PORTAL SOFTWARE INC, S-8, 1999-05-06

PORTAL SOFTWARE INC
S-8, 1999-05-06
COMPUTER PROGRAMMING SERVICES

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<PAGE>

As filed with the Securities and Exchange Commission on May 6, 1999
Registration No. 333-____________
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------
PORTAL SOFTWARE, INC.
(Exact name of registrant as specified in its charter)

Delaware 77-0369737
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

20833 Stevens Creek Boulevard
Cupertino, CA 95014
(Address of principal executive offices) (Zip Code)
-----------------------
1999 STOCK INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plan)
-----------------------
Mr. John E. Little
President and Chief Executive Officer
Portal Software, Inc.
20883 Stevens Creek Boulevard
Cupertino, CA 95014
(Name and address of agent for service)
(408) 343-4400
(Telephone number, including area code, of agent for service)
-----------------------
CALCULATION OF REGISTRATION FEE

================================================================================

<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
- ------------------------------- --------------------- --------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
1999 Stock Incentive Plan
Common Stock, $0.001 par value 13,290,062 shares $ 14.00 $ 186,060,868.00 $ 51,724.92

1999 Employee Stock Purchase Plan 1,800,000 shares $ 14.00 $ 25,200,000.00 $ 7,005.60

Common Stock, $0.001 par value
========================

Aggregate Registration Fee $ 58,730.52
</TABLE>

(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1999 Stock Incentive Plan or
Employee Stock Purchase Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in the
number of the outstanding shares of Registrant's Common Stock.

(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the highest proposed
selling price per share of Registrant's Common Stock.
<PAGE>

PART II

Information Required in the Registration Statement

Item 3. Incorporation of Documents by Reference
---------------------------------------

Portal Software, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):

(a) The Registrant's Registration Statement No. 333-72999 on Form S-1
filed with the Commission on February 26, 1999, as amended on Forms S-
1/A filed with the Commission on April 14, 1999, April 23, 1999,
April 30, 1999, May 4, 1999 and May 5, 1999, respectively;

(b) The Registrant's prospectus filed with the Commission pursuant to Rule
424(a) promulgated under the Securities Act of 1933, as amended (the
"1933 Act"), in connection with the Registrant's Registration
Statement No. 333-72999, in which there is set forth the audited
financial statements for the Registrant's fiscal year ended
January 31, 1999.

(c) The Registrant's Registration Statement No. 000-25829 on Form 8-A
filed with the Commission on April 20, 1999 and amended on April 27,
1999, pursuant to Section 12(b) of the Securities Exchange Act of
1934 (the "Exchange Act"), in which there is described the terms,
rights and provisions applicable to the Registrant's outstanding
Common Stock.

All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act") after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which de-registers all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.

Item 4. Description of Securities
--------------------------

Not Applicable

Item 5. Interests of Named Experts and Counsel
--------------------------------------

Not Applicable.

Item 6. Indemnification of Directors and Officers
-----------------------------------------

Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VII, Section 6 of the Registrant's
Amended and Restated Bylaws provides for mandatory indemnification of its
directors and officers and permissible indemnification of employees and other
agents to the maximum extent permitted by the Delaware General Corporation Law.
The Registrant's Second Amended and Restated Certificate of Incorporation
provides that, subject to Delaware law, its directors shall not be personally
liable for monetary damages for breach of the directors' fiduciary duty as
directors to the Registrant and its stockholders. This provision in the Second
Amended

II-1
<PAGE>

and Restated Certificate of Incorporation does not eliminate the directors'
fiduciary duty, and inappropriate circumstances equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant or its
stockholders for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
The Registrant has entered into indemnification agreements with its officers and
directors, a form of which was previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-72999) (the "Indemnification Agreements"). The Indemnification
Agreements provide the Registrant's officers and directors with further
indemnification to the maximum extent permitted by the Delaware General
Corporation Law.

Item 7. Exemption from Registration Claimed
-----------------------------------

Not Applicable.

Item 8. Exhibits
--------

Exhibit Number Exhibit
- -------------- -------

4 Instruments Defining the Rights of Stockholders. Reference is
made to Registrant's Registration Statement No. 000-25829 on
Form 8-A, together with any exhibits thereto, which are
incorporated herein by reference pursuant to Item 3(c) to this
Registration Statement.
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1999 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Corporate Transaction/Change in
Control).
99.5 Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.6 Form of Stock Issuance Agreement.
99.7 Form Addendum to Stock Issuance Agreement (Involuntary
Termination Following Corporate Transaction/Change in
Control).
99.8 Form Automatic Stock Option Agreement.
99.9 Form Notice of Grant of Non-Employee Director - Automatic
Stock Option.
99.10 1999 Employee Stock Purchase Plan.
99.11 Form of Enrollment/Change Form.
99.12 Form of Stock Purchase Agreement.

II-2
<PAGE>

Item 9. Undertakings
------------

A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement: (i) to include any prospectus required by
Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or
events arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Registrant's 1999
Stock Incentive Plan and Employee Stock Purchase Plan.

B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6 or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cupertino, State of California on this
6th day of May, 1999.

Portal Software, Inc.

By: /s/ John E. Little
------------------------------------------
John E. Little
Chief Executive Officer, President and
Chairman of the Board of Directors

POWER OF ATTORNEY
-----------------

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of Portal Software, Inc.,
a Delaware corporation, do hereby constitute and appoint John E. Little, Chief
Executive Officer, President and Chairman of the Board of Directors and Jack L.
Acosta, Chief Financial Officer, and each of them, the lawful attorneys-in-fact
and agents with full power and authority to do any and all acts and things and
to execute any and all instruments which said attorneys and agents, and any one
of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----

<C> <S> <C>
/s/ John E. Little
- ------------------- Chief Executive Officer, President May 6, 1999
John E. Little (Principal Executive Officer) and
Chairman of the Board of Directors

/s/ Jack L. Acosta
- ------------------- Chief Financial Officer, May 4, 1999
Jack L. Acosta Vice President, Finance
(Principal Financial and
Accounting Officer)
</TABLE>

II-4
<PAGE>

/s/ Arthur C. Patterson
___________________________ Director May 3, 1999
Arthur C. Patterson

/s/ Edward J. Zander
___________________________ Director May 4, 1999
Edward J. Zander

/s/ David C. Peterschmidt
___________________________ Director May 6, 1999
David C. Peterschmidt

/s/ William T. Coleman, III
___________________________ Director May 6, 1999
William T. Coleman, III
</TABLE>

II-5
<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXHIBITS

FORM S-8

UNDER

SECURITIES ACT OF 1933

PORTAL SOFTWARE, INC.
<PAGE>

EXHIBIT INDEX

Exhibit Number Exhibit
- -------------- -------

4 Instruments Defining the Rights of Stockholders.
Reference is made to Registrant's Registration Statement
No. 000-25829 on Form 8-A, together with any exhibits
thereto, which are incorporated herein by reference
pursuant to Item 3(c) to this Registration Statement.
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained
in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 1999 Stock Incentive Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Corporate Transaction/Change in
Control).
99.5 Form of Addendum to Stock Option Agreement (Limited
Stock Appreciation Right).
99.6 Form of Stock Issuance Agreement.
99.7 Form Addendum to Stock Issuance Agreement (Involuntary
Termination Following Corporate Transaction/Change in
Control).
99.8 Form Automatic Stock Option Agreement.
99.9 Form Notice of Grant of Non-Employee Director - Automatic
Stock Option.
99.10 1999 Employee Stock Purchase Plan.
99.11 Form of Enrollment/Change Form.
99.12 Form of Stock Purchase Agreement.

<PAGE>

EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP

May 6, 1999

Portal Software, Inc.
20833 Stevens Creek Blvd.
Cupertino, CA 95014

Re: Portal Software, Inc.- Registration Statement for Offering of an
Aggregate of 15,090,062 Shares of Common Stock

Dear Ladies and Gentlemen:

We have acted as counsel to Portal Software, Inc. a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
15,090,062 shares of common stock and related stock options for issuance (the
"Shares") under the Company's 1999 Stock Incentive Plan and Employee Stock
Purchase Plan (the "Plans").

This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.

We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Plans. Based on such review, we are of the opinion that, if, as and when the
Shares have been issued and sold (and the consideration therefor received)
pursuant to (a) the provisions of stock option agreements duly authorized under
the 1999 Stock Incentive Plan and in accordance with the Registration Statement,
or (b) duly authorized direct stock issuances in accordance with the 1999 Stock
Incentive Plan and in accordance with the Registration Statement or (c) the
provisions of duly authorized stock purchase rights issued in accordance with
the Employee Stock Purchase Plan and in accordance with the Registration
Statement, such Shares will be duly authorized, legally issued, fully paid and
nonassessable.

We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.

This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plans or the Shares.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE>

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to the 1999 Stock Incentive Plan and the 1999 Employee
Stock Purchase Plan of Portal Software, Inc. of our report dated February 24,
1999, except for the fifth and sixth paragraphs of Note 8 as to which the date
is April 29, 1999, with respect to the consolidated financial statements of
Portal Software, Inc, included in its Registration Statement on Form S-1, filed
with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Palo Alto, California
May 5, 1999

<PAGE>

EXHIBIT 99.1

PORTAL SOFTWARE, INC.
1999 STOCK INCENTIVE PLAN
-------------------------

ARTICLE ONE

GENERAL PROVISIONS
------------------

I. PURPOSE OF THE PLAN

This 1999 Stock Incentive Plan is intended to promote the interests of
Portal Software, Inc., a Delaware corporation, by providing eligible persons in
the Corporation's service with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in such service of the Corporation.

Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into five separate equity programs:

- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,

- the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each year in
special option grants,

- the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary),

- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock, and

- the Director Fee Option Grant Program under which non-employee
Board members may elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special option grant.
<PAGE>

B. The provisions of Articles One and Seven shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.

C. All share numbers in this document reflect the 3-for-1 split of
the Common Stock authorized by the Board in April 1999 and approved by the
stockholders in April 1999.

III. ADMINISTRATION OF THE PLAN

A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee shall be made by a disinterested majority of the Board.

B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.

D. The Primary Committee shall have the sole and exclusive authority
to determine which Section 16 Insiders and other highly compensated Employees
shall be eligible for participation in the Salary Investment Option Grant
Program for one or more calendar years. However, all option grants under the
Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.

E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

2.
<PAGE>

F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

(i) Employees,

(ii) non-employee members of the Board or the board of directors
of any Parent or Subsidiary, and

(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).

B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.

C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such option grants, the time or
times when the grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive such stock issuances, the time or times when the
issuances are to be made, the number of shares to be issued to each Participant,
the vesting schedule (if any) applicable to the issued shares and the
consideration for such shares.

D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to those individuals who
continue to serve as non-employee Board members at one or more Annual
Stockholders Meetings held after the Underwriting Date, whether or not those
individuals may have previously been in the employ of the Corporation (or any
Parent or Subsidiary).

F. All non-employee Board members shall be eligible to participate in
the Director Fee Option Grant Program.

3.
<PAGE>

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall not exceed 13,290,062
shares. Such reserve shall consist of (i) the number of shares estimated to
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders, including
the shares subject to outstanding options under that Predecessor Plan and the
6,000,000-share increase to such plan approved by the stockholders in April
1999, (ii) plus an additional increase of approximately 3,600,000 shares to be
approved by the Corporation's stockholders prior to the Plan Effective Date.

B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each fiscal
year during the term of the Plan, beginning with fiscal year 2001 (the fiscal
year beginning February 1, 2000), by an amount equal to four percent (4%) of the
shares of Common Stock outstanding on the last trading day of the immediately
preceding fiscal year, but in no event shall any such annual increase exceed
5,250,000 shares.

C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,000,000 shares of Common Stock in the aggregate per calendar year.

D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised under Section IV of Article Two, Section III of Article Three,
Section II of Article Five or Section III of Article Six of the Plan shall not
be available for subsequent issuance under the Plan.

4.
<PAGE>

E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities by which the share reserve is to increase each fiscal year pursuant
to the automatic share increase provisions of Section V.B of this Article One,
(iii) the maximum number and/or class of securities for which any one person may
be granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year, (iv) the number and/or
class of securities for which grants are subsequently to be made under the
Automatic Option Grant Program to new and continuing non-employee Board members,
(v) the number and/or class of securities and the exercise price per share in
effect under each outstanding option under the Plan and (vi) the number and/or
class of securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

5.
<PAGE>

ARTICLE TWO
-----------

DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

A. Exercise Price.
--------------

1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.

2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Seven
and the documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,

(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or

(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.

Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

B. Exercise and Term of Options. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

6.
<PAGE>

C. Effect of Termination of Service.
--------------------------------

1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.

(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution or by the Optionee's designated
beneficiary or beneficiaries of that option.

(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.

(iv) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.

2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or

(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the
Optionee continued in Service.

7.
<PAGE>

D. Stockholder Rights. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

E. Repurchase Rights. The Plan Administrator shall have the discretion
-----------------
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---

A. Eligibility. Incentive Options may only be granted to Employees.
-----------

B. Dollar Limitation. The aggregate Fair Market Value of the shares of
-----------------
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000).

8.
<PAGE>

To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

C. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
the total number of shares of Common Stock at the time subject to such option
and may be exercised for any or all of those shares as fully vested shares of
Common Stock. However, an outstanding option shall not become exercisable on
such an accelerated basis if and to the extent: (i) such option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) such option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.

B. All outstanding repurchase rights shall automatically terminate,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.

9.
<PAGE>

E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effect date of
such Corporate Transaction, become fully exercisable for the total number of
shares of Common Stock at the time subject to those options and may be exercised
for any or all of those shares as fully vested shares of Common Stock, whether
or not those options are to be assumed in the Corporate Transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.

F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become fully exercisable for the total
number of shares of Common Stock at the time subject to those options in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
-------
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights so that those rights shall immediately terminate with respect to any
shares held by the Optionee at the time of his or her Involuntary Termination,
and the shares subject to those terminated repurchase rights shall accordingly
vest in full at that time.

G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effect date of a
Change in Control, become fully exercisable for the total number of shares of
Common Stock at the time subject to those options and may be exercised for any
or all of those shares as fully vested shares of Common Stock. In addition, the
Plan Administrator shall have the discretionary authority to structure one or
more of the Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall terminate automatically upon the consummation
of such Change in Control, and the shares subject to those terminated rights
shall thereupon vest in full. Alternatively, the Plan Administrator may
condition the automatic acceleration of one or more outstanding options under
the Discretionary Option Grant Program and the termination of one or more of the
Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control. Each option so
accelerated shall remain exercisable for fully vested shares until the earlier
-------
of (i) the expiration of the option term or (ii) the expiration of the one (1)
year period measured from the effective date of Optionee's cessation of Service.

10.
<PAGE>

H. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.

I. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and authority to grant
to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.

B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution from
the Corporation in an amount equal to the excess of (a) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (b) the aggregate exercise price payable for such
shares.

(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled may be made in shares
of Common Stock valued at Fair Market Value on the option surrender date,
in cash, or partly in shares and partly in cash, as the Plan Administrator
shall in its sole discretion deem appropriate.

(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof)
on the option surrender date and may exercise such rights at any time prior
to the later of (a)
-----

11.
<PAGE>

five (5) business days after the receipt of the rejection notice or (b) the
last day on which the option is otherwise exercisable in accordance with
the terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant date.

C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:

(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.

(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation. In return for the surrendered option, the
Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock at the time subject to such option (whether or not the
Optionee is otherwise vested in those shares) over (B) the aggregate
exercise price payable for those shares. Such cash distribution shall be
paid within five (5) days following the option surrender date.

(iii) At the time such limited stock appreciation right is
granted, the Plan Administrator shall pre-approve any subsequent exercise
of that right in accordance with the terms of this Paragraph C.
Accordingly, no further approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution.

12.
<PAGE>

ARTICLE THREE

SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.

II. OPTION TERMS

Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.

A. Exercise Price.
--------------

1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.

2. The exercise price shall become immediately due upon exercise
of the option and shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

X = A / (B x 66-2/3%), where

X is the number of option shares,

A is the dollar amount of the reduction in the Optionee's base
salary for the calendar year to be in effect pursuant to this program,
and

13.
<PAGE>

B is the Fair Market Value per share of Common Stock on the
option grant date.

C. Exercise and Term of Options. The option shall become
----------------------------
exercisable in a twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.

D. Effect of Termination of Service. Should the Optionee cease
--------------------------------
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
-------
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the three
- -------
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
-------
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.

B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.

14.
<PAGE>

The option shall remain so exercisable until the earliest to occur of (i) the
--------
expiration of the ten (10)-year option term, (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service,
(iii) the termination of the option in connection with a Corporate Transaction
or (iv) the surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Salary Investment Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. The Primary Committee shall, at the time the option
with such limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Primary Committee or the Board shall be required at the time of
the actual option surrender and cash distribution.

E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

IV. REMAINING TERMS

The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

15.
<PAGE>

ARTICLE FOUR
------------

STOCK ISSUANCE PROGRAM
----------------------

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of designated
performance goals.

A. Purchase Price.
--------------

1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.

2. Subject to the provisions of Section I of Article Seven,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

(i) cash or check made payable to the Corporation, or

(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).

B. Vesting Provisions.
------------------

1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.

2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

16.
<PAGE>

3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.

5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

6. Outstanding share right awards under the Stock Issuance Program
shall automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals established for
such awards are not attained. The Plan Administrator, however, shall have the
discretionary authority to issue shares of Common Stock under one or more
outstanding share right awards as to which the designated performance goals have
not been attained.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.

B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate

17.
<PAGE>

Transaction in which those repurchase rights are assigned to the successor
corporation (or parent thereof).

C. The Plan Administrator shall also have the discretionary authority
to structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

18.
<PAGE>

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM
------------------------------

I. OPTION TERMS

A. Grant Dates. On the date of each Annual Stockholders Meeting held
-----------
after the Underwriting Date, each individual who is to continue to serve as an
Eligible Director, whether or not that individual is standing for re-election to
the Board at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 6,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 6,000 share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received one or
more stock option grants from the Corporation prior to the Underwriting Date
shall be eligible to receive one or more such annual option grants over their
period of continued Board service. Stockholder approval of the Plan shall also
constitute pre-approval of each option subsequently granted under the Automatic
Option Grant Program and the subsequent exercise of that option in accordance
with the provisions of this Article Five.

B. Exercise Price.
--------------

1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.

D. Exercise and Vesting of Options. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares as fully-vested shares of Common
Stock.

E. Limited Transferability of Options. Each option under this Article
----------------------------------
Five may, in connection with the Optionee's estate plan, be assigned in whole or
in part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding

19.
<PAGE>

options under this Article Five, and those options shall, in accordance with
such designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding those options. Such
beneficiary or beneficiaries shall take the transferred options subject to all
the terms and conditions of the applicable agreement evidencing each such
transferred option, including (without limitation) the limited time period
during which the option may be exercised following the Optionee's death.

F. Termination of Board Service. The following provisions shall
----------------------------
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:

(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution) shall have a twelve
(12)-month period following the date of such cessation of Board service in
which to exercise each such option.

(ii) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12)-
month exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any shares
for which the option has not been exercised.

II. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER

A. Immediately following the consummation of a Corporate Transaction,
each automatic option grant shall terminate and cease to be outstanding, except
to the extent assumed by the successor corporation (or parent thereof).

B. Following any Change in Control, each automatic option grant shall
remain exercisable for the shares at the time subject to that option until the
expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option over (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation. Stockholder
approval of the Plan shall constitute pre-approval of the grant of each such
limited cash-out right and the subsequent exercise of that right in accordance
with the terms of this Paragraph D. Accordingly, no approval or consent of the
Board or any Plan Administrator shall be required at the time of the actual
option surrender and cash distribution.

20.
<PAGE>

E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

III. REMAINING TERMS

The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.

21.
<PAGE>

ARTICLE SIX

DIRECTOR FEE OPTION GRANT PROGRAM
---------------------------------

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the Program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board for that year to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.

