Exhibit 10.2
Non-Employee Directors
With Full Acceleration of Vesting
PeopleSupport, Inc.
2004 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT

     
Tax Treatment
  This Option is not intended to be an incentive stock option under Section 422
of the Internal Revenue Code, as provided in the Notice of Stock Option Grant.
Even if this Option is designated as an incentive stock option, it shall be
deemed to be a nonstatutory option to the extent required by the $100,000 annual
limitation under Section 422(d) of the Internal Revenue Code.
 
   
Vesting
  This Option becomes exercisable in installments, as shown in the Notice of
Stock Option Grant. This Option will in no event become exercisable for
additional shares after your Service has terminated for any reason.

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Non-Employee Directors
With Full Acceleration of Vesting

     
Vesting on a
Change in Control
  In the event of a Change in Control (as hereinafter defined), all of the
remaining unvested shares subject to this Option at the time of such event shall
accelerate and become immediately exercisable upon the effective date of such
event.
 
   
 
  A “Change in Control” shall mean the occurrence of any of the following
events:

          (i) A change in the composition of the Board of Directors occurs, as a
result of which fewer than one-half of the incumbent directors are directors
who:
               (A) Had been directors of the Company on the “look-back date” (as
hereinafter defined) (the “original directors”); and
               (B) Were elected, nominated for election or appointed to the
Board of Directors with the affirmative vote of at least a majority of the
aggregate of the original directors, or a committee thereof, who were still in
office at the time of the election, nomination or appointment and the directors
whose election, nomination or appointment was previously so approved (the
“continuing directors”); or
          (ii) Any “person” (as hereinafter defined) who by the acquisition or
aggregation of securities, is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act (as defined in the Plan)), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s then outstanding securities ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote at elections of directors (the “Base Capital Stock”); except that any
change in the relative beneficial ownership of the Company’s securities by any
person resulting solely from a reduction in the aggregate number of outstanding
shares of Base Capital Stock, and any decrease thereafter in such person’s
ownership of securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person’s beneficial ownership of any
securities of the Company; or
          (iii) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if persons
who were not stockholders of the Company immediately prior to such merger,
consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization 50% or more of the voting power of the
outstanding securities of each of (A) the continuing or surviving entity and (B)
any direct or indirect parent corporation of such continuing or surviving
entity; or
          (iv) The sale, transfer or other disposition of all or substantially
all of the Company’s assets.
     For purposes of subsection (i) above, the term “look-back” date shall mean
the later of (1) the Effective Date (as defined in the Plan) or (2) the date
24 months prior to the date of the event that may constitute a Change in
Control.
     For purposes of subsection (ii) above, the term “person” shall have the
same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but
shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent (as defined in the
Plan) or Subsidiary (as defined in the Plan) and (2) a corporation owned
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of the Stock.
     Notwithstanding the foregoing, a transaction shall not constitute a Change
in Control if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities
immediately before such transaction, and a Change in Control shall not be deemed
to occur if the Company files a registration statement with the Securities and
Exchange Commission for the initial offering of Stock to the public.

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Non-Employee Directors
With Full Acceleration of Vesting

     
Term
  This Option expires in any event at the close of business at Company
headquarters on the day before the 10th anniversary of the Grant Date, as shown
on the Notice of Stock Option Grant (fifth anniversary for a more than 10%
stockholder as provided under the Plan if this is an incentive stock option).
This Option may expire earlier if your Service terminates, as described below.
 
   
Regular Termination
  If your Service terminates for any reason except for Cause (as hereafter
defined), death or “Total and Permanent Disability” (as defined in the Plan),
then this Option will expire at the close of business at Company headquarters on
the date twelve (12) months after the date your Service terminates (or, if
earlier, the Expiration Date). The Company has discretion to determine when your
Service terminates for all purposes of the Plan and its determinations are
conclusive and binding on all persons.
 
   
Cause
  If your Service with the Company and its subsidiaries is terminated for Cause,
your Option shall immediately expire. “Cause” means: (1) conviction of a felony
involving moral turpitude; (2) commission of any act of criminal fraud,
misappropriation of funds or embezzlement in connection with your Service with
the Company or a subsidiary; or (3) breach of any material provision of service
agreement between you and the Company or a subsidiary.
 
   
Death
  If you die, then this Option will expire at the close of business at Company
headquarters on the date 12 months after the date your Service terminates (or,
if earlier, the Expiration Date). During that period of up to 12 months, your
estate or heirs may exercise the Option.
 
   
Disability
  If your Service terminates because of your Total and Permanent Disability,
then this Option will expire at the close of business at Company headquarters on
the date 12 months after the date your Service terminates (or, if earlier, the
Expiration Date).
 
   
Leaves of Absence
  For purposes of this Option, your Service does not terminate when you go on a
military leave, a sick leave or another bona fide leave of absence, if the leave
was approved by the Company in writing and if continued crediting of Service is
required by the terms of the leave or by applicable law. But your Service
terminates when the approved leave ends, unless you immediately return to active
work.
 
   
 
  If you go on a leave of absence, then the vesting schedule specified in the
Notice of Stock Option Grant may be adjusted in accordance with the Company’s
leave of absence policy or the terms of your leave. If you commence working on a
part-time basis, then the vesting schedule specified in the Notice of Stock
Option Grant may be adjusted in accordance with the Company’s part-time work
policy or the terms of an agreement between you and the Company pertaining to
your part-time schedule.
 
   
Restrictions on
Exercise
  The Company will not permit you to exercise this Option if the issuance of
shares at that time would violate any law or regulation. The inability of the
Company to obtain approval from any regulatory body having authority deemed by
the Company to be necessary to the lawful issuance and sale of the Company stock
pursuant to this Option shall relieve the Company of any liability with respect
to the non-issuance or sale of the Company stock as to which such approval shall
not have been obtained. However, the Company shall use its best efforts to
obtain such approval.

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Non-Employee Directors
With Full Acceleration of Vesting

     
Notice of Exercise
  When you wish to exercise this Option you must notify the Company by either
completing the attached “Notice of Exercise of Stock Option” form and filing it
with the Company or by personally authorizing an option exercise with the
Company’s retained broker. You must specify how many shares you wish to
purchase. You must also specify how your shares should be registered. The notice
will be effective when it is received by the Company or its retained broker. If
your beneficiary wants to exercise this Option after your death, that person
must prove to the Company’s satisfaction that he or she is entitled to do so.
 
   
Form of Payment
  When you submit your notice of exercise, you must include payment of the
Option exercise price for the shares you are purchasing. Payment may be made in
the following form(s):

  •   Your personal check, a cashier’s check or a money order.     •  
Certificates for shares of Company stock that you own, along with any forms
needed to effect a transfer of those shares to the Company. The value of the
shares, determined as of the effective date of the Option exercise, will be
applied to the Option exercise price. Instead of surrendering shares of Company
stock, you may attest to the ownership of those shares on a form provided by the
Company and have the same number of shares subtracted from the Option shares
issued to you. However, you may not surrender, or attest to the ownership of
shares of Company stock in payment of the exercise price if your action would
cause the Company to recognize a compensation expense (or additional
compensation expense) with respect to this Option for financial reporting
purposes.     •   By delivering on a form approved by the Committee of an
irrevocable direction to a securities broker approved by the Company to sell all
or part of your Option shares and to deliver to the Company from the sale
proceeds in an amount sufficient to pay the Option exercise price and any
withholding taxes. The balance of the sale proceeds, if any, will be delivered
to you. The directions must be given by signing a special “Notice of Exercise”
form provided by the Company.     •   Irrevocable directions to a securities
broker or lender approved by the Company to pledge Option shares as security for
a loan and to deliver to the Company from the loan proceeds an amount sufficient
to pay the Option exercise price and any withholding taxes. The directions must
be given by signing a special “Notice of Exercise” form provided by the Company.
    •   Any other form permitted by the Committee in its sole discretion.

