Stock Option Agreement - Callidus Software Inc. and Robert Warfield
CALLIDUS SOFTWARE INC.
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT --EARLY EXERCISE
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
Robert Warfield
3470 Merrill Road
Aptos, CA 95003
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number 1179
Date of Grant May 20, 2003
Vesting Commencement Date May 20, 2003
Exercise Price per Share $.60
Total Number of Shares Granted 220,000
Total Exercise Price $132,000.00
Type of Option X Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date May 20, 2013
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Exercise and Vesting Schedule:
This Option is exercisable immediately, in whole or in part, and shall
vest according to the following vesting schedule:
1/48 of the Shares subject to the Option shall vest each month after the
Vesting Commencement Date. Such shares subject to the Option shall continue to
vest so long as the Optionee remains an employee of the Company. Upon an IPO or
if the Company is purchased by a qualified buyer for a price equal to or greater
than $6.67 per share, twenty-five percent (25%) of the total original shares
(55,000) shall immediately vest and the remainder of the shares shall vest over
a three-year period.
Termination Period:
You may exercise this Option for three months after you cease to be a
Service Provider. Upon your death or disability, this Option may be exercised
for such longer period as provided in the Plan. In no event may you exercise
this Option after the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below,
this Option shall be exercisable cumulatively according to the vesting schedule
set forth in the Notice of Grant. Alternatively, at the election of the
Optionee, this
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option may be exercised in whole or in part at any time as to Shares which have
not yet vested. For purposes of this Stock Option Agreement, Shares subject to
the Option shall vest based on continued employment of Optionee with the
Company.
Vested Shares shall not be subject to the Company's repurchase right (as set
forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit
C-l).
(ii) As a condition to exercising this Option for unvested
Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.
(iii) This Option may not be exercised for a fraction of a
Share.
(b) Method of Exercise. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities
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Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares;
(e) promissory note; or
(f) any combination of the foregoing.
6. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the stockholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
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INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of ISO Following Disability. If the Optionee ceases
to be an Employee as a result of a disability that is not a total and permanent
disability as defined in Section 22(e)(3) of the Code, to the extent permitted
on the date of termination, the Optionee must exercise an ISO within three
months of such termination for the ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (i) the Fair Market Value of the
Shares on the date of exercise, or (ii) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term depending on the
period that the ISO Shares were held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
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disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (i) the date two years after the Date of Grant, or (ii) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
(f) Section 83(b) Election for Unvested Shares Purchased Pursuant
to Options. With respect to the exercise of an Option for unvested Shares, an
election may be filed by the Optionee with the Internal Revenue Service, within
30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the
Code to be taxed currently on any difference between the purchase price of the
Shares and their Fair Market Value on the date of purchase. In the case of a
Nonstatutory Stock Option, this will result in a recognition of taxable income
to the Optionee on the date of exercise, measured by the excess, if any, of the
fair market value of the Shares, at the time the Option is exercised over the
purchase price for the Shares. Absent such an election, taxable income will be
measured and recognized by Optionee at the time or times on which the Company's
Repurchase Option lapses. In the case of an Incentive Stock Option, such an
election will result in a recognition of income to the Optionee for alternative
minimum tax purposes on the date of exercise, measured by the excess, if any, of
the fair market value of the Shares, at the time the option is exercised, over
the purchase price for the Shares. Absent such an election, alternative minimum
taxable income will be measured and recognized by Optionee at the time or times
on which the Company's Repurchase Option lapses. Optionee is strongly encouraged
to seek the advice of his or her own tax consultants in connection with the
purchase of the Shares and the advisability of filing of the Election under
Section 83(b) of the Code. A form of Election under Section 83(b) is attached
hereto as Exhibit C-5 for reference.
OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON
OPTIONEE'S BEHALF.
10. Entire Agreement; Governing Law. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by the internal substantive
laws but not the choice of law rules of the State of California.
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11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he or she is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof. Optionee
has reviewed the Plan and this Option in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE: CALLIDUS SOFTWARE INC.
/s/ ROBERT WARFIELD /s/ REED TAUSSIG
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Signature By Reed Taussig
Robert Warfield President and CEO
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Print Name Title
Residence Address: Address:
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3470 Merrill Road 160 West Santa Clara Street, Suite 1500
Aptos, CA 95003 San Jose, CA 95113
6-13-03
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Date Received
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