II. OPTION TERMS

Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.

A. Exercise Price.
--------------

1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.

B. Number of Option Shares. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

X = A / (B x 66-2/3%), where

X is the number of option shares,

A is the portion of the annual retainer fee subject to the non-
employee Board member's election, and

B is the Fair Market Value per share of Common Stock on the
option grant date.

22.
<PAGE>

C. Exercise and Term of Options. The option shall become exercisable
----------------------------
in a series of twelve (12) equal monthly installments upon the Optionee's
completion of each month of Board service over the twelve (12)-month period
measured from the grant date. Each option shall have a maximum term of ten (10)
years measured from the option grant date.

D. Limited Transferability of Options. Each option under this Article
----------------------------------
Six may, in connection with the Optionee's estate plan, be assigned in whole or
in part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Three, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

E. Termination of Board Service. Should the Optionee cease Board
----------------------------
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
- -------
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

F. Death or Permanent Disability. Should the Optionee's service as a
-----------------------------
Board member cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
-------
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service.

Should the Optionee die after cessation of Board service but while
holding one or more options under this Director Fee Option Grant Program, then
each such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's cessation of Board service
(less any shares subsequently purchased by Optionee prior to death), by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution. Such right of exercise shall lapse,
and the option shall terminate, upon

23.
<PAGE>

the earlier of (i) the expiration of the ten (10)-year option term or (ii) the
-------
three (3)-year period measured from the date of the Optionee's cessation of
Board service.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten (10)-
-------
year option term or (ii) the expiration of the three (3)-year period measured
from the date of the Optionee's cessation of Board service.

B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable for the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
--------
ten (10)-year option term, (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service, (iii) the
termination of the option in connection with a Corporate Transaction or (iv) the
surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Director Fee Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. Stockholder approval of the Plan shall constitute
pre-approval of the grant of each such limited cash-out right and the subsequent
exercise of that right in accordance with the terms of this Paragraph C.
Accordingly, no approval or consent of the Board or any Plan Administrator shall
be required at the time of the actual option surrender and cash distribution.

24.
<PAGE>

D. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

IV. REMAINING TERMS

The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

25.
<PAGE>

ARTICLE SEVEN

MISCELLANEOUS
-------------

I. FINANCING

The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.

B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant or Director Fee Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or both of the
following formats:

Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.

Stock Delivery: The election to deliver to the Corporation, at
--------------
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.

26.
<PAGE>

III. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan shall become effective immediately on the Plan Effective
Date. However, the Salary Investment Option Grant Program and the Director Fee
Option Grant Program shall not be implemented until such time as the Primary
Committee may deem appropriate. Options may be granted under the Discretionary
Option Grant at any time on or after the Plan Effective Date. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders. If
such stockholder approval is not obtained within twelve (12) months after the
Plan Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.

B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.

C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.

D. The Plan shall terminate upon the earliest to occur of (i)
February 23, 2009, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Should the Plan terminate on February 23, 2009, then all option
grants and unvested stock issuances outstanding at that time shall continue to
have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

27.
<PAGE>

B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

28.
<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Plan:

A. Automatic Option Grant Program shall mean the automatic option
------------------------------
grant program in effect under the Plan.

B. Board shall mean the Corporation's Board of Directors.
-----

C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or

(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.

D. Code shall mean the Internal Revenue Code of 1986, as amended.
----

E. Common Stock shall mean the Corporation's common stock.
------------

F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.

A-1.
<PAGE>

G. Corporation shall mean Portal Software, Inc., a Delaware
-----------
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Portal Software, Inc. which shall by appropriate
action adopt the Plan.

H. Director Fee Option Grant Program shall mean the special stock
---------------------------------
option grant in effect for non-employee Board members under Article Six of the
Plan.

I. Discretionary Option Grant Program shall mean the discretionary
----------------------------------
option grant program in effect under the Plan.

J. Eligible Director shall mean a non-employee Board member eligible
-----------------
to participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.

K. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

L. Exercise Date shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.

M. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

(iii) For purposes of any option grants made on the Underwriting
Date, the Fair Market Value shall be deemed to be equal to the price per
share at which the Common Stock is to be sold in the initial public
offering pursuant to the Underwriting Agreement.

A-2.
<PAGE>

N. Hostile Take-Over shall mean the acquisition, directly or
-----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.

O. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.

P. Involuntary Termination shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her duties and responsibilities or the level of management to which
he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonus under any
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.

Q. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

R. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.

S. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.

T. Optionee shall mean any person to whom an option is granted under
--------
the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.

A-3.
<PAGE>

U. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

V. Participant shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.

W. Permanent Disability or Permanently Disabled shall mean the
--------------------------------------------
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

X. Plan shall mean the Corporation's 1999 Stock Incentive Plan, as
----
set forth in this document.

Y. Plan Administrator shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

Z. Plan Effective Date shall mean the date the Plan shall become
-------------------
effective and shall be coincident with the Underwriting Date.

AA. Predecessor Plan shall mean the Corporation's 1995 Stock
----------------
Option/Stock Issuance Plan in effect immediately prior to the Plan Effective
Date hereunder.

BB. Primary Committee shall mean the committee of two (2) or more
-----------------
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program solely
with respect to the selection of the eligible individuals who may participate in
such program.

CC. Salary Investment Option Grant Program shall mean the salary
--------------------------------------
investment option grant program in effect under the Plan.

DD. Secondary Committee shall mean a committee of one or more Board
-------------------
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.

A-4.
<PAGE>

EE. Section 16 Insider shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

FF. Service shall mean the performance of services for the
-------
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.

GG. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.

HH. Stock Issuance Agreement shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

II. Stock Issuance Program shall mean the stock issuance program in
----------------------
effect under the Plan.

JJ. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

KK. Take-Over Price shall mean the greater of (i) the Fair Market
--------------- -------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

LL. Taxes shall mean the Federal, state and local income and
-----
employment tax withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.

MM. 10% Stockholder shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

NN. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

OO. Underwriting Date shall mean the date on which the Underwriting
-----------------
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.

A-5.

<PAGE>

EXHIBIT 99.2

PORTAL SOFTWARE, INC.
NOTICE OF GRANT OF STOCK OPTION
-------------------------------

Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Portal Software, Inc. (the
"Corporation"):

Optionee:_____________________________________________________________
--------

Grant Date:___________________________________________________________
----------

Vesting Commencement Date:____________________________________________
-------------------------

Exercise Price: $ ___________________________________________per share
--------------

Number of Option Shares:________________________________________shares
-----------------------

Expiration Date:______________________________________________________
---------------

Type of Option: ______ Incentive Stock Option
--------------

______ Non-Statutory Stock Option

Exercise Schedule: The Option shall become exercisable for twenty-
-----------------
five percent (25%) of the Option Shares upon Optionee's completion of
one (1) year of Service measured from the Vesting Commencement Date
and shall become exercisable for the balance of the Option Shares in
thirty-six (36) successive equal monthly installments upon Optionee's
completion of each additional month of Service over the thirty-six
(36) month period measured from the first anniversary of the Vesting
Commencement Date. In no event shall the Option become exercisable
for any additional Option Shares after Optionee's cessation of
Service.

Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Portal Software, Inc. 1999 Stock
Incentive Plan (the "Plan"). Optionee further agrees to be bound by the terms
of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A. Optionee hereby acknowledges the
---------
receipt of a copy of the official prospectus for the Plan in the form attached
hereto as Exhibit B. A copy of the Plan is available upon request made to the
--------
Corporate Secretary at the Corporation's principal offices.
<PAGE>

Employment at Will. Nothing in this Notice or in the attached Stock
------------------
Option Agreement or in the Plan shall confer upon Optionee any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.

Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.

DATED:___________, 1999

PORTAL SOFTWARE, INC.

By:____________________________________________

Title:_________________________________________

______________________________________________
OPTIONEE

Address:_______________________________________

_______________________________________________

ATTACHMENTS
- -----------
Exhibit A - Stock Option Agreement
Exhibit B - Plan Summary and Prospectus

2
<PAGE>

EXHIBIT A
---------

STOCK OPTION AGREEMENT
----------------------
<PAGE>

EXHIBIT B
---------

PLAN SUMMARY AND PROSPECTUS
---------------------------

<PAGE>

EXHIBIT 99.3

PORTAL SOFTWARE, INC.
STOCK OPTION AGREEMENT
----------------------

RECITALS
- --------

A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).

B. Optionee is to render valuable services to the Corporation (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.

C. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.

NOW, THEREFORE, it is hereby agreed as follows:

1. Grant of Option. The Corporation hereby grants to Optionee, as of the
---------------
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.

2. Option Term. This option shall have a maximum term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

3. Limited Transferability.
-----------------------
(a) This option shall be neither transferable nor assignable by
Optionee other than by will or by the laws of descent and distribution following
Optionee's death and may be exercised, during Optionee's lifetime, only by
Optionee. However, Optionee may designate one or more persons as the beneficiary
or beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding such option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.

(b) If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's lifetime to one or more
members of Optionee's immediate family or to a trust established for the
exclusive benefit of one or more such family members. The assigned portion shall
be exercisable only by the person or persons who acquire a proprietary interest
in the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment.
<PAGE>

4. Dates of Exercise. This option shall become exercisable for the Option
-----------------
Shares in one or more installments as specified in the Grant Notice. As the
option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

5. Cessation of Service. The option term specified in Paragraph 2 shall
---------------------
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

(a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

(b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of inheritance shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this option, then those
persons shall have the exclusive right to exercise this option following
Optionee's death. Such right shall lapse, and this option shall cease to be
outstanding, upon the earlier of (i) the expiration of the
-------
twelve (12)-month period measured from the date of Optionee's death or (ii) the
Expiration Date.

(c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any exercisable Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding with respect to
any Option Shares for which this option is not otherwise at that time
exercisable.

(e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.

2
<PAGE>

6. Special Acceleration of Option.
------------------------------
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. No such acceleration of
this option shall occur, however, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) this option is to be replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Corporate Transaction on the Option Shares for which
this option is not otherwise at that time exercisable (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent payout in accordance with the same
option exercise/vesting schedule set forth in the Grant Notice.

