Exhibit 10.35
CALLIDUS SOFTWARE, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
     Callidus Software Inc., a Delaware corporation (the “Company”), hereby
grants to Robert Youngjohns (“Optionee”) an option to purchase 1,000,000 shares
of its common stock on the terms set forth below (the “Option”). This option is
granted as an “inducement grant” under Nasdaq rules and is therefore being
granted outside the Company’s 2003 Stock Incentive Plan (as amended, the
“Plan”). However, for convenience, reference is made in this Option Agreement to
certain provisions of the Plan, and terms used but not defined herein have the
meaning set forth in the Plan.
1. Notice of Stock Option Grant

      Grant Number    1,721
 
    Date of Grant    May 31, 2005
 
    Vesting Commencement Date    May 31, 2005
 
    Exercise Price per Share    $3.45
 
    Total Number of Shares Granted    1,000,000
 
    Total Exercise Price   $3,450,000
 
    Type of Option:   Nonstatutory Stock Option
 
    Expiration Date:   May 31, 2015

     Vesting Schedule:
     This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
     25% of the Shares subject to the Option shall vest and become exercisable
12 months after the Vesting Commencement Date, and 1/48th of the Shares subject
to the Option shall vest and become exercisable each month thereafter, subject
to Optionee’s continuing to be a Service Provider on such dates and subject to
the terms of the Employment Agreement dated as of April 26, 2005 between
Optionee and the Company (the “Employment Agreement”).
     Termination Period:
     This Option shall be exercisable for 90 days after Optionee ceases to be a
Service Provider. Upon Optionee’s death or disability, this Option may be
exercised for such longer period as provided in the Plan. In no event may
Optionee exercise this Option after the Expiration Date as provided above.
             2. Exercise of Option.
          (a) Right to Exercise. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of this Option Agreement.

 

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          (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. The Administrator shall require payment of any amount the Company may
determine to be necessary to withhold for taxes as a result of the exercise of
an award. In the absence of any other arrangement, Optionee agrees that the
Company shall be entitled to withhold from any payments to be made by the
Company to Optionee an amount equal to such withholding obligations.
     No Shares shall be issued pursuant to the exercise of an Option unless such
issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
     3. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the “Managing Underwriter”)
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the “Market Standoff Period”) following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
     4. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee
and to the extent permitted by the Company at any time:
          (a) cash or check;
          (b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
          (c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (ii) have a Fair Market Value on
the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
     5. Restrictions on Exercise. This Option may not be exercised 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.
     6. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of the
Plan and this Option

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Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
     7. Incorporation of the Plan. This Option shall be subject to the authority
of the Administrator as set forth in Section 4(b) of the Plan and shall be
subject to Sections 8 and 13, 14 and 15 of the Plan, which are incorporated
herein by reference.
     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 terms of this Option Agreement.
     9. Entire Agreement; Governing Law. This Option Agreement constitutes 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 (except for the
Employment Agreement), 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.
     10. 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 hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under this Option Agreement. Optionee further agrees to notify the Company upon
any change in the residence address indicated below.

     
ROBERT H. YOUNGJOHNS [OPTIONEE]:
  CALLIDUS SOFTWARE, INC.
 
   
/s/ Robert H. Youngjohns
  /s/ Brian E. Cabrera
 
   
Signature
  Brian E. Cabrera, VP Corporate Development and General Counsel

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EXHIBIT A
EXERCISE NOTICE
Callidus Software, Inc.
160 West Santa Clara Street
Suite 1500
San Jose, CA 95113
Attention: Secretary
     1. Exercise of Option. Effective as of today,                     , 20___,
the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to
purchase                                 shares of the Common Stock (the
“Shares”) of Callidus Software Inc.(the “Company”) pursuant to the Stock Option
Agreement dated May 31, 2005 (the “Option Agreement”).
     2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price of the Shares, as set forth in the Option Agreement.
     3. Representations of Optionee. (a) Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and the 2003 Stock Incentive
Plan (the “Plan”) and agrees to abide by and be bound by their terms and
conditions.
          (b) Optionee acknowledges that Optionee has received and had access to
such information as Optionee considers necessary or appropriate for deciding
whether to invest in the Shares. Specifically, Optionee has received and read a
copy of the prospectus describing the Plan and Option Agreement.
     4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 13 of the Plan.
     5. Tax Consultation. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee’s purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.

     
Submitted by OPTIONEE:
  Accepted by CALLIDUS SOFTWARE INC.:
 
   
 
   
Signature
  By
 
   
 
   
Print Name
  Its
 
   
Address
  Address:  
 
  160 West Santa Clara Street, Suite 1500
San Jose, CA 95113
 
   
 
  Date Received: