
hereafter existing at law or in equity, shall not preclude the simultaneous or
later exercise by any person, including Bank, of any or all other rights, powers
or remedies.

      IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.

                                            GRANTOR:

Address of Grantor:                         CALLIDUS SOFTWARE, INC.

160 W. Santa Clara St., Suite 1500
San Jose, California  95113                 By:  /s/ RON J. FIOR
                                                 ---------------
                                                     Name:  Ron J. Fior
Attn:  Chief Financial Officer                       Title: VP Finance & CFO
       -----------------------

                                            BANK:

Address of Bank:                            SILICON VALLEY BANK

3003 Tasman Drive                           By:  /s/ SCOTT CHAMBERLIN
Santa Clara, CA  95054-1191                      --------------------
                                                     Name:  Scott Chamberlin
                                                     Title: Vice President
Attn:  Scott Chamberlin

                                        2
<PAGE>
                                    EXHIBIT A
                             CALLIDUS SOFTWARE, INC.
                           APPLICATIONS/REGISTRATIONS

<TABLE>
<CAPTION>
      MARK
    SERIAL NO.              ATTORNEY
   FILING DATE               FILE NO.                     GOODS                 OFFICE ACTION          COMMENTS        STATUS
   -----------               --------                     -----                 -------------          --------        ------
<S>                  <C>                      <C>                          <C>                       <C>             <C>
CALLIDUS             9695-0001-35             Software for the financial   Examiner requested        United States   Registered.
SOFTWARE &           Oblon, Spivak, et. al.   field for business             1. Disclaimer of the
Design                                        performance, modeling,            term "Software"
75/561,082                                    management and/or              2. Amendment to ID of
September 29, 1998                            reporting of business             goods-additional
                                              programs                          explanation

CALLIDUS             9695-0002-35             Software for the financial   Examiner requested        United States   Registered.
SOFTWARE             Oblon, Spivak, et. al.   field for business             1. Disclaimer of the
75/561,081                                    performance, modeling,            term "Software"
September 29, 1998                            management and/or              2. Amendment to ID of
                                              reporting of business             goods-additional
                                              programs                          explanation
</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>
      MARK
    SERIAL NO.              ATTORNEY
   FILING DATE               FILE NO.                     GOODS                 OFFICE ACTION          COMMENTS        STATUS
   -----------               --------                     -----                 -------------          --------        ------
<S>                  <C>                      <C>                          <C>                       <C>             <C>
CALLIDUS             196362EU-9695-35         Class 9, 16.  Software for                             European        Registered.
SOFTWARE             Oblon, Spivak, et. al.   the financial field for                                Community:
001827716                                     business performance,                                  Australia,
August 25, 2000                               modeling, management                                   Benelux,
                                              and/or reporting business                              Germany,
                                              programs.  User manuals                                Denmark,
                                              related to software for                                Spain,
                                              the financial field for                                Sweden,
                                              business performance,                                  Finland,
                                              modeling, management                                   France,
                                              and/or reporting business                              United
                                              programs.                                              Kingdom,
                                                                                                     Greece,
                                                                                                     Ireland,
                                                                                                     Italy,
                                                                                                     Portugal

TRUECOMP             9695-0004-35             Computer software to         No bar to registration    United States   Registered.
75/728,363           Oblon, Spivak, et. al.   manage variable cost
June 14, 1999                                 accounting processes and
                                              user manuals sold as a
                                              unit
</TABLE>

                                        4
<PAGE>
                                    EXHIBIT A
                             CALLIDUS SOFTWARE, INC.
                           APPLICATIONS/REGISTRATIONS

<TABLE>
<CAPTION>
      MARK
    SERIAL NO.              ATTORNEY
   FILING DATE               FILE NO.                     GOODS                 OFFICE ACTION          COMMENTS        STATUS
   -----------               --------                     -----                 -------------          --------        ------
<S>                  <C>                      <C>                          <C>                       <C>             <C>
TRUECHANNEL          9695-0005-35             Financial software for the   Registration initially    United States   Awaiting
75/797,607           Oblon, Spivak, et. al.   modeling, administration     refused because the                       registration
September 13, 1999                            and reporting of financial   proposed mark merely
                                              data.                        describes the goods and
                                                                           because of likelihood
                                                                           of confusion with prior
                                                                           registration of TRUE
                                                                           CHANNEL DIRECT

TRUECHANNEL          196373EU-9695-35         Class 9, 16:  Computer                                 European        Registered.
001827765            Oblon, Spivak, et. al.   software for modeling,                                 Community:
August 25, 2000                               administration and                                     Australia,
                                              reporting of financial                                 Benelux,
                                              data.  User manuals                                    Germany,
                                              relating to software for                               Denmark,
                                              the modeling,                                          Spain,
                                              administration, and                                    Sweden,
                                              reporting of financial                                 Finland,
                                              data.                                                  France,
                                                                                                     United
                                                                                                     Kingdom,
                                                                                                     Greece,
                                                                                                     Ireland,
                                                                                                     Italy,
                                                                                                     Portugal
</TABLE>

                                        5
<PAGE>
                                    EXHIBIT A
                             CALLIDUS SOFTWARE, INC.
                           APPLICATIONS/REGISTRATIONS

<TABLE>
<CAPTION>
      MARK
    SERIAL NO.              ATTORNEY
   FILING DATE               FILE NO.                     GOODS                 OFFICE ACTION          COMMENTS        STATUS
   -----------               --------                     -----                 -------------          --------        ------
<S>                  <C>                      <C>                          <C>                       <C>             <C>
TRUE PERFORMANCE     9695-0007-35             Software for sales and                                                 Awaiting
75/816,018           Oblon, Spivak, et. al.   quota management, product                                              registration
October 5, 1999                               performance and
                                              administration of
                                              territories and the like.
</TABLE>

                                       6
<PAGE>
                                    EXHIBIT A
                             CALLIDUS SOFTWARE, INC.
                           APPLICATIONS/REGISTRATIONS

                              COPYRIGHT APPLICATION

<TABLE>
<CAPTION>
  TITLE OF WORK
    FILING DATE             ATTORNEY             NATURE OF AUTHORSHIP         FIRST PUBLICATION        COMMENTS        STATUS
    -----------             --------             --------------------         -----------------        --------        ------
<S>                  <C>                      <C>                          <C>                       <C>             <C>
TrueComp             Kenneth B. Wilson        Computer Program             March 30, 1999            Form TX         Certificate of
April 30, 1999       Wilson Sonsini                                                                  For a           Registration
Registered 5/3/99    kwilson@wsgr.com                                                                nondramatic     Received-
                                                                                                     Literary Work   Effective as of
                                                                                                                     May 3, 1999
</TABLE>

                                       7

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