(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
--------

(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

7. Adjustment in Option Shares. Should any change be made to the Common
---------------------------
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

8. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

3
<PAGE>

9. Manner of Exercising Option.
---------------------------

(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions :

(i) Execute and deliver to the Corporation a Notice of Exercise
for the Option Shares for which the option is exercised.

(ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:

(A) cash or check made payable to the Corporation;

(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with
Paragraph 13;

(C) shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or

(D) through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the
option) shall concurrently provide irrevocable instructions (i) to a
Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (ii) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale .

Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.

(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.

4
<PAGE>

(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.

(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.

10. Compliance with Laws and Regulations.
------------------------------------
(a) The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.

11. Successors and Assigns. Except to the extent otherwise provided in
----------------------
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns, the legal representatives, heirs and legatees of
Optionee's estate and any beneficiaries of this option designated by Optionee.

12. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

13. Financing. The Plan Administrator may, in its absolute discretion and
---------
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including
the interest rate, the requirements for collateral and the terms of repayment)
shall be established by the Plan Administrator in its sole discretion.

5
<PAGE>

14. Construction. This Agreement and the option evidenced hereby are made
------------
and granted pursuant to the Plan and are in all respects limited by and subject
to the terms of the Plan. All decisions of the Plan Administrator with respect
to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.

15. Governing Law. The interpretation, performance and enforcement of this
-------------
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

16. Excess Shares. If the Option Shares covered by this Agreement exceed,
-------------
as of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to those excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.

17. Additional Terms Applicable to an Incentive Option. In the event this
--------------------------------------------------
option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

(a) This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this option is exercised for one or
more Option Shares: (A) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent Disability
or (B) more than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.

(b) No installment under this option shall qualify for favorable tax
treatment as an Incentive Option if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of the
Common Stock or other securities for which this option or any other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar
($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.

(c) Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option

6
<PAGE>

or one or more other Incentive Options granted to Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may nevertheless be
exercised for the excess shares in such calendar year as a Non-Statutory Option.

(d) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

7
<PAGE>

EXHIBIT I
NOTICE OF EXERCISE

I hereby notify Portal Software, Inc. (the "Corporation") that I elect
to purchase ______ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $_______ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 1999 Stock Incentive Plan on _______ , _______.

Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

___________________ , ________
Date
______________________________
Optionee

Address: _____________________

______________________________

Print name in exact manner it is
to appear on the stock certificate: ______________________________

Address to which certificate is to
be sent, if different from
address above: ______________________________

______________________________

Social Security Number: ______________________________

<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Stock Option Agreement.
---------

B. Board shall mean the Corporation's Board of Directors.
-----

C. Common Stock shall mean shares of the Corporation's common stock.
------------

D. Code shall mean the Internal Revenue Code of 1986, as amended.
----

E. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:

(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation .

F. Corporation shall mean Portal Software, Inc., a Delaware corporation,
-----------
and any successor corporation to all or substantially all of the assets or
voting stock of Portal Software, Inc. which shall by appropriate action adopt
the Plan.

G. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

H. Exercise Date shall mean the date on which the option shall have been
-------------
exercised in accordance with Paragraph 9 of the Agreement.

I. Exercise Price shall mean the exercise price per Option Share as
--------------
specified in the Grant Notice.

J. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.

K. Fair Market Value per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:

A-1
<PAGE>

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists, or

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

L. Grant Date shall mean the date of grant of the option as specified in
----------
the Grant Notice.

M. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

N. Incentive Option shall mean an option which satisfies the requirements
----------------
of Code Section 422.

O. Misconduct shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).

P. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.

Q. Notice of Exercise shall mean the notice of exercise in the form
------------------
attached hereto as Exhibit I.

R. Option Shares shall mean the number of shares of Common Stock subject
-------------
to the option as specified in the Grant Notice.

A-2
<PAGE>

S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.

T. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

U. Permanent Disability shall mean the inability of Optionee to engage in
--------------------
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.

V. Plan shall mean the Corporation's 1999 Stock Incentive Plan.
----

W. Plan Administrator shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.

X. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor.

Y. Stock Exchange shall mean the American Stock Exchange or the New York
--------------
Stock Exchange.

Z. Subsidiary shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

A-3

<PAGE>

EXHIBIT 99.4

ADDENDUM
TO
STOCK OPTION AGREEMENT

The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between Portal Software, Inc. (the "Corporation") and _____________________
("Optionee") evidencing the stock option (the "Option") granted this day to
Optionee under the terms of the Corporation's 1999 Stock Incentive Plan, and
such provisions are effective immediately. All capitalized terms in this
Addendum, to the extent not otherwise defined herein, shall have the meanings
assigned to them in the Option Agreement.

INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL

1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, the Option shall not accelerate upon the occurrence of that Corporate
Transaction, and the Option shall accordingly continue, over Optionee's period
of Service after the Corporate Transaction, to become exercisable for the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, immediately upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, the assumed Option, to the extent outstanding at the time but not
otherwise fully exercisable, shall automatically accelerate so that the Option
shall become immediately exercisable for all the Option Shares at the time
subject to the Option and may be exercised for any or all of those Option Shares
as fully vested shares.

2. The Option shall not accelerate upon the occurrence of a Change in
Control, and the Option shall, over Optionee's period of Service following such
Change in Control, continue to become exercisable for the Option Shares in one
or more installments in accordance with the provisions of the Option Agreement.
However, immediately upon an Involuntary Termination of Optionee's Service
within eighteen (18) months following the Change in Control, the Option, to the
extent outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately exercisable
for all the Option Shares at the time subject to the Option and may be exercised
for any or all of those Option Shares as fully vested shares.

3. The Option as accelerated pursuant to this Addendum shall remain
so exercisable until the earlier of (i) the Expiration Date or (ii) the
-------
expiration of the one (1)-year period measured from the date of the Optionee's
Involuntary Termination.
<PAGE>

4. For purposes of this Addendum the following definitions shall be
in effect:

(i) An Involuntary Termination shall mean the termination of
Optionee's Service by reason of:

(A) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(B) Optionee's voluntary resignation following (A) a change
in Optionee's position with the Corporation (or Parent or Subsidiary
employing Optionee) which materially reduces Optionee's duties and
responsibilities or the level of management to which Optionee reports,
(B) a reduction in Optionee's level of compensation (including base
salary, fringe benefits and target bonus under any corporate
performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Optionee's place of employment by
more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without
Optionee's consent.

(ii) A Change in Control shall be deemed to occur in the event of
a change in ownership or control of the Corporation effected through either
of the following transactions:

(A) the acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders, or

(B) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (i)
have been Board members continuously since the beginning of such
period or (ii) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time the Board
approved such election or nomination.
<PAGE>

5. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction or Change in Control and shall supersede any provisions to
the contrary in Paragraph 5 of the Option Agreement.

IN WITNESS WHEREOF, Portal Software, Inc. has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date specified
below.

PORTAL SOFTWARE, INC.

By: ______________________________________

Title: ___________________________________

EFFECTIVE DATE: ________________

<PAGE>

EXHIBIT 99.5

ADDENDUM
TO
STOCK OPTION AGREEMENT

The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between Portal Software, Inc. (the "Corporation") and ______________________
("Optionee") evidencing the stock option (the "Option") granted this day to
Optionee under the terms of the Corporation's 1999 Stock Incentive Plan, and
such provisions are effective immediately. All capitalized terms in this
Addendum, to the extent not otherwise defined herein, shall have the meanings
assigned to them in the Option Agreement.

LIMITED STOCK APPRECIATION RIGHT

1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:

(a) Optionee shall have the unconditional right, exercisable at
any time during the thirty (30)-day period immediately following a Hostile
Take-Over, to surrender the Option to the Corporation. In return for the
surrendered Option, Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price of
the shares of Common Stock which are the time subject to the surrendered
option (whether or not the Option is otherwise at the time exercisable for
those shares) over (B) the aggregate Exercise Price payable for such
shares.

(b) To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the Option is being
surrendered. Such notice must be accompanied by the return of Optionee's
copy of the Option Agreement, together with any written amendments to such
Agreement. The cash distribution shall be paid to Optionee within five (5)
business days following such delivery date. The exercise of the limited
stock appreciation right in accordance with the terms of this Addendum is
hereby pre-approved by the Plan Administrator in advance of such exercise,
and no further approval of the Plan Administrator or the Board shall be
required at the time of the actual option surrender and cash distribution.
Upon receipt of such cash distribution, the Option shall be cancelled with
respect to the Option Shares for which the Option has been surrendered, and
Optionee shall cease to have any further right to acquire those Option
Shares under the Option Agreement. The Option shall, however, remain
outstanding for the balance of the Option Shares (if any) in accordance
with the terms of the Option Agreement, and the Corporation shall issue a
replacement stock option agreement (substantially in the same form of the
surrendered Option Agreement) for those remaining Option Shares.
<PAGE>

(c) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair Market Value
of the Option Shares subject to the surrendered option and the aggregate
Exercise Price payable for such shares. This limited stock appreciation
right shall in all events terminate upon the expiration or sooner
termination of the option term and may not be assigned or transferred by
Optionee, except to the extent the Option is transferable in accordance
with the provisions of the Option Agreement.

2. For purposes of this Addendum, the following definitions shall be
in effect:

(a) A Hostile Take-Over shall be deemed to occur upon the
acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.

(b) The Take-Over Price per share shall be deemed to be equal to
the greater of (A) the Fair Market Value per Option Share on the option
-------
surrender date or (B) the highest reported price per share of Common Stock
paid by the tender offeror in effecting the Hostile Take-Over. However, if
the surrendered Option is designated as an Incentive Option in the Grant
Notice, then the Take-Over Price shall not exceed the clause (A) price per
share.

IN WITNESS WHEREOF, Portal Software, Inc. has caused this Addendum to
be executed by its duly-authorized officer.

PORTAL SOFTWARE, INC,

By:___________________________________

Title: _______________________________

EFFECTIVE DATE:______________________________________

<PAGE>

EXHIBIT 99.6

PORTAL SOFTWARE, INC.
STOCK ISSUANCE AGREEMENT
------------------------

AGREEMENT made this _____ day of ___________________________
__________, by and between Portal Software, Inc., a Delaware corporation, and
____________________________, a Participant in the Corporation's 1999 Stock
Incentive Plan.

All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.

A. PURCHASE OF SHARES
------------------

1. Purchase. Participant hereby purchases _____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").

2. Payment. Concurrently with the delivery of this Agreement to the
-------
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or check payable to the Corporation and shall deliver a duly-executed
blank Assignment Separate from Certificate (in the form attached hereto as
Exhibit I) with respect to the Purchased Shares.

3. Stockholder Rights. Until such time as the Corporation exercises
------------------
the Repurchase Right, Participant (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of this Agreement.

4. Escrow. The Corporation shall have the right to hold the
------
Purchased Shares in escrow until those shares have vested in accordance with the
Vesting Schedule.

5. Compliance with Law. Under no circumstances shall shares of
-------------------
Common Stock or other assets be issued or delivered to Participant pursuant to
the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.

B. TRANSFER RESTRICTIONS
---------------------

1. Restriction on Transfer. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right.
<PAGE>

2. Restrictive Legend. The stock certificate for the Purchased
------------------
Shares shall be endorsed with the following restrictive legend:

"The shares represented by this certificate are unvested and subject
to certain repurchase rights granted to the Corporation and accordingly may
not be sold, assigned, transferred, encumbered, or in any manner disposed
of except in conformity with the terms of a written agreement dated
____________, ______ between the Corporation and the registered holder of
the shares (or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Corporation's principal corporate offices."

3. Transferee Obligations. Each person (other than the Corporation)
----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to the Repurchase Right to
the same extent such shares would be so subject if retained by Participant.

C. REPURCHASE RIGHT
----------------

1. Grant. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the ninety (90)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price all or any portion of the Purchased Shares in
which Participant is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule set forth in Paragraph C.3 of this
Agreement or the special vesting acceleration provisions of Paragraph C.5 of
this Agreement (such shares to be hereinafter referred to as the "Unvested
Shares").

2. Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the ninety (90)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on or before the close
of business on the date specified for the repurchase. Concurrently with the
receipt of such stock certificates, the Corporation shall pay to Owner, in cash
or cash equivalent (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares to be repurchased from Owner.

3. Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Participant vests in accordance with the following Vesting Schedule:

2
<PAGE>

(i) Upon Participant's completion of one (1) year of Service
measured from ______________, _______, Participant shall acquire a vested
interest in, and the Repurchase Right shall lapse with respect to, twenty-
five percent (25%) of the Purchased Shares.

(ii) Participant shall acquire a vested interest in, and the
Repurchase Right shall lapse with respect to, the remaining Purchased
Shares in a series of thirty six (36) successive equal monthly installments
upon Participant's completion of each additional month of Service over the
thirty-six (36)-month period measured from the initial vesting date under
subparagraph (i) above.

4. Recapitalization. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of securities subject to this Agreement and to the price per share to be
paid upon the exercise of the Repurchase Right in order to reflect the effect of
any such Recapitalization upon the Corporation's capital structure; provided,
--------
however, that the aggregate purchase price shall remain the same.

5. Corporate Transaction.
---------------------

(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety and
the Purchased Shares shall vest in full, except to the extent the Repurchase
Right is to be assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction.

(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
--------
the aggregate purchase price shall remain the same. The new securities or other
property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Corporate Transaction shall immediately
be deposited in escrow with the Corporation (or the successor entity) and shall
not be released from escrow until Participant vests in such securities or other
property in accordance with the same Vesting Schedule in effect for the
Purchased Shares.

3
<PAGE>

D. SPECIAL TAX ELECTION
--------------------

1. Section 83(b) Election. Under Code Section 83, the excess of the
----------------------
fair market value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be filed
with the Internal Revenue Service within thirty (30) days after the date of this
Agreement. Even if the fair market value of the Purchased Shares on the date of
this Agreement equals the Purchase Price paid (and thus no tax is payable), the
election must be made to avoid adverse tax consequences in the future. THE FORM
FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT
UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-
DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE
RESTRICTIONS LAPSE.

2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.

E. GENERAL PROVISIONS
------------------

1. Assignment. The Corporation may assign the Repurchase Right to
----------
any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.

2. At Will Employment. Nothing in this Agreement or in the Plan
------------------
shall confer upon Participant any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation (or any Parent or Subsidiary employing or retaining
Participant) or of Participant, which rights are hereby expressly reserved by
each, to terminate Participant's Service at any time for any reason, with or
without cause.

3. Notices. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.

4
<PAGE>

4. No Waiver. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Participant. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.

5. Cancellation of Shares. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.

6. Participant Undertaking. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.

7. Agreement is Entire Contract. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.

8. Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of California without resort to that
State's conflict-of-laws rules.

9. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

10. Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.

5
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.

PORTAL SOFTWARE, INC.

By:_____________________________________

Title:__________________________________

Address:________________________________

________________________________________

PARTICIPANT

________________________________________
Signature

Address:________________________________

________________________________________

6
<PAGE>

SPOUSAL ACKNOWLEDGMENT

The undersigned spouse of the Participant has read and hereby approves
the foregoing Stock Issuance Agreement. In consideration of the Corporation's
granting the Participant the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which the Participant is not vested at the time of his or
her termination of Service.

_________________________________________
PARTICIPANT'S SPOUSE

Address:_________________________________

_________________________________________
<PAGE>

EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)

and transfer(s) unto Portal Software, Inc. (the "Corporation"),

_______________________________________ (___________) shares of the Common Stock

of the Corporation standing in his or her name on the books of the Corporation

represented by Certificate No. ___________________ herewith and do(es) hereby

irrevocably constitute and appoint ______________________________ Attorney to

transfer the said stock on the books of the Corporation with full power of

substitution in the premises.

Dated: _________________, _____.

Signature __________________________________

Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>

EXHIBIT II

SECTION 83(b) TAX ELECTION

This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.

(1) The taxpayer who performed the services is:

Name:
Address:
Taxpayer Ident. No.:

(2) The property with respect to which the election is being made is
____________ shares of the common stock of Portal Software, Inc.

(3) The property was issued on _________________, _________.

(4) The taxable year in which the election is being made is the calendar year
_________.

(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on _______________.

(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_____________per share.

(7) The amount paid for such property is $____________ per share.

(8) A copy of this statement was furnished to Portal Software, Inc. for whom
taxpayer rendered the services underlying the transfer of property.

(9) This statement is executed on ________________________, _______.

________________________________________________________________________________
Spouse (if any) Taxpayer

This election must be filed with the Internal Revenue Service Center with
which taxpayer files his or her Federal income tax returns and must be made
within thirty (30) days after the execution date of the Stock Issuance
Agreement. This filing should be made by registered or certified mail, return
receipt requested. Participant must retain two (2) copies of the completed form
for filing with his or her Federal and state tax returns for the current tax
year and an additional copy for his or her records.
<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Stock Issuance Agreement.
---------

B. Board shall mean the Corporation's Board of Directors.
-----

C. Common Stock shall mean shares of the Corporation's common stock.
------------

D. Code shall mean the Internal Revenue Code of 1986, as amended.
----

E. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions:

(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.

F. Corporation shall mean Portal Software, Inc., a Delaware
-----------
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of Portal Software, Inc.

G. Owner shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.

H. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

I. Participant shall mean the person to whom the Purchased Shares are
-----------
issued under the Stock Issuance Program.

A-1
<PAGE>

J. Permitted Transfer shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Corporation's
--------------------
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.

K. Plan shall mean the Corporation's 1999 Stock Incentive Plan.
----

L. Plan Administrator shall mean either the Board or a committee of
------------------
the Board acting in its administrative capacity under the Plan.

M. Purchase Price shall have the meaning assigned to such term in
--------------
Paragraph A.1.

N. Purchased Shares shall have the meaning assigned to such term in
----------------
Paragraph A.1.

O. Recapitalization shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.

P. Repurchase Right shall mean the right granted to the Corporation
----------------
in accordance with Article C.

Q. Service shall mean the Participant's performance of services for
-------
the Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant.

R. Stock Issuance Program shall mean the Stock Issuance Program under
----------------------
the Plan.

S. Subsidiary shall mean any corporation (other than the Corporation)
----------
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

T. Vesting Schedule shall mean the vesting schedule specified in
----------------
Paragraph C.3, pursuant to which the Purchased Shares are to vest in a series of
installments over Participant's period of Service.

A-2
<PAGE>

U. Unvested Shares shall have the meaning assigned to such term in
---------------
Paragraph C.1.

A-3

<PAGE>

EXHIBIT 99.7

ADDENDUM
TO
STOCK ISSUANCE AGREEMENT

The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement (the "Issuance Agreement")
by and between Portal Software, Inc. (the "Corporation") and
__________________________________________ ("Participant") evidencing the stock
issuance made this day to Participant under the terms of the Corporation's 1999
Stock Incentive Plan, and such provisions are effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meanings assigned to such terms in the Issuance Agreement.

INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL

1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction, no
accelerated vesting of the Purchased Shares shall occur upon such Corporate
Transaction, and the Repurchase Right shall continue to remain in full force and
effect in accordance with the provisions of the Issuance Agreement. The
Participant shall, over Participant's period of Service following the Corporate
Transaction, continue to vest in the Purchased Shares in one or more
installments in accordance with the provisions of the Issuance Agreement.

2. No accelerated vesting of the Purchased Shares shall occur upon a
Change in Control, and the Repurchase Right shall continue to remain in full
force and effect in accordance with the provisions of the Issuance Agreement.
The Participant shall, over Participant's period of Service following the Change
in Control, continue to vest in the Purchased Shares in one or more installments
in accordance with the provisions of the Issuance Agreement.

3. Immediately upon an Involuntary Termination of Participant's
Service within eighteen (18) months following the Corporate Transaction or
Change in Control, the Repurchase Right shall terminate automatically, and all
the Purchased Shares shall vest in full at that time.