     
 
  Notwithstanding the foregoing, payment may not be made in any form that is
unlawful, as determined by the Committee in its sole discretion.
 
   
Withholding Taxes and Stock Withholding
  You will not be allowed to exercise this Option unless you make arrangements
acceptable to the Company to pay any withholding taxes that may be due as a
result of the Option exercise. These arrangements may include withholding shares
of Company stock that otherwise would be issued to you when you exercise this
Option. The value of these shares, determined as of the effective date of the
Option exercise, will be applied to the withholding taxes.

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Non-Employee Directors
With Full Acceleration of Vesting

     
Restrictions on
Resale
  By signing this Agreement, you agree not to sell any Option shares at a time
when applicable laws, Company policies or an agreement between the Company and
its underwriters prohibit a sale (e.g., a lock-up period after the Company goes
public). This restriction will apply as long as you are an employee, consultant
or director of the Company or a subsidiary of the Company.
 
   
Transfer of Option
  In general, only you can exercise this Option prior to your death. You cannot
transfer or assign this Option, other than as designated by you by will or by
the laws of descent and distribution, except as provided below. For instance,
you may not sell this Option or use it as security for a loan. If you attempt to
do any of these things, this Option will immediately become invalid. You may in
any event dispose of this Option in your will. Regardless of any marital
property settlement agreement, the Company is not obligated to honor a notice of
exercise from your former spouse, nor is the Company obligated to recognize your
former spouse’s interest in your Option in any other way.
 
   
 
  However, if this Option is designated as a nonstatutory stock option in the
Notice of Stock Option Grant, then the “Committee” (as defined in the Plan) may,
in its sole discretion, allow you to transfer this Option as a gift to one or
more family members. For purposes of this Agreement, “family member” means a
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law or sister-in-law
(including adoptive relationships), any individual sharing your household (other
than a tenant or employee), a trust in which one or more of these individuals
have more than 50% of the beneficial interest, a foundation in which you or one
or more of these persons control the management of assets, and any entity in
which you or one or more of these persons own more than 50% of the voting
interest.
 
   
 
  In addition, if this Option is designated as a nonstatutory stock option in
the Notice of Stock Option Grant, then the Committee may, in its sole
discretion, allow you to transfer this option to your spouse or former spouse
pursuant to a domestic relations order in settlement of marital property rights.
 
   
 
  The Committee will allow you to transfer this Option only if both you and the
transferee(s) execute the forms prescribed by the Committee, which include the
consent of the transferee(s) to be bound by this Agreement.
 
   
Retention Rights
  Neither your Option nor this Agreement gives you the right to be retained by
the Company or a subsidiary of the Company in any capacity. The Company and its
subsidiaries reserve the right to terminate your Service at any time, with or
without cause.
 
   
Stockholder Rights
  You, or your estate or heirs, have no rights as a stockholder of the Company
until you have exercised this Option by giving the required notice to the
Company and paying the exercise price. No adjustments are made for dividends or
other rights if the applicable record date occurs before you exercise this
Option, except as described in the Plan.
 
   
Adjustments
  In the event of a stock split, a stock dividend or a similar change in Company
stock, the number of shares covered by this Option and the exercise price per
share may be adjusted pursuant to the Plan.
 
   
Applicable Law
  This Agreement will be interpreted and enforced under the laws of the State of
Delaware (without regard to their choice-of-law provisions).

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Non-Employee Directors
With Full Acceleration of Vesting

     
The Plan and Other Agreements
  The text of the Plan is incorporated in this Agreement by reference. All
capitalized terms in the Stock Option Agreement shall have the meanings assigned
to them in the Plan. This Agreement and the Plan constitute the entire
understanding between you and the Company regarding this Option. Any prior
agreements, commitments or negotiations concerning this Option are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT,
YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.

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