4. For purposes of this Addendum, the following definitions shall be
in effect:

An Involuntary Termination shall mean the termination of Participant's
Service by reason of:

(i) Participant's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(ii) Participant's voluntary resignation following (A) a change
in Participant's position with the Corporation (or Parent or Subsidiary
employing Participant) which materially reduces Participant's duties and
responsibilities or the level of management to which Participant reports,
(B) a
<PAGE>

reduction in Participant's level of compensation (including base
salary, fringe benefits and target bonus under any corporate performance
based bonus or incentive programs) by more than fifteen percent (15%) or
(C) a relocation of Participant's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without Participant's consent.

A Change in Control shall be deemed to occur in the event of a change
in ownership or control of the Corporation effected through either of the
following transactions:

(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders,
or

Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Participant, any unauthorized use or disclosure by the
Participant of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by the
Participant adversely affecting the business or affairs of the Corporation (or
any Parent or Subsidiary) in a material manner. The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of the Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).

2
<PAGE>

IN WITNESS WHEREOF, Portal Software, Inc. has caused this Addendum to
be executed by its duly-authorized officer, effective as of the Effective Date
specified below.

PORTAL SOFTWARE, INC.

By:______________________________________

Title:___________________________________

EFFECTIVE DATE:_________________________________

<PAGE>

EXHIBIT 99.8

PORTAL SOFTWARE, INC.
AUTOMATIC STOCK OPTION AGREEMENT
--------------------------------

RECITALS
- --------

A. The Corporation has implemented an automatic option grant program
under the Plan pursuant to which eligible non-employee members of the Board will
automatically receive special option grants at periodic intervals over their
period of Board service in order to provide such individuals with a meaningful
incentive to continue to serve as members of the Board.

B. Optionee is an eligible non-employee Board member, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of an option to purchase shares
of Common Stock under the Plan.

C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

NOW, THEREFORE, it is hereby agreed as follows:

1. Grant of Option. The Corporation hereby grants to Optionee, as of
---------------
the Grant Date, a Non-Statutory Option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.

2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 7.

3. Limited Transferability. This option may, in connection with the
-----------------------
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment. Should the Optionee die while
holding this option, then this option shall be transferred in accordance with
Optionee's will or the laws of descent and distribution or by the Optionee's
designated beneficiary or beneficiaries of that option.

4. Exercisability/Vesting.
----------------------

(a) This option shall be immediately exercisable for any or all of
the Option Shares, whether or not the Option Shares are at the time vested in
accordance with the Vesting Schedule, and shall remain so exercisable until the
Expiration Date or sooner termination of the option term under Paragraph 5, 6 or
7.
<PAGE>

(b) Optionee shall, in accordance with the Vesting Schedule set
forth in the Grant Notice, vest in the Option Shares in one or more installments
over his or her period of Board service. Vesting in the Option Shares may be
accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event,
however, shall any additional Option Shares vest following Optionee's cessation
of service as a Board member.

5. Cessation of Board Service. Should Optionee's service as a Board
--------------------------
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:

(a) Should Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while this option is
outstanding, then the period during which this option may be exercised shall be
reduced to a twelve (12)-month period (commencing with the date of such
cessation of Board service), but in no event shall this option be exercisable at
any time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares (if any) in which Optionee is vested on the date of
his or her cessation of Board service. Upon the earlier of (i) the expiration of
-------
such twelve (12)-month period or (ii) the specified Expiration Date, the option
shall terminate and cease to be exercisable with respect to any vested Option
Shares for which the option has not been exercised.

(b) Should Optionee die during the twelve (12)-month period
following his or her cessation of Board service and hold this option, at the
time of his or her death, then the personal representative of Optionee's estate
or the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and distribution or by
the Optionee's designated beneficiary or beneficiaries of that option shall have
the right to exercise this option for any or all of the Option Shares in which
Optionee is vested at the time of Optionee's cessation of Board service (less
any Option Shares purchased by Optionee after such cessation of Board service
but prior to death). Such right of exercise shall terminate, and this option
shall accordingly cease to be exercisable for such vested Option Shares, upon
the earlier of (i) the expiration of the twelve (12)-month period measured from
-------
the date of Optionee's cessation of Board service or (ii) the specified
Expiration Date.

(c) Should Optionee cease service as a Board member by reason of
death or Permanent Disability, then all Option Shares at the time subject to
this option but not otherwise vested shall vest in full so that this option may
be exercised for any or all of the Option Shares as fully vested shares of
Common Stock at any time prior to the earlier of (i) the expiration of the
-------
twelve (12)-month period measured from the date of Optionee's cessation of Board
service or (ii) the specified Expiration Date, whereupon this option shall
terminate and cease to be outstanding.

(d) Upon Optionee's cessation of Board service for any reason
other than death or Permanent Disability, this option shall immediately
terminate and cease to be outstanding with respect to any and all Option Shares
in which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule or the special vesting acceleration provisions of
Paragraph 6 or 7 below.

2
<PAGE>

6. Corporate Transaction.
---------------------

(a) In the event of a Corporate Transaction, all the Option Shares
at the time subject to this option but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the specified effective
date for the Corporate Transaction, become exercisable for all of the Option
Shares as fully-vested shares of Common Stock and may be exercised for all or
any portion of those vested shares. Immediately following the consummation of
the Corporate Transaction, this option shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its
parent company.

(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
--------

7. Change in Control/Hostile Take-Over.
-----------------------------------

(a) All the Option Shares subject to this option at the time of a
Change in Control but not otherwise vested shall automatically vest so that this
option shall, immediately prior to the effective date of such Change in Control,
become exercisable for all of the Option Shares as fully-vested shares of Common
Stock and may be exercised for all or any portion of those vested shares. This
option shall remain exercisable for such fully-vested Option Shares until the
earliest to occur of (i) the specified Expiration Date, (ii) the sooner
- --------
termination of this option in accordance with Paragraph 5 or 6 or (iii) the
surrender of this option under Paragraph 7(b).

(b) Optionee shall have an unconditional right, exercisable at the
time during the thirty (30)-day period immediately following the consummation of
a Hostile Take-Over to surrender this option to the Corporation in exchange for
a cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the Option Shares at the time subject to the surrendered
option (whether or not those Option Shares are otherwise at the time vested)
over (ii) the aggregate Exercise Price payable for such shares. This Paragraph
7(b) limited stock appreciation right shall in all events terminate upon the
expiration or sooner termination of the option term and may not be assigned or
transferred by Optionee.

(c) To exercise the Paragraph 7(b) limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in which
there is specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) business days following
such delivery date. The exercise of such limited stock appreciation right in
accordance with the terms of this Paragraph 7 has been pre-approved pursuant to
the express provisions of

3
<PAGE>

the Automatic Option Grant Program, and neither the approval of the Plan
Administrator nor the consent of the Board shall be required at the time of the
actual option surrender and cash distribution. Upon receipt of the cash
distribution, this option shall be cancelled with respect to the shares subject
to the surrendered option (or the surrendered portion), and Optionee shall cease
to have any further right to acquire those Option Shares under this Agreement.
The option shall, however, remain outstanding for the balance of the Option
Shares (if any) in accordance with the terms and provisions of this Agreement,
and the Corporation shall accordingly issue a replacement stock option agreement
(substantially in the same form as this Agreement) for those remaining Option
Shares.

8. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

9. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

10. Manner of Exercising Option.
---------------------------

(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

(i) To the extent the option is exercised for vested Option
Shares, execute and deliver to the Corporation a Notice of Exercise for the
Option Shares for which the option is exercised. To the extent this option
is exercised for unvested Option Shares, execute and deliver to the
Corporation a Purchase Agreement for those unvested Option Shares.

(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

(A) cash or check made payable to the Corporation,

(B) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or

4
<PAGE>

(C) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (I) to
a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise
and (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.

(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.

(b) Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Notice of Exercise (or the Purchase Agreement) delivered to
the Corporation in connection with the option exercise.

(c) As soon after the Exercise Date as practical, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto. To the extent any such Option Shares are
unvested, the certificates for those Option Shares shall be endorsed with an
appropriate legend evidencing the Corporation's repurchase rights and may be
held in escrow with the Corporation until such shares vest.

(d) In no event may this option be exercised for any fractional
shares.

11. No Impairment of Rights. This Agreement shall not in any way
-----------------------
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the right
of the Corporation or the stockholders to remove Optionee from the Board at any
time in accordance with the provisions of applicable law.

12. Compliance with Laws and Regulations.
------------------------------------

(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

5
<PAGE>

13. Successors and Assigns. Except to the extent otherwise
----------------------
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.

14. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.

15. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan.

16. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

6
<PAGE>

EXHIBIT I

NOTICE OF EXERCISE

I hereby notify Portal Software, Inc. (the "Corporation") that I elect
to purchase _____________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $___________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1999 Stock Incentive Plan on _________________,
________.

___________________ , ______
Date

_________________________________________________
Optionee

Address:_________________________________________

_________________________________________________
Print name in exact manner
it is to appear on the
stock certificate: _________________________________________________

Address to which certificate
is to be sent, if different
from address above: _________________________________________________

_________________________________________________

Social Security Number: _________________________________________________

<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Automatic Stock Option Agreement.
---------

B. Board shall mean the Corporation's Board of Directors.
-----

C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or

D. Common Stock shall mean shares of the Corporation's common stock.
------------

E. Code shall mean the Internal Revenue Code of 1986, as amended.
----

F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:

(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.

A-1
<PAGE>

G. Corporation shall mean Portal Software, Inc., a Delaware
-----------
corporation.

H. Exercise Date shall mean the date on which the option shall have
-------------
been exercised in accordance with Paragraph 10 of the Agreement.

I. Exercise Price shall mean the exercise price per share as
--------------
specified in the Grant Notice.

J. Expiration Date shall mean the date on which the option expires as
---------------
specified in the Grant Notice.

K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange which
serves as the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange.
If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.

L. Grant Date shall mean the date of grant of the option as specified
----------
in the Grant Notice.

M. Grant Notice shall mean the Notice of Grant of Automatic Stock
------------
Option accompanying the Agreement, pursuant to which Optionee has been informed
of the basic terms of the option evidenced hereby.

N. Hostile Takeover shall mean the acquisition, directly or
----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.

A-2
<PAGE>

O. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.

P. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.

Q. Notice of Exercise shall mean the notice of exercise in the form
------------------
of Exhibit I.

R. Option Shares shall mean the number of shares of Common Stock
-------------
subject to the option.

S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.

T. Permanent Disability shall mean the inability of Optionee to
--------------------
perform his or her usual duties as a member of the Board by reason of any
medically determinable physical or mental impairment which is expected to result
in death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.

U. Plan shall mean the Corporation's 1999 Stock Incentive Plan.
----

V. Purchase Agreement shall mean the stock purchase agreement (in
------------------
form and substance satisfactory to the Corporation) which grants the Corporation
the right to repurchase, at the Exercise Price, any and all unvested Option
Shares held by Optionee at the time of Optionee's cessation of Board service and
which precludes the sale, transfer or other disposition of any purchased Option
Shares while those shares are unvested and subject to such repurchase right.

W. Stock Exchange shall mean the American Stock Exchange or the New
--------------
York Stock Exchange.

X. Take-Over Price shall mean the greater of (i) the Fair Market
--------------- -------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting the
Hostile Take-Over.

Y. Vesting Schedule shall mean the vesting schedule specified in the
----------------
Grant Notice, pursuant to which the Option Shares will vest in one or more
installments over the Optionee's period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.

A-3

<PAGE>

EXHIBIT 99.9

PORTAL SOFTWARE, INC.

NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
----------------------------------------
AUTOMATIC STOCK OPTION
----------------------

Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Portal Software, Inc. (the
"Corporation"):

Optionee:
-------- ------------------------------------------------------------

Grant Date:
---------- ----------------------------------------------------------

Exercise Price: $ per share
-------------- ---------------------------------------

Number of Option Shares: 6000 shares of Common Stock
-----------------------

Expiration Date:
--------------- -----------------------------------------------------

Type of Option: Non-Statutory Stock Option
--------------

Date Exercisable: Immediately Exercisable for any or all of the
----------------
Option Shares as fully vested shares of Common Stock.

Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the automatic option grant program under the
Portal Software, Inc. 1999 Stock Incentive Plan (the "Plan"). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as set
forth in the Automatic Stock Option Agreement attached hereto as Exhibit A.
---------

Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
---------
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.

No Impairment of Rights. Nothing in this Notice or the attached
-----------------------
Automatic Stock Option Agreement or in the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.

<PAGE>

Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Automatic Stock
Option Agreement.

DATED: _________________, _______

PORTAL SOFTWARE, INC.

By: ___________________________________________

Title: ________________________________________

_______________________________________________
OPTIONEE

Address: ______________________________________

_______________________________________________

ATTACHMENTS
- -----------
Exhibit A - Automatic Stock Option Agreement
Exhibit B - Plan Summary and Prospectus

2
<PAGE>

EXHIBIT A
---------

AUTOMATIC STOCK OPTION AGREEMENT
--------------------------------
<PAGE>

EXHIBIT B
---------

PLAN SUMMARY AND PROSPECTUS
---------------------------

<PAGE>

EXHIBIT 99.10

PORTAL SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------

I. PURPOSE OF THE PLAN

This Employee Stock Purchase Plan is intended to promote the interests
of Portal Software, Inc., a Delaware Corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.

Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.

All share numbers in the document reflect the 3-for-1 split of the
Common Stock authorized by the Board in April 1999 and approved by the
shareholders in April 1999.

II. ADMINISTRATION OF THE PLAN

The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.

III. STOCK SUBJECT TO PLAN

A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall be limited to 1,800,000
shares.

B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of February each
year during the term of the Plan, beginning February 1, 2000, by an amount equal
to two percent (2%) of the total number of shares of Common Stock outstanding on
the last trading day of the immediately preceding January, but in no event shall
any such annual increase exceed 2,000,000 shares.

C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable by all Participants in the aggregate on any one Purchase
Date (iv) the number and
<PAGE>

class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder and (v) the maximum number and/or class of securities by which the
share reserve is to increase automatically each calendar year pursuant to the
provisions of Section III.B.

IV. OFFERING PERIODS

A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.

B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of that offering period. However, the initial offering period shall
commence at the Effective Time and terminate on the last business day in May
2001. The next offering period shall commence on the first business day in June
2001, and subsequent offering periods shall commence as designated by the Plan
Administrator.

C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in June to the last business day in November each year and from the
first business day in December each year to the last business day in May in the
following year. However, the first Purchase Interval in effect under the
initial offering period shall commence at the Effective Time and end on the last
business day in November 1999.

D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty (24) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days
following the start date of that offering period.

V. ELIGIBILITY

A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.

B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.

2.
<PAGE>

C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.

D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.

VI. PAYROLL DEDUCTIONS

A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Cash Earnings paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:

(i) The Participant may, at any time during the offering period,
reduce his or her rate of payroll deduction to become effective as soon as
possible after filing the appropriate form with the Plan Administrator.
The Participant may not, however, effect more than one (1) such reduction
per Purchase Interval.

(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent
(15%) maximum) shall become effective on the start date of the first
Purchase Interval following the filing of such form.

B. Payroll deductions shall begin on the first pay day
administratively feasible following the Participant's Entry Date into the
offering period and shall (unless sooner terminated by the Participant) continue
through the pay day ending with or immediately prior to the last day of that
offering period. The amounts so collected shall be credited to the
Participant's book account under the Plan, but no interest shall be paid on the
balance from time to time outstanding in such account. The amounts collected
from the Participant shall not be required to be held in any segregated account
or trust fund and may be commingled with the general assets of the Corporation
and used for general corporate purposes.

C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.

D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.

3.
<PAGE>

VII. PURCHASE RIGHTS

A. Grant of Purchase Right. A Participant shall be granted a
-----------------------
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.

Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.

B. Exercise of the Purchase Right. Each purchase right shall be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.

C. Purchase Price. The purchase price per share at which Common
--------------
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall be equal to eighty-five percent (85%) of the lower of
-----
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.

D. Number of Purchasable Shares. The number of shares of Common
----------------------------
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed one thousand two hundred fifty (1,250) shares, subject to periodic
adjustments in the event of certain changes in the Corporation's capitalization.
In addition, the maximum aggregate number of shares of Common Stock purchasable
by all Participants on any one Purchase Date shall not exceed three hundred
thousand (300,000) shares, subject to periodic adjustments in the event of
certain changes in the Corporation's capitalization. However, the Plan
Administrator shall have the discretionary authority, exercisable prior to the
start of any offering period under the Plan, to increase or decrease the
limitations to be in effect for the number of shares purchasable per Participant
and in the aggregate by all Participants on each Purchase Date during that
offering period.

4.
<PAGE>

E. Excess Payroll Deductions. Any payroll deductions not applied to
-------------------------
the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in the
aggregate on the Purchase Date shall be promptly refunded.

F. Termination of Purchase Right. The following provisions shall
-----------------------------
govern the termination of outstanding purchase rights:

(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator
(or its designate), and no further payroll deductions shall be collected
from the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the next Purchase Date. If
no such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated right
shall be refunded as soon as possible.

(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not resume participation in the offering period for
which the terminated purchase right was granted unless he or she re-enrolls
in the Plan (by making a timely filing of the prescribed enrollment forms)
on or before a regularly-scheduled Entry Date into that offering period.
In such event, the Participant shall be granted a new purchase right with a
new purchase price based upon the Fair Market Value per share on Common
Stock on his or her new Entry Date.

(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while his
or her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for
the Purchase Interval in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain in
active service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last business
day of the Purchase Interval in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for that
Purchase Interval or (b) have such funds held for the purchase of shares on
his or her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return to
active service (x) within ninety (90) days following the commencement of
such leave or (y) prior to the expiration of any longer period for which
such Participant's right

5.
<PAGE>

to reemployment with the Corporation is guaranteed by either statute or
contract, his or her payroll deductions under the Plan shall automatically
resume at the rate in effect at the time the leave began, unless the
Participant withdraws from the Plan prior to his or her return. An
individual who returns to active employment following a leave of absence
which exceeds in duration the applicable (x) or (y) time period will be
treated as a new Employee for purposes of subsequent participation in the
Plan and must accordingly re-enroll in the Plan (by making a timely filing
of the prescribed enrollment forms) on or before his or her scheduled Entry
Date into the offering period.

G. Change in Control. Each outstanding purchase right shall
-----------------
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
-----
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in the
aggregate.

The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.

H. Proration of Purchase Rights. Should the total number of shares
----------------------------
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.

I. Assignability. The purchase right shall be exercisable only by
-------------
the Participant and shall not be assignable or transferable by the Participant.

J. Stockholder Rights. A Participant shall have no stockholder
------------------
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.

VIII. ACCRUAL LIMITATIONS

A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right

6.
<PAGE>

granted under this Plan and (ii) similar rights accrued under other employee
stock purchase plans (within the meaning of Code Section 423) of the Corporation
or any Corporate Affiliate, would otherwise permit such Participant to purchase
more than Twenty-Five Thousand Dollars ($25,000.00) worth of stock of the
Corporation or any Corporate Affiliate (determined on the basis of the Fair
Market Value per share on the date or dates such rights are granted) for each
calendar year such rights are at any time outstanding.

B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:

(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.

(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one (1) or more other purchase rights at a rate equal to Twenty-Five
Thousand Dollars ($25,000.00) worth of Common Stock (determined on the
basis of the Fair Market Value per share on the date or dates of grant) for
each calendar year such rights were at any time outstanding.

C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.

D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.

IX. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan was adopted by the Board on February 24, 1999 and shall
become effective at the Effective Time, provided no purchase rights granted
--------
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.

7.
<PAGE>

B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in May, 2009, (ii) the date on
--------
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction.
No further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.

X. AMENDMENT OF THE PLAN

A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the recognition of compensation
expense in the absence of such amendment or termination.

B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan or the
maximum number of shares purchasable per Participant or in the aggregate on any
one Purchase Date, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) alter the purchase price
formula so as to reduce the purchase price payable for the shares of Common
Stock purchasable under the Plan or (iii) modify the eligibility requirements
for participation in the Plan.

XI. GENERAL PROVISIONS

A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.

B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.

C. The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.

8.
<PAGE>

Schedule A
----------

Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
------------------------

Portal Software, Inc.
<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Plan:

A. Board shall mean the Corporation's Board of Directors.
-----

B. Cash Earnings shall mean the (i) regular base salary paid to a
-------------
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, profit-sharing distributions and other
incentive-type payments received during such period. Such Cash Earnings shall
be calculated before deduction of (A) any income or employment tax withholdings
or (B) any and all contributions made by the Participant to any Code Section
401(k) salary deferral plan or Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Cash Earnings shall not include any contributions made on the Participant's
behalf by the Corporation or any Corporate Affiliate to any employee benefit or
welfare plan now or hereafter established (other than Code Section 401(k) or
Code Section 125 contributions).

C. Change in Control shall mean a change in ownership of the
-----------------
Corporation pursuant to any of the following transactions:

(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or

(iii) the acquisition, directly or indirectly by an person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common
control with the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders.

C. Code shall mean the Internal Revenue Code of 1986, as amended.
----

D. Common Stock shall mean the Corporation's common stock.
------------

A-1.
<PAGE>

E. Corporate Affiliate shall mean any parent or subsidiary
-------------------
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.

H. Effective Time shall mean the time at which the Underwriting
--------------
Agreement is executed and the Common Stock priced for the initial public
offering. Any Corporate Affiliate which becomes a Participating Corporation
after such Effective Time shall designate a subsequent Effective Time with
respect to its employee-Participants.

I. Eligible Employee shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).

J. Entry Date shall mean the date an Eligible Employee first
----------
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.

K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:

(iii) For purposes of the initial offering period which begins
at the Effective Time, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.

A-2.
<PAGE>

L. 1933 Act shall mean the Securities Act of 1933, as amended.
--------

M. Participant shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.

N. Participating Corporation shall mean the Corporation and such
-------------------------
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.

O. Plan shall mean the Corporation's 1999 Employee Stock Purchase
----
Plan, as set forth in this document.

P. Plan Administrator shall mean the committee of two (2) or more
------------------
Board members appointed by the Board to administer the Plan.

Q. Purchase Date shall mean the last business day of each Purchase
-------------
Interval. The initial Purchase Date shall be November 30, 1999.

R. Purchase Interval shall mean each successive six (6)-month period
-----------------
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.

S. Semi-Annual Entry Date shall mean the first business day in June
----------------------
and December each year on which an Eligible Employee may first enter an offering
period.

T. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.

U. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

A-3.

<PAGE>

EXHIBIT 99.11
PORTAL SOFTWARE, INC.
EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
ENROLLMENT/CHANGE FORM

<TABLE>
<S> <C> <C>
- ----------
SECTION 1: Action Complete Sections:
- ---------- ---------------------------------------- -------------------------------------------------------
ACTION [_] New Enrollment 2, 3, 7 and sign attached Stock Purchase Agreement
---
[_] Change Payroll Deduction 2, 4, 7
[_] Terminate Payroll Deductions 2, 5, 7
[_] Leave of Absence 2, 6, 7
====================================================================================================================================
- ----------
SECTION 2: Name
- ---------- --------------------------------------------------------------------------------------------------
PERSONNEL Last First MI Dept.
DATA
Home Address
------------------------------------------------------------------------------------------
Street

------------------------------------------------------------------------------------------
City State Zip Code

Social
Security # - -
--------------- ---------- ------------------------
====================================================================================================================================
- ----------
SECTION 3: Effective with the Purchase Payroll Deduction Amount: __________ % of cash earnings*
- ---------- Interval Beginning:
NEW [_] June 1, ______ * Must be a multiple of 1% up to a maximum of 15% of
ENROLLMENT [_] December 1, ______ cash earnings
[_] Initial Offering Period
====================================================================================================================================
- ----------
SECTION 4: Effective with the I authorize the following new level of payroll
- ---------- Pay Period Beginning: ________________________ deduction: ______________% of cash earnings*
Month, Day and Year
CHANGE * Must be a multiple of 1% up to a maximum of 15%
PAYROLL of cash earnings
DEDUCTIONS

NOTE: You may reduce your rate of payroll deductions once per 6-month purchase interval to become
---- effective as soon as possible following the filing of the change form. You may also increase
your rate of payroll deductions to become effective as of the start date of the next 6-month
purchase interval (first business day of June or December).
====================================================================================================================================
- ----------
SECTION 5: Effective with the Your election to terminate your payroll deductions
- ---------- Pay Period Beginning: ________________________ cannot be changed, and you may not rejoin the offering
TERMINATE Month, Day and Year period unless you re-enroll before a new semi-annual
PAYROLL entry date. If you do so, you will be granted a new
DEDUCTIONS purchase right with a purchase price based upon the
value of the common stock on your new entry date.

In connection with my voluntary termination of payroll deductions, I elect the following action regarding
my ESPP payroll deductions to date in the current six (6)-month purchase interval:
[_] Purchase shares of Portal Software, Inc. at end of the interval
OR
[_] Refund ESPP payroll deductions collected
NOTE: If your employment terminates for any reason or your eligibility status changes (less than 20
____ hrs/wk or less than 5 months/year), you will immediately cease to participate in the ESPP, and
your ESPP payroll deductions collected in that purchase interval will automatically be refunded
to you.
====================================================================================================================================
- ----------
SECTION 6: In connection with my unpaid leave of absence, I elect the following action with respect to my ESPP
- ---------- payroll deductions to date in the current purchase interval:
LEAVE OF
ABSENCE [_] Purchase shares of Portal Software, Inc. at end of the interval

OR
Refund ESPP payroll deductions collected

NOTE: If you take an unpaid leave of absence, your payroll deductions will immediately cease. Upon your
return to active service within 90 days after the start of your leave, your payroll deductions will
automatically resume at the rate in effect for you when you went on leave.
====================================================================================================================================
- ----------
SECTION 7:
- ----------
AUTHORIZATION I hereby authorize the specific action or actions indicated above.

- ------------------------------------------------------- ----------------------------------------------------
Date Signature of Employee
</TABLE>

<PAGE>

EXHIBIT 99.12

PORTAL SOFTWARE, INC.
STOCK PURCHASE AGREEMENT
------------------------

I hereby elect to participate in the 1999 Employee Stock Purchase Plan
(the "ESPP") for the offering period specified below, and I hereby subscribe to
purchase shares of Common Stock of Portal Software, Inc. (the "Corporation") in
accordance with the provisions of this Agreement and the ESPP. I hereby
authorize payroll deductions from each of my paychecks following my entry into
the ESPP in the 1% multiple of my cash compensation (not to exceed a maximum of
15%) specified in my attached Enrollment Form.

The offering period is divided into a series of consecutive purchase
intervals. With the exception of the initial purchase interval which begins at
the time of the initial public offering of the Common Stock and ends on November
30, 1999, those purchase intervals will each be of six months duration and will
run from the first business day of December each year to the last business day
of May in the following year and from the first business day of June each year
to the last business day of November in the same year. My participation will
automatically remain in effect from one purchase interval to the next in
accordance with my payroll deduction authorization, unless I withdraw from the
ESPP or change the rate of my payroll deduction or unless my employment status
changes. I may reduce the rate of my payroll deductions on one occasion per
purchase interval, and I may increase my rate of payroll deductions to become
effective at the beginning of any subsequent purchase interval.

My payroll deductions will be accumulated for the purchase of shares
of common stock on the last business day of each purchase interval within the
offering period. The purchase price per share will be equal to 85% of the lower
-----
of (i) the fair market value per share of Common Stock on my Entry Date into the
offering period or (ii) the fair market value per share on the purchase date. I
will also be subject to ESPP restrictions (i) limiting the maximum number of
shares which I may purchase per purchase interval, (ii) limiting the maximum
number of shares which may be purchased in total by all participants per
purchase interval and (iii) prohibiting me from purchasing more than $25,000
worth of Common Stock for each calendar year my purchase right remains
outstanding.

I may withdraw from the ESPP at any time prior to the last business
day of the purchase interval and elect either to have the Corporation refund all
my payroll deductions for that interval or to have such payroll deductions
applied to the purchase of Common Stock at the end of such interval. However, I
may not rejoin that particular offering period until a new semi-annual entry
date, with a new purchase price based upon the value of the Common Stock on my
new entry date. Upon the termination of my employment for any reason,
including death or disability, or my loss of eligible employee status, my
participation in the ESPP will immediately cease, and all my payroll deductions
for the purchase interval in which my employment terminates or my loss of
eligibility occurs will immediately be refunded.

If I take an unpaid leave of absence, my payroll deductions will
immediately cease, and any payroll deductions for the purchase interval in which
my leave begins will, at my election, either be refunded or applied to the
purchase of shares of Common Stock at the end of that purchase interval. If my
re-employment is guaranteed by either law or contract, or if I return to active
service within ninety (90) days, then upon my return my payroll deductions will
automatically resume at the rate in effect when my leave began.

The Corporation will issue a stock certificate for the shares
purchased on my behalf after the end of each purchase interval. The certificate
will be issued in street name and will be deposited directly in my Corporation-
designated brokerage account. I will notify the Corporation of any disposition
of shares purchased under the ESPP, and I will satisfy all applicable income and
employment tax withholding requirements at the time of such disposition.

The Corporation has the right, exercisable in its sole discretion, to
amend or terminate all outstanding purchase rights under the ESPP at any time,
with such amendment or termination to become effective immediately following the
end of any purchase interval. However, such purchase rights may be amended or
terminated with an immediate effective date to the extent necessary to avoid the
Corporation's recognition of compensation expense for financial reporting
purposes, should the accounting principles applicable to the ESPP change. Upon
any such termination, I will cease to have any further rights to purchase shares
of common stock under this Agreement.

I have read this Agreement and hereby agree to be bound by the terms
of both this Agreement and the ESPP. The effectiveness of this Agreement is
dependent upon my eligibility to participate in the ESPP.

Date:_____________________

Signature of Employee ______________________

Printed Name: ______________________________

Entry Date: _____________